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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): NOVEMBER 25, 1997
CRUISE AMERICA, INC.
(Exact name of registrant as specified in its charter)
FLORIDA
(State or other jurisdiction of incorporation)
1-9471 59-1403609
(Commission File Number) (I.R.S. Employer Identification No.)
11 WEST HAMPTON AVENUE
MESA, ARIZONA 85210
(Address of principal executive offices) (Zip Code)
(602) 464-7300
(Registrant's telephone number, including area code)
(NOT APPLICABLE)
(Former name or former address, if changed since last report)
Page 1 of 4 Pages
Exhibit Index at Page 3
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ITEM 5. OTHER EVENTS.
On November 25, 1997, Cruise America, Inc., a Florida
corporation ("Cruise America"), Budget Group, Inc., a Delaware
corporation ("Budget"), and CA Acquisition Corporation, a newly formed
Florida corporation and wholly owned subsidiary of Budget ("Sub"),
entered into a Plan and Agreement of Merger dated as of November 25,
1997 (the "Merger Agreement"), pursuant to which Sub will merge with
and into Cruise America (the "Merger"), with Cruise America thereafter
becoming a wholly owned subsidiary of Budget.
Pursuant to the terms of the Merger Agreement, each share of
Cruise America common stock, $.01 par value per share (the "Cruise
America Common Stock"), outstanding immediately prior to the effective
time (the "Effective Time") of the Merger will be converted into the
right to receive .28073 of a share of Budget's Class A common stock,
$.01 par value per share (the "Budget Common Stock").
Each holder of Cruise America Common Stock who would otherwise
be entitled to receive a fractional share of Budget Common Stock (after
taking into account all of a holder's certificates representing shares
of Cruise America Common Stock) will be entitled to receive cash,
without interest, in lieu thereof.
It is intended that the Merger will qualify as a tax-free
reorganization under 368(a) of the Internal Revenue Code of 1986, as
amended, for federal income tax purposes.
Consummation of the Merger is subject to various conditions,
including: (i) receipt of the approval of the holders of a majority of
the outstanding shares of Cruise America Common Stock; (ii) expiration
or early termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended; (iii) receipt of
certain tax and legal opinions; and (iv) listing, subject to notice of
issuance, on the New York Stock Exchange of the shares of Budget Common
Stock to be issued in the Merger.
The Merger Agreement and the Merger will be submitted for
approval at a special meeting of the shareholders (the "Special
Meeting") of Cruise America. Prior thereto, Budget will file a
registration statement (including a prospectus that will serve as a
proxy statement for the Special Meeting) with the Securities and
Exchange Commission to register under the Securities Act of 1933, as
amended, the shares of Budget Common Stock to be issued to Cruise
America's shareholders in connection with the Merger.
In connection with the Merger Agreement, certain of Cruise
America's shareholders, namely, Robert A. Smalley (Chairman of the
Board of Cruise America), Randall S. Smalley (President and Chief
Executive Officer of Cruise America), Robert A. Smalley, Jr. (Executive
Vice President and Chief Operating Officer of Cruise America), and
Sally Smalley DiLucente, who beneficially own or control in the
aggregate approximately 29% of the outstanding shares of Cruise America
Common Stock, have
Page 2 of 4 Pages
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executed Irrevocable Proxy Agreements (the "Irrevocable Proxy
Agreements") appointing Budget, with full power of substitution, as
proxy holder to represent their shares at the Special Meeting and to
vote in favor of approval of the Merger.
In connection with the execution of the Merger Agreement and
the Irrevocable Proxy Agreements, Cruise America amended the Rights
Agreement, dated as of March 8, 1989 (as amended, the "Rights
Agreement"), between Cruise America and ChaseMellon Shareholder
Services, LLC (formerly Mellon Securities Trust Company), as rights
agent, so that: (i) execution of such agreements and consummation of
the Merger and the other transactions contemplated thereby did not and
will not cause the Rights (as such term is defined in the Rights
Agreement) to be triggered or become exercisable; and (ii) the Rights
Agreement will terminate at the Effective Time.
The foregoing summary of the Merger is qualified in its
entirety by reference to the text of the Merger Agreement, Amendment
No. 1 to the Rights Agreement and Budget's Press Release dated November
25, 1997, which are attached hereto as Exhibit 2.1, 4.1 and 99.1,
respectively, and are incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits
The following Exhibits are provided in accordance with the
provisions of Item 601 of Regulation S-K and are filed herewith unless
otherwise noted.
EXHIBIT INDEX
2.1 Plan and Agreement of Merger dated as of November 25, 1997,
among Budget Group, Inc., CA Acquisition Corporation and Cruise America,
Inc.
4.1 Form of Amendment No. 1 to Rights Agreement dated as of March 8,
1989 between Cruise America, Inc. and ChaseMellon Shareholder Services,
LLC (formerly Mellon Securities Trust Company).
99.1 Press Release of Budget Group, Inc. dated November 25, 1997.
Page 3 of 4 Pages
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CRUISE AMERICA, INC.
Date: December 5, 1997 By: /s/ ERIC R. BENSEN
-------------------------------
Eric R. Bensen
Chief Financial Officer
Page 4 of 4 Pages
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EXHIBIT 2.1
- --------------------------------------------------------------------------------
PLAN AND AGREEMENT OF MERGER
AMONG
BUDGET GROUP, INC.,
CA ACQUISITION CORPORATION
AND
CRUISE AMERICA, INC.
- --------------------------------------------------------------------------------
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NOVEMBER 25, 1997
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TABLE OF CONTENTS
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ARTICLE 1 PLAN OF MERGER..................................................................................2
1.1 The Merger...................................................................................2
1.2 Conversion of Shares.........................................................................2
1.3 Exchange of Certificates.....................................................................3
1.4 Dividends....................................................................................4
1.5 Escheat Laws.................................................................................5
1.6 Closing of Company Transfer Books............................................................5
ARTICLE 2 CLOSING.........................................................................................5
2.1 Time and Place of Closing....................................................................5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF COMPANY.......................................................6
3.1 Disclosure Letter; Material Adverse Effect on Company........................................6
3.2 Organization, Good Standing and Power........................................................6
3.3 Capitalization...............................................................................7
3.4 Company Subsidiaries; Voting Trusts..........................................................7
3.5 Authority; Enforceability....................................................................8
3.6 Non-Contravention; Consents..................................................................8
3.7 SEC Reports; Company Financial Statements....................................................9
3.8 Absence of Certain Changes...................................................................9
3.9 Tax Matters.................................................................................11
3.10 Litigation..................................................................................12
3.11 Material Contracts..........................................................................12
3.12 Registration Statement, Etc.................................................................14
3.13 Employee Benefit Plans......................................................................14
3.14 Property....................................................................................15
3.15 Trademarks, Etc.............................................................................17
3.16 Labor Relations.............................................................................17
3.17 No Violation of Law.........................................................................19
3.18 Environmental Matters.......................................................................19
3.19 Insurance Policies..........................................................................21
3.20 Major Suppliers; Tour Organizers and Travel Arrangers.......................................21
3.21 Notes and Accounts Receivable...............................................................22
3.22 Transactions with Affiliates................................................................23
3.23 Fairness Opinion............................................................................23
3.24 Antitakover Statutes........................................................................23
3.25 Board Recommendations.......................................................................23
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3.26 Amendment to Rights Plan....................................................................23
3.27 Brokers and Finders.........................................................................24
3.28 Merger......................................................................................24
3.29 Pooling.....................................................................................24
3.30 Voting Requirements; Dissenters' Rights.....................................................24
3.31 No Existing Discussions.....................................................................24
3.32 Disclosure..................................................................................24
3.33 No Aggregate Material Adverse Effect........................................................24
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT.......................................................25
4.1 Organization, Good Standing and Power.......................................................25
4.2 Capitalization..............................................................................25
4.3 Authority; Enforceability...................................................................25
4.4 Non-Contravention; Consents.................................................................26
4.5 SEC Reports; Parent Financial Statements....................................................26
4.6 Absence of Certain Changes or Events........................................................27
4.7 Registration Statement, Etc.................................................................27
4.8 Litigation..................................................................................28
4.9 No Violation of Law.........................................................................28
4.10 Brokers and Finders.........................................................................28
4.11 Merger......................................................................................29
4.12 Pooling.....................................................................................29
ARTICLE 5 CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; CERTAIN .....................................29
5.1 Access and Information......................................................................29
5.2 Conduct of Business Pending Merger..........................................................29
5.3 Fiduciary Duties............................................................................33
5.4 Certain Fees................................................................................33
5.5 Takeover Statutes...........................................................................34
5.6 Consents....................................................................................35
5.7 Reasonable Efforts; Further Assurances; Cooperation.........................................35
5.8 NYSE Listing................................................................................36
5.9 Notice......................................................................................36
5.10 Registration Statement; Stockholder Approvals...............................................36
5.11 Expenses....................................................................................37
5.12 Press Releases; Filings.....................................................................37
5.13 Indemnification of Officers and Directors...................................................37
5.14 Tax Treatment...............................................................................38
5.15 Stock Options...............................................................................38
5.16 Company Affiliates..........................................................................39
5.17 Employment Agreements.......................................................................39
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5.18 Company Expenses............................................................................39
5.19 Pooling of Interest Accounting..............................................................40
5.20 Treatment of Warrants.......................................................................40
ARTICLE 6 CONDITIONS PRECEDENT TO MERGER.................................................................40
6.1 Conditions to Each Party's Obligations......................................................40
6.2 Conditions to Obligations of Company........................................................41
6.3 Conditions to Obligations of Parent.........................................................42
ARTICLE 7 TERMINATION AND ABANDONMENT OF THE MERGER......................................................43
7.1 Termination.................................................................................43
7.2 Specific Performance and Other Remedies.....................................................45
7.3 Effect of Termination and Abandonment.......................................................45
ARTICLE 8 MISCELLANEOUS..................................................................................45
8.1 Waiver and Amendment........................................................................45
8.2 Non-Survival of Representations, Warranties and Agreements..................................46
8.3 Notices.....................................................................................46
8.4 Descriptive Headings; Interpretation........................................................47
8.5 Counterparts................................................................................47
8.6 Entire Agreement............................................................................47
8.7 GOVERNING LAW...............................................................................47
8.8 Severability................................................................................47
8.9 Knowledge...................................................................................48
8.10 Assignment..................................................................................48
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PLAN AND AGREEMENT OF MERGER
PLAN AND AGREEMENT OF MERGER (this "Agreement"), dated as of November
25, 1997, among BUDGET GROUP, INC., a Delaware corporation ("Parent"), CA
ACQUISITION CORPORATION, a Florida corporation and direct or indirect wholly
owned subsidiary of Parent ("Sub"), and CRUISE AMERICA, INC., a Florida
corporation ("Company").
WHEREAS, Parent has formed Sub as a direct or indirect wholly owned
subsidiary corporation under the Florida Business Corporation Act (the "FBCA")
for the purpose of Sub merging with and into Company pursuant to the applicable
provisions of the FBCA (the "Merger") so that Company will continue as the
surviving corporation of the Merger and will become a direct or indirect wholly
owned subsidiary of Parent;
WHEREAS, the respective Boards of Directors of Company, Parent and Sub
have approved and declared advisable the Merger, the terms and provisions of
this Agreement and the transactions contemplated hereby and the Board of
Directors of Company has recommended that the stockholders of Company approve
the Merger upon the terms of this Agreement;
WHEREAS, the respective Boards of Directors of Parent and Company have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is fair to and in the best
interests of their respective stockholders;
WHEREAS, concurrently with the execution and delivery of this
Agreement, each of Robert A. Smalley, Randall S. Smalley, Robert A. Smalley, Jr.
and Sally Smalley DiLucente (collectively, the "Identified Shareholders") has
duly executed and delivered to Parent an irrevocable proxy agreement in the form
attached hereto as Exhibit 1.1 (the "Proxy Agreements");
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code, as amended (the "Code"), and this Agreement is
intended to be and is adopted as a plan of reorganization; and
WHEREAS, the Merger described herein is subject to the approval of the
shareholders of Company and satisfaction of certain other conditions described
in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
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ARTICLE 1
PLAN OF MERGER
1.1 THE MERGER
(a) Upon the terms and subject to the conditions of this
Agreement, at the Effective Time and in accordance with the provisions of this
Agreement and the FBCA, Sub shall be merged with and into Company, which shall
be the surviving corporation (sometimes referred to hereinafter as the
"Surviving Corporation") in the Merger, and the separate corporate existence of
Sub shall cease. Subject to the provisions of this Agreement, articles of merger
(the "Articles of Merger") shall be duly prepared, executed and acknowledged by
Company, on behalf of the Surviving Corporation, and thereafter delivered to the
Secretary of State of the State of Florida for filing as provided in the FBCA on
the Closing Date (as defined in Section 2.1). The Merger shall become effective
immediately upon the filing of the Articles of Merger with the Secretary of
State of the State of Florida or at such time thereafter as is provided in the
Articles of Merger (the "Effective Time").
(b) From and after the Effective Time, the Merger shall have
all the effects set forth in the FBCA. Without limiting the generality of the
foregoing, and subject thereto, by virtue of the Merger and in accordance with
the FBCA, all of the properties, rights, privileges, powers and franchises of
Company and Sub shall vest in the Surviving Corporation and all of the debts,
liabilities and duties of Company and Sub shall become the debts, liabilities
and duties of the Surviving Corporation.
(c) The Articles of Incorporation of Company in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
of the Surviving Corporation until thereafter amended in accordance with the
provisions thereof and the FBCA.
(d) The Bylaws of Company in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until altered,
amended or repealed as provided therein, in the Articles of Incorporation of the
Surviving Corporation and the FBCA.
(e) The officers and directors of Sub immediately prior to the
Effective Time shall be the initial officers and directors of the Surviving
Corporation, in each case until their respective successors are duly elected and
qualified.
1.2 CONVERSION OF SHARES. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder thereof:
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(a) Each share of capital stock of Sub that is issued and
outstanding immediately prior to the Effective Time 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) All shares of common stock, par value $.01 per share, of
Company ("Company Common Stock") or other capital stock of Company that are
owned by Company as treasury stock or by any wholly owned Company Subsidiary (as
defined in Section 3.4) shall be canceled and retired and shall cease to exist
and no stock of Parent or other consideration shall be delivered in exchange
therefor.
(c) Subject to Section 1.3(c), each share of Company Common
Stock that is issued and outstanding immediately prior to the Effective Time
(other than shares to be canceled in accordance with Section 1.2(b)) shall be
converted into a right to receive 0.28073 (the "Exchange Ratio") shares of Class
A Common Stock, par value $.01 per share, of Parent ("Parent Class A Common
Stock"). All such shares of Company Common Stock, when so converted, shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each certificate previously representing any such shares (a
"Certificate") shall thereafter represent the right to receive that number of
shares of Parent Class A Common Stock into which such shares of Company Common
Stock have been converted. Certificates previously representing shares of
Company Common Stock shall be exchanged for certificates representing whole
shares of Parent Class A Common Stock, and cash in lieu of any fractional share,
issued in consideration therefor upon the surrender of such certificates in
accordance with Section 1.3, without interest.
(d) If after the date hereof and prior to the Effective Time,
Parent shall have declared a stock split (including a reverse split) of Parent
Class A Common Stock or a dividend payable in Parent Class A Common Stock or
effected any recapitalization or reclassification of its common stock or any
other similar transaction, then the Exchange Ratio shall be appropriately
adjusted to reflect such stock split, dividend, recapitalization,
reclassification or similar transaction.
1.3 EXCHANGE OF CERTIFICATES
(a) As of the Effective Time, Parent shall deposit with Chase
Mellon Shareholder Services, or such other bank or trust company reasonably
designated by Parent (the "Exchange Agent"), for the benefit of the holders of
shares of Company Common Stock, for exchange in accordance with this Article 1
through the Exchange Agent, certificates representing the shares of Parent Class
A Common Stock (such shares of Parent Class A Common Stock, together with any
dividends or distributions with respect thereto or cash deposited by Parent in
accordance with this Section 1.3, being hereinafter referred to as the "Exchange
Fund") issuable pursuant to Section 1.2 in exchange for outstanding shares of
Company Common Stock, together with cash to be paid in lieu of fractional
shares. The aggregate number of shares of Parent Class A Common Stock which
shall be issuable shall be a number of such shares equal to the Exchange Ratio
multiplied by the total
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number of outstanding shares of Company Common Stock as of the Effective Time,
subject to adjustments for non-issuance of fractional shares as provided herein.
(b) As soon as practicable after the Effective Time, Parent
and the Surviving Corporation shall cause the Exchange Agent to mail to each
holder of record of a Certificate or Certificates (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
Exchange Agent accompanied by a properly executed letter of transmittal and
shall be in such form and have such other provisions as Parent may reasonably
specify), and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent Class A
Common Stock. Upon the surrender to the Exchange Agent of one or more
Certificates for cancellation, together with such letter of transmittal, duly
executed, the holder will be entitled to receive certificates representing that
number of whole shares of Parent Class A Common Stock to be issued in respect of
the aggregate number of such shares of Company Common Stock previously
represented by the stock certificates surrendered based upon the Exchange Ratio
and cash in lieu of fractional shares as provided in Section 1.3(c).
(c) No certificate or scrip representing fractional shares of
Parent Class A Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights as a stockholder of Parent. All fractional
shares of Parent Class A Common Stock that a holder of Company Common Stock
would otherwise be entitled to receive as a result of the Merger shall be
aggregated and if a fractional share results from such aggregation, such holder
shall be entitled to receive, in lieu thereof, an amount in cash determined by
multiplying (i) the Fair Market Value at the Effective Time (as defined below)
of one share of Parent Class A Common Stock, by (ii) the fraction of a share of
Parent Class A Common Stock to which such holder would otherwise have been
entitled. Parent shall timely make available to the Exchange Agent any cash
necessary to make payments in lieu of fractional shares as aforesaid. No such
cash in lieu of fractional shares of Parent Class A Common Stock shall be paid
to any holder of Company Common Stock until Certificates are surrendered and
exchanged in accordance with Section 1.3(a). The term "Fair Market Value at the
Effective Time" of one share of Parent Class A Common Stock shall be the average
of the high and low prices per share of Parent Class A Common Stock on the New
York Stock Exchange ("NYSE") during the 20 trading days immediately preceding
the last business day before the date of the Effective Time.
(d) If a certificate for Parent Class A Common Stock is to be
sent to a person other than the person in whose name the Certificates for shares
of Company Common Stock surrendered for exchange are registered, it shall be a
condition of the exchange that the person requesting such exchange shall pay to
the Exchange Agent any transfer or other taxes required by reason of the
delivery of such Certificate to a person other than the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable.
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(e) The cash paid and shares of Parent Class A Common Stock
issued upon the surrender of Certificates in accordance with the terms hereof
shall be deemed to have been paid and issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock.
1.4 DIVIDENDS. No dividends or other distributions that are declared or
made after the Effective Time with respect to Parent Class A Common Stock
payable to holders of record thereof after the Effective Time shall be paid to a
Company shareholder entitled to receive certificates representing Parent Class A
Common Stock until such shareholder has properly surrendered such shareholder's
Certificates. Upon such surrender, there shall be paid to the shareholder in
whose name the certificates representing such Parent Class A Common Stock shall
be issued any dividends which shall have become payable with respect to such
Parent Class A Common Stock between the Effective Time and the time of such
surrender, without interest. After such surrender, there shall also be paid to
the shareholder in whose name the certificates representing such Parent Class A
Common Stock shall be issued any dividend on such Parent Class A Common Stock
that shall have a record date subsequent to the Effective Time and prior to such
surrender and a payment date after such surrender; provided that such dividend
payments shall be made on such payment dates. In no event shall the shareholders
entitled to receive such dividends be entitled to receive interest on such
dividends. Any portion of the Exchange Fund which remains undistributed to the
shareholders of Company for one year after the Effective Time pursuant to this
Section 1.4 shall be returned by the Exchange Agent to Parent which shall
thereafter act as Exchange Agent, subject to the rights of holders of
unsurrendered Certificates under this Article 1.
1.5 ESCHEAT LAWS. Notwithstanding any other provision of this Article
1, none of Parent, Sub, Company, the Surviving Corporation, the Exchange Agent
or any other party hereto shall be liable to any holder of Company Common Stock
for any Parent Class A Common Stock, or dividends or distributions thereon or
cash in lieu of fractional shares, delivered to a public official pursuant to
any applicable abandoned property, escheat or similar laws.
1.6 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the stock
transfer books of Company shall be closed and no transfer of Company Common
Stock shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall, when accompanied by proper
documentation, be exchanged for Parent Class A Common Stock in the manner
provided in this Article 1.
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ARTICLE 2
CLOSING
2.1 TIME AND PLACE OF CLOSING. Unless otherwise mutually agreed upon in
writing by Parent and Company, the closing of the Merger (the "Closing") will be
held at 10:00 a.m., Eastern time, on the second business day following the date
that all of the conditions precedent specified in this Agreement have been (or
can be at the Closing) satisfied or waived by the party or parties permitted to
do so (such date being referred to hereinafter as the "Closing Date"). The place
of Closing shall be at the offices of King & Spalding, 191 Peachtree Street,
N.E., Atlanta, Georgia 30303, or at such other place as may be agreed between
Parent and Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Parent and Sub as follows:
3.1 DISCLOSURE LETTER; MATERIAL ADVERSE EFFECT ON COMPANY.
(a) Prior to the execution and delivery of this Agreement,
Company and Parent have delivered to each other a letter (the "Disclosure
Letter") setting forth, among other things, items the disclosure of which is
necessary or appropriate either in response to an express disclosure requirement
contained in this Agreement or as an exception to one or more of such party's
representations, warranties or covenants contained in this Agreement.
(b) As used in this Agreement, the phrase "Material Adverse
Effect on Company" means:
(i) as to matters which can reasonably be quantified in
economic terms, any effect or effects which have resulted in or would
reasonably be expected to result in, with respect to Company and the
Company Subsidiaries taken as a whole, a decrease in the value of
assets (net of any corresponding decrease in liabilities), an increase
in liabilities or obligations (net of any corresponding increase in
assets), a decrease in profits or cash flow, an increase in losses or
expenses, an adverse change in the business or financial condition, or
any combination thereof, involving, individually or in the aggregate,
more than $1,250,000;
(ii) as to matters which cannot reasonably be quantified in
economic terms, a material adverse effect on the financial condition,
business, assets, liabilities or results of operations of Company and
the Company Subsidiaries taken as a whole; or
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(iii) a material adverse effect on the ability of Company to
consummate the transactions contemplated by this Agreement.
3.2 ORGANIZATION, GOOD STANDING AND POWER
(a) Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Company has delivered to Parent
complete and correct copies of its Articles of Incorporation and all amendments
thereto to the date hereof and its Bylaws as amended to the date hereof.
(b) Company 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 make such qualification or licensing
necessary, except where the failure to be so qualified or licensed or to be in
good standing does not have and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company.
3.3 CAPITALIZATION. The authorized capital stock of Company consists of
15,000,000 shares of Common Stock, par value $.01 per share, of which as of
November 21, 1997, 5,783,059 shares were issued and outstanding, and 1,000,000
shares of Preferred Stock, par value $1.00 per share, of which as of the date
hereof no shares are issued and outstanding. All outstanding shares of Company
Common Stock are, and all shares which may be issued prior to the Effective Time
pursuant to any outstanding Company Stock Options will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to any
preemptive rights. Except as set forth above, as of November 21, 1997, there
were no shares of capital stock or other equity securities of Company
outstanding, and, except as set forth in Section 3.3 of the Disclosure Letter,
there are no outstanding options, warrants or rights to purchase or acquire from
Company any capital stock of Company, there are no existing registration
covenants with Company with respect to outstanding shares of Company Common
Stock, and there are no convertible securities or other contracts, commitments,
agreements, understandings, arrangements or restrictions by which Company is
bound to issue any additional shares of its capital stock or other securities.
3.4 COMPANY SUBSIDIARIES; VOTING TRUSTS. Section 3.4 of the Disclosure
Letter sets forth a correct and complete list of each corporation, association,
subsidiary, partnership, limited liability company or other entity of which
Company owns or controls, directly or indirectly, 50% or more of the outstanding
equity interests (such entities are hereinafter referred to as "Company
Subsidiaries"). Except as set forth in Section 3.4 of the Disclosure Letter,
there is no corporation, association, subsidiary, partnership, limited liability
company or other entity of which Company owns or controls, directly or
indirectly, more than 20% of the outstanding equity interests. Except as
disclosed in Section 3.4 of the Disclosure Letter, Company owns, directly or
indirectly, all of the equity interests of each Company Subsidiary, free and
clear of all liens, charges, pledges, security
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interests or other encumbrances. All of the capital stock of each Company
Subsidiary has been duly authorized and is validly issued, fully paid and
nonassessable, and not subject to any preemptive rights. There are no
outstanding options or rights to subscribe to, or any contracts or commitments
to issue or sell any shares of the capital stock or other equity interests or
any securities or obligations convertible into or exchangeable for, or giving
any person any right to acquire, any shares of the capital stock or other equity
interests of any Company Subsidiary to which Company or any Company Subsidiary
is a party. There are no voting trusts or other agreements or understandings
with respect to the voting of capital stock or other equity interests of Company
or any Company Subsidiary to which Company or any Company Subsidiary is a party.
Each Company Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and has the
power and authority necessary for it to own or lease its properties and assets
and to carry on its business as it is now being conducted. Each Company
Subsidiary 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,
except where the failure to be so qualified or licensed or to be in good
standing does not have and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company.
3.5 AUTHORITY; ENFORCEABILITY. Company has the corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby, subject to the approval of this Agreement by the
shareholders of Company. Subject to such approval, the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Company,
and this Agreement has been duly executed and delivered by Company and
constitutes the valid and binding obligation of Company, enforceable against it
in accordance with its terms, except as may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to the
enforcement of creditors' rights generally and subject to general principles of
equity.
3.6 NON-CONTRAVENTION; CONSENTS
(a) Except as set forth in Section 3.6(a) of the Disclosure
Letter, neither the execution, delivery and performance by Company of this
Agreement, nor the consummation by Company of the transactions contemplated
hereby, nor compliance by Company with any of the provisions hereof, will:
(i) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, result in the
termination of, accelerate the performance required by, or result in a
right of termination or acceleration, or the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of Company or any Company Subsidiary, under any of the terms,
conditions or provisions of, (x) its Articles of Incorporation or
Bylaws or the governing documents of any Company Subsidiary, or (y) any
note, bond, mortgage, indenture, deed of trust, license, lease,
contract, agreement or other instrument or
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obligation to which Company or any of the Company Subsidiaries is a
party, or by which Company or any of the Company Subsidiaries may be
bound, or to which Company or any of the Company Subsidiaries or the
properties or assets of any of them may be subject and that has or
would reasonably be expected to have, in any such event specified in
this clause (y), individually or in the aggregate, a Material Adverse
Effect on Company; or
(ii) subject to compliance with the statutes and regulations
referred to in Section 3.6(b), violate any valid and enforceable
judgment, ruling, order, writ, injunction, decree, or any statute, rule
or regulation applicable to Company or any of the Company Subsidiaries
or any of their respective properties or assets where such violation
has or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company.
(b) Except as set forth in Section 3.6(b) of the Disclosure
Letter and other than notices, filings, authorizations, exemptions, consents or
approvals, the failure of which to give or obtain does not have and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company, no notice to, filing with, authorization of,
exemption by, or consent or approval of, any governmental authority or other
regulatory body is necessary for the consummation by Company of the transactions
contemplated by this Agreement.
3.7 SEC REPORTS; COMPANY FINANCIAL STATEMENTS
(a) Since May 1, 1995, Company has timely filed all reports,
registration statements, proxy statements or information statements and all
other documents, together with any amendments required to be made thereto,
required to be filed with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933 (the "Securities Act") or the Securities Exchange Act
of 1934 (the "Exchange Act") (collectively, the "Company Reports"). Company has
heretofore made available to Parent true copies of all the Company Reports,
together with all exhibits thereto. Included in such Company Reports are (i)
audited consolidated balance sheets of Company and its subsidiaries at April 30,
1995, 1996 and 1997 and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended, and the notes
thereto and (ii) the unaudited consolidated balance sheet of Company and its
subsidiaries at July 31, 1997 (the "Interim Balance Sheet") and the related
unaudited consolidated statements of income, stockholders' equity and cash flows
for the periods then ended and the notes thereto.
(b) All of the financial statements included in the Company Reports
(which are collectively referred to herein as the "Company Consolidated
Financial Statements") fairly presented the consolidated financial position of
Company and its subsidiaries as of the dates mentioned and the consolidated
results of operations, changes in stockholders' equity and cash flows for the
periods then ended in conformity with generally accepted accounting principles
applied on a consistent basis (subject to any exceptions as to consistency
specified therein or as may be indicated in the notes
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thereto or in the case of the unaudited statements, as may be permitted by Form
10-Q of the SEC and subject, in the case of unaudited statements, to normal,
recurring audit adjustments). The Company Reports complied in all material
respects with all applicable rules and regulations promulgated by the SEC and
taken as a whole did not contain any untrue statement of a material fact or omit
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. Except as set forth in the Company Reports, neither
Company nor any Company Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by
generally accepted accounting principles to be set forth on a consolidated
balance sheet of Company and its consolidated subsidiaries or in the notes
thereto, other than liabilities or obligations which, individually or in the
aggregate, do not have and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company.
3.8 ABSENCE OF CERTAIN CHANGES
(a) Since May 1, 1997, except as set forth in Section 3.8(a)
of the Disclosure Letter, there has not been (i) any adverse change in the
assets (net of any corresponding decrease in liabilities), liabilities (net of
any corresponding increase in assets), results of operations, financial
condition or business of Company or any Company Subsidiary which has or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company (other than operating losses between October 1, 1997
and the Closing Date which are attributable to seasonal changes in the business
of Company and the Company Subsidiaries and which in the aggregate do not exceed
the amounts set forth in Section 3.8(a) of the Disclosure Letter), (ii) any
damage, destruction, loss or casualty to property or assets of Company or any
Company Subsidiary involving amounts in excess of $400,000 in the aggregate not
adequately covered by insurance, which property or assets are material to the
operations or business of Company or any Company Subsidiary, (iii) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) in respect of the capital stock or other equity
interests of Company or any Company Subsidiary, any redemption or other
acquisition by Company or any Company Subsidiary of any of the capital stock or
other equity interests of Company or any Company Subsidiary or any split,
combination or reclassification of shares of capital stock or other equity
interests declared or made by Company or any Company Subsidiary or (iv) any
agreement to do any of the foregoing.
(b) Since May 1, 1997, except as set forth in Section 3.8(b)
of the Disclosure Letter, there have not been in respect of Company or any
Company Subsidiary (i) any extraordinary losses suffered involving amounts in
excess of $200,000 in the aggregate, (ii) any assets with a value in excess of
$200,000 in the aggregate which have been mortgaged, pledged or made subject to
any lien, charge or other encumbrance, except for the incurrence in the ordinary
course of business consistent with past practice of liens on vehicles owned by
Company or any Company Subsidiary, (iii) any material liability or obligation
(absolute, accrued or contingent) incurred or any material bad debt, contingency
or other reserve increase suffered, except, in each such case, in the ordinary
course of business and consistent with past practice, (iv) any claims,
liabilities or obligations (absolute, accrued or contingent) paid, discharged or
satisfied, other than the payment, discharge or
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satisfaction, in the ordinary course of business and consistent with past
practice, of claims, liabilities and obligations reflected or reserved against
in the Company Consolidated Financial Statements or incurred in the ordinary
course of business and consistent with past practice, (v) any material
guaranteed checks, notes or accounts receivable written off as uncollectible,
except write-offs in the ordinary course of business and consistent with past
practice, (vi) any write down (under Statement of Financial Accounting Standards
No. 121 or otherwise) of the value of any asset or investment on Company's books
or records involving amounts in excess of $200,000 in the aggregate, except for
depreciation and amortization taken in the ordinary course of business and
consistent with past practice, (vii) any cancellation of any material debts or
waiver of any material claims or rights of substantial value, or sale, transfer
or other disposition (except for the disposition of vehicles in the ordinary
course of business consistent with past practice) of, any material properties or
assets (real, personal or mixed, tangible or intangible) of substantial value,
except, in each such case, in transactions in the ordinary course of business
and consistent with past practice and which in any event, do not exceed $200,000
individually, (viii) capital expenditures and commitments in the ordinary course
of business in excess of $200,000 individually for additions to property or
equipment, excluding vehicle purchases in the ordinary course of business
consistent with past practice, (ix) any material transactions entered into other
than in the ordinary course of business, or (x) any agreements to do any of the
foregoing.
3.9 TAX MATTERS
(a) For purposes of this Agreement, "Taxes" shall mean all
taxes (including any tax attributable to Company or any Company Subsidiary
ceasing to be a member of an affiliated group as defined in Section 1504(a) of
the Code), assessments, charges, duties, fees, levies or other governmental
charges (including interest, penalties or additions associated therewith)
including federal, state, city, county, foreign or other income, franchise,
capital stock, real property, personal property, tangible, withholding, FICA,
unemployment compensation, disability, transfer, sales, use, excise, gross
receipts and all other taxes of any kind for which Company or any Company
Subsidiary may have any liability imposed by the United States or any state,
county, city, country or foreign government or subdivision or agency thereof,
whether disputed or not.
(b) Except as otherwise disclosed in Section 3.9(b) of the
Disclosure Letter: (i) all returns, including estimated returns and reports of
every kind with respect to Taxes, which are due to have been filed in accordance
with any applicable law, have been duly filed, except where the failure to file
does not have and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Company; (ii) all Taxes, deposits or
other payments for which Company or any Company Subsidiary may have any
liability through the date hereof have been paid in full or are accrued as
liabilities for Taxes on the books and records of Company or the Company
Subsidiaries, as applicable, except for such Taxes as are not required by
generally accepted accounting principles to be accrued or are immaterial in
amount; (iii) there are not now any extensions of time in effect with respect to
the dates on which any returns or reports with respect to any federal Taxes (or
with respect to
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any other Taxes involving amounts in excess of $5,000) were or are due to be
filed; (iv) all deficiencies involving amounts in excess of $5,000 asserted as a
result of any examination of any return or report of Taxes have been paid in
full, or are being contested in good faith with appropriate accruals on the
books of each of Company and the Company Subsidiaries, or are finally settled;
(v) no claims have been asserted and no proposals or deficiencies for any Taxes
involving amounts in excess of $5,000 are being asserted, proposed or, to the
knowledge of Company, threatened, and no audit or investigation of any return or
report of Taxes is currently underway, pending or, to the knowledge of Company,
threatened; (vi) there are no outstanding waivers or agreements by Company or
any Company Subsidiary for the extension of time for the assessment of any
federal Taxes or deficiency thereof (or for any other Taxes or deficiencies
thereof involving amounts in excess of $5,000), nor are there any requests for
rulings, outstanding subpoenas or requests for information or any other matter
pending between Company or any Company Subsidiary and any taxing authority; and
(vii) there are no liens for Taxes upon any property or assets of Company or any
Company Subsidiary involving amounts in excess of $5,000 except liens for
current Taxes not yet due, nor are there any liens involving amounts in excess
of $5,000 which, to the knowledge of Company, are pending or threatened.
(c) Company has delivered to Parent true and complete copies
of all federal and state income tax returns (together with any Revenue Agent's
Reports) relating to the operations of Company and the Company Subsidiaries for
the taxable years ended since 1991.
(d) None of Company or the Company Subsidiaries has filed a
consent pursuant to Section 341(f) of the Code. None of Company, the Company
Subsidiaries or any predecessor in interest of such party, has filed, or may be
deemed to have filed, any election under Section 338 of the Code.
(e) Except as set forth in Section 3.9(f) of the Disclosure
Letter, neither Company nor any Company Subsidiary has made any payment which
constitutes an "excess parachute payment" within the meaning of Section 280G of
the Code, and no payment by Company or any Company Subsidiary required to be
made under any contract will, if made, constitute an "excess parachute payment"
within the meaning of Section 280G of the Code.
(f) None of Company and the Company Subsidiaries is a party to
any tax allocation or tax sharing agreement.
(g) None of Company and the Company Subsidiaries has been a
member of an affiliated group (within the meaning of Section 1504(a) of the
Code) filing a consolidated federal income tax return (other than a group the
common parent of which was Company).
3.10 LITIGATION
(a) Section 3.10(a) of the Disclosure Letter (i) sets forth
all litigation, claims, suits, actions, investigations, indictments or
informations, or administrative, arbitration or other
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proceedings pending, or, to the knowledge of Company, threatened (including
grand jury investigations, actions or proceedings and product liability and
workers' compensation suits, actions or proceedings) against Company or any
Company Subsidiary involving amounts in excess of $10,000 and (ii) indicates
which of such matters are being defended by an insurance carrier, and which of
the matters being so defended are being defended under a reservation of rights.
(b) Except as set forth in Section 3.10(b) of the Disclosure
Letter, there are no judgments, orders, injunctions, decrees, stipulations or
awards (whether rendered by a court, administrative agency, or by arbitration,
pursuant to a grievance or other procedure) currently in effect against or
relating to Company or any Company Subsidiary. To the knowledge of Company,
there are no events, facts or circumstances giving rise to any claim for
indemnification from Company or any Company Subsidiary by any present or former
officer or director of Company or any Company Subsidiary related to any act or
omission prior to the Closing by such present or former officer or director.
3.11 MATERIAL CONTRACTS. Section 3.11 of the Disclosure Letter contains
a correct and complete list of the following (the "Material Contracts"):
(a) all bonds, debentures, notes, loans, credit or loan
agreements or loan commitments, mortgages, indentures or guarantees involving
amounts in excess of $25,000 to which Company or any Company Subsidiary is a
party or by which any of its properties or assets (real, personal or mixed,
tangible or intangible) is bound;
(b) all leases to which Company or any Company Subsidiary is a
party or by which any of its properties or assets (real, personal or mixed,
tangible or intangible) is bound involving an annual rental payment in excess of
$25,000 individually;
(c) all contracts or agreements which limit or restrict
Company, any Company Subsidiary or, to the knowledge of Company, any of the
officers or key employees of Company from engaging in any business in any
jurisdiction;
(d) all contracts or agreements requiring Company or any
Company Subsidiary to register its capital stock or securities under federal or
state securities law;
(e) all repurchase agreements with vehicle manufacturers to
which Company or any Company Subsidiary is a party;
(f) all agreements with travel arrangers and tour organizers
to which Company or any Company Subsidiary is a party;
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(g) all franchising agreements to which Company or any Company
Subsidiary is a party; and
(h) all existing contracts and commitments (other than those
described in subparagraphs (a), (b), (c), (d), (e), (f) and (g) of this Section
3.11, the Company Benefit Plans and other than agreements and purchase orders
relating to the purchase of vehicles in the ordinary course of business) to
which Company or any Company Subsidiary is a party or by which its properties or
assets are bound involving an annual commitment or annual payment by Company or
any Company Subsidiary of more than $50,000 individually.
True and complete copies of all Material Contracts, including all amendments,
have been made available to Parent. The Material Contracts are valid and
enforceable in accordance with their respective terms with respect to Company
and valid and, to the knowledge of Company, enforceable in accordance with their
respective terms with respect to any other party to a Material Contract, in each
case to the extent material to the business and operations of Company and
subject to applicable bankruptcy, insolvency and other similar laws affecting
the enforceability of creditors' rights generally, general equitable principles
and the discretion of courts in granting equitable remedies. Except for events
or occurrences, the consequences of which, individually or in the aggregate, do
not have and would not be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect on Company, there is not under any of the
Material Contracts any existing breach, default or event of default by Company
or any Company Subsidiary or event that with notice or lapse of time or both
would constitute a breach, default or event of default by Company or any Company
Subsidiary, nor has Company received notice of, or made a claim with respect to,
any breach or default by any other party to a Material Contract.
3.12 REGISTRATION STATEMENT, ETC. None of the information supplied or
to be supplied by Company for inclusion or incorporation by reference in (a) the
Registration Statement to be filed by Parent with the SEC in connection with the
Parent Class A Common Stock to be issued in the Merger (the "Registration
Statement"), and (b) the Proxy Statement (the "Proxy Statement") to be mailed to
Company's shareholders in connection with the meeting (the "Shareholders'
Meeting") to be called to consider the Merger, will, at the respective times
such documents are filed and, in the case of the Registration Statement, when it
becomes effective or at the time any amendment or supplement thereto becomes
effective, cause such document to contain any untrue statement of a material
fact, or omit to state any material fact necessary in order to make the
statements therein not misleading; or, in the case of the Proxy Statement, when
first mailed to the shareholders of Company, or in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Shareholders' Meeting, cause the Proxy Statement or any amendment thereof or
supplement thereto to contain any untrue statement of a material fact, or omit
to state any material fact required to be stated therein necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. All documents that Company is responsible for filing with
the SEC and any other regulatory agency in connection with the Merger will
comply as to form in all material respects with the provisions of applicable law
and any applicable rules or regulations thereunder, except that no
representation is made by Company with
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respect to statements made therein based on information supplied by Parent or
with respect to information concerning Parent or Sub which is incorporated by
reference in the Registration Statement or the Proxy Statement.
3.13 EMPLOYEE BENEFIT PLANS
(a) For purposes of this Section 3.13, the term "Company
Benefit Plan" means any plan, program, arrangement, fund, policy, practice or
contract which, through which, under which or with respect to which Company or
any Company ERISA Affiliate (as defined in Section 3.13(b)) provides or has an
obligation to provide benefits or compensation to or on behalf of employees or
former employees of Company or any Company ERISA Affiliate, whether formal or
informal, whether or not written. Each and every Company Benefit Plan is
identified in Section 3.13 of the Disclosure Letter.
(b) For purposes of this Section 3.13, the term "Company ERISA
Affiliate" means each trade or business (whether or not incorporated) which
together with Company is treated as a single employer under Section 414(b), (c),
(m) or (o) of the Code.
(c) Company, each Company ERISA Affiliate and each Company
Benefit Plan is in compliance with the requirements prescribed by all statutes,
orders and governmental rules and regulations with respect to and applicable to
Company Benefit Plans, and each Company Benefit Plan has been administered
according to its terms and applicable law.
(d) Neither Company nor any Company ERISA Affiliate maintains,
or has at any time established or maintained, or has at any time been obligated
to make, or made, contributions to or under any defined benefit plan (as defined
in Section 3(35) of ERISA) or any multi-employer plan (as defined in Section
3(37) and Section 4001(a)(3) of ERISA).
(e) Company does not maintain, nor has at any time established
or maintained, nor has at any time been obligated to make, or made,
contributions to or under any plan which provides post-retirement medical or
health benefits with respect to former employees of Company.
(f) Company has made available to Parent a true and complete
copy of the following documents, if applicable, with respect to each Company
Benefit Plan identified in Section 3.13 of the Disclosure Letter: (1) all
documents, including any insurance contracts and trust agreements, setting forth
the terms of each Company Benefit Plan, or if there are no such documents
evidencing a Company Benefit Plan, a full description of such Company Benefit
Plan, (2) the ERISA summary plan description and any other summary of plan
provisions provided to participants or beneficiaries for each such Company
Benefit Plan, (3) the annual reports filed for the most recent three plan years
and most recent financial statements or periodic accounting or related plan
assets with respect to each Company Benefit Plan, (4) each favorable
determination letter, opinion or ruling
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from the Internal Revenue Service (the "IRS") for each Company Benefit Plan, the
assets of which are held in trust, to the effect that such trust is exempt from
federal income tax, including any outstanding request for a determination letter
and (5) each opinion or ruling from the Department of Labor with respect to any
such Company Benefit Plan.
(g) There are no audits or claims which are pending or, to the
knowledge of Company, threatened against any Company Benefit Plan, any fiduciary
of any of the Company Benefit Plans with respect to the Company Benefit Plans or
against the assets of any of the Company Benefit Plans, except claims for
benefits made in the ordinary course of the operation of such plans.
(h) The assets of all the Company Benefit Plans which are
required under applicable laws to be held in trust are in fact held in trust,
and the assets of each such Company Benefit Plan equal or exceed the liabilities
of each such plan. The liabilities of each other Company Benefit Plan are
properly and accurately reported on the financial statements and records of
Company to the extent required by generally accepted accounting principles. The
assets of each trust which is a part of a Company Benefit Plan are reported at
their fair market value on the books and records of such trust or plan.
(i) No payment required to be made to any employee associated
with Company or any Company Subsidiary as a result of the transactions
contemplated hereby under any contract or otherwise will, if made, constitute an
"excess parachute payment" within the meaning of Section 280G of the Code.
3.14 PROPERTY
(a) Company and the Company Subsidiaries have good and valid
title to or valid leasehold interests in its properties reflected in the Interim
Balance Sheet or acquired after July 31, 1997 (other than properties sold or
otherwise disposed of in the ordinary course of business), and all of such
properties are held free and clear of all liens, encumbrances and restrictions,
except, with respect to all such properties, (a) mortgages and liens securing
debt reflected as liabilities on the Interim Balance Sheet and (b) (i) liens for
current taxes and assessments not in default, (ii) mechanics', carriers',
workmen's, repairmen's, statutory or common law liens either not delinquent or
being contested in good faith, and (iii) liens, mortgages, encumbrances,
covenants, rights of way, building or use restrictions, easements, exceptions,
variances, reservations and other matters or limitations of any kind, if any,
which either individually or in the aggregate do not have a material adverse
effect on Company's or any of the Company Subsidiaries' use of the property
affected, taken as a whole.
(b) Section 3.14 of the Disclosure Letter sets forth a true
and complete list of all leases and agreements of Company or the Company
Subsidiaries granting possession of or rights to real or personal property and
involving an annual commitment or annual payment of more than $25,000
individually in the case of any real property and $25,000 individually in the
case of any personal property (the "Disclosed Leases"). All such Disclosed
Leases are in full force and effect
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and constitute the legal, valid, binding and enforceable obligations of Company
or the Company Subsidiaries and, to the knowledge of Company, are legal, valid,
binding and enforceable in accordance with their respective terms with respect
to each other party to a Disclosed Lease, in each case to the extent material to
the business and operations of Company and subject in each case to applicable
bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors' rights generally, general equitable principles and the discretion of
courts in granting equitable remedies. Company or one of the Company
Subsidiaries has physical possession of all real property, equipment and other
assets which are covered by Disclosed Leases. Except for events and occurrences,
the consequences of which, individually or in the aggregate, do not have and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company, there are no existing defaults of Company or
the Company Subsidiaries with respect to such Disclosed Leases or, to the
knowledge of Company, any of the other parties to such Disclosed Leases (or
events or conditions which, with notice or lapse of time, or both, would
constitute a default).
(c) To the knowledge of Company, the structures and equipment
owned or leased by each of Company and the Company Subsidiaries are structurally
sound, are in good and safe operating condition and repair and are adequate for
the uses to which they are being put, except for maintenance performed in the
ordinary course of business and any such circumstances which, individually or in
the aggregate, do not have or would not reasonably be expected to have,
individually or in the aggregate, Material Adverse Effect on Company.
(d) Except as otherwise does not have and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on Company, the rights, properties and other assets presently owned, leased or
licensed by each of Company and the Company Subsidiaries and reflected on the
Interim Balance Sheet include all rights, properties and other assets necessary
to permit Company and the Company Subsidiaries to conduct their businesses in
the same manner as such businesses are presently conducted, without any need for
replacement, refurbishment or extraordinary repair except in the ordinary course
of business consistent with past practice.
3.15 TRADEMARKS, ETC.
(a) Company has previously delivered to Parent a complete and
accurate list and description of (i) all United States and foreign patents,
trademarks, trade names, service marks, copyrights and applications therefor
owned by Company or any Company Subsidiary (hereinafter the "Patent and
Trademark Rights") and (ii) all United States and foreign patents, trademarks,
trade names, service marks, copyrights and applications therefor licensed to
Company or any Company Subsidiary (hereinafter the "Licensed Rights"). Company
represents and warrants that (i) the Patent and Trademark Rights are free of any
liens, claims or encumbrances; are not subject to any license (royalty bearing
or royalty free) and are not subject to any other arrangement requiring any
payment to any person or the obligation to grant rights to any person in
exchange, (ii) the Licensed Rights are
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free and clear of any liens, claims, encumbrances, royalties or other
obligations, and (iii) the Patent and Trademark Rights and the Licensed Rights
are all those material rights necessary to the conduct of the business of each
of Company and the Company Subsidiaries as currently being conducted. The
validity of the Patent and Trademark Rights and title thereto, and the validity
of the Licensed Rights, (i) have not been questioned in any prior litigation;
(ii) are not being questioned in any pending litigation; and (iii) to the
knowledge of Company, are not the subject(s) of any threatened or proposed
litigation. The business of each of Company and the Company Subsidiaries as now
conducted, to the knowledge of Company, does not conflict with and has not been
alleged to conflict with any patents, trademarks, trade names, service marks or
copyrights of others. The consummation of the transactions contemplated hereby
will not result in the loss or impairment of any of the Patent and Trademark
Rights or any of the Licensed Rights. Company does not know of any use by others
of any of the Patent and Trademark Rights or the Licensed Rights material to the
business of Company and the Company Subsidiaries as presently conducted.
(b) Each of Company and the Company Subsidiaries owns, or
possesses valid license rights to, all computer software programs that are
material to the conduct of the business of Company and the Company Subsidiaries.
There are no infringement suits, actions or proceedings pending or, to the
knowledge of Company, threatened against Company or any Company Subsidiary with
respect to any software owned or licensed by Company or any Company Subsidiary.
3.16 LABOR RELATIONS. Except to the extent set forth in Section
3.16 of the Disclosure Letter:
(a) Neither Company nor any Company Subsidiary is a party to
or bound by any and, to the knowledge of Company there are no, agreements or
arrangements on behalf of any officer, director or employee providing for
payment or other benefits to such person contingent upon the execution of this
Agreement or the Closing. There are no collective bargaining agreements to which
Company or any Company Subsidiary is a party.
(b) During the five years immediately preceding the date
hereof, none of Company or the Company Subsidiaries has experienced any
organized slow down, work interruption, strike or work stoppage. There are no
existing or, to Company's knowledge, threatened labor disputes. None of Company
or the Company Subsidiaries has failed to pay when due any wages, bonuses,
commissions, taxes, penalties or assessments, owed to, or arising out of the
employment of, any officer, director or employee, except where the failure to so
pay when due does not have and would not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on Company.
(c) Each of Company and the Company Subsidiaries is in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment, wages
and hours, occupational safety and health, and is not engaged in any unfair
labor or unfair employment practices.
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(d) There is no unfair labor practice charge or complaint or
any other matter against (or to the knowledge of Company, involving) Company or
any Company Subsidiary pending or, to the knowledge of Company, threatened
before the National Labor Relations Board or any other governmental authority.
(e) No certification or decertification question relating to
collective bargaining units at the premises of Company or any of the Company
Subsidiaries exists or has existed within the past five years.
(f) To the knowledge of Company, there are no investigations,
administrative proceedings or formal complaints of discrimination (including
discrimination based upon sex, age, marital status, race, national origin,
sexual preference, handicap or veteran status) pending or threatened before the
Equal Employment Opportunity Commission or any federal, state or local agency or
court against or involving Company or any Company Subsidiary.
(g) To the knowledge of Company, there are no citations,
investigations, administrative proceedings or formal complaints of violations of
local, state or federal occupational safety and health laws pending or
threatened before the Occupational Safety and Health Review Commission or any
federal, state or local agency or court against or involving Company or any
Company Subsidiary (excluding traffic citations).
(h) Section 3.16(h) of the Disclosure Letter sets forth a true
and correct list of all full-time employees employed by each of Company and the
Company Subsidiaries as of November 8, 1997 (in the case of employees in the
United States) and as of November 1, 1997 (in the case of employees in Canada),
together with their respective job titles, dates of hire and compensation. None
of Company and the Company Subsidiaries pays or provides any benefits (other
than wages) to part-time employees in the ordinary course of business.
(i) No agreement, arbitration or court decision or
governmental order to which Company or any Company Subsidiary is a party or by
which any of them or their respective assets are bound in any way limits or
restricts any of Company, any Company Subsidiary or Parent from relocating or
closing any of the operations of Company or any of the Company Subsidiaries.
3.17 NO VIOLATION OF LAW. The business and operations of Company and
the Company Subsidiaries have been conducted in compliance with all applicable
laws, ordinances, regulations and orders of all governmental entities and other
regulatory bodies (including, without limitation, laws, ordinances, regulations
and orders relating to zoning, environmental matters and the safety and health
of employees), except where the failure to do so does not and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company. Except as set forth in Section 3.17 of the Disclosure
Letter, (i) neither Company nor any Company Subsidiary has been charged with or,
to the knowledge of Company, is now under investigation with
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respect to, a violation of any applicable law, regulation, ordinance, order or
other requirement of a governmental entity or other regulatory body that has or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company, (ii) neither Company nor any Company
Subsidiary is a party to or bound by any order, judgment, decree or award of a
governmental entity or other regulatory body; and (iii) Company and the Company
Subsidiaries have filed all reports required to be filed with any governmental
entity or other regulatory body on or before the date hereof, except where the
failure to do so does not and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company. Company
and the Company Subsidiaries have all permits, certificates, licenses, approvals
and other governmental authorizations required in connection with the operation
of the business of Company and the Company Subsidiaries, except for permits,
certificates, licenses, approvals and other governmental authorizations the
failure of which to have does not and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company.
3.18 ENVIRONMENT MATTERS. Except as set forth in Section 3.18 of
the Disclosure Letter:
(a) Each of Company and the Company Subsidiaries possesses,
and is in compliance with, all permits, licenses and government authorizations
and has filed all notices that are required under local, state and federal laws
and regulations relating to protection of the environment, pollution control,
product registration and Hazardous Materials (as defined below in this Section
3.18) ("Environmental Laws"), except where the failure to do so does not and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company; and is in compliance with all applicable
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in those laws or contained in
any law, regulation, code, plan, order, decree, judgment, notice, permit or
demand letter issued, entered, promulgated or approved thereunder, except where
the failure to do so does not and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company;
(b) Neither Company nor any Company Subsidiary has received
notice of any actual or threatened liability under the Federal Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA") or any
similar state or local statute or ordinance from any governmental agency or any
third party and, to the knowledge of Company, there are no facts or
circumstances which could form the basis for the assertion of any claim against
Company or any Company Subsidiary under any Environmental Laws including,
without limitation, CERCLA or any similar local, state or foreign law with
respect to any on-site or off-site location which has or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company;
(c) Neither Company nor any Company Subsidiary has entered
into or agreed to nor do any of them contemplate entering into or agreeing to
any consent decree or order, and neither Company nor any Company Subsidiary is
subject to any judgment, decree or judicial or
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administrative order relating to compliance with, or the cleanup of Hazardous
Materials under, any Environmental Laws;
(d) Neither Company nor any Company Subsidiary has received
any notice of violation or been subject to any administrative or judicial
proceeding alleging violation of applicable Environmental Laws which has or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company;
(e) Neither Company nor any Company Subsidiary is subject to
any claim, obligation, liability, loss, damage or expense of any kind or nature,
contingent or otherwise, incurred or imposed or based upon any provision of any
Environmental Law and arising out of any act or omission of Company or any
Company Subsidiary, or any of their employees, agents or representatives or
arising out of the ownership, use, control or operation by Company or any
Company Subsidiary of any plant, facility, site, area or property (including,
without limitation, any plant, facility, site, area or property currently or
previously owned or leased by Company or any Company Subsidiary) from which any
Hazardous Materials were released into the environment (the term "release"
meaning any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing into the
environment, and the term "environment" meaning any surface or ground water,
drinking water supply, soil, surface or subsurface strata or medium, or the
ambient air) which has or would reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Company;
(f) Company has provided Parent with true, correct and
complete copies of all material documents of Company and the Company
Subsidiaries relating to environmental matters. Neither Company nor any Company
Subsidiary has paid any fines, penalties or assessments for violations of
Environmental Laws;
(g) To the knowledge of Company, none of the real property
owned, leased or occupied by Company or any Company Subsidiary or any other
assets, improvements or equipment of Company or any Company Subsidiary contains
any asbestos-containing material which is or may be friable (other than floor
tile, roofing material and drywall material), PCBs or underground storage tanks;
(h) Company has provided Parent with copies of all work place
or worker exposure measurements made by or on behalf of Company or any Company
Subsidiary, including, without limitation, all work place or worker exposure
measurements for particulates, OSHA hazardous chemicals and Hazardous Materials.
Company has established and is in full compliance with its OSHA Hazard
Communication Program; and
(i) There is not now on, in or at any real property owned,
leased or occupied by Company or any Company Subsidiary, or any portion thereof
any: (1) surface impoundment, lagoon
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or other containment facility, past or present, for the temporary or permanent
storage, treatment or disposal of Hazardous Materials, or (2) landfill or solid
waste disposal area.
As used in this Section 3.18, the term "HAZARDOUS MATERIALS" means any waste,
pollutant, hazardous substance, toxic, ignitable, reactive or corrosive
substance, hazardous waste, special waste, industrial substance, by-product,
process intermediate product or waste, petroleum or petroleum-derived substance
or waste, chemical liquids or solids, liquid or gaseous products, or any
constituent of any such substance or waste, the use, handling or disposal of
which by Company or any Company Subsidiary is in any way governed by or subject
to any applicable law, rule or regulation of any governmental or regulatory
authority.
3.19 INSURANCE POLITIES. Company has delivered to Parent prior to the
date hereof a complete and accurate list of all insurance policies in force
naming Company, any Company Subsidiary or employees thereof as an insured or
beneficiary or as a loss payable payee or for which Company or any Company
Subsidiary has paid or is obligated to pay all or part of the premiums. Neither
Company nor any of the Company Subsidiaries has received notice of any pending
or threatened cancellation or premium increase (retroactive or otherwise) with
respect thereto, and each of Company and the Company Subsidiaries is in
compliance in all material respects with all conditions contained therein. There
are no pending claims against such insurance by Company or any Company
Subsidiary as to which insurers are defending under reservation of rights or
have denied liability, and there exists no material claim under such insurance
that has not been properly filed by Company or any Company Subsidiary. To the
knowledge of Company, except for the self-insurance retentions or deductibles
set forth in the policies contained in the afore-mentioned list, the policies
are adequate in scope and amount to cover all prudent and reasonably foreseeable
risks which may arise in the conduct of the business of Company and the Company
Subsidiaries.
3.20 MAJOR SUPPLIERS, TOUR ORGANIZERS AND TRAVEL ARRANGERS
(a) Section 3.20(a) of the Disclosure Letter sets forth a list
of each supplier of goods or services to Company and the Company Subsidiaries to
whom Company and the Company Subsidiaries paid in the aggregate more than
$100,000 during the 10-month period ended October 31, 1997, together with in
each case the amount paid during such period. Neither Company nor any Company
Subsidiary is engaged in any material dispute with any of such suppliers and, to
the knowledge of Company, no such supplier intends to terminate, limit or reduce
its business relations with Company or any Company Subsidiary. Company does not
believe that the consummation of the transactions contemplated hereunder will
have any material adverse effect on the business relationship of Company or any
Company Subsidiary with any such supplier. None of the officers or directors of
Company or any Company Subsidiary, or any "affiliate" or "associate" (as such
terms are defined in Rule 12b-2 under the Exchange Act) of any officer or
director of Company or any Company Subsidiary, or any company or other
organization in which any officer or director of Company or any Company
Subsidiary or any "affiliate" or "associate" of any officer or director of
Company or any Company Subsidiary has a direct or indirect financial interest,
has any financial interest in any supplier of Company or any Company Subsidiary
(other than a publicly held
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corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by any such persons).
(b) Section 3.20(b) of the Disclosure Letter sets forth a list
of each travel arranger and tour organizer which accounted for net revenues to
Company and the Company Subsidiaries in the aggregate of more than $100,000
during the 10-month period ended October 31, 1997, together with in each case
the amount of net revenue produced during such period. Neither Company nor any
Company Subsidiary is engaged in any material dispute with any of such travel
arrangers or tour organizers and, to the knowledge of Company, no such travel
arranger or tour organizer intends to terminate, limit or reduce its business
relations with Company or any Company Subsidiary. Company does not believe that
the consummation of the transactions contemplated hereunder will have any
material adverse effect on the business relationship of Company or any Company
Subsidiary with any such travel arranger or tour organizer. None of the officers
or directors of Company or any Company Subsidiary, or any "affiliate" or
"associate" of any officer or director of Company or any Company Subsidiary, or
any company or other organization in which any officer or director of Company or
any Company Subsidiary or any "affiliate" or "associate" of any officer or
director of the Company or any Company Subsidiary has a direct or indirect
financial interest, has any financial interest in any travel arranger or tour
organizer of Company or any Company Subsidiary (other than a publicly held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by any such persons).
3.21 NOTES AND ACCOUNTS RECEIVABLE
(a) All notes receivable of Company or any Company Subsidiary
owing by any director, officer, stockholder or employee of Company or any
Company Subsidiary or any affiliate or associate of any such person (including
those notes receivable reflected on the Interim Balance Sheet and those incurred
since the date of the Interim Balance Sheet) have been paid in full prior to the
date hereof or shall have been paid in full prior to the Closing Date.
(b) All accounts receivable of Company and the Company
Subsidiaries which are reflected on the Interim Balance Sheet (i) are valid,
existing and collectible in a manner consistent with Company's past practice
without resort to legal proceedings or collection agencies, except where the
failure to be so valid, existing and collectible does not have and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company, (ii) represent monies due for goods sold and
delivered or services rendered in the ordinary course of business and (iii) are
not subject to any refunds or adjustments or any defenses, rights of set-off,
assignment, restrictions, security interests or other encumbrances of a material
nature. Except as shown in Section 3.21 of the Disclosure Letter, all such
accounts receivable are current, and there are no material disputes regarding
the collectibility of any such accounts receivable. Neither Company nor any
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Company Subsidiary has factored any of its accounts receivable since May 1,
1994.
3.22 TRANSACTIONS WITH AFFILIATES. Except as set forth in Section 3.22
of the Disclosure Letter, no director, officer or other "affiliate" or
"associate" (as such terms are defined in Rule 12b-2 under the Exchange Act) of
Company or any Company Subsidiary or any entity in which any such director,
officer or other affiliate or associate, owns any beneficial interest (other
than a publicly held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than 1% of the stock of
which is beneficially owned by any such persons) has any interest in: (i) any
contract, arrangement or understanding with, or relating to, the business or
operations of Company or any Company Subsidiary; (ii) any loan, arrangement,
understanding, agreement or contract for or relating to indebtedness of Company
or any Company Subsidiary; or (iii) any property (real, personal or mixed),
tangible, or intangible, used or currently intended to be used in, the business
or operations of Company or any Company Subsidiary.
3.23 FAIRNESS OPINION. The Board of Directors of Company has received
an opinion dated the date hereof from Peacock, Hislop, Staley & Given, Inc. to
the effect that as of such date the consideration to be received by the
shareholders of Company pursuant to the Merger is fair to such shareholders from
a financial point of view.
3.24 ANITAKEOVER STATUTES. Each of Company and the Board of Directors
of Company has taken all action required to be taken by it in order to exempt
this Agreement and the Proxy Agreements and the transactions contemplated hereby
and thereby from, and this Agreement and the Proxy Agreements and the
transactions contemplated hereby are exempt from the requirements of, any
"moratorium", "control share", "fair price", "affiliate transaction", "business
combination" or other antitakeover laws and regulations of any state, including,
without limitation, the provisions of Sections 607.0901 and 607.0902 of the
FBCA.
3.25 BOARD RECOMMENDATIONS. The Board of Directors of Company, at a
meeting duly called and held, has (i) determined that this Agreement and the
transactions contemplated hereby (including the Merger) are fair to and in the
best interests of the stockholders of Company, and (ii) resolved to recommend
that the holders of the shares of capital stock of Company entitled to vote
thereon approve this Agreement and the transactions contemplated hereby
(including the Merger).
3.26 AMENDMENT OF RIGHTS PLAN. The Board of Directors of Company has
amended the Rights Agreement dated as of March 8, 1989 between Company and
Mellon Securities Trust Company (the "Rights Plan") so that (i) Parent will not
become an "Acquiring Person" as a result of the execution and delivery of this
Agreement or the Proxy Agreements or the consummation of the transactions
contemplated by this Agreement or the Proxy Agreements, (ii) no "Stock
Acquisition Date" or "Distribution Date" (as such terms are defined in the
Rights Plan) will occur as a result of the execution and delivery of this
Agreement or the Proxy Agreements or the consummation of the transactions
contemplated by this Agreement or the Proxy Agreements, and
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(iii) all outstanding Company Common Stock Purchase Rights (the "Company
Rights") issued and outstanding under the Rights Plan will expire immediately
prior to the Effective Time.
3.27 BROKERS AND FINDERS. Neither Company nor any of the Company
Subsidiaries, nor any of their respective officers, directors or employees, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or indirectly for Company or any of the Company
Subsidiaries, in connection with this Agreement, the Proxy Agreements or any of
the transactions contemplated hereby or thereby, except that Company has
retained Peacock, Hislop, Staley & Given, Inc. as its financial advisor, whose
fees and expenses will be paid by Company.
3.28 MERGER. Neither Company nor any Company Subsidiary has taken any
action or failed to take any action which action or failure to take action would
jeopardize the Merger as a reorganization within the meaning of Section 368(a)
of the Code.
3.29 POOLING. KPMG Peat Marwick LLP has advised Company as of the date
hereof that based upon inquiries and its examination of the financial statements
of Company, it is not aware of any conditions relating to Company that would
preclude the use of "pooling of interests" accounting in connection with the
Merger.
3.30 VOTING REQUIREMENTS; DISSENTERS' RIGHTS. The affirmative vote of
the holders of a majority of the outstanding shares of Company Common Stock with
respect to this Agreement and the Merger is the only vote of the holders of any
class or series of Company's capital stock necessary to approve this Agreement,
the Merger and the transactions contemplated by this Agreement and the Merger.
No holder of any of Company's capital stock is entitled under the FBCA to
exercise dissenter's rights or appraisal rights in connection with the Merger.
3.31 NO EXISTING DISCUSSIONS. As of the date hereof, Company is not
engaged, directly or indirectly, in any negotiations or discussions with any
other party with respect to an Acquisition Proposal (as defined in Section 5.2).
3.32 DISCLOSURE. None of the representations and warranties by Company
in this Agreement and no statement on the part of Company contained in the
Disclosure Letter contains or will contain as to the applicable representation
and warranty any untrue statement of material fact or omits or will omit to
state any material fact necessary in order to make any of the statements herein
or therein, in light of the circumstances under which it was made, not
misleading.
3.33 NO AGGREGATE MATERIAL ADVERSE EFFECT. Assuming that the provisions
that contain exceptions for "Material Adverse Effect on Company" in the
representations and warranties set forth in Sections 3.2 through 3.32 did not
contain such exceptions, except for facts, circumstances and events which have
arisen or may hereafter arise in the ordinary course of business and which are
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consistent with the historical experience of Company and the Company
Subsidiaries during the five years preceding the date of this Agreement as
reflected in the Company's financial statements to the extent required by
generally accepted accounting principles, the failure of one or more of such
representations and warranties (without giving effect to any such "Material
Adverse Effect on Company" exception but taking into account the items set forth
in the Disclosure Letter and any other exception or limitation contained
therein) to be true and correct would not have and would not be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company. For purposes of this Section 3.33, the Altman Litigation (as defined in
Section 5.2(c)) shall be deemed not to be in the ordinary course of business.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Company as follows:
4.1 ORGANIZATION, GOOD STANDING AND POWER. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Parent 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 make such qualification or licensing necessary, except where the
failure to be so qualified or licensed or to be in good standing does not and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent (as defined below). Parent has delivered to
Company complete and correct copies of its certificate of incorporation and
bylaws and all amendments thereto to the date hereof. As used in this Agreement,
the phrase "Material Adverse Effect on Parent" means a material adverse effect
on (a) the financial condition, business, assets, liabilities or results of
operations of Parent and its subsidiaries on a consolidated basis or (b) the
ability of Parent or Sub to consummate the transactions contemplated by this
Agreement.
4.2 CAPITALIZATION. The authorized capital stock of Parent consists of
35,000,000 shares of Class A Common Stock, par value $.01 per share, of which as
of November 21, 1997, 23,866,404 shares were issued and outstanding; 2,500,000
shares of Class B Common Stock, par value $.01 per share, of which as of
November 21, 1997, 1,936,600 shares were issued and outstanding; and 250,000
shares of Preferred Stock, par value $.01 per share, of which as of the date
hereof no shares are issued and outstanding. All of the shares of Parent Class A
Common Stock to be issued in exchange for Company Common Stock at the Effective
Time in accordance with this Agreement will be, when so issued, duly authorized,
validly issued, fully paid and nonassessable and, except as set forth in Section
4.2 of the Disclosure Letter, free of preemptive rights. Except as set forth
above, as of November 21, 1997, there were no shares of capital stock or other
equity securities of Parent outstanding, and, except as set forth in Section 4.2
of the Disclosure Letter, there are no outstanding options, warrants or rights
to purchase or acquire from Parent any capital stock of Parent, and there
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are no convertible securities or other contracts, commitments, agreements,
understandings, arrangements or restrictions by which Parent is bound to issue
any additional shares of its capital stock or other equity securities.
4.3 AUTHORITY; ENFORCEABILITY. Each of Parent and Sub has the corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of each of Parent and
Sub, and this Agreement has been duly executed and delivered by Parent and Sub
and constitutes the valid and binding obligation of each such party, enforceable
against it in accordance with its terms, except as may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to the
enforcement of creditors' rights generally and subject to general principles of
equity.
4.4 NON-CONTRAVENTION; CONSENTS
(a) Except as set forth in Section 4.4(a) of the Disclosure
Letter, neither the execution, delivery and performance by Parent or Sub of this
Agreement, nor the consummation by Parent or Sub of the transactions
contemplated hereby, nor compliance by Parent or Sub with any of the provisions
hereof, will:
(i) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, result in the
termination of, accelerate the performance required by, or result in a
right of termination or acceleration, or the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of Parent or Sub, under any of the terms, conditions or
provisions of, (x) its respective organizational documents, or (y) any
note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Parent or any of
its subsidiaries is a party, or by which Parent or any of its
subsidiaries may be bound, or to which Parent or any of its
subsidiaries or the properties or assets of any of them may be subject,
and that has or would reasonably be expected to have, in any such event
specified in this clause (y), individually or in the aggregate, a
Material Adverse Effect on Parent; or
(ii) subject to compliance with the statutes and regulations
referred to in Section 4.4(b), violate any valid and enforceable
judgment, ruling, order, writ, injunction, decree, or any statute, rule
or regulation applicable to Parent or any of its subsidiaries or any of
their respective properties or assets where such violation has or would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
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(b) Except as set forth in Section 4.4(b) of the Disclosure
Letter and other than notices, filings, authorizations, exemptions, consents or
approvals, the failure of which to give or obtain does not have and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent, no notice to, filing with, authorization of, exemption
by, or consent or approval of, any governmental authority or other regulatory
body is necessary for the consummation by Parent or Sub of the transactions
contemplated by this Agreement.
4.5 SEC REPORTS; PARENT FINANCIAL STATEMENTS
(a) Since January 1, 1995, Parent has timely filed all
reports, registration statements, proxy statements or information statements and
all other documents, together with any amendments required to be made thereto,
required to be filed with the SEC under the Securities Act or the Exchange Act
(collectively, the "Parent Reports"). Parent has heretofore made available to
Company true copies of all the Parent Reports, together with all exhibits
thereto, that Company has requested. Included in such Parent Reports are (i)
audited consolidated balance sheets of Parent and its subsidiaries at December
31, 1994, 1995 and 1996 and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended, and the notes
thereto and (ii) the unaudited consolidated balance sheets of Parent and its
subsidiaries at March 31, 1997 and June 30, 1997 and the related unaudited
consolidated statements of income, stockholders' equity and cash flows for the
periods then ended and the notes thereto.
(b) All of the financial statements included in the Parent
Reports fairly presented the consolidated financial position of Parent and its
subsidiaries as of the dates mentioned and the consolidated results of
operations, changes in stockholders' equity and cash flows for the periods then
ended in conformity with generally accepted accounting principles (subject to
any exceptions as to consistency specified therein or as may be indicated in the
notes thereto or in the case of the unaudited statements, as may be permitted by
Form 10-Q of the SEC and subject, in the case of unaudited statements, to
normal, recurring audit adjustments). As of their respective dates, the Parent
Reports complied in all material respects with all applicable rules and
regulations promulgated by the SEC and did not contain any untrue statement of a
material fact or omit 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. Except as set forth in the Parent
Reports, neither Parent nor any subsidiary of Parent has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by generally accepted accounting principles to be set forth on a
consolidated balance sheet of Parent and its consolidated subsidiaries or in the
notes thereto, other than liabilities or obligations which, individually or in
the aggregate, do not have and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
Section 4.6 of the Disclosure Letter and the Parent Reports and except for the
transactions contemplated by this Agreement, since December 31, 1996, there has
not been (i) any change in the business, financial condition or results of
operations of Parent and its subsidiaries which has or would reasonably be
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expected to have, individually or in the aggregate, a Material Adverse Effect on
Parent, or (ii) any split, combination or reclassification of any of Parent's
outstanding capital stock or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in substitution for shares
of Parent's outstanding capital stock.
4.7 REGISTRATION STATEMENT, ETC. None of the information supplied or to
be supplied by Parent for inclusion or incorporation by reference in (a) the
Registration Statement and (b) the Proxy Statement will, at the respective times
such documents are filed, and, in the case of the Registration Statement, when
it becomes effective or at the time any amendment or supplement thereto becomes
effective, cause such document to contain any untrue statement of a material
fact, or omit to state any material fact necessary in order to make the
statements therein not misleading, or, in the case of the Proxy Statement, when
first mailed to the shareholders of Company, or in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Shareholders' Meeting, cause the Proxy Statement or any amendment thereof or
supplement thereto to contain any untrue statement of a material fact, or omit
to state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. All
documents that Parent is responsible for filing with the SEC and any other
regulatory agency in connection with the Merger will comply as to form in all
material respects with the provisions of applicable law and any applicable rules
or regulations thereunder, except that no representation is made by Parent with
respect to statements made therein based on information supplied by Company or
with respect to information concerning Company which is incorporated by
reference in the Registration Statement or the Proxy Statement.
4.8 LITIGATION. Except as set forth in the Parent Reports, there are no
litigation, claims, suits, actions, investigations, indictments or informations,
or administrative, arbitration or other proceedings pending, or, to the
knowledge of Parent, threatened, against Parent or any subsidiary of Parent
which has or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent. Except as set forth in the
Parent Reports or in Section 4.8 of the Disclosure Letter, there are no
judgments, orders, injunctions, decrees, stipulations or awards (whether
rendered by a court, administrative agency, or by arbitration, pursuant to a
grievance or other procedure) currently in effect against or relating to Parent
which have or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
4.9 NO VIOLATION OF LAW. Except as set forth in the Parent Reports, the
business and operations of Parent and its subsidiaries have been conducted in
compliance with all applicable laws, ordinances, regulations and orders of all
governmental entities and other regulatory bodies (including, without
limitation, laws, ordinances, regulations and orders relating to zoning,
environmental matters and the safety and health of employees), except where the
failure to be in compliance does not have and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Parent.
Except as set forth in the Parent Reports or in Section 4.9 of the Disclosure
Letter, (i) neither Parent nor any Subsidiary of Parent has been charged
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with or, to the knowledge of Parent, is now under investigation with respect to,
a violation of any applicable law, regulation, ordinance, order or other
requirement of a governmental entity or other regulatory body that has or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent, and (ii) Parent has filed all reports required to be
filed with any governmental entity or other regulatory body on or before the
date hereof, except where the failure to do so does not and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on Parent.
4.10 BROKERS AND FINDERS. Neither Parent nor any of its subsidiaries,
nor any of their respective officers, directors or employees, has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions, or finder's fees, and no broker or finder has acted
directly or indirectly for Parent or any of its subsidiaries, in connection with
this Agreement or any of the transactions contemplated hereby.
4.11 MERGER. Neither Parent nor any of its subsidiaries has taken any
action or failed to take any action which action or failure to take action would
jeopardize the Merger as a reorganization within the meaning of Section 368(a)
of the Code.
4.12 POOLING. Arthur Andersen LLP has advised Parent as of the date
hereof that based upon inquiries and its examination of the financial statements
of Parent, it is not aware of any conditions relating to Parent that would
preclude the use of "pooling of interests" accounting in connection with the
Merger.
ARTICLE 5
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; CERTAIN COVENANTS
5.1 ACCESS AND INFORMATION. Upon reasonable notice, each of Company and
Parent shall (and shall cause each of their respective subsidiaries to) give to
the other and to the respective accountants, counsel and other representatives
of such other party reasonable access during normal business hours throughout
the period prior to the Effective Time to all of its and its subsidiaries'
properties, books, contracts, commitments and records (including tax returns and
insurance policies) and shall permit them to consult with its and its
subsidiaries' respective officers, employees, auditors, attorneys and agents;
provided, however, that any such investigation shall be conducted in such a
manner as not to interfere unreasonably with the business or operations of the
other party or its subsidiaries. All confidential information provided pursuant
to this Section 5.1 will be subject to the Confidentiality Agreements dated as
of October 28, 1997 (the "Confidentiality Agreements"), each between Company and
Parent.
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5.2 CONDUCT OF BUSINESS PENDING MERGER
(a) Company agrees that from the date hereof to the Effective
Time, except as contemplated by this Agreement or to the extent that Parent
shall otherwise consent in writing, Company and the Company Subsidiaries will
operate their businesses only in the ordinary course in the same manner as
previously conducted and not engage in any new line of business or enter into
any agreement, transaction or activity or make any commitment except in the
ordinary course of business or as expressly permitted by this Section 5.2; and,
consistent with such operation, will use all commercially reasonable efforts
consistent with past practices to preserve their business organizations intact,
to keep available to them the goodwill of their customers, suppliers, tour
organizers, travel arrangers and others with whom business relationships exist
to the end that their goodwill and ongoing business shall not be materially
impaired at the Effective Time, and will further exercise all commercially
reasonable efforts to maintain their existing relationships with their employees
in general.
(b) Company agrees that from the date hereof to the Effective
Time, except as otherwise consented to by Parent in writing, neither it nor any
Company Subsidiary will (i) change any provision of its Articles of
Incorporation or Bylaws or similar governing documents; (ii) make, declare or
pay any dividend or other distribution; or (iii) make any distribution or
directly or indirectly sell, issue, redeem, purchase or otherwise acquire, any
shares of its outstanding capital stock, change the number of shares of its
authorized or issued capital stock or issue, grant any option, warrant, call,
commitment, subscription, right to purchase or agreement of any character
relating to its authorized or issued capital stock or any securities convertible
into shares of such stock or otherwise make any change in its capital structure,
except for the issuance of capital stock upon exercise of presently outstanding
stock options in accordance with the existing terms of such options.
(c) Company agrees that from the date hereof to the Effective
Time it will not take, or permit any Company Subsidiary to take, any of the
following actions, except to the extent consented to by Parent in writing.
(i) (A) create, incur or assume any long-term debt (including
obligations in respect of capital leases which individually involve
annual payments in excess of $25,000) other than vehicle financing in
the ordinary course of business consistent with past practice, (B)
except in the ordinary course of business under existing lines of
credit, create, incur or assume any short-term debt for borrowed money,
(C) create, incur or assume any debt having a maturity of in excess of
four years relating to vehicle financing, (D) 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, (E) make any loans or advances to any other person, except in
the ordinary course of business and consistent with past practice, (F)
make any capital contributions to, or investments in, any person
involving amounts in excess of $200,000 in
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the aggregate, or (G) excluding vehicle purchases in the ordinary
course of business, make capital expenditures involving in excess of
$500,000 in the aggregate;
(ii) mortgage or pledge any of its properties or assets
involving amounts in excess of $200,000 in the aggregate, except for
the incurrence in the ordinary course of business consistent with past
practice of liens on vehicles owned by Company or any Company
Subsidiary pursuant to fleet financing agreements in existence on the
date hereof or amendments to or renewals thereof on substantially
similar terms;
(iii) take any action to (i) amend or terminate any Company
Benefit Plan, (ii) increase the compensation of any of its executive
officers, (iii) materially increase the level of compensation of its
employees, or (iv) adopt any other plan, program, arrangement or
practice providing new or increased benefits or compensation to its
employees;
(iv) amend or cancel or agree to the amendment or cancellation
of any Material Contract or enter into any new Material Contract;
(v) enter into any negotiation with respect to any collective
bargaining agreement;
(vi) make any change in any accounting methods or systems of
internal accounting controls, except as may be appropriate to conform
to changes in generally accepted accounting principles;
(vii) pay, loan or advance (other than the payment of
compensation, directors' fees or reimbursements of expenses in the
ordinary course of business) any amount to, or sell, transfer or lease
any properties or assets (real, personal or mixed, tangible or
intangible) to, or enter into any agreement or arrangement with, any of
its officers or directors or any "affiliate" or "associate" of any of
its officers or directors (as such terms are defined in Rule 405
promulgated under the Securities Act);
(viii) acquire, form or commence the operations of any
business or any corporation, partnership, joint venture, business
association or other business organization or division thereof;
(ix) make any tax election (other than in the ordinary course
of business consistent with past practice) or settle or compromise any
tax liability involving amounts in excess of $25,000 in the aggregate;
(x) pay, discharge, settle or satisfy any claims, litigation,
liabilities or obligations (whether absolute, accrued, asserted or
unasserted, contingent or otherwise) involving amounts in excess of
$200,000 in the aggregate, other than the payment, discharge or
satisfaction of liabilities (i) reflected or reserved against in, or
contemplated by, the financial
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statements (or the notes thereto) of Company included in the Company
Reports or (ii) in the ordinary course of business consistent with past
practice;
(xi) pay, discharge, settle or satisfy any claims, liabilities
or obligations (whether absolute, accrued, asserted or unasserted,
contingent or otherwise) arising out of, or relating to, that certain
litigation styled as ALTMAN'S AMERICA, ET AL. V. AMERICAN LAND CRUISERS
OF CALIFORNIA INCORPORATED, ET AL. in the Superior Court of the State
of California for the County of Los Angeles (the "Altman Litigation")
other than the payment of court costs and attorney's fees and expenses
to counsel for Company;
(xii) fail to perform in all material respects all of its
obligations under all Material Contracts (except those being contested
in good faith);
(xiii) fail to use all commercially reasonable efforts to
maintain in full force and effect and in the same amounts policies of
insurance comparable in amount and scope of coverage to that now
maintained by Company and the Company Subsidiaries;
(xiv) fail to manage its fleet in the ordinary course of
business consistent with past practice;
(xv) fail to use all commercially reasonable efforts to
continue to collect its accounts payable in the ordinary course of
business and consistent with past practice;
(xvi) fail to prepare and file all material federal, state,
local and foreign returns for Taxes and other material Tax reports,
filings and amendments thereto required to be filed by it, or fail to
allow Parent, at its request, to review all such returns, reports,
filings and amendments at Company offices prior to the filing thereof,
which review shall not interfere with the timely filing of such
returns; or
(xvii) enter into any agreement to take any of the actions
described in Section 5.2(b) or elsewhere in this Section 5.2(c).
(d) In connection with the continued operation of the business
of Company and the Company Subsidiaries between the date of this Agreement and
the Effective Time, Company shall communicate in good faith on a regular and
frequent basis with one or more representatives of Parent designated in writing
with respect to the ongoing operations of Company. Company acknowledges that
Parent does not and will not waive any rights it may have under this Agreement
as a result of such communications. Without limiting the generality of the
foregoing, Company shall (i) keep Parent fully informed regarding the status of
the Altman Litigation, promptly apprise Parent of any developments relating to
the Altman Litigation, and provide Parent promptly with all motions, briefs,
orders, judgments, decisions, papers and other documents relating to the Altman
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Litigation, (ii) consult and confer with Parent on a regular and frequent basis
regarding the Altman Litigation, and (iii) not file any motions, briefs or other
papers or documents or take any other material action relating to the Altman
Litigation without the review and consent of Parent.
(e) Parent agrees that from the date hereof to the Effective
Time, except as contemplated by this Agreement or to the extent that Company
shall otherwise consent in writing, it will not take, and will cause each of its
subsidiaries not to take, any action which would materially and adversely affect
the ability of Parent to perform its covenants and agreements under this
Agreement.
(f) Company shall not, nor shall it permit any Company
Subsidiary to, nor shall it authorize or permit any officer, director or
employee of, or any investment banker, attorney or other advisor or
representative or agent of, Company or any Company Subsidiary to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal (as hereinafter defined) or (ii) enter into or encourage any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to encourage or facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal; provided, however, that nothing
contained in this Section 5.2(f) shall prohibit the Board of Directors of
Company from furnishing information to, or entering into discussions or
negotiations with, any person or entity that makes an unsolicited Acquisition
Proposal if, and only to the extent that (A) the Board of Directors of Company
after consultation with outside counsel determines in good faith that in order
for the Board of Directors of Company to comply with its fiduciary duties to
stockholders under applicable law it is required to take such action, (B) prior
to taking such action, Company receives from such person or entity an executed
agreement in reasonably customary form relating to the confidentiality of
information to be provided to such person or entity, and (C) the Board of
Directors of Company concludes in good faith that the Acquisition Proposal
contains an offer of consideration that is superior to the consideration set
forth herein. Notwithstanding anything in this Agreement to the contrary,
Company shall (i) promptly advise Parent orally and in writing of (A) the
receipt by it (or any of the other entities or persons referred to above) after
the date hereof of any Acquisition Proposal, or any inquiry which could
reasonably be expected to lead to any Acquisition Proposal, (B) the material
terms and conditions of such Acquisition Proposal or inquiry, and (C) the
identity of the person making any such Acquisition Proposal or inquiry and (ii)
keep Parent reasonably informed of the status and details of any such
Acquisition Proposal or inquiry. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the first
sentence of this Section 5.2(f) by any officer or director of Company or any
Company Subsidiary or any investment banker, attorney or other advisor,
representative or agent of Company or any Company Subsidiary, acting on behalf
of or at the request of the Board of Directors of the Company, shall be deemed
to be a breach of this Section 5.2(f) by Company. For purposes of this
Agreement, "Acquisition Proposal" means any bona fide proposal with respect to a
merger, consolidation, share exchange, joint venture, business combination or
similar transaction involving Company or any Company Subsidiary, or any purchase
of all or any significant portion of the assets of Company or any Company
Subsidiary.
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5.3 FIDUCIARY DUTIES. The Board of Directors of Company shall not (i)
withdraw or modify in a manner materially adverse to Parent, the approval or
recommendation by such Board of Directors of this Agreement or the Merger, or
(ii) approve, recommend or cause Company to enter into any agreement with
respect to any Acquisition Proposal (an "Alternative Transaction") unless
Company receives an unsolicited Acquisition Proposal and the Board of Directors
of Company determines in good faith after consultation with outside counsel that
it is required to do so in order to comply with its fiduciary duties to
stockholders under applicable law, in which event the Board of Directors may (w)
withdraw or modify its approval or recommendation of this Agreement and the
Merger, (x) approve or recommend such Acquisition Proposal, (y) cause Company to
enter into an agreement with respect to such Acquisition Proposal and/or (z)
terminate this Agreement pursuant to Section 7.1(b)(v). If (i) the Board of
Directors of Company takes any action described in clause (y) or (z) of the
preceding sentence, (ii) Parent exercises its right to terminate this Agreement
under Section 7.1(c) based on the Board of Directors of Company having taken any
action described in clause (w) or (x) of the preceding sentence or (iii) the
Agreement is terminated as a result of the failure to receive the requisite vote
for approval of this Agreement and the Merger at the Shareholders' Meeting and
at the time of such meeting a bona fide Acquisition Proposal involving Company
shall have been announced, Company shall, concurrently with the taking of such
action or such termination (a "Fee Payment Event"), as applicable, pay to Parent
the Section 5.4 Fee (as hereinafter defined).
5.4 CERTAIN FEES. Company shall pay to Parent upon demand $1.8 million
upon the occurrence of a Fee Payment Event (the "Section 5.4 Fee"), payable in
same-day funds, as liquidated damages and not as a penalty, if the Section 5.4
Fee is payable pursuant to Section 5.3 to reimburse and compensate Parent for
its time, expenses and lost opportunity costs of pursuing the Merger. In
addition, if Company enters into an agreement with respect to, or consummates,
an Alternative Transaction within one year of the payment by Company of the
Section 5.4 Fee, Company shall pay to Parent an additional fee (the "Topping
Fee"), payable in same-day funds, as liquidated damages and not as a penalty,
concurrently with the consummation of such Alternative Transaction. The Topping
Fee shall be equal to the product obtained by multiplying (a) 25% by (b) the
Incremental Value (as hereinafter defined), but in no case shall the Topping Fee
be less than $1.2 million. The "Incremental Value" shall be equal to the amount
by which the "Alternative Transaction Value" shall exceed the "Merger
Transaction Value" (each as hereinafter defined). The "Alternative Transaction
Value" shall mean the aggregate value of the Alternative Transaction to the
stockholders of Company, valued as of the date of the agreement relating to such
Alternative Transaction and calculated in accordance with generally recognized
and accepted valuation methodologies employed by nationally recognized
investment banking firms for valuing comparable transactions. The "Merger
Transaction Value" shall mean the aggregate value of the Merger to the
stockholders of Company, valued as of the date of the termination of this
Agreement and calculated in accordance with generally recognized and accepted
valuation methodologies employed by nationally recognized investment banking
firms for valuing comparable transactions. If the parties do not agree as to the
Alternative Transaction Value or the Merger Transaction Value, Company and
Parent shall negotiate
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with one another in good faith for a period of ten days to resolve such dispute.
If, after the expiration of such ten-day period, the parties do not agree as to
the Alternative Transaction Value or the Merger Transaction Value, Company and
Parent shall each engage a nationally recognized investment banking firm to
calculate the Alternative Transaction Value or the Merger Transaction Value, or
both, as the case may be. If such investment banking firms do not agree as to
such disputed valuation(s) after 30 days, such firms shall together appoint a
third nationally recognized investment banking firm to resolve such dispute by
calculating the disputed valuation(s). The calculation of such third investment
banking firm shall be conclusive as to the disputed valuation(s). Each party
shall bear the costs and expenses of the investment banking firm engaged by it
pursuant to this Section 5.4, and the costs and expenses of a third investment
banking firm, if necessary, shall be borne equally by Company and Parent. If
Company fails promptly to pay to Parent any amounts due under this Section 5.4,
Company shall pay the costs and expenses (including reasonable legal fees and
expenses) in connection with any action, including the filing of any lawsuit or
other legal action, taken to collect payment, together with interest on the
amount of any unpaid fee at the publicly announced prime rate of Citibank, N.A.
in effect from time to time from the date such fee was required to be paid.
5.5 TAKEOVER STATUTES. If any "fair price," "moratorium," "control
share acquisition," "business combination," "stockholder protection" or similar
antitakeover statute or regulation enacted under state or Federal law shall
become applicable to the Merger, the Proxy Agreements or any of the other
transactions contemplated hereby, Company and the Board of Directors of Company
shall grant such approvals and take all such actions as are within its authority
so that the Proxy Agreements shall be in full force and effect and so that the
Merger and the other transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise use all
commercially reasonable efforts to eliminate or minimize the effects of such
statute or regulation on the Merger, the Proxy Agreements and the other
transactions contemplated hereby.
5.6 CONSENTS. Company and Parent will use all commercially reasonable
efforts to obtain the written consent or approval of each and every governmental
authority and other regulatory body, the consent or approval of which shall be
required in order to permit Parent, Sub and Company to consummate the
transactions contemplated by this Agreement. Company will use all commercially
reasonable efforts to obtain the written consent or approval, in form and
substance reasonably satisfactory to Parent, of each person whose consent or
approval shall be required in order to permit Parent, Sub and Company to
consummate the transactions contemplated by this Agreement, except for any
contracts of Company as to which the failure to obtain any required written
consent or approval thereunder would not individually or in the aggregate result
in, or be reasonably likely to result in, a Material Adverse Effect on Company.
Parent will use all commercially reasonable efforts to obtain the written
consent or approval, in form and substance reasonably satisfactory to Company,
of each person whose consent or approval shall be required in order to permit
Parent, Sub and Company to consummate the transactions contemplated by this
Agreement, except for any contracts of Parent as to which the failure to obtain
any required written consent or approval thereunder would not
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individually or in the aggregate result in, or be reasonably likely to result
in, a Material Adverse Effect on Parent.
5.7 REASONABLE EFFORTS; FURTHER ASSURANCES; COOPERATION. Subject to the
other provisions of this Agreement, the parties hereto shall each use all
commercially reasonable efforts to perform their obligations herein and to take,
or cause to be taken or do, or cause to be done, all things necessary, proper or
advisable under applicable law to obtain all regulatory approvals, including
notices and approvals under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and satisfy all conditions to the obligations
of the parties under this Agreement and to cause the Merger and the other
transactions contemplated by this Agreement to be effected as soon as reasonably
practicable in accordance with the terms of this Agreement and shall cooperate
fully with each other and their respective officers, directors, employees,
agents, counsel, accountants and other designees in connection with any steps
required to be taken as a part of their respective obligations under this
Agreement, including without limitation:
(a) Company and Parent shall promptly make their respective
filings and submissions and shall take, or cause to be taken, all
actions and do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to obtain any required
approval of any other federal, state or local governmental agency or
regulatory body with jurisdiction over the transactions contemplated by
this Agreement.
(b) If any claim, action, suit, investigation or other
proceeding by any governmental body or other person is commenced which
questions the validity or legality of the Merger, the Proxy Agreements
or any of the other transactions contemplated by this Agreement or the
Proxy Agreements or seeks damages in connection with this Agreement or
the Proxy Agreements, the parties agree to cooperate and use all
commercially reasonable efforts to defend against such claim, action,
suit, investigation or other proceeding and, if an injunction or other
order is issued in any such action, suit or other proceeding, to use
all commercially reasonable efforts to have such injunction or other
order lifted, and to cooperate reasonably regarding any other
impediment to the consummation of the transactions contemplated by this
Agreement or the Proxy Agreements.
(c) Each party shall give prompt written notice to the other
of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any of such party's
representations or warranties contained in this Agreement to be untrue
or inaccurate in any material respect at any time from the date of this
Agreement to the Effective Time and (ii) any failure of such party to
comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement.
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(d) Without the prior written consent of Parent, Company will
not terminate any employee if such termination would result in the
payment of any amounts pursuant to "change in control" provisions of
any employment agreement or arrangement.
5.8 NYSE LISTING. Parent will use all commercially reasonable efforts
to cause to be approved for listing on the NYSE, subject to official notice of
issuance, a sufficient number of shares of Parent Common Stock to be issued in
the Merger and pursuant to Company Stock Options (as defined in Section 5.15).
5.9 NOTICE. Each of Company and Parent shall promptly notify the other
of any material change in the normal course of its business or in the operation
of its properties and of the receipt by it or any of its subsidiaries of notice
of any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or the receipt by it or any of its
subsidiaries of a notice of the institution or the threat of litigation
involving it or any of its subsidiaries which in any such case, individually or
in the aggregate, has or would reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Company or a Material Adverse
Effect on Parent, as the case may be, and will keep the other party fully
informed with respect to such events.
5.10 REGISTRATION STATEMENT; SHAREHOLDER APPROVALS
(a) As soon as is reasonably practicable after the execution
of this Agreement, Parent shall prepare and file with the SEC the Registration
Statement (in which the Proxy Statement will be included as a prospectus) and
Company shall prepare and file with the SEC the Proxy Statement. Parent shall
use all commercially reasonable efforts to cause the Registration Statement to
become effective under the Securities Act as promptly as practicable after such
filing and shall take all commercially reasonable actions required to be taken
under any applicable state blue sky or securities laws in connection with the
issuance of the shares of Parent Common Stock pursuant to this Agreement. Each
party hereto shall furnish all information concerning it and the holders of its
capital stock as the other party hereto may reasonably request in connection
with such actions.
(b) Company shall call a Shareholders' Meeting to be held as
soon as practicable after the date hereof for the purpose of voting upon the
Merger and this Agreement. In connection with the Shareholders' Meeting, Company
and Parent shall prepare and file the Proxy Statement with the SEC. Company
shall mail the Proxy Statement to its stockholders, the Board of Directors of
Company, subject to Section 5.3, shall recommend to its stockholders the
approval of the Merger and this Agreement, and Company shall use commercially
reasonable efforts to obtain such stockholder approval. Without limiting the
generality of the foregoing, Company agrees that, subject to its right to
terminate this Agreement pursuant to Section 7.1(b)(v), its obligations pursuant
to this Section 5.10(b) shall not be affected by the commencement, public
proposal, public disclosure or communication to Company of any Acquisition
Proposal.
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5.11 EXPENSES. Subject to Sections 5.3 and 5.4, if this Agreement is
terminated for any reason without breach by any party, each party hereto shall
pay its own expenses incident to preparing for, entering into, and carrying out
this Agreement and to consummating the Merger (including all attorneys' fees
incurred by such party in connection therewith), except that Company and Parent
shall divide equally the following expenses: (a) the costs incurred in
connection with the printing and mailing of the Registration Statement, the
Proxy Statement and related documents; and (b) all filing or registration fees
paid by Company or Parent, including state securities laws filing or
registration fees, if any (but excluding attorneys' fees).
5.12 PRESS RELASES; FILINGS. Without the consent of the other parties,
none of the parties shall issue any press release or make any public
announcement with regard to this Agreement or the Merger or any of the
transactions contemplated hereby or thereby; provided, however, that (i) nothing
in this Section 5.12 shall be deemed to prohibit any party hereto from making
any disclosure which its counsel deems necessary or advisable in order to
fulfill such party's disclosure obligations imposed by law or the rules of any
national securities exchange or automated quotation system so long as such party
uses all commercially reasonable efforts to consult with the other parties prior
to such disclosure, and (ii) if this Agreement is terminated, then each party
may make such disclosure as it deems reasonably appropriate so long as such
party uses all commercially reasonable efforts to consult with the other parties
prior to such disclosure. Each of Company and Parent shall promptly notify the
other of each report, schedule and other document filed by it or any of its
respective subsidiaries with the SEC and of any other document pertaining to the
transactions contemplated hereby filed with any other governmental authorities.
5.13 INDEMNIFICATION OF OFFICERS AND DIRECTORS
(a) For a period of six years after the Effective Time, the
Surviving Corporation shall provide with respect to each present or former
director and officer of Company and its subsidiaries (both present and past)
(the "Indemnified Parties"), the indemnification rights (including any rights to
advancement of expenses) which such Indemnified Parties had, whether from
Company or such subsidiary, immediately prior to the Merger, whether under the
FBCA or the bylaws of Company or such subsidiary or otherwise.
(b) Immediately following the Effective Time, Parent shall
cause to remain in effect the current policies of directors= and officers=
liability insurance maintained by Company or any Company Subsidiary (provided
Parent may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are no less advantageous) with
respect to claims arising from facts or events which occurred at or before the
Effective Time, and Parent shall maintain such coverage for a period of six
years after the Effective Time; provided, however, that in no event shall Parent
be required to expend pursuant to this Section 5.13(b) on an annual basis more
than an amount equal to 150% of the current annual premiums paid by Company and
the
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Company Subsidiaries for such insurance and, in the event the cost of such
coverage shall exceed that amount, Parent shall purchase as much coverage as
possible for such amount.
(c) This Section 5.13 shall survive the Closing and is
intended to benefit Company, the Surviving Corporation and each of the
Indemnified Parties and his or her heirs and representatives (each of whom shall
be entitled to enforce this Section 5.13 against Parent or the Surviving
Corporation to the extent specified herein) and shall be binding on all
successors and assigns of Parent and the Surviving Corporation.
5.14 TAX TREATMENT. Parent and Company agree to treat the Merger
as a reorganization within the meaning of Section 368(a) of the Code. During the
period from the date of this Agreement through the Effective Time, unless the
parties shall otherwise agree in writing, none of Parent, Company or any of
their respective subsidiaries shall knowingly take or fail to take any action
which action or failure to act would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
5.15 STOCK OPTIONS
(a) At the Effective Time, each outstanding option to purchase
shares of Company Common Stock (a "Company Stock Option") issued pursuant to any
incentive or stock option program of Company (the "Company Plan"), whether
vested or unvested, shall be assumed by Parent. From and after the Effective
Time, each Company Stock Option shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such Company
Stock Option, a number of shares of Parent Class A Common Stock equal to (x) the
number of shares of Company Common Stock covered by such Company Stock Option,
multiplied by (y) the Exchange Ratio, at a price per share equal to (A) the
exercise price of such Company Stock Option multiplied by (B) (1) one divided by
(2) the Exchange Ratio; PROVIDED, HOWEVER, that in the case of any option to
which Section 421 of the Code applies by reason of its qualification under
Section 422 of the Code ("incentive stock options"), the option price, the
number of shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in order to comply
with Section 424(a) of the Code.
(b) As soon as practicable after the Effective Time, Parent
shall deliver to the holders of Company Stock Options appropriate notices
setting forth such holders' rights pursuant to the Company Plan and the
agreements evidencing the grants of such Company Stock Options shall continue in
effect on the same terms and conditions (subject to the adjustments required by
this Section 5.15 after giving effect to the Merger and the assumption by Parent
as set forth above). If necessary, Parent shall comply with the terms of the
Company Plan and ensure, to the extent required by, and subject to the
provisions of, such Plan, that Company Stock Options which qualified as
incentive stock options prior to the Effective Time continue to qualify as
incentive stock options of Parent after the Effective Time.
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(c) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Class A Common
Stock for delivery upon exercise of Company Stock Options assumed by it in
accordance with this Section 5.15. As soon as practicable after the Effective
Time and in no event later than 30 days after the Effective Time, Parent shall
file a registration statement on Form S-3 or Form S-8, as the case may be (or
any successor or other appropriate forms), or another appropriate form with
respect to the shares of Parent Class A Common Stock subject to such options and
shall use all commercially reasonable efforts to maintain the effectiveness of
such registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
5.16 COMPANY AFFILIATES. Company shall deliver to Parent a letter
identifying all persons who are, at the time the Merger is submitted to a vote
of the stockholders of Company, possible "affiliates" of Company for purposes of
Rule 145 under the Securities Act. Company shall cause each person who is
identified as a possible "affiliate" in such letter to deliver to Parent on or
prior to the Effective Time a written statement in the form of Exhibit 5.16 (the
"Affiliates Letter"). Parent shall be entitled to place legends on any
certificates of Parent Class A Common Stock issued to such possible affiliates
to restrict transfer of such shares as set forth above.
5.17 EMPLOYMENT AGREEMENT. Concurrently with the execution and delivery
of this Agreement, Company shall enter into an employment agreement
substantially in the form of the agreement contained in Exhibit 5.17(a) (the
"Employment Agreements") with each of the persons listed on Exhibit 5.17(b).
Prior to the earlier to occur of the Effective Time or the termination of this
Agreement, Company shall not amend or terminate any of the Employment
Agreements. Prior to the Effective Time, Company will use its best efforts to
cause each of the persons listed on Exhibit 5.17(c) to enter into employment
agreements substantially in the form of the agreements contained in Exhibits
5.17(d)-1 and 5.17(d)-2.
5.18 COMPANY EXPENSES. Company agrees that the Anticipated Company
Transactional Expenses (as defined below) will be reasonable and customary for
transactions of this type and in any event shall not exceed $1,000,000. At least
thirty (30) days prior to the Effective Time, the Chief Financial Officer of
Company shall provide Parent with a written certificate setting forth and
certifying to the best of such Chief Financial Officer's knowledge and belief
the aggregate amount of fees, costs and expenses anticipated to be incurred by
Company in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, the anticipated fees, costs and expenses
of financial advisors, accountants and counsel (the "Anticipated Company
Transactional Expenses"). Parent shall have full and complete access to the
books, records and other documents of Company and to the employees of Company
for purposes of confirming and auditing the size and nature of the Anticipated
Company Transactional Expenses.
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5.19 POOLING OF INTERESTS ACCOUNTING. Except for other actions
specifically permitted to be taken hereunder, from and after the date of this
Agreement and until the Effective Time, unless Parent otherwise determines that
the acquisition will not be accounted for as a "pooling of interests", neither
Company nor Parent nor any of their respective subsidiaries or other affiliates
shall take, or fail to take, any action that would jeopardize the treatment of
Parent's acquisition of Company as a "pooling of interests" for accounting
purposes.
5.20 TREATMENT OF WARRANTS. Prior to the Effective Time, Parent shall
enter into an agreement with the holder of the warrants (the "Warrantholder")
issued pursuant to the Warrant Agreement dated as of April 26, 1994 by and among
Company and Teachers Insurance and Annuity Association of America (the "Warrant
Agreement") to assume the warrants issued pursuant to the Warrant Agreement and
the obligations of Company under the warrants and the Warrant Agreement upon
substantially the same terms as set forth in the Warrant Agreement, together
with such changes as shall be agreed to by the Warrantholder and Parent.
ARTICLE 6
CONDITIONS PRECEDENT TO MERGER
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations
of each party to effect the Merger shall be subject to the satisfaction on or
prior to the Closing Date of each of the following conditions:
(a) This Agreement and the Merger shall have been approved and
adopted by the affirmative vote or consent of the holders of at least a majority
of the outstanding shares of Company Common Stock.
(b) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental authority or other regulatory
body required in connection with the execution, delivery and performance of this
Agreement, the failure to obtain which would prevent the consummation of the
Merger or have a Material Adverse Effect on Company or a Material Adverse Effect
on Parent, shall have been obtained without the imposition of any condition
having a Material Adverse Effect on Company or a Material Adverse Effect on
Parent.
(c) All authorizations, consents, waivers and approvals from
parties to contracts or other agreements to which any of Company or Parent (or
their respective subsidiaries) is a party, or by which either is bound, as may
be required to be obtained by them in connection with the performance of this
Agreement, the failure to obtain which would prevent the consummation of the
Merger or have, individually or in the aggregate, a Material Adverse Effect on
Company or, individually or in the aggregate, a Material Adverse Effect on
Parent, shall have been obtained.
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(d) Early termination shall have been granted or applicable
waiting periods shall have expired under the HSR Act.
(e) No governmental authority or other regulatory body
(including any court of competent jurisdiction) shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of making illegal, materially
restricting or in any way preventing or prohibiting the Merger or the
transactions contemplated by this Agreement.
(f) The Registration Statement shall have become effective
under the Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such purpose,
or under the proxy rules of the SEC pursuant to the Exchange Act and with
respect to the transactions contemplated hereby, shall be pending before or
threatened by the SEC. At the effective date of the Registration Statement, the
Registration Statement shall not contain any untrue statement of a material
fact, or omit to state any material fact necessary in order to make the
statements therein not misleading, and, at the mailing date of the Proxy
Statement and the date of the Shareholders' Meeting, the Proxy Statement shall
not contain any untrue statement of a material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading.
(g) Parent and Company each shall have obtained a written
opinion of King & Spalding, counsel to Parent, reasonably acceptable to Parent
and Company (the "Tax Opinion"), to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and that the
exchange in the Merger of Parent Common Stock for Company Common Stock will not
give rise to gain or loss to the stockholders of Company with respect to such
exchange (except to the extent of any cash paid in lieu of fractional shares).
The Tax Opinion will be addressed to each of Parent and Company.
(h) The shares of Parent Common Stock to be issued pursuant to
this Agreement and pursuant to the Company Stock Options shall have been
authorized for listing on the NYSE, subject to official notice of issuance.
6.2 CONDITIONS TO OBLIGATIONS OF COMPANY. The obligations of Company to
effect the Merger shall be subject to the satisfaction on or prior to the
Closing Date of each of the following conditions unless waived by Company:
(a) The representations and warranties of Parent set forth in
this Agreement shall be true and correct in all material respects at and as of
the date of this Agreement and at and as of the Closing Date as though made at
and as of the Closing Date, except to the extent such representations and
warranties (i) speak as of a specified date (which representations and
warranties shall be true and correct as of such date) and except to the extent
contemplated by this Agreement;
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or (ii) are already qualified by materiality, in which event such
representations and warranties shall be true and correct in all respects.
(b) Parent and Sub each shall have performed in all material
respects all covenants and agreements required to be performed by them under
this Agreement at or prior to the Closing Date.
(c) Parent shall furnish Company with a certificate of its
appropriate officers as to compliance with the conditions set forth in Sections
6.2(a) and (b).
(d) Company shall have received from KPMG Peat Marwick LLP and
Arthur Andersen LLP letters dated (i) the effective date of the Registration
Statement and (ii) the Closing Date, with respect to certain financial
information regarding Parent included in the Registration Statement, in each
case in form and substance reasonably satisfactory to Company and customary in
scope and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement.
(e) Company shall have received an opinion, dated the Closing
Date, of King & Spalding, in form and substance reasonably satisfactory to
Company, with respect to the matters set forth in Exhibit 6.2(e).
(f) No suit, investigation, action or other proceeding shall
be overtly threatened or pending against Parent before any court or governmental
agency which (i) would result in the restraint or prohibition of Parent, or the
obtaining of damages or other relief from Parent, in connection with this
Agreement or the consummation of the transactions contemplated hereby or thereby
which would in any such case, individually or in the aggregate, have a Material
Adverse Effect on Parent or (ii) any orders restricting Parent from conducting
its business as now being conducted which, individually or in the aggregate,
would have a Material Adverse Effect on Parent.
6.3 CONDITIONS TO OBLIGATIONS OF PARENT. The obligations of Parent to
effect the Merger shall be subject to the satisfaction on or prior to the
Closing Date of each of the following conditions unless waived by Parent:
(a) (i) the representations and warranties of Company set
forth in Sections 3.2, 3.3, 3.4, 3.5, 3.6, 3.23, 3.24, 3.25, 3.26, 3.27, 3.28,
3.29, 3.30 and 3.31 of this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing
Date as though made at and as of the Closing Date, except to the extent such
representations and warranties speak as of a specified date (which
representations and warranties shall be true and correct as of such date); (ii)
the representations and warranties of Company set forth in Sections 3.7, 3.8,
3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16, 3.17, 3.18, 3.19, 3.20, 3.21,
3.22 and 3.32 of this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement; and (iii) the representation
and warranty set forth in Section 3.33 of this Agreement shall be true and
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correct in all respects at and as of the date of this Agreement and at and as of
the Closing Date as though made at and as of the Closing Date.
(b) Company shall have performed in all material respects all
covenants and agreements required to be performed by it under this Agreement at
or prior to the Closing Date.
(c) Company shall furnish Parent with a certificate of its
appropriate officers as to compliance with the conditions set forth in Sections
6.3(a) and (b).
(d) Parent shall have received from KPMG Peat Marwick LLP
letters dated (i) the date of the Proxy Statement and (ii) the Closing Date,
with respect to certain financial information regarding Company included in the
Proxy Statement, in each case in form and substance reasonably satisfactory to
Parent and customary in scope and substance for letters delivered by independent
public accountants in connection with proxy statements similar to the Proxy
Statement.
(e) Parent shall have received an Affiliates Letter from each
possible "affiliate" described in Section 5.16.
(f) Parent shall have received an opinion, dated the Closing
Date, of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., counsel to
Company, in form and substance reasonably satisfactory to Parent, with respect
to the matters set forth in Exhibit 6.3(f).
(g) No suit, investigation, action or other proceeding shall
be overtly threatened or pending against Parent, Company or any of the Company
Subsidiaries before any court or governmental agency which (i) would result in
the restraint or prohibition of any such party, or the obtaining of damages or
other relief from any such party, in connection with this Agreement or the
consummation of the transactions contemplated hereby or thereby which would in
any such case, individually or in the aggregate, have a Material Adverse Effect
on Parent or a Material Adverse Effect on Company, or (ii) any orders
restricting Company or any Company Subsidiary or Parent from conducting its
business as now being conducted which, individually or in the aggregate, would
have a Material Adverse Effect on Company or a Material Adverse Effect on
Parent.
(h) Each of the directors of Company requested by Parent to do
so shall have tendered to Parent resignation letters in form and substance
reasonably acceptable to Parent on or prior to the Closing Date, such
resignations to be effective at the Effective Time.
(i) Each of the persons identified in Exhibit 5.17(c) shall
have executed and delivered their respective employment agreement in
substantially the form of the agreements contained as Exhibits 5.17(d)-1 and
5.17(d)-2 hereto.
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ARTICLE 7
TERMINATION AND ABANDONMENT OF THE MERGER
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the approval by the stockholders of
Company:
(a) by the mutual written consent of Parent and Company;
(b) by Company if:
(i) the Merger is not consummated on or before May 31, 1998,
unless the failure of such occurrence shall be due to the failure of
Company to perform or observe the covenants, agreements and conditions
hereof to be performed or observed by it at or before the Effective
Time;
(ii) events occur which render impossible the satisfaction of
one or more of the conditions set forth in Sections 6.1 and 6.2 and
such conditions are not waived by Company, unless the failure of such
occurrence shall be due to the failure of Company to perform or observe
the covenants, agreements and conditions hereof to be performed or
observed by it at or before the Effective Time;
(iii) Company is enjoined or restrained by any governmental
authority or other regulatory body (including any court), such
injunction or restraining order prevents the performance by Company of
its obligations hereunder and such injunction shall not have been
withdrawn by the earlier to occur of the date 60 days after the date on
which such injunction was first issued or May 31, 1998;
(iv) the shareholders of Company do not approve this Agreement
and the Merger at the Shareholders' Meeting;
(v) the Board of Directors of Company, subject to and in
compliance with Section 5.3, shall have withdrawn or materially
modified in a manner adverse to Parent its recommendation of this
Agreement and the Merger or the Board of Directors shall have approved
or recommended another Acquisition Proposal, provided that prior to and
as a condition to such termination Company has paid the Section 5.4 Fee
and, if then payable, the Topping Fee to Parent;
(c) by Parent if:
(i) the Merger is not consummated on or before May 31, 1998,
unless the failure of such occurrence shall be due to the failure of
Parent or Sub to perform or observe the
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covenants, agreements and conditions hereof to be performed or observed
by them at or before the Effective Time;
(ii) events occur which render impossible the satisfaction of
one or more of the conditions set forth in Sections 6.1 and 6.3 and
such conditions are not waived by Parent, unless the failure of such
occurrence shall be due to the failure of Parent or Sub to perform or
observe the covenants, agreements and conditions hereof to be performed
or observed by them at or before the Effective Time;
(iii) Parent is enjoined or restrained by any governmental
authority or other regulatory body (including any court), such
injunction or restraining order prevents the performance by Parent of
its obligations hereunder and such injunction shall not have been
withdrawn by the earlier to occur of the date 60 days after the date on
which such injunction was first issued or May 31, 1998;
(iv) the shareholders of Company do not approve this Agreement
and the Merger at the Shareholders' Meeting;
(v) the Board of Directors of Company shall have withdrawn or
materially modified in a manner adverse to Parent its recommendation of
this Agreement and the Merger or the Board of Directors shall have
approved or recommended another Acquisition Proposal; or
(vi) the Anticipated Company Transactional Expenses exceed
$1,000,000.
7.2 SPECIFIC PERFORMANCE AND OTHER REMEDIES. The parties each
acknowledge that the rights of each party to consummate the transactions
contemplated by this Agreement are special, unique and of extraordinary
character, and that, if any party violates or fails or refuses to perform any
covenant or agreement made by it in this Agreement, the non-breaching party may
be without an adequate remedy at law. The parties each agree, therefore, that if
either party violates or fails or refuses to perform any covenant or agreement
made by such party in this Agreement, the non-breaching party or parties may,
subject to the terms of this Agreement seek remedies at law, including an action
for damages arising from such violation or failure, and in addition to any
remedies at law for damages or other relief, institute and prosecute an action
in any court of competent jurisdiction to enforce specific performance of such
covenant or agreement or seek any other equitable relief.
7.3 EFFECT OF TERMINATION AND ABANDONMENT. If the termination and
abandonment of this Agreement under Section 7.1, this Agreement shall become
void and have no effect, without any liability on the part of any party or its
directors, officers or stockholders except (i) as provided in the second
sentence of Section 5.1, and in Sections 5.3, 5.4, 5.11 and 5.12 and (ii) to the
extent that such
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termination results from the breach by any party hereto of any material
representation, warranty or covenant hereunder.
ARTICLE 8
MISCELLANEOUS
8.1 WAIVER AND AMENDMENT. Any term or provision of this Agreement may
be waived in writing at any time by the party which is, or whose stockholders
are, entitled to the benefits thereof, and any term or provision of this
Agreement may be amended or supplemented at any time by action of the respective
Boards of Directors (or its authorized representative) of Parent or Company
without action of the shareholders, whether before or after the Shareholders'
Meeting; provided, however, that after approval of the shareholders of Company
no such amendment shall reduce the amount or change the form of the
consideration to be delivered to Company's shareholders as contemplated by this
Agreement or otherwise materially adversely affect the interests of such
shareholders unless such amendment is approved by Company's shareholders. No
amendment to this Agreement shall be effective unless it has been executed by
Company, Parent and Sub.
8.2 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS. Except
for the agreements contained in Sections 1.2, 1.3, 1.4, 1.5, 1.6, 5.12, 5.13 and
5.15 and Article 8, none of the representations, warranties and agreements of
Company, Parent or Sub in this Agreement, or in any instrument or certificate
delivered pursuant to this Agreement, shall survive the Merger nor shall their
respective stockholders, directors or officers have any liability to the other
parties hereto after the Effective Time on account of any breach of warranty or
failure or the incorrectness of any of the representations or warranties
contained herein or in any certificate or other instrument delivered pursuant to
this Agreement. The sole right and remedy arising from a misrepresentation or
breach of warranty, from the failure of any of the conditions of the Merger to
be met, or from the failure to perform any promise or discharge any obligation
in this Agreement shall be termination of this Agreement by the aggrieved party
and the remedies provided in Sections 5.4, 7.2 and 7.3.
8.3 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
telecopied (if confirmed) or sent by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
If to Company:
Cruise America, Inc.
11 West Hampton Avenue
Mesa, Arizona 85210-5258
Attention: Mr. Randall S. Smalley, President
Telecopy No.: (602) 464-7302
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With a copy to:
Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Mr. Kenneth C. Hoffman
Telecopy No.: (305) 579-0717
If to Parent or Sub:
Budget Group, Inc.
4225 Naperville Road
Lisle, Illinois 60532
Attention: Mr. Robert L. Aprati,
Executive Vice President, General Counsel and Secretary
Telecopy No.: (630) 955-7810
With a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Mr. C. William Baxley
Telecopy No.: (404) 572-5100
8.4 DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive headings are
for convenience of reference only and shall not control or affect the meaning or
construction of any provision of this Agreement. When a reference is made in
this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available.
8.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement. This Agreement shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other parties, it
being understood that the parties need not sign the same counterpart.
8.6 ENTIRE AGREEMENT. This Agreement and the Confidentiality Agreements
contain the entire agreement between Parent, Sub and Company with respect to the
Merger, and supersede all
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prior arrangements or understandings with respect to the subject matter hereof,
including the Letter of Intent dated October 20, 1997. Except as otherwise
contemplated in the covenants listed in Sections 5.13, 5.15 and 5.21 (which
covenants shall be enforceable by the person or persons affected thereby
following the Effective Time), this Agreement is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
8.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA (WITHOUT REGARD TO ANY
APPLICABLE CONFLICTS OF LAW PROVISIONS THEREOF).
8.8 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in a mutually acceptable manner in order that
the transactions be consummated as originally contemplated to the fullest extent
possible.
8.9 KNOWLEDGE. As used in this Agreement, (i) the phrases "to the
knowledge of Company," "known to Company" and similar phrases shall mean the
knowledge of any of the executive officers of Company, and (ii) the phrases "to
the knowledge of Parent," "known to Parent" and similar phrases shall mean the
knowledge of any of the executive officers of Parent.
8.10 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, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties hereto and their respective successors and assigns.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its respective duly authorized
officers, all as of the date first above written.
BUDGET GROUP, INC.
By: /s/ Scott R. White
-----------------------------
Name: Scott R. White
Title: Executive Vice President
CA ACQUISITION CORPORATION
By: /s/ Scott R. White
-----------------------------
Name: Scott R. White
Title: President
CRUISE AMERICA, INC.
By: /s/ Randall S. Smalley
-----------------------------
Name: Randall S. Smalley
Title: President
<PAGE> 1
EXHIBIT 4.1
AMENDMENT NO. 1
TO
RIGHTS AGREEMENT
THIS AMENDMENT No. 1 (the "Amendment"), dated as of November 25, 1997
is between Cruise America, Inc., a Florida corporation (the "Company"), and
ChaseMellon Shareholder Services, LLC (formerly Mellon Securities Trust
Company), as rights agent (the "Rights Agent").
RECITALS
A. The Company and the Rights Agent are parties to a Rights Agreement
dated as of March 8, 1989 (the "Rights Agreement").
B. Budget Group, Inc., a company formed under the laws of Delaware
("Parent"), CA Acquisition Corporation, a Florida corporation and a wholly-owned
subsidiary of Parent ("Sub"), and the Company propose to enter into a Plan and
Agreement of Merger dated as of November 25, 1997 (the "Merger Agreement")
pursuant to which Sub will be merged with and into the Company, with the Company
as the surviving corporation (the "Merger").
C. Pursuant to Section 26 of the Rights Agreement, the Board of
Directors of the Company has determined that an amendment to the Rights
Agreement as set forth herein is necessary and desirable, and the Company and
the Rights Agent desire to evidence such amendment in writing.
Accordingly, the parties agree as follows:
1. AMENDMENT OF SECTION 1(A). Section 1(a) of the Rights Agreement is
amended by inserting the following at the end of Section 1(a):
"Notwithstanding anything in this Rights Agreement to the contrary
neither Budget Group, Inc., a company formed under the laws of Delaware
("Parent"), CA Acquisition Corporation, a Florida corporation and
wholly owned subsidiary of Parent ("Sub"), nor any Affiliate or
Associate of Parent or Sub, shall be deemed to be an Acquiring Person
by virtue of either: (i) the Irrevocable Proxy Agreements to be entered
into as November 25, 1997 by and between Parent and each of Robert A.
Smalley, Robert A. Smalley, Jr., Randall S. Smalley and Sally Smalley
DiLucente (the "Proxy Agreements"); or (ii) the Plan and Agreement of
Merger, to be entered into as of November 25, 1997, between the
Company, Parent and Sub, as it may be amended or supplemented from time
to time in
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accordance with its terms (the "Merger Agreement" and together with the
Proxy Agreements, sometimes hereinafter the "Acquisition Agreements"),
or by virtue of consummation of any of the transactions contemplated by
the Acquisition Agreements."
2. AMENDMENT TO SECTION 1(P). Section 1(p) of the Rights Agreement is
hereby amended in
its entirety as follows:
"(p) "Final Expiration Date" means the earlier to occur of (x)
the "Effective Time," as such term is defined in the Merger Agreement
(as defined in Section 1(a)) or (y) the close of business on March 8,
1999."
3. AMENDMENT OF SECTION 1(C)(C). Section 1(c)(c) of the Rights
Agreement is amended by adding the following sentence at the end thereof:
"Notwithstanding the foregoing or anything in this Rights Agreement to
the contrary, a Stock Acquisition Date shall not be deemed to have
occurred by virtue of the execution and delivery of the Acquisition
Agreements or consummation of the transactions contemplated thereby."
4. AMENDMENT OF SECTION 13(D). Section 13(d) of the Rights Agreement is
hereby amended by inserting the following sentence as the penultimate sentence
thereof:
"Notwithstanding the foregoing, this Section 13 shall not apply to the
Merger or as a result of the execution and delivery of the Acquisition
Agreements or the consummation of the transactions contemplated
thereby."
5. EFFECTIVENESS. This Amendment shall be deemed effective as of
November 25, 1997 as if executed on such date. Except as amended hereby, the
Rights Agreement shall remain in full force and effect and shall be otherwise
unaffected hereby.
6. MISCELLANEOUS. This Amendment shall be deemed to be a contract made
under the laws of the State of Florida and for all purposes shall be governed by
and construed in accordance with the laws of such State applicable to contracts
to be made and performed entirely within such State. This Amendment may be
executed in any number of counterparts, each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument. If any term, provision, covenant or
restriction of this Amendment is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Amendment shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
2
<PAGE> 3
EXECUTED as of the date first set forth above.
Cruise America, Inc.,
Attest: a Florida corporation
- --------------------------- ------------------------------
Name: Name:
Title: Title:
ChaseMellon Shareholder Services, LLC
(formerly Mellon Securities Trust
Company), as Rights Agent
Attest:
- --------------------------- ------------------------------
Name: Name:
Title: Title:
3
<PAGE> 1
EXHIBIT 99.1
BUDGET AND CRUISE AMERICA SIGN DEFINITIVE MERGER AGREEMENT
LISLE, Ill., Nov. 25 1997 - Budget Group, Inc. (NYSE: BD), the world's third
largest car and truck rental company, and Cruise America, Inc. (Amex: RVR), one
of the largest North American companies specializing primarily in the rental and
sale of recreational vehicles, have signed a definitive merger agreement.
The agreement follows last month's announcement of Budget's plans to acquire
Cruise America in a stock-for-stock merger. Under the terms of the transaction,
Cruise America stockholders will receive 0.28073 shares of Budget Class A common
stock for each share of Cruise America, or a total of approximately 1.77 million
shares of Budget Class A common stock. The parties expect that the transaction
will close in the first quarter of 1998.
Cruise America, which had revenues of $95.6 million and pretax income of $3.8
million for its fiscal year ended April 30, 1997, operates a network of 17
company-owned facilities and 74 satellite rental centers throughout North
America, with a combined fleet of more than 4,300 recreational vehicles,
including motorhomes, truck campers, motorcycles and shuttle busses. With
locations strategically situated near national parks and other scenic
destinations across the U.S., Canada and Alaska, Cruise America caters largely
to a clientele of North American and European vacationers.
In recent years, Cruise America has significantly lowered its costs by switching
its motorhome fleet from single-bodied units to modular units. This proprietary
modular approach allows the company to refurbish the camper portion of these
vehicles and remount them on new RV truck chassis. The used chassis are
converted at a nominal cost into delivery trucks and then sold at attractive
prices into the large market for pre-owned trucks.
The completion of the transaction will be subject to approval by Cruise
America's stockholders, the receipt of all necessary regulatory approvals and
other customary closing conditions. There can be no assurances that the
transaction ultimately will close.
Budget Group, Inc., through subsidiary companies and their franchises, operates
Budget Car and Truck Rental, the third largest worldwide car and truck rental
system, with over 3,200 airport and local market locations in more than 120
countries and territories. In addition, the Company owns Premier Car Rental,
which serves the insurance replacement market through a network of 101 locations
in 13 major U.S. markets. Budget Car Sales, a subsidiary of Budget Group, is one
of the largest independent retailers of late model vehicles in the United
States, operating 26 retail car sales operations in 28 states, and operates
airport parking facilities at certain locations.
Cruise America, Inc. believes that it is one of the largest companies in North
America specializing in the rental and sale of recreational vehicles, including
motorhomes, truck campers, motorcycles
<PAGE> 2
and shuttle buses. The company's common stock trades on the American Stock
Exchange under the ticker symbol "RVR."
Certain items in this press release may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and
as such may involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of Budget or
Cruise America to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
forward-looking statements speak only as of the date of this press release.
Budget and Cruise America expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in Budget's or Cruise America's
expectations with regard thereto or any change in events, conditions or
circumstances on which any statement is based.
This press release does not constitute "proxy solicitation material" within the
meaning of Regulation 14A and Schedule 14A of the Securities Exchange Act of
1934, as amended. In addition, this press release shall not constitute an offer
to sell or the solicitation of an offer to buy Budget Class A common stock nor
shall there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state.
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