<PAGE> 1
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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
------------------------
GALOOB TOYS, INC.
(NAME OF SUBJECT COMPANY)
NEW HIAC II CORP.
HASBRO, INC.
(BIDDERS)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
364091 10 8
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
PHILLIP H. WALDOKS, ESQ.
SENIOR VICE PRESIDENT --
CORPORATE LEGAL AFFAIRS
AND SECRETARY
HASBRO, INC.
32 W. 23RD STREET
NEW YORK, NY 10010
TELEPHONE: (212) 645-2400
FACSIMILE: (212) 741-0663
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPY TO:
THOMAS H. KENNEDY, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NY 10022
TELEPHONE: (212) 735-3000
FACSIMILE: (212) 735-2000
------------------------
CALCULATION OF FILING FEE
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<TABLE>
<S> <C>
TRANSACTION VALUATION* $230,086,776 AMOUNT OF FILING FEE $46,018
</TABLE>
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* Estimated for purposes of calculating the amount of the filing fee only. The
filing fee calculation assumes the purchase of 18,127,864 shares of common
stock, $0.01 par value per share (the "Shares"), of Galoob Toys, Inc. at a
price of $12.00 per Share in cash, without interest. The filing fee
calculation is based on the 18,127,864 Shares outstanding as of September 27,
1998 and assumes the issuance prior to the consummation of the Offer (as
defined herein), of 1,046,034 Shares upon the exercise of outstanding options
and other rights and securities exercisable into Shares that have an exercise
price of less than $12.00. The amount of the filing fee calculated in
accordance with Regulation 240.0-11 of the Securities Exchange Act of 1934,
as amended, equals 1/50th of one percent of the value of the transaction.
[ ] 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.
Amount Previously Paid: Not applicable.
Form or Registration No.: Not applicable.
Filing Party: Not applicable.
Date Filed: Not applicable.
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<PAGE> 2
14D-1
CUSIP NO. 364091 10 8
<TABLE>
<S> <C> <C>
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1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF
ABOVE PERSONS NEW HIAC II CORP.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(e) OR 2(f) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
NONE
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES [ ]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
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10 TYPE OF REPORTING PERSON CO
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</TABLE>
2
<PAGE> 3
14D-1
CUSIP NO. 364091 10 8
<TABLE>
<S> <C> <C>
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1. NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION
NOS. OF ABOVE PERSONS HASBRO, INC.
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS WC
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(e) OR 2(f) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION RHODE ISLAND
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
NONE
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8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES [ ]
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
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10. TYPE OF REPORTING PERSON CO
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</TABLE>
3
<PAGE> 4
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by New HIAC II Corp., a Delaware corporation ("Purchaser") and a
wholly owned subsidiary of Hasbro, Inc., a Rhode Island corporation ("Parent"),
to purchase all of the outstanding shares of common stock, par value $0.01 per
share (the "Common Stock") including the associated preferred stock purchase
rights issued pursuant to the Rights Agreement, dated as of January 17, 1990, by
and between the Company and Mellon Securities Trust Company, Rights Agent (the
"Rights" and, together with the Common Stock, the "Shares"), of Galoob Toys,
Inc., a Delaware corporation (the "Company"), at $12.00 per Share, net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated October 2, 1998 (the "Offer to
Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and in the
related Letter of Transmittal, a copy of which is attached hereto as Exhibit
(a)(2) (which, as amended or supplemented from time to time, together constitute
the "Offer").
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Galoob Toys, Inc., and the address
of its principal executive offices is 500 Forbes Boulevard, South San Francisco,
CA 94080. The telephone number of the Company at such location is (650)
952-1678.
(b) The information set forth in the "INTRODUCTION" of the Offer to
Purchase is incorporated herein by reference.
(c) The information set forth in "Price Range of the Shares; Dividends on
the Shares" of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by Purchaser and Parent. The
information set forth in the "INTRODUCTION" and "Certain Information Concerning
Parent and Purchaser" of the Offer to Purchase is incorporated herein by
reference. The name, business address, present principal occupation or
employment, the material occupations, positions, offices or employments for the
past five years and citizenship of each director and executive officer of Parent
and Purchaser and the name, principal business and address of any corporation or
other organization in which such occupations, positions, offices and employments
are or were carried on are set forth in Schedule I to the Offer to Purchase and
incorporated herein by reference.
(e)-(f) During the last five years, neither Purchaser nor Parent nor, to
the best knowledge of Purchaser and Parent, any of the persons listed in
Schedule I to the Offer to Purchase (i) have 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 as a result of which any such person 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)(1) Other than the transactions described in Item 3(b) below, neither
Purchaser nor Parent nor, to the best knowledge of Purchaser and Parent, any of
the persons listed in Schedule I to the Offer to Purchase have entered into any
transaction with the Company, or any of the Company's affiliates which are
corporations, since the commencement of the Company's third full fiscal year
preceding the date of this Statement, the aggregate amount of which was equal to
or greater than one percent of the consolidated revenues of the Company for (i)
the fiscal year in which such transaction occurred or (ii) the portion of the
current fiscal year which has occurred if the transaction occurred in such year.
(a)(2) Other than the transactions described in Item 3(b) below, neither
Purchaser nor Parent nor, to the best knowledge of Purchaser and Parent, any of
the persons listed in Schedule I to the Offer to Purchase have entered into any
transaction since the commencement of the Company's third full fiscal year
preceding the date of this Statement with the executive officers, directors or
affiliates of the Company which are not
4
<PAGE> 5
corporations, in which the aggregate amount involved in such transaction or in a
series of similar transactions, including all periodic installments in the case
of any lease or other agreement providing for periodic payments or installments,
exceeded $40,000.
(b) The information set forth in the "INTRODUCTION," "Certain Information
Concerning Parent and Purchaser," "Background of the Offer; Purpose of the Offer
and the Merger; The Merger Agreement and Certain Other Agreements" and "Plans
for the Company; Other Matters" of the Offer to Purchase is incorporated herein
by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in the "INTRODUCTION" and "Source and
Amount of Funds" of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS.
(a)-(e) The information set forth in the "INTRODUCTION," "Background of the
Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain
Other Agreements" and "Plans for the Company; Other Matters" of the Offer to
Purchase is incorporated herein by reference.
(f)-(g) The information set forth in the "INTRODUCTION" and "Effect of the
Offer on the Market for the Shares; Stock Listing; Exchange Act Registration;
Margin Regulations" of the Offer to Purchase is incorporated herein by
reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the "INTRODUCTION," "Certain
Information Concerning Parent and Purchaser" and "Background of the Offer;
Purpose of the Offer and the Merger; The Merger Agreement and Certain Other
Agreements" of the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the "INTRODUCTION," "Source and Amount of
Funds," "Background of the Offer; Purpose of the Offer and the Merger; The
Merger Agreement and Certain Other Agreements," "Plans for the Company; Other
Matters" and "Fees and Expenses" of the Offer to Purchase is incorporated herein
by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Fees and Expenses" of the Offer to Purchase
is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable.
ITEM 10. ADDITIONAL INFORMATION.
(a) Except as disclosed in Items 3 and 7 above, there are no present or
proposed material contracts, arrangements, understandings or relationships
between Purchaser or Parent, or to the best knowledge of Purchaser and Parent,
any of the persons listed in Schedule I to the Offer to Purchase, and the
Company or any of its executive officers, directors, controlling persons or
subsidiaries.
(b)-(c) The information set forth in the "INTRODUCTION," "Conditions to the
Offer" and "Certain Legal Matters" of the Offer to Purchase is incorporated
herein by reference.
5
<PAGE> 6
(d) The information set forth in "Effect of the Offer on the Market for the
Shares; Stock Listing; Exchange Act Registration; Margin Regulations" and
"Certain Legal Matters" 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, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, to the extent not otherwise incorporated herein by reference, is
incorporated herein by reference.
ITEM 11. MATERIALS TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated October 2, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Press Release of Parent dated September 28, 1998.
(a)(8) Press Release of Parent dated October 2, 1998.
(a)(9) Summary Advertisement.
(b) None.
(c)(1) Agreement and Plan of Merger, dated as of September 27, 1998, by and
among Parent, Purchaser and the Company.
(c)(2) Confidentiality Agreement, dated as of April 2, 1998, by and between
Parent and the Company (as amended on June 23, 1998).
(d) None.
(e) Not applicable.
(f) None.
6
<PAGE> 7
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: October 2, 1998
NEW HIAC II CORP.
BY: /s/ PHILLIP H. WALDOKS
------------------------------------
NAME: PHILLIP H. WALDOKS
TITLE: Senior Vice
President -- Corporate Legal
Affairs and Secretary
HASBRO, INC.
BY: /s/ PHILLIP H. WALDOKS
------------------------------------
NAME: PHILLIP H. WALDOKS
TITLE: Senior Vice
President -- Corporate Legal
Affairs and Secretary
7
<PAGE> 8
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE NO.
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<S> <C> <C>
(a)(1) Offer to Purchase, dated October 2, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Press Release of Parent dated September 28, 1998.
(a)(8) Press Release of Parent dated October 2, 1998.
(a)(9) Summary Advertisement.
(c)(1) Agreement and Plan of Merger, dated as of September 27,
1998, by and among Parent, Purchaser and the Company.
(c)(2) Confidentiality Agreement, dated as of April 2, 1998, by and
between Parent and the Company (as amended on June 23,
1998).
(d) None.
(e) Not Applicable.
(f) None.
</TABLE>
8
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
GALOOB TOYS, INC.
AT
$12.00 NET PER SHARE
BY
NEW HIAC II CORP.,
A WHOLLY OWNED SUBSIDIARY OF
HASBRO, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, OCTOBER 30, 1998, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF SEPTEMBER 27, 1998, BY AND AMONG HASBRO, INC. ("PARENT"), NEW HIAC II
CORP. ("PURCHASER") AND GALOOB TOYS, INC. (THE "COMPANY"). THE BOARD OF
DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (EACH AS
DEFINED HEREIN), AND HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN) THAT
NUMBER OF SHARES WHICH, WHEN ADDED TO THE SHARES BENEFICIALLY OWNED BY PARENT OR
PURCHASER (IF ANY), REPRESENTS AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON
A FULLY DILUTED BASIS (EXCLUDING THE WARRANTS (AS DEFINED HEREIN)) ON THE DATE
SHARES ARE ACCEPTED FOR PAYMENT. THE OFFER IS ALSO SUBJECT TO THE OTHER
CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE SECTION 14.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (as defined herein) should either (i) complete and sign the enclosed
Letter of Transmittal (or a facsimile thereof) in accordance with the
Instructions in the Letter of Transmittal, have such stockholder's signature
thereon guaranteed (if required by Instruction 1 to the Letter of Transmittal),
mail or deliver the Letter of Transmittal (or a facsimile thereof) and any other
required documents to the Depositary (as defined herein) and either deliver the
certificates for such Shares to the Depositary or tender such Shares pursuant to
the procedure for book-entry transfer set forth in Section 3 of this Offer to
Purchase or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder.
Any stockholder whose Shares are 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 to tender such Shares.
Any stockholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, or who cannot comply with
the procedures for book-entry transfer on a timely basis, or who cannot deliver
all required documents to the Depositary prior to the expiration of the Offer,
may tender such Shares by following the procedures for guaranteed delivery set
forth in Section 3 of this Offer to Purchase.
Questions and requests for assistance may be directed to the Information
Agent (as defined herein) at its address and telephone number set forth on the
back cover of this Offer to Purchase. Requests for additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other tender offer materials may be directed to the Information Agent or
brokers, dealers, commercial banks or trust companies.
------------------------
The Information Agent for the Offer is:
D.F. KING & CO., INC.
October 2, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION................................................ 1
THE OFFER................................................... 4
1. Terms of the Offer..................................... 4
2. Acceptance for Payment and Payment..................... 5
3. Procedures for Tendering Shares........................ 6
4. Withdrawal Rights...................................... 9
5. Certain U.S. Federal Income Tax Consequences........... 9
6. Price Range of the Shares; Dividends................... 10
7. Effect of the Offer on the Market for the Shares; Stock
Listing; Exchange Act Registration; Margin
Regulations............................................ 10
8. Certain Information Concerning the Company............. 11
9. Certain Information Concerning Parent and Purchaser.... 13
10. Sources and Amount of Funds............................ 14
11. Background of the Offer; Purpose of the Offer and the
Merger; the Merger Agreement and Certain Other
Agreements............................................. 15
12. Plans for the Company; Other Matters................... 24
13. Dividends and Distributions............................ 27
14. Conditions to the Offer................................ 27
15. Certain Legal Matters.................................. 28
16. Fees and Expenses...................................... 30
17. Miscellaneous.......................................... 31
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
OF PARENT AND PURCHASER................................. I-1
</TABLE>
<PAGE> 3
To the Holders of Common Stock of
GALOOB TOYS, INC.:
INTRODUCTION
New HIAC II Corp., a Delaware corporation ("Purchaser") and a wholly owned
subsidiary of Hasbro, Inc., a Rhode Island corporation ("Parent"), hereby offers
to purchase all outstanding shares of common stock, par value $0.01 per share
(the "Common Stock"), including the associated preferred stock purchase rights
issued pursuant to the Rights Agreement (as defined below) (the "Rights" and,
together with the Common Stock, the "Shares"), of Galoob Toys, Inc., a Delaware
corporation (the "Company"), at a price of $12.00 per Share, net to the seller
in cash, without interest (the "Offer Price"), 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 or supplemented from time to time, collectively
constitute the "Offer").
Tendering stockholders of record who tender Shares directly 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 by Purchaser pursuant to the Offer. Stockholders who hold their Shares
through a bank or broker should check with such institution as to whether they
charge any service fees. Purchaser will pay all fees and expenses of BankBoston,
N.A., which is acting as the Depositary (in such capacity, the "Depositary") and
D.F. King & Co., Inc., which is acting as Information Agent (in such capacity,
the "Information Agent"), incurred in connection with the Offer and in
accordance with the terms of the agreements entered into between Purchaser
and/or Parent and each such person. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER, AND HAS UNANIMOUSLY DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS ACCEPT THE OFFER
AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
Allen & Company Incorporated ("Allen & Company"), financial advisor to the
Company, has delivered to the Company Board its opinion, dated as of September
27, 1998 (the "Financial Advisor Opinion"), to the effect that, as of such date
and based upon and subject to certain assumptions and matters stated therein,
the consideration to be received by the holders of Shares (other than Parent and
its affiliates) in the Offer and the Merger was fair, from a financial point of
view, to such holders. A copy of the Financial Advisor Opinion is attached as an
exhibit to the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9"), which has been filed by the Company with the Securities
and Exchange Commission (the "Commission") in connection with the Offer and
which is being mailed to holders of Shares herewith. Holders of Shares are urged
to, and should, read the Financial Advisor Opinion carefully.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES
WHICH, WHEN ADDED TO THE SHARES BENEFICIALLY OWNED BY PARENT OR PURCHASER (IF
ANY), REPRESENTS AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS (EXCLUDING THE WARRANTS) ON THE DATE SHARES ARE ACCEPTED FOR
PAYMENT (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO THE OTHER
CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE SECTION 14. As used in this
Offer to Purchase, "fully diluted basis" takes into account the exercise of all
outstanding options and other rights and securities exercisable into shares of
Common Stock (excluding the Warrants). The Company has represented and warranted
to Parent and Purchaser that, as of September 27, 1998, there were 18,127,864
Shares issued and outstanding, 2,048,222 Shares were issuable pursuant to the
exercise of options ("Options"), 1,450,000 Shares were issuable pursuant to the
exercise of warrants expiring October 14, 2009, held by Lucasfilm Ltd. (the
"Lucasfilm Ltd. Warrants"), and 2,130,000 Shares were issuable pursuant to the
exercise of warrants expiring October 14, 2009, held by Lucas Licensing Ltd.
(the
<PAGE> 4
"Lucas Licensing Ltd. Warrants" and, together with the Lucasfilm Ltd. Warrants
and an obligation of the Company to issue 24,299 additional warrants to
Lucasfilm Ltd. and Lucas Licensing Ltd., the "Warrants"). The Merger Agreement
provides, among other things, that the Company will not, without the prior
written consent of Parent, issue any additional Shares (except upon the exercise
of outstanding Options). See Section 11. Based on the foregoing and assuming the
issuance of 2,048,222 Shares issuable upon the exercise of outstanding Options,
Purchaser believes that the Minimum Condition will be satisfied if 10,088,044
Shares are validly tendered and not withdrawn prior to the Expiration Date.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 27, 1998 (the "Merger Agreement"), by and among Parent,
Purchaser and the Company. Pursuant to the Merger Agreement and the Delaware
General Corporation Law, as amended (the "DGCL"), as soon as practicable after
the completion of the Offer and satisfaction or waiver, if permissible, of all
conditions, including the purchase of Shares pursuant to the Offer (sometimes
referred to herein as the "consummation" of the Offer) and the approval and
adoption of the Merger Agreement by the stockholders of the Company (if required
by applicable law), Purchaser shall be merged with and into the Company (the
"Merger") and the Company will be the surviving corporation in the Merger (the
"Surviving Corporation"). At the effective time of the Merger (the "Effective
Time"), each Share then outstanding, other than Shares held by (i) the Company
or any of its subsidiaries, (ii) Parent or any of its subsidiaries including
Purchaser and (iii) stockholders who properly perfect their dissenters' rights
under the DGCL, will be converted into the right to receive $12.00 in cash or
any higher price per Share paid in the Offer (the "Merger Consideration"),
without interest. The Merger Agreement is more fully described in Section 11.
The Merger Agreement provides that, upon the purchase by Purchaser of at
least a majority of the Shares pursuant to the Offer and from time to time
thereafter, Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Company Board so that the percentage
of Parent's nominees on the Company Board equals the percentage of outstanding
Shares beneficially owned by Parent and its affiliates. The Company shall, at
such time, upon the request of Purchaser promptly use its best efforts to take
all action necessary to cause such persons designated by Parent to be elected to
the Company Board, if necessary, by increasing the size of the Company Board or
securing resignations of incumbent directors or both.
Consummation of the Merger is conditioned upon, among other things, the
approval and adoption by the requisite vote of stockholders of the Company of
the Merger Agreement and the Merger, if required by applicable law and the
Company's Certificate of Incorporation (the "Certificate of Incorporation"). See
Section 11. Under the DGCL and pursuant to the Certificate of Incorporation, the
affirmative vote of the holders of a majority of the outstanding Shares is the
only vote of any class or series of the Company's capital stock that would be
necessary to approve the Merger Agreement and the Merger at a meeting of the
Company's stockholders. If the Minimum Condition is satisfied and Purchaser
purchases at least a majority of the outstanding Shares in the Offer, Purchaser
will be able to effect the Merger without the affirmative vote of any other
stockholder. Pursuant to the Merger Agreement, Parent and Purchaser have agreed
to vote the Shares acquired by them pursuant to the Offer in favor of the
Merger. See Section 12. The Merger Agreement is more fully described in Section
11.
2
<PAGE> 5
Under Section 253 of the DGCL, if a corporation owns at least 90% of the
outstanding shares of each class of a subsidiary corporation, the corporation
holding such stock may merge such subsidiary into itself, or itself into such
subsidiary, without any action or vote on the part of the board of directors or
the stockholders of such other corporation (a "short-form merger"). In the event
that Purchaser acquires in the aggregate at least 90% of the outstanding Shares
pursuant to the Offer or otherwise, then, at the election of Parent, a short-
form merger could be effected without any further approval of the Company Board
or the stockholders of the Company. In the Merger Agreement, Parent, Purchaser
and the Company have agreed that, notwithstanding that all conditions to the
Offer are satisfied or waived as of the scheduled Expiration Date, Purchaser may
extend the Offer for a period not to exceed ten (10) business days, subject to
certain conditions, if the Shares tendered pursuant to the Offer are less than
90% of the outstanding Shares. Even if Purchaser does not own 90% of the
outstanding Shares following consummation of the Offer, Parent or Purchaser
could seek to purchase additional shares in the open market or otherwise in
order to reach the 90% threshold and employ a short-form merger. The per share
consideration paid for any Shares so acquired in open market purchases may be
greater or less than the Offer Price. Parent presently intends to effect a
short-form merger, if permitted to do so under the DGCL, pursuant to which
Purchaser will be merged with and into the Company. See Section 12.
The Company has distributed one Right for each outstanding Share pursuant
to the Preferred Stock Rights Agreement, dated as of January 17, 1990, by and
between the Company and Mellon Securities Trust Company, as Rights Agent (the
"Rights Agreement"). The Company has represented in the Merger Agreement that it
has taken all action which may be necessary under the Rights Agreement so that
(i) the Offer is deemed to be an Approved Transaction (as defined in the Rights
Agreement) and (ii) the execution and delivery of the Merger Agreement (and any
amendments thereto) and the consummation of the Merger and the transactions
contemplated thereby will not cause (x) Parent and/or Purchaser to constitute an
Acquiring Person (as defined in the Rights Agreement), (y) a Distribution Date,
Section 13 Event, Triggering Event or a Stock Acquisition Date (as each such
term is defined in the Rights Agreement) to occur or (z) the Rights (as defined
in the Rights Agreement) to become exercisable pursuant to Section 11(a)(ii) of
the Rights Agreement or otherwise.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
3
<PAGE> 6
4
THE OFFER
1. TERMS OF THE OFFER.
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 prior to the Expiration Date, and not withdrawn in accordance with
Section 4. The term "Expiration Date" shall mean 12:00 Midnight, New York City
time, on Friday, October 30, 1998, unless and until Purchaser, in accordance
with the terms of the Merger Agreement, shall have extended the period of time
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. In the Merger Agreement, Parent and Purchaser have agreed that if
all conditions to Purchaser's obligation to accept for payment and pay for
Shares pursuant to the Offer are not satisfied on the scheduled Expiration Date,
Purchaser may, in its sole discretion, extend the Offer for additional periods;
provided, however, that Purchaser may not extend the Offer beyond March 1, 1999,
without the consent of the Company.
The Offer is conditioned upon the satisfaction of the Minimum Condition,
the expiration or termination of all waiting periods imposed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the other conditions set forth in Section 14. If such conditions are
not satisfied prior to the Expiration Date, Purchaser reserves the right,
subject to the terms of the Merger Agreement and subject to complying with
applicable rules and regulations of the Commission, to (i) decline to purchase
any Shares tendered in the Offer and terminate the Offer and return all tendered
Shares to the tendering stockholders, (ii) waive any or all conditions to the
Offer (except the Minimum Condition) and, to the extent permitted by applicable
law, purchase all Shares validly tendered, (iii) extend the Offer and, subject
to the right of stockholders to withdraw Shares until the Expiration Date,
retain all Shares which have been tendered during the period or periods for
which the Offer is extended or (iv) subject to the next sentence, amend the
Offer. The Merger Agreement provides that Purchaser will not decrease the Offer
Price, change the form of consideration to be paid in the Offer, waive the
Minimum Condition, decrease the number of Shares sought in the Offer, amend any
other condition to the Offer in any manner materially adverse to the holders of
the Shares or impose additional conditions to the Offer without the written
consent of the Company. Purchaser has agreed that if all of the conditions set
forth in Section 14 have not been satisfied on any scheduled Expiration Date
then, provided that all such conditions are reasonably capable of being
satisfied, Purchaser shall extend the Offer from time to time until such
conditions are satisfied or waived, provided that Purchaser shall not be
required to extend the Offer beyond March 1, 1999.
The Merger Agreement requires Purchaser to accept for payment and pay for
all Shares validly tendered and not withdrawn pursuant to the Offer if all
conditions to the Offer are satisfied on the Expiration Date. However, if,
immediately prior to the scheduled Expiration Date, all conditions to the Offer
are satisfied but the number of Shares tendered and not withdrawn pursuant to
the Offer constitutes less than 90% of the Shares outstanding, Purchaser may
extend the Offer for a period not to exceed ten (10) business days so long as
Purchaser irrevocably waives the satisfaction of any of the conditions to the
Offer (other than the Minimum Condition and the condition set forth in paragraph
(b) of Section 14 hereof) that subsequently may not be satisfied during such
extension of the Offer. As used in this Offer to Purchase, "business day" has
the meaning set forth in Rule 14d-1 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement thereof, the announcement in the
case of an extension to be issued no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date in
accordance with Rules 14d-4(c), 14d-6(d) and 14e-1(d) under the Exchange Act.
Without limiting the obligation of Purchaser under such Rules or the manner in
which Purchaser may choose to make any public announcement, Purchaser currently
intends to make announcements by issuing a press release to the Dow Jones News
Service.
If Purchaser extends the Offer, or if Purchaser (whether before or after
its acceptance for payment of Shares) is delayed in its purchase of, or payment
for, Shares or is unable to pay for Shares pursuant to the
5
<PAGE> 7
Offer for any reason, then, without prejudice to Purchaser's rights under the
Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and
such Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in Section 4. However, the ability of
Purchaser to delay the payment for Shares which Purchaser has accepted for
payment is limited by Rule 14e-1(c) under the Exchange Act, which requires that
a bidder pay the consideration offered or return the securities deposited by, or
on behalf of, holders of securities promptly after the termination or withdrawal
of the Offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will disseminate additional tender offer materials 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 the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances then existing, including
the relative materiality of the changed terms or information. In a public
release, the Commission has stated its view that an offer must remain open for a
minimum period of time following a material change in the terms of the Offer and
that waiver of a material condition, such as the Minimum Condition, is a
material change in the terms of the Offer. The release states that an offer
should remain open for a minimum of five (5) business days from the date a
material change is first published, or sent or given to security holders and
that, if material changes are made with respect to information not materially
less significant than the offer price and the number of shares being sought, a
minimum of ten (10) business days may be required to allow adequate
dissemination and investor response. The requirement to extend the Offer will
not apply to the extent that the number of business days remaining between the
occurrence of the change and the then-scheduled Expiration Date equals or
exceeds the minimum extension period that would be required because of such
amendment. If, prior to the Expiration Date, Purchaser increases the
consideration offered to holders of Shares pursuant to the Offer, such increased
consideration will be paid to all holders whose Shares are purchased in the
Offer whether or not such Shares were tendered prior to such increase.
The Company has provided Purchaser with the Company's stockholder lists 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 will be
mailed to record holders of Shares and will be furnished to brokers, dealers,
banks and similar persons whose names, or the names of whose nominees, appear on
the stockholder lists 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.
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, as soon as
practicable after the Expiration Date, all Shares validly tendered prior to the
Expiration Date and not properly withdrawn in accordance with Section 4.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to Purchaser and not
withdrawn, if, as and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares. 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 stockholders for the purpose of receiving payment from Purchaser and
transmitting payment to tendering stockholders. In all cases, payment for Shares
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates for such Shares (or a timely Book
Entry Confirmation (as defined below) with respect thereto), (ii) a Letter of
Transmittal (or 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 (as defined below) and (iii) any other documents required by the
Letter of Transmittal. Accordingly, payment may be made to tendering
stockholders at different times if delivery of the Shares and other required
documents occur at different times. The per share consideration paid to any
holder of Shares pursuant to the Offer will be the highest per share
consideration paid to any other holder of such Shares pursuant to the Offer.
5
<PAGE> 8
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY
PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY
IN MAKING SUCH PAYMENT.
The Purchaser expressly reserves the right, in its sole discretion, to
delay acceptance for payment of, or payment for, Shares in order to comply in
whole or in part with any applicable law. If Purchaser is delayed in its
acceptance for payment of, or payment for, Shares or is unable to accept for
payment or pay for Shares pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer (including such rights as are
set forth in Sections 1 and 14) (but subject to compliance with Rule 14e-1(c)
under the Exchange Act), the Depositary may, nevertheless, on behalf of
Purchaser, retain tendered Shares, and such Shares may not be withdrawn except
to the extent tendering stockholders are entitled to exercise, and duly
exercise, withdrawal rights as described in Section 4.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted representing more Shares than are
tendered, certificates evidencing Shares not tendered or not accepted for
purchase will be returned to the tendering stockholder, or such other person as
the tendering stockholder shall specify in the Letter of Transmittal, as
promptly as practicable following the expiration, termination or withdrawal of
the Offer. In the case of Shares delivered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3, such Shares will be credited to such account
maintained at the Book-Entry Transfer Facility as the tendering stockholder
shall specify in the Letter of Transmittal, as promptly as practicable following
the expiration, termination or withdrawal of the Offer. If no such instructions
are given with respect to Shares delivered by book-entry transfer, any such
Shares not tendered or not purchased will be returned by crediting the account
at the Book-Entry Transfer Facility designated in the Letter of Transmittal as
the account from which such Shares were delivered.
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 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 stockholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender. For Shares to be validly tendered pursuant to the Offer,
either (i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees, or in the
case of a book-entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date and
either certificates evidencing tendered Shares must be received by the
Depositary at one of such addresses or such Shares must be delivered to the
Depositary pursuant to the procedures for book-entry transfer set forth below
and a Book-Entry Confirmation must be received by the Depositary, in each case
prior to the Expiration Date, or (ii) the tendering stockholder must comply with
the guaranteed delivery procedures described below.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two (2) business days after the date
of this Offer to Purchase. Any financial institution that is a participant in
the Book-Entry Transfer Facility's system may make book-entry delivery of Shares
by causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account 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 into the Depositary's account at the
Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message, and any other required documents must, in any case, be
transmitted to, and received by, the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date,
or the tendering stockholder must comply with the guaranteed delivery procedures
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at the Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation."
6
<PAGE> 9
DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO THE
BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the 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 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.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A 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. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
the Book Entry Transfer Facility's systems whose name appears on a security
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on the
Letter of Transmittal or (ii) if such Shares are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (each, an
"Eligible Institution" and, collectively, "Eligible Institutions"). In all other
cases, all signatures on Letters of Transmittal must be guaranteed by an
Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If
the certificates for Shares 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
certificates for Shares not tendered or not accepted for payment are to be
returned, to a person other than the registered holder of the certificates
surrendered, then the tendered certificates for such Shares must be endorsed or
accompanied by appropriate stock powers, in either case, signed exactly as the
name or names of the registered holders or owners appear on the certificates,
with the signatures on the certificates or stock powers guaranteed as aforesaid.
See Instruction 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(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 provided by Purchaser, is received by
the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for (or a Book-Entry Confirmation with respect
to) such Shares, together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message,
and any other required documents, are received by the Depositary within
three (3) trading days after the date of execution of such Notice of
Guaranteed Delivery. A "trading day" is any day on which the New York Stock
Exchange (the "NYSE") is open for business.
7
<PAGE> 10
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mailed to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering stockholder and
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing the Letter of Transmittal as set forth above
(including delivery through an Agent's Message), the tendering stockholder will
irrevocably appoint designees of Parent as such stockholder's attorneys-in-fact
and proxies in the manner set forth in the Letter of Transmittal, each with full
power of substitution, to the full extent of such stockholder's rights with
respect to the Shares tendered by such stockholder and accepted for payment by
Purchaser and with respect to any and all non-cash dividends, distributions,
rights, other Shares or other securities issued or issuable in respect of such
Shares on or after September 27, 1998 (collectively, "Distributions"). All such
proxies will be considered coupled with an interest in the tendered Shares. Such
appointment will be effective if, as and when, and only to the extent that,
Purchaser accepts for payment Shares tendered by such stockholder as provided
herein. All such powers of attorney and proxies will be irrevocable and will be
deemed granted in consideration of the acceptance for payment by Purchaser of
Shares tendered in accordance with the terms of the Offer. Upon such
appointment, all prior powers of attorney, proxies and consents given by such
stockholder with respect to such Shares (and any and all Distributions) will,
without further action, be revoked and no subsequent powers of attorney,
proxies, consents or revocations may be given by such stockholder (and, if
given, will not be deemed effective). The designees of Parent will thereby be
empowered to exercise all voting and other rights with respect to such Shares
(and any and all Distributions), including, without limitation, in respect of
any annual or special meeting of the Company's stockholders (and any adjournment
or postponement thereof), actions by written consent in lieu of any such meeting
or otherwise, as each such attorney-in-fact and proxy or his substitute shall in
his sole discretion deem proper. Purchaser reserves the right to require that,
in order for Shares to be deemed validly tendered, immediately upon Purchaser's
acceptance for payment of such Shares, Purchaser must be able to exercise full
voting, consent and other rights with respect to such Shares (and any and all
Distributions), including voting at any meeting of stockholders.
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 will be final and binding. Purchaser reserves the absolute right
to reject any or all tenders of any Shares determined by it not to be in proper
form or the acceptance for payment of which, or payment for which, may, in the
opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the
absolute right, in its sole discretion, subject to the provisions of the Merger
Agreement, to waive any defect or irregularity in any tender of Shares of any
particular stockholder, whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares will be deemed to
have been validly made until all defects or irregularities relating thereto have
been cured or waived. None of Purchaser, Parent, 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. Subject to the terms of the Merger Agreement, Purchaser's
interpretation of the terms and conditions of the Offer in this regard
(including the Letter of Transmittal and the instructions thereto) will be final
and binding.
Backup Withholding. Under the "backup withholding" provisions of federal
income tax law, unless a tendering registered holder, or its assignee (in either
case, the "Payee"), satisfies the conditions described in Instruction 10 of the
Letter of Transmittal or is otherwise exempt, the cash payable as a result of
the Offer may be subject to backup withholding tax at a rate of 31% of the gross
proceeds. To prevent backup withholding, each Payee should complete and sign the
Substitute Form W-9 provided in the Letter of Transmittal. See Instruction 10 to
the Letter of Transmittal.
8
<PAGE> 11
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4 or as provided by applicable
law, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer
may be withdrawn pursuant to the procedures set forth below at any time prior to
the Expiration Date and, unless theretofore accepted for payment and paid for by
Purchaser pursuant to the Offer, may also be withdrawn at any time after
December 1, 1998.
To be effective, a written, telegraphic 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 such 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 of the
Shares to be withdrawn, if different from the name of the person who tendered
the Shares. If certificates evidencing Shares 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, unless such Shares have been tendered by an
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been delivered pursuant to
the procedures for book-entry transfer as set forth in Section 3, any notice of
withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares and
otherwise comply with such Book-Entry Transfer Facility's procedures.
Withdrawals of tendered Shares may not be rescinded, and any Shares
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by again following one of the
procedures described in Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
which determination will be final and binding. None of Purchaser, Parent, 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.
5. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES.
The following is a general summary of certain U.S. federal income tax
consequences of the Offer and the Merger relevant to a beneficial holder of
Shares whose Shares are tendered and accepted for payment pursuant to the Offer
or whose Shares are converted to cash in the Merger (a "Holder"). The discussion
is based on the Internal Revenue Code of 1986, as amended (the "Code"),
regulations issued thereunder, judicial decisions and administrative rulings,
all of which are subject to change, possibly with retroactive effect. The
following does not address the U.S. federal income tax consequences to all
categories of Holders that may be subject to special rules (e.g., holders who
acquired their Shares pursuant to the exercise of employee stock options or
other compensation arrangements with the Company, holders who perfect their
appraisal rights under the DGCL, foreign holders, insurance companies,
tax-exempt organizations, dealers in securities and persons who have acquired
the Shares as part of a straddle, hedge, conversion transaction or other
integrated investment), nor does it address the federal income tax consequences
to persons who do not hold the Shares as "capital assets" within the meaning of
Section 1221 of the Code (generally, property held for investment). Holders
should consult their own tax advisors regarding the U.S. federal, state, local
and foreign income and other tax consequences of the Offer and the Merger.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for U.S. federal income tax purposes and may also be a
taxable transaction under applicable state, local and foreign income and other
tax laws. In general, a Holder who sells Shares pursuant to the Offer or
receives cash in exchange for Shares pursuant to the Merger will recognize gain
or loss for federal income tax purposes equal to the difference, if any, between
the amount of cash received and the Holder's adjusted tax basis in the Shares
sold pursuant to the Offer or surrendered for cash pursuant to the Merger. Gain
or loss will be determined separately for each block of Shares (i.e., Shares
acquired at the same cost in a single transaction) tendered pursuant to the
Offer or surrendered for cash pursuant to the Merger. Such gain or loss will be
long-term capital gain or loss if the Holder has held the Shares for more than
one (1) year at the time of the
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<PAGE> 12
consummation of the Offer or the Merger. Under recently adopted amendments to
the Code, capital gains recognized by an individual investor (or an estate or
certain trusts) upon a disposition of a Share that has been held for more than
one year generally will be subject to a maximum tax rate of 20% or, in the case
of a Share that has been held for one year or less, will be subject to tax at
ordinary income rates. Certain limitations apply to the use of capital losses.
6. PRICE RANGE OF THE SHARES; DIVIDENDS.
The Shares are traded through the NYSE under the symbol "GAL". The
following table sets forth, for each of the fiscal quarters indicated, the high
and low reported closing sales price per Share on the NYSE.
<TABLE>
<CAPTION>
COMMON STOCK
----------------
HIGH LOW
------ ------
<S> <C> <C>
Fiscal Year Ended December 31, 1996
First Quarter ended March 31, 1996........................ $20.25 $10.50
Second Quarter ended June 30, 1996........................ 28.25 18.88
Third Quarter ended September 30, 1996.................... 30.50 22.38
Fourth Quarter ended December 31, 1996.................... 33.25 14.00
Fiscal Year Ended December 31, 1997
First Quarter ended March 31, 1997........................ $19.75 $12.63
Second Quarter ended June 30, 1997........................ 19.63 16.25
Third Quarter ended September 30, 1997.................... 23.81 13.56
Fourth Quarter ended December 31, 1997.................... 17.81 9.19
Fiscal Year Ending December 31, 1998
First Quarter ended March 31, 1998........................ $10.06 $ 8.13
Second Quarter ended June 30, 1998........................ 11.69 8.69
Third Quarter ended September 30, 1998.................... 11.44 6.88
</TABLE>
On September 25, 1998, the last full trading day prior to the public
announcement of the execution of the Merger Agreement by the Company, Parent and
Purchaser, the last reported closing sales price of the Shares on the NYSE was
$8.00 per Share. On October 1, 1998, the last full trading day prior to the
commencement of the Offer, the last reported sales price of the Shares on the
NYSE was $11.13 per Share. Stockholders are urged to obtain a current market
quotation for the Shares.
The Company did not declare or pay any cash dividends during any of the
periods indicated in the above table. In addition, under the terms of the Merger
Agreement, the Company is not permitted to declare or pay dividends with respect
to the Shares without the prior written consent of Parent and Parent does not
intend to consent to any such declaration or payment.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK LISTING; EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS.
Market for the Shares. The purchase of Shares by the Purchaser pursuant to
the Offer will reduce the number of holders of Shares and the number of Shares
that might otherwise trade publicly and, depending upon the number of Shares so
purchased, could adversely affect the liquidity and market value of the
remaining Shares held by the public.
Stock Listing. The Shares are listed on the NYSE. Depending upon the
aggregate market value and the per share price of any Shares not purchased
pursuant to the Offer, the Shares may no longer meet the requirements for
continued listing on the NYSE. According to the NYSE's published guidelines, the
NYSE would consider delisting the Shares if, among other things, the number of
record holders of at least 100 or more Shares should fall below 1,200, the
number of publicly held Shares (exclusive of holdings of officers and directors
of the Company and their immediate families and other concentrated holdings of
10% or more)
10
<PAGE> 13
should fall below 600,000, or the aggregate market value of the publicly held
Shares should fall below $5,000,000. According to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, there were approximately
1,258 holders of record of Shares as of March 2, 1998. The Company has
represented that, as of September 27, 1998, 18,127,864 Shares were issued and
outstanding.
If the NYSE were to delist the Shares, the market therefor could be
adversely affected. 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 the Nasdaq or other
sources. The extent of the public market for the Shares and the availability of
such quotations would, however, depend upon the number of stockholders and/or
the aggregate market value of such Shares remaining at such time, the interest
in maintaining a market in such Shares on the part of securities firms, the
possible termination of registration of such Shares under the Exchange Act 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 or whether it
would cause future market prices to be greater or less than the Offer Price.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its stockholders and to the Commission and would make certain
provisions of the Exchange Act no longer applicable to the Company, such as the
short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement pursuant to Section 14(a) in connection with
stockholders' meetings and the related requirement of furnishing an annual
report to stockholders and the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 or Rule 144A
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
may be impaired or eliminated.
Margin Regulations. The Shares are presently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which status has the effect, among other things, of
allowing brokers to extend credit on the collateral of the Shares. Depending
upon factors similar to those described above regarding stock exchange listing
and market quotations, it is possible that, following the Offer, the Shares
would no longer constitute "margin securities" for the purposes of the margin
regulations of the Federal Reserve Board and therefore could no longer be used
as collateral for loans made by brokers. In addition, if registration of the
Shares under the Exchange Act were terminated, the Shares would no longer
constitute "margin securities."
Purchaser currently intends to seek delisting of the Shares from the NYSE
and the termination of the registration of the Shares under the Exchange Act as
soon after the completion of the Offer as the requirements for such delisting
and termination are met. If the NYSE listing and the Exchange Act registration
of the Shares are not terminated prior to the Merger, then the Shares will be
delisted from the NYSE and the registration of the Shares under the Exchange Act
will be terminated following the consummation of the Merger.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
General. The information concerning the Company contained in this Offer to
Purchase, including that set forth below under the caption "Selected Financial
Information," has been furnished by the Company or has been taken from or based
upon publicly available documents and records on file with the Commission and
other public sources. Neither Parent, Purchaser nor the Information Agent
assumes responsibility for the accuracy or completeness of the information
concerning the Company contained in such documents and records or for any
failure by the Company to disclose events which may have occurred or may affect
the significance or accuracy of any such information but which are unknown to
Parent, Purchaser or the Information Agent.
11
<PAGE> 14
The Company designs, develops, markets and sells high quality toys
worldwide. Founded in 1957, the Company's current product categories include:
small scale vehicles, including Micro Machines(R) vehicles; entertainment-based
toys, including Star Wars(TM) toys; mini-dolls, comprised of the number one
mini-doll brand in 1997, Pound Puppies(R); recently introduced authentic
military vehicles, figures and playsets, including Battle Squads(TM); and a
series of Titanic collector fashion dolls and celebrity-based fashion dolls. The
Company's first celebrity fashion doll offering is the Spice Girls(TM) line
based on the British pop music group. Micro Machines(R) is a comprehensive line
of miniature scale toys for boys, embracing traditional vehicle, military and
male action play patterns.
Selected Financial Information. Set forth below is certain consolidated
financial information with respect to the Company, excerpted or derived from the
Company's Annual Reports on Form 10-K for the fiscal years ended December 31,
1997 and December 31, 1996 and its Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998, each as filed with the Commission pursuant to the Exchange
Act.
More comprehensive financial information is included in such reports and in
other documents filed by the Company with the Commission. The following summary
is qualified in its entirety by reference to such reports and other documents
and all of the financial information (including any related notes) contained
therein. Such reports, documents and financial information may be inspected and
copies may be obtained from the Commission in the manner set forth below.
GALOOB TOYS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
(UNAUDITED) FISCAL YEARS ENDED DECEMBER 31,
-------------------------- --------------------------------------------
1998 1997 1997 1996 1995
--------- --------- ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues............. $ 70,280 $ 92,954 $239,551 $284,905 $220,044
Earnings (loss) from
operations............ (5,136) (3,069) (21,858) 23,664 12,989
Net earnings (loss)...... (2,939) (15,441) (29,450) 18,451 9,399
Net earnings (loss) per
common share:
Basic............... 0.04 0.73 (1.63) (0.41) 0.62
Diluted............. 0.04 0.73 (1.63) (0.41) 0.60
BALANCE SHEET DATA:
Total Assets............. $195,584 $165,777 $207,783 $196,905 $106,582
Total Liabilities........ 36,274 30,969 45,753 47,114 51,912
Total Shareholders'
Equity................ 159,310 134,808 162,030 149,791 54,172
</TABLE>
Other Financial Information. During the course of the discussions between
Parent and the Company that led to the execution of the Merger Agreement, the
Company provided Parent with certain information about the Company and its
financial performance which is not publicly available. The information provided
12
<PAGE> 15
included financial projections for the Company as an independent company (i.e.,
without regard to the impact to the Company of a transaction with Parent), which
information is summarized as set forth below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
--------------------------------
1999 2000 2001 2002
----- ----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net revenues................................................ 482.4 426.4 370.9 522.8
EBIT(1)..................................................... 96.2 78.6 57.0 106.2
Net earnings................................................ 57.7 50.7 39.2 70.5
</TABLE>
- ---------------
(1) "EBIT" is defined as net earnings from operations before interest and taxes.
The foregoing information was prepared by the Company solely for internal use
and not for publication or with a view to complying with the published
guidelines of the SEC regarding projections or with the guidelines established
by the American Institute of Certified Public Accountants and are included in
this Offer to Purchase only because they were furnished to Parent. The foregoing
information is "forward-looking" and inherently subject to significant
uncertainties and contingencies, many of which are beyond the control of the
Company, including industry performance, general business and economic
conditions, changing competition, adverse changes in applicable laws,
regulations or rules governing environmental, tax or accounting matters and
other matters. Although the Company believes the assumptions used in preparing
this information were reasonable when made, such assumptions are inherently
subject to significant uncertainties and contingencies which are impossible to
predict and beyond the Company's control. One cannot predict whether the
assumptions made in preparing the foregoing information will be accurate, and
accordingly, there can be no assurance, and no representation or warranty is
made, that actual results will not vary materially from those described above.
The inclusion of this information should not be regarded as an indication that
Parent, Purchaser, the Company or anyone who received this information
considered it a reliable prediction of future events, and this information
should not be relied on as such. None of Parent, Purchaser, the Company or Allen
& Company assumes any responsibility for the validity, reasonableness, accuracy
or completeness of the projections, and the Company has made no representation
to Parent or Purchaser regarding the financial information described above. The
projections have not been adjusted to reflect the effects of the Merger.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file 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
remuneration, options granted to them, the principal holders of the Company's
securities and any material interests of such persons in transactions with the
Company is required to be disclosed in proxy statements distributed to the
Company's stockholders 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 at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
Seven World Trade Center, Suite 1300, New York, NY 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such
information should be obtainable by mail, upon payment of the Commission's
customary charges, by writing to the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also maintains a website on
the internet at http://www.sec.gov that contains reports, proxy statements and
other information relating to the Company which have been filed via the
Commission's EDGAR System.
9. CERTAIN INFORMATION CONCERNING PARENT AND PURCHASER.
Parent and Purchaser. Parent is a Rhode Island corporation and (with its
subsidiaries) is a leading global designer, manufacturer and marketer of a
diverse line of toy products and related items. Included in its offerings are
games, including traditional board and card, hand-held electronic and
interactive CD-ROM, and puzzles, preschool, boys' action and girls' toys, dolls,
plush products and infant products. The Company also licenses various
tradenames, characters and other property rights for use in connection with the
sale by others of noncompeting toys and non-toy products.
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<PAGE> 16
Purchaser is a newly incorporated Delaware corporation organized in
connection with the Offer and the Merger and has not carried on any significant
activities other than in connection with the Offer and the Merger. All of the
outstanding capital stock of Purchaser is owned directly by Parent. Until
immediately prior to the time Purchaser purchases Shares pursuant to the Offer,
it is not anticipated that Purchaser will have any significant assets or
liabilities or engage in any significant activities other than those incident to
its formation and capitalization and the transactions contemplated by the Offer
and the Merger.
The principal offices of Purchaser and Parent are located at 1027 Newport
Avenue, Pawtucket, Rhode Island 02861. The telephone number of Parent and
Purchaser at such location is (401) 431-8697.
For certain information concerning the executive officers and directors of
Parent and Purchaser, see Schedule I.
Except as set forth in this Offer to Purchase, neither Purchaser nor
Parent, nor, to the best knowledge of Purchaser or Parent, any of the persons
listed on Schedule I, nor any associate or majority owned subsidiary of any of
the foregoing, beneficially owns or has a right to acquire any Shares, and
neither Purchaser nor Parent nor, to the best of knowledge of Purchaser or
Parent, any of the persons or entities referred to above, nor any of the
respective executive officers, directors or subsidiaries of any of the
foregoing, has effected any transaction in the Shares during the past sixty (60)
days.
Except as set forth in this Offer to Purchase, neither Purchaser nor Parent
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 securities of the Company, 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, none of Purchaser, Parent,
any of their respective affiliates, nor, to the best knowledge of Purchaser or
Parent, any of the persons listed on Schedule I, has had, since January 1, 1995,
any business relationships or transactions with the Company or any of its
executive officers, directors or affiliates that would be required to be
reported under the rules of the Commission. Except as set forth in this Offer to
Purchase, since January 1, 1995 there have been no contacts, negotiations or
transactions between Purchaser, Parent, any of their respective affiliates or,
to the best knowledge of Purchaser or Parent, any of the persons listed on
Schedule I, and the Company or its affiliates concerning a merger, consolidation
or acquisition, tender offer or other acquisition of securities, election of
directors or a sale or other transfer of a material amount of assets.
Available Information. Parent is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports, proxy statements and other information with the Commission
relating to its business, financial condition and other matters. Information as
of particular dates concerning Parent's directors and officers, their
remuneration, options granted to them, the principal holders of Parent's
securities and any material interests of such persons in transactions with
Parent is required to be disclosed in proxy statements distributed to Parent's
stockholders 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 at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661. Copies of such information should be
obtainable by mail, upon payment of the Commission's customary charges, by
writing to the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a website at
http://www.sec.gov that contains reports, proxy statements and other information
relating to Parent which have been filed via the EDGAR System. Such materials
should also be available at the offices of the American Stock Exchange ("Amex"),
86 Trinity Place, New York, NY 10006.
10. SOURCES AND AMOUNT OF FUNDS.
The Offer is not conditioned upon any financing arrangements. The total
amount of funds required by Purchaser to consummate the Offer and the Merger,
including the fees and expenses of the Offer and the
14
<PAGE> 17
Merger, is estimated to be approximately $227 million. Purchaser will obtain all
such funds from Parent in the form of capital contributions and/or loans. Parent
will provide such funds through a combination of its cash on hand and short term
borrowings, including but not limited to, commercial paper.
11. BACKGROUND OF THE OFFER; PURPOSE OF THE OFFER AND THE MERGER; THE MERGER
AGREEMENT AND CERTAIN OTHER AGREEMENTS.
Contacts with the Company; Background of the Offer.
On several occasions between January 1995 and February 1998, senior
executive officers of Parent contacted Mark D. Goldman, the President, Chief
Executive Officer and a Director of the Company, and suggested that the
companies explore the possibility of a business combination. None of these
contacts led to any agreements or understandings.
In February 1998, Alfred J. Verrecchia, Executive Vice President and
President -- Global Operations of Parent, telephoned Mr. Goldman and again
suggested that the companies explore the possibility of a business combination.
On April 2, 1998, Mr. Verrecchia and Mr. Goldman met in New York and executed a
confidentiality agreement. Subsequently, during April 1998, representatives of
Parent reviewed preliminary due diligence materials supplied by Allen & Company,
the Company's investment bankers.
On May 1, 1998, in response to a request by the Company, Parent sent the
Company a letter which indicated an interest in continuing to explore the
possibility of a business combination with the Company. The Company provided
Lucasfilm Ltd. and Lucas Licensing Ltd. (collectively "Lucas") with a copy of
the Company's confidentiality agreement with Parent. Lucas is the owner and
licensor of certain property related to the Star Wars motion pictures and whose
consent is required for any transfer of the license held by the Company with
respect to such property or the continuation of such license upon a change in
control of the Company. On June 23, 1998, the Company and Parent amended their
confidentiality agreement to address certain confidentiality concerns of Lucas.
On July 21, 1998, Parent entered into a confidentiality agreement with Lucas and
subsequently conducted certain additional due diligence regarding the Company's
agreements with Lucas and engaged in discussions with Lucas regarding the
transfer of the rights under such agreements to Parent should Parent and the
Company consummate a business combination.
In September 1998, Parent intensified its due diligence investigation of
the Company. On September 3, 1998, senior officers of Parent and of the Company
met in New York to review the Company's products in development. Intensive
discussions took place between Parent, the Company and their respective legal
representatives beginning on the week of September 14, 1998 and continuing
through the following week.
On September 25, 1998, Parent and Lucas entered into agreements whereby,
among other things, in exchange for warrants (with an exercise price of $35.00
per share) to acquire an aggregate of 4,000,000 shares of common stock, par
value $0.50 per share, of Parent and conditioned on consummation of the Offer,
(i) Lucas' warrants to acquire shares of common stock of the Company would be
exchanged for such Parent warrants and (ii) Parent's existing agreements with
Lucas would be amended to add rights currently held by the Company under the
Company's existing agreements with Lucas. The Parent warrants are not
exercisable prior to the initial theatrical release in the United States of the
first prequel theatrical motion picture to the Star Wars trilogy. The Parent
warrants would remain exercisable, with respect to 2,400,000 shares of Parent
common stock through the eleventh anniversary of the grant date, and with
respect to 1,600,000 shares of Parent common stock through the twelfth
anniversary of the grant date. As a result of Parent entering into these
agreements with Lucas, no additional action on the part of Lucas is required in
connection with the consummation of the Offer or the Merger, provided the Merger
is consummated by March 31, 1998.
On September 27, 1998, the Merger Agreement was executed and delivered by
Parent, Purchaser and the Company. On September 28, 1998, Parent announced in a
press release the signing of the Merger Agreement. On October 2, 1998, pursuant
to the terms of the Merger Agreement, Parent and Purchaser commenced the Offer.
Purpose of the Offer and the Merger. The purpose of the Offer and the
Merger is to enable Parent to acquire control of, and the entire equity interest
in, the Company. The Offer is being made pursuant to the Merger Agreement and is
intended to increase the likelihood that the Merger will be effected. The
purpose of the Merger is to acquire all of the outstanding Shares not purchased
pursuant to the Offer.
15
<PAGE> 18
Stockholders of the Company who sell their Shares in the Offer will cease
to have any equity interest in the Company and any right to participate in its
earnings and future growth. If the Merger is consummated, non-tendering
stockholders will no longer have an equity interest in the Company and instead
will have only the right to receive cash consideration pursuant to the Merger
Agreement or to exercise statutory appraisal rights under Section 262 of the
DGCL. See Section 12. Similarly, after selling their Shares in the Offer or the
subsequent Merger, stockholders of the Company will not bear the risk of any
decrease in the value of the Company.
The primary benefits of the Offer and the Merger to the stockholders of the
Company are that such stockholders are being afforded an opportunity to sell all
of their Shares for cash at a price which represents a premium of approximately
50% over the closing sales price of the Shares on September 25, 1998, the last
full trading day prior to the initial public announcement that the Company,
Purchaser and Parent had executed the Merger Agreement.
Merger Agreement
The following is a summary of certain provisions of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
of the Merger Agreement filed with the Commission as an exhibit to the Schedule
14D-1 and is incorporated herein by reference. Capitalized terms not otherwise
defined below shall have the meanings set forth in the Merger Agreement. The
Merger Agreement may be examined, and copies obtained, as set forth in Section 9
of this Offer to Purchase.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and Purchaser with
respect to, among other things, corporate organization, subsidiaries, capital
stock, options or other rights to acquire Shares, authority to enter into the
Merger Agreement, required consents, no conflicts between the Merger Agreement
and applicable laws and certain agreements to which the Company or its assets
may be subject, financial statements, filings with the Commission, disclosures
in proxy statement and tender offer documents, absence of certain changes or
events, litigation, absence of changes in benefit plans, employee benefit plans,
tax matters, no non-deductible payments, compliance with applicable laws,
environmental matters, intellectual property, owned and leased real property,
material contracts, labor and employment matters, product liability,
applicability of state takeover statutes, votes required to approve the Merger
Agreement, brokers' and finders' fees, receipt of the Financial Advisor Opinion,
Year 2000, Company Rights Agreement and absence of questionable payments.
In the Merger Agreement, each of Parent and Purchaser has made customary
representations and warranties to the Company with respect to, among other
things, corporate organization, authority to enter into the Merger Agreement,
required consents, no conflicts between the Merger Agreement and the certificate
of incorporation and by-laws of Parent and Purchaser or laws applicable to
Parent or Purchaser, disclosures in proxy statement and tender offer documents,
prior activities by Purchaser, brokers' and finders' fees and financing.
Conditions to the Merger. The respective obligations of Parent and
Purchaser, on the one hand, and the Company, on the other hand, to effect the
Merger are subject to the satisfaction of each of the following conditions, any
and all of which may be waived in whole or in part by the Company, Parent or
Purchaser, as the case may be, to the extent permitted by applicable law: (i)
the Merger Agreement shall have been approved and adopted by the requisite vote
of the holders of Shares, if required by applicable law and the Certificate of
Incorporation, in order to consummate the Merger; (ii) any waiting period
applicable to the Merger under the HSR Act shall have expired or been
terminated; (iii) no statute, rule, regulation, order, decree or injunction
shall have been enacted, promulgated or issued by any governmental entity
precluding, restraining, enjoining or prohibiting consummation of the Merger;
and (iv) Parent, Purchaser or their affiliates shall have purchased Shares
pursuant to the Offer.
The Company Board. The Merger Agreement provides that promptly after (i)
the purchase of and payment for any Shares by Purchaser or any of its affiliates
pursuant to the Offer as a result of which Purchaser and its affiliates own
beneficially at least a majority of the then outstanding Shares and (ii)
compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, whichever
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<PAGE> 19
shall occur later, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Company Board as is equal
to the product of the total number of directors on such Board (giving effect to
the increase in the size of such Board) multiplied by the percentage that the
number of Shares beneficially owned by Purchaser (including Shares so accepted
for payment) bears to the total number of Shares then outstanding. In
furtherance thereof, the Company shall, upon request of Parent and in compliance
with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder,
use its best efforts promptly either to increase the size of the Company Board
or to secure the resignations of such number of its incumbent directors, or
both, as is necessary to enable such designees of Parent to be so elected or
appointed to the Company Board, and the Company shall take all actions available
to the Company to cause such designees of Parent to be so elected or appointed.
At such time, the Company shall, if requested by Parent, also take all action
necessary to cause Persons designated by Parent to constitute at least the same
percentage (rounded up to the next whole number) as is on the Company Board of
(i) each committee of the Company Board, (ii) each board of directors (or
similar body) of each subsidiary of the Company and (iii) each committee (or
similar body) of each such board.
The Merger Agreement provides that, notwithstanding the foregoing, the
parties thereto shall use their respective reasonable best efforts to ensure
that at least two of the members of the Board shall, at all times prior to the
Effective Time be, Continuing Directors. From and after the time, if any, that
Parent's designees constitute a majority of the Company Board, any amendment or
modification of the Merger Agreement, any amendment to the Certificate of
Incorporation or By-Laws inconsistent with the Merger Agreement, any termination
of the Merger Agreement by the Company, any extension of time for performance of
any of the obligations of Parent or Purchaser under the Merger Agreement, any
waiver of any condition to the Company's obligations under the Merger Agreement
or any of the Company's rights under the Merger Agreement or other action by the
Company under the Merger Agreement may be effected only by the action of a
majority of the Continuing Directors of the Company, which action shall be
deemed to constitute the action of any committee specifically designated by the
Company Board to approve the actions contemplated by the Merger Agreement and
the Transactions and the full Company Board; provided, that, if there shall be
no Continuing Directors, such actions may be effected by majority vote of the
entire Company Board, except that no such action shall amend the terms of the
Merger Agreement or modify the terms of the Offer or the Merger in a manner
materially adverse to the holders of Shares.
Stockholders' Meeting. If required by applicable Law in order to
consummate the Merger, the Company, acting through the Company Board, shall, in
accordance with applicable Law, its Certificate of Incorporation and By-laws:
(i) as promptly as practicable following the acceptance for payment and purchase
of Shares by Purchaser pursuant to the Offer, duly call, give notice of, convene
and hold a special meeting of its stockholders (the "Special Meeting") for the
purposes of considering and taking action upon the approval of the Merger and
the approval and adoption of the Merger Agreement; (ii) prepare and file with
the Commission a preliminary proxy or information statement relating to the
Merger and the Merger Agreement and (x) obtain and furnish the information
required to be included in the Proxy Statement (as defined below) and, after
consultation with Parent, respond promptly to any comments made by the
Commission with respect to the preliminary proxy or information statement and
cause a definitive proxy or information statement, including any amendment or
supplement thereto (the "Proxy Statement") to be mailed to its stockholders at
the earliest practicable date; provided that no amendment or supplement to the
Proxy Statement will be made by the Company without consultation with Parent and
its counsel and (y) use its reasonable best efforts to obtain the necessary
approvals of the Merger and the Merger Agreement by its stockholders; and (iii)
unless the Merger Agreement has been terminated in accordance with the
provisions of the section summarized under "Termination" below, subject to its
rights pursuant to the section summarized under "No Solicitation" below, include
in the Proxy Statement the recommendation of the Company Board that stockholders
of the Company vote in favor of the approval of the Merger and the approval and
adoption of the Merger Agreement. Parent has agreed to vote, or cause to be
voted, all of the Shares then owned by it, Purchaser or any of its other
subsidiaries in favor of the approval of the Merger and the approval and
adoption of the Merger Agreement.
Options. The Merger Agreement provides that immediately prior to the
Effective Time, each then outstanding Option, whether or not then vested or
exercisable, shall be cancelled by the Company and in consideration of such
cancellation and except to the extent that Parent or the Purchaser and the
holder of any
17
<PAGE> 20
such Option otherwise agree, the Company (or, at Parent's option, the Purchaser)
shall pay to such holders of Options an amount in respect thereof equal to the
product of (A) the excess, if any, of the Offer Price over the exercise price of
each such Option and (B) the number of Shares previously subject to the Option
immediately prior to its cancellation (such payment to be net of withholding
taxes and without interest).
The Merger Agreement provides that the Company shall use its reasonable
best efforts to take all actions necessary and appropriate so that all stock
option or other equity based plans maintained with respect to the Shares
("Option Plans"), shall terminate as of the Effective Time and the provisions in
any other Benefit Plan providing for the issuance, transfer or grant of any
capital stock of the Company or any interest in respect of any capital stock of
the Company shall be deleted as of the Effective Time, and the Company shall use
its best efforts to ensure that following the Effective Time no holder of an
Option or any participant in any Option Plan shall have any right thereunder to
acquire any capital stock of the Company, Parent, Purchaser or the Surviving
Corporation. In addition, the Company has agreed to use its reasonable best
efforts to obtain all necessary consents from, and mail any required notices to,
holders of Options and amend the terms of the applicable Option Plans, in each
case as is necessary to give effect to the foregoing.
Interim Operations. The Merger Agreement provides that after the date of
the Merger Agreement and prior to the time the designees of Parent have been
elected to or appointed to, and shall constitute a majority of, the Company
Board pursuant to the applicable provisions of the Merger Agreement (the
"Appointment Date"), and except (i) as expressly contemplated by the Merger
Agreement, (ii) as set forth in the applicable section of the disclosure
schedule thereto or (iii) as agreed in writing by Parent:
(a) the Company shall and shall cause its Subsidiaries to carry on
their respective businesses in the ordinary course;
(b) the Company shall and shall cause its Subsidiaries to use all
reasonable best efforts consistent with good business judgment to preserve
intact their current business organizations, keep available the services of
their current officers and key employees and preserve their relationships
consistent with past practice with desirable customers, suppliers,
licensors, licensees, distributors and others having business dealings with
them;
(c) neither the Company nor any of its Subsidiaries shall, directly or
indirectly, amend its Certificate of Incorporation or By-laws or similar
organizational documents;
(d) Representatives of the Company and its Subsidiaries shall confer
at such times as Parent may reasonably request with one or more
representatives of Parent to report material operational matters and the
general status of ongoing operations;
(e) neither the Company nor any of its Subsidiaries shall: (i)(A)
declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to the Company's capital stock or that
of its Subsidiaries, except that a wholly-owned Subsidiary of the Company
may declare and pay a dividend or make advances to its parent or the
Company or (B) redeem, purchase or otherwise acquire directly or indirectly
any of the Company's capital stock or that of its Subsidiaries; (ii) issue,
sell, pledge, dispose of or encumber any additional shares of, or
securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital
stock of any class of the Company or its Subsidiaries, other than Shares
issued upon the exercise of Options outstanding on the date of the Merger
Agreement in accordance with the Option Plans as in effect on the date of
the Merger Agreement or additional warrants issued in accordance with the
terms of the Warrants; or (iii) split, combine or reclassify the
outstanding capital stock of the Company or of any of the Subsidiaries of
the Company;
(f) neither the Company nor any of its Subsidiaries shall enter into
any agreement or arrangement with respect to the distribution of any of the
Company's products;
(g) neither the Company nor any of its Subsidiaries shall acquire or
agree to acquire (A) by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other
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<PAGE> 21
manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof (including
entities which are subsidiaries of the Company) or (B) any assets,
including real estate, except purchases in the ordinary course of business
consistent with past practice;
(h) neither the Company nor any of its Subsidiaries shall make any new
capital expenditure or expenditures in excess of $50,000 individually or
$500,000 in the aggregate;
(i) neither the Company nor any of its Subsidiaries shall, except in
the ordinary course of business and except as otherwise permitted by the
Merger Agreement, amend or terminate any Company Material Contract where
such amendment or termination would have a Material Adverse Effect on the
Company, or waive, release or assign any material rights or claims;
(j) neither the Company nor any of its Subsidiaries shall transfer,
lease, license, sell, mortgage, pledge, dispose of, or encumber any
property or assets other than in the ordinary course of business and
consistent with past practice;
(k) neither the Company nor any of its Subsidiaries shall: (i) enter
into any employment or severance agreement with or grant any severance or
termination pay to any officer, director or key employee of the Company or
any its Subsidiaries; or (ii) hire or agree to hire any new or additional
key employees or officers;
(l) neither the Company nor any of its Subsidiaries shall, except as
required to comply with applicable Law or expressly provided in the Merger
Agreement, (A) adopt, enter into, terminate, amend or increase the amount
or accelerate the payment or vesting of any benefit or award or amount
payable under any Benefit Plan or other arrangement for the current or
future benefit or welfare of any director, officer or current or former
employee, except to the extent necessary to coordinate any such Benefit
Plans with the terms of the Merger Agreement, (B) increase in any manner
the compensation or fringe benefits of, or pay any bonus to, any director,
officer or employee provided that employees with annual compensation of
$100,000 or less may receive increases of not more than 5.0% on the
anniversary date of their employment in the ordinary course of business and
consistent with past practice, (C) pay any benefit not provided for under,
or contemplated by, any Benefit Plan, (D) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or Benefit
Plan (including the grant of stock options, stock appreciation rights,
stock-based or stock-related awards, performance units or restricted stock,
or the removal of existing restrictions in any Benefit Plans or agreements
or awards made thereunder) or (E) take any action to fund or in any other
way secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or Benefit Plan;
(m) neither the Company nor any of its Subsidiaries shall: (i) incur
or assume any long-term debt or, except in the ordinary course of business,
incur or assume any short-term indebtedness in amounts not consistent with
past practice; (ii) incur or modify any material indebtedness or other
liability except as set forth on the applicable section of the disclosure
schedule to the Merger Agreement; (iii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business and consistent with past practice; (iv) make any loans,
advances or capital contributions to, or investments in, any other person
(other than to wholly owned Subsidiaries of the Company or customary loans
or advances to employees in the ordinary course of business in accordance
with past practice); or (v) settle any material claims other than in the
ordinary course of business, in accordance with past practice and without
admission of liability;
(n) neither the Company nor any of its Subsidiaries shall change any
of the accounting principles used by it unless required by GAAP, the SEC or
Law;
(o) neither the Company nor any of its Subsidiaries shall make any tax
election, amend any material tax return, make a claim for any material tax
refund or settle or compromise any material tax liability (whether with
respect to amount or timing);
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<PAGE> 22
(p) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of any such claims, liabilities or
obligations in the ordinary course of business and consistent with past
practice, of any such claims, liabilities or obligations which are
reflected or reserved against in, or contemplated by, the consolidated
financial statements (or the notes thereto) of the Company and its
consolidated Subsidiaries; or except in the ordinary course of business
consistent with past practice, waive the benefits of, or agree to modify in
any manner, any confidentiality, standstill or similar agreement to which
the Company or any of its Subsidiaries is a party;
(q) neither the Company nor any of its Subsidiaries shall (by action
or inaction) amend, renew, terminate or cause to be extended any lease,
agreement or arrangement relating to any of the leased properties or enter
into any lease, agreement or arrangement with respect to real property;
(r) neither the Company nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing,
or to authorize, recommend, propose or announce an intention to do any of
the foregoing; and
(s) neither the Company nor any of its Subsidiaries shall take any
action that would result in (i) any of its representations and warranties
that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not qualified as to materiality
becoming untrue in any material respect or (iii) any of the conditions to
the Offer, as set forth in the Merger Agreement, not being satisfied
(subject to the Company's right to take action specifically permitted by
the Merger Agreement).
No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
that it shall not, nor shall it permit any of its Subsidiaries to, nor shall it
authorize (and shall use its best efforts not to permit) any officer, director
or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, (i) solicit or
initiate, or encourage, directly or indirectly, any inquires or the submission
of, any Takeover Proposal (as defined below), (ii) participate in any
discussions or negotiations regarding, or furnish to any Person any information
or data with respect to or access to the properties of, or take any other action
to knowingly facilitate the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal or (iii) enter into any
agreement with respect to any Takeover Proposal or approve or resolve to approve
any Takeover Proposal; provided that nothing contained in the applicable
provisions of the Merger Agreement shall prohibit the Company or the Company
Board from (A) taking and disclosing to the Company's stockholders a position
with respect to a tender or exchange offer by a third party pursuant to Rules
14d-9 and 14e-2 promulgated under the Exchange Act, or (B) making such
disclosure to the Company's stockholders as, in the good faith judgment of the
Company Board, after receiving advice from outside counsel, is required under,
or is necessary to comply with, applicable Law, provided that the Company may
not, except as permitted by the following paragraph, withdraw or modify, or
propose to withdraw or modify, its position with respect to the Offer or the
Merger or approve or recommend, or propose to approve or recommend any Takeover
Proposal, or enter into any agreement with respect to any Takeover Proposal.
Upon execution of the Merger Agreement, the Company will immediately cease any
existing activities, discussions or negotiations with any parties conducted
prior to the date of the Merger Agreement with respect to any of the foregoing.
Notwithstanding the foregoing, prior to the time of acceptance of Shares for
payment pursuant to the Offer, the Company may withdraw or modify its
recommendation of the Offer, furnish information concerning its business,
properties or assets to any Person or group and may negotiate and participate in
discussions and negotiations with such Person or group concerning a Takeover
Proposal if: (x) such Person or group has submitted a Superior Proposal; and (y)
in the opinion of the Company Board such action is required to discharge the
Board's fiduciary duties to the Company's stockholders under applicable law,
determined only after receipt of advice from independent legal counsel to the
Company that the failure to provide such information or access or to engage in
such discussions or negotiations may cause the Company's Board to violate its
fiduciary duties to the Company's stockholders under applicable law. The Company
will promptly (but in no case later than 24 hours) notify Parent of the
existence of any proposal, discussion, negotiation or inquiry received by the
Company regarding any Takeover Proposal, and the Company will promptly
communicate to Parent the terms of any proposal, discussion, negotiation or
inquiry which it may receive regarding any Takeover Proposal (and will promptly
provide to Parent copies of any written materials received by the Company in
connection with such proposal,
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<PAGE> 23
discussion, negotiation or inquiry) and the identity of the party making such
proposal or inquiry or engaging in such discussion or negotiation. The Company
will promptly provide to Parent any non-public information concerning the
Company provided to any other Person in connection with any Takeover Proposal
which was not previously provided to Parent. The Company will keep Parent
informed of the status and details of any such Takeover Proposal and of any
amendments or proposed amendments to any Takeover Proposal and will promptly
notify Parent (but in no case later than 24 hours) of any determination by the
Company Board that a Superior Proposal has been made.
Pursuant to the Merger Agreement, except as set forth in this paragraph,
neither the Company Board nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or
Purchaser, the approval or recommendation by the Company Board or any such
committee of the Offer, the Merger Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Takeover Proposal or (iii)
enter into any agreement with respect to any Takeover Proposal. Notwithstanding
the foregoing, subject to compliance with this paragraph prior to the time of
acceptance for payment of Shares pursuant to the Offer, the Company Board may
withdraw or modify its approval or recommendation of the Offer, the Merger
Agreement or the Merger, approve or recommend a Superior Proposal, or enter into
an agreement with respect to a Superior Proposal, in each case at any time after
the third business day following Parent's receipt of written notice from the
Company advising Parent that the Company Board has received a Superior Proposal
which it intends to accept, specifying the material terms and conditions of such
Superior Proposal and, identifying the person making such Superior Proposal, but
only if the Company shall have caused its financial and legal advisors to
negotiate with Parent to make such adjustments to the terms and conditions of
the Merger Agreement as would enable the Company to proceed with the
Transactions on such adjusted terms. The term "Takeover Proposal" means any bona
fide proposal or offer, whether in writing or otherwise, from any Person other
than Parent, Purchaser or any affiliates thereof (a "Third Party") to acquire
beneficial ownership (as defined under Rule 13(d) of the Exchange Act) of all or
a material portion of the assets of the Company and its Subsidiaries on a
consolidated basis or 30% or more of any class of equity securities of the
Company pursuant to a merger, consolidation or other business combination, sale
of shares of capital stock, sale of assets, tender offer, exchange offer or
similar transaction with respect to the Company, including any single or related
multi-step transaction or series of related transactions, which is structured to
permit such Third Party to acquire beneficial ownership of any material portion
of the assets of or 30% or more of the equity interest in the Company. The term
"Superior Proposal" means an unsolicited Takeover Proposal on terms which the
Company Board determines in good faith to be more favorable to the Company's
stockholders than the Offer and the Merger (based on advice from the Company's
independent financial advisor that the value of the consideration provided for
in such proposal is superior to the value of the consideration provided for in
the Offer and the Merger), for which financing, to the extent required, is then
committed or which, in the good faith reasonable judgment of the Company Board,
based on advice from the Company's independent financial advisor, is reasonably
capable of being financed by such Third Party and which, in the good faith
reasonable judgement of the Company Board is reasonably likely to be consummated
within a period of time not materially longer in duration than the period of
time reasonably believed to be necessary to consummate the Offer and the Merger.
Termination. The Merger Agreement may be terminated and the Merger
contemplated therein may be abandoned at any time prior to the Effective Time,
whether before or after approval of matters presented in connection with the
Merger by the stockholders of the Company:
(a) By the mutual written consent of Parent and the Company; provided,
however, that if Parent shall have a majority of the directors pursuant to
the applicable provisions of the Merger Agreement, such consent of the
Company may only be given if approved by the Continuing Directors.
(b) By either of Parent or the Company if (i) a statute, rule or
executive order shall have been enacted, entered or promulgated prohibiting
the Transactions on the terms contemplated by the Merger Agreement or (ii)
any governmental entity shall have issued an order, decree or ruling or
taken any other action (which order, decree, ruling or other action the
parties to the Merger Agreement shall use their reasonable efforts to
lift), in each case permanently restraining, enjoining or otherwise
prohibiting the
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<PAGE> 24
Transactions contemplated by the Merger Agreement and such order, decree,
ruling or other action shall have become final and non-appealable.
(c) By either of Parent or the Company if the Effective Time shall not
have occurred on or before March 31, 1999, provided, however, that if the
Effective Time shall not have occurred by such date solely as a result of
the failure of the condition summarized in clause (iii) under the heading
"Conditions to the Merger" above by reason of the entry of a preliminary
injunction, the Merger Agreement may not be terminated pursuant to this
paragraph (c) until June 30, 1999; provided, further, that the party
seeking to terminate the Merger Agreement pursuant to this paragraph (c)
shall not have breached in any material respect its obligations under the
Merger Agreement in any manner that shall have been the cause of, or
resulted in, the failure to consummate the Merger on or before such date;
(d) By the Company: (i) if the Company has entered into an agreement
with respect to a Superior Proposal or has approved or recommended a
Superior Proposal in accordance with the applicable provisions of the
Merger Agreement, provided the Company has complied with all provisions
thereof, including the notice provisions therein, and that it
simultaneously terminates the Merger Agreement and makes simultaneous
payment to the Parent of the Termination Fee; or (ii) if Parent or
Purchaser shall have terminated the Offer or the Offer expires without
Parent or Purchaser, as the case may be, purchasing any Shares pursuant
thereto; provided that the Company may not terminate the Merger Agreement
pursuant to this clause (d)(ii) if the Company is in material breach of the
Merger Agreement; or (iii) if Parent, Purchaser or any of their affiliates
shall have failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer,
provided, that the Company may not terminate the Merger Agreement pursuant
to this clause (d) (iii) if the Company is in material breach of the Merger
Agreement; or (iv) if there shall be a material breach by either Parent or
Purchaser of any of its representations, warranties, covenants or
agreements contained in the Merger Agreement, except where such breach does
not have a material adverse effect on the ability of Parent or Purchaser to
consummate the Offer or the Merger.
(e) By Parent or Purchaser: (i) (A) if prior to the purchase of the
Shares pursuant to the Offer, the Company Board shall have withdrawn, or
modified or changed in a manner adverse to Parent or Purchaser its approval
or recommendation of the Offer, the Merger Agreement or the Merger or shall
have recommended or approved a Takeover Proposal, or (B) there shall have
been a material breach of any provision of the section of the Merger
Agreement summarized under "No Solicitation" above, Parent shall have given
at least five (5) days' written notice of such breach and such breach shall
not have been cured within such five (5) day period; or (ii) if due to an
occurrence that if occurring after the commencement of the Offer would
result in a failure to satisfy any of the conditions set forth in Section
14 below, Parent or Purchaser shall have terminated the Offer without
Parent or Purchaser purchasing any Shares thereunder, provided that Parent
or Purchaser may not terminate the Merger Agreement pursuant to this clause
(e) (ii) if Parent or Purchaser is in material breach of the Merger
Agreement; or (iii) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in the Section 14 below, Parent, Purchaser or any of
their affiliates shall have failed to commence the Offer on or prior to
five (5) business days following the date of the initial public
announcement of the Offer; provided that Parent or Purchaser may not
terminate the Merger Agreement pursuant to this clause (e)(iii) if Parent
or Purchaser is in material breach of the Merger Agreement; or (iv) if any
Person or "group" (as defined in Section 13(d)(3) of the Exchange Act),
other than Parent, Purchaser or their affiliates or any group of which any
of them is a member, shall have acquired beneficial ownership (as
determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of
30% or more of the Shares; or (v) if there shall be a breach by the Company
of any of its representations, warranties, covenants or agreements
contained in the Merger Agreement and such breach (without giving effect to
any limitation as to "knowledge," "materiality" or "material adverse
effect" set forth therein) individually, or together with any other
breaches, has a Material Adverse Effect on the Company.
Termination Fee. Pursuant to the Merger Agreement, if (x) Parent or
Purchaser terminates the Merger Agreement pursuant to clauses (e)(i) or (e)(iv)
under the heading "Termination" above or (y) the
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Company terminates this Agreement pursuant to clause (d)(i) under the heading
"Termination" above, then in each case, the Company shall pay, or cause to be
paid to Parent, at the time of termination, an amount equal to $6,000,000 (the
"Termination Fee"). In addition, if the Merger Agreement is terminated by Parent
pursuant to clause (e)(v) under the heading "Termination" above (other than by
reason of a breach of the section in the Merger Agreement summarized under "No
Solicitation" above) and at the time of such termination, Parent is not in
material breach of the Merger Agreement, then the Company shall pay to Parent,
at the time of termination, and an amount equal to Parent's and Purchaser's
actual and reasonably documented out-of-pocket expenses incurred by Parent or
Purchaser in connection with the Offer, the Merger, the Merger Agreement and the
consummation of the Transactions, including, without limitation, the fees and
expenses payable to all banks, investment banking firms, and other financial
institutions and Persons and their respective agents and counsel incurred in
connection with acting as Parent's or Purchaser's financial advisor with respect
to, or arranging or committing to provide or providing any financing for, the
Transactions (the "Expenses") and, if the breach referred to in clause (e)(v)
under the heading "Termination" above was a willful breach and if the Company
shall thereafter, within nine (9) months after such termination, enter into an
agreement with respect to a Takeover Proposal, then the Company shall pay the
Termination Fee (less any Expenses previously paid by the Company to Parent
pursuant to this section) concurrently with entering into any such agreement.
Any payments required to be made pursuant to this Section shall be made by wire
transfer of same day funds to an account designated by Parent.
Indemnification. The Merger Agreement provides that Parent, and from and
after the Effective Time, the Surviving Corporation, shall indemnify, defend and
hold harmless each person who is now, or has been at any time prior to September
27, 1998 or who becomes prior to the Effective Time, an officer, director,
employee or agent of the Company or any of its Subsidiaries (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses (including
reasonable attorneys' fees and expenses), liabilities or judgments or amounts of
or in connection with any threatened or actual claim, action, suit, proceeding
or investigation based on or arising out of the fact that such person is or was
serving in such person's capacity as a director, officer, employee or agent of
the Company or any of its Subsidiaries, whether pertaining to any matter
existing or occurring at or prior to the Effective Time or any acts or omissions
occurring or existing at or prior to the Effective Time and whether asserted or
claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), including all Indemnified Liabilities based on, or arising out
of, or pertaining to the Merger Agreement or the Transactions, in each case to
the fullest extent a corporation is permitted under the DGCL and the Certificate
of Incorporation or By-Laws as currently in effect to indemnify such persons
(and the Company and the Surviving Corporation, as the case may be, will pay
expenses promptly after statements thereof are received, to each Indemnified
Party to the fullest extent permitted by Delaware law, subject to delivery of
the undertaking described below). Without limiting the foregoing, in the event
any such claim, action, suit, proceeding or investigation is brought against any
Indemnified Party (whether arising before or after the Effective Time), (i) such
Indemnified Party may retain counsel satisfactory to the Indemnified Party and
reasonably satisfactory to the Company (and reasonably satisfactory to the
Surviving Corporation after the Effective Time) and the Company (or after the
Effective Time, the Surviving Corporation) will pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements and
supporting documentation thereof are received; and (ii) the Company (or after
the Effective Time, the Surviving Corporation) will use all reasonable best
efforts to assist in the vigorous defense of any such matter, provided that
neither the Company nor the Surviving Corporation will be liable for any
settlement effected without its prior written consent which written consent will
not unreasonably be withheld. Any Indemnified Party, upon learning of any such
claim, action, suit, proceeding or investigation, will notify the Company (or
after the Effective Time, the Surviving Corporation) promptly (but the failure
so to notify will not relieve a party from any liability which it may have under
this provision except to the extent such failure materially prejudices such
party's position with respect to such claims), and will deliver to the Company
(or after the Effective Time, the Surviving Corporation) the undertaking
contemplated by Section 145(e) of the DGCL. The Indemnified Parties as a group
may retain only one law firm (and one local counsel) to represent them with
respect to each such matter unless there is, under applicable standards of
professional conduct, an existing or potential conflict on any significant issue
between the positions of any two or more Indemnified Parties in which case such
additional counsel reasonably acceptable to the Indemnified Parties, the Company
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<PAGE> 26
or, after the Effective Time, the Surviving Corporation as may be required may
be retained by the Indemnified Parties at the cost and expense of the Company
(or Surviving Corporation). Furthermore, the provisions with respect to
indemnification set forth in the Certificate of Incorporation and By-Laws of the
Surviving Corporation will not be amended following the Effective Time in any
way that would materially and adversely affect the rights thereunder of
individuals who at any time prior to the Effective Time were directors,
officers, employees or agents of the Company in respect of actions or omissions
occurring at or prior to the Effective Time.
The Merger Agreement provides that for a period of three (3) years after
the Effective Time, Parent shall cause the Surviving Corporation to maintain in
effect, if available, directors' and officers' liability insurance covering
those persons who are currently covered by the Company's directors' and
officers' liability insurance policy with respect to acts prior to the Effective
Time (a copy of which has been made available to Parent) on terms (including the
amounts of coverage and the amounts of deductibles, if any) that are no less
favorable to the terms now applicable to them under the Company's current
policies; provided, however, that in no event shall Parent or the Surviving
Corporation be required to expend in excess of 150% of the annual premium
currently paid by the Company for such coverage; and provided further, that if
the premium for such coverage exceeds such amount, Parent or the Surviving
Corporation shall purchase a policy with the greatest coverage available for
such 150% of the annual premium. The Merger Agreement further provides that the
foregoing indemnification provisions shall survive the consummation of the
Merger at the Effective Time, are intended to benefit the Company, the Surviving
Corporation and the Indemnified Parties, shall be binding on all successors and
assigns of the Surviving Corporation and shall be enforceable by the Indemnified
Parties.
Confidentiality Agreement
The following is a summary of certain provisions of the Confidentiality
Agreement entered into on April 2, 1998 by Parent and the Company, as amended on
June 23, 1998 (the "Confidentiality Agreement"). This summary is not a complete
description of the terms and conditions of the Confidentiality Agreement and is
qualified in its entirety by reference to the full text of the Confidentiality
Agreement filed with the Commission as an exhibit to the Schedule 14D-1 and is
incorporated herein by reference. Capitalized terms not otherwise defined below
shall have the meanings set forth in the Confidentiality Agreement. The
Confidentiality Agreement may be examined, and copies obtained, as set forth in
Section 9 of this Offer to Purchase.
Pursuant to the terms of the Confidentiality Agreement that Parent and
Purchaser entered into on April 2, 1998, the Company and Parent agreed to
provide, among other things, for the confidential treatment of their discussions
regarding the Offer and the Merger and the exchange of certain confidential
information concerning the Company. Parent further agreed that (i) for a period
of one (1) year from the date the Confidentiality Agreement was entered into by
and between Parent and Purchaser, neither Parent nor any of its subsidiaries
would directly or indirectly solicit for employment any officer or employee of
the Company, subject to certain exceptions and (ii) through December 31, 1999,
Parent will not, subject to certain exceptions, (a) acquire any securities or
property of the Company, (b) propose to enter into any merger or business
combination or purchase a material portion of the assets of the Company other
than a confidential proposal made to the Company Board without any public
disclosure by Parent, (c) participate in any solicitations of proxies, (d)
participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) with respect to any securities of the Company, (e) seek to control or
influence the management, Company Board or policies of the Company, (f) disclose
any intention, plan or arrangement inconsistent with any of the foregoing or (g)
advise, assist or encourage any other persons in connection with any of the
foregoing. On June 23, 1998, Parent and the Company amended the Confidentiality
Agreement in connection with Parent's negotiations with Lucas.
12. PLANS FOR THE COMPANY; OTHER MATTERS.
Plans for the Company
Parent is conducting a detailed review of the Company and its business and
operations with a view towards determining how to optimally realize any
potential synergies which exist between the operations of the
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<PAGE> 27
Company and those of Parent. Such review is not expected to be completed until
after the consummation of the Merger, and, following such review, Parent will
consider what, if any, changes would be desirable in light of the circumstances
then existing.
If, as and to the extent that Purchaser acquires control of the Company,
Parent and Purchaser intend to conduct a detailed review of the Company and its
assets, corporate structure, capitalization, operations, properties, policies,
management and personnel and to consider and determine what, if any, changes
would be desirable in light of the circumstances which then exist. Such changes
could include, among other things, changes in the Company's business, corporate
structure, certificate of incorporation, by-laws, capitalization, management or
dividend policy.
Assuming the Minimum Condition is satisfied and Purchaser purchases Shares
pursuant to the Offer, Parent intends to promptly exercise its rights under the
Merger Agreement to obtain majority representation on, and control of, the
Company Board. See "Merger Agreement-Company Board" above. Parent will exercise
such rights by causing the Company to elect to the Company Board Messrs. Alan G.
Hassenfeld, Alfred J. Verrecchia and Harold P. Gordon. Information with respect
to such directors is contained in Schedule I hereto and in the Schedule 14D-9.
The Merger Agreement provides that, upon the purchase of and payment for any
Shares by Parent or any of its subsidiaries pursuant to the Offer, Parent shall
be entitled to designate such number of directors, rounded up to the next whole
number, on the Company Board such that the percentage of its designees on the
Company Board shall equal the percentage of the outstanding Shares beneficially
owned by Parent and its affiliates. See Section 11. The Merger Agreement
provides that the directors of Purchaser and the officers of the Company at the
Effective Time of the Merger will, from and after the Effective Time, be the
initial directors and officers, respectively, of the Surviving Corporation.
Purchaser or an affiliate of Purchaser may, following the consummation or
termination of the Offer, seek to acquire additional Shares through open market
purchases, privately negotiated transactions, a tender offer or exchange offer
or otherwise, upon such terms and at such prices as it shall determine, which
may be more or less than the price to be paid pursuant to the Offer. Purchaser
and its affiliates also reserve the right to dispose of any or all Shares
acquired by them, subject to the terms of the Merger Agreement.
Except as disclosed in this Offer to Purchase, and except as may be
effected in connection with the integration of operations referred to above,
neither Parent nor Purchaser has any present plans or proposals that would
result in an extraordinary corporate transaction, such as a merger,
reorganization, liquidation, relocation of operations, or sale or transfer of a
material amount of assets, involving the Company or any of its subsidiaries, or
any material changes in the Company's capitalization, corporate structure,
business or composition of its management or the Company Board.
Stockholder Approval. Under the DGCL, the approval of the Company Board
and the affirmative vote of the holders of a majority of the outstanding Shares
are required to adopt and approve the Merger Agreement and transactions
contemplated thereby. The Company has represented in the Merger Agreement that
the execution and delivery of the Merger Agreement by the Company and the
consummation by the Company of the transactions contemplated by the Merger
Agreement have been duly authorized by all necessary corporate action on the
part of the Company, subject to the approval of the Merger by the Company's
stockholders in accordance with the DGCL. In addition, the Company has
represented that the affirmative vote of the holders of a majority of the
outstanding Shares is the only vote of the holders of any class or series of the
Company's capital stock which is necessary to approve the Merger Agreement and
the transactions contemplated thereby, including the Merger. Therefore, unless
the Merger is consummated pursuant to the short-form merger provisions under the
DGCL described below (in which case no further corporate action by the
stockholders of the Company will be required to complete the Merger), the only
remaining required corporate action of the Company will be the approval of the
Merger Agreement and the transactions contemplated thereby by the affirmative
vote of the holders of a majority of the Shares. The Merger Agreement provides
that Parent will vote, or cause to be voted, all of the Shares then owned by
Parent, Purchaser or any of Parent's other subsidiaries and affiliates in favor
of the approval of the Merger and the adoption of the Merger Agreement. In the
event that Parent, Purchaser and Parent's other subsidiaries acquire in the
aggregate at least a majority of the Shares entitled to vote on the approval of
the Merger and the
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<PAGE> 28
Merger Agreement, they would have the ability to effect the Merger without the
affirmative votes of any other stockholders.
Short-Form Merger. Section 253 of the DGCL provides that, if a corporation
owns at least 90% of the outstanding shares of each class of another
corporation, the corporation holding such stock may merge itself into such
corporation without any action or vote on the part of the board of directors or
the stockholders of such other corporation (a "short-form merger"). In the event
that Parent, Purchaser and any other subsidiaries of Parent acquire in the
aggregate at least 90% of the outstanding Shares, pursuant to the Offer or
otherwise, then, at the election of Parent, a short-form merger could be
effected without any approval of the Company Board or the stockholders of the
Company, subject to compliance with the provisions of Section 253 of the DGCL.
In the Merger Agreement, Parent, Purchaser and the Company have agreed that,
notwithstanding that all conditions to the Offer are satisfied or waived as of
the scheduled Expiration Date, Purchaser may extend the Offer for a period not
to exceed ten (10) business days, subject to certain conditions, if the Shares
tendered pursuant to the Offer are less than 90% of the outstanding Shares so
long as Purchaser irrevocably waives the satisfaction of any of the conditions
to the Offer (other than the Minimum Condition and the condition set forth in
paragraph (b) of Section 14 hereof) that subsequently may not be satisfied
during such extension of the Offer. Even if Parent and Purchaser do not own 90%
of the outstanding Shares following consummation of the Offer, Parent and
Purchaser could seek to purchase additional shares in the open market or
otherwise in order to reach the 90% threshold and employ a short-form merger.
The per share consideration paid for any Shares so acquired may be greater or
less than that paid in the Offer. Parent presently intends to effect a
short-form merger if permitted to do so under the DGCL.
Appraisal Rights. Holders of the Shares do not have appraisal rights in
connection with the Offer. However, if the Merger is consummated, holders of the
Shares at the Effective Time will have certain rights pursuant to the provisions
of Section 262 of the DGCL including the right to dissent and demand appraisal
of, and to receive payment in cash of the fair value of, their Shares. Under
Section 262 of the DGCL, dissenting stockholders of the Company who comply with
the applicable statutory procedures will be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest thereon, 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 to be paid in the
Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS UNDER THE
DGCL DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE
FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY APPRAISAL RIGHTS AVAILABLE
UNDER THE DGCL. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT
ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL.
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 or another business
combination following the purchase of Shares pursuant to the Offer in which
Purchaser seeks to acquire the remaining Shares not held by it. Purchaser
believes, however, that Rule 13e-3 will not be applicable to the Merger because
it is anticipated that the Merger would be effected within one (1) year
following consummation of the Offer and in the Merger stockholders would receive
the same price per Share as paid in the Offer. If Rule 13e-3 were applicable to
the Merger, it would require, among other things, that certain financial
information concerning the Company, and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
stockholders in such a transaction, be filed with the Commission and disclosed
to minority stockholders prior to consummation of the transaction.
13. DIVIDENDS AND DISTRIBUTIONS.
As described above, the Merger Agreement provides that from September 27,
1998 until such time as the designees of Parent have been elected to, and shall
constitute a majority of, the Company Board, without the
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<PAGE> 29
prior written consent of Parent, neither the Company nor any of its subsidiaries
shall: (i)(A) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to the Company's capital stock
or that of its subsidiaries, except that a wholly owned subsidiary of the
Company may declare and pay a dividend or make advances to its parent or the
Company or (B) redeem, purchase or otherwise acquire directly or indirectly any
of the Company's capital stock or that of its subsidiaries; (ii) issue, sell,
pledge, dispose of or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of capital stock of any class of
the Company or its subsidiaries, other than Shares issued upon the exercise of
Options outstanding on September 27, 1998 in accordance with the Option Plans as
in effect on September 27, 1998 or additional warrants issued in accordance with
the terms of the Warrants; or (iii) split, combine or reclassify the outstanding
capital stock of the Company or of any of the subsidiaries of the Company.
14. CONDITIONS TO THE OFFER.
The Offer is subject to the Minimum Condition being satisfied by the
Expiration Date or such later date as the Offer may be extended in accordance
with the terms of the Merger Agreement. Purchaser has agreed that if all of the
conditions set forth herein have not been satisfied on any scheduled Expiration
Date then, provided that all such conditions are reasonably capable of being
satisfied, Purchaser shall extend the Offer from time to time until such
conditions are satisfied or waived, provided that Purchaser shall not be
required to extend the Offer beyond March 1, 1999. Notwithstanding any other
provision of the Offer, subject to the terms of the Merger Agreement, Purchaser
shall not be required to accept for payment or pay for any Shares if (i) any
applicable waiting period under the HSR Act has not expired or been terminated
or (ii) at any time on or after the date of the Merger Agreement and prior to
the Expiration Date, any of the following events shall occur:
(a) there shall be threatened or pending any suit, action or
proceeding by a federal, state or foreign governmental entity (other than a
suit, action or proceeding based on facts solely relating to Parent or
Purchaser), (i) in connection with the Transactions, seeking to prohibit or
impose any material limitations on Parent's or Purchaser's ownership or
operation (or that of any of their respective Subsidiaries or Affiliates)
of all or a material portion of their or the Company's businesses or
assets, (ii) in connection with the Transactions, seeking to compel Parent
or Purchaser or their respective Subsidiaries and Affiliates to dispose of
or hold separate any material portion of the business or assets of the
Company or Parent and their respective Subsidiaries, in each case taken as
a whole, (iii) challenging the acquisition by Parent or Purchaser of any
Shares pursuant to the Offer, (iv) seeking to restrain or prohibit the
making or consummation of the Offer or the Merger or the performance of any
of the other Transactions, (v) seeking to obtain from the Company any
damages that would be reasonably likely to have a Material Adverse Effect
on the Company, (vi) seeking to impose material limitations on the ability
of Purchaser, or rendering Purchaser unable, to accept for payment, pay for
or purchase some or all of the Shares pursuant to the Offer and the Merger,
(vii) seeking to impose material limitations on the ability of Purchaser or
Parent effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased by it
on all matters properly presented to the Company's stockholders, or (viii)
which otherwise is reasonably likely to have a Material Adverse Effect on
the Company or, as a result of the Transactions, Parent and its
Subsidiaries; or
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger
of applicable waiting periods under the HSR Act, that is reasonably likely
to result, directly or indirectly, in any of the consequences referred to
in clauses (i) through (viii) of paragraph (a) above; or
(c) there shall have occurred and be continuing (1) any general
suspension of trading in, or limitation on prices for, securities on the
New York Stock Exchange for a period in excess of three (3) hours
(excluding suspensions or limitations resulting solely from physical damage
or interference with such exchanges not related to market conditions), (2)
a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory) by any
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<PAGE> 30
Governmental Entity, (3) any limitation or proposed limitation (whether or
not mandatory) by any United States governmental authority or agency that
has a material adverse effect generally on the extension of credit by banks
or other financial institutions, (4) any change in general financial bank
or capital market conditions such that banks are unwilling to extend credit
to A-1/P-1 borrowers generally, or (5) any decline in either the Dow Jones
Industrial Average or the Standard & Poor's Index of 500 Industrial
Companies by an amount in excess of 25% measured from the close of business
on the date of the Merger Agreement; or
(d) the representations and warranties of the Company (without giving
effect to any limitation as to "knowledge" set forth in the Merger
Agreement) set forth in the Merger Agreement shall not be true and accurate
as of the date of consummation of the Offer as though made on or as of such
date (except for those representations and warranties that address matters
only as of a particular date or only with respect to a specific period of
time which need only be true and accurate as of such date or with respect
to such period) or the Company shall have breached or failed to perform or
comply with any obligation, agreement or covenant required by the Merger
Agreement to be performed or complied with by it except, in each case where
the failure of such representations and warranties to be true and accurate
(without giving effect to any limitation as to "knowledge" "materiality" or
"material adverse effect" set forth therein), or the failure to perform or
comply with such obligations, agreements or covenants, do not, individually
or in the aggregate, have a Material Adverse Effect on the Company or a
materially adverse effect on the ability to consummate the Offer or the
Merger; or
(e) there shall have occurred any events or changes which have had or
which are reasonably likely to have or constitute, individually or in the
aggregate, a Material Adverse Effect on the Company; or
(f) the Company Board (i) shall have withdrawn, or modified or changed
in a manner adverse to Parent or Purchaser (including by amendment of the
Schedule 14D-9) its recommendation of the Offer, the Merger Agreement, or
the Merger, (ii) shall have recommended a Takeover Proposal or (iii) shall
have adopted any resolution to effect any of the foregoing; or
(g) any Person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent, Purchaser or their affiliates or any
group of which any of them is a member, shall have acquired beneficial
ownership (as determined pursuant to Rule 13d-3 promulgated under the
Exchange Act) of 30% or more of the Shares; or
(h) the Merger Agreement shall have been terminated in accordance with
its terms;
which in the sole good faith judgment of Parent or Purchaser, in any such case,
and regardless of the circumstances (including any action or inaction by Parent
or Purchaser) giving rise to such condition makes it inadvisable to proceed with
the Offer and/or with such acceptance for payment of or payments for Shares.
The foregoing conditions (other than the Minimum Condition) are for the
sole benefit of Parent and Purchaser and may be waived by Parent or Purchaser,
in whole or in part, at any time and from time to time, in the sole discretion
of Parent or Purchaser. The failure by Parent or Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any right
and each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time.
15. CERTAIN LEGAL MATTERS.
General. Except as described in this Section 15, based on information
provided by the Company, none of the Company, Purchaser or Parent is aware of
any license or regulatory permit that appears to be material to the business of
the Company and its subsidiaries, taken as a whole, that might be adversely
affected by the acquisition of Shares by Parent or Purchaser pursuant to the
Offer, the Merger or otherwise, except as set forth above, of any approval or
other action by any governmental, administrative or regulatory agency or
authority, domestic or foreign, that would be required prior to the acquisition
of Shares by Purchaser pursuant to the Offer, the Merger or otherwise. Should
any such approval or other action be required, Purchaser and Parent presently
contemplate that such approval or other action will be sought, except as
described below under "State Antitakeover Statutes." While, except as otherwise
described in this Offer to Purchase,
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<PAGE> 31
Purchaser does not presently intend to delay the acceptance for payment of, or
payment for, Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial conditions
or that failure to obtain any such approval or other action might not result in
consequences adverse to the Company's business or that certain parts of the
Company's business might not have to be disposed of, or other substantial
conditions complied with, in the event that such approvals were not obtained or
such other actions were not taken or in order to obtain any such approval or
other action. If certain types of adverse action are taken with respect to the
matters discussed below, Purchaser could decline to accept for payment, or pay
for, any Shares tendered. See Section 14 for certain conditions to the Offer,
including conditions with respect to governmental actions.
State Antitakeover Statutes. Section 203 of the DGCL, in general,
prohibits a Delaware corporation, such as the Company, from engaging in a
"Business Combination" (defined as a variety of transactions, including mergers)
with an "Interested Stockholder" (defined generally as a person that is the
beneficial owner of 15% or more of the outstanding voting stock of the subject
corporation) for a period of three years following the date that such person
became an Interested Stockholder unless, prior to the date such person became an
Interested Stockholder, the board of directors of the corporation approved
either the Business Combination or the transaction that resulted in the
stockholder becoming an Interested Stockholder. The provisions of Section 203 of
the DGCL are not applicable to any of the transactions contemplated by the
Merger Agreement, since the Merger Agreement and the transactions contemplated
thereby were approved by the Company Board prior to the execution thereof.
A number of states have adopted laws and regulations that purport to apply
to attempts to acquire corporations that are incorporated in such states, or
whose business operations have substantial economic effects in such states, or
which have substantial assets, security holders, employees, principal executive
offices or principal places of business in such states. In Edgar v. MITE Corp.,
the Supreme Court of the United States (the "Supreme Court") invalidated on
constitutional grounds the Illinois Business Takeover statute, which, as a
matter of state securities law, made certain corporate acquisitions more
difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the
Supreme Court held that the State of Indiana may, as a matter of corporate law
and, in particular, with respect to 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 stockholders. The state law before the Supreme Court was by its terms
applicable only to corporations that had a substantial number of stockholders in
the state and were incorporated there.
Parent and Purchaser do not believe that the antitakeover laws and
regulations of any state other than the State of Delaware will by their terms
apply to the Offer, and, except as set forth above with respect to Section 203
of the DGCL, neither Parent nor Purchaser has attempted to comply with any state
antitakeover statute or regulation. Purchaser reserves the right to challenge
the applicability or validity of any state law purportedly applicable to the
Offer and nothing in this Offer to Purchase or any action taken in connection
with the Offer is intended as a waiver of such right. If it is asserted that any
state antitakeover statute is applicable to the Offer and an appropriate court
does not determine that it is inapplicable or invalid as applied to the Offer,
Purchaser might be required to file certain information with, or to receive
approvals from, the relevant state authorities, and Purchaser might be unable to
accept for payment or pay for Shares tendered pursuant to the Offer or may be
delayed in consummating the Offer. In such case, Purchaser may not be obligated
to accept for payment, or pay for, any Shares tendered pursuant to the Offer.
See Section 14.
Antitrust. The Offer and the Merger are subject to the HSR Act, which
provides that certain acquisition transactions may not be consummated unless
certain information has been furnished to the Antitrust Division of the
Department of Justice (the "DOJ") and the Federal Trade Commission (the "FTC")
and certain waiting period requirements have been satisfied.
Parent and the Company have filed their Notification and Report Forms with
respect to the Offer under the HSR Act. The waiting period under the HSR Act
with respect to the Offer will expire at 11:59 p.m., New York City time, on the
fifteenth day after the date Parent's form was filed unless early termination of
the
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waiting period is granted. However, the DOJ or the FTC may extend the waiting
period by requesting additional information or documentary material from Parent
or the Company. If such a request is made, such waiting period will expire at
11:59 p.m., New York City time, on the tenth day after substantial compliance by
Parent with such request. Only one extension of the waiting period pursuant to a
request for additional information is authorized by the HSR Act. Thereafter,
such waiting period may be extended only by court order or with the consent of
Parent. In practice, complying with a request for additional information or
material can take a significant amount of time. In addition, if the DOJ or the
FTC raises substantive issues in connection with a proposed transaction, the
parties frequently engage in negotiations with the relevant governmental agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while such negotiations continue. The Purchaser
will not accept for payment Shares tendered pursuant to the Offer unless and
until the waiting period requirements imposed by the HSR Act with respect to the
Offer have been satisfied. See Section 14.
The FTC and the DOJ frequently scrutinize the legality under the Antitrust
Laws of transactions such as Purchaser's acquisition of Shares pursuant to the
Offer and the Merger. At any time before or after Purchaser's acquisition of
Shares, the DOJ or the FTC could take such action under the Antitrust Laws as it
deems necessary or desirable in the public interest, including seeking to enjoin
the acquisition of Shares pursuant to the Offer or otherwise seeking divestiture
of Shares acquired by Purchaser or divestiture of substantial assets of Parent
or its subsidiaries. Private parties, as well as state governments, may also
bring legal action under the Antitrust Laws under certain circumstances. Based
upon an examination of information provided by the Company relating to the
businesses in which Parent and the Company are engaged, Parent and Purchaser
believe that the acquisition of Shares by Purchaser will not violate the
Antitrust Laws. Nevertheless, there can be no assurance that a challenge to the
Offer or other acquisition of Shares by Purchaser on antitrust grounds will not
be made or, if such a challenge is made, of the result. See Section 14 for
certain conditions to the Offer, including conditions with respect to litigation
and certain government actions.
As used in this Offer to Purchase, "Antitrust Laws" shall mean and include
the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, and all other Federal and state
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines, and other laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade.
Federal Reserve Board Regulations. Regulations G, U and X (the "Margin
Regulations") of the Federal Reserve Board 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 by margin stock. Such
secured credit may not be extended or maintained in an amount that exceeds the
maximum loan value of all the direct and indirect collateral securing the
credit, including margin stock and other collateral. The financing of the Offer
will not be directly or indirectly secured by the Shares or other securities
which constitute margin stock. Accordingly, all financing for the Offer will be
in full compliance with the Margin Regulations.
16. FEES AND EXPENSES.
Purchaser and Parent have retained D.F. King & Co. Inc. to serve as the
Information Agent and BankBoston, N.A. to serve as the Depositary in connection
with the Offer. The Information Agent may contact holders of Shares by personal
interview, mail, telephone, telex, telegraph and other methods of electronic
communication and may request brokers, dealers, commercial banks, trust
companies and other nominees to forward the Offer materials to beneficial
holders. The Information Agent and the Depositary will each receive reasonable
and customary compensation for their services, be reimbursed for certain
reasonable out-of-pocket expenses and be indemnified against certain liabilities
in connection with their services, including certain liabilities and expenses
under the federal securities laws.
Except as set forth above, neither Parent nor Purchaser will pay any fees
or commissions to any broker or dealer or other person or entity in connection
with the solicitation of tenders of Shares pursuant to the Offer.
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<PAGE> 33
Brokers, dealers, banks and trust companies will be reimbursed by Purchaser for
customary mailing and handling expenses incurred by them in forwarding the Offer
materials to their customers.
17. MISCELLANEOUS.
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 the Shares pursuant thereto, Purchaser
shall make a good faith effort to comply with such statute or seek to have such
statute declared inapplicable to the Offer. 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) holders of Shares in such
state.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR 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.
Purchaser and Parent have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act, together with exhibits,
furnishing certain additional information with respect to the Offer. In
addition, the Company has filed with the Commission the Schedule 14D-9 pursuant
to Rule 14d-9 under the Exchange Act, setting forth its recommendation with
respect to the Offer and the reasons for its recommendation and furnishing
certain additional related information. Such Schedules and any amendments
thereto, including exhibits, should be available for inspection and copies
should be obtainable in the same manner set forth in Section 9 of this Offer to
Purchase (except that such material will not be available at the regional
offices of the Commission).
NEW HIAC II CORP.
October 2, 1998
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SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of Parent. Unless otherwise indicated, each such
person is a citizen of the United States of America and the business address of
each such person is c/o Hasbro, Inc. 1027 Newport Avenue, Pawtucket, RI 02861.
Unless otherwise indicated, each occupation set forth opposite an individual's
name refers to employment with Parent. Unless otherwise indicated, each such
person has held his or her present occupation as set forth below, or has been an
executive officer at Parent for the past five years.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<S> <C>
DONAL A. BARKSDALE........................ Mr. Barksdale has been Chief Information Officer since
1997. Prior thereto, he was Senior Director of
Applications Development at Anheuser Busch from 1996 to
1997. Prior thereto, he was Vice President and Director
of Information Systems at General Electric Company.
ALAN R. BATKIN............................ Mr. Batkin is Vice Chairman of Kissinger Associates,
Director since 1992 Inc. (geopolitical strategic consulting firm) and a
director of PEC Israel Economic Corporation. Mr. Batkin
is a member of both the Executive Committee and the
Compensation and Stock Option Committee.
HAROLD P. GORDON.......................... Mr. Gordon has been Vice Chairman of the Board since
Director since 1988 1995. Prior thereto, he was a Partner at Stikeman,
Elliott (law firm). He is a director of Alliance
Communications Corporation, Fonorola Inc. and G.T.C.
Transcontinental Group, Ltd. Mr. Gordon is a citizen of
Canada.
ALEX GRASS................................ Mr. Grass has been the Chairman of the Executive
Director since 1981 Committee of Rite Aid Corporation (drug store chain)
since 1995. Prior thereto, he was the Chairman of the
Board and Chief Executive Officer of Rite Aid
Corporation. He is Chairman of the Board of SuperRite
Corporation. Mr. Grass is a member of both the Audit
Committee and the Compensation and the Stock Option
Committee.
ALAN G. HASSENFELD........................ Mr. Hassenfeld has been Chairman of the Board, President
Director since 1978 and Chief Executive Officer since 1989. Mr. Hassenfeld
is Chairman of the Executive Committee.
SYLVIA K. HASSENFELD...................... Mrs. Hassenfeld is the former Chairman of the Board
Director since 1983 since 1996 and from 1993 through 1996, she was the
Chairman of the Board of the American Jewish Joint
Distribution Committee, Inc. ("JDC"). Prior thereto, she
was President of JDC. Mrs. Hassenfeld is Chair of the
Nominating and Governance Committee.
RICHARD B. HOLT........................... Mr. Holt has been Senior Vice President and Controller
since 1992.
VIRGINIA H. KENT.......................... Ms. Kent has been President of Global Brands and Product
Development since 1996. Prior thereto, she was General
Manager, Girls/Boys/Nerf from 1994 to 1996. Prior
thereto, she was Senior Vice President of Marketing for
the Kenner Products Division.
</TABLE>
I-1
<PAGE> 35
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<S> <C>
ADAM KLEIN................................ Mr. Klein has been President of Global Marketing &
Strategy since 1998. Prior thereto, he was Executive
Vice President -- Global Strategy & Development from
1996 to 1998. Prior thereto, he was President, Klein &
Co., a consulting firm specializing in managing
strategic change.
MARIE JOSEE KRAVIS........................ Mrs. Kravis has been a Senior Fellow of the Hudson
Director since 1995 Institute (public policy analysis) since 1994. Prior
thereto, she was Executive Director of the Hudson
Institute of Canada. She is a Visiting Fellow of the
Council on Foreign Relations. She is also a director of
the Canadian Imperial Bank of Commerce, Ford Motor
Company, Hollinger International, Inc., The Seagram
Company, Ltd. and Unimedia Inc. Mrs. Kravis is a member
of the Compensation and Stock Option Committee. Mrs.
Kravis is a citizen of the United States, Canada and
Switzerland.
CLAUDINE B. MALONE........................ Ms. Malone is the President of Financial and Management
Director since 1992 Consulting, Inc., and a director of Dell Computer
Corporation, Hannaford Brothers Co., Houghton Mifflin
Company, Lafarge Corp., The Limited, Inc., Lowe's
Companies, Inc., Mallinckrodt Group, Inc., Science
Applications International Corporation and Union Pacific
Resources Corporation. Ms. Malone is a member of the
Audit Committee.
MORRIS W. OFFIT........................... Mr. Offit is Chairman and Chief Executive Officer of
Director since 1995 Offitbank (investment management) and a director of
Cantel Industries, Inc. and Mercantile Bankshares
Corporation. Mr. Offit is a member of the Audit
Committee.
JOHN T. O'NEILL........................... Mr. O'Neill has been Executive Vice President and Chief
Financial Officer since 1989. Mr. O'Neill is a Trustee
of the Galaxy Funds.
NORMA T. PACE............................. Mrs. Pace has been the President of Paper Analytics
Director since 1984 Associates (economic consulting) since 1995. She is also
the Senior Economic Advisor for the WEFA Group (economic
consulting and planning). She is a director of Englehard
Corporation. Mrs. Pace is both the Chair of the Audit
Committee and a member of the Executive Committee.
CYNTHIA S. REED........................... Mrs. Reed has been Senior Vice President and General
Counsel since 1995. Prior thereto, she was Vice
President -- Legal.
E. JOHN ROSENWALD, JR..................... Mr. Rosenwald is the Vice Chairman of the Board of The
Director since 1983 Bear Stearns Companies Inc. (investment bankers) and a
director of Cendant Corporation. Mr. Rosenwald is a
member of the Executive Committee.
</TABLE>
I-2
<PAGE> 36
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<S> <C>
CARL SPIELVOGEL........................... Mr. Spielvogel has been the Chairman and Chief Executive
Director since 1992 Officer of Carl Spielvogel Associates, Inc.
(international investments) since 1997. Prior thereto,
he was Chairman of the Board and Chief Executive Officer
of United Auto Group, Inc. (operator of
multiple-franchise auto dealerships) from 1994 to 1997.
Prior thereto, Mr. Spielvogel was Chairman of the Board
and Chairman of the Executive Committee of Backer
Spielvogel Bates Worldwide, Inc. (advertising) during
1994. Prior thereto, he was Chairman and Chief Executive
Officer of Backer Spielvogel Bates Worldwide, Inc. He is
a director of Data Broadcasting Inc. Mr. Spielvogel is
Chairman of the Compensation and Stock Option Committee.
PRESTON ROBERT TISCH...................... Mr. Tisch has been the Co-Chairman and Co-Chief
Director since 1993 Executive Officer of Loews Corporation since 1994. Prior
thereto, he was President and Co-Chief Executive Officer
of Loews Corporation. He is also a director of Bulova
Watch Company, Inc., CNA Financial Corporation, Loews
Corporation, Rite Aid Corporation and Chairman of the
Board of the N.Y. Football Giants. Mr. Tisch is a member
of the Nominating and Governance Committee.
MARTIN R. TRUEB........................... Mr. Trueb has been Senior Vice President and Treasurer
since 1997. Prior thereto, Mr. Trueb was Assistant
Treasurer of Amway Corporation from 1995 to 1997. Prior
thereto, he was Director of International Treasury at
RJR Nabisco, Inc.
ALFRED J. VERRECCHIA...................... Mr. Verrecchia has been the Executive Vice President and
Director since 1992 President -- Global Operations since 1996. Prior
thereto, he was Chief Operating Officer of Domestic Toy
Operations. Mr. Verrecchia is also a director of Old
Stone Corporation.
GEORGE B. VOLANAKIS....................... Mr. Volanakis has been President of European Sales and
Marketing since 1998. Prior thereto, he was President
and CEO of the ERTL Company Inc. (a toy and hobby
manufacturer and marketer). Mr. Volanakis is a director
of Zindart Ltd.
PHILLIP H. WALDOKS........................ Mr. Waldoks has been Senior Vice President -- Corporate
Legal Affairs and Secretary since 1995. Prior thereto,
he was Senior Vice President -- Corporate Legal Affairs.
E. DAVID WILSON........................... Mr. Wilson has been President of Hasbro Americas since
1996. Prior thereto, he was President of the Hasbro
Games Group from 1995 to 1996. Prior thereto, he was
President of Milton Bradley Company.
PAUL WOLFOWITZ............................ Mr. Wolfowitz has been the Dean of Paul H. Nitze School
Director since 1995 of Advanced International Studies at the Johns Hopkins
University since 1994. Prior thereto, he was a
Distinguished Visiting Fellow, at the National Defense
University and the George F. Kennan Professor of
National Security Strategy, at the National War College
during 1993. Prior thereto, Mr. Wolfowitz was
Undersecretary of Defense for Policy, U.S. Department of
Defense. Prior thereto, he was U.S. Ambassador to the
Republic of Indonesia. He is a director of eleven mutual
funds of the Dreyfus Corporation. Mr. Wolfowitz is a
member of the Nominating and Governance Committee.
</TABLE>
I-3
<PAGE> 37
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of Purchaser. Other than Mr. Gordon, who is a
Canadian citizen, each such person is a citizen of the United States of America,
and the business address of each such person is c/o Hasbro, Inc., 1027 Newport
Avenue, Pawtucket, RI 02861. Unless otherwise indicated, each occupation set
forth opposite an individual's name refers to employment with Parent. Unless
otherwise indicated, each such person has held his or her present occupation as
set forth below, or has been an executive officer at Parent, or the organization
indicated, for the past five years.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<S> <C>
ALAN G. HASSENFELD......... Director and President of the Purchaser. See Part 1 of
this Schedule I.
ALFRED J. VERRECCHIA....... Director and Executive Vice President and
President -- Global Operations of the Purchaser. See Part
1 of this Schedule I.
HAROLD P. GORDON........... Director and Executive Vice President of the Purchaser.
See Part 1 of this Schedule I.
JOHN T. O'NEILL............ Executive Vice President and Chief Financial Officer of
the Purchaser. See Part 1 of this Schedule I.
RICHARD B. HOLT............ Senior Vice President and Controller of the Purchaser. See
Part 1 of this Schedule I.
CYNTHIA S. REED............ Senior Vice President and General Counsel of the
Purchaser. See Part 1 of this Schedule I.
MARTIN R. TRUEB............ Senior Vice President and Treasurer of the Purchaser. See
Part 1 of this Schedule I.
PHILLIP H. WALDOKS......... Senior Vice President -- Corporate Legal Affairs and
Secretary of the Purchaser. See Part 1 of this Schedule I.
</TABLE>
I-4
<PAGE> 38
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 stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary, at the applicable address set forth below:
The Depositary for the Offer is:
BANKBOSTON, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Delivery:
BankBoston, N.A. Securities Transfer & Reporting BankBoston, N.A.
Attention: Corporate Services, Inc. Attention: Corporate
Reorganization c/o Boston EquiServe L.P. Reorganization
P.O. Box 8029 1 Exchange Plaza 150 Royall Street
Boston, MA 02266-8029 55 Broadway, 3rd Floor Canton, MA 02021
New York, NY 10006
</TABLE>
By Facsimile Transmission: (781) 575-2233 or (781) 575-2232
(For Eligible Institutions Only)
Confirm Facsimile by Telephone: (800) 733-5001
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
the other tender offer materials may be directed to the Information Agent at the
address and telephone number set forth below. Stockholders may also contact
their broker, dealer, commercial bank, trust company or other nominee 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
CALL TOLL FREE: (800) 755-3107
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
GALOOB TOYS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED OCTOBER 2, 1998
OF
NEW HIAC II CORP.,
A WHOLLY OWNED SUBSIDIARY OF
HASBRO, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, OCTOBER 30, 1998, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
BANKBOSTON, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Delivery:
BankBoston, N.A. Securities Transfer & Reporting BankBoston, N.A.
Attention: Corporate Services, Inc. Attention: Corporate
Reorganization c/o Boston EquiServe L.P. Reorganization
P.O. Box 8029 1 Exchange Plaza 150 Royall Street
Boston, MA 02266-8029 55 Broadway, 3rd Floor Canton, MA 02021
New York, NY 10006
</TABLE>
By Facsimile Transmission: (781) 575-2233 or (781) 575-2233
(For Eligible Institutions Only)
Confirm Facsimile by Telephone: (800) 733-5001
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
THE INSTRUCTIONS CONTAINED WITHIN THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used by stockholders of Galoob Toys,
Inc. if certificates for Shares (as such term is defined below) are to be
forwarded herewith or, unless an Agent's Message (as defined in Instruction 2
below) is utilized, if delivery of Shares is to be made by book-entry transfer
to an account maintained by the Depositary at the Book-Entry Transfer Facility
(as defined in and pursuant to the procedures set forth in Section 3 of the
Offer to Purchase). Stockholders who deliver Shares by book-entry transfer are
referred to herein as "Book-Entry Stockholders" and other stockholders who
deliver shares are referred to herein as "Certificate Stockholders."
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver either the certificates for, or a Book-Entry Confirmation (as
defined in Section 3 of the Offer to Purchase) with respect to, their Shares and
all other documents required hereby to the Depositary prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares
pursuant to the guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE> 2
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE
THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY
DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution
- --------------------------------------------------------------------------------
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED 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: [ ]
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARES TENDERED
APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
<S> <C> <C> <C>
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total Shares
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) NEED NOT BE COMPLETED BY BOOK-ENTRY STOCKHOLDERS.
(2) UNLESS OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES REPRESENTED
BY SHARE CERTIFICATES DELIVERED TO THE DEPOSITARY ARE BEING TENDERED
HEREBY. SEE INSTRUCTION 4.
- --------------------------------------------------------------------------------
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to New HIAC II Corp., a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Hasbro, Inc., a Rhode Island
corporation ("Parent"), the above-described shares of common stock, par value
$0.01 per share (the "Common Stock"), including the associated preferred stock
purchase rights (the "Rights" and, together with the Common Stock, the
"Shares"), of Galoob Toys, Inc., a Delaware corporation (the "Company"),
pursuant to Purchaser's offer to purchase all of the outstanding Shares at a
price of $12.00 per Share, net to the seller in cash, without interest thereon
(the "Offer Price") upon the terms and subject to the conditions set forth in
the Offer to Purchase dated October 2, 1998, and in this Letter of Transmittal
(which, together with any amendments or supplements thereto or hereto,
collectively constitute the "Offer"). The undersigned understands that Purchaser
reserves the right to transfer or assign, in whole at any time, or in part from
time to time, 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 stockholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
Receipt of the Offer is hereby acknowledged.
The Company has distributed one Right for each outstanding Share pursuant
to the Rights Agreement (as defined in the Offer to Purchase). The Rights are
currently evidenced by and trade with certificates evidencing the Common Stock.
The Company has taken such action so as to make the Rights Agreement
inapplicable to Parent, Purchaser and their respective affiliates and associates
in connection with the Transactions contemplated by the Merger Agreement (as
such terms are defined in the Offer to Purchase).
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 27, 1998 (the "Merger Agreement"), by and among Parent,
Purchaser and the Company.
Upon the terms and subject to the conditions of the Offer (and if the Offer
is extended or amended, the terms of any such extension or amendment), subject
to, and effective upon, acceptance for payment of, and 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 the Shares that are being tendered
hereby (and any and all non-cash dividends, distributions, rights, other Shares
or other securities issued or issuable in respect thereof on or after September
27, 1998 (collectively, "Distributions")) and irrevocably constitutes and
appoints the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares (and all Distributions), with full power
of substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (i) deliver certificates for such Shares (and any
and all Distributions), or transfer ownership of such Shares (and any and all
Distributions) on the account books maintained by the Book-Entry Transfer
Facility, together, in any such case, with all accompanying evidences of
transfer and authenticity, to or upon the order of Purchaser, (ii) present such
Shares (and any and all Distributions) for transfer on the books of the Company,
and (iii) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares (and any and all Distributions), all in accordance with
the terms of the Offer.
By executing this Letter of Transmittal, the undersigned hereby irrevocably
appoints Alan G. Hassenfeld, Harold P. Gordon and Alfred J. Verrecchia in their
respective capacities as officers of Purchaser, and any individual who shall
thereafter succeed to any such office of Purchaser, and each of them, the
attorneys-in-fact and proxies of the undersigned, each with full power of
substitution, to vote at any annual or special meeting of the Company's
stockholders or any adjournment or postponement thereof or otherwise in such
manner as each such attorney-in-fact and proxy or his substitute shall in his
sole discretion deem proper with respect to, to execute any written consent
concerning any matter as each such attorney-in-fact and proxy or his substitute
shall in his sole discretion deem proper with respect to, and to otherwise act
as each such attorney-in-fact and proxy or his substitute shall in his sole
discretion deem proper with respect to, all of the Shares (and any and all
Distributions) tendered hereby and accepted for payment by Purchaser. This
appointment will be effective if and when, and only to the extent that,
Purchaser accepts such Shares for payment pursuant to the Offer. This power of
attorney and proxy are irrevocable and are granted in consideration of the
acceptance for payment of such Shares in accordance with the terms of the Offer.
Such acceptance for payment shall, without further action, revoke any prior
powers of attorney and proxies granted by the undersigned at any time with
respect to such Shares (and any and all Distributions), and no subsequent powers
of attorney, proxies, consents or revocations may be given by the undersigned
with respect thereto (and, if given, will not be deemed effective). Purchaser
reserves the right to require that, in order for Shares or other securities to
be deemed validly tendered, immediately upon Purchaser's acceptance for payment
of such Shares, Purchaser must be able to exercise full voting, consent and
other rights with respect to such Shares (and any and all Distributions),
including voting at any meeting of the Company's stockholders.
<PAGE> 4
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, that the undersigned owns the Shares
tendered hereby within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that the
tender of the tendered Shares complies with Rule 14e-4 under the Exchange Act,
and that when the same are accepted for payment by Purchaser, Purchaser will
acquire good, marketable and unencumbered title thereto and to all
Distributions, free and clear of all liens, restrictions, charges and
encumbrances and the same will not be subject to any adverse claims. The
undersigned will, upon request, 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 all
Distributions. In addition, the undersigned shall remit and transfer promptly to
the Depositary for the account of Purchaser all Distributions in respect of the
Shares tendered hereby, accompanied by appropriate documentation of transfer,
and, pending such remittance and transfer or appropriate assurance thereof,
Purchaser shall be entitled to all rights and privileges as owner of each such
Distribution and may withhold the entire purchase price of the Shares tendered
hereby or deduct from such purchase price, the amount or value of such
Distribution as determined by Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, successors and assigns of the
undersigned. Except as stated in the Offer, this tender is irrevocable.
The undersigned understands that the valid tender of Shares pursuant to any
one 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 of the Offer (and if
the Offer is extended or amended, the terms or conditions of any such extension
or amendment). Without limiting the foregoing, if the price to be paid in the
Offer is amended in accordance with the terms of the Merger Agreement, the price
to be paid to the undersigned will be the amended price notwithstanding the fact
that a different price is stated in this Letter of Transmittal. The undersigned
recognizes that under certain circumstances set forth in the Offer to Purchase,
Purchaser may not be required to accept for payment any of the Shares tendered
hereby.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of all Shares purchased and/or return any
certificates for Shares not tendered or accepted for payment in the name(s) of
the registered holder(s) appearing above under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price of all Shares purchased and/or
return any certificates for Shares not tendered or not accepted for payment (and
any accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing above under "Description of Shares Tendered." In the event
that the boxes entitled "Special Payment Instructions" and "Special Delivery
Instructions" are both completed, please issue the check for the purchase price
of all Shares purchased and/or return any certificates evidencing Shares not
tendered or not accepted for payment (and any accompanying documents, as
appropriate) in the name(s) of, and deliver such check and/or return any such
certificates (and any accompanying documents, as appropriate) to, the person(s)
so indicated. Unless otherwise indicated herein in the box entitled "Special
Payment Instructions," please credit any Shares tendered herewith by book-entry
transfer that are not accepted for payment by crediting the account at the
Book-Entry Transfer Facility designated above. The undersigned recognizes that
Purchaser has no obligation, pursuant to the "Special Payment Instructions," to
transfer any Shares from the name of the registered holder thereof if Purchaser
does not accept for payment any of the Shares so tendered.
<PAGE> 5
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN
HAVE BEEN LOST, DESTROYED OR STOLEN AND SEE INSTRUCTION 11.
NUMBER OF SHARES REPRESENTED BY LOST, DESTROYED OR STOLEN CERTIFICATES:
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
accepted for payment is to be issued in name of someone other than the
undersigned, if certificates for Shares not tendered or not accepted for
payment are to be issued in the name of someone other than the undersigned
or if Shares tendered hereby and delivered by book-entry transfer that are
not accepted for payment are to be returned by credit to an account
maintained at a Book-Entry Transfer Facility other than the account
indicated above.
Issue check and/or Share certificate(s) to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
---------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9)
Credit Shares delivered by book-entry transfer and not purchased to the
Book-Entry Transfer Facility account.
------------------------------------------------------------
(ACCOUNT NUMBER)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment is to be sent to someone other than the undersigned
or to the undersigned at an address other than that shown under
"Description of Shares Tendered."
Mail check and/or Share certificates to:
Name
-----------------------------------------------------
(PLEASE PRINT)
Address
---------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9)
------------------------------------------------------------
<PAGE> 6
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF STOCKHOLDER(S))
Dated:
- ------------------------ ,1998
(Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Share 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 trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following information
and see Instruction 5.)
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Name of Firm
- --------------------------------------------------------------------------------
Capacity (full title)
- --------------------------------------------------------------------------------
(SEE INSTRUCTION 5)
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
- ---------------------------------------------------------------------------
Taxpayer Identification or Social Security Number
- -----------------------------------------------------------
(SEE SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
- --------------------------------------------------------------------------------
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Title
- --------------------------------------------------------------------------------
Name of Firm
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
- ---------------------------------------------------------------------------
<PAGE> 7
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) (which term, for purposes of this Section, includes any
participant in any of the Book-Entry Transfer Facility's systems whose name
appears on a security position listing as the owner of the Shares) of Shares
tendered herewith, unless such registered holder(s) has completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (b) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(each, an "Eligible Institution"). In all other cases, all signatures on this
Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by stockholders of
the Company either if Share certificates are to be forwarded herewith or, unless
an Agent's Message is utilized, if delivery of Shares is to be made by
book-entry transfer pursuant to the procedures set forth herein and in Section 3
of the Offer to Purchase. For a stockholder validly to tender Shares pursuant to
the Offer, either (a) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), together with any required signature
guarantees or an Agent's Message (in connection with book-entry transfer) and
any other required documents, must be received by the Depositary at one of its
addresses set forth herein prior to the Expiration Date and either (i)
certificates for tendered Shares must be received by the Depositary at one of
such addresses prior to the Expiration Date or (ii) Shares must be delivered
pursuant to the procedures for book-entry transfer set forth herein and in
Section 3 of the Offer to Purchase and a Book-Entry Confirmation must be
received by the Depositary prior to the Expiration Date or (b) the tendering
stockholder must comply with the guaranteed delivery procedures set forth herein
and in Section 3 of the Offer to Purchase.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot comply with the book-entry
transfer procedures on a timely basis may tender their Shares by properly
completing and duly executing the Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedure set forth herein and in Section 3 of the Offer to
Purchase.
Pursuant to such guaranteed delivery procedures, (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 provided by
Purchaser, must be received by the Depositary prior to the Expiration Date and
(iii) the certificates for all tendered Shares, in proper form for transfer (or
a Book-Entry Confirmation with respect to all tendered Shares), 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 transfer, an Agent's Message, and any other required documents must
be received by the Depositary within three trading days after the date of
execution of such Notice of Guaranteed Delivery. A "trading day" is any day on
which the New York Stock Exchange is open for business.
The term "Agent's Message" means a message, transmitted by the 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, 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 the participant.
The signatures on this Letter of Transmittal cover the Shares tendered
hereby.
THE METHOD OF DELIVERY OF THE SHARES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. THE SHARES
WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY
<PAGE> 8
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 will be purchased. All tendering stockholders, by executing
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the number of Shares tendered and the Share
certificate numbers with respect to such Shares should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS. (Not applicable to stockholders who tender by
book-entry transfer). If fewer than all the Shares evidenced by any Share
certificate delivered to the Depositary herewith are to be tendered hereby, fill
in the number of Shares that are to be tendered in the box entitled "Number of
Shares Tendered." In any such case, new certificate(s) for the remainder of the
Shares that were evidenced by the old certificates will be sent to the
registered holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as soon as practicable after the Expiration Date or the
termination of the Offer. All Shares represented by 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
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 tendered hereby are held of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares 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 Share certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of the authority of such person so to act must be
submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Share certificates or
separate stock powers are required unless payment or certificates for Shares not
tendered or not accepted for payment are to be issued in the name of a person
other than the registered holder(s). Signatures on any such Share 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 Shares evidenced by certificates listed and
transmitted hereby, the Share certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the Share certificates. Signature(s) on any
such Share certificates or stock powers must be guaranteed by an Eligible
Institution.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the transfer and
sale of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or if
certificates for Shares not tendered or not accepted for payment are to be
registered in the name of, any person other than the registered holder(s), or if
tendered certificates 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 other person) payable
on account of the transfer to such other person will be deducted from the
purchase price of such Shares purchased unless evidence satisfactory to
Purchaser of the payment of such taxes, or exemption therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Share certificates evidencing the
Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares accepted for payment is to be issued in the name of, and/or
Share certificates for Shares not accepted for payment or not tendered are to be
issued in the name of and/or returned to, a person other than the signer of this
Letter of Transmittal or if a check is
<PAGE> 9
to be sent, and/or such certificates are to be returned, to a person other than
the signer of this Letter of Transmittal, or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Any stockholder(s) delivering Shares by book-entry transfer may request that
Shares not purchased be credited to such account maintained at the Book-Entry
Transfer Facility as such stockholder(s) may designate in the box entitled
"Special Payment Instructions." If no such instructions are given, any such
Shares not purchased will be returned by crediting the account at the Book-Entry
Transfer Facility designated above as the account from which such Shares were
delivered.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent at its address and phone number set forth
below, or from brokers, dealers, commercial banks or trust companies.
9. WAIVER OF CONDITIONS. Subject to the Merger Agreement, Purchaser
reserves the absolute right in its sole discretion to waive, at any time or from
time to time, any of the specified conditions of the Offer, in whole or in part,
in the case of any Shares tendered.
10. BACKUP WITHHOLDING. In order to avoid "backup withholding" of federal
income tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such stockholder's correct taxpayer identification number ("TIN") on
Substitute Form W-9 in this Letter of Transmittal and certify, under penalties
of perjury, that such TIN is correct and that such stockholder is not subject to
backup withholding.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the federal income tax liability
of the person subject to the backup withholding, provided that the required
information is given to the IRS. If backup withholding results in an overpayment
of tax, a refund can be obtained by the stockholder upon filing an income tax
return.
The stockholder is required to give the Depositary the TIN (i.e., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are held 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.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder 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 stockholder 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% on all payments made prior to the time a properly certified TIN is
provided to the Depositary. However, such amounts will be refunded to such
stockholder if a TIN is provided to the Depositary within 60 days.
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign the main signature
form and 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 the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for more instructions.
11. LOST, DESTROYED OR STOLEN SHARE CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary by checking the box immediately preceding the
special payment/special delivery instructions and indicating the number of
Shares lost. The stockholder will then be instructed as to the steps that must
be taken in order to replace the Share certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Share certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) TOGETHER WITH
ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN
AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED
SHARES MUST BE
<PAGE> 10
RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT TO THE
PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION DATE,
OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED
DELIVERY.
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payer) with such
stockholder's correct taxpayer identification number on Substitute Form W-9
below. If such stockholder is an individual, the taxpayer identification number
is his social security number. If a tendering stockholder is subject to backup
withholding, such stockholder must cross out item (2) of the Certification box
on the Substitute Form W-9. If the Depositary is not provided with the correct
taxpayer identification number, the stockholder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, payments that are made to
such stockholder with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding.
Certain stockholders (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, that stockholder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Depositary. Exempt stockholders, other than
foreign individuals, should furnish their TIN, write "Exempt" on the face of the
Substitute Form W-9 below, and sign, date and return the Substitute Form W-9 to
the Depositary. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. 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.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct taxpayer
identification number by completing the form contained herein certifying that
the taxpayer identification number provided on Substitute Form W-9 is correct
(or that such stockholder is awaiting a taxpayer identification number).
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of 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.
If the tendering stockholder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, such stockholder
should write "Applied For" in the space provided for in the TIN in Part 1, and
sign and date the Substitute Form W-9. If "Applied For" is written in Part I and
the Depositary is not provided with a TIN within sixty (60) days, the Depositary
will withhold 31% on all payments of the purchase price until a TIN is provided
to the Depositary.
<PAGE> 11
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PAYOR'S NAME: BANKBOSTON, N.A.
- ---------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN IN THE BOX AT -------------------------------
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW Social Security Number
DEPARTMENT OF THE TREASURY (If awaiting TIN write
INTERNAL REVENUE SERVICE "Applied For")
OR
-------------------------------
Employer Identification Number
(If awaiting TIN write
"Applied For")
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
PAYER'S REQUEST FOR PART 2 -- CERTIFICATE -- Under penalties of perjury, I certify that:
TAXPAYER IDENTIFICATION (1) The number shown on this form is my correct Taxpayer Identification Number (or I
NUMBER ("TIN") am waiting for a number to be issued for 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 the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
---------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if 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 returns. However, if after being
notified by the IRS that you are subject to backup withholding, you receive another
notification from the IRS that you are no longer subject to backup withholding, do not
cross out such item (2). (Also see instructions in the enclosed Guidelines).
---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
SIGNATURE ---------------------- DATE , 1998 Part 3 -- Awaiting TIN [ ]
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY CASH 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 to the Depositary by the time of
payment, 31% of all reportable payments made to me thereafter will be withheld,
but that such amounts will be refunded to me if I provide a certified Taxpayer
Identification Number to the Depositary within sixty (60) days.
<TABLE>
<S> <C>
Signature Date
------------------------------------------------------- ------------------------------------ ,
1998
</TABLE>
<PAGE> 12
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and other tender offer materials may be
directed to the Information Agent at its address and telephone number set forth
below:
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
CALL TOLL FREE: (800) 755-3107
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
GALOOB TOYS, INC.
TO
NEW HIAC II CORP.,
A WHOLLY OWNED SUBSIDIARY OF
HASBRO, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or a form substantially equivalent
hereto, must be used to accept the Offer (as defined below) if certificates
representing shares of Common Stock, par value $0.01 per share (the "Common
Stock"), including the associated preferred stock purchase rights (the "Rights"
and, together with the Common Stock, the "Shares"), of Galoob Toys, Inc., a
Delaware corporation, are not immediately available, if the procedure for
book-entry transfer cannot be completed prior to the Expiration Date (as defined
in Section 1 of the Offer to Purchase), or if time will not permit all required
documents to reach the Depositary prior to the Expiration Date. Such form may be
delivered by hand, transmitted by facsimile transmission or mailed to the
Depositary. See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
BANKBOSTON, N.A.
By Hand:
Securities Transfer & Reporting Services, Inc.
c/o Boston EquiServe L.P.
1 Exchange Plaza
55 Broadway, 3rd Floor
New York, NY 10006
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Overnight Delivery:
BankBoston, N.A. (781) 575-2233 or BankBoston, N.A.
Attention: (781)575-2232 Attention:
Corporate Reorganization (For Eligible Institutions Only) Corporate Reorganization
P.O. Box 8029 150 Royall Street
Boston, MA 02266-8029 Canton, MA 02021
</TABLE>
Confirm Facsimile by Telephone:
(800) 733-5001
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE NUMBER 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 ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to New HIAC II Corp., a Delaware corporation
and a wholly owned subsidiary of Hasbro, Inc., a Rhode Island corporation, upon
the terms and subject to the conditions set forth in Purchaser's Offer to
Purchase dated October 2, 1998 and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, constitute the "Offer"),
receipt of which is hereby acknowledged, the number of shares set forth below of
common stock, par value $0.01 per share (the "Common Stock"), including the
associated preferred stock purchase rights (the "Rights" and, together with the
Common Stock, the "Shares"), of Galoob Toys, Inc., a Delaware corporation,
pursuant to the guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase.
------------------------------------------------------------
Number of Shares:
--------------------------------------
Certificate Nos. (if available):
------------------------------------------------------------
------------------------------------------------------------
Check box if Shares will be tendered by book-entry transfer: [ ]
Account Number:
----------------------------------------
Dated: , 1998
- ------------------------------------------------------------
------------------------------------------------------------
Name(s) of Record Holder(s):
------------------------------------------------------------
------------------------------------------------------------
PLEASE PRINT
Address(es):
---------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
ZIP CODE
Area Code and Tel. No.:
------------------------------------------------------------
------------------------------------------------------------
Signature(s):
---------------------------------------------
------------------------------------------------------------
- ------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program, guarantees to deliver to the Depositary
either certificates representing the Shares tendered hereby, in proper form for
transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's accounts at The Depository Trust Company, in each case with
delivery of a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or an Agent's
Message, and any other documents required by the Letter of Transmittal, within
three trading days (as defined in the Offer to Purchase) after the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
<TABLE>
<S> <C>
Name of Firm: -----------------------------------------
-----------------------------------------------
AUTHORIZED SIGNATURE
Address:
------------------------------------------------ Name:
-----------------------------------------------
PLEASE PRINT
Title:
- -------------------------------------------------------- -----------------------------------------------
ZIP CODE
Area Code and Tel. No.: ------------------------------- Dated:
-------------------------------------------- , 1998
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD
BE SENT ONLY WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
GALOOB TOYS, INC.
AT
$12.00 NET PER SHARE
BY
NEW HIAC II CORP.,
A WHOLLY OWNED SUBSIDIARY OF
HASBRO, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, OCTOBER 30, 1998, UNLESS THE OFFER IS EXTENDED.
October 2, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies And Other Nominees:
We have been appointed by New HIAC II Corp., a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Hasbro, Inc., a Rhode Island
corporation ("Parent"), to act as Information Agent in connection with
Purchaser's offer to purchase all outstanding shares of common stock, par value
$0.01 per share (the "Common Stock"), including the associated preferred stock
purchase rights (the "Rights" and, together with the Common Stock, the
"Shares"), of Galoob Toys, Inc., a Delaware corporation (the "Company"), at
$12.00 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated October 2, 1998 (the "Offer
to Purchase") and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, constitute the "Offer") enclosed herewith.
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.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in the Offer
to Purchase) that number of Shares which, when added to the Shares beneficially
owned by Parent or Purchaser (if any), represents at least a majority of the
Shares outstanding on a fully diluted basis (excluding the Warrants (as defined
in the Offer to Purchase)) on the date Shares are accepted for payment. The
Offer is also subject to the other conditions set forth in the Offer to
Purchase. See Section 14 of the Offer to Purchase.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase dated October 2, 1998;
2. Letter of Transmittal for your use in accepting the Offer and
tendering Shares and for the information of your clients;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares and all other required documents cannot be
delivered to the Depositary, or if the procedures for book-entry transfer
cannot be completed, by the Expiration Date (as defined in the Offer to
Purchase);
4. A 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;
5. A letter to stockholders of the Company from Mark D. Goldman,
President and Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 dated October 2,
1998, which has been filed by the Company with the Securities and Exchange
Commission;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
<PAGE> 2
7. A return envelope addressed to BankBoston, N.A. (the
"Depositary").
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 pay for Shares which are
validly tendered prior to the Expiration Date and not theretofore properly
withdrawn when, as and if Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares for payment pursuant to the
Offer. Payment for Shares purchased pursuant to the Offer will in all cases be
made only after timely receipt by the Depositary of (i) certificates for such
Shares, or timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company, pursuant to the procedures
described in Section 3 of the Offer to Purchase, (ii) a properly completed and
duly executed Letter of Transmittal (or a properly completed and manually signed
facsimile thereof) or an Agent's Message (as defined in the Offer to Purchase)
in connection with a book-entry transfer and (iii) all other documents required
by the Letter of Transmittal.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Depositary and 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 brokers, dealers,
commercial banks and trust companies for customary mailing and handling costs
incurred by them in forwarding the enclosed materials to their customers.
Purchaser will pay or cause to be paid all stock transfer taxes applicable
to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the
Letter of Transmittal.
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 OCTOBER 30, 1998, UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer of Shares, and any other required documents, should be sent to the
Depositary, and certificates representing the tendered Shares should be
delivered or such Shares should be tendered by book-entry transfer, all in
accordance with the Instructions set forth in the Letter of Transmittal and in
the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or to complete the
procedures for delivery by book-entry transfer prior to the expiration of the
Offer, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained from, the
Information Agent at its address and telephone number set forth on the back
cover of the Offer to Purchase.
Very truly yours,
D.F. KING & CO., INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF PARENT, PURCHASER, THE COMPANY, THE INFORMATION AGENT, THE
DEPOSITARY, OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM
IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE
STATEMENTS CONTAINED THEREIN.
2
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
GALOOB TOYS, INC.
AT
$12.00 NET PER SHARE IN CASH
BY
NEW HIAC II CORP.,
A WHOLLY OWNED SUBSIDIARY OF
HASBRO, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, OCTOBER 30, 1998, UNLESS THE OFFER IS EXTENDED.
To Our Clients: October 2, 1998
Enclosed for your consideration are the Offer to Purchase dated October 2,
1998 and the related Letter of Transmittal (which, together with any amendments
or supplements thereto, collectively constitute the "Offer") in connection with
the offer by New HIAC II Corp., a Delaware corporation ("Purchaser"), and a
wholly owned subsidiary of Hasbro, Inc., a Rhode Island corporation ("Parent"),
to purchase for cash all outstanding shares of common stock, par value $0.01 per
share (the "Common Stock"), including the associated preferred stock purchase
rights (the "Rights" and, together with the Common Stock, the "Shares"), of
Galoob Toys, Inc., a Delaware corporation (the "Company"). We are the holder of
record of Shares held 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 enclosed
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 us to tender any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer.
Your attention is invited to the following:
1. The offer price is $12.00 per Share, net to you in cash without
interest.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company has unanimously approved the
Merger Agreement (as defined in the Offer to Purchase) and the transactions
contemplated thereby, including the Offer and the Merger (each as defined in
the Offer to Purchase), and has unanimously determined that the Offer and
the Merger are fair to, and in the best interests of, the Company's
stockholders and unanimously recommends that the stockholders accept the
Offer and tender their Shares pursuant to the Offer.
4. The Offer and withdrawal rights expire at 12:00 Midnight, New York
City time, on October 30, 1998, unless the Offer is extended.
5. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the Expiration Date (as defined
in the Offer to Purchase) that number of Shares which, when added to the
Shares beneficially owned by Parent or Purchaser (if any), represents at
least a majority of the Shares outstanding on a fully diluted basis
(excluding the Warrants (as defined in the Offer to Purchase)) on the date
Shares are accepted for payment. The Offer is also subject to the other
conditions set forth in the Offer to Purchase. See Section 14 of the Offer
to Purchase.
6. Any stock transfer taxes applicable to the sale of Shares to
Purchaser pursuant to the Offer will be paid by Purchaser, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
Except as disclosed in the Offer to Purchase, Purchaser is not aware of any
state in which the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. In any jurisdiction in
which the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer will be deemed to be made on behalf of
Purchaser by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form set forth
on the reverse side of this letter. An envelope to return your instructions to
us is enclosed. If you authorize the tender of your Shares, all such Shares will
be tendered unless otherwise specified on the reverse side of this letter. 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.
<PAGE> 2
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
GALOOB TOYS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated October 2, 1998 and the related Letter of Transmittal in
connection with the Offer by New HIAC II Corp., a Delaware corporation and a
wholly owned subsidiary of Hasbro, Inc., a Rhode Island corporation, to purchase
all outstanding shares of common stock, par value $0.01 per share (the "Common
Stock"), including the associated preferred stock purchase rights (the "Rights"
and, together with the Common Stock, the "Shares"), of Galoob Toys, Inc., a
Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or
if no number is indicated below, all Shares) held by you for the account of the
undersigned, upon the terms and subject to the conditions set forth in the
Offer.
<TABLE>
<S> <C>
Number of Shares to be Tendered:*
Shares
Dated: ____________________, 1998 ---------------------------------------------
---------------------------------------------
SIGNATURE(S)
---------------------------------------------
PRINT NAME(S)
---------------------------------------------
---------------------------------------------
ADDRESS(ES)
---------------------------------------------
AREA CODE AND TELEPHONE NUMBER
---------------------------------------------
TAX ID OR SOCIAL SECURITY NUMBER
</TABLE>
- ------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
2
<PAGE> 1
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>
<C> <S> <C>
- ------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(2)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(2)
4. Custodian account of a minor The minor(3)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if
the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent
minor, or incompetent person person(4)
7. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under State law
- ------------------------------------------------------------
- ------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ------------------------------------------------------------
8. Sole proprietorship account The owner(5)
9. A valid trust, estate, or pension Legal entity (Do
trust not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(1)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of The public entity
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 legal trust, estate, or pension trust.
(2) List first and circle the name of the person whose number you furnish.
(3) Circle the minor's name and furnish the minor's social security number.
(4) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(5) Show the name of the owner.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a TIN or you don't know your number, obtain Internal Revenue
Service Form SS-5, Application for a Social Security Number Card, or Form SS-4,
Application for Employer Identification Number, at your 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:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a) or an individual
retirement plan.
- 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 nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
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, AND RETURN IT TO
THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
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 the regulations under sections 6041, 6041A(a),
6045, and 6050A.
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. Payers must be given the numbers whether or not recipients are
required to file tax returns. 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 will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(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.--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> 1
Exhibit A(7)
FOR IMMEDIATE RELEASE:
CONTACT:
HASBRO: Wayne S. Charness (News Media) 401-727-5983
Renita E. O'Connell (Investor Relations)401-727-5401
GALOOB: Kathleen R. McElwee 650-952-1678 x2210
HASBRO ANNOUNCES DEFINITIVE AGREEMENT TO ACQUIRE GALOOB TOYS, INC.
Pawtucket, RI (September 28, 1998) - Hasbro, Inc. [ASE:HAS] announced
today that it has entered into a definitive agreement to acquire Galoob Toys,
Inc. [NYSE:GAL], an international toy manufacturer whose leading brands include
Micro Machines(R) miniature-scale boys' toys, Star Wars(TM) small-scale figures
and vehicles, Spice Girls(TM) fashion dolls, and Pound Puppies(R) mini-dolls.
The purchase price is $12 per common share of Galoob, payable in cash, for a
total transaction value of approximately $220 million. Closing is expected in
the fourth quarter of 1998.
"Galoob is a tremendous addition to our rich brand portfolio," said
Alan G. Hassenfeld, Chairman and CEO of Hasbro, Inc. "This acquisition will
allow us to build critical mass worldwide in the fast-growing vehicles category
by combining our popular Winner's Circle(TM) racing cars with Galoob's highly
successful Micro Machines(R). We are also excited about adding Galoob's
tremendously popular Spice Girls(TM) line to our portfolio," Hassenfeld
continued.
"In addition, the combination of Galoob's Star Wars(TM) small-scale
figures and vehicles license with Hasbro's extensive Star Wars(TM) license will
allow us to further develop this global brand franchise," Hassenfeld added.
-more-
<PAGE> 2
Page Two
By fully integrating the worldwide operations of Galoob into Hasbro,
the Company expects to achieve economies of scale and cost savings in a variety
of areas including product sourcing, manufacturing, marketing, advertising and
administrative support functions. Hasbro expects the transaction will be
modestly dilutive to earnings in 1998 and accretive beginning in 1999.
Mark D. Goldman, President and Chief Executive Officer of Galoob, said,
"We are excited about joining Hasbro. Hasbro's global reach and resources will
enormously expand the potential of Galoob's brands, especially Star Wars(TM) and
Micro Machines(R)."
The merger agreement with Galoob calls for a wholly owned subsidiary of
Hasbro to commence a tender offer no later than October 2, 1998 for all of
Galoob's approximately 18 million outstanding common shares. The offer will be
conditioned upon, among other things, the expiration or earlier termination of
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and the tender of a majority of the common shares outstanding on a
diluted basis of Galoob. Following the consummation of the offer, Hasbro's
subsidiary will be merged with Galoob and any remaining Galoob common shares
will be converted into the right to receive $12 per share in cash.
Founded in 1957, Galoob Toys' current product categories include
miniature vehicles, led by Micro Machines(R); entertainment-based toys, led by
Star Wars(TM); mini-dolls, comprised of the number one mini-doll brand in 1997,
Pound Puppies(R); newly introduced authentic military vehicles, figures and
playsets led by Battle Squads(TM); a series of Titanic collector fashion dolls
and celebrity-based fashion dolls. The Company's first celebrity fashion doll
offering is the highly successful Spice Girls(TM) line based on the British pop
group. Micro Machines(R) is the most comprehensive line of miniature scale toys
for boys in the world, embracing traditional vehicle, military and male action
play patterns. Now in its eleventh successful year, the brand has generated over
$1 billion in retail sales in the U.S. alone.
-more-
<PAGE> 3
Page Three
Hasbro, Inc. is a worldwide leader in the design, manufacture and
marketing of toys, games, interactive software, puzzles and infant products.
Both internationally and in the U.S., its Playskool(R), Kenner(R), Tonka(R),
OddzOn(R), Super Soaker(R), Milton Bradley(R), Parker Brothers(R), Tiger(TM) and
Hasbro Interactive(TM) products, provide children and families with the highest
quality and most recognizable toys and games in the world.
Galoob Toys, Inc. designs, develops, markets and sells high quality
toys worldwide. For more information about the Company and its products, visit
Galoob's World Wide Web site at http://www.galoob.com.
HASBRO: Certain statements contained in this release contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements are inherently subject to known and
unknown risks and uncertainties. The Company's actual actions or results may
differ materially from those expected or anticipated in the forward-looking
statements. Specific factors that might cause such a difference include, but are
not limited to, the timely manufacture and shipping by the Company of new and
continuing products and their acceptance by customers and consumers in a
competitive product environment; economic conditions and currency fluctuations
in the various markets in which the Company operates throughout the world; the
continuing trend of increased concentration of the Company's revenues in the
second half and fourth quarter of the year, together with increased reliance by
retailers on quick response inventory management techniques, which increases the
risk of underproduction of popular items, overproduction of less popular items
and failure to achieve tight and compressed shipping schedules; the impact of
competition on revenues, margins and other aspects of the Company's business;
third party actions or approvals that could delay, modify or increase the cost
of implementation of, the Company's Global Integration and Profit Enhancement
program; and the risk that anticipated benefits of acquisitions may not occur or
be delayed or reduced in their realization. The Company undertakes no obligation
to make any revisions to the forward-looking statements contained in this
release or to update them to reflect events or circumstances occurring after the
date of this release.
###
<PAGE> 1
Exhibit A(8)
FOR IMMEDIATE RELEASE:
CONTACT:
--------
HASBRO: Wayne S. Charness (News Media) 401-727-5983
Renita E. O'Connell (Investor Relations) 401-727-5401
GALOOB: Kathleen R. McElwee 650-952-1678 x2210
HASBRO ANNOUNCES COMMENCEMENT OF TENDER OFFER FOR GALOOB TOYS
PAWTUCKET, RI, October 2, 1998 -- Hasbro, Inc. [ASE:HAS]
announced today that New HIAC II Corp., its wholly owned subsidiary, has
commenced a cash tender offer to purchase all of the outstanding shares of
Galoob Toys, Inc. [NYSE:GAL] at a price of $12 per share.
The offer is being made pursuant to the previously announced
merger agreement among New HIAC II Corp., Hasbro, Inc. and Galoob Toys, Inc. The
offer is conditioned upon, among other things, the tender of at least a majority
of the shares of common stock outstanding on a diluted basis and the expiration
or earlier termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. The offer and withdrawal
rights are scheduled to expire at 12:00 midnight, New York City time, on Friday,
October 30, 1998, unless the offer is extended. D.F. King & Co., Inc. is acting
as the Information Agent in connection with the offer.
In addition, Hasbro announced that it has entered into
agreements with the Lucas companies whereby Hasbro's existing agreements with
Lucas would be amended to add Galoob's rights, effective upon the consummation
of the tender offer.
Hasbro, Inc. is a worldwide leader in the design, manufacture
and marketing of toys, games, interactive software, puzzles and infant products.
Both internationally and in the U.S., its Playskool(R), Kenner(R), Tonka(R),
OddzOn(R), Super Soaker(R), Milton Bradley(R), Parker Brothers(R), Tiger(TM) and
Hasbro Interactive(TM) products, provide children and families with the highest
quality and most recognizable toys and games in the world.
Galoob Toys, Inc. designs, develops, markets and sells high
quality toys worldwide. For more information about the Company and its products,
visit Galoob's World Wide Web site at http://www.galoob.com.
This press release is neither an offer to purchase nor a
solicitation of an offer to sell securities. The tender offer is made only
through the Offer to Purchase and the related Letter of Transmittal which is
being mailed to stockholders today. Additional copies of such documents can be
obtained by contacting the Information Agent at (800) 755-3107.
<PAGE> 1
EXHIBIT A (9)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase, dated October
2, 1998, and the related Letter of Transmittal, and is being made to all holders
of Shares. The Offer is not being made to (nor will tenders be accepted from or
on behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction or any administrative or judicial action pursuant thereto. In any
jurisdiction where 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 New HIAC II Corp. by one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All of the Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Galoob Toys, Inc.
at
$12.00 Net Per Share
by
New HIAC II Corp.
a Wholly Owned Subsidiary of
Hasbro, Inc.
New HIAC II Corp., a Delaware corporation ("Purchaser") and a wholly owned
subsidiary of Hasbro, Inc., a Rhode Island corporation ("Parent"), is offering
to purchase all of the outstanding shares of Common Stock, par value $0.01 per
share (the "Common Stock"), including the associated preferred stock purchase
rights issued pursuant to a Rights Agreement (as defined in the Offer to
Purchase) (the "Rights" and, together with the Common Stock, the "Shares") of
Galoob Toys, Inc., a Delaware corporation (the "Company"), at a price of $12.00
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 dated October
2, 1998 (the "Offer to Purchase") and in the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, OCTOBER 30, 1998, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in the Offer
to Purchase) that number of Shares which, when added to the Shares beneficially
owned by Parent or Purchaser (if any), represents at least a majority of the
Shares outstanding on a fully diluted basis (excluding the Warrants (as defined
in the Offer to Purchase)) on the date Shares are accepted for payment. The
Offer is also subject to the other conditions set forth in the Offer to
Purchase. See Section 14 of the Offer to Purchase.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 27, 1998 (the "Merger Agreement"), by and among Parent,
Purchaser and the Company. The Merger Agreement provides that, as soon as
practicable after the completion of the Offer and satisfaction or waiver, if
permissible, of all conditions
-1-
<PAGE> 2
contained in the Merger Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), Purchaser will be merged
with and into the Company (the "Merger"). Following the consummation of the
Merger, the Company will continue as the surviving corporation and will be a
wholly owned subsidiary of Parent. At the effective time of the Merger (the
"Effective Time"), each Share then outstanding (other than Shares held by the
Company or any of its subsidiaries, in the treasury of the Company, or by
Parent, Purchaser or any other subsidiary of Parent or any of its subsidiaries
including Purchaser and stockholders who properly perfect their dissenters'
rights under the DGCL) will be converted into the right to receive $12.00 in
cash or any higher price per Share paid in the Offer, without interest.
The Board of Directors of the Company has unanimously approved the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, and has unanimously determined that the Offer and the Merger
are fair to, and in the best interests of, the Company's Stockholders and
unanimously recommends that stockholders accept the Offer and tender their
Shares pursuant to the Offer.
For purposes of the Offer, Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to Purchaser and
not withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary (as defined in the Offer to Purchase) of its acceptance for payment
of such Shares. 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 stockholders for the purpose of receiving payment from
Purchaser and transmitting payment to tendering stockholders. In all cases,
payment for Shares accepted for payment pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) certificates for such Shares (or
a confirmation of a book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility (as defined in the Offer to
Purchase)), (ii) a Letter of Transmittal (or 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 (as defined in the Offer to
Purchase), and (iii) any other documents required by the Letter of Transmittal.
The per Share consideration paid to any stockholder pursuant to the Offer will
be the highest per Share consideration paid to any other stockholder pursuant
to the Offer. Under no circumstances will interest be paid on the purchase
price to be paid by Purchaser for such Shares, regardless of any extension of
the Offer or any delay in making such payment.
The term "Expiration Date" shall mean 12:00 Midnight, New York City
time, on Friday, October 30, 1998, unless and until Purchaser (in accordance
with the terms of the
-2-
<PAGE> 3
Merger Agreement), shall have extended the period of time 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. Subject
to the applicable rules and regulations of the Securities and Exchange
Commission and to applicable law, Purchaser expressly reserves the right, in its
sole discretion (subject to the terms of the Merger Agreement), at any time and
from time to time, to extend for any reason the period of time during which the
Offer is open, including the occurrence of any of the events specified in
Section 14 of the Offer to Purchase, by giving oral or written notice of such
extension to the Depositary; provided, however, that Purchaser cannot extend the
Offer beyond March 1, 1999 without the consent of the Company. Any such
extension will be followed by a public announcement thereof by no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
right of a tendering stockholder to withdraw such stockholder's Shares. Without
limiting the manner in which Purchaser may choose to make any public
announcement, Purchaser will have no obligation to publish, advertise or
otherwise communicate any such announcement other than by issuing a press
release to the Dow Jones News Service or otherwise as may be required by
applicable law.
Except as otherwise provided below, tenders of Shares made pursuant to the
Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at
any time prior to the Expiration Date and, unless theretofore accepted for
payment pursuant to the Offer, may also be withdrawn at any time after December
1, 1998, or such later time as may apply if the Offer is extended. For a
withdrawal to be effective, a written, telegraphic or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth in the Offer to Purchase. Any such notice of withdrawal must
specify the name of the person having tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder of the
Shares to be withdrawn, if different from the name of the person who tendered
the Shares. If certificates evidencing such Shares 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, unless such Shares have been tendered for
the account of an Eligible Institution (as defined in the Offer to Purchase),
the signatures on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been delivered pursuant to the procedures for
book-entry transfer set forth in Section 3 of the Offer to Purchase, any notice
of withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares and
otherwise comply with the Book-Entry Transfer Facility's procedures. Withdrawals
of tenders of Shares may not be rescinded, and any Shares properly withdrawn
will thereafter be deemed not validly tendered for purposes of the Offer.
However, withdrawn Shares may be retendered by again following one of the
procedures described in Section 3 of the
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<PAGE> 4
Offer to Purchase at any time prior to the Expiration Date. All questions as to
the form and validity (including time of receipt) of notices 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 paragraph (e)(1)(vii) of Rule
14d-6 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 stockholder lists and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase, the related Letter of Transmittal and other
relevant documents will be mailed to record holders of Shares whose names appear
on the stockholder list, and will be furnished to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the Company's stockholder lists, 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 and should be read carefully before any decision is made
with respect to the Offer.
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer documents may be directed
to the Information Agent (as defined in the Offer to Purchase), at its address
and telephone number set forth below, and copies will be furnished promptly at
Purchaser's expense. Neither of Parent or Purchaser will pay any fees or
commissions to any broker or dealer or other person other than 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
Call Toll Free: (800) 755-3107
October 2, 1998
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<PAGE> 1
Exhibit A
AGREEMENT AND PLAN OF MERGER
by and among
HASBRO, INC.,
NEW HIAC II CORP.
and
GALOOB TOYS, INC.
dated as of
September 27, 1998
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 27, 1998,
by and among HASBRO, INC., a Rhode Island corporation ("Parent"), NEW HIAC II
CORP., a Delaware corporation and a wholly-owned Subsidiary of Parent
("Purchaser"), and GALOOB TOYS, INC., a Delaware corporation (the "Company").
WHEREAS, the Board of Directors of each of Parent, Purchaser
and the Company have approved, and deem it fair to, advisable and in the best
interests of their respective stockholders to consummate, the acquisition of the
Company by Parent and Purchaser upon the terms and subject to the conditions set
forth herein;
WHEREAS, in furtherance thereof, it is proposed that Purchaser
make a cash tender offer to acquire all shares of the issued and outstanding
common stock, $.01 par value, of the Company (the "Shares") (including the
related Preferred Stock Purchase Rights (as herein defined)) for $12.00 per
share, net to the seller in cash, upon the terms and subject to the conditions
set forth herein;
WHEREAS, also in furtherance of such acquisition, the Board of
Directors of each of Parent, Purchaser and the Company have approved this Agree-
ment and the Merger (as herein defined) following the Offer (as herein defined)
pursuant to which Purchaser shall merge with and into the Company and
outstanding Shares shall be converted into the right to receive the Offer Price
(as herein defined) in cash, without interest, all in accordance with the DGCL
(as herein defined) and upon the terms and subject to the conditions set forth
herein;
WHEREAS, the Board of Directors of the Company has determined
that the consideration to be paid for each Share in the Offer and the Merger is
fair to the holders of such Shares and has resolved to recommend that the
holders of such Shares tender their Shares pursuant to the Offer and approve and
adopt this Agree ment and the Merger upon the terms and subject to the
conditions set forth herein;
WHEREAS, the Company, Parent and Purchaser desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and the Merger; and
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NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer.
(a) As promptly as practicable (but in no event later than
five business days after the public announcement of the execution hereof),
Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) a tender offer (the
"Offer") for all of the outstanding Shares (including the related Preferred
Stock Purchase Rights) at a price of $12.00 per Share, net to the seller in cash
(such price, or such higher price per Share as may be paid in the Offer, being
referred to herein as the "Offer Price"), subject to the conditions set forth in
Annex A hereto.
(b) The obligations of Purchaser to commence the Offer and to
accept for payment and to pay for any Shares validly tendered on or prior to the
expiration of the Offer and not withdrawn shall be subject only to the
conditions set forth in Annex A hereto; provided, that Purchaser's right in
Annex A hereto to terminate the Offer shall be subject to Purchaser's
obligations under this Agreement. The Offer shall be made by means of an offer
to purchase (the "Offer to Purchase") containing the terms set forth in this
Agreement and the conditions set forth in Annex A hereto.
(c) Purchaser expressly reserves the right to modify the terms
of the Offer; provided, that, without the Company's prior written consent,
Purchaser shall not decrease the Offer Price, change the form of consideration
to be paid in the Offer, waive the Minimum Condition or decrease the number of
Shares sought or amend any other condition of the Offer in any manner adverse to
the holders of the Shares (other than with respect to insignificant changes or
amendments and subject to the penultimate sentence of this Section 1.1) or
impose additional conditions without the written consent of the Company;
provided further, however, that, if on the initial scheduled expiration date of
the Offer, which shall be 20 business days after the date that the Offer is
commenced, all conditions to the Offer shall not have been satisfied or waived,
Purchaser may, from time to time until such time as all
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<PAGE> 4
such conditions are satisfied or waived, in its sole discretion, extend the
expiration date provided, however, that the expiration date of the Offer may not
be extended beyond March 1, 1999. Parent and Purchaser agree that if all of the
conditions set forth on Annex A hereto are not satisfied on any scheduled
expiration date of the Offer then, provided that all such conditions are
reasonably capable of being satisfied, Purchaser shall extend the Offer from
time to time until such conditions are satisfied or waived, provided that
Purchaser shall not be required to extend the Offer beyond March 1, 1999. In
addition, the Offer Price may be increased and the Offer may be extended to the
extent required by applicable Law in connection with such increase, in each case
without the consent of the Company. Purchaser shall, on the terms and subject to
the prior satisfaction or waiver of the conditions of the Offer, accept for
payment and pay for Shares validly tendered as promptly as practicable;
provided, however, that if, immediately prior to the initial expiration date of
the Offer, the Shares validly tendered and not withdrawn pursuant to the Offer
equal less than 90% of the outstanding Shares, Purchaser may extend the Offer
for a period not to exceed 10 business days, notwithstanding that all conditions
to the Offer are satisfied as of such expiration date of the Offer so long as
Purchaser irrevocably waives the satisfaction of any of the conditions to the
Offer (other than the Minimum Condition and the condition set forth in paragraph
(b) of Annex A hereto) that subsequently may not be satisfied during such
extension to the Offer.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer
and represents that the Board of Directors of the Company, at a meeting duly
called and held, has (i) unanimously determined that each of the Agreement, the
Offer and the Merger (as defined in Section 1.5) are fair to and in the best
interests of the stockholders of the Company, (ii) unanimously approved this
Agreement, the Offer, the acquisition of Shares pursuant to the Offer and the
Merger for purposes of Section 203 of the DGCL (the "Section 203 Approval"),
(iii) received the opinion of Allen & Company Incorporated, financial advisor to
the Company, to the effect that the Offer Price to be received by holders of
Shares pursuant to the Offer and the Merger Consideration (as defined herein)
pursuant to the Merger is fair to the stockholders of the Company from a
financial point of view, (iv) approved this Agreement and the transactions
contemplated hereby including the Offer and the Merger (collectively, the
"Transactions") and (v) resolved to recommend that the stockholders of the
Company accept the Offer, tender their Shares thereunder to Purchaser and
approve and adopt this Agreement and the Merger. The Company has been advised by
each of its directors and by each executive officer who as of the
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<PAGE> 5
date hereof is actually aware (to the Knowledge of the Company) of the
Transactions that each such Person either intends to tender pursuant to the
Offer all Shares owned by such Person or vote all Shares owned by such Person in
favor of the Merger.
(b) In connection with the Offer, the Company will promptly
furnish or cause to be furnished to Purchaser mailing labels, security position
listings and any available listings or computer files containing the names and
addresses of all holders of record of the Shares as of a recent date, and shall
furnish Purchaser with such additional information (including, but not limited
to, updated lists of holders of the Shares and their addresses, mailing labels
and lists of security positions) and such assistance as Purchaser or its agents
may reasonably request in communicating the Offer to the record and beneficial
holders of the Shares. Subject to the requirements of applicable Law, and except
for such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Purchaser and its affiliates and
associates shall hold in confidence the information contained in any such
labels, listings and files and all other information delivered pursuant to this
Section 1.2(b), will use such information only in connection with the Offer and
the Merger and, if this Agreement shall be terminated, will deliver to the
Company all copies, extracts or summaries of such information in their
possession or the possession of their agents.
Section 1.3 SEC Documents.
(a) On the date the Offer is commenced, Parent and Purchaser
shall file with the United States Securities and Exchange Commission (the "SEC")
a Tender Offer Statement on Schedule 14D-1 in accordance with the Exchange Act
with respect to the Offer (together with all amendments and supplements thereto
and including the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1
will include, as exhibits, the Offer to Purchase and a form of letter of
transmittal (collectively, together with any amendments and supplements
thereto, the "Offer Documents"). Concurrently with the filing of the Schedule
14D-1 by Parent and Purchaser, the Company shall file with the SEC a
Solicitation/Recommendation State ment on Schedule 14D-9 in accordance with the
Exchange Act (together with all amendments and supplements thereto and including
the exhibits thereto, the "Schedule 14D-9"), which shall, except as otherwise
provided herein, contain the recommendation referred to in clause (v) of
Section 1.2(a) hereof.
(b) Parent and Purchaser will take all steps necessary to
ensure that the Offer Documents, and the Company will take all steps necessary
to
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<PAGE> 6
ensure that the Schedule 14D-9, will comply in all material respects with the
provisions of applicable Federal and state securities Laws. Each of Parent and
Purchaser will take all steps necessary to cause the Offer Documents, and the
Company will take all steps necessary to cause the Schedule 14D-9, to be filed
with the SEC and to be disseminated to holders of the Shares, in each case as
and to the extent required by applicable Federal and state securities Laws. Each
of Parent and Purchaser, on the one hand, and the Company, on the other hand,
will promptly correct any information provided by it for use in the Offer
Documents and the Schedule 14D-9 if and to the extent that it shall have become
false and misleading in any material respect and Purchaser will take all steps
necessary to cause the Offer Documents, and the Company will take all steps
necessary to cause the Schedule 14D-9, as so corrected to be filed with the SEC
and to be disseminated to holders of the Shares, in each case as and to the
extent required by applicable Federal and state securities Laws. Parent and its
counsel shall be given a reasonable opportunity to review and comment upon the
Schedule 14D-9 and all amendments and supplements thereto prior to their filing
with the SEC or dissemination to stockholders of the Company. The Company and
its counsel shall be given a reasonable opportunity to review and comment upon
the Offer Documents prior to their filing with the SEC or dissemination to
stockholders of the Company. The Company agrees to provide Parent and its
counsel with copies of any written comments that the Company or its counsel may
receive from the SEC or its staff with respect to the Schedule 14D-9 promptly
after the receipt of such comments and each of Parent and Purchaser agrees to
provide the Company and its counsel with copies of any written comments that
Parent, Purchaser or their counsel may receive from the SEC or its staff with
respect to the Offer Documents promptly after the receipt of such comments.
Section 1.4 Directors.
(a) Promptly after (i) the purchase of and payment for any
Shares by Purchaser or any of its affiliates pursuant to the Offer as a result
of which Purchaser and its affiliates own beneficially at least a majority of
then outstanding Shares and (ii) compliance with Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder, whichever shall occur later, Parent
shall be entitled to designate such number of directors, rounded up to the next
whole number, on the Company's Board of Directors as is equal to the product of
the total number of directors on such Board (giving effect to the increase in
the size of such Board pursuant to this Section 1.4) multiplied by the
percentage that the number of Shares beneficially owned by Purchaser (including
Shares so accepted for payment) bears to the total number of Shares then
outstanding. In furtherance thereof, the Company
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<PAGE> 7
shall, upon request of Parent and compliance with Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder, use its best efforts promptly either
to increase the size of its Board of Directors or to secure the resignations of
such number of its incumbent directors, or both, as is necessary to enable such
designees of Parent to be so elected or appointed to the Company's Board of
Directors, and the Company shall take all actions available to the Company to
cause such designees of Parent to be so elected or appointed. At such time, the
Company shall, if requested by Parent, also take all action necessary to cause
Persons designated by Parent to constitute at least the same percentage (rounded
up to the next whole number) as is on the Company's Board of Directors of (i)
each committee of the Company's Board of Directors, (ii) each board of directors
(or similar body) of each Subsidiary of the Company and (iii) each committee (or
similar body) of each such board.
(b) The Company shall promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under Section 1.4(a), including
mailing to stockholders the information required by such Section 14(f) and Rule
14f-1 (or, at Parent's request, furnishing such information to Parent for
inclusion in the Offer Documents initially filed with the SEC and distributed to
the stockholders of the Company) as is necessary to enable Parent's designees to
be elected to the Company's Board of Directors. Parent or Purchaser will supply
to the Company in writing and be solely responsible for any information with
respect to either of them and their nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1. The provisions of this Section
1.4 are in addition to and shall not limit any rights which Purchaser, Parent or
any of their affiliates may have as a holder or beneficial owner of Shares as a
matter of applicable Law with respect to the election of directors or otherwise.
(c) Notwithstanding the provisions of this Section 1.4, the
parties hereto shall use their respective reasonable best efforts to ensure that
at least two of the members of the Board shall, at all times prior to the
Effective Time (as defined in Section 1.6 hereof) be, Continuing Directors. From
and after the time, if any, that Parent's designees constitute a majority of the
Company's Board of Directors, any amendment or modification of this Agreement,
any amendment to the Company's Certificate of Incorporation or By-Laws
inconsistent with this Agree ment, any termination of this Agreement by the
Company, any extension of time for performance of any of the obligations of
Parent or Purchaser hereunder, any waiver of any condition to the Company's
obligations hereunder or any of the Company's rights hereunder or other action
by the Company hereunder may be effected only by
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the action of a majority of the Continuing Directors of the Company, which
action shall be deemed to constitute the action of any committee specifically
designated by the Board of Directors of the Company to approve the actions
contemplated hereby and the Transactions and the full Board of Directors of the
Company; provided, that, if there shall be no Continuing Directors, such actions
may be effected by majority vote of the entire Board of Directors of the
Company, except that no such action shall amend the terms of this Agreement or
modify the terms of the Offer or the Merger in a manner materially adverse to
the holders of Shares.
Section 1.5 The Merger. (a) Subject to the terms and
conditions of this Agreement, and in accordance with the DGCL, at the Effective
Time (as defined in Section 1.6 hereof), the Company and Purchaser shall
consummate a merger (the "Merger") pursuant to which (x) Purchaser shall be
merged with and into the Company and the separate corporate existence of
Purchaser shall thereupon cease and (y) the Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and shall continue to be governed by the Laws of the State of
Delaware.
(b) Pursuant to the Merger, at the Effective Time, (x) the
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be the certificate of incorporation of the Surviving
Corporation and (y) the By-Laws of the Company, as in effect immediately prior
to the Effective Time, shall be the by-laws of the Surviving Corporation, each
until thereafter changed or amended as provided therein and by the DGCL.
(c) The directors of Purchaser at the Effective Time shall be
the initial directors of the Surviving Corporation until their respective
successors are duly elected and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
certificate of incorporation and by-laws. The officers of the Company at the
Effective Time shall be the initial officers of the Surviving Corporation until
their respective successors are duly elected and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's certificate of incorporation and by-laws.
(d) The Merger shall have the effects specified in the
applicable provisions of the DGCL.
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Section 1.6 Effective Time. Subject to the terms and
conditions of this Agreement, Parent, Purchaser and the Company will cause a
certificate of merger or, if applicable, a certificate of ownership and merger
(as applicable, the "Certificate of Merger"), to be executed and filed on the
date of the Closing (as defined in Section 1.7) (or on such other date as Parent
and the Company may agree) with the Secretary of State of Delaware (the
"Secretary of State") as provided in the DGCL. The Merger shall become effective
on the date on which the Certificate of Merger has been duly filed with the
Secretary of State or such time as is agreed upon by the parties and specified
in the Certificate of Merger, and such time is hereinafter referred to as the
"Effective Time."
Section 1.7 Closing. The closing of the Merger (the "Closing")
shall take place at 10:00 a.m., local time, on a date to be specified by the
parties, which shall be no later than the second business day after satisfaction
or waiver of all of the conditions set forth in Article VI hereof (the "Closing
Date"), at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
Avenue, New York, New York, 10022, unless another date or place is agreed to in
writing by the parties hereto.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of any Shares or any shares of capital stock of Purchaser:
(a) Purchaser Capital Stock. Each issued and
outstanding share of common stock, par value $.01 per share, of Purchaser shall
be converted into and become one fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Purchaser-
Owned Stock. All Shares that are owned by the Company or any Subsidiary of the
Company and any Shares owned by Parent, Purchaser or any Subsidiary of Parent or
Purchaser shall be cancelled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.
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(c) Exchange of Shares. Each issued and outstanding
Share (other than Shares to be cancelled in accordance with Section 2.1(b) and
Dissenting Shares (as herein defined)) shall be converted into the right to
receive the Offer Price in cash, without interest (the "Merger Consideration").
All such Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
therefor upon the surrender of such certificate in accordance with Section 2.2,
without interest.
Section 2.2 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time,
Parent shall designate a bank, trust company or other Person, reasonably
acceptable to the Company, to act as agent for the holders of the Shares in
connection with the Merger (the "Paying Agent") to receive the funds to which
holders of the Shares shall become entitled pursuant to Section 2.1(c). Parent
shall, from time to time, make available to the Paying Agent funds in amounts
and at times necessary for the payment of the Merger Consideration as provided
herein. All interest earned on such funds shall be paid to Parent.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, Parent shall cause the Paying Agent to
mail to each holder of record of a certificate or certificates which immediately
prior to the Effective Time represented outstanding Shares (the "Certificates")
whose Shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.1, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent and shall be in
such form not inconsistent with this Agreement as Parent may specify) and (ii)
instructions for use in surrendering the Certificates in exchange for payment of
the Merger Consideration. Upon surrender of a Certificate for cancellation to
the Paying Agent, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Paying Agent, Parent
shall cause the Paying Agent to pay to the holder of such Certificate the Merger
Consideration, and the Certificate so surrendered shall forthwith be cancelled.
In the event of a surrender of a Certificate representing Shares which are not
registered in the transfer records of the Company under the name of the Person
surrendering such Certificate, payment may be made to a Person other than the
Person in whose name the Certificate so surrendered is registered if such
Certificate
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shall be properly endorsed or otherwise be in proper form for transfer and the
Person requesting such payment shall pay any transfer or other Taxes required by
reason of payment to a Person other than the registered holder of such
Certificate or establish to the satisfaction of the Paying Agent that such tax
has been paid or is not applicable. Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the Merger
Consideration which the holder thereof has the right to receive in respect of
such Certificate pursuant to the provisions of this Article II. No interest
shall be paid or will accrue on the Merger Consideration payable to holders of
Certificates pursuant to the provisions of this Article II.
(c) Transfer Books; No Further Ownership Rights in
Shares. At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of the
Shares on the records of the Company. From and after the Effective Time, the
holders of Certificates evidencing ownership of the 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. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided in
this Article II.
(d) Termination of Fund; No Liability. At any time
following one year 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 made available to the
Paying Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or other similar Laws) only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates, without any interest thereon. Notwithstanding
the foregoing, none of Parent, the Company, the Surviving Corporation or the
Paying Agent shall be liable to any holder of a Certifi cate for Merger
Consideration delivered to a public official pursuant to any applica ble
abandoned property, escheat or similar Law.
(e) Lost Certificates. If any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen or destroyed
and, if required by the Surviving Corporation, the posting by such Person of a
bond in such reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that
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may be made against it with respect to such Certificate, the Paying Agent shall
pay in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration pursuant to this Agreement.
Section 2.3 Withholding Taxes. Parent and Purchaser shall be
entitled to deduct and withhold, or cause the Paying Agent to deduct and
withhold, from the Offer Price or the Merger Consideration payable to a holder
of Shares pursuant to the Offer or the Merger any withholding and stock transfer
Taxes and such amounts as are required under the Code, or any applicable
provision of state, local or foreign Tax law. Parent shall take appropriate
steps to minimize such Taxes. To the extent that amounts are so withheld by
Parent or Purchaser, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the Shares in respect of
which such deduction and withholding was made by Parent or Purchaser.
Section 2.4. Stock Options. (a) Immediately prior to the
Effective Time, each then outstanding option to purchase any shares of capital
stock of the Company (in each case, an "Option"), whether or not then vested or
exercisable, shall be cancelled by the Company and in consideration of such
cancellation and except to the extent that Parent or the Purchaser and the
holder of any such Option otherwise agree, the Company (or, at Parent's option,
the Purchaser) shall pay to such holders of Options an amount in respect thereof
equal to the product of (A) the excess, if any, of the Offer Price over the
exercise price of each such Option and (B) the number of Shares previously
subject to the Option immediately prior to its cancellation (such payment to be
net of withholding taxes and without interest).
(b) The Company shall use its reasonable best
efforts to take all actions necessary and appropriate so that all stock option
or other equity based plans maintained with respect to the Shares, including,
without limitation, the plans listed in Section 3.3 hereof ("Option Plans"),
shall terminate as of the Effective Time and the provisions in any other Benefit
Plan providing for the issuance, transfer or grant of any capital stock of the
Company or any interest in respect of any capital stock of the Company shall be
deleted as of the Effective Time, and the Company shall use its best efforts to
ensure that following the Effective Time no holder of an Option or any
participant in any Option Plan shall have any right thereunder to acquire any
capital stock of the Company, Parent, Purchaser or the Surviving Corporation.
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(c) Prior to the Effective Time, the Company shall
use its reasonable best efforts to (i) obtain all necessary consents from, and
provide (in a form acceptable to Parent) any required notices to, holders of
Options and (ii) amend the terms of the applicable Option Plan, in each case as
is necessary to give effect to the provisions of paragraphs (a) and (b) of this
Section 2.4.
Section 2.5. Appraisal Rights. Notwithstanding anything in
this Agreement to the contrary, Shares (the "Dissenting Shares") that are issued
and outstanding immediately prior to the Effective Time and which are held by
stock holders who did not vote in favor of the Merger and who comply with all of
the relevant provisions of Section 262 of the DGCL (the "Dissenting
Stockholders") shall not be converted into or be exchangeable for the right to
receive the Merger Consideration, unless and until such holders shall have
failed to perfect or shall have effectively withdrawn or lost their rights to
appraisal under the DGCL. If any Dissenting Stockholder shall have failed to
perfect or shall have effectively with drawn or lost such right, such holder's
Shares shall thereupon be converted into and become exchangeable for the right
to receive, as of the Effective Time, the Merger Consideration without any
interest thereon. The Company shall give Parent (i) prompt notice of any written
demands for appraisal of any Shares, attempted withdrawals of such demands and
any other instruments served pursuant to the DGCL and received by the Company
relating to stockholders' rights of appraisal, and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal
under the DGCL. Neither the Company nor the Surviving Corporation shall, except
with the prior written consent of Parent, voluntarily make any payment with
respect to, or settle or offer to settle, any such demand for payment. If any
Dissenting Stockholder shall fail to perfect or shall have effectively withdrawn
or lost the right to dissent, the Shares held by such Dissenting Stockholder
shall thereupon be treated as though such Shares had been converted into the
right to receive the Merger Consideration pursuant to Section 2.1(c).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as
follows:
Section 3.1 Organization, Standing and Corporate Power. Each
of the Company and each of its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the Laws of the jurisdiction in
which it is organized and has the requisite corporate power and authority to
carry on its business as is now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) would not have a
Material Adverse Effect on the Company. The Company has delivered to Parent
complete and correct copies of the Certificate of Incorporation of the Company
and By-Laws of the Company, in each case as amended to the date of this
Agreement, and has delivered the certificates of incorporation and by-laws or
other organizational documents of its Subsidiaries that currently have
operations, in each case as amended as of the date of this Agreement. Except as
set forth on Schedule 3.2 of the Company Disclosure Schedule or in the Company's
SEC Documents, the respective certificates of incorporation and by-laws or other
organizational documents of the Subsidiaries of the Company do not contain any
provision limiting or otherwise restricting the ability of the Company to
control such Subsidiaries.
Section 3.2 Subsidiaries. (a) Exhibit 21.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and
Schedule 3.2 of the disclosure schedule delivered by the Company to Parent at or
prior to the execution of this Agreement (the "Company Disclosure Schedule")
together include the names, jurisdictions of incorporation and capitalization of
all of the Subsidiaries of the Company. Except as set forth on Schedule 3.2 of
the Company Disclosure Schedule or in the Company's SEC Documents, all the
outstanding shares of capital stock of, or other equity interests in, each
Subsidiary of the Company have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by the Company, free and
clear of all Liens and free of any other restric-
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tion (including any restriction on the right to vote, sell or otherwise dispose
of such capital stock or other ownership interests).
(b) The Company does not directly or indirectly
beneficially own any securities or other beneficial ownership interests in any
other entity (including through joint ventures or partnership arrangements)
other than (i) the Subsidiaries of the Company or (ii) as disclosed on Schedule
3.2 of the Company Disclosure Schedule.
Section 3.3 Capital Structure. The authorized capital stock of
the Company consists of 50,000,000 Shares and 1,000,000 shares of preferred
stock, par value $1.00 per share (the "Preferred Shares") of which 50,000 shares
have been designated as Series A Preferred Stock (the "Series A Preferred
Shares"). As of the date hereof, (i) 18,127,864 Shares were issued and
outstanding and no Preferred Shares were issued and outstanding, (ii) 511,810
Shares were reserved for issuance upon exercise of outstanding Options pursuant
to the Company's Amended and Restated 1984 Employee Stock Option Plan with an
exercise price range of a minimum exercise price of $3.00 and a maximum exercise
price of $30.63, (iii) 727,912 Shares were reserved for issuance upon exercise
of outstanding Options pursuant to the Company's 1994 Senior Management Stock
Option Plan with an exercise price range of a minimum exercise price of $9.00
and a maximum exercise price of $21.25, (iv) 28,000 Shares were reserved for
issuance upon exercise of outstanding Options pursuant to the 1995 Non-Employee
Directors' Stock Option Plan with an exercise price range of a minimum exercise
price of $8.00 and a maximum exercise price of $14.13, (v) 780,500 Shares were
reserved for issuance upon exercise of outstanding Options pursuant to the 1996
Share Incentive Plan with an exercise price range of a minimum exercise price of
$9.25 and a maximum exercise price of $15.75, (vi) 1,450,000 Shares were
reserved for issuance upon exercise of warrants (the "Lucasfilm Ltd. Warrants"),
expiring October 14, 2009, held by Lucasfilm Ltd., with an exercise price of
$15.00 per Share, (vii) 2,130,000 Shares were reserved for issuance upon
exercise of warrants (the "Lucas Licensing Ltd. Warrants"), expiring October 14,
2009, held by Lucas Licensing Ltd., with an exercise price of $15.00 per Share
and (viii) no Shares were issued and are held in the Company's treasury. Except
as set forth above or on Schedule 3.3 of the Company Disclosure Schedule, as of
the date of this Agreement: (i) no shares of capital stock or other voting
securities of the Company are issued, reserved for issuance or outstanding; (ii)
there are no stock appreciation rights, phantom stock units, restricted stock
grants, contingent stock grants or Benefit Plans which grant awards of any of
the foregoing, and there are no other outstanding contractual rights to which
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<PAGE> 16
the Company is a party the value of which is based on the value of Shares; (iii)
all outstanding shares of capital stock of the Company are, and all Shares which
may be issued will be, when so issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights; and (iv) there are
no bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of the Company may vote.
Except for the Preferred Stock Purchase Rights, and except as set forth above,
as of the date of this Agree ment, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company or any of its Subsidiaries is a party or by
which any of them is bound obligating the Company or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or of any of
its Subsidiaries or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no programs in
place, nor any outstanding contractual obligations of the Company or any of its
Subsidiaries, to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its Subsidiaries. Schedule 3.3 of the Company
Disclosure Schedule accurately sets forth information regarding the current
exercise price, date of grant and number of granted Options for each holder of
Options pursuant to any Company Option Plan. Following the Effective Time, no
holder of Options will have any right to receive shares of common stock of the
Surviving Corporation upon exercise of Options.
Section 3.4 Authority; Noncontravention; Company Action. The
Company has the requisite corporate power and authority to enter into this Agree
ment and, subject to approval of this Agreement by the holders of a majority of
the outstanding Shares, to consummate the Merger contemplated by this Agreement.
The execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the Transactions have been duly authorized by all
necessary corporate action on the part of the Company, subject, in the case of
the Merger, to approval of this Agreement by the holders of a majority of the
outstanding Shares. This Agreement has been duly executed and delivered by the
Company and, assuming this Agreement constitutes the valid and binding
obligation of Parent and Purchaser, constitutes the valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except that (i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar Laws now or hereafter in effect
relating to creditors' rights generally and (ii)
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<PAGE> 17
the remedy of specific performance and injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. Except as set forth on Schedule 3.4 of the
Company Disclosure Schedule or waivers or consents that have been obtained and
delivered to Parent, the execution, delivery and performance of this Agreement
do not, and the consummation of the Transactions (including the changes in the
composition of the Board of Directors of the Company) and compliance with the
provisions of this Agreement will not, conflict with, or result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of a material benefit under, or result in the creation of any Lien upon
any of the material properties or assets of the Company or any of its
Subsidiaries under, or result in the termination of, or require that any consent
be obtained or any notice be given with respect to, (i) the Certificate of
Incorporation or By-laws of the Company or the comparable charter or organiza-
tional documents of any of its Subsidiaries, (ii) any loan or credit agreement
note, bond, mortgage, indenture, lease or other agreement, instrument or Permit
applicable to the Company or any of its Significant Subsidiaries or their
respective properties or assets, (iii) any Law applicable to the Company or any
of its Subsidiaries or their respective properties or assets or (iv) any
licenses to which the Company or any of its Subsidiaries is a party, other than,
in the case of clauses (ii), (iii) or (iv), any such conflicts, violations,
defaults, rights, Liens, losses of a material benefit, consents or notices that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company and its Subsidiaries taken as a whole or the consents Parent and
Purchaser have obtained as described in Section 5.14 hereof. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the Transactions, except for
(i) the filings, permits, authorizations, consents and approvals set forth in
Section 3.4 of the Company Disclosure Schedule, or as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, the HSR
Act, any applicable state securities or "blue sky" Laws and the DGCL, and (ii)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, (x) impair, in any material respect, the
ability of the Company to perform its obligations under this Agreement, (y)
prevent or significantly delay the consummation of the Transactions or (z) have
a Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
The Board of Directors of the Company has taken all appropriate action so that
neither Parent nor Purchaser will be an "interested stockholder" within
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<PAGE> 18
the meaning of Section 203 of the DGCL by virtue of Parent, Purchaser and the
Company entering into this Agreement or any other agreement contemplated hereby
and consummating the Transactions.
Section 3.5 SEC Documents; Financial Statements. The Company
has filed all SEC Documents required to be filed by it since January 1, 1996
(the "Company's SEC Documents"). As of their respective dates, (i) the Company's
SEC Documents complied in all material respects with the requirements of the
Securities Act, or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such SEC Documents,
and (ii) none of the Company's SEC Documents contained at the time of their
filing any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Company's
SEC Documents, as of the dates of such SEC Documents, are true and complete and
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles as in effect at such time ("GAAP") in the United States applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presented the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth on Schedule 3.5 of the Company Disclosure
Schedule and except as set forth in the Company's SEC Documents filed and
publicly available prior to the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of the most recent consolidated
balance sheet included in the Company's SEC Documents filed and publicly
available prior to the date of this Agreement, neither the Company nor any of
its Subsidiaries has any material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise).
Section 3.6 Schedule 14D-9; Offer Documents; Proxy Statement.
Neither the Schedule 14D-9, any other document required to be filed by the
Company with the SEC in connection with the Transactions, nor any information
supplied by the Company in writing for inclusion in the Offer Documents shall,
at the respective times the Schedule 14D-9, any such other filings by the
Company, the Offer Documents or any amendments or supplements thereto are filed
with the SEC
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or are first published, sent or given to stockholders of the Company, 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 made therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will not, on the date the Proxy
Statement (including any amendment or supplement thereto) is first mailed to
stockholders of the Company, 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 light of the circumstances under
which they are made, not misleading or shall, at the time of the Special Meeting
(as hereinafter defined) or at the Effective Time, omit to state any material
fact necessary to correct any statement in any earlier communication in light of
the circumstances in which they are made, with respect to the solicitation of
proxies for the Special Meeting which shall have become false or misleading in
any material respect. The Schedule 14D-9, any other document required to be
filed by the Company with the SEC in connection with the Transactions and the
Proxy Statement will, when filed by the Company with the SEC, comply as to form
in all material respects with the applicable provisions of the Exchange Act and
the rules and regulations thereunder. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to the statements made in any
of the foregoing documents based on and in conformity with information supplied
by or on behalf of Parent or Purchaser specifically for inclusion or
incorporation by reference therein.
Section 3.7 Absence of Certain Changes or Events. Except as
set forth in the Company's SEC Documents or on Schedule 3.7 of the Company
Disclosure Schedule, since December 31, 1997, the Company and its Subsidiaries
have conducted their respective businesses only in the ordinary course, and
there has not been any Material Adverse Change in the Company and its
Subsidiaries, taken as a whole.
Section 3.8 Litigation. Except as set forth in the Company's
SEC Documents or on Schedule 3.8 of the Company Disclosure Schedule or to the
extent reserved for as reflected on the Company's financial statements for the
fiscal year ended December 31, 1997, there are (i) no suits, actions or
proceedings pending or, to the Knowledge of the Company, threatened against the
company or any of its Subsidiaries that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on the Company, (ii) no
complaints, lawsuits, charges or other proceedings pending or, to the Knowledge
of the Company, threatened in any forum by or on behalf of any present or
former employee of the Com-
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<PAGE> 20
pany or any of its Subsidiaries, any applicant for employment or classes of the
foregoing alleging breach of any express or implied contract of employment, any
applicable Law governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on the Company, (iii) no judgments,
decrees, injunctions or orders of any Governmental Entity or arbitrator
outstanding against the Company that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on the Company and (iv)
no orders, writs, judgments, injunctions, decrees or determinations adverse to
the Trademarks or the Other Intellectual Property.
Section 3.9 Absence of Changes in Benefit Plans; SEC
Disclosure. Except as disclosed on Schedule 3.9 of the Company Disclosure
Schedule, there has not been any adoption or amendment by the Company or any of
its Subsidiaries or any ERISA Affiliate (as defined in Section 3.10 hereof) of
any Benefit Plan (as defined in Section 3.10 hereof) since December 31, 1997.
Except as disclosed on Schedule 3.9 of the Company Disclosure Schedule, neither
the Company nor any of its Subsidiaries has any formal plan or commitment to
create any additional Benefit Plan or modify or change any existing Benefit Plan
that would affect any employee or terminated employee of the Company or a
Subsidiary of the Company. All employment, consulting, severance, termination,
change in control or indemnification agreements, arrangements or understandings
between the Company or any of its Subsidiaries and any current or former officer
or director of the Company or any of its Subsidiaries which were required to be
disclosed in the Company's SEC Documents at the time such documents were filed
have been disclosed therein.
Section 3.10 Employee Benefits; ERISA. (a) Schedule 3.10 of
the Company Disclosure Schedule contains a true and complete list of each
material bonus, deferred compensation, incentive compensation, stock purchase,
stock option, employment, severance or termination pay, health insurance,
supplemental unemployment benefits, profit-sharing, pension, or retirement
plan, program, agreement or arrangement, and each other material (as determined
in the Company's reasonable good faith) employee benefit plan, program,
agreement or arrangement, other than a non-material fringe benefit plan,
sponsored, maintained or contributed to or required to be contributed to by the
Company or any of its Subsidiaries or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that is a member of a "controlled group"
within the meaning of section 4001 of the Employee Retirement Income Security
Act of 1974, as amended, and the regulations promulgated thereun-
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der ("ERISA") of which the Company or a Subsidiary is a member or which is under
"common control" within the meaning of Section 4001 of ERISA, with the Company
or a Subsidiary, for the benefit of any employee or terminated employee of the
Company, its Subsidiaries or any ERISA Affiliate, whether formal or informal
(the "Benefit Plans").
(b) With respect to each Benefit Plan, the Company
has made available a true and complete copy thereof (including all amendments
thereto), as well as true and complete copies of the two most recent annual
reports, if required under ERISA, with respect thereto; the most recent Summary
Plan Description, together with each Summary of Material Modifications, if
required under ERISA with respect thereto; if the Benefit Plan is funded through
a trust or any third party funding vehicle, the trust or other funding agreement
(including all amendments thereto) and the latest financial statements thereof;
and the most recent determination letter received from the Internal Revenue
Service with respect to each Benefit Plan that is intended to be qualified under
section 401 of the Code.
(c) No material liability to the Pension Benefit
Guaranty Corporation ("PBGC") under Title IV of ERISA has been incurred by the
Company, its Subsidiaries or any ERISA Affiliate since the effective date of
ERISA that has not been satisfied in full, and no condition exists that presents
a material risk to the Company, its Subsidiaries or any ERISA Affiliate of
incurring a liability under such Title, other than liability for premiums due
the PBGC (which premiums have been paid when due). Each Benefit Plan has been
operated and administered in all respects in accordance with its terms and
applicable Law, including but not limited to ERISA and the Code, except for such
noncompliance which would not reasonably be expected to have a Material Adverse
Effect on the Company.
(d) No Benefit Plan is subject to Section 302 of the
Code or Title IV of ERISA.
(e) Neither the Company, nor any Subsidiary of the
Company, nor any trust created thereunder, nor, to the Knowledge of the Company,
any trustee or administrator thereof has engaged in a transaction in connection
with which the Company or any Subsidiary of the Company, any such trust, or any
trustee or administrator thereof, or any party dealing with any Benefit Plan or
any such trust could be subject to either a civil penalty assessed pursuant to
section 409 or 502(i) of ERISA or a tax imposed pursuant to section 4975 or 4976
of the Code and which assessment or imposition would have a Material Adverse
Effect on the Company.
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(f) All Benefit Plans that are subject to the laws of
any jurisdiction outside the United States are in material compliance with such
applicable laws, including relevant tax laws, and the requirements of any trust
deed under which they are established, except for such non-compliance which
would not reasonably be expected to have a Material Adverse Effect on the
Company.
(g) Each Benefit Plan which is intended to be
"qualified" within the meaning of section 401(a) of the Code is so qualified and
the trusts maintained thereunder are exempt from taxation under section 501(a)
of the Code.
(h) Except as set forth on Schedule 3.10 of the
Company Disclosure Schedule, no Benefit Plan that is subject to the laws of any
jurisdiction within the United States provides health, death or medical benefits
(whether or not insured) with respect to current or former employees of the
Company or its Subsidiaries beyond their retirement or other termination of
employment (other than (a) coverage mandated by applicable Law or (b) benefits
the full cost of which is borne by the current or former employee (or his
beneficiary)).
(i) Except as set forth on Schedule 3.10 of the
Company Disclosure Schedule, the consummation of the Transactions, alone, will
not (a) entitle any current or former employee or officer of the Company or any
Subsidiary to severance pay, unemployment compensation or any other payment, (b)
accelerate the time of payment or vesting, or increase the amount of
compensation or benefits due any such employee or officer or (c) require the
Company or any ERISA Affiliate to fund or make any payments to any trust or
other funding vehicle in respect of any Benefit Plan.
(j) There are no pending, anticipated or, to the
Knowledge of the Company, threatened claims by or on behalf of any Benefit Plan,
by any employee or beneficiary covered under any such Benefit Plan, or
otherwise involving any such Benefit Plan (other than routine claims for
benefits) which would result in a Material Adverse Effect on the Company.
Section 3.11 Taxes. Except as set forth on Schedule 3.11 of
the Company Disclosure Schedule:
(a) Each of the Company and each of its Subsidiaries has duly
and timely filed (or has had duly and timely filed on its behalf) all federal,
state and local
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income Tax Returns and all other material Tax Returns required to be filed by
it, and all such Tax Returns are true, complete and correct in all material
respects. Each of the Company and each of its Subsidiaries has either paid (or
has had paid on its behalf) all Taxes due and owing by them, or the most recent
financial statements contained in the Company's SEC Documents reflect adequate
reserves in accordance with generally accepted accounting principles for all
Taxes not yet paid, except as would not, individually or in the aggregate, have
a Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
(b) Each of the Company and each of its Subsidiaries has
complied in all material respects with all applicable Laws relating to the
payment and withholding of Taxes (including, without limitation, the
withholding of Taxes pursuant to Sections 1441 and 1442 of the Code or similar
provisions under any applicable foreign Laws) and have, within the time and in
the manner prescribed by applicable Laws, withheld from employee wages and paid
over to the proper Governmental Entity all material amounts required to be so
withheld and paid over under all applicable Laws.
(c) (i) No material deficiencies for any Taxes have been
threatened, proposed, asserted or assessed (either in writing or orally) to the
Knowledge of the Company against the Company or any of its Subsidiaries which
have not been fully paid or finally settled, (ii) no Governmental Entity is
conducting or has proposed in writing to conduct an audit with respect to Taxes
or any Tax Returns of the Company or any of its Subsidiaries, (iii) no extension
or waiver of the statute of limitations with respect to Taxes or any Tax Return
has been granted by the Company or any of its Subsidiaries, which remains in
effect, (iv) neither the Company nor any of its Subsidiaries is a party to any
agreement or arrangement to allocate, share or indemnify another party for
Taxes, (v) there are no material Liens for Taxes upon the assets of the Company
or any of its Subsidiaries, except for Liens for Taxes not yet due, (vi) no
jurisdiction where either the Company or any of its Subsidiaries does not file a
Tax Return has asserted or otherwise made a claim that the Company or any of its
Subsidiaries is required to file a Tax Return for such jurisdiction, except as
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company and its Subsidiaries taken as a whole, (vii) neither the Company nor
any of its Subsidiaries has agreed to make, or is required to make, any
adjustment under Section 481(a) of the Code (or comparable provision under
state, local or foreign Tax laws) by reason of a change in accounting method or
otherwise and the Company and each of its Subsidiaries do not have knowledge
that the Internal Revenue Service has proposed any such adjustment or change in
accounting method, (viii) neither the
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Company nor any of its Subsidiaries is or has been a member of an affiliated
group (within the meaning of Section 1504(a) of the Code) filing a consolidated
return for federal income tax purposes (or a group filing consolidated, combined
or unitary income tax returns under comparable provisions of state, local or
foreign laws) for any taxable period beginning on or after January 1, 1994,
other than a group the common parent of which is the Company, (ix) neither the
Company nor any of its Subsidiaries has filed a consent pursuant to Section
341(f) of the Code (or any predecessor provision) or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned by the Company or
any of its Subsidiaries, (x) the Company has filed, as a common parent
corporation of an affiliated group (within the meaning of Section 1504(a) of the
Code) a consolidated return for Federal income tax purposes on behalf of such
affiliated group and (xii) no power of attorney has been granted by or with
respect to the Company or any of its Subsidiaries with respect to any matter
relating to Taxes which remains in force.
(d) Schedule 3.11(d) of the Company Disclosure Schedule sets
forth a list of the Company's income Tax Returns for taxable years or periods
for which the statute of limitations has not expired.
Section 3.12 No Nondeductible Payments.
(a) Except as set forth on Schedule 3.12 of the Company
Disclosure Schedule, no amounts payable as a result of the Transactions under
the Benefit Plans or any other plans or arrangements will be nondeductible by
reason of Section 280G of the Code.
(b) Except as set forth on Schedule 3.12 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to any contract, agreement or other arrangement which would result in the
payment of amounts prior to the Effective Time that will be nondeductible by
reason of Section 162(m) of the Code.
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Section 3.13 Compliance with Applicable Laws.
Except as set forth on Schedule 3.13 of the Company Disclosure
Schedule:
(a) The Company and each of its Subsidiaries have complied and
are presently complying in all material respects with all applicable Laws, and
neither the Company nor any of its Subsidiaries has received notification of any
asserted present or past failure to so comply, except, in each case, such
non-compliance that would not be reasonably expected to (x) result in a Material
Adverse Effect on the Company or (y) materially impair the ability of the
parties hereto to consummate the Transactions.
(b) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company or its Subsidiaries taken as a
whole, each of the Company and its Subsidiaries has in effect, or has timely
filed applications for, all material Permits necessary for it to own, lease or
operate its properties and assets and to carry on its business substantially as
now conducted and there are no appeals nor any other actions pending to revoke
any such Permits, and there has occurred no material default or violation under
any such Permits.
(c) Each of the Company and its Subsidiaries is, and has been,
and each of the Company's former Subsidiaries, while a Subsidiary of the
Company, was in compliance in all material respects with all applicable
Environmental Laws (and Permits issued thereunder), and there are no
circumstances or conditions that would be reasonably likely to prevent or
interfere with material compliance by the Company or its Subsidiaries in the
future with Environmental Laws (or Permits issued thereunder).
(d) Neither the Company nor any Subsidiary of the Company has
received any material written claim, demand, notice, complaint, court order,
administrative order or request for information from any Governmental Entity or
private party, alleging violation of, or asserting any noncompliance with or
liability under or potential liability under, any Environmental Laws, except for
matters which are no longer threatened or pending or for which the Company or
its Subsidiaries are not subject to further requirements pursuant to an
administrative or court order, judgment or settlement agreement.
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(e) During the period of ownership or operation by the Company
and its Subsidiaries of any of their respective current or previously owned or
leased properties, there have been no Releases of Hazardous Material in, on,
under or affecting such properties at concentrations requiring reporting,
investigation, or remediation under Environmental Laws or which would otherwise
pose a significant threat to human health or the environment. None of the
Company or its Subsidiaries have disposed of any Hazardous Material or any other
substance at other properties, in a manner that has led, or could reasonably be
anticipated to lead, to a Release that could have a Material Adverse Effect on
the Company and its Subsidiaries taken as a whole. Prior to the period of
ownership or operation by the Company and its Subsidiaries of any of their
respective current or previously owned or leased proper ties, to the Knowledge
of the Company, no Hazardous Material was disposed of at such current or
previously owned or leased properties, and there were no Releases of Hazardous
Material in, on, under or affecting any such property, except for disposal or
Releases that would not require investigation or remediation under Environmental
Laws and do not pose a significant threat to human health or the environment.
(f) Except for leases and credit agreements entered into in
the ordinary course of business, as to which no notice of a claim for indemnity
or reimbursement has been received and is outstanding by the Company, neither
the Company nor any of its Subsidiaries has entered into any agreement that may
require it to pay to, reimburse, guarantee, pledge, defend, indemnify, or hold
harmless any Person for or against any Environmental Liabilities and Costs.
(g) Neither the Company nor any of its Subsidiaries has
treated, stored or disposed of "hazardous waste", as that term is defined in the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.,
analogous state Laws, or the regulations promulgated thereunder, such that the
Company or any of its Subsidiaries would be required to obtain a permit (as
compared to a registration or identification number) under said Laws for such
treatment, storage or disposal.
(h) The Company has provided to Parent true and correct copies
of all environmental studies and reports in its possession or in the possession
of its representative, agents or consultants, prepared within the last five
years, relating to the environmental condition of the Company's and its
Subsidiaries' currently owned or leased properties, including, but not limited
to, the extent of any on-site contamination at any of such properties, results
of investigations at such properties, remedial action plans for such properties,
and asbestos surveys.
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Section 3.14 Intellectual Property.
(a) (i) Except as set forth on Schedule 3.14(a)(i) of the
Company Disclosure Schedule, the Company or one of its Subsidiaries is the sole
and exclusive owner of, or has the valid right to use and enforce, the
Trademarks and Internet domain names, free and clear of all Liens. Schedule
3.14(a)(i) of the Company Disclosure Schedule sets forth a complete and accurate
list of all such U.S., state and foreign Trademark registrations and
applications and Internet domain names, registrations and applications. Except
as set forth in Schedule 3.14(a)(i) of the Company Disclosure Schedule, the
Company or one of its Subsidiaries currently is listed in the records of the
appropriate United States, state or foreign agency as the sole owner of record
for each application and registration listed on Schedule 3.14(a)(i) of the
Company Disclosure Schedule that is currently owned by the Company or one of its
Subsidiaries.
(ii) Except as set forth on Schedule 3.14(a)(ii) of
the Company Disclosure Schedule, the Company is the sole and exclusive owner of,
or has the valid right to use and enforce the Other Intellectual Property, free
and clear of all Liens. Schedule 3.14(a)(ii) of the Company Disclosure Schedule
sets forth a complete and accurate list of all U.S. and foreign:
(1) patents and patent applications, and
(2) copyright registrations and applications.
Except as set forth on Schedule 3.14(a)(ii) of the Company
Disclosure Schedule, the Company or one of its Subsidiaries currently is listed
in the records of the appropriate United States, state or foreign agency as the
sole owner of record for each patent, patent application, copyright application,
and copyright registration listed on Schedule 3.14(a)(ii) of the Company
Disclosure Schedule that is currently owned by the Company or one of its
Subsidiaries.
(b) The patents, applications and registrations listed on
Schedules 3.14(a)(i) and 3.14(a)(ii) of the Company Disclosure Schedule are
valid and subsisting, in full force and effect in all material respects, and
have not been cancelled, expired or abandoned. There is no material pending,
existing or, to the Company's Knowledge, threatened, opposition, interference,
cancellation proceeding or other legal or governmental proceeding before any
court or registration authority in any jurisdiction against the foregoing. To
the Company's Knowledge, there is no
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pending, existing or threatened, opposition, interference, cancellation
proceeding or other legal or governmental proceeding before any court or
registration authority in any jurisdiction against any of the Trademarks or any
of the Other Intellectual Property owned by the Company or its Subsidiaries.
(c) Schedule 3.14(c)(i) of the Company Disclosure Schedule
sets forth a complete and accurate list of all agreements granting to third
parties any right to use or practice any rights under any of the Trademarks or
any of the Other Intellectual Property owned by the Company. Schedule
3.14(c)(ii) of the Company Disclosure Schedule sets forth a complete and
accurate list of all agreements permitting the Company or its Subsidiaries to
use any third party's Trademarks or Other Intellectual Property (such
agreements, together with the agreements referenced on Schedule 3.14(c)(i) of
the Company Disclosure Schedule are collectively referred to herein as the
"Licenses"). The Licenses are valid and binding agreements of the Company or one
or more of its Subsidiaries, as applicable, enforceable in accordance with their
terms, and the Company and the Subsidiaries, and to the Company's Knowledge, the
other parties thereto, as applicable, are not in material breach or default
thereunder.
(d) The Company has taken reasonable measures to protect the
confidentiality of its material trade secrets, including requiring employees
having access thereto to execute written non-disclosure agreements. To the
Company's Knowledge, no trade secret or confidential know-how material to the
business of the Company or any of its Subsidiaries as currently operated has
been disclosed or authorized to be disclosed to any third party, other than
pursuant to a non-disclosure agreement that protects the Company's or such
Subsidiary's proprietary interests in and to such trade secrets and confidential
know-how.
(e) To the Company's Knowledge, except as set forth on
Schedule 3.14(e) of the Company Disclosure Schedule the conduct of the business
of the Company and each of its Subsidiaries does not infringe upon any
intellectual property right owned or controlled by any third party. Except as
set forth in the Company's SEC Documents or on Schedule 3.14(e) of the Company
Disclosure Schedule, there are no claims or suits pending or, to the Company's
Knowledge, threatened, and neither the Company nor any of its Subsidiaries has
received any written notice of a third party claim or suit:
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(i) alleging that the Company's or such Subsidiary's
activities or the conduct of its business infringes
upon or constitutes the unauthorized use of the
proprietary rights of any third party, or
(ii) challenging the ownership, use, validity or
enforceability of the Trademarks or the Other
Intellectual Property owned or used by the Company or
its Subsidiaries.
(f) To the Company's Knowledge, except as set forth on
Schedule 3.14(f) of the Company Disclosure Schedule, no third party is
infringing upon any of the Trademarks or the Other Intellectual Property owned
by the Company or any of its Subsidiaries and, except as set forth on Schedule
3.14(f) of the Company Disclosure Schedule, no such claims have been made
against a third party by the Company or any of its Subsidiaries.
(g) Except as set forth on Schedule 3.14(g) of the Company
Disclosure Schedule, there are no settlements, consents, judgments or orders or
other agreements which restrict the Company's or any of its Subsidiaries' rights
to use any of the Trademarks or the Other Intellectual Property, and no
concurrent use or other agreements (aside from license and other like
agreements) which restrict the Company's or any of its Subsidiaries' rights to
use any of the Trademarks or the Other Intellectual Property owned by the
Company or any of its Subsidiaries.
(h) Except as set forth on Schedule 3.14(h) of the Company
Disclosure Schedule, the consummation of the Transactions will not result in the
loss or impairment of the Company's or any of its Subsidiaries' rights to own or
use any of the Trademarks or the Other Intellectual Property owned by or
licensed to the Company or its Subsidiaries nor will it require the consent of
any Governmental Authority or third party in respect of any such Trademarks or
the Other Intellectual Property.
Section 3.15 Properties. Each of the Company and each of its
Subsidiaries has sufficiently good and valid title to, or an adequate leasehold
interest in, its material properties and assets (including the Real Property) in
order to allow it to conduct, and continue to conduct, its business as currently
conducted in all material respects. Except as set forth on Schedule 3.15 of the
Company Disclosure Schedule such material tangible properties and assets
(including the Real Property) are sufficiently free of Liens to allow the
Company and each of its Subsidiaries to conduct, and continue to conduct, its
business as currently conducted in all material
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respects and the consummation of the Transactions will not alter or impair such
ability in any material respect. Except as set forth on Schedule 3.15 of the
Company Disclosure Schedule the Company and/or its Subsidiaries have good,
valid, market able and fee simple title to all the Fee Property, free and clear
of all Liens other than Liens the enforcement of which is not reasonably likely
to have a material impact on the continued use (as currently used) or value of
such properties.
Section 3.16 Contracts. (a) Except as set forth in the
Company's SEC Documents or Schedule 3.16 of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries is a party to or bound by any
(i) "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC), (ii) non-competition agreement or any other
agreement or obligation which purports to limit in any respect the manner in
which, or the localities in which, all or any material portion of the business
of the Company and its Subsidiaries, taken as a whole, may be conducted, (iii)
transaction, agreement, arrangement or understanding with any Affiliate that
would be required to be disclosed under Item 404 of regulation S-K under the
Securities Act, (iv) voting or other agreement governing how any Shares shall be
voted, (v) material agreement with any stockholders of the Company, (vi)
acquisition, merger, asset purchase or sale agreement related to the acquisition
or sale of a business or (vii) contract or other agreement which would prohibit
or materially delay the consummation of the Merger or any of the Transactions
(all contracts of the type described in clauses (i) - (vii) being referred to
herein as "Company Material Contracts"). Each Company Material Contract is valid
and binding on the Company (or, to the extent a Subsidiary of the Company is a
party, such Subsidiary) and is in full force and effect. Neither the Company nor
any Subsidiary of the Company is in default or knows of, or has received notice
of, any violation or default under (nor, to the Knowledge of the Company, does
there exist any condition which with the passage of time or the giving of notice
or both would result in such a violation or default under) any Company Material
Contract; except as would not, individually or in the aggregate have a Material
Adverse Effect on the Company.
(b) Except as disclosed in the Company's SEC Documents or on
Schedule 3.16 of the Company Disclosure Schedule or as provided for in this
Agreement, neither the Company nor any of its Subsidiaries is a party to any
oral or written (i) employment agreements or consulting agreements (in excess of
$50,000 per year) not terminable on thirty (30) days' or less notice, (ii) union
or collective bargaining agreement, (iii) agreement with any executive officer
or other key employee of the Company or any of its Subsidiaries the benefits of
which are
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contingent or vest, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company or any of its Subsidiaries of
the nature contemplated by this Agreement, or (iv) agreement with respect to any
executive officer or other key employee of the Company or any of its
Subsidiaries providing any term of employment or compensation guarantee.
Section 3.17 Labor Relations. Except to the extent set forth
in the Company's SEC Documents or Schedule 3.17 of the Company Disclosure
Schedule, there is no labor strike, slowdown, stoppage or lockout actually
pending, or, to the Knowledge of the Company, threatened against or affecting
the Company or any of its Subsidiaries, and neither the Company nor any of its
Subsidiaries is a party to or bound by any collective bargaining or similar
agreement with any labor organization.
Section 3.18 Products Liability; Recalls. (a) Except as set
forth in the Company's SEC Documents or on Schedule 3.18 of the Company
Disclosure Schedule, (i) there is no notice, demand, claim, action, suit,
inquiry, hearing, proceeding, notice of violation or investigation of a civil,
criminal or administrative nature (collectively, "Notices") pending, or to the
Company's Knowledge, threatened before any Governmental Entity in which a
Product is alleged to have a Defect or relating to or resulting from any alleged
failure to warn or from any alleged breach of express or implied warranties or
representations, nor, to the Company's Knowledge, is there any valid basis for
any such demand, claim, action, suit, inquiry, hearing, proceeding, notice of
violation or investigation; (ii) no demand, claim, action, suit, inquiry,
hearing, proceeding, notice of violation or investigation referred to in clause
(i) of this Section 3.18 would, if adversely determined, have, individually or
in the aggregate, a Material Adverse Effect on the Company; (iii) there has not
been any recall, rework, retrofit or post-sale general consumer warning since
January 1, 1993 (collectively, "Recalls") of any Product, or any investigation
or consideration of or decision made by any person or entity concerning whether
to undertake or not to undertake any Recalls and the Company has received no
Notices from any Governmental Entity or any other person with respect to the
foregoing; and (iv) to the Company's Knowledge, there are currently no material
defects in design, manufacturing, materials, or workmanship, including, without
limitation, any failure to warn, or any breach of express or implied warranties
or representations, which involve any Product that accounts for a material
portion of the Company's sales.
(b) Section 3.18 of the Company Disclosure Schedule sets forth
all Notices received by the Company or its Subsidiaries since January 1, 1996
and the Company's best estimate of the reserves provided therefor.
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Section 3.19 Applicability of State Takeover Statutes. The
Section 203 Approval is valid and in full force and effect. Section 203 of the
DGCL will not apply to the Offer, the acquisition of Shares pursuant to the
Offer or the Merger. No other state takeover statute or similar statute or
regulation applies or purports to apply to the Offer, the Merger or the other
Transactions.
Section 3.20 Voting Requirements. In the event that Section
253 of the DGCL is inapplicable and unavailable to effectuate the Merger, the
affirmative vote of the holders of a majority of all the outstanding Shares
entitled to vote approving this Agreement at the Special Meeting is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the Transactions.
Section 3.21 Brokers. No broker, investment banker, financial
advisor or other Person, other than Allen & Company Incorporated, the fees and
expenses of which will be paid by the Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of the
Company. The Company has provided Parent true and correct copies of all
agreements between the Company and Allen & Company Incorporated, including,
without limitations, any fee arrangements.
Section 3.22 Opinion of Financial Advisor. The Company has
received the opinion of Allen & Company Incorporated, to the effect that, as of
the date of this Agreement, the consideration to be received in the Offer and
the Merger by the Company's stockholders is fair to the Company's stockholders
from a financial point of view, and a complete and correct signed copy of such
opinion has been, or promptly upon receipt thereof will be, delivered to Parent.
The Company has been authorized by Allen & Company Incorporated to permit the
inclusion of such opinion in its entirety in the Schedule 14D-9 and the Proxy
Statement, so long as such inclusion is in form and substance reasonably
satisfactory to Allen & Company Incorporated and its counsel.
Section 3.23 Year 2000.
Except as set forth on Schedule 3.23 of the Company Disclosure
Schedule or the Company's SEC Documents, or as would not have, individually or
in the aggregate, a Material Adverse Effect on the Company:
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(a) all of the Computer Programs, computer firmware, computer
hardware (whether general or special purpose) and other similar or related items
of automated, computerized and/or software system(s) that are used or relied on
by the Company or by any of its Subsidiaries in the conduct of their respective
businesses will not malfunction, will not cease to function, will not generate
incorrect data, and will not provide incorrect results when processing,
providing, and/or receiving (i) date-related data into and between the twentieth
and twenty-first centuries and (ii) date-related data in connection with any
valid date in the twentieth and twenty-first centuries; and
(b) all of the products and services sold, licensed, rendered
or otherwise provided by the Company or by any of its Subsidiaries in the
conduct of their respective businesses will not malfunction, will not cease to
function, will not generate incorrect data and will not produce incorrect
results when processing, providing and/or receiving (i) date-related data into
and between the twentieth and twenty-first centuries and (ii) date-related data
in connection with any valid date in the twentieth and twenty-first centuries;
and neither the Company nor any of its Subsidiaries is or shall be subject to
claims or liabilities arising from their failure to do so; and
(c) neither the Company nor any of its Subsidiaries has made
other representations or warranties regarding the ability of any product or
service sold, licensed, rendered or otherwise provided by the Company or by any
of its Subsidiaries in the conduct of their respective businesses to operate
without malfunction, to operate without ceasing to function, to generate
correct data and to produce correct results when processing, providing and/or
receiving (i) date-related data into and between the twentieth and twenty-first
centuries and (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
Section 3.24 Company Rights Agreement. The Company and its
Board of Directors have taken all action which may be necessary under the
Company Rights Agreement so that the Offer is deemed to be an "Approved
Transaction" (as defined in the Company Rights Agreement") and the execution and
delivery of this Agreement (and any amendments thereto by the parties hereto),
and the consummation of the Merger and the Transactions, will not cause (i)
Parent or Purchaser to constitute an "Acquiring Person" (as defined in the
Company Rights Agreement), (ii) a "Distribution Date," "Section 13 Event,"
"Triggering Event," or "Stock Acquisition Date" (each as defined in the Company
Rights Agreement) to occur or (iii) the Rights
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(as defined in the Company Rights Agreement) to become exercisable pursuant to
Section 11(a)(ii) thereof or otherwise.
Section 3.25 Absence of Questionable Payments. To the
Company's Knowledge, neither the Company nor any of its Subsidiaries nor any
director, officer, agent, employee or other person acting on behalf of the
Company or any of its Subsidiaries, has used any corporate or other funds for
unlawful contributions, payments, gifts, or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others or
established or maintained any unlawful or unrecorded funds in violation of
Section 30A of the Exchange Act. To the Company's Knowledge, neither the Company
nor any of its Subsidiaries nor any current director, officer, agent, employee
or other person acting on behalf of the Company or any of its Subsidiaries, has
accepted or received any unlawful contributions, payments, gifts, or
expenditures. To the Company's Knowledge, the Company and each of its
Subsidiaries which is required to file reports pursuant to Section 12 or 15(d)
of the Exchange Act is in compliance with the provisions of Section 13(b) of the
Exchange Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company as
follows:
Section 4.1 Organization, Standing and Corporate Power. Each
of Parent and Purchaser is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction in which each is incorporated
and has the requisite corporate power and authority to carry on its business as
now being conducted. Each of Parent and Purchaser is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where
the failure to be so qualified or licensed (individually or in the aggregate)
would not have a Material Adverse Effect on Parent.
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Section 4.2 Authority; Noncontravention. Parent and Purchaser
have the requisite corporate power and authority to enter into this Agreement
and to consummate the Transactions. The execution and delivery of this Agreement
by Parent and Purchaser and the consummation by Parent and Purchaser of the
Transactions have been duly authorized by all necessary corporate action on the
part of Parent and Purchaser, as applicable. This Agreement has been duly
executed and delivered by Parent and Purchaser and, assuming this Agreement
constitutes the valid and binding obligation of the Company, constitutes a valid
and binding obligation of each such party, enforceable against each such party
in accordance with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or
hereafter in effect relating to creditors' rights generally and (ii) the remedy
of specific performance and injunctive relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The execution and delivery of this Agreement do not, and the
consummation of the Transactions will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any lien upon any of the material properties or assets of Parent under, (i)
the certificate of incorporation or by-laws of Parent or Purchaser, (ii) any
loan or credit agreement, note, bond, indenture, lease or other agreement,
instrument or Permit applicable to the Company or any of its Significant
Subsidiaries or their respective properties or assets, (iii) any Law applicable
to Parent or Purchaser or their respective properties or assets, other than, in
the case of clause (ii) and (iii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (x) impair in
any material respect the ability of Parent and Purchaser to perform their
respective obligations under this Agreement or (y) prevent or impede the
consummation of any of the Transactions. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity or any other Person is required by Parent or Purchaser in connection with
the execution and delivery of this Agreement or the consummation by Parent or
Purchaser, as the case may be, of any of the Transactions, except for (i) the
filings, permits, authorizations, consents and approvals set forth in Schedule
4.2 of the disclosure schedule delivered by Parent to the Company at or prior to
the execution of this Agreement (the "Parent Disclosure Schedule"), or as may be
required under, and other applicable requirements of, the Securities Act, the
Exchange Act, the HSR Act, any applicable state securities or "blue sky" Laws
and the DGCL, and (ii) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the
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aggregate, prevent the consummation of or materially impair the ability of
Parent or Purchaser to consummate the Transactions.
Section 4.3 Proxy Statement; Offer Documents. The Offer
Documents and any other documents to be filed by Parent with the SEC or any
other Government Entity in connection with the Merger and the other Transactions
will (in the case of the Offer Documents and any such other documents filed with
the SEC under the Securities Act or the Exchange Act) comply as to form in all
material respects with the applicable provisions of the Exchange Act and the
Securities Act, respectively, and the rules and regulations thereunder. None of
the Offer Documents, any other documents required to be filed by Parent or
Purchaser with the SEC in connection with the Transactions, nor any information
supplied by Parent or Purchaser in writing for inclusion in the Schedule 14D-9
shall, at the respective times the Offer Documents or any amendments and
supplements thereto, any such other filings by Parent or Purchaser or the
Schedule 14D-9 are filed with SEC or are first published, sent or given to
stockholders of the Company, as the case may be, or, in the case of the Proxy
Statement, on the date the Proxy Statement is first mailed to stockholders of
the Company, 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 misleading or shall, at the time of the Special Meeting (as
defined in Section 5.3) or at the Effective Time, omit to state any material
fact necessary to correct any statement in any earlier communication in light of
the circumstances in which they are made, with respect to the solicitation of
proxies for the Special Meeting which shall have become false or misleading in
any material respect. Notwithstanding the foregoing, neither Parent nor
Purchaser makes any representation or warranty with respect to the statements
made in any of the foregoing documents based on and in conformity with
information supplied by or on behalf of the Company specifically for inclusion
or incorporation by reference therein.
Section 4.4 Operations of Purchaser. Purchaser is a wholly
owned Subsidiary of Parent and was formed solely for the purpose of engaging in
the Transactions and has not engaged in any business activities or conducted any
operations other than in connection with the Transactions.
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Section 4.5 Brokers. No broker, investment banker, financial
advisor or other Person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the Transactions
based upon arrangements made by or on behalf of Parent or Purchaser.
Section 4.6 Financing.
(a) Parent or a wholly owned subsidiary thereof owns all of
the outstanding capital stock of Purchaser. At all times prior to the Effective
Time, no person other than Parent has owned, or will own, any of the outstanding
capital stock of Purchaser. Purchaser has not incurred, and prior to the
Effective Time will not incur, directly or though any Subsidiary, any
liabilities or obligations for borrowed money or otherwise, except incidental
liabilities or obligations not for borrowed money incurred in connection with
its organization and except in connection with the Transactions.
(b) Parent and Purchaser have, and, at all times between the
date hereof and the payment for Shares validly tendered and not withdrawn in the
Offer or converted in the Merger, will have sufficient financial capacity to
accept for payment, purchase and pay for all of the Shares validly tendered and
not withdrawn pursuant to the Offer, and will have sufficient financial capacity
to pay the Merger Consideration payable in the Merger.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. After the date
hereof and prior to the time the designees of Parent have been elected or
appointed to, and shall constitute a majority of, the Board of Directors of the
Company pursuant to Section 1.4 or the date, if any, on which this Agreement is
earlier terminated pursuant to Section 7.1, and except (i) as expressly
contemplated by this Agreement, (ii) as set forth on Schedule 5.1 of the Company
Disclosure Schedule or (iii) as agreed in writing by Parent:
(a) the Company shall and shall cause its
Subsidiaries to carry on their respective businesses in the ordinary course;
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(b) the Company shall and shall cause its
Subsidiaries to use all reasonable best efforts consistent with good business
judgment to preserve intact their current business organizations, keep available
the services of their current officers and key employees and preserve their
relationships consistent with past practice with desirable customers, suppliers,
licensors, licensees, distributors and others having business dealings with
them;
(c) neither the Company nor any of its Subsidiaries
shall, directly or indirectly, amend its certificate of incorporation or by-laws
or similar organizational documents;
(d) Representatives of the Company and its
Subsidiaries shall confer at such times as Parent may reasonably request with
one or more Representatives of Parent to report material operational matters
and the general status of ongoing operations;
(e) neither the Company nor any of its Subsidiaries
shall: (i)(A) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to the Company's capital stock
or that of its Subsidiaries, except that a wholly-owned Subsidiary of the
Company may declare and pay a dividend or make advances to its parent or the
Company or (B) redeem, purchase or otherwise acquire directly or indirectly any
of the Company's capital stock or that of its Subsidiaries; (ii) issue, sell,
pledge, dispose of or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of capital stock of any class of
the Company or its Subsidiaries, other than Shares issued upon the exercise of
Options outstanding on the date hereof in accordance with the Option Plans as in
effect on the date hereof or additional warrants issued in accordance with the
terms of the Warrants; or (iii) split, combine or reclassify the outstanding
capital stock of the Company or of any of the Subsidiaries of the Company;
(f) neither the Company nor any of its Subsidiaries
shall enter into any agreement or arrangement with respect to the distribution
of any of the Company's products;
(g) except as permitted by this Agreement, neither
the Company nor any of its Subsidiaries shall acquire or agree to acquire (A) by
merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
joint venture,
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association or other business organization or division thereof (including
entities which are Subsidiaries of the Company or any of the Company's
Subsidiaries) or (B) any assets, including real estate, except purchases in the
ordinary course of business consistent with past practice;
(h) neither the Company nor any of its Subsidiaries
shall make any new capital expenditure or expenditures in excess of $50,000
individually, or $500,000 in the aggregate, other than the specific capital
expenditures disclosed and set forth on Schedule 5.1 of the Company Disclosure
Schedule;
(i) neither the Company nor any of its Subsidiaries
shall, except in the ordinary course of business and except as otherwise
permitted by this Agreement, amend or terminate any Company Material Contract
where such amendment or termination would have a Material Adverse Affect on the
Company, or waive, release or assign any material rights or claims;
(j) neither the Company nor any of its Subsidiaries
shall transfer, lease, license, sell, mortgage, pledge, dispose of or encumber
any property or assets other than in the ordinary course of business and
consistent with past practice;
(k) neither the Company nor any of its Subsidiaries
shall: (i) enter into any employment or severance agreement with or grant any
severance or termination pay to any officer, director or key employee of the
Company or any its Subsidiaries; or (ii) hire or agree to hire any new or
additional key employees or officers;
(l) neither the Company nor any of its Subsidiaries
shall, except as required to comply with applicable Law or expressly provided in
this Agreement, (A) adopt, enter into, terminate, amend or increase the amount
or accelerate the payment or vesting of any benefit or award or amount payable
under any Benefit Plan or other arrangement for the current or future benefit or
welfare of any director, officer or current or former employee, except to the
extent necessary to coordinate any such Benefit Plans with the terms of this
Agreement, (B) increase in any manner the compensation or fringe benefits of, or
pay any bonus to, any director, officer or employee provided that employees with
annual compensation of $100,000 or less may receive increases of not more than
5.0% on the anniversary date of their employment in the ordinary course of
business and consistent with past practice, (C) pay any benefit not provided for
under, or contemplated by, any Benefit Plan, (D)
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grant any awards under any bonus, incentive, performance or other compensation
plan or arrangement or Benefit Plan (including the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units or
restricted stock, or the removal of existing restrictions in any Benefit Plans
or agreements or awards made thereunder) or (E) take any action to fund or in
any other way secure the payment of compensation or benefits under any employee
plan, agreement, contract or arrangement or Benefit Plan;
(m) neither the Company nor any of its Subsidiaries
shall: (i) incur or assume any long-term debt, or except in the ordinary course
of business, incur or assume any short-term indebtedness in amounts not
consistent with past practice; (ii) incur or modify any material indebtedness or
other liability except as set forth on Schedule 5.1 of the Company Disclosure
Schedule; (iii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other Person, except in the ordinary course of business and consistent with
past practice; (iv) make any loans, advances or capital contributions to, or
investments in, any other Person (other than to wholly owned Subsidiaries of the
Company or customary loans or advances to employees in the ordinary course of
business and consistent with past practice); or (v) settle any material claims
other than in the ordinary course of business, in accordance with past practice
and without admission of liability;
(n) neither the Company nor any of its Subsidiaries
shall change any of the accounting methods used by it unless required by GAAP,
the SEC or Law;
(o) neither the Company nor any of its Subsidiaries
shall make any Tax election, amend any material Tax Return, make a claim for any
material Tax Refund or settle or compromise any material Tax liability (whether
with respect to amount or timing);
(p) neither the Company nor any of its Subsidiaries
shall pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction of any such claims, liabilities or
obligations, in the ordinary course of business and consistent with past
practice, of claims, liabilities or obligations reflected or reserved against
in, or contemplated by, the consolidated financial statements (or the notes
thereto) of the Company and its consolidated Subsidiaries; or, except in the
ordinary course of business consistent with past practice, waive the
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benefits of, or agree to modify in any manner, any confidentiality, standstill
or similar agreement to which the Company or any of its Subsidiaries is a party;
(q) neither the Company nor any of its Subsidiaries
shall (by action or inaction) amend, renew, terminate or cause to be extended
any lease, agreement or arrangement relating to any of the Leased Properties or
enter into any lease, agreement or arrangement with respect to any real
property;
(r) neither the Company nor any of its Subsidiaries
will enter into an agreement, contract, commitment or arrangement to do any of
the foregoing, or to authorize, recommend, propose or announce an intention to
do any of the foregoing; and
(s) neither the Company nor any of its Subsidiaries
shall take any action that would result in (i) any of its representations and
warranties set forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (iii) any of the conditions
to the Offer set forth in Annex A not being satisfied (subject to the Company's
right to take action specifically permitted by Section 5.5).
Section 5.2 Access; Confidentiality. The Company shall (and
shall cause each of its Subsidiaries to) afford to the Representatives of Parent
reasonable access on reasonable prior notice during normal business hours,
throughout the period prior to the earlier of the Effective Time or the
termination of this Agreement, to all of its properties, offices, employees,
contracts, commitments, books and records (including but not limited to Tax
Returns) and any report, schedule or other document filed or received by it
pursuant to the requirements of federal or state securities laws and shall (and
shall cause each of its Subsidiaries to) furnish promptly to Parent such
additional financial and operating data and other information as to its and its
Subsidiaries' respective businesses and properties as Parent may from time to
time reasonably request. Parent and Purchaser will make all reasonable efforts
to minimize any disruption to the businesses of the Company and its Subsidiaries
which may result from the requests for data and information hereunder and
pursuant to Section 5.1(d) hereof. Parent agrees that it will not, and will
cause its Representatives not to, use any information obtained pursuant to this
Section 5.2 for any purpose unrelated to the Transactions. Except as otherwise
agreed to by the Company, unless and until Parent and Purchaser shall have
purchased Shares pursuant to the Offer, Parent will be bound by the terms of a
confidentiality agreement (the
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"Confidentiality Agreement"), dated as of April 2, 1998 and amended as of June
23, 1998, by and between Parent and the Company. Except as otherwise agreed to
by Parent or Purchaser, unless and until Parent and Purchaser shall have
purchased Shares pursuant to the Offer, the Company will be bound by the terms
of the Confidentiality Agreement.
Section 5.3. Special Meeting, Proxy Statement.
(a) If required by applicable Law in order to
consummate the Merger, the Company, acting through its Board of Directors,
shall, in accordance with applicable Law, its Certificate of Incorporation and
By-laws:
(i) as promptly as practicable following the
acceptance for payment and purchase of Shares by Purchaser pursuant to
the Offer duly call, give notice of, convene and hold a special meeting
of its stockholders (the "Special Meeting") for the purposes of
considering and taking action upon the approval of the Merger and the
approval and adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary
proxy or information statement relating to the Merger and this
Agreement and (x) obtain and furnish the information required to be
included by the SEC in the Proxy Statement (as hereinafter defined)
and, after consultation with Parent, respond promptly to any comments
made by the SEC with respect to the preliminary proxy or information
statement and cause a definitive proxy or information statement,
including any amendment or supplement thereto (the "Proxy Statement")
to be mailed to its stockholders at the earliest practicable date;
provided that no amendment or supplement to the Proxy Statement will be
made by the Company without consultation with Parent and its counsel
and (y) use its reasonable best efforts to obtain the necessary
approvals of the Merger and this Agreement by its stockholders; and
(iii) unless this Agreement has been terminated in
accordance with Article VII, subject to its rights pursuant to Section
5.5, include in the Proxy Statement the recommendation of its Board of
Directors that stockholders of the Company vote in favor of the
approval of the Merger and the approval and adoption of this Agreement.
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(b) Parent shall vote, or cause to be voted, all of
the Shares then owned by it, Purchaser or any of its other Subsidiaries in favor
of the approval and adoption of this Agreement.
(c) Notwithstanding anything else herein or in this
Section 5.3, in the event that Parent, Purchaser and any other Subsidiaries of
Parent shall acquire in the aggregate a number of the outstanding shares of each
class of capital stock of the Company, pursuant to the Offer or otherwise,
sufficient to enable Purchaser or the Company to cause the Merger to become
effective under applicable Law without a meeting of stockholders of the Company,
the parties hereto shall, at the request of Parent and subject to Article VI,
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the consummation of such acquisition,
without a meeting of stockholders of the Company, in accordance with Section
253 of the DGCL.
Section 5.4. Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions
hereof, each of the parties hereto will (i) make promptly its respective
filings, and thereafter make any other required submissions, under the HSR Act,
the Securities Act and the Exchange Act, with respect to the Transactions and
(ii) use all reasonable 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 to satisfy the conditions to the Offer and the Merger and to
consummate and make effective the 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 will use all reasonable efforts to take all such action.
(b) Parties hereby agree that they will, and they
will cause each of their respective affiliates to, use all reasonable efforts to
obtain any government clearances required for completion of the Offer and the
Merger (including through compliance with the HSR Act), to respond to any
government requests for information, and to contest and resist any action,
including any legislative, administrative or judicial action, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) (an "Order") that
restricts, prevents or prohibits the consummation of the Merger, including by
vigorously pursuing all available avenues of administrative and judicial appeal.
Notwithstanding the foregoing, in no event shall the Parent, Purchaser or the
Surviving Corporation be required to divest any of their respective
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<PAGE> 44
assets or agree to any restriction in their businesses as currently or proposed
to be conducted. The parties hereto will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to the HSR Act or any other federal, state
or foreign antitrust or fair trade law.
(c) Each of the Company, Parent and Purchaser
shall give prompt notice to the other of (i) any of their representations or
warranties contained in this Agreement becoming untrue or inaccurate in any
respect (including in the case of representations or warranties receiving
knowledge of any fact, event or circumstance which may cause any representation
qualified as to the knowledge to be or become untrue or inaccurate in any
respect) or (ii) the failure by them to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied
by them under this Agreement; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement.
Section 5.5 No Solicitation. (a) The Company shall not, nor
shall it permit any of its Subsidiaries to, nor shall it authorize (and shall
use its best efforts not to permit) any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, the Company
or any of its Subsidiaries to, (i) solicit or initiate, or encourage, directly
or indirectly, any inquiries or the submission of, any Takeover Proposal, (ii)
participate in any discussions or negotiations regarding, or furnish to any
Person any information or data with respect to or access to the properties of,
or take any other action to knowingly facilitate the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal or
(iii) enter into any agreement with respect to any Takeover Proposal or approve
or resolve to approve any Takeover Proposal; provided, that nothing contained in
this Section 5.5 or any other provision hereof shall prohibit the Company or the
Company's Board of Directors from (i) taking and disclosing to the Company's
stockholders a position with respect to a tender or exchange offer by a third
party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act, or
(ii) making such disclosure to the Company's stockholders as, in the good faith
judgment of the Company's Board of Directors, after receiving advice from
outside counsel, is required under, or is necessary to comply with, applicable
Law, provided that the Company may not, except as permitted by Section 5.5(b),
withdraw or modify, or propose to withdraw or modify, its position with respect
to the Offer or
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<PAGE> 45
the Merger or approve or recommend, or propose to approve or recommend any
Takeover Proposal, or enter into any agreement with respect to any Takeover
Proposal. Upon execution of this Agreement, the Company will immediately cease
any existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. Notwithstanding the foregoing,
prior to the time of acceptance of Shares for payment pursuant to the Offer, the
Company may withdraw or modify its recommendation of the Offer, may furnish
information concerning its business, properties or assets to any Person or group
and may negotiate and participate in discussions and negotiations with such
Person or group concerning a Takeover Proposal if:
(x) such Person or group has submitted a Superior
Proposal; and
(y) in the opinion of the Company's Board of
Directors such action is required to discharge the Board's fiduciary
duties to the Company's stockholders under applicable Law, determined
only after receipt of advice from independent legal counsel to the
Company that the failure to provide such information or access or to
engage in such discussions or negotiations may cause the Company's
Board of Directors to violate its fiduciary duties to the Company's
stockholders under applicable Law.
The Company will promptly (but in no case later than 24 hours) notify Parent of
the existence of any proposal, discussion, negotiation or inquiry received by
the Company regarding any Takeover Proposal, and the Company will promptly
communicate to Parent the terms of any proposal, discussion, negotiation or
inquiry which it may receive regarding any Takeover Proposal (and will promptly
provide to Parent copies of any written materials received by the Company in
connection with such proposal, discussion, negotiation or inquiry) and the
identity of the party making such proposal or inquiry or engaging in such
discussion or negotiation. The Company will promptly provide to Parent any
non-public information concerning the Company provided to any other Person in
connection with any Takeover Proposal which was not previously provided to
Parent. The Company will keep Parent informed of the status and details of any
such Takeover Proposal and of any amendments or proposed amendments to any
Takeover Proposal and will promptly (but in no case later than 24 hours) notify
Parent of any determination by the Company's Board of Directors that a Superior
Proposal has been made.
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(b) Except as set forth in this Section 5.5(b),
neither the Board of Directors of the Company nor any committee thereof shall
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent or Purchaser, the approval or recommendation by the Board of Directors of
the Company or any such committee of the Offer, this Agreement or the Merger,
(ii) approve or recommend, or propose to approve or recommend, any Takeover
Proposal or (iii) enter into any agreement with respect to any Takeover
Proposal. Notwithstanding the foregoing, subject to compliance with the
provisions of this Section 5.5, prior to the time of acceptance for payment of
Shares pursuant to the Offer, the Company's Board of Directors may withdraw or
modify its approval or recommendation of the Offer, this Agreement or the
Merger, approve or recommend a Superior Proposal, or enter into an agreement
with respect to a Superior Proposal, in each case at any time after the third
business day following Parent's receipt of written notice (including by
facsimile) from the Company advising Parent that the Board of Directors of the
Company has received a Superior Proposal which it intends to accept, specifying
the material terms and conditions of such Superior Proposal and identifying the
Person making such Superior Proposal, but only if the Company shall have caused
its financial and legal advisors to negotiate with Parent to make such
adjustments to the terms and conditions of this Agreement as would enable the
Company to proceed with the Transactions on such adjusted terms.
Section 5.6 Publicity. Except as required by Law or as
permitted by Section 5.5, so long as this Agreement is in effect, neither the
Company, Parent nor any of their respective affiliates shall issue or cause the
publication of any press release or other announcement with respect to the
Merger, this Agreement or the other Transactions without the prior consultation
of the other party.
Section 5.7 Transfer Taxes. All liability for transfer or
other similar Taxes arising out of or related to the Offer and the Merger or the
consummation of any other Transaction, and due to the property owned by the
Company or any of its Subsidiaries or affiliates ("Transfer Taxes") shall be
borne by the Company, and the Company shall file or cause to be filed all Tax
Returns relating to such Transfer Taxes which are due.
Section 5.8 State Takeover Laws. Notwithstanding any other
provision in this Agreement, in no event shall the Section 203 Approval be
withdrawn, revoked or modified by the Board of Directors of the Company. If any
state takeover statute other than Section 203 of the DGCL becomes or is deemed
to become applicable to the Company Stockholder Agreement, the Offer, the
acquisi-
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tion of Shares pursuant to the Offer or the Merger, the Company shall take all
reasonable action necessary to render such statute inapplicable to all of the
foregoing.
Section 5.9 Indemnification and Insurance.
(a) Parent, and from and after the Effective Time, the
Surviving Corporation, shall indemnify, defend and hold harmless each person who
is now, or has been at any prior time to the date hereof or who becomes prior to
the Effective Time, an officer, director, employee or agent of the Company or
any of its Subsidiaries (the "Indemnified Parties") against all losses, claims,
damages, costs, expenses (including reasonable attorneys' fees and expenses),
liabilities or judgments or amounts of or in connection with any threatened or
actual claim, action, suit, proceeding or investigation based on or arising out
of the fact that such person is or was serving in such person's capacity as a
director, officer, employee or agent of the Company or any of its Subsidiaries,
whether pertaining to any matter existing or occurring at or prior to the
Effective Time or any acts or omissions occurring or existing at or prior to the
Effective Time and whether asserted or claimed prior to, or at or after, the
Effective Time ("Indemnified Liabilities"), including all Indemnified
Liabilities based on, or arising out of, or pertaining to this Agreement or the
Transactions, in each case to the fullest extent a corporation is permitted
under the DGCL and the Company's Certificate of Incorporation or By-Laws as
currently in effect to indemnify such persons (and the Company and the Surviving
Corporation, as the case may be, will pay expenses promptly after statements
thereof are received, to each Indemnified Party to the fullest extent permitted
by Delaware law, subject to delivery of the undertaking described below).
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Party (whether
arising before or after the Effective Time), (i) such Indemnified Party may
retain counsel satisfactory to the Indemnified Party and reasonably satisfactory
to the Company (and reasonably satisfactory to the Surviving Corporation after
the Effective Time) and the Company (or after the Effective Time, the Surviving
Corporation) will pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements and supporting documentation thereof
are received; and (ii) the Company (or after the Effective Time, the Surviving
Corporation) will use all reasonable best efforts to assist in the vigorous
defense of any such matter, provided that neither the Company nor the Surviving
Corporation will be liable for any settlement effected without its prior written
consent which written consent will not unreasonably be withheld. Any Indemnified
Party, upon learning of any such claim, action, suit, proceeding or
investigation, will notify the Company (or after the Effective Time, the
Surviving Corporation) promptly (but the
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failure so to notify will not relieve a party from any liability which it may
have under this Section 5.9 except to the extent such failure materially
prejudices such party's position with respect to such claims), and will deliver
to the Company (or after the Effective Time, the Surviving Corporation) the
undertaking contemplated by Section 145(e) of the DGCL. The Indemnified Parties
as a group may retain only one law firm (and one local counsel) to represent
them with respect to each such matter unless there is, under applicable
standards of professional conduct, an existing or potential conflict on any
significant issue between the positions of any two or more Indemnified Parties
in which case such additional counsel reasonably acceptable to the Indemnified
Parties, the Company or, after the Effective Time, the Surviving Corporation as
may be required may be retained by the Indemnified Parties at the cost and
expense of the company (or Surviving Corporation). Furthermore, the provisions
with respect to indemnification set forth in the Certificate of Incorporation
and By-Laws of the Surviving Corporation will not be amended following the
Effective Time in any way that would materially and adversely affect the rights
thereunder of individuals who at any time prior to the Effective Time were
directors, officers, employees or agents of the Company in respect of actions or
omissions occurring at or prior to the Effective Time.
(b) For a period of three years after the Effective Time,
Parent shall cause the Surviving Corporation to maintain in effect, if
available, directors' and officers' liability insurance covering those Persons
who are currently covered by the Company's directors' and officers' liability
insurance policy with respect to acts prior to the Effective Time (a copy of
which has been made available to Parent) on terms (including the amounts of
coverage and the amounts of deductibles, if any) that are no less favorable to
the terms now applicable to them under the Company's current policies; provided,
however, that in no event shall Parent or the Surviving Corporation be required
to expend in excess of 150% of the annual premium currently paid by the Company
for such coverage; and provided further, that, if the premium for such coverage
exceeds such amount, Parent or the Surviving Corporation shall purchase a
policy with the greatest coverage available for such 150% of the annual premium.
(c) This Section 5.9 shall survive the consummation of the
Merger at the Effective Time, is intended to benefit the Company, the Surviving
Corporation and the Indemnified Parties, shall be binding on all successors and
assigns of the Surviving Corporation and shall be enforceable by the Indemnified
Parties.
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Section 5.10 Certain Employment Matters. (a) Parent will cause
the Surviving Corporation to honor the obligations of the Company or any of its
Subsidiaries under the provisions of all employment, consulting, termination,
severance, change in control and indemnification agreements between or among the
Company or any of its Subsidiaries and any current or former officer, director,
consultant or employee of the Company or any of its Subsidiaries.
(b) Immediately following the consummation of the Offer,
Parent shall cause the Company and the Surviving Corporation, and, in either
case, its Subsidiaries, through December 31, 1998 (except in the case of
employees of Galco International Toys, Ltd. ("Galco"), which date shall be the
first day of the Chinese New Year 4697 (February 16, 1999) and not December 31,
1998), to continue the employment of each employee of the Company and its
Subsidiaries who is employed by the Company or any of its Subsidiaries
immediately prior to the consummation of the Offer (other than officers of the
Company who have written agreements with the Company that are disclosed pursuant
to Schedule 3.4(ii) of the Company Disclosure Schedule) at the compensation in
effect immediately prior to the consummation of the Offer. In addition, all such
employees shall be entitled to receive through December 31, 1998 (except in the
case of employees of Galco, which date shall be the first day of the Chinese New
Year 4697 (February 16, 1999) and not December 31, 1998) health and welfare
benefits, and qualified retirement benefits, on terms that are not substantially
less favorable, in the aggregate, to those currently provided to employees of
the Company and its Subsidiaries under the Company's existing plans. The Company
may provide severance payments to each domestic employee of the Company or its
Subsidiaries (other than those officers of the Company who have written
agreements with the Company that are disclosed pursuant to Schedule 3.4(ii) of
the Company Disclosure Schedule) who is employed by the Company or its
Subsidiaries immediately following the consummation of the Offer, and who is
thereafter involuntarily terminated without cause by the Company or the
Surviving Corporation or, in either case, any of its Subsidiaries after such
time, in an amount per such employee equal to two weeks' base salary for each
full year of any such employee's service with the Company or any of its
Subsidiaries, subject to a receipt from such employee of a full and complete
release of all claims against Parent, Purchaser, the Surviving Corporation, the
Company and their respective affiliates, directors, officers, agents and
representatives. For purposes of eligibility for the paid vacation and the
health and welfare benefit plans of the Surviving Corporation, such employees
will be credited for their years of service with the Company or any of its
Subsidiaries.
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Section 5.11 Acceleration of Outstanding Indebtedness. If,
after the Offer is consummated, the Company's or any Subsidiary's obligation for
borrowed money outstanding is accelerated or the Company or such Subsidiary is
otherwise required to repurchase, repay or prepay any such obligation, Parent
agrees within ten business days after written notice thereof, to loan to the
Company an amount equal to the amount which the Company or any such Subsidiary
is required to so repurchase, repay or prepay (including any related prepayment
premiums or penalties) at an interest rate not to exceed the rate under Parent's
existing bank credit facility.
Section 5.12 The Company Rights Plan. The Company, acting
through its Board of Directors or otherwise, shall not, except as specifically
provided herein, (a) amend, alter or modify the Company Rights Plan or (b) take
any action with respect to, or make any determination under, the Company Rights
Plan, to facilitate a Takeover Proposal.
Section 5.13 Confidentiality and Standstill Agreements. (a)
The Company hereby waives any rights the Company may have under any "standstill"
or similar agreements to object to the transfer to Purchaser of all Shares held
by stockholders covered by such "standstill" or similar agreements and hereby
covenants not to consent to the transfer of any Shares held by such
stockholders to any other Person unless (i) the Company will have obtained the
specific, prior written consent of Parent with respect to any such transfer or
(ii) this Agreement will have been terminated pursuant to Article VII and (b)
the Company covenants not to alter, modify or amend the terms or conditions of
any confidentiality agreement to which it is a party or beneficiary in a manner
adverse to the interests of Parent or Purchaser, including, but not limited, to
authorizing any other Person to disclose or use any confidential information it
has received from the Company, whether to facilitate a Takeover Proposal or
otherwise.
Section 5.14 Certain Matters Related to Lucas Licensing Ltd.
and Lucasfilm Ltd. Notwithstanding anything contained in this Agreement to the
contrary, it shall be the obligation of Parent and not the Company to obtain all
necessary consents and approvals of Lucas Licensing Ltd. and Lucasfilm Ltd.
under the Toy Licensing Agreement, dated as of October 14, 1997, by and between
Lucas Licensing Ltd. and the Company, the Agreement of Strategic Relationship,
dated as of October 14, 1997, by and between Lucasfilm Ltd. and the Company, and
any other agreement between Lucas Licensing Ltd. and/or Lucasfilm Ltd. and the
Company that have been disclosed to Parent, to the consummation of the Offer,
the Merger and the other Transactions contemplated by this Agreement, and the
obtain-
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ing of any of such consents or approvals shall not be a condition to Parent or
Purchaser consummating the Offer, the Merger or the other Transactions, and the
failure to obtain any of such consents or approvals shall not under any
circumstances constitute a "Material Adverse Effect" or "Material Adverse
Change" under this Agreement or otherwise be a basis, in any respect, for Parent
or Purchaser to terminate this Agreement.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to effect the Merger shall
be subject to the satisfaction on or prior to the Effective Time of each of the
following conditions, any and all of which may be waived in whole or in part by
the Company, Parent or Purchaser, as the case may be, to the extent permitted by
applicable Law:
(a) this Agreement shall have been approved and
adopted by the requisite vote of the holders of Shares, if required by
applicable Law and the Certificate of Incorporation, in order to consummate the
Merger;
(b) any waiting period applicable to the Merger
under the HSR Act shall have expired or been terminated;
(c) no statute, rule, regulation, order, decree or
injunction shall have been enacted, promulgated or issued by any Governmental
Entity precluding, restraining, enjoining or prohibiting consummation of the
Merger; and
(d) Parent, Purchaser or their affiliates shall have
purchased Shares pursuant to the Offer.
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ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and
the Merger contemplated herein may be abandoned at any time prior to the
Effective Time, whether before or after approval of matters presented in
connection with the Merger by the stockholders of the Company:
(a) By the mutual written consent of Parent and the
Company; provided, however, that if Parent shall have a majority of the
directors pursuant to Section 1.4, such consent of the Company may only be given
if approved by the Continuing Directors.
(b) By either of Parent or the Company if (i) a
statute, rule or executive order shall have been enacted, entered or promulgated
prohibiting the Transactions on the terms contemplated by this Agreement or (ii)
any Governmental Entity shall have issued an order, decree or ruling or taken
any other action (which order, decree, ruling or other action the parties hereto
shall use their reasonable best efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the Transactions and such
order, decree, ruling or other action shall have become final and
non-appealable.
(c) By either of Parent or the Company if the
Effective Time shall not have occurred on or before March 31, 1999; provided,
however, that if the Effective Time shall not have occurred by such date solely
as a result of the failure of the condition set forth in Section 6.1(c) by
reason of the entry of a preliminary injunction, this Agreement may not be
terminated pursuant to this Section 7.1(c) until June 30, 1999; provided,
further, that the party seeking to terminate this Agreement pursuant to this
Section 7.1(c) shall not have breached in any material respect its obligations
under this Agreement in any manner that shall have been the cause of, or
resulted in, the failure to consummate the Merger on or before such date;
(d) By the Company:
(i) if the Company has entered into an
agreement with respect to a Superior Proposal or has approved or
recommended a Superior Proposal in accordance with Section 5.5(b),
provided the Company has complied with all provisions thereof,
including the notice provisions therein,
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and that it simultaneously terminates this Agreement and makes
simultaneous payment to the Parent of the Termination Fee; or
(ii) if Parent or Purchaser shall have
terminated the Offer or the Offer expires without Parent or Purchaser,
as the case may be, purchasing any Shares pursuant thereto; provided
that the Company may not terminate this Agreement pursuant to this
Section 7.1(d)(ii) if the Company is in material breach of this
Agreement; or
(iii) if Parent, Purchaser or any of their
affiliates shall have failed to commence the Offer on or prior to five
business days following the date of the initial public announcement of
the Offer; provided, that the Company may not terminate this Agreement
pursuant to this Section 7.1(d)(iii) if the Company is in material
breach of this Agreement.
(iv) if there shall be a material breach by
either Parent or Purchaser of any of their representations, warranties
covenants or agreements contained in this Agreement, except where such
breach does not have a material adverse effect on the ability of Parent
or Purchaser to consummate the Offer or the Merger.
(e) By Parent or Purchaser:
(i) (A) if prior to the purchase of the
Shares pursuant to the Offer, the Board of Directors of the Company
shall have withdrawn, or modified or changed in a manner adverse to
Parent or Purchaser its approval or recommendation of the Offer, this
Agreement or the Merger or shall have recommended or approved a
Takeover Proposal; or
(B) there shall have been a material breach
of any provision of Section 5.5, Parent shall have given at least 5
days' written notice of such breach and such breach shall not have been
cured within such 5 day period; or
(ii) if due to an occurrence that if
occurring after the commencement of the Offer would result in a failure
to satisfy any of the conditions set forth in Annex A hereto, Parent or
Purchaser shall have terminated the Offer without Parent or Purchaser
purchasing any Shares thereunder, provided that Parent or Purchaser may
not terminate this Agree-
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ment pursuant to this Section 7.1(e)(ii) if Parent or Purchaser is in
material breach of this Agreement; or
(iii) if, due to an occurrence that if
occurring after the commencement of the Offer would result in a failure
to satisfy any of the conditions set forth in Annex A hereto, Parent,
Purchaser or any of their affiliates shall have failed to commence the
Offer on or prior to five business days following the date of the
initial public announcement of the Offer, provided that Parent or
Purchaser may not terminate this Agreement pursuant to Section
7.1(e)(iii) if Parent of Purchaser is in material breach of this
Agreement; or
(iv) any Person or "group" (as defined in
Section 13(d)(3) of the Exchange Act), other than Parent, Purchaser or
their affiliates or any group of which any of them is a member, shall
have acquired beneficial ownership (as determined pursuant to Rule
13d-3 promulgated under the Exchange Act) of 30% or more of the Shares;
or
(v) if there shall be a breach by the
Company of any of its representations, warranties, covenants or
agreements contained in this Agreement and such breach (without giving
effect to any limitation as to "knowledge," "materiality" or "material
adverse effect" set forth herein) individually, or together with any
other breaches, has a Material Adverse Effect on the Company.
Section 7.2 Effect of Termination. In the event of termination
of this Agreement by either the Company or Parent or Purchaser as provided in
Section 7.1, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Parent, Purchaser or the
Company, other than the provisions of Section 3.21, 4.5, 5.2 (only with respect
to the last two sentences thereof), this Section 7.2 and Article VIII and except
to the extent that such termination results from the wilful and material breach
by a party of any of its representations, warranties, covenants or agreements
set forth in this Agreement.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. (a) Except as provided below,
all fees and expenses incurred in connection with the Offer, the Merger, this
Agreement and the Transactions shall be paid by the party incurring such fees or
expenses, whether or not the Offer or the Merger is consummated; provided, that
all printing expenses related to the Offer Documents, the Schedule 14D-9 and the
Proxy Statement shall be borne by Parent.
(b) If (x) Parent or Purchaser terminates this
Agreement pursuant to Section 7.1(e)(i) or 7.1(e)(iv) or (y) the Company
terminates this Agree ment pursuant to Section 7.1(d)(i), then in each case, the
Company shall pay, or cause to be paid to Parent, at the time of termination, an
amount equal to $6,000,000 (the "Termination Fee"). In addition, if this
Agreement is terminated by Parent pursuant to Section 7.1(e)(v) (other than by
reason of a breach of Section 5.5) and at the time of such termination, Parent
is not in material breach of this Agreement, then the Company shall pay to
Parent, at the time of termination, an amount equal to Parent's and Purchaser's
actual and reasonably documented out-of-pocket expenses incurred by Parent or
Purchaser in connection with the Offer, the Merger, this Agreement and the
consummation of the Transactions, including, without limitation, the fees and
expenses payable to all banks, investment banking firms, and other financial
institutions and Persons and their respective agents and counsel incurred in
connection with acting as Parent's or Purchaser's financial advisor with respect
to, or arranging or committing to provide or providing any financing for, the
Transactions (the "Expenses") and, if the breach referred to in Section
7.1(e)(v) was a willful breach and the Company shall thereafter, within 9 months
after such termination, enter into an agreement with respect to a Takeover
Proposal, then the Company shall pay the Termination Fee (less any Expenses
previously paid by the Company to Parent pursuant to this Section 8.1(b))
concurrently with entering into any such agreement. Any payments required to be
made pursuant to this Section 8.1 shall be made by wire transfer of same day
funds to an account designated by Parent.
Section 8.2 Amendment and Modification. Subject to applicable
Law, this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the stockholders of the Company
contemplated hereby, by written agreement of the parties hereto (which in the
case of the Company shall include approvals as contemplated in Section 1.4(c)),
at any time
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prior to the Closing Date with respect to any of the terms contained herein;
provided, however, that after the approval of this Agreement by the stockholders
of the Company, no such amendment, modification or supplement shall reduce the
amount or change the form of the Merger Consideration or otherwise adversely
affect the rights of stockholders, and provided, further, that there shall be no
decrease in the amount of the Merger Consideration after consummation of the
Offer.
Section 8.3 Nonsurvival. None of the representations,
warranties, covenants and agreements in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time. This Section 8.3 shall not limit any covenant or agreement
of the parties which by its terms contemplates performance after the Effective
Time including, without limitation, those contained in Article III and Sections
5.9, 5.10, 8.1 and 8.8 hereto, and the last two sentences of Section 5.2 hereof.
Section 8.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given upon receipt, and shall
be given to the parties at the following addresses or telecopy numbers (or at
such other address or telecopy number for a party as shall be specified by like
notice):
(a) if to Parent or Purchaser, to:
Hasbro, Inc.
1027 Newport Avenue
Pawtucket, Rhode Island 02862
Attention: Alfred J. Verrecchia, Executive Vice
President
Telecopy: (401) 721-7202
with a copy to:
Hasbro, Inc.
1027 Newport Avenue
Pawtucket, Rhode Island 02862
Attention: Cynthia S. Reed, Senior Vice President
and General Counsel
Telecopy: (401) 729-7025
with a copy to:
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Hasbro, Inc.
32 W. 23rd Street
New York, New York 10010
Attention: Phillip H. Waldoks
Senior Vice President-Corporate
Legal Affairs and Secretary
Telecopy: (212) 741-0663
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Thomas H. Kennedy, Esq.
Telecopy: 212-735-2000
(b) if to the Company, to:
Galoob Toys, Inc.
500 Forbes Boulevard
South San Francisco, California 94080
Attention: William G. Catron, Esq.
Telecopy: 650-583-5572
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Jeffrey J. Weinberg, Esq.
Telecopy: 212-310-8007
Section 8.5 Interpretation. (a) The words "hereof," "herein"
and "herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, paragraph, exhibit and
schedule references are to the articles, sections, paragraphs, exhibits and
schedules of this Agreement unless otherwise specified. Whenever the words
"include," "includes" or "including" are used in this Agreement they shall be
deemed to be followed by the words "without
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limitation." All terms defined in this Agreement shall have the defined meanings
contained herein when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements and instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
(b) The phrases "the date of this Agreement,"
"the date hereof" and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to September 27, 1998. The phrase "made
available" in this Agreement shall mean that the information referred to has
been actually delivered to the party to whom such information is to be made
available.
(c) The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
Section 8.6 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties.
Section 8.7 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership. This Agreement and the Confidentiality Agreement (including
the documents and the instruments referred to herein and therein): (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 5.9 are not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
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Section 8.8 Governing Law. This Agreement shall be governed by
and construed in accordance with the Laws of the State of Delaware without
giving effect to the principles of conflicts or choice of law thereof or of any
other jurisdiction.
Section 8.9 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of Law or otherwise) without the prior
written consent of the other parties, except that Purchaser may assign, in its
sole discretion, any or all of its rights, interests and obligations hereunder
to Parent or to any direct or indirect wholly owned Subsidiary of Parent,
provided that Parent shall remain primarily responsible for the obligations of
Purchaser or any other Subsidiary of Parent, and any of their permitted assigns.
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.
Section 8.10 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 Delaware or in Delaware state court, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of any Federal court located in the State of Delaware
or any Delaware state court in the event any dispute arises out of this
Agreement or any of the Transactions, (b) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for leave
from any such court and (c) agrees that it will not bring any action relating to
this Agreement or any of the Transactions in any court other than a Federal or
state court sitting in the State of Delaware.
Section 8.11 Extension; Waiver. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 8.2, waive compliance by the
other parties with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any
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such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
Section 8.12 Procedure for Termination, Amendment, Extension
or Waiver. A termination of this Agreement pursuant to Section 7.1, an amendment
of this Agreement pursuant to Section 8.2 or an extension or waiver pursuant to
Section 8.11 shall, in order to be effective, require in the case of Parent,
Purchaser or the Company, action by its Board of Directors or the duly
authorized designee of its Board of Directors; provided, however, that in the
event that Parent's designees are appointed or elected to the Board of Directors
of the Company as provided in Section 1.4, after the acceptance for payment of
Shares pursuant to the Offer and prior to the Effective Time, except as
otherwise contemplated by this Agreement the affirmative vote of a majority of
the Continuing Directors of the Company shall be required by the Company to
amend this Agreement by the Company.
Section 8.13 Certain Undertakings of Parent. Parent shall be
responsible for the performance of, and, if necessary, shall perform, or cause
to be performed any obligation of Purchaser or the Surviving Corporation, or
either of their permitted successors and assigns under this Agreement.
Section 8.14 Definitions. For purposes of this Agreement:
"Affiliate" has the meaning set forth in Rule 12b-2 of the Exchange
Act.
"Benefit Plans" has the meaning assigned thereto in Section 3.10.
"By-laws" means the by-laws of the Company as in effect on the date of
this Agreement.
"Certificate of Incorporation" means the certificate of incorporation
of the Company as in effect on the date of this Agreement.
"Certificate of Merger" has the meaning assigned thereto in Section
1.6.
"Certificates" has the meaning assigned thereto in Section 2.2.
"Closing" has the meaning assigned thereto in Section 1.7.
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"Closing Date" has the meaning assigned thereto in Section 1.7.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Galoob Toys, Inc., a Delaware corporation.
"Company Disclosure Schedule" has the meaning assigned thereto in
Article III.
"Company Material Contract" has the meaning assigned thereto in Section
3.16.
"Company's SEC Documents" has the meaning assigned thereto in Section
3.5.
"Computer Programs" means:
(i) any and all computer software programs, including all
source and object code,
(ii) databases and compilations, including any and all
data and collections of data, whether machine
readable or otherwise,
(iii) billing, reporting, and other management information
systems,
(iv) all descriptions, flow-charts and other work product
used to design, plan, organize and develop any of the
foregoing,
(v) all content contained on any Internet site(s), and
(vi) all documentation, including user manuals and
training materials, relating to any of the
foregoing.
"Company Rights Agreement" means the Preferred Stock Rights Agreement,
dated as of January 17, 1990, by and between the Company and Mellon Securities
Trust Company.
"Confidentiality Agreement" has the meaning assigned thereto in Section
5.2.
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"Continuing Director" means (i) any member of the Board of Directors of
the Company as of the date hereof, or (ii) any successor of a Continuing
Director who is (A) unaffiliated with, and not a designee or nominee, of Parent
or Purchaser, and (B) recommended to succeed a Continuing Director by a majority
of the Continuing Directors then on the Board of Directors of the Company, and
in each case under clauses (i) and (ii), who is not an employee of the Company.
"Defect" means a defect or impurity of any kind, whether in design,
manufacture, processing, or otherwise, including, without limitation, any
dangerous propensity associated with any reasonably foreseeable use of a
Product, or the failure to warn of the existence of any defect, impurity, or
dangerous propensity.
"DGCL" means the Delaware General Corporation Law, as in effect on the
date of this Agreement and as amended from time to time.
"Dissenting Shares" has the meaning assigned thereto in Section 2.5.
"Dissenting Stockholders" has the meaning assigned thereto in Section
2.5.
"Effective Time" has the meaning assigned thereto in Section 1.6.
"Environmental Laws" means all applicable foreign, Federal, state and
local Laws relating to pollution or protection of human health, safety and the
environment, including, without limitation, Laws relating to Releases or
threatened Releases of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
transport or handling of Hazardous Materials, and all Laws and regulations with
regard to record keeping, notification, disclosure and reporting requirements
respecting Hazardous Materials, and all Laws relating to endangered or
threatened species of fish, wildlife and plants and the management or use of
natural resources, provided, however, that the above definition does not include
the Occupational Safety and Health Act, 29 U.S.C.A. Section 651.
"Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, obligations to conduct cleanup, losses, damages,
deficiencies, punitive damages, consequential damages, treble damages, costs and
expenses (including, without limitation, all reasonable fees, disbursements and
expenses of counsel, expert and consulting fees and costs of investigations and
feasibility studies
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and responding to government requests for information or documents), fines,
penalties, restitution and monetary sanctions or interest resulting from any
claim or demand, by any Person or entity under any Environmental Law, or arising
from the Release or threatened Release of Hazardous Materials by the Company
into the environment.
"ERISA" has the meaning assigned thereto in Section 3.10.
"ERISA Affiliate" has the meaning assigned thereto in Section 3.10.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expenses" has the meaning assigned thereto in Section 8.1.
"Fee Properties" means all real property and interests in real property
owned in fee by the Company or one of its Subsidiaries.
"GAAP" has the meaning assigned thereto in Section 3.5.
"Galco" has the meaning assigned thereto in Section 5.10.
"Governmental Entity" means any (i) nation, state, county, city, town,
village, district, or other jurisdiction of any nature; (ii) federal, state,
local, municipal, foreign or other government; (iii) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal); or
(iv) body exercising, or entitled to exercise any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or power of any
nature.
"Hazardous Materials" means all substances defined as hazardous
substances in the National Oil and Hazardous Substances Pollution Contingency
Plan, 40 C.F.R. Section 300.5, or substances defined as hazardous substances,
hazardous materials, toxic substances, hazardous wastes, pollutants or
contaminants, under any Environmental Law, or substances regulated under any
Environmental Law, including, but not limited to, petroleum (including crude oil
or any fraction thereof), asbestos, and polychlorinated biphenyls.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
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"Indemnified Parties" has the meaning assigned thereto in Section 5.9.
"Indemnified Liabilities" has the meaning assigned thereto in Section
5.9.
"Knowledge" or "knowledge" means, with respect to the Company and/or
any Subsidiary thereof, knowledge of the President, Chief Financial Officer and
any Executive Vice President of the Company after reasonable investigation and
inquiry commensurate with that of a reasonable person holding such a position
with a public company.
"Laws" means any administrative order, constitution, law, ordinance,
principle of common law, rule, regulation, statute, treaty, judgment, decree,
license or permit enacted, promulgated, issued, enforced or entered by any
Governmental Entity.
"Leased Properties" means all real property and interests in real
property leased by the Company or one of its Subsidiaries.
"Licenses" has the meaning assigned thereto in Section 3.14 hereof.
"Lien" means any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, lien, mortgage, pledge,
reservation, restriction, security interest, title retention or other security
arrangement, or any adverse right or interest, charge or claim of any nature
whatsoever of, on, or with respect to any asset, property or property interest.
"Lucasfilm Ltd. Warrants" has the meaning assigned thereto in Section
3.3.
"Lucas Licensing Ltd. Warrants" has the meaning assigned thereto in
Section 3.3.
"Material Adverse Change" or "Material Adverse Effect" means, when used
in connection with the Company or Parent, any change or effect (or any
development that, insofar as can reasonably be foreseen, is likely to result in
any change or effect) that is materially adverse to the business, properties,
assets, financial condition or results of operations of such party and its
Subsidiaries taken as a whole (except for any such change or effect that (i) is
caused by or otherwise results from conditions affecting the United States or
world economy as a whole, (ii) is caused by or otherwise results from changes
in general political or regulatory conditions in the United
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States or any foreign jurisdiction in which the Company conducts business, (iii)
affects generally the industry in which the Company competes or (iv) arises as a
result of the announcement or pendency of the Offer or the Merger).
"Merger" has the meaning assigned thereto in Section 1.5.
"Merger Consideration" has the meaning assigned thereto in Section 2.1.
"Minimum Condition" has the meaning assigned thereto in Annex A.
"Occurrence" means any accident, happening or event which is caused or
allegedly caused by any alleged hazard or alleged defect in manufacture, design,
materials or workmanship including, without limitation, any alleged failure to
warn or any breach of express or implied warranties or representations with
respect to, or any such accident, happening or event otherwise involving, a
product (including any parts or components) which results or is alleged to have
resulted in injury or death to any person or damage to or destruction of
property, or other consequential damages, at any time.
"Offer" has the meaning assigned thereto in Section 1.1.
"Offer Documents" has the meaning assigned thereto in Section 1.3.
"Offer Price" has the meaning assigned thereto in Section 1.1.
"Offer to Purchase" has the meaning assigned thereto in Section 1.1.
"Option Plans" has the meaning assigned thereto in Section 2.4.
"Option" has the meaning assigned thereto in Section 2.4.
"Other Intellectual Property" shall mean all intellectual property
rights used in the business of the Company or any of its Subsidiaries as
currently conducted, including but not limited to all patents and patent
applications; copyrights, copyright registrations and applications (including
copyrights in Computer Programs); Computer Programs; technology, trade secrets,
know-how, confidential information, proprietary processes and formulae;
"semiconductor chip product" and "mask works" (as such terms are defined in 17
U.S.C. 901); and rights of publicity and privacy relating to the use of the
names, signatures, likenesses, voices and biographical
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information of real persons; together with any and all rights of renewal thereof
and the right to sue for past, present or future infringements or
misappropriations thereof.
"Paying Agent" has the meaning assigned thereto in Section 2.2.
"Parent" means Hasbro, Inc., a Rhode Island Corporation.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permit" means any Federal, state, local and foreign governmental
approval, authorization, certificate, filing, franchise, license, notice, permit
or right.
"Person" means an individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, labor union,
estate, trust, unincorporated organization or other entity, including any
Governmental Entity.
"Preferred Shares" has the meaning assigned thereto in Section 3.3.
"Preferred Stock Purchase Rights" shall mean the preferred stock
purchase rights issued pursuant to the Company Rights Agreement.
"Product" means any product designed, manufactured, shipped, sold,
marketed, distributed and/or otherwise introduced into the stream of commerce
by or on behalf of the Company or any of its past or present Subsidiaries.
"Proxy Statement" has the meaning assigned thereto in Section 5.3.
"Purchaser" means New HIAC II Corp., a Delaware corporation.
"Real Property" means the Leased Properties and the Fee Properties.
"Recalls" has the meaning assigned thereto in Section 3.18
"Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment (including, without limitation,
ambient air, surface water, groundwater, and surface or subsurface strata) or
into or out of any property of any Hazardous Material, including the movement of
Hazardous Materials through or in the air, soil, surface water, groundwater or
property.
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"Representative" means, with respect to any Person, such Person's
officers, directors, employees, agents and representatives (including any
investment banker, financial advisor, accountant, legal counsel, agent,
representative or expert retained by or acting on behalf of such Person or its
Subsidiaries).
"Schedule 14D-1" has the meaning assigned thereto in Section 1.3.
"Schedule 14D-9" has the meaning assigned thereto in Section 1.3.
"SEC" means the United States Securities and Exchange Commission or any
successor agency.
"SEC Documents" means reports, proxy statements, forms, and other
documents required to be filed with the SEC under the Securities Act and the
Exchange Act, including any schedules and exhibits thereto.
"Secretary of State" has the meaning assigned thereto in Section 1.6.
"Section 203 Approval" has the meaning assigned thereto in Section 1.2.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Shares" has the meaning assigned thereto in Section
3.3.
"Shares" has the meaning assigned thereto in the recitals.
"Significant Subsidiaries" has the meaning assigned thereto in Rule
1-02 of Regulation S-X of the SEC.
"Special Meeting" has the meaning assigned thereto in Section 5.3.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, joint venture or other entity, whether incorporated or
unincorporated, of which such Person or any other Subsidiary of such Person (i)
owns, directly or indirectly, 50% or more of the outstanding voting securities
or equity interests, (ii) is entitled to elect at least a majority of the Board
of Directors or similar governing body, or (iii) is a general partner (excluding
such partnerships where such Person or any Subsidiary of such Person do not have
a majority of the voting interests in such partnership).
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"Superior Proposal" means an unsolicited Takeover Proposal on terms
which the Board of Directors of the Company determines in good faith to be more
favorable to the Company's stockholders than the Offer and the Merger (based on
advice of the Company's independent financial advisor that the value of the
consideration provided for in such proposal is superior to the value of the
consideration provided for in the Offer and the Merger), for which financing, to
the extent required, is then committed or which, in the good faith reasonable
judgment of the Board of Directors of the Company, based on advice from the
Company's independent financial advisor, is reasonably capable of being financed
by such Third Party and which, in the good faith reasonable judgment of the
Board of Directors of the Company, is reasonably likely to be consummated within
a period of time not materially longer in duration that the period of time
reasonably believed to be necessary to consummate the Offer and the Merger.
"Surviving Corporation" has the meaning assigned thereto in Section
1.5.
"Takeover Proposal" means any bona fide proposal or offer, whether in
writing or otherwise, from any Person other than Parent, Purchaser or any
affiliates thereof (a "Third Party") to acquire beneficial ownership (as defined
under Rule 13(d) of the Exchange Act) of all or a material portion of the assets
of the Company and its Subsidiaries on a consolidated basis or 30% or more of
any class of equity securities of the Company pursuant to a merger,
consolidation or other business combination, sale of shares of capital stock,
sale of assets, tender offer, exchange offer or similar transaction with respect
to the Company including any single or related multi-step transaction or series
of related transactions, which is structured to permit such Third Party to
acquire beneficial ownership of any material portion of the assets of or 30% or
more of the equity interest in the Company.
"Tax" or "Taxes" mean all taxes, charges, fees, levies, penalties or
other assessments imposed by any federal, state, local or foreign Taxing
Authority including but not limited to net income, gross income, receipts,
windfall profit, severance, property, production, sales, use, license, excise,
franchise, employment, payroll, withholding, alternative or add-on minimum, ad
valorem, transfer, stamp or environmental tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, addition to tax or additional amount
imposed by any Governmental Entity.
"Taxing Authority" shall mean a governmental authority or any
subdivision, agency, commission or authority thereof, any judicial body, or any
quasi-governmen-
67
<PAGE> 69
tal or private body having jurisdiction over the assessment, determination,
collection or imposition of any Tax (including, without limitation, the Internal
Revenue Service).
"Tax Returns" mean all returns, reports, or statements required to be
filed with any Governmental Entity with respect to any Tax (including any
attachments thereto), including, without limitation, any consolidated, unitary
or similar return, information return, claim for refund, amended return or
declaration of estimated Tax.
"Termination Fee" has the meaning assigned thereto in Section 8.1.
"Third Party" has the meaning assigned thereto in this Section 8.14
under "Takeover Proposal."
"Trademarks" shall mean all United States and foreign trademarks
(including service marks and trade names, whether registered or at common law),
registrations and applications therefor, owned or licensed by the Company or its
Subsidiaries, and the goodwill of the Company's and each of its Subsidiaries'
respective businesses associated therewith, together with any and all (i) rights
of renewal thereof and (ii) rights to sue for past, present and future
infringements or misappropriation thereof.
"Transactions" has the meaning assigned thereto in Section 1.2.
"Transfer Taxes" has the meaning assigned thereto in Section 5.7.
"Warrants" means collectively the Lucasfilm Ltd. Warrants and the Lucas
Licensing Ltd. Warrants.
68
<PAGE> 70
IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
HASBRO, INC.
By: /s/ Alfred J. Verrecchia
______________________________________________
Name: Alfred J. Verrecchia
Title: Executive Vice President and President
- Global Operations
NEW HIAC II CORP.
By: /s/ Alfred J. Verrecchia
______________________________________________
Name: Alfred J. Verrecchia
Title: Executive Vice President and President
- Global Operations
GALOOB TOYS, INC.
By: /s/ Mark D. Goldman
______________________________________________
Name: Mark D. Goldman
Title: President and Chief Executive Officer
<PAGE> 1
EXHIBIT C
Galoob Toys, Inc.
500 Forbes Boulevard
South San Francisco, California 94080
April 2, 1998
Hasbro, Inc.
1027 Newport Avenue
Pawtucket, RI 02861
Attention: Alfred J. Verrecchia
Executive Vice President and
President, Global Operations
Dear Mr. Verrecchia:
In connection with your analysis of a possible negotiated transaction
(the "Transaction") with or involving Galoob Toys, Inc. (the "Company"), you
have requested and may from time to time receive oral and/or written information
concerning the Company, from officers, directors, employees and/or agents of the
Company (collectively, the "Evaluation Material"), which the Company views as
containing confidential and/or proprietary information regarding the Company. In
consideration of furnishing you (whether prior to or after the date hereof) with
the Evaluation Material, you and the Company hereby agree as follows (it being
understood that you are also agreeing to cause your affiliates to comply with
the provisions hereof):
(1) All Evaluation Material heretofore or hereafter furnished to
you by or on behalf of the Company shall be deemed
confidential and shall be kept in strict confidence in
accordance with the terms hereof and under appropriate
safeguards. The Evaluation Material is to be used solely for
the purpose of evaluating a possible transaction between the
Company and you, and the Evaluation Material will be kept
confidential by you, except that you may disclose the
Evaluation Material or portions thereof to those of your
directors, officers and employees and representatives of your
advisors (the category of persons to whom the disclosure is
permissible being collectively called "Representatives") who
need to know the information (it being understood that those
Representatives will be informed of the confidential nature of
the Evaluation Material and
<PAGE> 2
Alfred J. Verrecchia
April 2, 1998
Page 2
will agree to be bound by this agreement as if a party hereto
and not to disclose the Evaluation Material to any other
individual). You agree to be responsible for any breach of
this agreement by your Representatives. In the event that you
or any of your Representatives become legally compelled (by
deposition, interrogatory, request for documents, subpoena,
civil investigative demand or similar process) to disclose any
of the Evaluation Material, you shall provide the Company with
prompt prior notice of the requirement (by written notice to
the Company delivered to the address set forth above and to
the attention of the General Counsel) so that the Company may
seek (with your cooperation, if so requested by the Company) a
protective order or other appropriate remedy. In the event
that the protective order or other remedy is not obtained, you
agree to furnish only that portion of the Evaluation Material
that is legally required. In any event, neither you nor any of
your Representatives will oppose action by the Company to
obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the
Evaluation Material.
(2) The term "Evaluation Material" does not include any
information that (i) at the time of disclosure or thereafter
is generally available to and known by the public (other than
as a result of a disclosure directly or indirectly by you or
your Representatives), (ii) was available to you on a
nonconfidential basis from a source other than the Company or
its advisors, provided that the source is not known to you
(after reasonable inquiry) to be bound by a confidentiality
agreement with the Company or another party, or otherwise
prohibited from transmitting the information by a contractual,
legal or fiduciary obligation to the Company or another party,
(iii) has been independently acquired or developed by you
without violating any of your obligations under this
agreement, or (iv) is disclosed by the Company to others on an
unrestricted and non-confidential basis.
<PAGE> 3
Alfred J. Verrecchia
April 2, 1998
Page 3
(3) If a Transaction with the Company is not consummated by you or
if the Company so requests, you promptly will return to the
Company all copies of the Evaluation Material in your
possession or in the possession of your Representatives, and
you will destroy all copies, notes or extracts thereof, and
all copies of any analyses, compilations, studies or other
documents (whether in written form or contained in database or
other similar form) prepared by you or for your use containing
or reflecting any Evaluation Material. If requested by the
Company this destruction shall be confirmed in writing by you
and your Representatives to the Company. Notwithstanding the
return or destruction of the Evaluation Material and the other
documents, you and your Representatives shall continue to be
bound by your obligations hereunder.
(4) You and the Company agree that, without the prior written
consent of the other, you and the Company will not, and will
direct your and its Representatives not to, disclose to any
person (i) the fact that we have provided Evaluation Material
to you, (ii) that discussions have taken or are taking place
between us concerning the Transaction or disclose the status,
terms, conditions or other facts concerning such discussions,
or (iii) otherwise identify the other by name or by
identifiable description to any other person in connection
with your or our participation in such discussions, provided,
however, that such disclosures may be made if a party has
received the opinion of counsel that such disclosure is
required by applicable law or stock exchange rules, (and then
only subject to and in accordance with the terms of paragraph
1 hereof). The term "person" as used in this agreement will be
interpreted broadly to include, without limitation, the
media and any corporation, company, partnership or individual.
Notwithstanding the foregoing: (x) the Company shall have the
right to advise Lucasfilm Ltd. and its subsidiaries,
affiliates and related entities ("Lucas") or its
representatives that the Company has been contacted by you
regarding a possible Transaction, in which event the Company
will promptly notify
<PAGE> 4
Alfred J. Verrecchia
April 2, 1998
Page 4
you that Lucas has been so advised; and (y) within five
business days after the execution and delivery of this
Agreement, you and the Company shall jointly advise Lucas that
we have entered into a Confidentiality Agreement, after which
either of us shall be permitted to discuss the information in
this paragraph or in the Evaluation Material relating to Lucas
with Lucas or its representatives provided, however, that (a)
you shall not disclose the terms or provisions of this
Confidentiality Agreement to Lucas without the prior written
consent of the Company and (b) within five business days upon
reaching an agreement or understanding with Lucas relating to
its approval or consent in connection with a Transaction, you
will either terminate discussions with the Company by written
notice to the Company or disclose to the Company the complete
terms of any such agreement or understanding and any
modifications of existing terms under licenses with Lucas.
Except to the extent required by law, the Company will hold in
strict confidence and will not disclose any information with
respect to your agreement with Lucas to any third party.
(5) (a) Subject to subparagraph 5(b) below, during the period from
the date hereof through December 31, 1999, you agree that you
shall not, and you will ensure that your affiliates, and any
person acting on behalf of or in concert with you or any of
your affiliates shall not, without the prior written approval
of the Board of Directors of the Company, (i) in any manner
acquire, agree to acquire or make any proposal to acquire,
directly or indirectly, any securities or property of the
Company or any of its subsidiaries, (ii) propose to enter
into, directly or indirectly, any merger or business
combination involving the Company or any of its subsidiaries
or to purchase, directly or indirectly, a material portion of
the assets of the Company or any of its subsidiaries, other
than a confidential proposal made to the Board of Directors of
the Company without any public disclosure thereof by you (iii)
make, or in any way participate, directly or indirectly, in
any "solicitations" of "proxies" (as such terms are used in
the proxy rules of the Securities and
<PAGE> 5
Alfred J. Verrecchia
April 2, 1998
Page 5
Exchange Commission) to vote, or seek to advise or influence
any person with respect to the voting of any securities of the
Company or any of its subsidiaries, (iv) form, join or in any
way participate in a "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934) with respect
to any securities of the Company or any of its subsidiaries,
(v) otherwise act, alone or in concert with others, to seek to
control or influence the management, Board of Directors or
policies of the Company, (vi) disclose any intention, plan or
arrangement inconsistent with the foregoing or (vii) advise,
assist or encourage any other persons in connection with any
of the foregoing. Subject to subparagraph 5(b) below, you also
agree during such period not to (i) request the Company (or
its directors, officers, employees or agents), directly or
indirectly, to amend or waive any provisions of this paragraph
(including this sentence) or (ii) take any action which might
require the Company to make a public announcement regarding
any of the matters specified in this paragraph. You will
promptly advise the Company of any inquiry or proposal made to
you with respect to any of the foregoing.
(b) The restrictions contained in subparagraph 5(a) above
shall not apply to you in the event that either or both of the
following events shall occur: (i) a tender offer or exchange
offer is commenced by another party for a majority of the
outstanding common stock of the Company or (ii) a definitive
agreement is entered into by the Company providing for the
merger of the Company or the sale of more than 50% of the
assets or securities of the Company or for any similar
business combination involving the Company.
(6) For a period of one year from the date hereof, you agree that
neither you nor any of your subsidiaries will directly or
indirectly solicit to employ any of the officers or employees
of the Company. The parties agree that this restriction shall
not apply to (i) any solicitation directed at the public in
general by you in publications available to the public in
general, whether or not
<PAGE> 6
Alfred J. Verrecchia
April 2, 1998
Page 6
the individuals responding to such general solicitations were
also individuals that you may have been acquainted with during
the course of the anticipated negotiations, or (ii) your
employment of the Company's employees not involving any
initial solicitation by you.
(7) You understand and acknowledge that the Company is not making
any representation or warranty, express or implied, as to the
accuracy or completeness of the Evaluation Material, and
neither the Company nor any of its officers, directors,
employees, stockholders, owners, affiliates or agents will
have any liability to you or any other person resulting from
your use of the Evaluation Material. Only those particular
representations or warranties that are made to you in a
definitive Transaction Agreement (as defined in paragraph 9
below) when, as, and if it is executed, and subject to the
limitations and restrictions as may be specified in the
Transaction Agreement, will have any legal effect.
(8) You acknowledge that you (i) are aware that the United States
federal securities laws prohibit any person who has material
non-public information about a company which is obtained from
the company or its representatives from purchasing or selling
any securities of that company or communicating the
information to any person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase
or sell any of those securities, unless the counterparty in
such purchase or sale also has such information or such
information is generally available to the market, and (ii) are
familiar with the United States Securities Exchange Act of
1934 (the "Exchange Act") and the rules and regulations
promulgated thereunder, and agree that you will not use, or
communicate to any person under circumstances where it is
reasonably likely that such person is likely to use or cause
any person to use, any Evaluation Material in contravention of
the Exchange Act or any of its rules and regulations,
including Rules 10b-5 and 14e-3. In connection with the
foregoing, the Company hereby agrees and acknowledges that you
shall be permitted to
<PAGE> 7
Alfred J. Verrecchia
April 2, 1998
Page 7
disclose publicly any information (including any information
which is otherwise confidential hereunder) which you believe,
after receipt of advice of counsel, must be disclosed in order
to comply with the Exchange Act and such other securities laws
as may be applicable in order to permit you to purchase or
offer to purchase any securities of the Company at any time
when you are not precluded from doing so under paragraph 5
hereof.
(9) You and the Company also understand and agree that this
agreement pertains only to the confidentiality of Evaluation
Material and the related matters expressly stated herein and
that no contract or agreement with respect to any possible
Transaction shall be deemed to exist between you and the
Company and/or the owners or stockholders of the Company
unless and until a definitive agreement has been executed and
delivered by you and the Company as shall be mutually agreed
to by the parties thereto (a "Transaction Agreement"). For
purposes of this paragraph, the term "Transaction Agreement"
shall not include an executed letter of intent or any other
preliminary written agreement, nor does it include any verbal
acceptance of an offer or bid.
(10) You agree that the Company shall be entitled to equitable
relief, including injunction and specific performance, in the
event of any breach or threatened breach of the provisions of
this agreement, in addition to all other remedies available to
the Company at law or in equity. You also hereby irrevocably
and unconditionally consent to submit to the exclusive
jurisdiction of the courts of the State of New York and of the
United States located in the City of New York for any actions,
suits or proceedings arising out of or relating to this
agreement and the transactions contemplated hereby (and you
agree not to commence any action, suit or proceeding relating
thereto except in those courts), and further agree that
service of any process, summons, notice or document by United
States registered mail, return receipt requested, to your
address set forth above shall be effective service of process,
summons,
<PAGE> 8
Alfred J. Verrecchia
April 2, 1998
Page 8
notice or document for or in any action, suit or proceeding
brought against you in any of those courts. You hereby
irrevocably and unconditionally waive any objection to the
laying of venue of any action, suit or proceeding arising out
of this agreement or the transactions contemplated hereby, in
the courts of the State of New York or the United States
located in the City of New York, and hereby further
irrevocably and unconditionally waive and agree not to plead
or claim in that court that any action, suit or proceeding
brought in that court has been brought in an inconvenient
forum.
(11) It is further understood and agreed that no failure or delay
by the Company in exercising any right, power or privilege
hereunder will operate as a waiver thereof, nor will any
single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power
or privilege hereunder.
This letter agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This agreement contains, and is intended as, a complete
statement of all of the terms of the arrangements among the parties with respect
to the matters provided for and supersedes any previous agreements and
understandings among the parties with respect to those matters.
This agreement will be governed by and construed in accordance
with the laws of the State of New York, without giving effect to the principles,
policies or provisions thereof concerning conflict or choice of law.
<PAGE> 9
Alfred J. Verrecchia
April 2, 1998
Page 9
If you agree with the foregoing, please sign and return two
copies of this letter, which will constitute our agreement with respect to the
subject matter of this letter.
Very truly yours,
GALOOB TOYS, INC.
By: /s/ William G. Catron
-------------------------------
Name: William G. Catron
Title: Executive Vice President
CONFIRMED AND AGREED
HASBRO, INC.
By: /s/ Alfred J. Verrecchia
-------------------------------
Name: Alfred J. Verrecchia
Title: Executive Vice President
<PAGE> 10
Hasbro, Inc.
1027 Newport Avenue
Pawtucket, RI 02862
June 23, 1998
Galoob Toys, Inc.
500 Forbes Boulevard
South San Francisco, CA 94080
Attention: Mark N. Goldman
President and Chief Executive Officer
Dear Mr. Goldman:
Reference is made to our letter agreement dated April 2, 1998.
The proviso in the third sentence of paragraph 4 of the letter agreement shall
be amended to read as follows:
provided, however, that within five business days upon reaching an
agreement or understanding with Lucas relating to its approval or
consent in connection with a Transaction, you will either terminate
discussions with the Company by written notice to the Company or
disclose to the Company the existence of such agreement or
understanding, but you shall not be required to disclose any terms of
any such agreement or understanding with Lucas or any modifications of
existing terms under licenses with Lucas unless and until you and the
Company have executed a definitive agreement providing for your
acquisition of the Company, which definitive agreement may not be
conditioned or terminable in any respect based upon the Company's
satisfaction with your agreement with Lucas.
The letter, dated June 18, 1998, which amended the proviso in the third sentence
of paragraph 4 of the letter agreement, is hereby superceded and shall be of no
force and effect. All other terms of the letter agreement shall remain in full
force and effect.
<PAGE> 11
If you agree with the foregoing, please sign and return two
copies of this letter, which together with the letter agreement, will constitute
our complete agreement with respect to the subject matter hereof.
Very truly yours,
HASBRO, INC.
By: /s/ Alfred J. Verracchia
-------------------------------
Name: Alfred J. Verracchia
Title: Executive Vice President
CONFIRMED AND AGREED
GALOOB TOYS, INC.
By: /s/ Mark D. Goldman
-------------------------------
Name: Mark D. Goldman
Title: President and
Chief Executive Officer
2
