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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
DUTY FREE INTERNATIONAL, INC.
(Name of Subject Company)
DUTY FREE INTERNATIONAL, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title and Class of Securities)
267 08410
(CUSIP Number of Class of Securities)
LAWRENCE CAPUTO, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
DUTY FREE INTERNATIONAL, INC.
63 COPPS HILL ROAD
RIDGEFIELD, CONNECTICUT 06877
(203) 431-6057
(Name, address and telephone number of person
authorized to receive notice and communications
on behalf of the person(s) filing statement)
WITH A COPY TO:
STEPHEN P. FARRELL, ESQ.
MORGAN, LEWIS & BOCKIUS LLP
101 PARK AVENUE
NEW YORK, NEW YORK 10178
(212) 309-6050
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Duty Free International, Inc., a Maryland
corporation (the "Company"), and the address of its principal executive offices
is 63 Copps Hill Road, Ridgefield, Connecticut 06877. The title of the class of
equity securities to which this Statement relates is the common stock, par value
$.01 per share, of the Company (the "Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to a tender offer by W&G Acquisition Corporation, a
Maryland corporation ("Purchaser") and a wholly owned subsidiary of BAA plc, a
corporation organized under the laws of England ("Parent"), disclosed in a
Tender Offer Statement on Schedule 14D-1, dated July 9, 1997 (the "Schedule
14D-1"), to purchase all outstanding shares of Common Stock (the "Shares"), at a
price of $24.00 per Share, net to the seller in cash, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated July 9, 1997 (the
"Offer to Purchase"), and the related Letter of Transmittal (which, as amended
from time to time, together constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 2, 1997 (the "Merger Agreement"), among Parent, the Purchaser and the
Company. The Merger Agreement provides, among other things, that following
satisfaction or waiver of all conditions to the Merger, the Purchaser will be
merged with the Company (the "Merger"). A copy of the Merger Agreement has been
filed as Exhibit 1 hereto and is incorporated herein by reference.
Based on the information contained in the Schedule 14D-1, the principal
executive offices of the Purchaser are located c/o The Corporation Trust
Incorporated at 32 South Street, Baltimore, Maryland 21202 and the principal
executive offices of Parent are located at Stockley House, 130 Wilton Road,
London SW1V 1LQ.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and (i) the Company, its executive officers,
directors or affiliates or (ii) the Purchaser, its executive officers, directors
or affiliates are described at pages 8 through 14 of the Company's Proxy
Statement, dated April 14, 1997, relating to the Company's 1997 Annual Meeting
of Stockholders (the "1997 Proxy Statement"). Copies of such pages are filed as
Exhibit 2 hereto and are incorporated herein by reference. As of the date
hereof, except as described below or as set forth in Schedule I to this
Statement or pages 8 through 14 of the 1997 Proxy Statement (each of which is
incorporated herein by reference), there exists no material contract, agreement,
arrangement or understanding and no actual or potential conflict of interest
between the Company or its affiliates and (i) the Company's executive officers,
directors or affiliates, or (ii) the Purchaser or the Purchaser's executive
officers, directors or affiliates.
MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement.
The summary is qualified in its entirety by reference to the Merger Agreement
which is incorporated herein by reference and a copy of which is filed as
Exhibit 1 hereto.
THE OFFER. The Merger Agreement provides that, subject to the provisions
thereof, as promptly as practicable but in no event later than five business day
after the announcement of the execution of the Merger Agreement, the Purchaser
will commence the Offer and that, upon the terms and subject to prior
satisfaction or waiver of the conditions of the Offer, the Purchaser will
purchase all Shares validly tendered pursuant to the Offer. The Merger Agreement
provides that, without the consent of the Company, the Purchaser will not reduce
the number of shares subject to the Offer, reduce the Offer price, modify or add
to the conditions of the Offer set forth in "Conditions to the Offer" below or
otherwise amend the Offer in any manner materially adverse to the Company's
stockholders, except as provided in the next two
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sentences, extend the Offer, or change the form of consideration payable in the
Offer. Notwithstanding the foregoing, the Purchaser may, without the consent of
the Company, (i) extend the Offer for a period of not more than 10 business days
beyond the initial expiration date of the Offer (which initial expiration date
shall be 20 business days following commencement of the Offer), if on the date
of such extension less than 90% of the outstanding Shares have been validly
tendered and not properly withdrawn pursuant to the Offer, (ii) extend the Offer
from time to time if at the initial expiration date or any extension thereof the
Minimum Condition (as defined below) or any of the other conditions to the
Purchaser's obligation to purchase Shares set forth in paragraphs (a), (b) and
(e) under "Conditions to the Offer" below, shall not be satisfied or waived,
until such time as such conditions are satisfied or waived, (iii) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer and (iv) extend the Offer for any reason for a
period of not more than 10 business days beyond the latest expiration date that
would otherwise be permitted under clauses (i), (ii) or (iii) of this sentence.
In addition, the Purchaser shall at the request of the Company extend the Offer
for five business days if at any scheduled expiration date of the Offer any of
the conditions to the Purchaser's obligation to purchase Shares shall not be
satisfied; PROVIDED, HOWEVER, that the Purchaser shall not be required to extend
the Offer beyond December 31, 1997.
CONDITIONS TO THE OFFER. Notwithstanding any other terms of the Offer or
the Merger Agreement, the Purchaser shall not be required to accept for payment
or, subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (relating to the Purchaser's obligation to pay for or return tendered
Shares after the termination or withdrawal of the Offer), to pay for any Shares
tendered pursuant to the Offer, unless (i) there shall have been validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which would represent at least a majority of the Shares outstanding on a
fully diluted basis (the "Minimum Condition") and (ii) any waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), applicable to the purchase of Shares pursuant to the Offer shall have
expired or been terminated. Furthermore, notwithstanding any other term of the
Offer or the Merger Agreement, the Purchaser shall not be required to accept for
payment or, subject as aforesaid, to pay for any Shares not theretofore accepted
for payment or paid for, and may terminate the Offer if, at any time on or after
the date of the Merger Agreement and before the acceptance of such shares for
payment or the payment therefor, any of the following conditions exists:
(a) there shall be threatened or pending any suit, action or proceeding
by any Governmental Entity (as defined below) (including, without
limitation, the Department of the Treasury, the Customs Service Bureau and
the Bureau of Alcohol, Tobacco and Firearms) or any other person (in the
case of any suit, action or proceeding by a person other than a Governmental
Entity, such suit, action or proceeding having a reasonable likelihood of
success) (i) challenging the acquisition by Parent or the Purchaser of any
Shares, seeking to restrain or prohibit the making or consummation of the
Offer or the Merger or the performance of any of the other transactions
contemplated by the Operative Agreements (as defined below), or seeking to
obtain from the Company, Parent or the Purchaser any damages that are
material in relation to the Company and its subsidiaries taken as a whole,
(ii) seeking to prohibit or limit the ownership or operation by the Company,
Parent or any of their respective subsidiaries of any material portion of
the business or assets of the Company, Parent or any of their respective
subsidiaries, or to compel the Company, Parent or any of their respective
subsidiaries to dispose of or hold separate any material portion of the
business or assets of the Company, Parent or any of their respective
subsidiaries, as a result of the Offer or the Merger or any of the other
transactions contemplated by the Operative Agreements, (iii) seeking to
impose limitations on the ability of Parent or the Purchaser to acquire or
hold or exercise full rights of ownership of, any Shares, including the
right to vote the Shares purchased by it on all matters properly presented
to the stockholders of the Company, (iv) seeking to prohibit Parent or any
of its subsidiaries from effectively controlling in any material respect the
business or operations of the Company or its
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subsidiaries, or (v) which otherwise is reasonably likely to prevent
consummation of the transactions contemplated by the Operative Agreements;
(b) there shall be any statute, rule, regulation, legislation,
interpretation, judgment, order or injunction threatened, proposed, sought,
enacted, entered, enforced, promulgated, amended or issued (each of the
foregoing, a "Legal Event") with respect to, or deemed applicable to, or any
consent or approval withheld with respect to, (i) Parent, the Company or any
of their respective subsidiaries or (ii) the Offer, the Merger or any of the
other transactions contemplated by the Operative Agreements by any
Governmental Entity or before any court or governmental authority, agency or
tribunal, domestic or foreign, that has a substantial likelihood of
resulting, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above;
(c) since the date of the Merger Agreement there shall have occurred any
material adverse change or any development that, insofar as reasonably can
be foreseen, is reasonably likely to result in a material adverse change in
the business, properties, assets, condition (financial or otherwise),
results of operations or prospects of the Company and its subsidiaries taken
as a whole other than changes resulting from currency exchange rate
fluctuations, customs, tax and duty law changes and changes relating to the
economy in general and to the Company's industry in general and not
specifically relating to the Company or any of its subsidiaries;
(d) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer, the Merger or the
Merger Agreement, or approved or recommended any Superior Takeover Proposal
(as defined below) or (ii) the Board of Directors of the Company or any
committee thereof shall have resolved to do any of the foregoing;
(e) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange or on
the London Stock Exchange, for a period in excess of 24 hours (excluding
suspensions or limitations resulting solely from physical damage or
interference with such exchanges not related to market conditions), (ii) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States (whether or not mandatory), (iii) a
commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States or involving the
United Kingdom and, in the case of armed hostilities involving the United
Kingdom, having, or which could reasonably be expected to have, a
substantial continuing general effect on business and financial conditions
in the United Kingdom, (iv) any limitation (whether or not mandatory) by any
United States or the United Kingdom governmental authority on the extension
of credit generally by banks or other financial institutions, or (v) in the
case of any of the foregoing existing at the time of the commencement of the
Offer, a material acceleration or worsening thereof;
(f) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct and any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case as if such representations and warranties were made as of such time and
the failure to be so true and correct in any material respect would have a
material adverse effect on the business, properties, assets, condition
(financial or otherwise) or results of operations or prospects of the
Company and its Subsidiaries taken as a whole other than as the result of
currency exchange rate fluctuations, customs, tax and duty law changes and
changes relating to the economy generally or to the Company's industry in
general and not specifically relating to the Company or any of its
Subsidiaries (a "Company Material Adverse Effect"), and except with respect
to representations and warranties made as of an earlier time;
(g) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement and such failure would result in a Company Material Adverse
Effect; or
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(h) the Merger Agreement shall have been terminated in accordance with
its terms.
Subject to the provisions of the Merger Agreement set forth under "The
Offer" above, the foregoing conditions (i) may be asserted by Parent and the
Purchaser regardless of the circumstances giving rise to such condition and (ii)
are for the sole benefit of Parent and the Purchaser and may be waived by Parent
or the Purchaser, in whole or in part at any time and from time to time in the
sole discretion of Parent or the Purchaser. The failure by Parent or the
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time.
THE MERGER. The Merger Agreement provides that following the satisfaction
or waiver of the conditions described below under "Conditions to the Merger" and
in accordance with the Maryland General Corporation Law (the "MGCL"), the
Purchaser will be merged with the Company, and each then outstanding Share
(other than Shares owned by the Company or by any subsidiary of the Company and
Shares owned by Parent, the Purchaser or any other subsidiary of Parent) will be
converted into the right to receive an amount in cash equal to the price per
Share paid pursuant to the Offer, without interest.
VOTE REQUIRED TO APPROVE MERGER. The MGCL requires, among other things,
that the adoption of any plan of merger or consolidation of the Company must be
approved by the Board of Directors and generally by the holders of the Company's
outstanding voting securities. The Board of Directors of the Company has
approved the Offer and the Merger. Consequently, the only additional action of
the Company that may be necessary to effect the Merger is approval by such
stockholders if the "short-form" merger procedure described below is not
available. Under the Company's Charter, the affirmative vote of holders of a
majority of the outstanding Shares (including any Shares owned by the
Purchaser), is required to approve the Merger if the short-form merger procedure
is unavailable. If the Purchaser acquires, through the Offer or otherwise,
voting power with respect to at least a majority of the outstanding Shares, it
would have sufficient voting power to effect the Merger without the vote of any
other stockholder of the Company. However, as of October 1, 1997, the MGCL
permits a parent company that owns at least 90% of each class of stock of a
subsidiary to merge into that subsidiary without the action of the other
stockholders of the subsidiary. Accordingly, if, as a result of the Offer or
otherwise, the Purchaser acquires or controls the voting power of at least 90%
of the outstanding Shares, the Purchaser could effect the Merger without any
action by any other stockholder of the Company.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the Merger is
subject to the satisfaction or waiver of the following conditions: (1) if
required by applicable law, the Merger Agreement and the Merger shall have been
approved by the affirmative vote or consent of the holders of a majority of the
outstanding Shares in accordance with applicable law and the Company's Charter,
(2) the waiting period (and any extension thereof) applicable to the Merger
under the HSR Act shall have been terminated or shall have expired, (3) no
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect;
PROVIDED, HOWEVER, that each of the Company, the Purchaser and Parent shall have
used its best efforts to prevent the entry of any such injunction or other order
and to appeal as promptly as possible any injunction or other order that may be
entered and (4) the receipt by the Company and Parent of all necessary consents
and approvals from each of the Customs Service Bureau and the Bureau of Alcohol,
Tobacco and Firearms applicable to the Merger.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
at any time prior to the Effective Time, whether before or after approval of
matters presented in connection with the Merger by the stockholders of the
Company, (1) by mutual written consent of the Company and Parent, (2) by either
the Company or Parent if (a) the Purchaser shall not have purchased that number
of Shares which constitutes the Minimum Condition pursuant to the Offer prior to
December 31, 1997; provided, however, that the passage of such period shall be
tolled for any part thereof during which any party shall be subject to a
nonfinal order, decree, ruling or action restraining, enjoining or otherwise
prohibiting the purchase of
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Shares pursuant to the Offer or the consummation of the Merger; or (b) if any
Federal, state or local government or any court, administrative or regulatory
agency or commission or other governmental authority or agency, domestic or
foreign (a "Governmental Entity"), shall have issued an order, decree or ruling
or taken any other action permanently enjoining, restraining or otherwise
prohibiting the purchase of Shares pursuant to the Offer or the Merger and such
order, decree or ruling or other action shall have become final and
nonappealable, (3) by either Parent or the Company if the Merger shall not have
consummated by April 30, 1998 or such later date mutually agreed to by the
parties; PROVIDED, HOWEVER, that the passage of such period shall be tolled for
any part thereof during which any party shall be subject to a non final order,
decree, ruling or action restraining, enjoining or otherwise prohibiting the
purchase of shares of Common Stock pursuant to the Offer or the consummation of
the Merger; PROVIDED, FURTHER, HOWEVER, that the right to terminate the Merger
Agreement pursuant to such clause shall not be available to any party whose
failure to perform any obligations under the Merger Agreement results in the
failure of the Merger to be consummated by such time, (4) by the Company if (a)
the Board of Directors of the Company approves or recommends a Superior Proposal
(as defined below) under circumstances described below in the second paragraph
under "Takeover Proposals; No Solicitation" and (b) the Company has paid to the
Purchaser an amount in cash equal to the sum of the Termination Fee (as defined
below), or (5) by the Purchaser or Parent if the Purchaser terminates the Offer
as a result of the occurrence of any event set forth in paragraph (d), (f) and
(g) of "Conditions to the Offer" above; (6) by the Company, if the Purchaser
terminates the Offer as a result of the occurrence of any event set forth in
paragraph (a), (b), (c), (e), (f) or (g) of "Conditions to the Offer" above; (7)
by the Company in the event the Company has convened a meeting of the Company's
stockholders in accordance with the Merger Agreement and the Merger and the
Merger Agreement have not been approved by the affirmative vote or consent of
the holders of the requisite number of outstanding shares of Common Stock in
accordance with applicable law and the Company's Charter; (8) by the Company, if
the Purchaser (a) shall have failed to commence the Offer within the time
required under the Exchange Act, or (b) shall have failed to pay for any Common
Stock accepted for payment pursuant to the Offer and, in the case of clause (b),
the Purchaser shall have failed to make such payment within three business days
of receipt of written notice thereof from the Company; PROVIDED, HOWEVER, that
any such failure is not caused by a material breach by the Company, or (9) by
the Company, if Parent or the Purchaser fail to perform in any material respect
any provision of the Merger Agreement and Parent or the Purchaser have failed to
perform such obligation or cure such breach within 10 business days of its
receipt of written notice from the Company and such failure to perform has not
been waived in accordance with the terms of the Merger Agreement; PROVIDED,
HOWEVER, that such failure to perform is not caused by a material breach by the
Company.
TAKEOVER PROPOSALS; NO SOLICITATION. (a) The Company has agreed that it
will not, and will not permit any officer or director of the Company or any
officer or director of its subsidiaries to, nor shall it authorize or permit any
officer, director or employee of, or any investment banker, attorney or other
advisor or representative of, the Company or any of its subsidiaries to, (i)
solicit or initiate the submission of, any Takeover Proposal (ii) except as
provided in (b) below, enter into any agreement with respect to any Takeover
Proposal or (iii) participate in any discussions or negotiations regarding, or
furnish to any person any non-public information with respect to any Takeover
Proposal, or take any other action to solicit or initiate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Takeover Proposal; provided, however, that prior to the acceptance for
payment of Shares pursuant to the Offer, the Company may, after taking into
account the advice of outside counsel, in response to an unsolicited written
bona fide Takeover Proposal which contains no financing condition from a person
that the Company Board reasonably believes has the financial ability to make a
Superior Proposal, subject to compliance with the notification requirements
described below in (c), furnish non-public information with respect to the
Company to such person pursuant to a customary confidentiality agreement and
participate in discussions or negotiations with such person. For purpose of the
Merger Agreement, "Takeover Proposal" means any written proposal for a merger or
other business combination involving the Company or any of its subsidiaries or
any proposal or offer to acquire in any manner, directly or indirectly, more
than
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20% of the equity securities of the Company or more than 20% of the Company's
consolidated total assets, other than the transactions contemplated by the
Merger Agreement.
(b) Neither the Company Board nor any committee thereof shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Parent or
Purchaser, the approval or recommendation by the Company Board or any such
committee of the Offer, the Merger Agreement or the Merger or (ii) approve or
recommend, or propose to approve or recommend, any Takeover Proposal.
Notwithstanding the foregoing, the Company Board may approve or recommend (and,
in connection therewith withdraw or modify its approval or recommendation of the
Offer, the Merger Agreement or the Merger) a Superior Proposal. For purposes of
the Merger Agreement, "Superior Proposal" means a bona fide Takeover Proposal
which contains no financing condition made by a third party on terms which the
Company Board determines in its good faith judgment, after taking into account
the written advice of the Company's investment banker, to be more favorable to
the Company's stockholders than the Offer and the Merger.
(c) The Company has agreed to promptly advise Parent orally and in writing
of any Takeover Proposal or any inquiry with respect to or which it believes
would be reasonably likely to lead to any Takeover Proposal unless the Company
Board is advised by outside legal counsel that the furnishing of such advice
would be inconsistent with the legal obligations of the Company Board. The
Company has agreed to keep Parent informed of the status of any such Takeover
Proposal or inquiry.
(d) The Merger Agreement provides that nothing in the provisions thereof
described above shall prevent the Company and the Company Board from complying
with Rule 14e-2 under the Exchange Act, or issuing a communication meeting the
requirements of Rule 14d-9(e) under the Exchange Act, with respect to any tender
offer or otherwise prohibit the Company from making any public disclosures
required by law or the requirements of the New York Stock Exchange; provided,
however, that the Company may not, except as permitted by (b) above, withdraw or
modify its position with respect to the Offer or the Merger or approve or
recommend, or propose to approve or recommend, a Takeover Proposal.
FEES AND EXPENSES. The Merger Agreement provides that the Company shall pay
to Parent a fee of $20 million (the "Termination Fee") if (i) the Purchaser or
the Company terminates the Merger Agreement under the circumstances described in
clause 2(a) under "Termination of the Merger Agreement" as a result of the
existence of any condition set forth in paragraph (d) under "Conditions to the
Offer" above, (ii) (a) after the date of the Merger Agreement, any person or
"group" (within the meaning of Section 13(d)(3) of the Exchange Act), other than
Parent, Purchaser, any of their respective affiliates or other persons with whom
any of the foregoing is part of a group, shall have publicly made a Takeover
Proposal, (b) the Offer shall have remained open until at least the scheduled
expiration date immediately following the date such Takeover Proposal is made
(and in any event for at least 10 business days following the date such Takeover
Proposal is made), (c) the Minimum Condition shall not have been satisfied at
the expiration of the Offer, (d) the Merger Agreement shall thereafter be
terminated by either Parent or the Company under the circumstances described in
clause 2(a) under "Termination of the Merger Agreement," and (e) the Board of
Directors of the Company, within 10 business days after the public announcement
of such Takeover Proposal, either fails to recommend against acceptance of such
Takeover Proposal by the Company's stockholders or announces that it takes no
position with respect to the acceptance of such Takeover Proposal by the
Company's stockholders or (iii) the Merger Agreement is terminated under the
circumstances described in clause (4) or (5) under "Termination of the Merger
Agreement" (but only in the case of paragraph (f) of "Conditions to the Offer,"
where such condition existed on the date of the Merger Agreement), or in the
event the Merger Agreement is terminated pursuant to clause 5 under "Termination
of Merger Agreement" as a result of any condition set forth in paragraph (f) of
"Conditions to the Offer", and provided that no Termination Fee is or would
become payable hereunder, the Company shall pay to Parent all of Parent's
expenses up to and including $1,000,000. In the event the Merger Agreement is
terminated, the Offer is terminated or the Merger does not occur, solely due to
a breach by Parent or the Purchaser of any of its covenants, agreements or
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obligations under the Merger Agreement, without limitation of any other rights
or remedies available to the Company at law or in equity, Parent and the
Purchaser shall pay to the Company, upon demand, all expenses of the Company up
to and including $4,000,000.
CONDUCT OF BUSINESS BY THE COMPANY. The Merger Agreement provides that
during the period from the date of the Merger Agreement to the earlier of the
effective time of the Merger in accordance with the Merger Agreement (the
"Effective Time") and the appointment or election of the Purchaser's designees
to the Board of Directors of the Company pursuant to the terms of the Merger
Agreement (such earlier time, the "Control Time"), the Company shall, and shall
cause its subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as conducted prior
to the date of the Merger Agreement and, to the extent consistent therewith, use
all reasonable efforts to preserve intact their current business organizations,
keep available the services of their current officers and employees and preserve
their relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with them to the end that their
goodwill and ongoing businesses shall be unimpaired at the Effective Time. The
Merger Agreement further provides that, except as contemplated by the Merger
Agreement or otherwise approved in writing by Parent, during the period from the
date of the Merger Agreement to the Control Time, the Company shall not, and
shall not permit any of its subsidiaries to, (1) (a) declare, set aside or pay
any dividends on, or make any other distributions in respect of, any of its
capital stock, other than regular quarterly dividends of $.06 per share and
other than dividends and distributions by any direct or indirect wholly owned
subsidiary of the Company to its parent, (b) split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or (c)
purchase, redeem or otherwise acquire any shares of capital stock of the Company
or any of its subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities; (2) issue,
deliver, sell, pledge or otherwise encumber any shares of its capital stock, any
other voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities other than the issuance of Shares upon the exercise of
stock options outstanding on the date of the Merger Agreement in accordance with
their present terms; (3) amend its certificate of incorporation, by-laws or
other comparable charter or organizational documents; (4) acquire or agree to
acquire (a) by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof or (b) any assets that are material,
individually or in the aggregate, to the Company and its subsidiaries taken as a
whole, except purchases of inventory in the ordinary course of business
consistent with past practice; (5) sell, lease, license, mortgage or otherwise
encumber or subject to any lien (except for such lien required by law) or
otherwise dispose of any of its properties or assets, except sales of inventory
in the ordinary course of business consistent with past practice; (6) (a) incur
any indebtedness for borrowed money or guarantee any such indebtedness of
another person, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company or any of its subsidiaries, guarantee
any debt securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing,
except for short term borrowings incurred in the ordinary course of business
consistent with past practice and pursuant to existing agreements, or (b) make
any loans, advances or capital contributions to, or investments in, any other
person, other than to the Company or any direct or indirect wholly owned
subsidiary of the Company; (7) make or agree to make any new capital expenditure
or expenditures not contemplated by the Company's current budget; (8) (a) grant
to any officer of the Company or any of its subsidiaries any increase in
compensation, except as was required under employment agreements in effect as of
January 26, 1997, (b) grant to any officer of the Company or any of its
subsidiaries any increase in severance or termination pay, except as was
required under employment, severance or termination agreements in effect as of
January 26, 1997, (c) enter into any employment, severance or termination
agreement with any officer of the Company or any of its subsidiaries or (d)
amend any benefit plan in any respect; (9) make any change in accounting
methods, principles or practices materially affecting the Company's assets,
liabilities or
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business, except insofar as may have been required by a change in generally
accepted accounting principles; (10) pay, discharge, settle or satisfy any
material claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms; (11) except in the ordinary
course of business, modify, amend or terminate any material note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which any of them or any of their properties or assets may be bound, or waive or
release or assign any material rights or claims; (12) make any material tax
election or settle or compromise any material income tax liability; or (13)
authorize any of, or commit or agree to take any of, the foregoing actions.
Pursuant to the Merger Agreement, the Company shall not, and shall not
permit any of its subsidiaries to, take any action that would or that could
reasonably be expected to result in (1) any of its representations and
warranties set forth in the Merger Agreement that are qualified as to
materiality becoming untrue, (2) any of such representations and warranties that
are not so qualified becoming untrue in any material respect or (3) except as
otherwise permitted by the provisions of the Merger Agreement described above
under "Takeover Proposals", any of the conditions to the Offer or to the Merger
not being satisfied.
In addition, the Merger Agreement provides that the Company shall promptly
advise the Purchaser orally and in writing of any change or event having, or
which, insofar as can reasonably be foreseen, would have, a Company Material
Adverse Effect.
BOARD OF DIRECTORS. The Merger Agreement provides that upon the acceptance
for payment of, and payment by the Purchaser for, any Shares pursuant to the
Offer, the Purchaser shall be entitled to designate such number of directors on
the Board of Directors of the Company as shall give the Purchaser, subject to
compliance with Section 14(f) of the Exchange Act, representation on the Board
of Directors of the Company equal to at least that number of directors, rounded
up to the next whole number, which is the product of (a) the total number of
directors on the Board of Directors of the Company (giving effect to the
directors elected pursuant to this sentence) multiplied by (b) the percentage
that (i) such number of Shares so accepted for payment and paid for by the
Purchaser plus the number of Shares otherwise owned by the Purchaser or any
other subsidiary of Parent bears to (ii) the number of such Shares outstanding,
and the Company shall, at such time, cause the Purchaser's designees to be so
elected. Subject to applicable law, the Company has agreed to take all action
requested by Parent necessary to effect any such election, including mailing to
its stockholders the Information Statement containing the information required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
the Company shall make such mailing with the mailing of this Schedule 14D-9
(provided that the Purchaser shall have provided to the Company on a timely
basis all information required to be included in the Information Statement with
respect to the Purchaser's designees). In connection with the foregoing, the
Company shall promptly, at the option of the Purchaser, either increase the size
of the Board of Directors of the Company or obtain the resignation of such
number of its current directors as is necessary to enable the Purchaser's
designees to be elected or appointed to the Board of Directors of the Company as
provided above. The Merger Agreement also provides that the provisions of this
paragraph are in addition to and shall not limit any rights which the Purchaser
or any of its affiliates may have as a holder or beneficial owner of Shares as a
matter of law with respect to the election of directors or otherwise.
STOCK OPTIONS. The Merger Agreement provides that either prior to or as
soon as practicable following the consummation of the Offer, the Board of
Directors of the Company (or, if appropriate, any committee administering the
stock plans of the Company) shall adopt such resolutions or take such other
actions as are required to adjust the terms of all outstanding stock options to
provide that, at the Effective Time, each stock option outstanding immediately
prior to the acceptance for payment of Shares pursuant to the Offer (whether or
not vested) shall be canceled in exchange for a cash payment by the Company of,
or can only be exercised for net cash equal to, an amount equal to (i) the
excess, if any, of (A) the price per Share to be paid pursuant to the Offer over
(B) the exercise price per Share subject to such stock option, multiplied by
(ii) the number of Shares for which such stock option shall not theretofore have
been exercised.
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The Merger Agreement provides further that all stock plans shall terminate
as of the Effective Time and the provisions in any other benefit plan of the
Company providing for the issuance, transfer or grant of any capital stock of
the Company or any interest in respect of any capital stock of the Company shall
be deleted as of the Effective Time, and the Company shall ensure that following
the Effective Time no holder of a stock option or any participant in any stock
plan or any other benefit plan of the Company shall have any right thereunder to
acquire any capital stock of the Company or the Surviving Corporation.
INDEMNIFICATION. From and after the Effective Time, Parent and the
Surviving Corporation have agreed to indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date of the Merger
Agreement or who becomes prior to the Effective Time, an officer, director or
employee of the Company or any of its subsidiaries (the "Indemnified Parties")
against (i) all losses, claims, damages, costs, expenses (including attorney's
fees and expenses), liabilities or judgments or amounts that are paid in
settlement (which settlement shall require the prior written consent of Parent,
which consent shall not be unreasonably withheld or delayed) of or in connection
with any claim, action, suit, proceeding or investigation (a "Claim") in which
an Indemnified Party is, or is threatened to be made, a party or a witness based
in whole or in part on or arising in whole or in part out of the fact that such
person is or was an officer, director or employee of the Company or any of its
subsidiaries, whether such Claim pertains to any matter or fact arising,
existing or occurring at or prior to the Effective Time, regardless of whether
such Claim is asserted or claimed prior to, at or after the Effective Time (the
"Indemnified Liabilities"), and (ii) all Indemnified Liabilities based in whole
or in part on, or arising in whole or in part out of, or pertaining to the
Merger Agreement, the Merger, the Offer, the Operative Agreements (as defined
below) or the other transactions contemplated by the Merger Agreement or by the
Operative Agreements, in the case of either clause (i) or (ii) to the full
extent the Company would have been permitted under Maryland law and its Charter
and Bylaws to indemnify such person (and Parent shall pay expenses in advance of
the final disposition of any such action or proceeding to each Indemnified Party
to the full extent permitted by law and under such Charter or Bylaws, upon
receipt of any undertaking required by such Charter, Bylaws or applicable law).
The obligations of Parent described above shall continue in full force and
effect, without any amendment thereto, for a period of not less than six years
from the Effective Time.
Parent and the Surviving Corporation have agreed to cause to be maintained
in effect for not less than six years from the Effective Time the current
policies of directors' and officers' liability insurance maintained by the
Company and its subsidiaries (provided that Parent and the Surviving Corporation
may substitute therefor policies of at least the same coverage containing terms
and conditions which are no less advantageous to the Indemnified Parties in all
material respects so long as no lapse in coverage occurs as a result of such
substitution) with respect to all matters, including the transactions
contemplated hereby, occurring prior to, and including, the Effective Time,
provided that, in the event that any Claim is asserted or made within such
six-year period, such insurance shall be continued in respect of any such Claim
until final disposition of any and all such Claims, provided, further, that
Parent shall not be obligated to make annual premium payments for such insurance
to the extent such premiums exceed 150% of the premiums paid as of the date
hereof by Parent for such insurance.
The obligations of Parent and the Surviving Corporation described above are
intended to benefit, and be enforceable against Parent and the Surviving
Corporation directly by, the Indemnified Parties, and shall be binding on all
respective successors of Parent and the Surviving Corporation.
REASONABLE NOTIFICATION. The Merger Agreement provides that, on the terms
and subject to the conditions of the Merger Agreement, each of the parties shall
use its reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Offer and the Merger
and the other transactions contemplated by the Merger Agreement, the
Shareholders Agreement (as defined below) or the Stock Option Agreement (as
defined below) (collectively, the "Operative Agreements").
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PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. The Merger
Agreement provides that in the event the Purchaser's designees are appointed or
elected to the Board of Directors of the Company as described above under "Board
of Directors," after the acceptance for payment of Shares pursuant to the Offer
and prior to the Effective Time, the affirmative vote of a majority of the
Directors (other than the Purchaser's designees or appointees) shall be required
for the Company to amend or terminate the Merger Agreement, exercise or waive
any of its rights or remedies under the Merger Agreement or extend the time for
performance of the Purchaser's and Parent's respective obligations under the
Operative Agreements.
REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and the Purchaser with
respect to, among other things, its organization, capitalization, financial
statements, public filings, conduct of business, employee benefit plans, labor
relations and employment matters, compliance with laws, subsidiaries, tax
matters, litigation, vote required to approve the Merger Agreement, undisclosed
liabilities, information supplied, the absence of any material adverse changes
in the Company since January 26, 1997, absence of excess parachute payments,
inapplicability of state takeover statutes, the opinion of the Company's
financial advisor, brokers, fees and expenses, intellectual property,
environmental protection, and contracts.
THE SHAREHOLDERS AGREEMENT
As an inducement and a condition to entering into the Merger Agreement,
Parent required that certain stockholders who were the beneficial owners of an
aggregate of 8,626,073 Shares on July 2, 1997 (the "Selling Stockholders")
agree, and the Selling Stockholders agreed, to enter into a Shareholders
Agreement among such Selling Stockholders, Parent and the Company (the
"Shareholders Agreement"). The following is a summary of the material terms of
the Shareholders Agreement. This summary is not a complete description of the
terms and conditions thereof and is qualified in its entirety by reference to
the full text of the Shareholders Agreement which is incorporated herein by
reference and a copy of which is filed herewith as Exhibit 3.
TENDER OF SHARES. Upon the terms and subject to the conditions of the
Shareholders Agreement, each Selling Stockholder has agreed to validly tender
(and not to withdraw) pursuant to and in accordance with the terms of the Offer,
not later than the fifth business day after commencement of the Offer, the
number of Shares set forth opposite such Selling Stockholder's name under the
caption "Existing Shareholders" on Schedule I to the Shareholders Agreement
(together with Shares acquired by such Selling Stockholder after the date of the
Shareholders Agreement) and owned by him, her or it. Each Selling Stockholder
has acknowledged and agreed that the Purchaser's obligation to accept for
payment and pay for Shares in the Offer is subject to the terms and conditions
of the Offer.
VOTING. Each Selling Stockholder has agreed that during the period
commencing on the date of the Shareholders Agreement and continuing until the
first to occur of the purchase of the Shares by Purchaser pursuant to the Offer,
the Effective Time or termination of the Merger Agreement in accordance with its
terms, at any meeting of the Company's stockholders, however called, or in
connection with any written consent of the Company's stockholders, such Selling
Stockholder will vote (or cause to be voted) the Shares held of record or
beneficially owned by such Selling Stockholder, whether issued, heretofore owned
or hereafter acquired, (i) in favor of the Merger, the execution and delivery by
the Company of the Merger Agreement and the approval of the terms thereof and
each of the other actions contemplated by the Merger Agreement and the
Shareholders Agreement and any actions required in furtherance thereof; (ii)
against any action or agreement that would result in a breach in any respect of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or the Shareholders Agreement (after
giving effect to any materiality or similar qualifications contained therein);
and (iii) except as otherwise agreed to in writing in advance by Parent, against
the following actions (other than the Merger and the transactions contemplated
by the Merger Agreement): (A) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company or its
subsidiaries; (B) a sale, lease or transfer of a material amount of assets of
the
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Company or its subsidiaries, or a reorganization, recapitalization, dissolution
or liquidation of the Company or its subsidiaries; (C) (1) any change in a
majority of the persons who constitute the Board of Directors of the Company;
(2) any change in the present capitalization of the Company or any amendment of
the Company's Charter or By-Laws; (3) any other material change in the Company's
corporate structure or business; or (4) any other action involving the Company
or its subsidiaries which is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, or materially adversely affect the
Merger and the transactions contemplated by the Shareholders Agreement and the
Merger Agreement. Each Selling Stockholder further agreed not to enter into any
agreement or understanding with any person or entity, the effect of which would
be inconsistent with or violative of the provisions and agreements described
above.
REPRESENTATIONS, WARRANTIES, COVENANTS AND OTHER AGREEMENTS. Each Selling
Stockholder has made certain customary representations, warranties and
covenants, including with respect to (i) ownership of the Shares to be tendered
by it or him, (ii) the authority to enter into and perform its or his
obligations under the Shareholders Agreement, (iii) the absence of required
consents or contractual conflicts relating to the Shareholders Agreement, (iv)
the absence of liens and encumbrances on and in respect of its Shares to be
tendered by it or him, (v) no finder's fees, (vi) the solicitation of
acquisition proposals, (vii) transfers of Shares, (viii) waiver of appraisal
rights and (ix) further assurances.
TERMINATION. Other than as provided therein, the covenants and agreements
contained in the Shareholders Agreement with respect to the Shares will
terminate upon the earliest of (w) the acquisition of the Shares by Parent or
Purchaser pursuant to the Offer, (x) the Effective Time, (y) if the Effective
Time does not occur, the termination of the Merger Agreement or the withdrawal
or modification by the Board of Directors of the Company of its recommendation
of the Offer or the Merger as permitted by the Merger Agreement and (z) the
first anniversary of the date of the Shareholders Agreement.
THE OPTION AGREEMENT
Simultaneously with the execution of the Merger Agreement, Parent and the
Company entered into an option agreement (the "Option Agreement") as a condition
to Parent's willingness to proceed with the Offer. The following is a summary of
the material terms of the Option Agreement. This summary is not a complete
description of the terms and conditions thereof and is qualified in its entirety
by reference to the full text of the Option Agreement which is incorporated
herein by reference and a copy of which is filed herewith as Exhibit 4.
The Option Agreement provides for the grant by the Company to Parent of an
irrevocable option (the "Option") to purchase up to 5,434,367 option shares at a
price of $24.00 per option share. The Option Agreement provides that the Option
may be exercised by Parent, in whole or in part, at any time or from time to
time, commencing upon the Option Exercise Date (as defined below) and prior to
the Option Expiration Date (as defined below). "The Option Exercise Date" is
defined in the Option Agreement as the first to occur of any of the following
dates: (i) any corporation (including the Company or any of its subsidiaries or
affiliates), partnership, person, other entity or group (as defined in Section
13(d)(3) of the Exchange Act) other than Parent, Purchaser or any of their
respective affiliates or other persons with whom any of the foregoing is a part
of a group (collectively, "Persons") shall have become the beneficial owner of
more than 20% of the outstanding Shares and the Merger Agreement is terminated
pursuant to clause (4) or clause (5) under "Merger Agreement--Termination of the
Merger Agreement" above but, with respect to clause (5), only in the case of
paragraph (d) set forth under "The Merger Agreement-- Conditions to the Offer";
(ii) (a) any Person other than Parent, Purchaser, any of their respective
affiliates or other Persons with whom any of the foregoing is a part of a group
has commenced or publicly proposed a Takeover Proposal at a value greater than
the aggregate consideration to be received by holders of Shares pursuant to the
Offer and (b) the Merger Agreement is terminated pursuant to clause (4) or
clause (5) under "Merger Agreement--Termination of the Merger Agreement" above
but, with respect to clause (5), only in the case of paragraph (d) set forth
under "The Merger Agreement--Conditions to the Offer". The
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"Option Expiration Date" is defined in the Option Agreement as the first to
occur of any of the following dates: (a) the satisfaction of the Minimum
Condition, (b) 120 days after the later of (i) the termination of the Merger
Agreement in accordance with its terms and (ii) the expiration or termination of
the applicable waiting period under HSR Act applicable to the exercise of the
Option; (c) December 31, 1997; or (d) the date on which written notice of
termination of the Merger Agreement is given by Parent to the Company.
The Option Agreement provides that if the Option is exercised and if Parent
has so requested in writing on or before December 31, 1997, the Company will use
its reasonable efforts to effect the registration under the Securities Act of
1933, as amended, of such number of Shares owned by Parent and its subsidiaries
as Parent may request and to keep such registration statement effective for a
period of not less than one year. The Company has no obligation to register
shares issued upon exercise of the Option after two registrations pursuant to
the Option Agreement have been effected.
Parent may exercise the Option and purchase option shares pursuant to the
Option Agreement only if (i) such purchase would not otherwise violate, or cause
the violation of, any applicable law or regulation (including, without
limitation, the HSR Act, the Exon-Florio Amendment or the rules of the New York
Stock Exchange), and (ii) no United States or United Kingdom statute, rule,
regulation, decree, order or injunction has been promulgated, enacted, entered
into or enforced by any United States or United Kingdom government, governmental
agency, authority or court which prohibits delivery of the option shares,
whether temporary, preliminary or permanent (PROVIDED, HOWEVER, that Parent and
the Company have agreed to use their best efforts to have any such order, decree
or injunction vacated or reversed).
The Option Agreement contains customary representations and warranties by
the Company and
Parent.
CONFIDENTIALITY AGREEMENTS
COMPANY CONFIDENTIALITY AGREEMENT. Pursuant to a Confidentiality Agreement
entered into as of January 6, 1997 by Parent and the Company (the "Company
Confidentiality Agreement"), the parties agreed to provide, among other things,
for the confidential treatment of their discussions regarding the Offer and the
Merger and the exchange of certain confidential information concerning the
Company. Parent also agreed, for a two year period commencing on the date of the
Confidentiality Agreement, not to (i) in any manner acquire, agree to acquire or
make any proposal to acquire, directly or indirectly, any securities or direct
or indirect rights to acquire any securities of the Company or any of its
subsidiaries, (ii) propose to enter into, directly or indirectly, any merger or
business combination involving the Company or any of its subsidiaries or to
purchase, directly or indirectly, a material portion of the assets of the
Company or any of its subsidiaries, (iii) make, or in any way participate,
directly or indirectly, in any "solicitations" of "proxies" (as such terms are
used in the proxy rules of the SEC) to vote, or seek to advise or influence any
person with respect to the voting of, any securities of the Company or any of
its subsidiaries, (iv) form, join or in any way participate in a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with respect to any
securities of the Company or any of its subsidiaries, (v) otherwise act, alone
or in concert with others, to seek to control or influence the management, Board
of Directors or policies of the Company, (vi) disclose any intention, plan or
arrangement inconsistent with the foregoing, or (vii) advise, assist or
encourage any other persons in connection with any of the foregoing. The
Confidentiality Agreement is incorporated herein by reference and a copy of it
is filed herewith as Exhibit 5 hereto.
PARENT CONFIDENTIALITY AGREEMENT. Pursuant to a Confidentiality Agreement
entered into as of January 6, 1997 by Parent and the Company (the "Parent
Confidentiality Agreement") , the Company agreed, among other things, to treat
as confidential certain information and documents concerning Parent to be
provided to the Company in connection with the transactions contemplated by the
Merger Agreement. The Company also agreed that until the expiration of two years
from the date of the Parent Confidentiality Agreement it would not, and would
ensure that its associates (as defined in Section 435 of the English Insolvency
Act of 1986), advisors and certain other related persons would not (i) in any
manner acquire,
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agree to acquire or make any proposal to acquire, directly or indirectly, any
securities or direct or indirect rights to acquire any securities of Parent or
any of its subsidiaries, (ii) propose to enter into, directly or indirectly, any
merger or business combination involving the Parent or any of its subsidiaries
or to purchase, directly or indirectly, a material portion of the assets of the
Parent or any of its subsidiaries, (iii) otherwise act, alone or in concert with
others, to seek to control or influence the management, Board of Directors or
policies of the Company, (iv) disclose any intention, plan or arrangement
inconsistent with the foregoing, or (v) advise, assist or encourage any other
persons in connection with any of the foregoing. The Parent Confidentiality
Agreement is incorporated herein by reference and a copy of it is filed herewith
as Exhibit 6 hereto.
LIMITATION OF LIABILITY AND INDEMNIFICATION.
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter contains
such a provision which eliminates such liability to the maximum extent permitted
by the MGCL.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the director or officer actually received an improper personal
benefit in money, property or services or (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, under the MGCL, a Maryland corporation may
not indemnify for an adverse judgment in a suit by or in the right of the
corporation or for a judgment of liability on the basis that personal benefit
was improperly received, unless in either case a court orders indemnification
and then only for expenses. In addition, the MGCL permits a corporation to
advance reasonable expenses to a director or officer upon the corporation's
receipt of (a) a written affirmation by the director or officer of his good
faith belief that he has met the standard of conduct necessary for
indemnification by the corporation and (b) a written statement by or on his
behalf to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not met.
The Company's Charter provides, among other things, that the Company shall
indemnify, to the full extent permitted by the laws of the State of Maryland,
any person made or threatened to be made a party to an action or a proceeding,
whether criminal, civil, or administrative or investigative, by reason of the
fact he is or was a director or officer of the Company or served another
enterprise as a director or officer at the request of the Company.
The By-Laws of the Company provide, among other things, that the Company
shall indemnify as set forth in the Company's Charter and to the full extent
permitted by the laws of the State of Maryland, any person who was or is a
party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason that he is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or is or was serving at the request of the
Company as a trustee or administrator or in any other fiduciary capacity under
any pension, profit sharing or other deferred compensation plan, or any
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employee welfare benefit plan of the Company. The By-Laws further provide that
the Company shall pay expenses (including attorney's fees) incurred in defending
a civil or criminal action, suit or proceeding in advance of the final
disposition thereof on the conditions and to the extent permitted by the laws of
the State of Maryland.
As described above under the caption "The Merger Agreement-Indemnification,"
Parent and the surviving corporation of the Merger have agreed in the Merger
Agreement to indemnify the current or former directors, officers and employees
of the Company and its subsidiaries with respect to certain Indemnified
Liabilities. Such indemnification obligation shall continue in full force and
effect for a period of not less than six years from the Effective Time.
The Company has entered into a separate indemnity agreement with Jack
Africk, a Director of the Company, whereby the Company agrees (i) to indemnify
Mr. Africk in certain events and (ii) to provide Mr. Africk with directors' and
officers' liability insurance to the maximum extent of the coverage available
for any Director of the Company.
The Company and Compass Partners International, L.L.C. (of which Stephen M.
Waters, a Director of the Company, is a founding partner) ("Compass") have
entered into a letter agreement pursuant to which the Company has agreed (i) to
pay Compass a fee in connection with the services rendered by Compass as the
Company's exclusive financial advisor thereunder, (ii) to reimburse Compass for
reasonable out-of-pocket expenses incurred by Compass in connection with its
activities thereunder and (iii) to indemnify Compass against certain liabilities
incurred in connection with such activities including liabilities arising under
federal securities laws.
STOCK OPTIONS
At the Effective Time of the Merger, each stock option outstanding
immediately prior to the acceptance for payment of shares of Common Stock
pursuant to the Offer (whether or not vested) shall be canceled in exchange for
a cash payment by the Company of, or shall be exercised for net cash equal to,
an amount equal to (i) the excess, if any, of (A) the price per share of Common
Stock to be paid pursuant to the Offer over (B) the exercise price per share of
Common Stock subject to such stock option, multiplied by (ii) the number of
shares of Common Stock for which such stock option shall not theretofore have
been exercised.
EMPLOYMENT AGREEMENTS WITH MANAGEMENT
In connection with the transactions contemplated by the Merger Agreement,
various members of management, including Alfred Carfora, the Chief Executive
Officer, John Edmondson, the Chief Operating Officer and Gerald F. Egan, the
Chief Financial Officer, are entering into employment contracts with the Company
with durations ranging from two to three years and setting forth base salaries
and bonuses at levels comparable to their current compensation.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION
a. RECOMMENDATION OF THE BOARD OF DIRECTORS.
The Board of Directors has unanimously approved the Merger Agreement and the
transactions contemplated thereby and unanimously recommends that all holders of
Shares tender such Shares pursuant to the Offer.
b. (i) BACKGROUND.
Since its formation, the Company has grown primarily through acquisitions.
In 1992, it completed the acquisition of UETA, Inc., which afforded it the
ability to serve duty free markets along the United States/ Mexico border. In
1994, it acquired Inflight Sales Group Ltd., a company engaged in duty free
sales on international air flights. Because it has actively pursued
acquisitions, the Company has frequently been in discussions with other
companies interested in potential business combinations.
In October 1996, Mr. Carfora, the President and Chief Executive Officer of
the Company, met with the chief executive officer of another duty free retailer
(the "other retailer") at a duty free industry convention. They agreed to meet
in January 1997 to discuss opportunities for potential business combinations
between certain operations of each of the Company and the other retailer.
At the same industry convention, in October 1996, Mr. Carfora met Barry
Gibson, Group Retail Director of Parent and they discussed possible business
combinations between the Company and Parent. Mr. Carfora and Mr. Gibson agreed
to meet again in January 1997 to continue such discussions.
At its December 1996 meeting, the Board of Directors of the Company
authorized management to engage in discussions with both Parent and the other
retailer regarding potential business combinations.
On January 6, 1997, the Company resumed discussing different possible
transactions with Parent, including a joint venture with Parent of the Company's
and Parent's duty free retail operations, a contribution of Parent's duty free
retail operations to the Company in exchange for shares of the Company's Common
Stock and other possible transactions. Also on that date, the Company entered
into the Company Confidentiality Agreement with Parent and Parent entered into
the Parent Confidentiality Agreement with the Company. Thereafter, the Company
and Parent exchanged certain confidential financial information and other
confidential information relating to their respective duty free operations.
At its meeting on January 24, 1997, the Board of Directors of the Company
authorized management to engage in further discussions with both the other
retailer and Parent, with the objective of exploring the possibility of a
transaction with either the other retailer or Parent, and also authorized the
Company's engagement of Compass. The Company retained Compass as its exclusive
financial advisor in connection with any transaction involving the sale of
control of the Company and entered into a letter agreement dated April 1, 1997
with Compass relating thereto (the "Engagement Letter").
On April 19, Mr. Carfora received an inquiry from Mr. Gibson as to whether
the Company would be willing to consider an offer to purchase all of the
outstanding Common Stock of the Company. The parties discussed matters that
would need to be addressed in connection with such a transaction, and Mr. Gibson
said that if Parent were to proceed it would require the Company to enter into
an exclusivity agreement for a certain period of time.
On April 22, Mr. Carfora met with an executive officer of the other retailer
to discuss opportunities for potential business combinations between certain of
the Company's and the other retailer's operations.
On April 25, Mr. Carfora, together with a representative of Compass, met
with Mr. Gibson and Russell Walls, Chief Financial Officer of Parent, to discuss
the possible acquisition of the Company by Parent in a cash tender offer.
Although a price range per share of $21-$23 was raised at the meeting, no
detailed discussion or agreement concerning such a range was reached at that
time.
16
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On May 7, the Company entered into an exclusivity agreement with Parent (the
"Exclusivity Agreement"), providing, among other things, that until May 30, the
Company would not initiate or solicit offers for a business combination from any
other person. Promptly thereafter, Parent commenced a due diligence review of
the Company's business, including non-public information provided by the
Company. The term of the Exclusivity Agreement was subsequently extended until
June 13.
On May 9, representatives of Parent and of NatWest Markets met with Mr.
Carfora and Mr. Egan of the Company and representatives of Compass. At this
meeting, the Company's representatives responded to questions from Parent
regarding the Company's financial position and operating results.
On May 12, Mr. Gibson and other representatives of Parent met with Mr.
Carfora and other representatives of the Company and representatives of Compass
at the offices of Gleacher NatWest Inc. to discuss strategic values which might
be achieved through a business combination transaction and to discuss financial
due diligence matters. On May 13, representatives of Parent's and the Company's
respective independent accountants met to review tax and accounting matters. On
May 14, representatives of Parent and the Company met in the offices of Compass
to review the Company's management information systems. From May 12 through May
16, representatives of Parent, Cahill Gordon & Reindel, counsel to Parent
("Cahill"), and Parent's independent accountants visited the offices of Morgan,
Lewis & Bockius LLP, counsel to the Company ("MLB"), to review information
regarding the Company and its business.
On May 16, Mr. Carfora received a follow-up inquiry from the other retailer
regarding the opportunities for potential business combinations that had been
the subject of the other retailer's and the Company's earlier discussions, as
well as the possibility of the other retailer acquiring a controlling interest
in the Company.
On May 18, the Company advised Parent of the Company's receipt of an
expression of interest from another interested party, although the name of such
party was not disclosed at that time.
At a meeting of the Board of Directors of the Company on May 22, Mr. Carfora
updated the Board as to the status of the separate discussions with Parent and
the other retailer. The Board reconfirmed the authorization of management to
engage in further discussions with Parent and the other retailer regarding
possible business combinations.
On Friday, May 23, Parent distributed the initial draft of the Merger
Agreement and related documents to the Company's representatives. The draft
Merger Agreement did not set forth any terms regarding the price to be proposed
by Parent, a subject which was left for discussion between the chief executives
of the Company and Parent.
On May 23, an executive officer of the other retailer sent a letter to Mr.
Carfora expressing interest in the possibility of the other retailer acquiring
100% of the equity of the Company.
On May 27, the other retailer and one of its affiliates entered into a
confidentiality and standstill agreement with the Company, on substantially the
same terms set forth in the Company Confidentiality Agreement between the
Company and Parent, and the Company prepared to provide to the other retailer
the same information that had previously been provided to Parent.
The Board of Directors of the Company met by conference telephone call on
May 28, at which time Mr. Carfora informed the Board of the letter received from
the other retailer. He also told the Board that Parent had been informed that
another unnamed party had expressed interest and that, based on this
development, the transaction had been removed from the agenda for a scheduled
meeting of the board of Parent. Mr. Carfora further explained that information
would be provided to the other retailer so that it would be in substantially the
same position as Parent to evaluate a potential transaction with the Company.
Discussions would then be pursued, so that the Company could determine whether
the proposal of the other retailer presented a potential alternative to the
transaction with Parent. Mr. Carfora said a more definitive expression of
interest from the other retailer was expected by the end of the week.
17
<PAGE>
On May 29, at the request of the Company, Compass provided to the other
retailer an information memorandum prepared by the Company containing certain
non-public financial information regarding the Company and its business.
On June 3, the other retailer informed Mr. Carfora that it would not proceed
with a purchase of 100% of the equity of the Company, but proposed that the
Company consider the contribution to the Company of certain of the other
retailer's duty free operations in exchange for Common Stock of the Company, as
well as the possible acquisition by the other retailer of a controlling interest
in the Company. At the Company's direction, Compass requested additional
information regarding the proposed alternative transactions. Subsequently, the
other retailer provided to Compass and the Company financial data with respect
to certain of its duty free operations.
On June 5, the Chairman of Parent informed Mr. Carfora that Parent would not
be in a position to proceed with further discussions regarding the price range
for any possible business combination until after July 2.
On June 13, the Company forwarded to Parent comments on the proposed draft
of the Merger Agreement.
On June 18, Mr. Carfora suggested to Mr. Gibson that Parent should propose a
price of $26.00 per share. Mr. Gibson said he would need to discuss this price
with the directors of Parent. On June 23, the Company and Parent reached a
tentative understanding on a price per share in the range of $23.00 to $25.00.
On June 19, the other retailer informed the Company that it did not wish to
pursue the possible acquisition of a controlling interest in the Company, but
that it remained interested in discussing the contribution to the Company of
certain of the other retailer's duty free operations in exchange for Common
Stock of the Company.
On June 28, Parent distributed a revised draft of the Merger Agreement.
On June 30, the Company provided to Parent its comments on the revised
Merger Agreement, as well as the Shareholders Agreement and the Option
Agreement, although an express stipulation was made by the Company that there
was no agreement that the Option Agreement and/or the Shareholders Agreement
would be entered into.
On July 1, representatives of the Company and Parent met to negotiate the
provisions of the Merger Agreement.
On July 2, further discussions were held by the Company and Parent with
respect to the proposed price for the transaction. At the conclusion of such
discussions, Parent proposed to acquire 100% of the equity of the Company for
$24.00 per share, conditioned upon the execution and delivery of the Option
Agreement by the Company and the Shareholders Agreement by certain of the
Company's stockholders, including Gebr. Heinemann, its largest stockholder.
On July 2, revised drafts of the Merger Agreement, the Option Agreement and
the Shareholders Agreement were circulated by Parent and further negotiation
thereof between Parent and the Company ensued throughout the day.
At a special telephonic meeting of the Board on July 2, representatives of
Compass made a presentation to the Board which included, among other things, a
discussion of the merits and effects of the transaction proposed with Parent,
the alternative transaction proposed by the other retailer on June 3, and the
Company continuing to operate on a stand-alone basis. Representatives of Compass
also delivered its written opinion dated July 2, 1997 that, as of such date and
on the basis of and subject to the matters set forth therein, the cash
consideration to be received by the holders of Shares in the Offer and the
Merger was fair, from a financial point of view, to such holders. The Board also
received a summary by counsel to the Company regarding the negotiation of and
the principal terms of the Merger Agreement, the Option Agreement and the
Shareholders Agreement. The Board deliberated as to the proposed transaction
with
18
<PAGE>
Parent, the alternative transaction proposed by the other retailer and the
possibility of continuing to operate on a stand-alone basis and the respective
merits and effects of each. After consideration of the presentations made by the
Company's management and its financial and legal advisors, the Board unanimously
(i) approved the Merger Agreement and the transactions contemplated thereby,
(ii) determined that the Offer and the Merger are advisable and fair to and in
the best interests of the shareholders of the Company, (iii) determined to
recommend acceptance of the Offer and approval and adoption of the Merger
Agreement, the Merger, the Shareholders Agreement and the Option Agreement by
the shareholders of the Company, (iv) took actions to amend the Company's
By-laws to exempt the transactions from the control share acquisition provisions
of the MGCL and (v) adopted a resolution exempting the transaction from the
business combination provisions of the MGCL.
On July 2, 1997, the Company was informed that the Board of Parent had
unanimously approved the terms and conditions of the proposed transaction with
the Company, including the terms and conditions of the Merger Agreement and the
other transaction documents contemplated thereby.
In the early morning of July 3, the parties executed the Merger Agreement,
dated as of July 2, 1997, and publicly announced the transactions contemplated
thereby.
On July 9, 1997, Purchaser commenced the Offer.
(b) (2) REASONS FOR THE RECOMMENDATION. In approving the Merger Agreement,
the Shareholders Agreement and the Option Agreement and the transactions
contemplated thereby and recommending that all holders of Shares tender their
Shares pursuant to the Offer, the Board of Directors considered a number of
factors, including:
(i) the familiarity of the Board of Directors with the Company's
business, financial condition, results of operations, properties and
prospects as an independent entity, and the nature of the industry in which
it operates, based in part upon presentations by the Company's management
and Compass;
(ii) the trading range for the Company's Common Stock during the period
from 1995 to the present, and the fact that the $24.00 price proposed by
Parent represents a significant premium over the sale prices for the
Company's Common Stock over the past three years;
(iii) the Board's determination, based in part on presentations by the
Company's management and Compass, that the alternative transaction proposed
by the other retailer on June 3 was, on balance, less favorable to the
Company and its stockholders and that the terms of the Merger Agreement,
including the termination fee and expense reimbursement provisions and
should not preclude third parties from making bona fide acquisition
proposals subsequent to signing the Merger Agreement;
(iv) the terms of the Merger Agreement, including the proposed structure
of the Offer and the Merger involving an immediate cash tender offer for all
outstanding Shares to be followed by a merger for the same consideration,
thereby enabling stockholders to obtain cash for their Shares at the
earliest possible time;
(v) the presentation of Compass at the July 2, 1997 Board meeting and
the written opinion of Compass dated July 2, 1997 that, as of such date and
on the basis of and subject to the matters set forth therein, the cash
consideration to be received by the holders of the Shares pursuant to the
Offer and the Merger was fair, from a financial point of view, to such
holders. A copy of the written opinion of Compass, which sets forth the
factors considered and the assumptions made, is attached hereto as Exhibit
15 and incorporated herein by reference. STOCKHOLDERS ARE URGED TO READ THE
OPINION OF COMPASS CAREFULLY AND IN ITS ENTIRETY;
(vi) that the Merger Agreement permits the Company, prior to the
acceptance for payment of Shares pursuant to the Offer, to furnish nonpublic
information and access thereto to third parties, in response to an
unsolicited written bona fide proposal for a merger or other business
combination involving the Company or any of its subsidiaries or any proposal
or offer to acquire in any manner, directly or indirectly, more than 20% of
the equity securities of the Company or more than 20% of the
19
<PAGE>
Company's consolidated total assets which contains no financing condition
from a person the Company's Board reasonably believes has the financial
ability to make a takeover proposal which is, after taking into account the
written advice of the Company's investment banker, more favorable to the
Company's stockholders than the Offer and the Merger, and to participate in
the discussions and negotiations with such parties with respect thereto;
(vii) the ability of Parent and Purchaser to consummate the Offer and
the Merger without conditioning the Offer on the arrangement of financing;
and
(viii) the enhanced competition the Company had encountered in seeking
to retain existing, or to acquire new, duty free and other retail
concessions at airports; the prospect of the significant reduction of duty
free markets in the European Economic Community commencing in 1999 and the
increased competition the Company could thereafter experience from duty free
operators with greater access to capital resources than the Company.
The Board of Directors did not assign relative weights to the foregoing
factors or determine that any factor was of particular importance. Rather, the
Board of Directors viewed its position and recommendations as being based on the
totality of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company has retained Compass to act as its exclusive financial advisor
in connection with any proposed Sale Transaction (as defined in the Engagement
Letter). Pursuant to the Engagement Letter, the Company has agreed to pay
Compass a fee of $4,000,000 (less a $100,000 retainer previously paid to Compass
by the Company) for Compass' financial advisory services, 20% of which became
payable upon the public announcement of the execution of the Merger Agreement,
and the remainder of which is payable upon the purchase of Shares pursuant to
the Offer. The Company has also agreed to reimburse Compass for reasonable
out-of-pocket expenses incurred by Compass in connection with its activities
under the Engagement Letter, including reasonable fees and disbursements of
Compass' legal counsel. In addition, the Company has agreed to indemnify Compass
against certain liabilities, including liabilities arising under federal
securities laws.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to security holders on its behalf concerning the Offer or the
Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Except as set forth in Schedule II hereto, no transactions in the Shares
have been effected during the past 60 days by the Company or, to the best of the
Company's knowledge, by any executive officer, director, affiliate or subsidiary
of the Company.
(b) To the best of the Company's knowledge, except for Shares the sale of
which may trigger liability for the holder(s) under Section 16(b) of the
Exchange Act, each executive officer, director and affiliate of the Company
currently intends to tender all Shares over which he or she has sole dispositive
power in the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth above in Items 3(b) and 4(b), no negotiation is
being undertaken or is underway by the Company in response to the Offer which
relates to or would result in (i) an extraordinary transaction, such as a merger
or reorganization, involving the Company or any subsidiary of the Company; (ii)
a purchase, sale or transfer of a material amount of assets by the Company or
any subsidiary of the Company; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
20
<PAGE>
(b) Except as set forth above or in Items 3(b) or 4(b) above, there are no
transactions, Board resolutions, agreements in principle or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible election of persons designated by Parent to a
majority of the seats on the Board of Directors of the Company.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
Exhibit 1. Agreement and Plan of Merger dated as of July 2, 1997 among BAA plc, W & G
Acquisition Corporation and Duty Free International, Inc.
Exhibit 2. Pages 8 through 14 of Duty Free International, Inc.'s Proxy Statement dated
April 14, 1997 relating to its 1997 Annual Meeting of Stockholders.
Exhibit 3. Shareholders Agreement dated as of July 2, 1997 among BAA plc, W & G Acquisition
Corporation, Gebr. Heinemann, John A. Couri, Elaine C. Couri, David H.
Bernstein, Carl Reimerdes, Heribert H. Diehl and Alfred Carfora.
Exhibit 4. Stock Option Agreement dated as of July 2, 1997 by and between BAA plc and Duty
Free International, Inc.
Exhibit 5. Letter Agreement dated January 6, 1997 between BAA plc and Duty Free
International, Inc. (the Company Confidentiality Agreement).
Exhibit 6. Letter Agreement dated January 6, 1997 between Duty Free International, Inc. and
BAA plc (the Parent Confidentiality Agreement).
Exhibit 7. Charter of Duty Free International, Inc.
Exhibit 8. By-laws of Duty Free International, Inc.
Exhibit 9. Indemnity Agreement dated September 18, 1987 between Duty Free International,
Inc. and Jack Africk.
Exhibit Letter Agreement dated April 1, 1997 between Duty Free International, Inc. and
10. Compass Partners International, L.L.C.
Exhibit Consulting Agreement between Duty Free International, Inc. and John Couri.
11.
Exhibit Form of Promissory Notes payable to Duty Free International, Inc. issued by
12. Fenton Hill Florida, Inc.
Exhibit Duty Free International, Inc. 1989 Stock Option Plan.
13.
Exhibit Duty Free International, Inc. 1994 Stock Option Plan.
14.
Exhibit Opinion of Compass Partners International, L.L.C. dated July 2, 1997*.
15.
Exhibit Press Release issued by Duty Free International on July 3, 1997.
16.
Exhibit Form of Letter to Shareholders of Duty Free International, Inc. dated July 9,
17. 1997*.
Exhibit Tombstone Advertisement.
18.
</TABLE>
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* Included in copies mailed to Shareholders.
21
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: July 9, 1997
<TABLE>
<S> <C> <C>
DUTY FREE INTERNATIONAL, INC.
By: /s/ Alfred Carfora
---------------------------------------
Name: Alfred Carfora
Title: President and Chief Executive Officer
</TABLE>
22
<PAGE>
SCHEDULE I
DUTY FREE INTERNATIONAL, INC.
63 COPPS HILL ROAD
RIDGEFIELD, CT 06877
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about July 9, 1997 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") to holders of the common stock, par value $.01 per share ("Common
Stock"), of Duty Free International, Inc. ("the Company"). Capitalized terms
used and not otherwise defined herein shall have the meaning set forth in the
Schedule 14D-9. You are receiving this Information Statement in connection with
the possible election of persons designated by BAA plc ("BAA") to a majority of
the seats on the Board of Directors of the Company.
Pursuant to the Agreement and Plan of Merger, dated as of July 2, 1997,
among the Company, BAA and W&G Acquisition Corporation (the "Purchaser") (the
"Merger Agreement"), on July 9, 1997, the Purchaser commenced the Offer. The
Offer is scheduled to expire at 12:00 midnight (New York time) on August 5, 1997
unless extended.
The information contained in this Information Statement (including
information incorporated by reference) concerning BAA and the Purchaser and the
BAA Designees (as defined below) has been furnished to the Company by BAA and
the Purchaser and the Company assumes no responsibility for the accuracy or
completeness of such information.
GENERAL INFORMATION REGARDING THE COMPANY
GENERAL
The Common Stock is the only class of voting securities of the Company
outstanding. Each share of Common Stock has one vote. As of July 1, 1997, there
were 27,353,088 shares of Common Stock outstanding and 2,143,220 shares of
Common Stock reserved for issuance upon the exercise of options outstanding. The
Board of Directors of the Company currently consists of nine members and there
are currently no vacancies on the Board of Directors. The Board of Directors is
divided into three classes and each director serves a term of three years and
until his successor is duly elected and qualified or until his earlier death,
resignation or removal.
BAA DESIGNEES
The Merger Agreement provides that, subject to compliance with applicable
law and promptly following the purchase by the Purchaser of more than 50% of the
outstanding Shares pursuant to the Offer, the Purchaser shall be entitled to
designate such number of directors (the "BAA Designees") to the Board of
Directors of the Company as shall give it representation on the Company's Board
equal to at least that number of directors, rounded up to the next whole number,
which represents the product of (x) the total number of directors on the
Company's Board of Directors multiplied by (y) the percentage that the number of
Shares so accepted for payment plus any Shares otherwise owned by the Purchaser
or any other subsidiary of BAA bears to the number of Shares outstanding and the
Company shall, at such time, cause the BAA Designees to be so elected. In
furtherance thereof, the Company will increase the size of the Company's Board
of Directors, or obtain the resignation of directors, as is necessary to permit
the Purchaser's designees to be elected or appointed to the Company's Board of
Directors. This Information Statement is required by Section 14(f) of the
Securities Exchange Act of 1934, as amended (the "Exchange
1
<PAGE>
Act"), and Rule 14f-1 thereunder. YOU ARE URGED TO READ THIS INFORMATION
STATEMENT CAREFULLY. YOU ARE NOT, HOWEVER, REQUIRED TO TAKE ANY ACTION.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to the number of
shares of Common Stock owned, as of July 1, 1997 (except as noted in note (2)
below), by each person who is known by the Company to beneficially own more than
5% of Common Stock, each Director of the Company, each executive officer named
in the Summary Compensation Table and all executive officers and Directors of
the Company as a group. A person is a beneficial owner if such person has or
shares voting power or investment power. Each beneficial owner has sole voting
and investment power unless otherwise noted. At July 1, 1997, there were
27,353,088 shares of Common Stock outstanding. Except as noted in the footnotes
below, the addresses of all stockholders, Directors and executive officers
identified in the table and accompanying footnotes are in care of the Company's
principal executive offices at 63 Copps Hill Road, Ridgefield, Connecticut
06877.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENTAGE OF
BENEFICIALLY OUTSTANDING
NAME OF BENEFICIAL OWNER OWNED COMMON STOCK
- ------------------------------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
Gebr. Heinemann(l)............................................................ 4,571,664 16.7%
FMR Corporation (2)........................................................... 2,454,600 9.0%
John A. Couri (3)............................................................. 1,221,819 4.4%
David H. Bernstein(4)......................................................... 1,205,423 4.4%
Carl Reimerdes(5)............................................................. 989,948 3.6%
Heribert Diehl (1) (6)........................................................ 935,756 3.4%
Alfred Carfora(7)............................................................. 309,229 1.1*
Gerald F. Egan(8)............................................................. 81,100 *
Jack Africk(9)................................................................ 56,101 *
John Edmondson(10)............................................................ 46,667 *
Susan H. Stackhouse(11)....................................................... 17,234 *
Stephen M. Waters(12)......................................................... 4,000 *
All executive officers and Directors as a group (10 persons) (13)............. 4,867,277 17.3%
</TABLE>
- ------------------------
* Represents less than 1% of the issued and outstanding Common Stock.
(1) Heribert Diehl, a member of the executive committee of Gebr. Heinemann, a
partnership, is a Director of the Company. The Company believes that certain
members of the Heinemann family who are partners in Gebr. Heinemann may be
deemed to be indirect beneficial owners of the Common Stock owned by Gebr.
Heinemann.
(2) Fidelity Management & Research Company ("Fidelity"), 82 Devonshire Street,
Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940, is the beneficial owner of 2,454,600 shares of the Company's
Common Stock as of December 31, 1996 as a result of acting as investment
adviser to various investment companies registered under Section 8 of the
Investment Company Act of 1940 (the "Funds"). The ownership of one
investment company, Fidelity Value Fund, amounted to 1,825,700 shares of the
Common Stock.
Fidelity Value Fund has its principal business office at 82 Devonshire
Street, Boston, Massachusetts 02109. Edward C. Johnson 3d, FMR Corp.,
through its control of Fidelity, and the Funds each has sole power to
dispose of the 2,454,600 shares owned by the Funds. Neither FMR Corp. nor
Edward C. Johnson 3d, Chairman of FMR Corp., has the sole power to vote or
direct the voting of the shares
2
<PAGE>
owned directly by the Funds, which power resides with each Fund's Boards of
Trustees. Fidelity carries out the voting of the shares under written
guidelines established by the Fund's Board of Trustees. Members of the
Edward C. Johnson 3d family and trusts for their benefit are the predominant
owners of Class B shares of common stock of FMR Corp., representing
approximately 49% of the voting power of FMR Corp. Mr. Johnson 3d owns 12.0%
and Abigail Johnson owns 24.5% of the aggregate outstanding voting stock of
FMR Corp. Mr. Johnson 3d is chairman of FMR Corp. and Abigail P. Johnson is
a director of FMR Corp. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Accordingly, through their ownership of voting common stock
and execution of the shareholders' agreement, members of the Johnson family
may be deemed, under the Investment Company Act of 1940, to form a
controlling group with respect to FMR Corp. All of the foregoing information
is based on FMR Corporation's Schedule 13G dated February 14, 1997.
(3) This amount includes 337,000 shares of Common Stock beneficially owned by
Mr. Couri as Trustee for the Couri Charitable Remainder Trust and Couri
Charitable Lead Unitrust; 32,485 shares of Common Stock as trustee with his
wife for their children; and 17,515 shares of Common Stock held by his son
for which Mr. Couri disclaims beneficial ownership. This amount also
includes stock options exercisable within 60 days after July 1, 1997 to
purchase approximately 148,334 shares of Common Stock.
(4) This amount includes stock options exercisable within 60 days after July 1,
1997 to purchase approximately 148,334 shares of Common Stock.
(5) This amount includes stock options exercisable within 60 days of July 1,
1997 to purchase approximately 140,000 shares of Common Stock.
(6) This amount includes stock options exercisable within 60 days after July 1,
1997 to purchase approximately 40,334 shares of Common Stock.
(7) This amount includes stock options exercisable within 60 days after July 1,
1997 to purchase approximately 133,334 shares of Common Stock.
(8) This amount includes stock options exercisable within 60 days after July 1,
1997 to purchase approximately 80,000 shares of Common Stock.
(9) This amount includes stock options exercisable within 60 days after July 1,
1997 to purchase approximately 52,001 shares of Common Stock.
(10) This amount includes stock options exercisable within 60 days after July 1,
1997 to purchase approximately 46,667 shares of Common Stock.
(11) This amount includes stock options exercisable within 60 days after July 1,
1997 to purchase approximately 16,334 shares of Common Stock.
(12) This amount includes stock options exercisable within 60 days after July 1,
1997 to purchase approximately 2,000 shares of Common Stock.
(13) This amount excludes Common Stock owned by Gebr. Heinemann. The amount
includes stock options exercisable within 60 days after July 1, 1997 to
purchase approximately 807,338 shares of Common Stock.
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
The Company currently has a classified Board of Directors consisting of
three Class A Directors, three Class B Directors and three Class C Directors.
The current terms of the Directors continue until the Annual Meetings of
Stockholders to be held in 1999, 2000 and 1998, respectively, and until their
respective successors are elected and qualified.
CLASS A DIRECTORS
DAVID H. BERNSTEIN, age 62, was the Chairman of the Board of the Company
from 1986 to 1993 and has been a Director since the Company's formation in 1983.
He served until 1992 as President of Samuel Meisel and Company, Inc., a wholly
owned subsidiary of the Company ("Meisel"), with which he had been associated
since 1957. He currently serves as the President of the International
Association of Airport Duty Free Stores, Inc., the trade association
representing all major airport duty free operators in North, South and Central
America, and the Caribbean. He has served in this capacity for the past thirteen
years. Mr. Bernstein is a member of the Board of Trustees of The Johns Hopkins
University and is a trustee of Sinai Hospital and Johns Hopkins Medicine. Mr.
Bernstein is a director of Fenton Hill Florida, Inc.
JOHN A. COURI, age 55, is a consultant to the Company and has been a
Director since the Company's formation. Mr. Couri was Co-Chief Executive Officer
from October 1993 to May 1994 and served as Chairman of the Board of the Company
from October 1993 to December 1994. He was Chief Executive Officer of the
Company from 1987 to 1993, President from 1983 to 1993 and Chief Financial
Officer from 1987 until 1990. In addition, he served as President of the
Northern Border Division from its formation until 1989. Mr. Couri was employed
by IDF Services, Inc. ("IDF Services") from 1972 to 1987, and served as a
director of that corporation until the merger of that corporation with the
Company in 1992.
HERIBERT DIEHL, age 63, has been a Director since the Company's formation.
Mr. Diehl has been an employee of Gebr. Heinemann, a stockholder of the Company,
since 1962 and has been a managing director of that firm since 1983. Gebr.
Heinemann is a major wholesale supplier of duty free merchandise and an operator
of duty free concessions in Europe.
CLASS B DIRECTORS
JACK AFRICK, age 68, is Chairman of Evolution Consulting Group, Inc. Mr.
Africk was the Vice Chairman of the Board of the Company from May 1993 through
December 1994, and was the Vice Chairman of UST, Inc. from 1990 to 1993. He was
a director and Executive Vice President of UST, Inc. from 1987 to 1990, and
previously served as the President and Chief Executive Officer of United States
Tobacco Company, a wholly owned subsidiary of UST, Inc. Mr. Africk is also a
director of Crown Central Petroleum Corp., Tanger Factory Outlets and Transmedia
Network, Inc.
CARL REIMERDES, age 56, has been a Vice President and a Director of the
Company since its formation and the principal operating officer of the Company's
Airport Division and its predecessor since 1983. Mr. Reimerdes was employed by
IDF Services from 1972, and served as its President and as a director, until the
merger of that corporation with the Company in 1992.
LOWELL P. WEICKER, JR., age 65, is a teacher at the University of Virginia.
Mr. Weicker was the Governor of the State of Connecticut from 1990 to 1994; a
U.S. Senator from Connecticut from 1970 to 1988; and a U.S. Congressman from
1968 to 1970. Mr. Weicker is also a director of Compuware, HPSC, Phoenix Home
Life Mutual Fund and UST, Inc.
4
<PAGE>
CLASS C DIRECTORS
ALFRED CARFORA, age 46, was elected President and Co-Chief Executive Officer
of the Company in October 1993 and became Chief Executive Officer in May 1994.
Previously, he served as Executive Vice President and Chief Operating Officer,
and he has been a Director of the Company since 1985. Prior to 1992, Mr. Carfora
had principal operating responsibilities for the Company's Northern Border
Division and Airport Division. Mr. Carfora was employed by IDF Services from
1973 to 1988 and served as its Vice President, Secretary and Treasurer and as a
director until the merger of that corporation with the Company in 1992.
SUSAN H. STACKHOUSE, age 43, has been President of Fenton Hill Florida, Inc.
since 1986 and a Director of the Company since 1992. Ms. Stackhouse joined
Fenton Hill Florida, Inc., formerly known as Bonanni Exports, Inc., in 1980 as
General Manager and served as its Executive Vice President from 1984 until her
election as President in 1986. Fenton Hill Florida, Inc., operates duty free and
retail concessions in eight airports. Ms. Stackhouse has served as a director of
the International Association of Airport Duty Free Stores, Inc. since 1986.
STEPHEN M. WATERS, age 50, is a Managing Partner of Compass Partners
International, L.L.C., a financial services firm. He was Co-Chief Executive of
Morgan Stanley U.K. Group from 1992 to 1996 and a Managing Director of Morgan
Stanley & Company, Inc. from 1988 to 1996. He is a member of the Chancellor's
City Promotion Panel in the United Kingdom, a member of the Harvard Business
School Visiting Committee and Chairman of the Financial Aid Council at Harvard
College.
EXECUTIVE OFFICERS
The Company's executive officers include Alfred Carfora, President and Chief
Executive Officer; John Edmondson, Executive Vice President and Chief Operating
Officer; Carl Reimerdes, Vice President; Gerald F. Egan, Vice President of
Finance, Treasurer, Chief Financial Officer and Secretary; and David H.
Bernstein, Chairman of the Executive Committee of the Board of Directors.
Information concerning each executive officer's age and length of service with
the Company, other than Messrs. Edmondson and Egan, can be found herein under
the subsection entitled "Directors". Each of these executive officers was
elected by, and serves at the pleasure of, the Board of Directors.
JOHN EDMONDSON, age 52, was appointed Executive Vice President and Chief
Operating Officer of the Company in September 1995. From June 1992 to September
1995, Mr. Edmondson had principal operating responsibilities for the Company's
Southern Border Division. He also had principal operating responsibilities for
the Company's Northern Border Division from May 1994 to September 1995. Before
joining the Company in 1992, Mr. Edmondson was a Senior Vice President for Host
Marriott Corporation with complete responsibility for over 150 retail and duty
free airport locations.
GERALD F. EGAN, age 49, joined the Company in August 1989 as Vice President
of Finance. He was elected Chief Financial Officer by the Board of Directors in
January 1990, Treasurer in May 1993 and Secretary in June 1994. Prior to joining
the Company, Mr. Egan had served, since 1985, as chief financial officer of H.B.
Ives Company, a manufacturer of architectural and builders hardware. Mr. Egan
previously had been employed by Cadbury-Schweppes, Inc., a beverage and
confectionery producer, in various financial management positions prior to
becoming its Vice President-Controller in 1984. Mr. Egan is a certified public
accountant.
5
<PAGE>
MEETINGS OF BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors met five times during the fiscal year ended January
26, 1997. All of the Directors attended at least 75% of the aggregate of all
meetings of the Board of Directors and the Committees on which they served
during the fiscal year ended January 26, 1997.
The Audit Committee presently consists of Messrs. Africk, Diehl and Waters.
The Audit Committee is responsible for reviewing, with the Company's independent
auditors, (i) the general scope of the accountants' audit services and the
annual results of their audit, (ii) the reports and recommendations made to the
Audit Committee by the independent auditors and the Company's Internal Audit
Department, and (iii) the Company's internal controls structure. The Audit
Committee held three meetings during the fiscal year ended January 26, 1997.
The Executive Committee presently consists of Messrs. Africk, Bernstein,
Carfora, Couri and Reimerdes. The Executive Committee may exercise all powers of
the Board of Directors between meetings of the Board except as otherwise
provided by law or by the By-laws of the Company. The Executive Committee held
one meeting during the fiscal year ended January 26, 1997.
The Compensation Committee presently consists of Messrs. Africk, Diehl and
Waters. The Compensation Committee is responsible for reviewing and making
recommendations to the Board of Directors concerning remuneration paid to the
Company's executive officers. The Compensation Committee determines the bonuses
awarded under the Company's Incentive Compensation Plan and administers and
makes awards of stock options under the Company's stock option plans. The
Compensation Committee held two meetings during the fiscal year ended January
26, 1997.
The Nominating Committee presently consists of Messrs. Couri and Reimerdes.
The Nominating Committee reviews the qualifications of, and recommends to the
Board, candidates for election to the Board. The Nominating Committee considers
suggestions from many sources, including stockholders, regarding possible
candidates for Director. Such suggestions, together with appropriate
biographical information, may be submitted to the Secretary of the Company. The
Nominating Committee held one meeting during the fiscal year ended January 26,
1997.
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table sets forth certain information
about the cash and non-cash compensation earned by or awarded to Alfred Carfora,
President and Chief Executive Officer, and the four other most highly
compensated executive officers of the Company for the fiscal years ended January
1997, 1996, and 1995.
6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1)
-----------------------------------
<S> <C> <C> <C>
FISCAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS
- ---------------------------------------------------------------------------------- ----------- ---------- ----------
Alfred Carfora,................................................................... 1997 $ 325,000 $ 250,000
President and Chief Executive Officer 1996 $ 325,000 $ 175,000
1995 $ 299,000 $ 150,000
John Edmondson,................................................................... 1997 $ 265,000 $ 175,000
Executive Vice President and Chief Operating Officer 1996 $ 245,000 $ 150,000
1995 $ 216,000 $ 100,000
Carl Reimerdes,................................................................... 1997 $ 288,000 $ 125,000
Vice President 1996 $ 288,000 $ 100,000
1995 $ 275,000 $ 125,000
Gerald F. Egan,................................................................... 1997 $ 206,000 $ 75,000
Vice President of Finance, Treasurer, Secretary and Chief Financial Officer 1996 $ 182,000 $ 125,000
1995 $ 170,000 $ 125,000
David H. Bernstein,............................................................... 1997 $ 50,000 $ --
Chairman of the Executive Committee of the Board, former Chairman of the Board 1996 $ 150,000 $ --
1995 $ 256,000 $ 75,000
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-----------------------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION OPTIONS(2) COMPENSATION(3)
- ------------------------------------------------------------------------------------ ----------- ----------------
<S> <C> <C>
Alfred Carfora,..................................................................... 50,000 $ 18,415
President and Chief Executive Officer -- $ 7,954
125,000 $ 7,477
John Edmondson,..................................................................... 35,000 $ 12,953
Executive Vice President and Chief Operating Officer -- $ 2,491
40,000 $ 2,270
Carl Reimerdes,..................................................................... 25,000 $ 21,015
Vice President -- $ 7,394
125,000 $ 8,942
Gerald F. Egan,..................................................................... 20,000 $ 17,464
Vice President of Finance, Treasurer, Secretary and Chief Financial Officer -- $ 6,734
60,000 $ 7,051
David H. Bernstein,................................................................. -- $ 12,105
Chairman of the Executive Committee of the Board, former Chairman of the Board -- $ 6,091
125,000 $ 11,844
</TABLE>
- ------------------------
(1) Salary and bonus amounts relate to the year in which earned, regardless of
when paid.
(2) This column represents options to purchase the stated number of shares of
Common Stock.
(3) This column includes other compensation that could not properly be reported
in any other column of the Summary Compensation Table. The amounts for
fiscal 1997 include the contributions by the Company to the Duty Free
International, Inc. Employees' Retirement Savings Plan for all named
executives, the cost of life and disability insurance premiums paid by the
Company for all named executives, and professional fees paid by the Company
on behalf of Mr. Bernstein.
7
<PAGE>
The following table summarizes for the named executive officers information
about the grant of options during the fiscal year ended January 26, 1997 and the
potential realizable value of the options.
<TABLE>
<CAPTION>
OPTION GRANTS IN THE LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(2) FISCAL YEAR ($ /SH) DATE
- ----------------------------------------------------------------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Alfred Carfora................................................... 50,000 20% $ 14.00 9/25/06
John Edmondson................................................... 35,000 14% $ 14.00 9/25/06
Carl Reimerdes................................................... 25,000 10% $ 14.00 9/25/06
Gerald F. Egan................................................... 20,000 8% $ 14.00 9/25/06
David H. Bernstein............................................... -0- N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
TERMS (1)
------------------------
NAME 5% 10%
- ---------------------------------------------------------------------------------------- ---------- ------------
<S> <C> <C>
Alfred Carfora.......................................................................... $ 440,226 $ 1,115,620
John Edmondson.......................................................................... $ 308,158 $ 780,934
Carl Reimerdes.......................................................................... $ 220,113 $ 557,810
Gerald F. Egan.......................................................................... $ 176,090 $ 446,248
David H. Bernstein...................................................................... N/A N/A
</TABLE>
- ------------------------
(1) These values have been determined based upon assumed rates of appreciation
and are not intended to forecast the possible future appreciation, if any,
of the price or value of the Company's Common Stock.
(2) The options entitle the holder to purchase shares of the Company's Common
Stock at an exercise price which is equal to the closing price on the New
York Stock Exchange of the Company's Common Stock on the day preceding the
date the stock option was granted. The options vest in three equal annual
installments commencing September 25, 1997 for all named executive officers.
No stock option may be exercised after the expiration of 10 years after the
date of grant.
8
<PAGE>
The following table summarizes for the named executive officers information
about the exercise of stock options by the named executive officers during the
fiscal year ended January 26, 1997 and the value of stock options they held at
January 26, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND JANUARY 26, 1997 OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT JANUARY 26,
1997
--------------------------
<S> <C> <C> <C> <C>
SHARES ACQUIRED VALUE
NAME ON EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------------- --------- ----------- -------------
Alfred Carfora............................................ 6,666 $ 67,493 133,334 91,666
John Edmondson............................................ 0 $ 0 46,667 48,333
Carl Reimerdes............................................ 0 $ 0 140,000 66,666
Gerald F. Egan............................................ 0 $ 0 80,000 40,000
David H. Bernstein........................................ 0 $ 0 148,334 41,666
</TABLE>
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY(L)
OPTIONS AT JANUARY 26,
1997(2)
--------------------------
<S> <C> <C>
NAME EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------------------------- ----------- -------------
Alfred Carfora........................................................................ $ 114,584 $ 69,791
John Edmondson........................................................................ $ 86,668 $ 52,082
Carl Reimerdes........................................................................ $ 163,746 $ 63,541
Gerald F. Egan........................................................................ $ 55,000 $ 32,500
David H. Bernstein.................................................................... $ 114,584 $ 57,291
</TABLE>
- ------------------------
(1) Options are "in-the-money" if the closing market price of the Company's
Common Stock on January 24, 1997 exceeded the exercise prices of the
options.
(2) The value of options represents the difference between the exercise prices
of the options and the closing market price of the Company's Common Stock on
January 24, 1997.
9
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee presently consists of Messrs. Africk, Diehl and
Waters. The Compensation Committee is responsible for reviewing and making
recommendations to the Board of Directors concerning remuneration paid to the
Company's executive officers. The Compensation Committee determines the bonuses
awarded under the Company's Incentive Compensation Plan and administers and
makes awards of stock options under the Company's stock option plans. The
Compensation Committee held two meetings during the fiscal year ended January
26, 1997. Mr. Diehl is a member of the executive committee of Gebr. Heinemann, a
partnership which is a greater than five percent stockholder of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for reviewing and making
recommendations to the Board of Directors with respect to the Company's
executive compensation policies. In addition, the Compensation Committee
determines on an annual basis the compensation to be paid to the Chief Executive
Officer and each of the other executive officers of the Company.
COMPENSATION PHILOSOPHY
The Company's compensation programs for executive officers are designed to
enable the Company to:
- Hire, reward, motivate and retain the highest quality managers possible.
- Match the Company's compensation plans to its business strategies, as well
as to the external business environment.
- Align the executive officers' interest with those of stockholders by
providing a significant portion of incentive compensation in the form of
Company stock options.
- Emphasize the relationship between pay and performance by placing a
significant portion of compensation at risk through the Company's
Incentive Compensation Plan.
Executive annual compensation levels (base salary and incentive compensation
awards) are targeted at the median of compensation paid by comparably positioned
companies for like jobs including the companies used in the performance table on
page 12 of this Information Statement (the "Peer Group").
COMPENSATION ELEMENTS
BASE SALARY
In determining an executive officer's base salary, the responsibilities of
the position, the officer's experience, individual performance, and the
competitive marketplace, including a comparison of salaries paid within the Peer
Group, are considered. Based on the most recent information available, the base
salary for the Chief Executive Officer, Alfred Carfora, ranked below the median
base salary relative to the compensation paid by the Peer Group, and the four
other most highly compensated executive officers' base salaries ranked at the
median relative to the compensation paid by the Peer Group.
INCENTIVE COMPENSATION PLAN
Cash bonuses are provided to senior and other key executives under the
Company's Incentive Compensation Plan (the "Plan") which rewards employees based
on performance relative to financial and other predetermined objectives
established for the year. For fiscal 1997, approximately $2,897,000 was set
aside for distribution as bonuses under the Plan. Individual bonus awards were
determined by evaluating each employee's performance toward Company, divisional
or departmental objectives established for the year and specific performance
measures related to both revenue and profitability.
10
<PAGE>
STOCK OPTIONS
The last principal component of compensation arises from the Company's grant
of stock options under the Company's Stock Option Plans. Stock option grants are
designed to more closely align the interests of management with those of
shareholders, and because the full value of an employee's compensation package
cannot be realized unless stock price appreciation occurs over a number of
years, stock option grants are utilized to retain key employees and to provide
an incentive for them to create long-term shareholder value. In granting stock
options under the Stock Option Plans, the Committee considers (i) the
recipient's level of responsibility; (ii) the recipient's specific function
within the Company's overall organization; (iii) the recipient's performance
toward Company, divisional or departmental objectives established for the year;
(iv) the number of options granted to executive officers by the other companies
included in the Peer Group; and (v) the amount of options currently held by the
executive officer. The Stock Option Plans are administered by the Compensation
Committee and provide that no one person, including executive officers, may be
granted options for the purchase of more than 250,000 shares in any fiscal year
(subject to adjustments as noted in the Stock Option Plans in order to prevent
dilution or enlargement of the rights of optionees).
BENEFITS
The Company provides its executives with medical and other benefits that are
generally available to its employees. The Company also pays premiums for life
and disability insurance for certain executive officers.
TAX COMPLIANCE POLICY
Section 162(m) of the Internal Revenue Code generally limits to $1,000,000
the tax deductible compensation paid to the Chief Executive Officer and the four
highest-paid executive officers who are employed as executive officers on the
last day of the year. However, the limitation does not apply to
performance-based compensation provided certain conditions are satisfied.
The Company's policy is generally to preserve the federal income tax
deductibility of compensation paid, to the extent feasible. The Compensation
Committee believes that the incentive compensation and stock option awards
earned for fiscal 1997 and compensation arising from exercise of stock options
granted in fiscal 1997 will be deductible by the Company.
The Compensation Committee considers its primary goal to be the design of
compensation strategies that further the best interests of the Company and its
stockholders. To the extent not inconsistent with that goal, the Compensation
Committee will attempt, where practical, to use compensation policies and
programs that preserve the deductibility of compensation expenses. The
Compensation Committee reserves the right to use its judgment, where merited by
the Compensation Committee's need for flexibility, to respond to changing
business conditions or an executive's individual performance, to nevertheless
authorize compensation payments which may not, in a specific case, be fully
deductible by the Company.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The compensation program for Alfred Carfora, the Company's Chief Executive
Officer, including salary, annual cash incentive and stock options was
determined using the criteria set forth above. As with the other executive
officers, emphasis is placed on incentive compensation, with approximately 43%
of his fiscal year 1997 compensation (salary and cash bonus) being incentive
based.
Three major factors affected the actions of the Compensation Committee in
fiscal 1997 regarding the compensation of Mr Carfora:
- The Company's operating results improved significantly in fiscal 1997.
11
<PAGE>
- The Company successfully continued a series of cost reduction programs
which contributed to the Company's 34% improvement in profitability.
- Progress was made in each of the Company's businesses.
The Compensation Committee has increased Mr. Carfora's base salary to
$350,000. Mr. Carfora's base salary is below the median base salary for chief
executive officers included in the Peer Group.
Mr. Carfora earned an incentive compensation award of $250,000 for the
fiscal year ended January 26, 1997, which falls below the median bonus award of
chief executive officers who are included in the Peer Group. The Compensation
Committee determined the size of the award after an evaluation of the factors
mentioned above.
Jack Africk
Heribert Diehl
Stephen M. Waters
Members of the Compensation Committee
PERFORMANCE TABLE
The following table compares the cumulative total return on a $100
investment in the Company's Common Stock against the cumulative total return on
a similar investment in (i) the Standard & Poor's Mid-Cap 400 Stock Index and
(ii) a group of five other specialty retail companies, consisting of: CML Group,
Inc., Pier 1 Imports, Inc., Sharper Image Corp., Tiffany & Co. and
Williams-Sonoma, Inc. The table assumes that all investments were made on
January 31, 1992, were held through the Company's fiscal year ended January 26,
1997 and that all dividends were reinvested.
<TABLE>
<CAPTION>
DUTY FREE SPECIALTY RETAIL STANDARD & POOR'S
DATE INTERNATIONAL COMPANIES MID-CAP 400
- ---------------------------------------------------------------- --------------- ----------------- -------------------
<S> <C> <C> <C>
January 31, 1992................................................ $ 100 $ 100 $ 100
January 31, 1993................................................ $ 45 $ 119 $ 111
January 31, 1994................................................ $ 39 $ 117 $ 128
January 29, 1995................................................ $ 19 $ 107 $ 122
January 28, 1996................................................ $ 33 $ 104 $ 161
January 26, 1997................................................ $ 32 $ 155 $ 196
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Ms. Stackhouse, a Director, is the President and an owner of Fenton Hill
Florida, Inc. which has certain arrangements for the purchase of merchandise and
services from the Company. For the fiscal year ended January 26, 1997, such
arrangements included the payment of approximately $43,000 for services rendered
and the purchase of approximately $658,000 of merchandise. On April 28, 1994 and
May 1, 1996, Fenton Hill Florida, Inc. redeemed 4.9 shares of its own stock from
the Company, which was all of the stock owned by the Company, for a total of
$1,425,000. Fenton Hill Florida, Inc. paid the Company $75,000 in 1994 and
promissory notes for $1,350,000 were signed in 1994 and 1996. The notes are
payable in installments starting April 30, 1997 through April 30, 2006. Mr.
Bernstein, a Director and executive of the Company, is a director of Fenton Hill
Florida, Inc.
COMPLIANCE WITH EXCHANGE ACT FILING REQUIREMENTS
The Exchange Act requires the Company's executive officers and directors,
and any persons owning more than 10% of the Common Stock, to file certain
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Based solely on its review of the copies of the Forms 3, 4 and 5
received by it, and written representations from certain reporting persons that
no Forms 5 were required to
12
<PAGE>
be filed by those persons, the Company believes that all executive officers,
directors and 10% shareholders complied with such filing requirements.
INFORMATION WITH RESPECT TO BAA DESIGNEES
BAA has informed the Company that, as of the date of this Information
Statement, BAA has not determined who will be the BAA Designees, but that it
currently intends that some or all of the following persons will be selected as
the BAA Designees.
The following table sets forth the name, business address, present principal
occupation and material positions and occupations within the past five years of
the persons who may be BAA Designees. Unless otherwise specified, each person
listed below is a citizen of the United Kingdom and has his principal address at
the offices of BAA, Stockley House, 130 Wilton Road, London SW1V 1LQ. None of
the persons listed below owns any Common Stock.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND CURRENT EMPLOYMENT, MATERIAL POSITIONS HELD
BUSINESS ADDRESS DURING PAST FIVE YEARS
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Sir John Egan (57) Chief Executive since September 1990. Non Executive Chairman of The London
Tourist Board, 26 Grosvenor Gardens, London SW1W 0DU, since January 1994.
Non Executive Vice Chairman of Legal & General plc, Temple Court, 11 Queen
Victoria Street, London EC4N 4TT, since May 1994. Non Executive Director of
The Foreign & Colonial Investment Trust PLC, Exchange House, Primrose
Street, London EC2 since May 1994. Non Executive Director of World Travel &
Tourism Council, 20 Grosvenor Place, London SW1X 7TT, since March 1994. Non
Executive Director of Marketing Council, Moor Hall, Cookham, Maidenhead,
Berkshire SL6 9QH, since October 1995.
J. Russell F. Walls (53) Group Finance Director since June 1995. Director, Wellcome plc (now
Glaxo-Wellcome), Lansdowne House, Barclay Square, London W1X 6BQ, January
1995-April 1995. Director, Coats Viyella plc, 28 Saville Row, London W1,
until 1994. Non Executive Director Ladbroke Group PLC, Chancel House,
Neasden Lane, London NW10, since June 1996.
Brian Collie (42) Retail Director, Gatwick Airport Limited for the past 5 years. Director of
Duty Free Confederation, 31 Great Peter Street, London SW1P 3LR, May
1996-April 1997.
Nicholas A. Ziebland (44) Group Retail Strategy Director, BAA plc, since February 1996. Head of
Retail Operations, October 1995-February 1996. Head of Retail Operations
BAA plc, 1992-1995.
R.M. Livingstone (54) Chief Executive Officer, World Duty Free Limited since November 1996,
Director of Allders International Limited 1992-1996 (now Allders Nuance
Ltd).
</TABLE>
13
<PAGE>
SCHEDULE II
RECENT TRANSACTIONS WITH RESPECT TO SECURITIES
<TABLE>
<CAPTION>
NAME OF DIRECTOR NUMBER OF OPTIONS GRANTED
- --------------------------------------------------------------------------------------- ---------------------------
<S> <C>
Jack Africk............................................................................ 8,500
Heribert Diehl......................................................................... 6,000
John A. Couri.......................................................................... 6,000
Stephen M. Waters...................................................................... 6,000
Lowell P. Weicker...................................................................... 6,000
Susan H. Stackhouse.................................................................... 1,000
</TABLE>
<PAGE>
Exhibit 99.1
AGREEMENT AND PLAN OF MERGER
Dated as of July 2, 1997
Among
BAA PLC,
W & G ACQUISITION CORPORATION
And
DUTY FREE INTERNATIONAL, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I The Offer
SECTION 1.01. The Offer.......................................................2
SECTION 1.02. Company Actions.................................................4
ARTICLE II
The Merger
SECTION 2.01. The Merger......................................................6
SECTION 2.02. Closing.........................................................6
SECTION 2.03. Effective Time..................................................6
SECTION 2.04. Charter and By-Laws.............................................6
SECTION 2.05. Directors.......................................................7
SECTION 2.06. Officers........................................................7
ARTICLE III
Effect of the Merger on the Capital Stock
of the Constituent Corporations; Exchange
of Certificates
SECTION 3.01. Effect on Stock.................................................7
SECTION 3.02. Exchange of Certificates........................................8
ARTICLE IV
Representations and Warranties of the Company
SECTION 4.01. Standing and Corporate Power...................................10
SECTION 4.02. Subsidiaries...................................................10
SECTION 4.03. Capital Structure..............................................11
SECTION 4.04. Authority; Noncontravention....................................12
SECTION 4.05. SEC Documents; Undisclosed Liabilities.........................13
SECTION 4.06. Information Supplied...........................................14
SECTION 4.07. Absence of Certain Changes or Events...........................15
SECTION 4.08. Litigation.....................................................15
SECTION 4.09. Absence of Changes in Benefit Plans............................16
SECTION 4.10. ERISA Compliance...............................................16
SECTION 4.11. Taxes..........................................................18
SECTION 4.12. No Excess Parachute Payments...................................19
SECTION 4.13. Voting Requirements............................................20
SECTION 4.14. State Takeover Statutes........................................20
-i-
<PAGE>
PAGE
SECTION 4.15. Brokers; Schedule of Fees and Expenses.........................20
SECTION 4.16. Opinion of Financial Advisor...................................20
SECTION 4.17. Intellectual Property..........................................21
SECTION 4.18. Compliance with Laws...........................................21
SECTION 4.19. Environmental Protection.......................................22
SECTION 4.20. Labor Relations and Employment.................................24
SECTION 4.21. Contracts......................................................25
SECTION 4.22. Inventory......................................................26
SECTION 4.23. Balance Sheet Reserves.........................................26
SECTION 4.24. Foreign Corrupt Practices Act..................................26
ARTICLE V
Representations and Warranties of Parent and Sub
SECTION 5.01. Standing and Corporate Power...................................27
SECTION 5.02. Authority; Noncontravention....................................27
SECTION 5.03. Information Supplied...........................................28
SECTION 5.04. Brokers........................................................28
SECTION 5.05. Financing......................................................29
ARTICLE VI
Covenants Relating to Conduct of Business
SECTION 6.01. Conduct of Business............................................29
SECTION 6.02. No Solicitation................................................32
ARTICLE VII
Additional Agreements
SECTION 7.01. Stockholder Approval; Preparation of Proxy Statement...........34
SECTION 7.02. Access to Information; Confidentiality.........................35
SECTION 7.03. Reasonable Efforts; Notification...............................35
SECTION 7.04. Stock Options..................................................36
SECTION 7.05. Indemnification................................................37
SECTION 7.06. Directors......................................................39
SECTION 7.07. Fees and Expenses..............................................40
SECTION 7.08. Public Announcements...........................................41
SECTION 7.09. Transfer Taxes.................................................42
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<PAGE>
PAGE
ARTICLE VIII
Conditions Precedent 42
ARTICLE IX
Termination, Amendment and Waiver
SECTION 9.01. Termination....................................................43
SECTION 9.02. Effect of Termination..........................................45
SECTION 9.03. Amendment......................................................45
SECTION 9.04. Extension; Waiver..............................................45
SECTION 9.05. Procedure for Termination, Amendment, Extension or Waiver......45
ARTICLE X
General Provisions
SECTION 10.01. Nonsurvival of Representations and Warranties.................46
SECTION 10.02. Notices.......................................................46
SECTION 10.03. Definitions...................................................47
SECTION 10.04. Interpretation................................................48
SECTION 10.05. Counterparts..................................................48
SECTION 10.06. Entire Agreement; No Third-Party Beneficiaries................48
SECTION 10.07. Governing Law.................................................48
SECTION 10.08. Assignment....................................................49
SECTION 10.09. Enforcement...................................................49
Exhibit A Conditions of the Offer
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<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of July 2, 1997, among BAA plc,
a corporation organized under the laws of England ("Parent"), W & G Acquisition
Corporation, a Maryland corporation ("Sub") and a wholly owned subsidiary of
Parent, and Duty Free International, Inc., a Maryland corporation (the
"Company").
WHEREAS, the respective Board of Directors of Parent, Sub and the
Company have approved the acquisition of the Company by Parent on the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes to cause
Sub to make a tender offer (as it may be amended from time to time as permitted
under this Agreement, the "Offer") to purchase all the issued and outstanding
shares of Common Stock, par value $0.01 per share, of the Company (the "Common
Stock"), at a price per share of Common Stock of $24, net to the seller in cash,
upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, Sub and certain stockholders of the Company (the
"Stockholders"), are entering into a stockholder agreement (the "Stockholders
Agreement") pursuant to which the Stockholders shall agree to take certain
actions to support the transactions contemplated by this Agreement;
WHEREAS, concurrently with the execution and delivery of this Agreement, Parent
and the Company are entering into a stock option agreement (the "Option
Agreement"), pursuant to which the Company has granted to Parent an irrevocable
option to purchase up to 5,434,367 newly issued shares of Common Stock (the
"Option Shares"), upon the terms and subject to the conditions of the Option
Agreement, at a price of $24 per Option Share.
WHEREAS, the Board of Directors of the Company has (a) determined that
the Offer and the Merger (as defined below) are advisable and fair to and in the
best interests of the stockholders of the Company, (b) approved (i) the
acquisition of the Company by Parent on the terms and subject to the conditions
set forth in this Agreement, (ii) the transactions contemplated by the
Stockholder Agreement and (iii) the transactions contemplated by the Option
Agreement (collectively, the "Transactions"), (c) approved the execution,
delivery and performance of this Agreement and (d) resolved to recommend accep-
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tance of the Offer and approval of the Merger by such stockholders;
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved the merger of Sub into the Company (the "Merger"), on the
terms and subject to the conditions set forth in this Agreement, whereby each
issued and outstanding share of Common Stock not owned directly or indirectly by
Parent or the Company shall be converted into the right to receive the per share
consideration paid pursuant to the Offer; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
The Offer
SECTION 1.01. THE OFFER. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than five business
days after the announcement of the execution of this Agreement, Sub shall, and
Parent shall cause Sub to, commence the Offer. The obligation of Sub to and of
Parent to cause Sub to, accept for payment, and pay for, any shares of Common
Stock tendered pursuant to the Offer shall be subject to the conditions set
forth in Exhibit A attached hereto and to the other conditions of this
Agreement. Sub expressly reserves the right to modify the terms of the Offer
and to waive any condition of the Offer, except that, without the consent of the
Company, Sub shall not (i) reduce the number of shares of Common Stock subject
to the Offer, (ii) reduce the price per share of Common Stock to be paid
pursuant to the Offer, (iii) modify or add to the conditions set forth in
Exhibit A or otherwise amend the Offer in any manner materially adverse to the
Company's stockholders, (iv) except as provided in the next two sentences,
extend the Offer, or (v) change the form of consideration payable in the Offer.
Notwithstanding the foregoing, Sub may, without the consent of the Company, (i)
extend the Offer for a period of not more than 10 business days beyond
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the initial expiration date of the Offer (which initial expiration date shall be
20 business days following commencement of the Offer), if on the date of such
extension less than 90% of the outstanding shares of Common Stock have been
validly tendered and not properly withdrawn pursuant to the Offer, (ii) extend
the Offer from time to time if at the initial expiration date or any extension
thereof the Minimum Tender Condition (as defined in Exhibit A) or any of the
other conditions to Sub's obligation to purchase shares of Common Stock set
forth in paragraphs (a), (b) and (e) of Exhibit A shall not be satisfied or
waived, until such time as such conditions are satisfied or waived, (iii) extend
the Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer and (iv) extend the Offer for any reason for a
period of not more than 10 business days beyond the latest expiration date that
would otherwise be permitted under clause (i), (ii) or (iii) of this sentence.
In addition, Sub shall at the request of the Company extend the Offer for five
business days if at any scheduled expiration date of the Offer any of the
conditions to Sub's obligation to purchase shares of Common Stock shall not be
satisfied; provided, however, that Sub shall not be required to extend the Offer
beyond December 31, 1997. On the terms and subject to the conditions of the
Offer and this Agreement, Sub shall, and Parent shall cause Sub to, pay for all
shares of Common Stock validly tendered and not withdrawn pursuant to the Offer
that Sub becomes obligated to purchase pursuant to the Offer as soon as
practicable after the expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer, which shall contain an offer to purchase and a related letter of
transmittal and summary advertisement (such Schedule 14D-1 and the documents
included therein pursuant to which the Offer shall be made, together with any
supplements or amendments thereto, the "Offer Documents"). The Offer Documents
shall comply as to form in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder and, on the date filed with the SEC and
on the date first published, sent or given to the Company's stockholders, shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by Parent or Sub with
respect to information
<PAGE>
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supplied by the Company for inclusion in the Offer Documents. Each of Parent,
Sub and the Company shall promptly correct any information provided by it for
use in the Offer Documents if and to the extent that such information shall have
become false or misleading in any material respect, and each of Parent and Sub
shall take all steps necessary to amend or supplement the Offer Documents and to
cause the Offer Documents as so amended or supplemented to be filed with the SEC
and to be disseminated to the Company's stockholders, in each case as and to the
extent required by applicable Federal securities laws. Parent and Sub shall
provide the Company and its counsel in writing with any comments Parent, Sub or
their counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
(c) Parent shall provide or cause to be provided to Sub on a timely
basis all funds necessary to purchase any shares of Common Stock that Sub
becomes obligated to purchase pursuant to the Offer.
SECTION 1.02. COMPANY ACTIONS. (a) The Company hereby approves of
and consents to the Offer and represents that the Board of Directors of the
Company (the "Company Board"), at a meeting duly held, has unanimously duly
adopted resolutions (i) determining that the Offer ,the Merger and the
Transactions are advisable and fair to and in the best interests of the
stockholders of the Company, (ii) approving (A) the acquisition of the Company
by Parent on the terms and subject to the conditions set forth in this Agreement
and (B) the Offer, the Merger and the other Transactions, (iii) approving this
Agreement, (iv) amending the Company's Bylaws such that Section 3-702 of the
Maryland General Corporation Law ("MGCL") is inapplicable to the Offer, the
Merger, and the Transactions and exempting the Offer, the Merger and the
Transactions from Section 3-602 of the MGCL and (v) recommending that the
stockholders of the Company accept the Offer, tender their shares of Common
Stock pursuant to the Offer and approve the Merger; provided, however, that such
approval, determination, recommendation or other action may be withdrawn,
modified or amended in accordance with Section 6.02(b) and Section 7.01.
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9") containing the recommendations described in
Section 1.02(a) and shall as promptly as practicable thereafter mail the
Schedule 14D-9 to the stockholders of the Com-
<PAGE>
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pany. The Schedule 14D-9 shall comply as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations promulgated
thereunder and, on the date filed with the SEC and on the date first published,
sent or given to the Company's stockholders, shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or Sub for inclusion in the Schedule 14D-9. Each of the Company, Parent
and Sub shall promptly correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect, and the Company shall take all
steps necessary to amend or supplement the Schedule 14D-9 and to cause the
Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable Federal securities laws. The Company shall provide
Parent and its counsel in writing with any comments the Company or its counsel
may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments.
(c) In connection with the Offer, the Company shall either (i) cause
its transfer agent to furnish Sub promptly with mailing labels containing the
names and addresses of the record holders of Common Stock as of a recent date
and of those persons becoming record holders subsequent to such date, together
with copies of all lists of stockholders, security position listings and other
computer files and all other information in the Company's possession or control
regarding the beneficial owners of Common Stock and shall furnish to Sub such
information and assistance, and of stockholders, security position listings
(including updated lists of stockholders, security position listings and
computer files) as Parent may reasonably request in communicating the Offer to
the Company's stockholders or (ii) make available to Sub the services of the
Company's transfer agent for purposes of the dissemination of the Offer
Documents and any other documents necessary to consummate the Merger. Subject
to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent and Sub shall hold in confidence the
information contained in any such labels, listings and files, shall use such
information only in connection with the Offer, the Merger and, if this Agreement
shall be terminated, shall,
<PAGE>
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upon request, promptly deliver to the Company any copies of such information
then in their possession.
ARTICLE II
The Merger
SECTION 2.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the MGCL, Sub
shall be merged with and into the Company at the Effective Time of the Merger
(as hereinafter defined). Following the Merger, the separate corporate
existence of Sub shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the MGCL.
SECTION 2.02. CLOSING. The closing of the Merger (the "Closing")
shall take place at 10:00 a.m. on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or waiver of
the conditions set forth in Article VIII (the "Closing Date"), at the offices of
Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005, unless
another date or place is agreed to in writing by the parties hereto.
SECTION 2.03. EFFECTIVE TIME. On the Closing Date, the parties shall
file articles of merger or other appropriate documents (in any such case, the
"Articles of Merger") executed in accordance with the relevant provisions of the
MGCL and shall make all other filings or recordings required under the MGCL.
The Merger shall become effective at such time as the Articles of Merger are
accepted for record by the State Department of Assessment and Taxation of
Maryland ("SDAT"), or at such other time as Sub and the Company shall agree and
shall specify in the Articles of Merger (the time the Merger becomes effective
being the "Effective Time of the Merger").
SECTION 2.04. CHARTER AND BY-LAWS. (a) The Restated Certificate of
Incorporation of the Company (the "Charter"), as in effect immediately prior to
the Effective Time shall be the charter of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
(b) The Bylaws of Sub as in effect at the Effective Time of the Merger shall be
the Bylaws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable Law.
<PAGE>
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SECTION 2.05. DIRECTORS. The directors of Sub at the Effective Time
of the Merger shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 2.06. OFFICERS. The officers of the Company at the Effective
Time of the Merger shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE III
Effect of the Merger on the Stock of the Constituent
Corporations; Exchange of Certificates
SECTION 3.01. EFFECT ON STOCK. As of the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the holder
of any shares of Common Stock or any shares of capital stock of Sub:
(a) Each issued and outstanding share of the stock of Sub shall be
converted into and become one fully paid and nonassessable share of Common
Stock, par value $0.01 per share, of the Surviving Corporation.
(b) Each share of Common Stock that is owned by any subsidiary of the
Company and each share of Common Stock that is owned by Parent, Sub or any
other subsidiary of Parent shall automatically be canceled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor.
(c) Each issued and outstanding share of Common Stock shall be converted
into the right to receive from the Surviving Corporation in cash, without
interest, the price per share of Common Stock paid pursuant to the Offer
(the "Merger Consideration"). As of the Effective Time of the Merger, all
such shares of Common Stock shall no longer be outstanding and shall
automatically be canceled
<PAGE>
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and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Common Stock shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration,
without interest.
SECTION 3.02. EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Parent shall designate a bank or trust company
reasonably acceptable to the Company to act as paying agent (the "Paying Agent")
for the payment of the Merger Consideration upon surrender of certificates
representing Common Stock.
(b) PARENT TO PROVIDE FUNDS. Parent shall take all steps necessary
to enable and cause the Surviving Corporation to provide to the Paying Agent on
a timely basis, immediately following the Effective Time of the Merger, all the
funds necessary to pay for the shares of Common Stock pursuant to Section 3.01,
it being understood that any and all interest earned on funds made available to
the Paying Agent in accordance with this Agreement shall be turned over to
Parent.
(c) EXCHANGE PROCEDURE. As soon as reasonably practicable after the
Effective Time of the Merger, the Paying Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time of the Merger represented outstanding shares of Common Stock (the
"Certificates") whose shares were converted into the right to receive the Merger
Consideration pursuant to Section 3.01 (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the certificates to the Paying
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Paying Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the amount of cash into which the shares of Common Stock
theretofore represented by such Certificate shall have been converted pursuant
to Section 3.01, and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Common Stock which is not registered
in the transfer records of the Company, payment may be made to a per-
<PAGE>
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son other than the person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of such Certificate or establish to the satisfaction of
the Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 3.02, each Certificate shall
be deemed at any time after the Effective Time of the Merger to represent only
the right to receive upon such surrender the amount of cash, without interest,
into which the shares of Common Stock theretofore represented by such
Certificate shall have been converted pursuant to Section 3.01. No interest
shall be paid or accrue on the cash payable upon the surrender of any
Certificate.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMMON STOCK. All cash paid upon
the surrender of Certificates in accordance with the terms of this Article III
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Common Stock theretofore represented by such Certificates, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Common Stock which were
outstanding immediately prior to the Effective Time of the Merger. If, after
the Effective Time of the Merger, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article III.
(e) NO LIABILITY. None of Parent, Sub, the Company or the Paying
Agent shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to seven years after
the Effective Time of the Merger (or immediately prior to such earlier date on
which any payment pursuant to this Article III would otherwise escheat to or
become the property of any Governmental Entity (as defined in Section 4.04)),
the payment in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
<PAGE>
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ARTICLE IV
Representations and Warranties
of the Company
The Company represents and warrants to Parent and Sub, except as
disclosed in the SEC Documents (as defined below) or in the Disclosure Schedule
attached hereto (the "Disclosure Schedule") as follows:
SECTION 4.01. STANDING AND CORPORATE POWER. Each of the Company and
each of its Significant Subsidiaries (as defined below) is a corporation validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry on its
business as now being conducted. Each of the Company and each of its
Significant Subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed (individually or in the aggregate) would not have a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
or results of operations or prospects of the Company and its subsidiaries taken
as a whole other than as the result of currency exchange rate fluctuations,
customs, tax and duty law changes and changes relating to the economy generally
or to the Company's industry in general and not specifically relating to the
Company or any of its Subsidiaries (a "Company Material Adverse Effect"). The
Company has delivered to Parent complete and correct copies of its Restated
Charter and By-laws and the certificates of incorporation and by-laws of its
Significant Subsidiaries, in each case as amended to the date of this Agreement.
For purposes of this Agreement, a "Significant Subsidiary" means any subsidiary
of the Company that constitutes a significant subsidiary within the meaning of
Rule 1-02 of Regulation S-X of the SEC.
SECTION 4.02. SUBSIDIARIES. Section 4.02 of the Disclosure Schedule
lists each subsidiary of the Company and indicates those subsidiaries that
constitute Significant Subsidiaries. All the outstanding shares of capital
stock of, or other equity interests in, each such Significant Subsidiary have
been validly issued and are fully paid and nonassessable and, except as set
forth in Section 4.02 of the Disclosure Schedule, are owned by the Company, by
another wholly owned
<PAGE>
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subsidiary of the Company or by the Company and another such wholly owned
subsidiary, free and clear of all pledges, claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever (collectively, "Liens").
Except for the capital stock of its subsidiaries and except for the ownership
interests set forth in Section 4.02 of the Disclosure Schedule hereto, the
Company does not own, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership, joint venture or other
entity.
SECTION 4.03. CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of 75,000,000 shares of Common Stock, par value $0.01 per
share. As of July 1, 1997, (i) 27,340,088 shares of Common Stock were issued
and outstanding, and (ii) 1,572,316 shares of Common Stock were reserved for
issuance pursuant to the outstanding employee stock options ("Plan Options")
granted pursuant to the Stock Plans (as defined in Section 7.04), and other
options ("Other Options" and, together with the Plan Options, the "Stock
Options") granted to employees, directors and consultants and former employees,
directors and consultants of the Company. Except as set forth above, as of the
date of this Agreement, no shares of capital stock or other voting securities of
the Company were issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of the Company are, and all shares which may be issued
pursuant to the Stock Plans or pursuant to the agreements representing
outstanding Other Options described in clause (iii) above shall be, when issued
and paid for in accordance with the terms of the applicable Stock Plan or Other
Option, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. There are not any bonds, debentures, notes or
other indebtedness of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Company may vote. Except as set forth in Section 4.03
of the Disclosure Schedule hereto, as of the date of this Agreement, there are
not any securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of its
Significant Subsidiaries is a party or by which any of them is bound obligating
the Company or any of its Significant Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other voting securities of the Company or any of its Significant Subsidiaries or
obligating the Company or any of its Significant Subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of this
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Agreement, there are not any outstanding contractual obligations of the Company
or any of its Significant Subsidiaries to purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any of its Significant
Subsidiaries or to provide funds to make any investment (in the form of a loan,
capital contribution or otherwise) in any Significant Subsidiary or any other
entity.
SECTION 4.04. AUTHORITY; NONCONTRAVENTION. The Company has the
requisite corporate power and authority to enter into this Agreement and,
subject to adoption of this Agreement by the holders of a majority of the
outstanding shares of Common Stock, to consummate the Transactions. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the Transactions have been duly authorized by all necessary
corporate action on the part of the Company, subject to approval of the Merger
and the adoption of this Agreement by the holders of a majority of the
outstanding shares of Common Stock. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. The
execution and delivery of this Agreement by the Company does not, and the
consummation of the Transactions and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or result in the creation of any Lien upon any of
the properties or assets of the Company or any of its Significant Subsidiaries
under, (i) the Charter or By-Laws of the Company or the comparable charter or
organizational documents of any of its Significant Subsidiaries, (ii) any loan
or credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its Significant Subsidiaries or their respective properties or assets
or (iii) subject to the governmental filings and other matters referred to in
the following sentence, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company or any of its Significant
Subsidiaries or their respective properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, violations, defaults, rights or
Liens or judgments, orders, decrees, statutes, law ordinances, rules or
regulations that individually or in the aggregate would not (x) have a Company
Material Adverse Effect, (y) materially impair the ability of the Company to
perform its obligations under this Agreement or (z) prevent the consummation of
any of
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the Transactions. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state or local government
or any court, administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign (a "Governmental Entity"),
is required by or with respect to the Company or any of its Significant
Subsidiaries in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the Transactions, except for
(i) the filing of a premerger notification and report form by the Company under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), (ii)
the filing with the SEC of (x) the Schedule 14D-9, (y) a proxy or information
statement relating to the approval by the Company's stockholders of the Merger
and this Agreement, if such approval is required by law (as amended or
supplemented from time to time, the "Proxy Statement"), and (z) such reports
under Section 13(a) of the Exchange Act as may be required in connection with
the Operative Agreements and the Transactions, (iii) the filing of the Articles
of Merger with the SDAT and appropriate documents with the relevant authorities
of other states in which the Company is qualified to do business, (iv) all
necessary consents and approvals from each of the Customs Service Bureau and
Bureau of Alcohol, Tobacco and Firearms applicable to the Merger and (v) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under the laws of any foreign country in which
the Company or any of its Significant Subsidiaries conducts any business or owns
any property or assets, the failure to obtain or make would not have a Material
Adverse Effect.
SECTION 4.05. SEC DOCUMENTS; UNDISCLOSED LIABILITIES. The Company
has filed all required reports, schedules, forms, statements and other documents
with the SEC since January 1, 1994 (the "SEC Documents"). As of their
respective dates, the SEC Documents complied as to form in all material respects
with the requirements of the Securities Act of 1933 (the "Securities Act"), or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent that information contained in any SEC
Document was revised or superseded by a later filed SEC Document, none of the
SEC Documents contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the
<PAGE>
-14
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto in effect at the time of the filing of the respective SEC
Documents were prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved and
fairly presented the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the SEC Documents hereto, neither the Company nor any of its
subsidiaries 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 the Company and
its consolidated subsidiaries or in the notes thereto, except for liabilities
and obligations incurred in the ordinary course of business consistent with past
practice since the date of the most recent consolidated balance sheet included
in the SEC Documents which, individually or in the aggregate, could not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 4.06. INFORMATION SUPPLIED. None of the information supplied
or to be supplied by the Company for inclusion or incorporation by reference in
the Offer Documents, the Schedule 14D-9, the information statement to be filed
by the Company in connection with the Offer pursuant to Rule 14f-1 promulgated
under Exchange Act (the "Information Statement") or the Proxy Statement will, in
the case of the Offer Documents, the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first published, sent or
given to the Company's stockholders, or, in the case of the Proxy Statement, at
the time the Proxy Statement is first mailed to the Company's stockholders or at
the time of the meeting of the Company's stockholders held to vote on adoption
of this Agreement, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Schedule 14D-9, the Information Statement and the
Proxy Statement will comply as to form in all
<PAGE>
-15-
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation or warranty is made by the
Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub for inclusion or incorporation by
reference therein.
SECTION 4.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth in Section 4.07 of the Disclosure Schedule, from January 26, 1997 to the
date of this Agreement, the Company has conducted its business only in the
ordinary course, and there has not been (i) any Company Material Adverse Effect,
(ii) except for regular quarterly dividends payable, any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, Stock
or property) with respect to the Common Stock, (iii) any split, combination or
reclassification of any of its 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 its capital stock, (iv) (A) any granting by the
Company or any of its Significant Subsidiaries to any executive officer of the
Company or any Significant Subsidiaries of any increase in compensation, except
as was required under employment agreements in effect as of the date of the most
recent audited financial statements included in the SEC Documents, (B) any
granting by the Company or any of its Significant Subsidiaries to any such
executive officer of any increase in severance or termination pay, except as was
required under employment, severance or termination agreements in effect as of
the date of the most recent audited financial statements included in the SEC
Documents or (C) any entry by the Company or any of its Significant Subsidiaries
into any employment, severance or termination agreement with any such executive
officer, (v) any damage, destruction or loss, whether or not covered by
insurance, that has or could reasonably be expected to have a Company Material
Adverse Effect on the Company and its subsidiaries taken as a whole, (vi) any
change in accounting methods, principles or practices by the Company materially
affecting its assets, liabilities or business, except insofar as may have been
required by a change in generally accepted accounting principles or (vii) any
action which would have been prohibited without Parent's approval under Section
6.01(a) if taken between the date of this Agreement and the Effective Time of
the Merger.
SECTION 4.08. LITIGATION. Except as set forth in Section 4.08 of the
Disclosure Schedule, as of the date of this Agreement (i) there is no single or
series of related suits, actions or proceedings pending or, to the knowledge of
the Com-
<PAGE>
-16-
pany, threatened against the Company or any of its Significant Subsidiaries, or
any unsatisfied judgment against the Company or any of its Significant
Subsidiaries, relating to or involving an amount greater than $500,000 and (ii)
there is not any judgment, decree, injunction or similar order of any
Governmental Entity or arbitrator outstanding against the Company or any of its
Significant Subsidiaries or other single or series of related suits, actions or
proceedings pending or, to the knowledge of the Company, threatened that,
individually or in the aggregate, could reasonably be expected to have a Company
Material Adverse Effect or prevent the consummation of the Transactions.
SECTION 4.09. ABSENCE OF CHANGES IN BENEFIT PLANS. From January 26,
1997, to the date of this Agreement, there has not been any adoption or
amendment in any material respect by the Company or any of its Significant
Subsidiaries of any collective bargaining agreement or any bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan, arrangement
or understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of the Company or any of its
Significant Subsidiaries (other than with respect to a Foreign Benefit Plan, as
defined in Section 4.10(v)) (collectively, the "Benefit Plans"). Except as set
forth in Section 4.09 of the Disclosure Schedule, there are no employment,
consulting, severance, termination or indemnification agreements, arrangements
or understandings between the Company or any of its Significant Subsidiaries and
any current or former employee, officer or director of the Company or any of its
Significant Subsidiaries.
SECTION 4.10. ERISA COMPLIANCE. (i) Section 4.10 of the Disclosure
Schedule hereto contains a list of all "employee pension benefit plans" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) (sometimes referred to herein as "Pension Plans"),
"employee welfare benefit plans" (as defined in Section 3(l) of ERISA) and all
other Benefit Plans (other than Foreign Benefit Plans) maintained, or
contributed to, by the Company, any entity which is under common control with
the Company under Code Section 414 ("ERISA Affiliate"), or any of the Company's
Significant Subsidiaries for the benefit of any current or former employees,
officers or directors of the Company or any of its ERISA Affiliates or
Significant Subsidiaries. The Company has made available to Parent true,
complete and correct copies of
<PAGE>
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(A) each (or, in the case of any unwritten Benefit Plans, descriptions thereof),
(B) the most recent annual report on Form 5500 filed with the Internal Revenue
Service with respect to each Benefit Plan (if any such report was required), (C)
the most recent actuarial valuations, if any, for the Benefit Plans, (D) the
most recent description for each Benefit Plan for which such summary plan
description is required and (C) each trust agreement and group annuity contract
relating to any Benefit Plan.
(ii) All Pension Plans (other than Foreign Benefit Plans as defined in
Section 4.10(v)) ("U.S. Pension Plans) have been the subject of determination
letters from the Internal Revenue Service to the effect that such Pension Plans
are qualified and exempt from Federal income taxes under Sections 401(a) and
501(a), respectively, of the Internal Revenue Code of 1986, as amended (the
"Code"), or are standardized prototype plans which properly rely on such
determination letters of the plans' sponsor and no such determination letter has
been revoked nor, to the knowledge of the Company, has revocation been
threatened, nor has any event occurred, nor has any such U.S. Pension Plan been
amended since the date of its most recent determination letter or application
therefor in any respect that would adversely affect its qualifications.
(iii) Each Benefit Plan has been administered in compliance with
its terms and applicable provisions of ERISA and the Code except for any
instances of non-compliance that, individually or in the aggregate, are not
reasonably expected to have a Company Material Adverse Effect. Neither the
Company nor any Benefit Plans have engaged in any prohibited transaction as
defined in ERISA Section 406 or Code Section 4975 that could have a Company
Material Adverse Effect. No conditions exist in connection with any Benefit
Plan (other than claims for benefits or contributions in the ordinary course)
that could give rise to liability under ERISA or the Code that would reasonably
be expected to have a Company Material Adverse Effect. None of the U.S. Pension
Plans has an "accumulated funding deficiency" (as such term is defined in
Section 302 of ERISA or Section 412 of the Code), whether or not waived, and all
minimum funding obligations have been made when due. Neither any of such
Benefit Plans nor any of such trusts has been terminated, nor has there been any
"reportable event" (as that term is defined in Section 4043 of ERISA) with
respect thereto, during the last six years which could give rise to liability
that would reasonably be expected to have a Company Material Adverse Effect.
Neither the Company, any of its subsidiaries nor any entity required to be
aggregated with the Company under
<PAGE>
-18-
Section 414 of the Code has incurred any liability under Title IV of ERISA
(other than insurance premiums) that could reasonably be expected to have a
Company Material Adverse Effect and that has not been satisfied as of the date
hereof. Neither the Company nor any ERISA Affiliates has had any obligation to
contribute to a multiemployer plan (as defined in ERISA Section 3(37) or Code
Section 414(f)) in the past six years.
(iv) With respect to any Benefit Plan that is an employee welfare benefit
plan, except as disclosed in the Disclosure Schedule, each such Benefit Plan
(including any such Plan covering retirees or other former employees) may be
amended or terminated without material liability to the Company or any of its
ERISA Affiliates or Significant Subsidiaries on or at any time after the
consummation of the Offer.
(v) With respect to any employee benefit plan, program or arrangement
maintained the Company by an ERISA Affiliate or Significant Subsidiary that is
maintained outside the United States primarily for the benefit of persons
substantially all of whom are nonresident aliens as to the United States (a
"Foreign Benefit Plan"), each such Foreign Benefit Plan has been maintained in
compliance with all applicable law other than any noncompliance that would not
reasonably be expected to have a Company Material Adverse Effect. Neither the
Company nor any of its Subsidiaries has incurred any obligation in connection
with the termination of or withdrawal from any Foreign Benefit Plan other than
any obligation that would not reasonably be expected to have a Company Material
Adverse Effect. The present value of the accrued benefit liabilities (whether
or not vested) under each Foreign Benefit Plan which is required to be funded,
determined as of the end of the most recently ended fiscal year of the Company
on the basis of actuarial assumptions, each of which is reasonable, did not
exceed the current value of the assets of such Foreign Benefit Plan unless such
excess would not reasonably be expected to have a Company Material Adverse
Effect, and for each Foreign Benefit Plan which is not required to be funded,
the obligations of such Foreign Benefit Plan are properly accrued on the balance
sheets of the Company or the Significant Subsidiary unless such nonaccrual of
the balance sheets would not reasonably be expected to have a Company Material
Adverse Effect.
SECTION 4.11. TAXES. Each of the Company and each of its Significant
Subsidiaries has filed all Federal income tax returns and all other tax returns
and reports required to be filed by it, except to the extent that a failure to
file, in the individual or in the aggregate, would not reasonably be ex
<PAGE>
-19-
pected to result in a Company Material Adverse Effect. All such returns are
complete and correct in all respects, other than any inaccuracy or
incompleteness that, in the individual or in the aggregate, would not reasonably
be expected to result in a Company Material Adverse Effect. The Company and
each of its Significant Subsidiaries has paid (or the Company has paid on its
subsidiaries' behalf) all taxes shown to be due on such returns and reports
except to the extent that a failure to pay, in the individual or in the
aggregate, would not reasonably be expected to result in a Company Material
Adverse Effect. The Company and each of its Significant Subsidiaries has paid
(or the Company has paid on its subsidiaries' behalf) all taxes for which no
return was required to be filed, except to the extent that a failure to pay, in
the individual or in the aggregate, would not reasonably be expected to result
in a Company Material Adverse Effect. All taxes not previously paid do not
exceed the reserve in the most recent financial statements contained in the SEC
Documents for taxes payable by the Company and its Significant Subsidiaries for
all taxable periods and portions thereof through the date of such financial
statements by an amount that would reasonably be expected to result in a Company
Material Adverse Effect. All liabilities for taxes incurred by the Company or
any of its Significant Subsidiaries since the date of the most recent
consolidated balance sheet included in the SEC Documents have been incurred in
the ordinary course of business consistent with past practice, other than any
liabilities for taxes that, individually or in the aggregate, would not
reasonably be expected to result in a Company Material Adverse Effect. No
deficiencies for any taxes have been proposed, asserted or assessed against the
Company or any of its Significant Subsidiaries in writing that would reasonably
be expected to have a Company Material Adverse Effect, and no requests for
waivers of the time to assess any such taxes are pending. The Federal income
tax returns of the Company and each of its Significant Subsidiaries consolidated
in such returns have been examined by and settled with the United States
Internal Revenue Service for all years since 1994. As used in this Agreement,
"taxes" shall include all Federal, state, local and foreign income, franchise,
property, sales, excise and other taxes, tariffs or governmental charges of any
nature whatsoever.
SECTION 4.12. NO EXCESS PARACHUTE PAYMENTS. Other than payments that
may be made to the persons previously disclosed in writing to Parent, any amount
that could be received (whether in cash or property or the vesting of property)
as a result of any of the Transactions by any employee, officer or director of
the Company or any of its affiliates who is a
<PAGE>
-20-
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Benefit Plan currently in effect
would not be characterized as an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code).
SECTION 4.13. VOTING REQUIREMENTS. The affirmative vote of the
holders of a majority of the outstanding shares of Common Stock approving the
Merger is the only vote of the holders of any class or series of the Company's
capital stock necessary to approve the Merger and the Transactions.
SECTION 4.14. STATE TAKEOVER STATUTES. The Board of Directors of the
Company has (i) duly adopted a resolution exempting the Offer, the Merger and
the Transactions from Section 3-602 of the MGCL and (ii) has amended the
Company's By-laws such that the Offer, the Merger and the Transactions are
exempt from the provisions of 3-702 of the MGCL. To the best of the Company's
knowledge, no other state takeover statute or similar statute or regulation
applies or purports to apply to the Offer, the Merger, this Agreement or any of
the Transactions.
SECTION 4.15. BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker,
investment banker, financial advisor or other person, other than Compass
Partners International, LLC ("Compass"), the fees and expenses of which shall be
paid by the Company, is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the Transactions based
upon arrangements made by or on behalf of the Company. The Company's current
estimate of fees and expenses incurred and to be incurred by the Company in
connection with this Agreement and the Transactions (including the fees of the
Company's legal counsel) are set forth in Section 4.15 of the Disclosure
Schedule hereto. A true and complete copy of the engagement letter between the
Company and Compass has been provided to Parent.
SECTION 4.16. OPINION OF FINANCIAL ADVISOR. The Company has received
the opinion of Compass, dated July 2, 1997, to the effect that, as of such date
and based upon and subject to the matters set forth therein, the consideration
to be received in the Offer and the Merger by the Company's stockholders is fair
to the Company's stockholders from a financial point of view, and a signed copy
of such opinion has been delivered to Parent.
<PAGE>
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SECTION 4.17. INTELLECTUAL PROPERTY.
(i) The Company and its Significant Subsidiaries own, license or
otherwise have the right to use all copyrights, trade names, trademarks, service
marks, trade secrets, know-how, designs, software, patents, licenses and other
intellectual property rights (collectively, the "Intellectual Property") that
are necessary to conduct the business of the Company and its Significant
Subsidiaries as presently conducted free and clear of all Liens, other than
those rights the absence of which individually or in the aggregate would not
reasonably be expected to have a Company Material Adverse Effect. Section 4.17
of the Disclosure Schedule contains a list setting forth all material registered
patents and trademarks and applications therefor that are owned by the Company
or any of its Significant Subsidiaries. There are no material trade names,
trademarks or service marks owned by the Company or any of its Significant
Subsidiaries that are not registered or the subject of applications therefor.
(ii) As of the date of this Agreement, there is no suit, action or
proceeding pending or, to the Company's knowledge, threatened against or
affecting the Company or any of its Significant Subsidiaries, which challenges
the legality, validity, enforceability of, or the Company's or any of its
Significant Subsidiaries' use or ownership of any of the Intellectual Property
owned by the Company or any of its Significant Subsidiaries or, to the Company's
knowledge, licensed to the Company or to any of its Significant Subsidiaries,
other than any such suit, action or proceeding that individually or in the
aggregate would not reasonably be expected to have a Company Material Adverse
Effect.
(iii) The conduct of the Company's and its Significant
Subsidiaries' business, the Intellectual Property owned or used by the Company
and its Significant Subsidiaries, and the products or services produced, sold or
licensed by the Company and its Significant Subsidiaries do not infringe,
violate or misappropriate any Intellectual Property right or any other
proprietary right of any person or give rise to any obligations to any person as
a result of co-authority, co-authorship, co-inventorship, or any express or
implied contract for any use or transfer, other than any such infringement,
violation or appropriation that individually or in the aggregate would not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 4.18. COMPLIANCE WITH LAWS. The Company and its Significant
Subsidiaries are in material compliance with,
<PAGE>
-22-
and have not violated any applicable law, rule or regulation of any United
States federal, state, local, or foreign government or agency thereof which
materially affects the business, properties or assets of the Company and its
Significant Subsidiaries, and no notice, charge, claim, action or assertion has
been received by the Company or any of its Significant Subsidiaries or has been
filed, commenced or, to the Company's knowledge, threatened against the Company
or any of its Significant Subsidiaries alleging any such violation, except for
any matter which could not reasonably be expected to have a Company Material
Adverse Effect. All material licenses, permits and authorizations which are
required under all laws, rules and regulations to conduct the Company's and its
Significant Subsidiaries' operations as presently conducted are in full force
and effect, no appeal nor any other action is pending to revoke any such permit,
license or authorization, and the Company and its Significant Subsidiaries are
in full compliance with all terms and conditions of all such permits, licenses
and authorizations, except where the failure to have all such permits, licenses
and other authorizations, the failure to be in full force and effect and in
compliance therewith or the existence of any such appeal or other action would
not reasonably be expected to have a Company Material Adverse Effect or prevent
consummation of the Transactions.
SECTION 4.19. ENVIRONMENTAL PROTECTION.
(i) The Company and its Significant Subsidiaries have obtained all
permits, licenses and other authorizations which are required under the
Environmental Laws (as defined below) for the ownership, use and operation of
each property owned, operated or leased by the Company and its Significant
Subsidiaries (the "Property"), all such permits, licenses and authorizations are
in full force and effect, no appeal nor any other action is pending to revoke
any such permit, license or authorization, and the Company and its Significant
Subsidiaries are in full compliance with all material terms and conditions of
all such permits, licenses and authorizations, except where the failure to have
all such permits, licenses and other authorizations, the failure to be in full
force and effect and in compliance therewith or the existence of any such appeal
or other action would not reasonably be expected to have a Company Material
Adverse Effect.
(ii) The Company and its Significant Subsidiaries are in compliance in
all respects with all Environmental Laws, except where the failure to be in
compliance therewith is not
<PAGE>
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reasonably expected to individually or in any series of related occurrences
result in a Company Material Adverse Effect.
(iii) There is no suit, action, demand, claim or proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any of its Significant Subsidiaries nor, to the knowledge of the Company, is
there any investigation by any Governmental Entity under way, in any case
relating in any way to alleged noncompliance by the Company or any of its
Significant Subsidiaries with, or liability of the Company or any of its
Significant Subsidiaries under Environmental Laws.
(iv) The Company and its Significant Subsidiaries have not, and to the
Company's knowledge, no other person has, Released (as defined below), placed,
stored, buried or dumped any material quantities of Hazardous Substances (as
defined below) on, beneath or adjacent to the Property or, to the knowledge of
the Company, any property formerly owned, operated or leased by the Company or
its Significant Subsidiaries, except for the presence of such Hazardous
Substances as could not reasonably be expected to have a Company Material
Adverse Effect.
(v) Neither the Company nor any of its Significant Subsidiaries has
entered into any agreement that requires them to pay to, reimburse, guarantee,
pledge, defend, indemnify or hold harmless any person for or against any
liabilities or costs in connection with any currently pending or, to the
Company's knowledge, currently threatened suit, action, notice, proceeding or
investigation relating to alleged noncompliance with, or liability under,
Environmental Laws.
(vi) The Company and its Significant Subsidiaries have not received
any written notice or written order from any Governmental Entity or private
entity advising them that they are responsible for or potentially responsible
for cleanup or paying for the cost of Cleanup of any Hazardous Substances and
neither the Company nor any Significant Subsidiary has entered into any
agreements concerning such Cleanup, nor is the Company aware of any material
facts which the Company has specific grounds to believe will give rise to such
notice, order or agreement.
(vii) As used in this Agreement: "Cleanup" shall mean all actions
required to (a) cleanup, remove, treat or remediate Hazardous Substances in the
indoor or outdoor environment, (b) prevent the Release of Hazardous Substances
so that they do not migrate, endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment, (c) perform pre-
<PAGE>
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remedial studies and investigations and post-remedial monitoring and care, (d)
respond to any government requests for information or documents in any way
relating to cleanup, removal, treatment or remediation or potential cleanup,
removal, treatment or remediation of Hazardous Substances in the indoor or
outdoor environment or (e) any administrative, judicial, or other proceedings
related to the above. "Environmental Laws" shall mean all applicable foreign,
federal, state and local laws, regulations, rules and ordinances relating to
pollution or protection of the environment or human health and safety, including
laws relating to Releases or threatened Releases of Hazardous Substances into
the indoor or outdoor environment including ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, release,
transport or handling of Hazardous Substances and all laws and regulations with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Substances, and all laws relating to endangered or
threatened species of fish, wildlife and plants and the management or use of
natural resources; "Hazardous Substance" means: (a) any petrochemical or
petroleum products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls and radon gas; (b) any chemicals, materials or substances defined as
or included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "restricted hazardous materials", "extremely hazardous
substances", "toxic substances", "contaminants" or "pollutants" or words of
similar meaning and regulatory effect; or (c) any other chemical, material or
substance exposure to which is prohibited, limited or regulated by any
Environmental Law; and "release" shall mean any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal, dispersal, Leaching
or migration into the indoor or outdoor environment including ambient air,
surface water, groundwater and surface or subsurface strata) or into or out of
any property, including the movement of Hazardous Substances through or in the
air, soil, surface water, groundwater or property.
SECTION 4.20. LABOR RELATIONS AND EMPLOYMENT. Except as set forth in
Section 4.20 of the Disclosure Schedule, (i) there is no labor strike, or
material dispute, slowdown, stoppage or lockout actually pending, or to the
knowledge of the Company, threatened against or affecting the business of the
Company and its Significant Subsidiaries and during the past five years there
has not been any such action that was ma-
<PAGE>
-25-
terial to the Company; (ii) to the knowledge of the Company, no union claims to
represent the employees of the Company and its Significant Subsidiaries; (iii)
neither the Company nor any Significant Subsidiary of the Company is a party to
or bound by any collective bargaining or similar agreement with any labor
organization, and no work rules or practices agreed to with any labor
organization or employee association are applicable to employees of the Company
or any Significant Subsidiary; (iv) to the knowledge of the Company, none of the
employees of the Company or any Significant Subsidiary is represented by any
labor organization; (v) there is no unfair labor practice charge or complaint
against the Company or any Significant Subsidiary pending or, to the knowledge
of the Company, threatened before the National Labor Relations Board or any
similar state or foreign agency which, if adversely determined, would reasonably
be expected to have a Company Material Adverse Effect; (vi) there is no
grievance arising out of any collective bargaining agreement or other grievance
procedure which, if adversely determined, would reasonably be expected to have a
Company Material Adverse Effect; (vii) to the knowledge of the Company, no
charges with respect to or relating to the Company or any Significant Subsidiary
are pending before the Equal Employment Opportunity Commission or any other
agency responsible for the prevention of unlawful practices which, if adversely
determined, would reasonably be expected to have a Company Material Adverse
Effect; and (viii) the Company has not received notice of the intent of any
federal, state, local or foreign agency responsible for the enforcement of labor
or employment laws to conduct an investigation with respect to or relating to
the Company or any Significant Subsidiary and, to the knowledge of the Company,
no such investigation is in progress.
SECTION 4.21. CONTRACTS. Each material note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any of its Significant Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound (the
"Material Contracts") is a valid and binding obligation of the Company or such
Significant Subsidiaries, as applicable, and in full force and effect, except
where failure to be valid and binding and in full force and effect would not
reasonably be expected to have a Company Material Adverse Effect, and there are
no defaults by the Company or any of its Significant Subsidiaries or, to the
Company's knowledge, any other party thereto, thereunder, except those defaults
that would not reasonably be expected to have a Company Material Adverse Effect.
<PAGE>
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SECTION 4.22. INVENTORY. Except as disclosed in Section 4.22 of the
Disclosure Schedule hereto, all inventory reflected on the most recent unaudited
balance sheet of the Company and all inventory acquired since the date of such
balance sheet, in either instance, other than inventory sold in the ordinary
course of business consistent with past practice is, as of the date hereof, the
property of the Company and its subsidiaries, free and clear of any Lien, other
than statutory Liens being contested in good faith, has not been pledged as
collateral, and is not held on consignment from others. Except as disclosed on
Schedule 4.22 hereto, all inventories held by the Company and its subsidiaries
at any location are (a) valued on the most recent unaudited balance sheet of the
Company at lower of cost or market, (b) except to the extent of any reserve
therefor on the most recent audited balance sheet of the Company, based on the
Company's experience, not obsolete, slow-moving, or damaged.
SECTION 4.23. BALANCE SHEET RESERVES. The reserves for accounts
receivable reflected in the most recent audited balance sheet of the Company
have been established in accordance with GAAP and such reserves, taken as a
whole, based on the Company's experience, are adequate to cover any losses
relating to collectibility of accounts receivable.
SECTION 4.24. FOREIGN CORRUPT PRACTICES ACT. Neither the Company
nor any of its Significant Subsidiaries, nor, to the Company's knowledge, any
director, officer or employee of the Company or any of its Significant
Subsidiaries has, directly or indirectly, used any corporate funds for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity, made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
from corporate funds, violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment.
ARTICLE V
Representations and Warranties of Parent and Sub
Parent and Sub jointly and severally represent and warrant to the
Company as follows:
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SECTION 5.01. STANDING AND CORPORATE POWER. Each of Parent and Sub
is a corporation validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted.
SECTION 5.02. AUTHORITY; NONCONTRAVENTION. Parent and Sub have all
the requisite corporate power and authority to enter into this Agreement and to
consummate the Transactions. The execution and delivery of this Agreement and
the consummation of the Transactions have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been duly
executed and delivered by Parent and Sub and constitutes a valid and binding
obligation of each such party, enforceable against each such party in accordance
with its terms. The execution and delivery of the Operative Agreements do not,
and the consummation of the Transactions and compliance with the provisions of
the Operative Agreements will not, conflict with, or result in any violation of,
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of Parent or any of its subsidiaries under,
(i) the certificate of incorporation or by-laws of Parent or Sub or the
comparable charter or organizational documents of any other subsidiary of
Parent, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to Parent or Sub or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Parent, Sub or any other subsidiary of Parent or
their respective properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, violations, defaults, rights or Liens or
judgments, orders, decrees, statutes, laws, ordinances, rules or regulations
that individually or in the aggregate would not (x) have a material adverse
effect on Parent and its subsidiaries taken as a whole, (y) impair the ability
of Parent and Sub to perform their respective obligations under this Agreement
or (z) prevent the consummation of any of the Transactions. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to Parent, Sub or
any other subsidiary of Parent in connection with the execution and delivery of
this Agreement or the consummation by Parent or Sub, as the case may be, of any
of the Transactions, except for
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(i) the filing of a premerger notification and report form under the HSR Act,
(ii) the filing with the SEC of the Offer Documents and such reports under
Sections 13 and 16(a) of the Exchange Act as may be required in connection with
the Operative Agreements and the Transactions, (iii) the filing of the
Certificate of Merger with the Maryland Secretary of State and appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business, (iv) all necessary consents and approvals from each of
the Customs Service Bureau and the Bureau of Alcohol, Tobacco and Firearms
applicable to the Merger and (v) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the "takeover" or "blue sky" laws of various states.
SECTION 5.03. INFORMATION SUPPLIED. None of the information supplied
or to be supplied by Parent or Sub for inclusion or incorporation by reference
in the Offer Documents, the Schedule 14D-9, the Information Statement or the
Proxy Statement will, in the case of the Offer Documents, the Schedule 14D-9 and
the Information Statement, at the respective times the Offer Documents, the
Schedule 14D-9 and the Information Statement are filed with the SEC or first
published, sent or given to the Company's stockholders, or, in the case of the
Proxy Statement, at the date the Proxy Statement is first mailed to the
Company's stockholders or at the time of the meeting of the Company's
stockholders held to vote on approval and adoption of this Agreement, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Offer Documents will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation or warranty is made by
Parent or Sub with respect to statements made or incorporated by reference
therein based on information supplied by the Company for inclusion or
incorporation by reference therein.
SECTION 5.04. BROKERS. No broker, investment banker, financial
advisor or other person, other than NatWest Markets Corporate Finance Advisory
Limited, the fees and expenses of which shall be paid by Parent, is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the Transactions based upon arrangements made by or on behalf
of Parent or Sub.
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SECTION 5.05. FINANCING. Parent and Sub have readily available all
of the funds necessary to consummate the Offer and the Merger on the terms
contemplated by the Operative Agreements, and, at the expiration of the Offer
and the Effective Time of the Merger, Parent and Sub shall have available all of
the funds necessary for the acquisition of all shares of Common Stock pursuant
to the Offer and the Merger, as the case may be, and to perform their respective
obligations under this Agreement.
ARTICLE VI
Covenants Relating to Conduct of Business
SECTION 6.01. CONDUCT OF BUSINESS.
(a) ORDINARY COURSE. During the period from the date of this
Agreement to the earlier of the Effective Time of the Merger and the appointment
or election of Sub's designees to the Company Board pursuant to Section 7.06
(such earlier time, the "Control Time"), the Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and, to
the extent consistent therewith, use all reasonable efforts to preserve intact
their current business organizations, keep available the services of their
current officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them to the end that their goodwill and ongoing businesses shall
be unimpaired at the Effective Time of the Merger. Without limiting the
generality of the foregoing, except as contemplated by this Agreement or
otherwise approved in writing by Parent, during the period from the date of this
Agreement to the Control Time, the Company shall not, and shall not permit any
of its subsidiaries to:
(i) (A) declare, set aside or pay any dividends on (except for the
regularly quarterly dividends of $.06 per share), or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by any direct or indirect wholly owned subsidiary of the
Company to its parent, (B) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or
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(C) purchase, redeem or otherwise acquire any shares of capital stock of
the Company or any of its subsidiaries or any other securities thereof or
any rights, warrants or options to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities, other than the
issuance of Common Stock upon the exercise of Stock Options outstanding on
the date of this Agreement in accordance with their present terms;
(iii) amend its charter, by-laws or other comparable charter or
organizational documents;
(iv) acquire or agree to acquire (A) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (B) any
assets that are material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole, except purchases of inventory in the
ordinary course of business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien (except for such Liens required by law) or otherwise dispose of
any of its properties or assets, except in the ordinary course of business
consistent with past practice;
(vi) (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with past
practice and pursuant to existing agreements, or (B) make any loans,
advances or capital contributions to, or investments in, any other person,
other than to the Company or any direct or indirect wholly owned subsidiary
of the Company;
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(vii) make or agree to make any new capital expenditure or
expenditures not contemplated by the Company's current budget, as such
budget is set forth in Section 6.01 of the Disclosure Schedule;
(viii) (A) grant to any officer of the Company or any of its
subsidiaries any increase in compensation, except as was required under
employment agreements in effect as of January 26, 1997, (B) grant to any
officer of the Company or any of its subsidiaries any increase in severance
or termination pay, except as was required under employment, severance or
termination agreements in effect as of January 26, 1997, (C) except as set
forth in Section 6.01 of the Disclosure Schedule, enter into any
employment, severance or termination agreement with any officer of the
Company or any of its subsidiaries or (D) amend any Benefit Plan in any
respect;
(ix) make any change in accounting methods, principles or practices
materially affecting the Company's assets, liabilities or business, except
insofar as may have been required by a change in generally accepted
accounting principles;
(x) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms;
(xi) except in the ordinary course of business, modify, amend or
terminate any Material Contract or waive or release or assign any material
rights or claims under any Material Contract;
(xii) make any material tax election or settle or compromise any
material income tax liability; or
(xiii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) OTHER ACTIONS. The Company shall not, and shall not permit any
of its subsidiaries to, take any action that would, or that could reasonably be
expected to, result in (i) any of the representations and warranties of the
Company set forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warran-
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ties that are not so qualified becoming untrue in any material respect or (iii)
except as otherwise permitted by Section 6.02, any of the conditions to the
Offer set forth in Exhibit A, or any of the conditions to the Merger set forth
in Article VIII, not being satisfied.
(c) ADVICE OF CHANGES. The Company shall promptly advise Parent
orally and in writing of any change or event having, or which, insofar as can
reasonably be foreseen, would have, a Company Material Adverse Effect.
SECTION 6.02. NO SOLICITATION. (a) The Company shall not, nor shall
it permit any officer or director of the Company or any officer or director of
its subsidiaries to, nor shall it authorize or permit any officer, director or
employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, (i) solicit or
initiate the submission of, any Takeover Proposal (as defined below), (ii)
except as provided in Section 6.02(b), enter into any agreement with respect to
any Takeover Proposal or (iii) participate in any discussions or negotiations
regarding, or furnish to any person any non-public information with respect to
any Takeover Proposal, or take any other action to solicit or initiate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Takeover Proposal; provided, however, that prior to the
acceptance for payment of shares of Common Stock pursuant to the Offer, the
Company may, after taking into account the advice of outside counsel, in
response to an unsolicited written bona fide Takeover Proposal which contains no
financing condition from a person that the Company Board reasonably believes has
the financial ability to make a Superior Proposal (as defined in Section
6.02(b)), subject to compliance with Section 6.02(c), furnish non-public
information with respect to the Company to such person pursuant to a customary
confidentiality agreement and participate in discussions or negotiations with
such person. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
executive officer or director of the Company or any of its subsidiaries or any
investment banker/attorney or other advisor or representative of the Company or
any of its subsidiaries shall be deemed to be a breach of this Section 6.02(a)
by the Company. For purposes of this Agreement, "Takeover Proposal" means any
written proposal for a merger or other business combination involving the
Company or any of its subsidiaries or any proposal or offer to acquire in any
manner, directly or indirectly, more than 20% of the equity
<PAGE>
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securities of the Company or more than 20% of the Company's consolidated total
assets, other than the Transactions.
(b) Neither the Company Board nor any committee thereof shall (i)
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent or Sub, the approval or recommendation by the Company Board or any such
committee of the Offer, this Agreement or the Merger or (ii) approve or
recommend, or propose to approve or recommend, any Takeover Proposal.
Notwithstanding the foregoing, the Company Board, may approve or recommend (and,
in connection therewith withdraw or modify its approval or recommendation of the
Offer, this Agreement or the Merger) a Superior Proposal. For purposes of this
Agreement, "Superior Proposal" means a bona fide Takeover Proposal which
contains no financing condition made by a third party on terms which the Company
Board determines in its good faith judgment, after taking into account the
written advice of the Company's investment banker, to be more favorable to the
Company's stockholders than the Offer and the Merger.
(c) The Company shall promptly advise Parent orally and in writing of
any Takeover Proposal or any inquiry with respect to or which it believes would
be reasonably likely to lead to any Takeover Proposal unless the Company Board
is advised by outside legal counsel that the furnishing of such advice would be
inconsistent with the legal obligations of the Company Board. The Company shall
keep Parent informed of the status of any such Takeover Proposal or inquiry.
(d) Nothing in this Section 6.02 shall prevent the Company and the
Company Board from complying with Rule 14e-2 under the Exchange Act, or issuing
a communication meeting the requirements of Rule 14d-9(e) under the Exchange
Act, with respect to any tender offer or otherwise prohibit the Company from
making any public disclosures required by law or the requirements of the New
York Stock Exchange; provided, however, that the Company may not, except as
permitted by Section 6.02(b), withdraw or modify its position with respect to
the Offer or the Merger or approve or recommend, or propose to approve or
recommend, a Takeover Proposal.
<PAGE>
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ARTICLE VII
Additional Agreements
SECTION 7.01. STOCKHOLDER APPROVAL; PREPARATION OF PROXY STATEMENT.
(a) If stockholder approval of the Merger is required by law, except to the
extent that the Company Board shall have withdrawn or modified its approval or
recommendation of the Offer, or the Merger as permitted by Section 6.02(b), the
Company shall, at Parent's request, as soon as practicable following Sub's
purchase of shares of Common Stock in the Offer satisfying the Minimum
Condition, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Stockholders Meeting") for the purpose of the approval of the
Merger and adoption of this Agreement. The Company shall, through the Company
Board, recommend to its stockholders the approval of the Merger, except to the
extent that the Company Board shall have withdrawn or modified its approval or
recommendation of the Offer or the Merger as permitted by Section 6.02(b).
Notwithstanding the foregoing, if Sub or any other subsidiary of Parent shall
acquire at least 90% of the outstanding shares of Common Stock the parties shall
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without a
Stockholders Meeting in accordance with Section 3-106 of the MGCL.
(b) If stockholder adoption of this Agreement is required by law,
except to the extent that the Company Board shall have withdrawn or modified its
approval or recommendation of the Offer or the Merger as permitted by Section
6.02(b), the Company shall, at Parent's request, as soon as practicable
following Sub's purchase of shares of Common Stock in the Offer satisfying the
Minimum Condition, prepare and file a preliminary Proxy Statement with the SEC
and shall use its reasonable efforts to respond to any comments of the SEC or
its staff and, except to the extent that the Company Board shall have withdrawn
or modified its approval or recommendation of the Offer or the Merger as
permitted by Section 6.02(b), to cause the Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable after such filing. The
Company shall notify Parent promptly of the receipt of any comments from the SEC
or its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or for additional information and shall
supply Parent with copies of all correspondence between the Company or any of
its representatives, on the one hand, and the SEC or its staff on the other
<PAGE>
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hand, with respect to the Proxy Statement or the Merger. If at any time prior
to the adoption of this Agreement by the Company's stockholders there shall
occur any event that should be set forth in an amendment or supplement to the
Proxy Statement, this Company shall promptly prepare and mail to its
stockholders such an amendment or supplement. The Company shall not mail any
Proxy Statement, or any amendment or supplement thereto, to which Parent
reasonably objects.
(c) Parent shall cooperate with the Company in preparing the Proxy
Statement and shall promptly furnish to the Company all information as may be
requested in connection therewith and Parent shall cause all shares of Common
Stock purchased pursuant to the Offer and all other shares of Common Stock owned
by Sub or any other subsidiary of Parent to be voted in favor of the adoption of
this Agreement.
SECTION 7.02. ACCESS TO INFORMATION; CONFIDENTIALITY. The Company
shall, and shall cause each of its Significant Subsidiaries to, afford to
Parent, and to Parent's officers, employees, accountants, counsel, financial
advisers and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time of the Merger to all their
respective properties, books, contracts, commitments, personnel and records and,
during such period, the Company shall, and shall cause each of its Significant
Subsidiaries to, furnish promptly to Parent (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities laws and (b) all
other information concerning its business, properties and personnel as Parent
may reasonably request. All such information shall be held in accordance with
the confidentiality agreement (the "Confidentiality Agreement") dated
January 6, 1997.
SECTION 7.03. REASONABLE EFFORTS; NOTIFICATION. (a) Upon the terms
and subject to the conditions set forth in this Agreement, unless, to the extent
permitted by Section 6.02(b), the Company Board approves or recommends a
Superior Proposal, each of the parties shall use its reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Offer, the Merger and the other Transactions, including (i) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including
<PAGE>
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filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by any Governmental Entity, (ii) the obtaining of all
necessary consents, approvals or waivers from third parties, (iii) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging any Operative Agreement or the consummation of any of the
Transactions, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed and
(iv) the execution and delivery of any additional instruments necessary to
consummate the Transactions and to fully carry out the purposes of the Operative
Agreements. In connection with and without limiting the foregoing, the Company
and the Company Board shall (i) take all action necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes applicable
to the Offer, the Merger or any Operative Agreement or any of the other
Transactions and (ii) if any state takeover statute or similar statute or
regulation becomes applicable to the Offer, the Merger, any Operative Agreement
or any other Transaction, take all action necessary to ensure that the Offer,
the Merger and the other Transactions may be consummated as promptly as
practicable on the terms contemplated by the Operative Agreements and otherwise
to minimize the effect of such statute or regulation on the Offer, the Merger
and the other Transactions. Notwithstanding the foregoing, the Company Board
shall not be prohibited from taking any action permitted by Section 6.02(b).
(b) The Company shall give prompt notice to Parent, and Parent or Sub
shall give prompt notice to the Company, of (i) any representation or warranty
made by it contained in this Agreement that is qualified as to materiality
becoming untrue or inaccurate in any respect or any such representation or
warranty that is not so qualified becoming untrue or inaccurate in any material
respect or (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement.
SECTION 7.04. STOCK OPTIONS. (a) Either prior to or as soon as
practicable following the consummation of the Offer, the Company Board (or, if
appropriate, any committee administering the Stock Plans) shall adopt such
resolutions or take such other actions as are required to adjust the terms of
all outstanding Stock Options heretofore granted under any stock option program
or arrangement of the Company (collectively, the "Stock Plans") or any other
stock option
<PAGE>
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plan to provide that, at the Effective Time of the Merger, each Stock Option
outstanding immediately prior to the acceptance for payment of shares of Common
Stock pursuant to the Offer (whether or not vested) shall be canceled in
exchange for a cash payment by the Company of, or can only be exercised for net
cash equal to, an amount equal to (i) the excess, if any, of (A) the price per
share of Common Stock to be paid pursuant to the Offer over (B) the exercise
price per share of Common Stock subject to such Stock Option, multiplied by (ii)
the number of shares of Common Stock for which such Stock Option shall not
theretofore have been exercised. The Company represents and warrants that no
consents of the holders of the Stock Options are necessary to effectuate the
foregoing cash-out. After the date of this Agreement, neither the Company Board
nor any committee thereof shall cause any Stock Option to become exercisable as
a result of the execution of the Operative Agreements or the consummation of the
Transactions.
(b) All amounts payable pursuant to this Section 7.04 shall be
subject to any required withholding of taxes and shall be paid without interest.
(c) The Stock Plans shall terminate as of the Effective Time of the
Merger, and the provisions in any other Benefit Plan providing for the issuance,
transfer or grant of any capital stock of the Company or any interest in respect
of any capital stock of the Company shall be deleted as of the Effective Time of
the Merger, and the Company shall ensure that following the Effective Time of
the Merger no holder of a Stock Option or any participant in any Stock Plan or
other Benefit Plan shall have any right thereunder to acquire any capital stock
of the Company or the Surviving Corporation.
SECTION 7.05. INDEMNIFICATION. (a) From and after the Effective
Time, Parent and the Surviving Corporation shall indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time, an officer, director or
employee of the Company or any of its subsidiaries (the "Indemnified Parties")
against (i) all losses, claims, damages, costs, expenses (including attorney's
fees and expenses), liabilities or judgments or amounts that are paid in
settlement (which settlement shall require the prior written consent of Parent,
which consent shall not be unreasonably withheld or delayed) of or in connection
with any claim, action, suit, proceeding or investigation (a "Claim") in which
an Indemnified Party is, or is threatened to be made, a party or a witness based
in whole or in part on or arising in whole or in part out of the fact that
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such person is or was an officer, director or employee of the Company or any of
its subsidiaries, whether such Claim pertains to any matter or fact arising,
existing or occurring at or prior to the Effective Time, regardless of whether
such Claim is asserted or claimed prior to, at or after the Effective Time (the
"Indemnified Liabilities"), and (ii) all Indemnified Liabilities based in whole
or in part on, or arising in whole or in part out of, or pertaining to this
Agreement, the Merger, the Offer, the Operative Agreements or the other
transactions contemplated hereby or by the Operative Agreements, in the case of
either clause (i) or (ii) to the full extent the Company would have been
permitted under Maryland law and its Restated Certificate of Incorporation and
By-Laws to indemnify such person (and Parent shall pay expenses in advance of
the final disposition of any such action or proceeding to each Indemnified Party
to the full extent permitted by law and under such Restated Certificate of
Incorporation or By-Laws, upon receipt of any undertaking required by such
Restated Certificate of Incorporation, By-Laws or applicable law). Any
Indemnified Party wishing to claim indemnification under this Section 7.05(a),
upon learning of any Claim, shall notify Parent (but the failure so to notify
Parent shall not relieve it from any liability which Parent may have under this
Section 7.05(a) except to the extent such failure prejudices Parent) and shall
deliver to Parent any undertaking required by such Restated Certificate of
Incorporation, By-Laws or applicable law. Parent shall use its best efforts to
assure, to the extent permitted under applicable law, that all limitations of
liability existing in favor of the Indemnified Parties as provided in the
Company's Restated Certificate of Incorporation and By-Laws, as in effect as of
the date hereof, with respect to claims or liabilities arising from facts or
events existing or occurring prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement and the Operative
Agreements), shall survive the Merger. The obligations of Parent described in
this Section 7.05(a) shall continue in full force and effect, without any
amendment thereto, for a period of not less than six years from the Effective
Time; provided, however, that all rights to indemnification in respect of any
Claim asserted or made within such period shall continue until the final
disposition of such Claim; and provided, further, that nothing in this Section
7.05(a) shall be deemed to modify applicable Maryland law regarding
indemnification of former officers and directors. The Indemnified Parties as a
group may retain only one law firm to represent them with respect to each such
matter unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties.
<PAGE>
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(b) Parent and the Surviving Corporation shall cause to be maintained
in effect for not less than six years from the Effective Time the current
policies of directors' and officers' liability insurance maintained by the
Company and its subsidiaries (provided that Parent and the Surviving Corporation
may substitute therefor policies of at least the same coverage containing terms
and conditions which are no less advantageous to the Indemnified Parties in all
material respects so long as no lapse in coverage occurs as a result of such
substitution) with respect to all matters, including the transactions
contemplated hereby, occurring prior to, and including, the Effective Time,
provided that, in the event that any Claim is asserted or made within such
six-year period, such insurance shall be continued in respect of any such Claim
until final disposition of any and all such Claims, provided, further, that
Parent shall not be obligated to make annual premium payments for such insurance
to the extent such premiums exceed 150% of the premiums paid as of the date
hereof by Parent for such insurance.
(c) The obligations of Parent and the Surviving Corporation under
this Section 7.05 are intended to benefit, and be enforceable against Parent and
the Surviving Corporation directly by, the Indemnified Parties, and shall be
binding on all respective successors of Parent and the Surviving Corporation.
SECTION 7.06. DIRECTORS. Promptly upon the acceptance for payment
of, and payment by Sub for, any shares of Common Stock pursuant to the Offer
(which constitute at least the Minimum Condition), Sub shall be entitled to
designate such number of directors on the Company Board as shall give Sub,
subject to compliance with Section 14(f) of the Exchange Act, representation on
the Company Board equal to at least that number of directors, rounded up to the
next whole number, which is the product of (a) the total number of directors on
the Company Board (giving effect to the directors elected pursuant to this
sentence) multiplied by (b) the percentage that (i) such number of shares of
Common Stock so accepted for payment and paid for by Sub plus the number of
shares of Common Stock otherwise owned by Sub or any other subsidiary of Parent
bears to (ii) the number of such shares outstanding, and the Company shall, at
such time, cause Sub's designees to be so elected. Subject to applicable law,
the Company shall take all action requested by Parent necessary to effect any
such election, including mailing to its stockholders the Information Statement
containing the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, and the Company shall make such mailing with
the mailing of the Schedule 14D-9 (provided that Sub shall have provided to the
Company on
<PAGE>
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a timely basis all information required to be included in the Information
Statement with respect to Sub's designees). In connection with the foregoing,
the Company shall promptly, at the option of Sub, either increase the size of
the Company Board or obtain the resignation of such number of its current
directors as is necessary to enable Sub's designees to be elected or appointed
to the Company Board as provided above. The provisions of this Section 7.07 are
in addition to and shall not limit any rights which Sub, Parent or any of their
affiliates may have as a holder or beneficial owner of shares of Common Stock as
a matter of law with respect to the election of directors or otherwise.
SECTION 7.07. FEES AND EXPENSES. (a) Except as provided in
paragraphs (b) and (c) below and in Section 7.09, all fees and expenses incurred
in connection with the Offer, the Merger, this Agreement and the Transactions
shall be paid by the party incurring such fees or expenses, whether or not the
Offer or the Merger is consummated.
(b) The Company shall pay to Parent, upon demand, a fee of:
(x) $20 million (the "Termination Fee"), payable in same day funds,
if:
(i) this Agreement shall be terminated pursuant to Section
9.01(b)(i) as a result of the existence of any condition set forth in
paragraph (d) of Exhibit A;
(ii) (A) after the date of this Agreement, any person or
"group" (within the meaning of Section 13(d)(3) of the Exchange Act),
other than Parent, Sub, any of their respective affiliates or other
persons with whom any of the foregoing is part of a group, shall have
publicly made a Takeover Proposal, (B) the Offer shall have remained
open until at least the scheduled expiration date immediately
following the date such Takeover Proposal is made (and in any event
for at least ten business days following the date such Takeover
Proposal is made), (C) the Minimum Tender Condition shall not have
been satisfied at the expiration of the Offer, (D) this Agreement
shall thereafter be terminated pursuant to Section 9.01(b)(i) and
(E) the Company Board, within 10 business days after the public
announcement of such Takeover Proposal, either fails to recommend
against ac-
<PAGE>
-41-
ceptance of such Takeover Proposal by the Company's shareholders or
announces that it takes no position with respect to the acceptance of
such Takeover Proposal by the Company's shareholders; or
(iii) this Agreement shall be terminated pursuant to
Section 9.01(c) or 9.01(d) (but, only if, in the case of paragraph (f)
of Exhibit A, where such condition existed on the date of this
Agreement); or
(y) in the event this Agreement is terminated pursuant to Section
9.01(d) as a result of any condition set forth in paragraph (f) of Exhibit
A, and provided that no Termination Fee is or would become payable
hereunder, the Company shall pay to Parent all Parent Expenses up to and
including $1,000,000. For purposes of this Section 7.07(b)(y), "Parent
Expenses" shall mean all out-of-pocket fees and expenses (including,
without limitation, all travel expenses and all fees and expenses of
counsel, investment banking firms, accountants, experts and consultants to
Parent) incurred or paid by or on behalf of Parent in connection with or
leading to this Agreement, the transactions contemplated hereby, and
performing or securing performance of the obligations of Parent hereunder,
including, without limitation, such fees and expenses related to
preparation and negotiation of documentation.
(c) In the event this Agreement is terminated, the Offer is
terminated or the Merger does not occur, solely due to a breach by Parent or Sub
of any of its covenants, agreements or obligations hereunder, without limitation
of any other rights or remedies available to the Company at law or in equity,
Parent and Sub shall pay to the Company, upon demand, all Expenses of the
Company up to and including $4,000,000. For purposes of this Section 7.07(c),
"Expenses" shall mean all out-of-pocket fees and expenses (including, without
limitation, all travel expenses and all fees and expenses of counsel, investment
banking firms, accountants, experts and consultants to the Company) incurred or
paid by or on behalf of the Company in connection with or leading to this
Agreement, the transactions contemplated hereby, and performing or securing
performance of the obligations of the Company hereunder, including, without
limitation, such fees and expenses related to preparation and negotiation of
documentation.
SECTION 7.08. PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand,
and the Company, on the other hand, shall consult with each other before
issuing, and provide each other the
<PAGE>
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opportunity to review and comment upon, any press release or other public
statements with respect to the Transactions, including the Offer and the Merger,
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by applicable law, court
process or by obligations pursuant to any listing agreement with any national
securities exchange.
SECTION 7.09. TRANSFER TAXES. Parent shall pay or cause Sub to pay
any state or local taxes, use, transfer tax or similar tax (including any real
property transfer or gains tax) payable in connection with the consummation of
the Offer and/or the Merger (collectively, the "Transfer Taxes"). The Company
agrees to cooperate with Parent or Sub, as the case may be, in the filing of any
returns with respect to the Transfer Taxes, including supplying in a timely
manner a complete list of all real property interests held by the Company and
its subsidiaries and any information with respect to such property that is
reasonably necessary to complete such returns. The portion of the consideration
allocable to the assets giving rise to such Transfer Taxes shall be agreed to by
the Company and Parent.
ARTICLE VIII
Conditions Precedent
The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) STOCKHOLDER APPROVAL. If required by applicable law, this
Agreement and the Merger shall have been approved by the affirmative vote
or consent of the holders of a majority of the outstanding shares of Common
Stock in accordance with applicable law and the Company's Charter.
(b) HSR ACT. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however, that
each of the parties shall have used its best
<PAGE>
-43-
efforts to prevent the entry of any such injunction or other order and to
appeal as promptly as possible any injunction or other order that may be
entered.
(d) OTHER GOVERNMENTAL CONSENTS. The Company and Parent shall have
received all necessary consents and approvals from each of the Customs
Service Bureau and the Bureau of Alcohol, Tobacco and Firearms applicable
to the Merger.
ARTICLE IX
Termination, Amendment and Waiver
SECTION 9.01. TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time of the Merger, whether before or after approval
of matters presented in connection with the Merger by the stockholders of the
Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if Sub shall not have purchased that number of shares which
constitutes the Minimum Tender Condition of Common Stock pursuant to
the Offer prior to December 31, 1997; PROVIDED, HOWEVER, that the
passage of such period shall be tolled for any part thereof during
which any party shall be subject to a nonfinal order, decree, ruling
or action restraining, enjoining or otherwise prohibiting the purchase
of shares of Common Stock pursuant to the Offer or the consummation of
the Merger; or
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the purchase of shares of Common
Stock pursuant to the Offer or the Merger and such order, decree,
ruling or other action shall have become final and nonappealable;
(iii) if the Merger shall not have consummated by April 30,
1998 or such later date mutually agreed
<PAGE>
-44-
to by the parties; PROVIDED, HOWEVER, that the passage of such period
shall be tolled for any part thereof during which any party shall be
subject to a nonfinal order, decree, ruling or action restraining,
enjoining or otherwise prohibiting the purchase of shares of Common
Stock pursuant to the Offer or the consummation of the Merger;
PROVIDED, FURTHER, HOWEVER, that the right to terminate this Agreement
pursuant to this Section 9.01(b)(iii) shall not be available to any
party whose failure to perform any obligations under this Agreement
results in the failure of the Merger to be consummated by such time;
(c) by the Company if (x) to the extent permitted by Section 6.02(b),
the Company Board approves or recommends a Superior Proposal and (y) prior
to or contemporaneously with such termination, the Company pays to Parent
an amount in cash equal to the Termination Fee;
(d) by Parent or Sub if Sub terminates the Offer as a result of the
occurrence of any event set forth in paragraphs (d), (f) and (g) of Exhibit
A to this Agreement;
(e) by the Company if Sub terminates the Offer as a result of the
occurrence of any event set forth in paragraph (a), (b), (c), (e), (f) or
(g) of Exhibit A to this Agreement;
(f) by the Company in the event the Company has convened a
Stockholders Meeting in accordance with Section 7.01 and the Merger and
this Agreement have not been approved by the affirmative vote or consent of
the holders of the requisite number of outstanding shares of Common Stock
in accordance with applicable law and the Company's Charter;
(g) by the Company if Sub (A) shall have failed to commence the Offer
within the time required under the Exchange Act or (B) shall have failed to
pay for any Common Stock accepted for payment pursuant to the Offer and, in
the case of clause (B), Sub shall have failed to make such payment within
three business days of receipt of written notice thereof from the Company;
PROVIDED, HOWEVER, that any such failure is not caused by a material breach
by the Company; or
(h) by the Company if Parent or Sub fail to perform in any material
respect any provision of this Agreement
<PAGE>
-45-
and Parent or Sub have failed to perform such obligation or cure such
breach within 10 business days of its receipt of written notice from the
Company and such failure to perform has not been waived in accordance with
the terms of this Agreement; PROVIDED, HOWEVER, that such failure to
perform is not caused by a material breach by the Company.
SECTION 9.02. EFFECT OF TERMINATION. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 9.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of Section 4.15, Section 5.04, the last sentence of Section 7.02,
Section 7.07, this Section 9.02 and Article IX and except to the extent that
such termination results from the wilful and material breach by a party of any
of its representations, warranties, covenants or agreements set forth in the
Operative Agreements.
SECTION 9.03. AMENDMENT. This Agreement may be amended by the
parties at any time before or after any required approval of matters presented
in connection with the Merger by the stockholders of the Company; provided,
however, that after any such approval, there shall not be made any amendment
that by law requires further approval by such stockholders without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
SECTION 9.04. EXTENSION; WAIVER. At any time prior to the Effective
Time of the Merger, the parties may (a) extend the time for the performance of
any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 9.03, waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
SECTION 9.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR
WAIVER. A termination of this Agreement pursuant to Section 9.01, an amendment
of this Agreement to Section 9.03 or an extension or waiver pursuant to Section
9.04 shall, in
<PAGE>
-46-
order to be effective, require (a) in the case of Parent or Sub action by a
majority of its respective Board of Directors and (b) in the case of the
Company, action by a majority of the members of the Board of Directors of the
Company who were members thereof on the date of this Agreement and remain as
such hereafter; PROVIDED, HOWEVER, that in the event that Sub's designees are
appointed or elected to the Board of Directors of the Company as provided in
Section 7.06, after the acceptance for payment of shares of Common Stock
pursuant to the Offer and prior to the Effective Time of the Merger, the
affirmative vote of a majority of the Directors who are not Sub's, designees or
appointees as provided in Section 7.06, in lieu of the vote required pursuant to
clause (b) above, shall be required to (i) amend or terminate this Agreement by
the Company, (ii) exercise or waive any of the Company's rights or remedies
under this Agreement or (iii) extend the time for performance or Parent's and
Sub's respective obligations under this Agreement.
ARTICLE X
General Provisions
SECTION 10.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None
of the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time of the
Merger. This Section 10.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time of
the Merger.
SECTION 10.02. NOTICES. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
BAA plc
Stockley House
130 Wilton Road
London SW1V 1LQ
Attention: Robert Herga
<PAGE>
-47-
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: Stephen A. Greene, Esq.
(b) if to the Company, to
Duty Free International, Inc.
63 Copps Hill Road
Ridgefield, CT 06877
Attention: Lawrence Caputo, Esq.
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178-0060
Attention: Stephen P. Farrell, Esq.
SECTION 10.03. DEFINITIONS. For purposes of this Agreement:
An "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person.
"material" means, when used in connection with the Company or Parent,
material to the business, financial condition or results of operations of such
party and its subsidiaries taken as a whole, and the term "materially" has a
correlative meaning.
"material adverse change" or "material adverse effect" means, when
used in connection with the Parent, any change or effect (or any development
that, insofar as can reasonably be foreseen, is likely to result in any change
or effect) that is materially adverse to the business, properties, assets,
condition (financial or otherwise), results of operations or prospects of such
party and its subsidiaries taken as a whole.
<PAGE>
-48-
"Operative Agreements" means this Agreement, the Stockholder
Agreement, the Option Agreement, the Offer Documents and any other documents
necessary to consummate the Merger.
"person" means an individual, corporation, partnership, company,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
A "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
SECTION 10.04. INTERPRETATION. When a references is made in this
Agreement to a Section or Exhibit, such reference shall be to a Section of, or
an Exhibit to, this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include, "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation".
SECTION 10.05. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 10.06. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. The
Operative Agreements and the Confidentiality Agreement (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of the Operative
Agreements and (b) except for the provisions of Article III with respect to the
Paying Agent and Section 7.05, are not intended to confer upon any person other
than the parties any rights or remedies hereunder.
SECTION 10.07. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Maryland, regardless
of the laws that might otherwise govern under applicable principles of conflict
of laws thereof.
<PAGE>
-49-
SECTION 10.08. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, except that Sub may assign, in
its sole discretion, any of or all its rights, interests and obligations under
this Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations under
this Agreement. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
SECTION 10.09. ENFORCEMENT. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Maryland, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself to the personal jurisdiction
of any Federal court located in the State of Maryland in the event any dispute
arises out of any Operative Agreement or any of the Transactions, (b) agrees
that it shall not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it shall not
bring any action relating to any Operative Agreement or any of the Transactions
in any court other than a Federal or state court sitting in the State of
Maryland.
<PAGE>
-50-
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
BAA PLC
By: /s/ Barry Gibson
-------------------------------
Name: J M BARRY GIBSON
Title: DIRECTOR
W & G ACQUISITION CORPORATION
By: /s/ Brian Collie
-------------------------------
Name: BRIAN COLLIE
Title: VICE-PRESIDENT
DUTY FREE INTERNATIONAL, INC.
By: /s/ Alfred Carfora
-------------------------------
Name: ALFRED CARFORA
Title: PRESIDENT
<PAGE>
EXHIBIT A
Conditions of the Offer
Notwithstanding any other term of the Offer or this Agreement, Sub
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered shares of Common
Stock after the termination or withdrawal of the Offer), to pay for any shares
of Common Stock tendered pursuant to the Offer unless (i) there shall have been
validly tendered and not withdrawn prior to the expiration of the Offer that
number of shares of Common Stock which would represent at least a majority of
the Fully Diluted Shares (the "Minimum Tender Condition")and (ii) any waiting
period under the HSR Act applicable to the purchase of shares of Common Stock
pursuant to the Offer shall have expired or been terminated. The term "Fully
Diluted Shares" means all outstanding securities entitled generally to vote in
the election of directors of the Company on a fully diluted basis, after giving
effect to the exercise or conversion of all options, rights and securities
exercisable or convertible into such voting securities. Furthermore,
notwithstanding any other term of the Offer or this Agreement, Sub shall not be
required to accept for payment or, subject as aforesaid, to pay for any shares
of Common Stock not theretofore accepted for payment or paid for, and may
terminate the Offer if, at any time on or after the date of this Agreement and
before the acceptance of such shares for payment or the payment therefor, any of
the following conditions exists:
(a) there shall be threatened or pending any suit, action or
proceeding by any Governmental Entity (including, without limitation, the
Department of the Treasury, the Customs Service Bureau and the Bureau of
Alcohol, Tobacco and Firearms) or any other person (in the case of any
suit, action or proceeding by a person other than a Governmental Entity,
such suit, action or proceeding having a reasonable likelihood of success)
(i) challenging the acquisition by Parent or Sub of any shares of Common
Stock, seeking to restrain or prohibit the making or consummation of the
Offer or the Merger or the performance of any of the other Transactions, or
seeking to obtain from the Company, Parent or Sub any damages that are
material in relation to the Company and its subsidiaries
<PAGE>
-2-
taken as whole, (ii) seeking to prohibit or limit the ownership or
operation by the Company, Parent or any of their respective subsidiaries of
any material portion of the business or assets of the Company, Parent or
any of their respective subsidiaries, or to compel the Company, Parent or
any of their respective subsidiaries to dispose of or hold separate any
material portion of the business or assets of the Company, Parent or any of
their respective subsidiaries, as a result of the Offer, the Merger or any
of the other Transactions, (iii) seeking to impose limitations on the
ability of Parent or Sub to acquire or hold, or exercise full rights of
ownership of, any shares of Common Stock, including the right to vote the
Common Stock purchased by it on all matters properly presented to the
stockholders of the Company, or (iv) seeking to prohibit Parent or any of
its subsidiaries from effectively controlling in any material respect the
business or operations of the Company or its subsidiaries, or (v) which
otherwise is reasonably likely to prevent consummation of the Transactions;
(b) there shall be any statute, rule, regulation, legislation,
interpretation, judgment, order or injunction threatened, proposed, sought,
enacted, entered, enforced, promulgated, amended or issued (each of the
foregoing, a "Legal Event") with respect to, or deemed applicable to, or
any consent or approval withheld with respect to, (i) Parent, the Company
or any of their respective subsidiaries or (ii) the Offer, the Merger or
any of the other Transactions by any Governmental Entity or before any
court or governmental authority, agency or tribunal, domestic or foreign,
that has a substantial likelihood of resulting, directly or indirectly, in
any of the consequences referred to in clauses (i) through (v) of paragraph
(a) above;
(c) since the date of this Agreement there shall have occurred any
material adverse change, or any development that, insofar as reasonably can
be foreseen, is reasonably likely to result in a material adverse change,
in the business, properties, assets, condition (financial or otherwise),
results of operations or prospects of the Company and its subsidiaries
taken as a whole other than changes resulting from currency exchange rate
fluctuations, customs, tax and duty law changes and changes relating to the
economy in general and to the Company's industry in general and not
specifically relating to the Company or any of its Subsidiaries;
<PAGE>
-3-
(d) (i) the Company Board or any committee thereof shall have
withdrawn or modified in a manner adverse to Parent or Sub its approval or
recommendation of the Offer, the Merger or this Agreement, or approved or
recommended any Superior Proposal or (ii) the Company Board or any
committee thereof shall have resolved to do any of the foregoing;
(e) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange
or in the London Stock Exchange, for a period in excess of 24 hours
(excluding suspensions or limitations resulting solely from physical damage
or interference with such exchanges not related to market conditions), (ii)
a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (iii) a
commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States or involving
the United Kingdom and, in the case of armed hostilities involving the
United Kingdom, having, or which could reasonably be expected to have, a
substantial continuing general effect on business and financial conditions
in the United Kingdom, (iv) any limitation (whether or not mandatory) by
any United States or the United Kingdom governmental authority on the
extension of credit generally by banks or other financial institutions or
(v) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
(f) any of the representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall not be
true and correct and any such representations and warranties that are not
so qualified shall not be true and correct in any material respect, in each
case as if such representations and warranties were made as of such time
and the failure to be so true and correct or so true and correct in any
material respect is a Company Material Adverse Effect, and except with
respect to representations and warranties made as of an earlier time;
(g) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agree-
<PAGE>
-4-
ment and such failure would result in a Company Material Adverse Effect; or
(h) the Merger Agreement shall have been terminated in accordance
with its terms.
Subject to Section 1.01(a), the foregoing conditions (i) may be
asserted by Parent and Sub regardless of the circumstances giving rise to such
condition and (ii) are for the sole benefit of Parent and Sub and may be waived
by Parent or Sub, in whole or in part at any time and from time to time in the
sole discretion of Parent or Sub. The failure by Parent or Sub at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
<PAGE>
Exhibit 99.2
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information about
the cash and non-cash compensation earned by or awarded to Alfred Carfora,
President and Chief Executive Officer, and the four other most highly
compensated executive officers of the Company for the fiscal years ended January
1997, 1996, and 1995.
Summary Compensation Table
Annual compensation (1)
Name and Fiscal
Principal Position Year Salary Bonus
<PAGE>
Alfred Carfora,
President and Chief
Executive Officer 1997 $325,000 $250,000
1996 $325,000 $175,000
1995 $299,000 $150,000
John Edmondson, 1997 $265,000 $175,000
Executive Vice 1996 $245,000 $150,000
President and Chief 1995 $216,000 $100,000
Operating Officer
Carl Reimerdes, 1997 $288,000 $125,000
Vice President 1996 $288,000 $100,000
1995 $275,000 $125,000
Gerald F. Egan, Vice 1997 $206,000 $ 75,000
President of Finance, 1996 $182,000 $125,000
Treasurer, Secretary 1995 $170,000 $125,000
and Chief Financial
Officer
David H. Bernstein, 1997 $ 50,000 $ --
Chairman of the 1996 $150,000 $ --
Executive Committee 1995 $256,000 $ 75,000
of the Board, former
Chairman of the
Board
(TABLE CONTINUED)
Long-term
Compensation
Awards
Securities
Name and Underlying All other
Principal Position Options(2) Compensation(3)
Alfred Carfora, President
and Chief Executive 50,000 $ 18,415
Officer -- $ 7,954
125,000 $ 7,477
John Edmondson, 35,000 $ 12,953
Executive vice -- $ 2,491
<PAGE>
President and Chief 40,000 $ 2,270
Operating Officer
Carl Reimerdes, 25,000 $ 21,015
Vice President -- $ 7,394
125,000 $ 8,942
Gerald F. Egan, Vice 20,000 $ 17,464
President of Finance, -- $ 6,734
Treasurer, Secretary 60,000 $ 7,051
and Chief Financial
Officer
David H. Bernstein, -- $ 12,105
Chairman of the -- $ 6,091
Executive Committee 125,000 $ 11,844
of the Board, former
Chairman of the Board
(1) Salary and bonus amounts relate to the year in which earned, regardless of
when paid.
(2) This column represents options to purchase the stated number of shares of
Common Stock.
(3) This column includes other compensation that could not properly be reported
in any other column of the Summary Compensation Table. The amounts for
fiscal 1997 include the contributions by the Company to the Duty Free
International, Inc. Employees' Retirement Savings Plan for all named
executives, the cost of life and disability insurance premiums paid by the
Company for all named executives, and professional fees paid by the Company
on behalf of Mr. Bernstein.
[*9]
The following table summarizes for the named executive officers information
about the grant of options during the fiscal year ended January 26, 1997 and the
potential realizable value of the options.
<PAGE>
Option Grants in the Last Fiscal Year
Individual Grants
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted(2) Fiscal Year ($ /Sh) Date
Alfred Carfora 50,000 20% $14.00 9/25/06
John Edmondson 35,000 14% $14.00 9/25/06
Carl Reimerdes 25,000 10% $14.00 9/25/06
Gerald F. Egan 20,000 8% $14.00 9/25/06
David H. Bernstein -0- N/A N/A N/A
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for
Option Terms (1)
Name 5% 10%
Alfred Carfora $440,226 $1,115,620
John Edmondson $308,158 $ 780,934
Carl Reimerdes $220,113 $ 557,810
Gerald F. Egan $176,090 $ 446,248
David H. Bernstein N/A N/A
(1) These values have been determined based upon assumed rates of appreciation
and are not intended to forecast the possible future appreciation, if any,
of the price or value of the Company's Common Stock.
(2) The options entitle the holder to purchase shares of the Company's Common
Stock at an exercise price which is equal to the closing price on the New
York Stock Exchange of the Company's Common Stock on the day preceding the
date the stock option was granted. The options vest in three equal annual
installments commencing September 25, 1997 for all named executive
officers. No stock option may be exercised after the expiration of 10
years after the date of grant.
The following table summarizes for the named executive officers information
about the exercise of stock options by the named executive officers during the
fiscal year ended January 26, 1997 and the value of stock options they held at
January 26, 1997.
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and January 26, 1997 Option
Values
Number of Securities
Underlying Unexercised
Options at January 26, 1997
Shares Acquired Value
Name On Exercise(#) Realized Exercisable Unexercisable
Alfred Carfora 6,666 $67,493 133,334 91,666
John Edmondson 0 $0 46,667 48,333
Carl Reimerdes 0 $0 140,000 66,666
Gerald F. Egan 0 $0 80,000 40,000
David H. Bernstein 0 $0 148,334 41,666
Value of Unexercised
In-the-Money(l)
Options at January 26, 1997(2)
Name Exercisable Unexercisable
Alfred Carfora $114,584 $69,791
John Edmondson $ 86,668 $52,082
Carl Reimerdes $163,746 $63,541
Gerald F. Egan $ 55,000 $32,500
David H.Bernstein $114,584 $57,291
(1) Options are "in-the-money" if the closing market price of the Company's
Common Stock on January 24, 1997 exceeded the exercise prices of the
options.
(2) The value of options represents the difference between the exercise price
of the options and the closing market price of the Company's Common Stock
on January 24, 1997.
[*10]
Compensation of Directors
Each Director who was not an officer of or consultant to the Company or a holder
of more than 3% of the Company's Common Stock received $10,000 for serving on
the Board of Directors and
<PAGE>
$1,000 for each Board of Directors meeting and each committee meeting attended
during the fiscal year ended January 26, 1997.
Each non-employee Director is granted stock options annually under the 1989
Stock Option Plan to purchase (i) 1,000 shares of Common Stock, plus (ii) an
additional 5,000 shares if the non-employee Director serves on any one or more
of the Audit, Compensation, Executive or Nominating Committees of the Board of
Directors, and (iii) an additional 2,500 shares if the non-employee Director
serves on three or more of such Board committees. The exercise price per share
of such options will be the fair market value of the Common Stock on the day
before the date of the grant; such exercise price will be payable in cash or in
shares of Common Stock. The options will become exercisable for one-third of
the underlying shares on each of the first three anniversaries of the date of
grant. The options will expire at the earlier of ten years after the date of
grant, one year after cessation of service on the Board of Directors due to
death or disability, or upon cessation of service on the Board of Directors for
any other reason.
John A. Couri is a consultant to the Company's Chief Executive Officer and the
Board of Directors. His consulting agreement provides for an annual consulting
fee of $150,000 through December 31, 1999 with automatic extensions for
successive one-year periods unless written notice is given by either party of an
intention not to further extend the agreement.
Certain Relationships and Related Transactions
Ms. Stackhouse, a Director, is the President and an owner of Fenton Hill
Florida, Inc. which has certain arrangements for the purchase of merchandise and
services from the Company. For the fiscal year ended January 26, 1997, such
arrangements included the payment of approximately $43,000 for services rendered
and the purchase of approximately $658,000 of merchandise. On April 28, 1994
and May 1, 1996, Fenton Hill Florida, Inc. redeemed 4.9 shares of its own stock
from the Company, which was all of the stock owned by the Company, for a total
of $1,425,000. Fenton Hill Florida, Inc. paid the Company $75,000 in 1994 and
promissory notes for $1,350,000 were signed in 1994 and 1996. The notes are
payable in installments starting April 30, 1997 through April 30, 2006. Mr.
Bernstein, Director and executive of the Company, is a director of Fenton Hill
Florida, Inc.
[*11]
Compensation Committee Interlocks and Insider Participation
The Compensation Committee presently consists of Messrs. Africk, Diehl and
Waters. The Compensation Committee is responsible for reviewing and making
recommendations to the Board of Directors about the salary of the Company's
executive officers. It also determines the amount of bonuses paid under the
Company's Incentive Compensation Plan and administers and makes awards of stock
options under the Company's stock option plans. The Compensation Committee held
two meetings during the fiscal year ended January 26, 1997. Mr. Diehl is a
member of the executive committee of Gebr. Heinemann, a partnership which is a
greater than
<PAGE>
five percent stockholder of the Company.
Compensation Committee Report on Executive Compensation
The Compensation Committee is responsible for reviewing and making
recommendations to the Board of Directors with respect to the Company's
executive compensation policies. In addition, the Compensation Committee
determines on an annual basis the compensation to be paid to the Chief Executive
Officer and each of the other executive officers of the Company.
Compensation Philosophy
The Company's compensation programs for executive officers are designed to
enable the Company to:
* Hire, reward, motivate and retain the highest quality managers possible.
* Match the Company's compensation plans to its business strategies, as well as
to the external business environment.
* Align the executive officers' interest with those of stockholders by providing
a significant portion of incentive compensation in the form of Company stock
options.
* Emphasize the relationship between pay and performance by placing a
significant portion of compensation at risk through the Company's Incentive
Compensation Plan.
Executive annual compensation levels (base salary and incentive compensation
awards) are targeted at the median of compensation paid by comparably positioned
companies for like jobs including the companies used in the performance graph on
page 15 of this Proxy Statement (the "Peer Group").
[*12]
Compensation Elements
Base Salary
In determining an executive officer's base salary, the responsibilities of the
position, the officer's experience, individual performance, and the competitive
marketplace, including a comparison of salaries paid within the Peer Group, are
considered. Based on the most recent information available, the base salary for
the Chief Executive Officer, Alfred Carfora, ranked below the median base salary
relative to the compensation paid by the Peer Group, and the four other most
highly compensated executive officers' base salaries ranked at the median
relative to the compensation paid by the Peer Group.
<PAGE>
Incentive Compensation Plan
Cash bonuses are provided to senior and other key executives under the Company's
Incentive Compensation Plan (the "Plan") which rewards employees based on
performance relative to financial and other predetermined objectives established
for the year. For fiscal 1997, approximately $2,897,000 was set aside for
distribution as bonuses under the Plan. Individual bonus awards were determined
by evaluating each employee's performance toward Company, divisional or
departmental objectives established for the year and specific performance
measures related to both revenue and profitability.
Stock Options
The last principal component of compensation arises from the Company's grant of
stock options under the Company's Stock Option Plans. Stock option grants are
designed to more closely align the interests of management with those of
stockholders, and because the full value of an employee's compensation package
cannot be realized unless stock price appreciation occurred over a number of
years, stock option grants are utilized to retain key employees and to provide
an incentive for them to create long-term shareholder value. In granting stock
options under the Stock Option Plans, the Committee considers (i) the
recipient's level of responsibility, (ii) the recipient's specific function
within the Company's overall organization; (iii) the recipient's performance
toward Company, divisional or departmental objectives established for the year;
(iv) the number of options granted to executive officers by the other companies
included in the Peer Group; and (v) the amount of options currently held by the
executive officer. The Stock Option Plans are administered by the Compensation
Committee and provide that no one person, including executive officers, may be
granted options for the purchase of more than 250,000 shares in any fiscal year
(subject to adjustments as noted in the Stock Option Plan in order to prevent
dilution or enlargement of the rights of the rights of optionees).
[*13]
<PAGE>
Benefits
The Company provides its executives with medical and other benefits that are
generally available to its employees. The Company also pays premiums for life
and disability insurance for certain executive officers.
Tax Compliance Policy
Section 162(m) of the Internal Revenue Code generally limits to $1,000,000 the
tax deductible compensation paid to the Chief Executive Officer and the four
highest-paid executive officers who are employed as executive officers on the
last day of the year. However, the limitation does not apply to
performance-based compensation provided certain conditions are satisfied.
The Company's policy is generally to preserve the federal income tax
deductibility of compensation paid, to the extent feasible. The Compensation
Committee believes that the incentive compensation and stock option awards
earned for fiscal 1997 and compensation arising from exercise of stock options
granted in fiscal 1997 will be deductible by the Company.
The Compensation Committee considers its primary goal to be the design of
compensation strategies that further the best interests of the Company and its
stockholders. To the extent not inconsistent with that goal, the Compensation
Committee will attempt, where practical, to use compensation policies and
programs that preserve the deductibility of compensation expenses. The
Compensation Committee reserves the right to use its judgment, where merited by
the Compensation Committee's need for flexibility to respond to changing
business conditions or by an executive's individual performance, to nevertheless
authorize compensation payments which may not, in a specific case, be fully
deductible by the Company.
Chief Executive Officer's Compensation
The compensation program for Alfred Carfora, the Company's Chief Executive
Officer, including salary, annual cash incentive and stock options was
determined using the criteria set forth above. As with the other executive
officers, emphasis is placed on Incentive compensation, with approximately 43%
of his fiscal year 1991 compensation (salary and cash bonus) being incentive
based.
Three major factors affected the actions of the Compensation Committee in fiscal
1997 regarding the compensation of Mr Carfora:
* The Company's operating results improved significantly in fiscal 1997.
* The Company successfully continued a series of cost reduction programs which
contributed to the Company's 34% improvement in profitability.
* Progress was made in each of the Company's businesses.
<PAGE>
[*14]
The Compensation Committee has increased Mr. Carfora's base salary to $350,000.
Mr. Carforals base salary is below the median base salary for Chief Executive
Officers included in the Peer Group.
Mr. Carfora earned an incentive compensation award of $250,000 for the fiscal
year ended January 26, 1997, which falls below the median bonus award of chief
executive officers who are included in the Peer Group. The Compensation
Committee determined the size of the award after an evaluation of the factors
mentioned above.
Jack Africk
Heribert Diehl
Stephen M. Waters
Members of the Compensation Committee
<PAGE>
Exhibit 99.3
SHAREHOLDERS AGREEMENT
AGREEMENT, dated as of July 2, 1997, among BAA plc, a corporation
organized under the laws of England (the "Parent"), W & G Acquisition
Corporation, a Maryland corporation and a direct wholly owned subsidiary of
Parent ("Merger Sub"), and the other parties signatory hereto (each a
"Shareholder," and collectively, the "Shareholders").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, concurrently herewith, Parent, Merger Sub and Duty Free
International, Inc. a Maryland corporation (the "Company"), are entering into an
Agreement and Plan of Merger (as such agreement may hereafter be amended from
time to time, the "Merger Agreement"; capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Merger Agreement),
pursuant to which, among other things, Merger Sub will be merged with and into
the Company (the "Merger");
WHEREAS, in furtherance of the Merger, Parent and the Company have
agreed that as soon as practicable (and not later than five business days) after
the first public announcement of the execution and delivery of the Merger
Agreement, Merger Sub will commence a cash tender offer to purchase all
outstanding shares of Company Common Stock (as defined in Section 1), including
all of the Shares (as defined in Section 2) Beneficially Owned (as defined in
Section 1) by the Shareholders; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Shareholders agree, and the Shareholders
have agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
<PAGE>
-2-
1. DEFINITIONS. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean at any time the common stock,
$.01 par value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity.
2. TENDER OF SHARES.
(a) Subject to Section 6, each Shareholder hereby agrees to validly
tender (and not to withdraw) pursuant to and in accordance with the terms of the
Offer, not later than the fifth business day after commencement of the Offer
pursuant to Rule 14d-2 under the Exchange Act, the number of shares of Company
Common Stock set forth opposite such Shareholder's name on Schedule I hereto
(the "Existing Shares" and, together with any shares of Company Common Stock
acquired by such Shareholder after the date hereof and prior to the termination
of this Agreement, whether upon the exercise of options, warrants or rights, the
conversion or exchange of convertible or exchangeable securities, or by means of
purchase, dividend, distribution or otherwise, the "Shares"). Each Shareholder
hereby acknowledges and agrees that Merger Sub's obligation to accept for
payment and pay for Shares in the Offer is subject to the terms and conditions
of the Offer.
(b) Subject to Section 6, each Shareholder hereby agrees to permit
Parent and Merger Sub to publish and disclose in the Offer Documents and, if
approval of the Merger by the Company's shareholders (other than Parent or any
of its wholly-owned subsidiaries) is required under applicable law, in the Proxy
Statement (including all documents and schedules filed with the SEC) his or its
identity and ownership of Company Com-
<PAGE>
-3-
mon Stock and the nature of his or its commitments under this Agreement.
3. PROVISIONS CONCERNING COMPANY COMMON STOCK.
Each Shareholder hereby agrees that during the period commencing on
the date hereof and continuing until the first to occur of the (i) purchase of
the Shares by Merger Sub pursuant to the Offer, (ii) Effective Time or
(iii) termination of the Merger Agreement in accordance with its terms, at any
meeting of the holders of Company Common Stock, however called, or in connection
with any written consent of the holders of Company Common Stock, such
Shareholder shall vote (or cause to be voted) the Shares held of record or
Beneficially Owned by such Shareholder, whether issued, heretofore owned or
hereafter acquired, (i) in favor of the Merger, the execution and delivery by
the Company of the Merger Agreement and the approval of the terms thereof and
each of the other actions contemplated by the Merger Agreement and this
Agreement and any actions required in furtherance thereof and hereof; (ii)
against any action or agreement that would result in a breach in any respect of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or this Agreement (after giving effect to
any materiality or similar qualifications contained therein); and (iii) except
as otherwise agreed to in writing in advance by Parent, against the following
actions (other than the Merger and the transactions contemplated by the Merger
Agreement): (A) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or its
subsidiaries; (B) a sale, lease or transfer of a material amount of assets of
the Company or its subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of the Company or its subsidiaries; (C) (1) any
change in a majority of the persons who constitute the Board of Directors of the
Company; (2) any change in the present capitalization of the Company or any
amendment of the Company's Articles of Incorporation or Bylaws; (3) any other
material change in the Company's corporate structure or business; or (4) any
other action involving the Company or its subsidiaries which is intended, or
could reasonably be expected, to impede, interfere with, delay, postpone, or
materially adversely affect the Merger and the transactions contemplated by this
Agreement and the Merger Agreement. Such Shareholder shall not enter into any
agreement or understanding with any person or entity the effect of which would
be inconsistent with or violative of the provisions and agreements contained in
this Section 3.
<PAGE>
-4-
4. OTHER COVENANTS, REPRESENTATIONS AND WARRANTIES. Each
Shareholder hereby individually as to itself represents and warrants to Parent
as follows:
(a) OWNERSHIP OF SHARES. Such Shareholder is either (i) the record
and Beneficial Owner of, or (ii) the Beneficial Owner but not the record
holder of, the number of Existing Shares, other shares, and derivative
securities set forth opposite such Shareholder's name on Schedule I hereto.
On the date hereof, the Existing Shares set forth opposite such
Shareholder's name on Schedule I hereto constitute all of the shares or
securities issued by the Company owned of record or Beneficially Owned by
such Shareholder. Except as noted on Schedule I, such Shareholder has sole
voting power and sole power to issue instructions with respect to the
matters set forth in Sections 2 and 3 hereof, sole power of disposition,
sole power of conversion, sole power to demand appraisal rights and sole
power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Existing Shares set forth opposite such
Shareholder's name on Schedule I hereto, with no limitations,
qualifications or restrictions on such rights, subject to applicable
securities laws and the terms of this Agreement.
(b) POWER; BINDING AGREEMENT. Such Shareholder has the legal
capacity, power and authority, as applicable, to enter into and perform all
of such Shareholder's obligations under this Agreement. The execution,
delivery and performance of this Agreement by such Shareholder will not
violate any other agreement to which such Shareholder is a party including,
without limitation, any voting agreement, shareholders agreement or voting
trust. This Agreement has been duly and validly executed and delivered by
such Shareholder and constitutes a valid and binding agreement of such
Shareholder, enforceable against such Shareholder in accordance with its
terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
similar laws affecting creditors' rights generally. There is no
beneficiary or holder of a voting trust certificate or other interest of
any trust of which such Shareholder is trustee whose consent is required
for the execution and delivery of this Agreement or the consummation by
such Shareholder of the transactions contemplated hereby.
<PAGE>
-5-
(c) NO CONFLICTS. Except for filings under the HSR Act, if
applicable, (A) no filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority or any other
Person is necessary for the execution of this Agreement by such Shareholder
and the consummation by such Shareholder of the transactions contemplated
hereby and (B) none of the execution and delivery of this Agreement by such
Shareholder, the consummation by such Shareholder of the transactions
contemplated hereby or compliance by such Shareholder with any of the
provisions hereof shall (1) conflict with or result in any breach of any
applicable organizational documents applicable to such Shareholder, (2)
result in a violation or breach of, or constitute (with or without notice
or lapse of time or both) a default (or give rise to any third party right
of termination, cancellation, material modification or acceleration) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which such
Shareholder is a party or by which such Shareholder or any of such
Shareholder's properties or assets may be bound, or (3) violate any order,
writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to such Shareholder or any of such Shareholder's properties or
assets.
(d) NO ENCUMBRANCES. Except as applicable in connection with the
transactions contemplated by Section 2 hereof and except as noted on
Schedule I hereto, the certificates representing such Shareholder's
Existing Shares are now, and with respect to such Shareholder's Shares
(other than the other shares listed on Schedule I) at all times during the
term hereof will be, held by such Shareholder, or by a nominee or custodian
for the benefit of such Shareholder, free and clear of all liens, claims,
security interests, proxies, voting trusts or agreements, or any other
encumbrances whatsoever, except for any such encumbrances arising
hereunder. The transfer by each Shareholder of his or its Shares to Merger
Sub in the Offer shall pass to Merger Sub good and valid title to the
number of Shares set forth opposite such Shareholder's name on Schedule I
hereto, free and clear of all claims, liens, restrictions, security
interests, pledges, limitations and encumbrances whatsoever.
<PAGE>
-6-
(e) NO FINDER'S FEES. Other than existing financial advisory and
investment banking arrangements and agreements entered into by the Company,
no broker, investment banker, financial adviser or other Person is entitled
to any broker's, finder's, financial adviser's or other similar fee or
commission in connection with the transactions contemplated hereby based
upon arrangements made by or on behalf of such Shareholder.
(f) NO SOLICITATION. Subject to Section 6, no Shareholder shall, in
his or its capacity as such, directly or indirectly, solicit (including by
way of furnishing information for the purpose of soliciting) any inquiries
by any person or entity (other than Parent or any affiliate of Parent) for
the purchase or voting of his or its Shares or with respect to the Company
that constitutes a Takeover Proposal, except that a Shareholder who is a
director of the Company may take actions in such capacity as a director to
the extent permitted by the Merger Agreement. Subject to Section 6, if any
Shareholder receives any such inquiry or proposal, then such Shareholder
shall promptly inform Parent of the existence thereof. Each Shareholder
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing.
(g) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. Except as
applicable in connection with the transactions contemplated by Section 2
hereof, subject to Section 6, no Shareholder shall (i) directly or
indirectly, offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to or consent to the offer for
sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of such Shareholder's Shares or any interest
therein; (ii) except as contemplated by this Agreement, grant any proxies
or powers of attorney, deposit any Shares into a voting trust or enter into
a voting agreement with respect to any Shares; or (iii) take any action
that would make any representation or warranty of such Shareholder
contained herein untrue or incorrect or have the effect of preventing or
disabling such Shareholder from performing such Shareholder's obligations
under this Agreement.
<PAGE>
-7-
(h) WAIVER OF APPRAISAL RIGHTS. Each Shareholder hereby waives any
rights of appraisal or rights to dissent from the Merger that such
Shareholder may have.
(i) RELIANCE BY PARENT. Such Shareholder understands and
acknowledges that Parent is entering into, and causing Merger Sub to enter
into, the Merger Agreement in reliance upon such Shareholder's execution
and delivery of this Agreement.
(j) FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto shall execute
and deliver such additional documents and take all such further lawful
action as may be necessary or desirable to consummate and make effective,
the transactions contemplated by this Agreement.
5. STOP TRANSFER; CHANGES IN SHARES. Each Shareholder agrees with,
and covenants to, Parent that such Shareholder shall not request that the
Company register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of such Shareholder's Shares, unless
such transfer is made in compliance with this Agreement (including the
provisions of Section 2 hereof). In the event of a stock dividend or
distribution, or any change in the Company Common Share by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall be deemed to refer to and include the Shares as
well as all such stock dividends and distributions and any shares into which or
for which any or all of the Shares may be changed or exchanged.
6. TERMINATION. Except as otherwise provided herein, the covenants
and agreements contained herein with respect to the Shares shall terminate upon
the earliest of (w) the acquisition of the Shares by Parent or Merger Sub
pursuant to the Offer, (x) the Effective Time, (y) if the Effective Time does
not occur, the termination of the Merger Agreement or the withdrawal or
modification by the Company Board of its recommendation of the Offer or the
Merger as permitted by Section 6.02(b) of the Merger Agreement and (z) the first
anniversary of the date hereof.
7. SHAREHOLDER CAPACITY. No person executing this Agreement who is
or becomes during the term hereof a director
<PAGE>
-8-
of the Company makes any agreement or understanding herein in his or her
capacity as such director.
8. CONFIDENTIALITY. The Shareholders recognize that successful
consummation of the transactions contemplated by this Agreement may be dependent
upon confidentiality with respect to the matters referred to herein. In this
connection, pending public disclosure thereof, each Shareholder hereby agrees
not to disclose or discuss such matters with anyone not a party to this
Agreement (other than such Shareholder's counsel and advisors, if any, and other
than with another Shareholder or the Company's counsel or advisors) without the
prior written consent of Parent, except for filings required pursuant to the
Exchange Act and the rules and regulations thereunder or disclosures such
Shareholder's counsel advises are necessary in order to fulfill such
Shareholder's obligations imposed by law, in which event such Shareholder shall
give notice of such disclosure to Parent as promptly as practicable.
9. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(b) CERTAIN EVENTS. Each Shareholder agrees that this Agreement and
the obligations hereunder shall attach to such Shareholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of such
Shares shall pass, whether by operation of law or otherwise, including, without
limitation, such Shareholder's heirs, guardians, administrators or successors.
Notwithstanding any transfer of Shares, the transferor shall remain liable for
the performance of all obligations under this Agreement of the transferor.
(c) ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of the other party, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
<PAGE>
-9-
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, with respect
to any one or more Shareholders, except upon the execution and delivery of a
written agreement executed by the relevant parties hereto; provided that
Schedule I hereto may be supplemented by Parent by adding the name and other
relevant information concerning any shareholder of the Company who agrees to be
bound by the terms of this Agreement without the agreement of any other party
hereto, and thereafter such added shareholder shall be treated as a
"Shareholder" for all purposes of this Agreement.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to Shareholders: At the addresses set forth on Schedule I hereto
copy to: Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attn: Stephen P. Farrell, Esq.
Telecopy: (212) 309-6273
If to Parent: BAA plc
Stockley House
130 Wilton Road
London SW1 VLQ
Attention: Robert Herga
copy to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Telecopy: (212) 269-5420
Attention: Stephen A. Greene, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
<PAGE>
-10-
(f) SEVERABILITY. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(i) NO WAIVER. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(j) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by, any person or entity who
or which is not a party hereto.
<PAGE>
-11-
(k) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
(l) DESCRIPTIVE HEADINGS. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(m) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
<PAGE>
-12-
IN WITNESS WHEREOF, Parent, Merger Sub and each Shareholder have
caused this Agreement to be duly executed as of the day and year first above
written.
BAA PLC
By: /s/ Barry Gibson
-----------------------------
Name: J M BARRY GIBSON
Title: Director
W & G ACQUISITION CORPORATION
By: /s/ Brian Collie
-----------------------------
Name: BRIAN COLLIE
Title: DIRECTOR
GEBR. HEINEMANN
By: /s/ Claus Heinemann Gunnar Heinemann
-------------------------------------
Name: CLAUS & GUNNAR HEINEMANN
Title: OWNERS
/s/ John A. Couri
-------------------------------
JOHN A. COURI
/s/ David H. Bernstein
-------------------------------
DAVID H. BERNSTEIN
/s/ Carl Reimerdes
-------------------------------
CARL REIMERDES
/s/ Heribert H. Diehl
-------------------------------
HERIBERT H. DIEHL
/s/ Alfred Carfora
-------------------------------
ALFRED CARFORA
/s/ Elaine Couri
-------------------------------
ELAINE COURI
<PAGE>
-13-
AGREED TO AND ACKNOWLEDGED
(with respect to Section 5):
DUTY FREE INTERNATIONAL, INC.
By: /s/ Alfred Carfora
------------------------------
Name: ALFRED CARFORA
Title: PRESIDENT/CEO
<PAGE>
Schedule I to
Shareholders Agreement
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Name and Address Derivative
of Shareholder Existing Shares Other Shares Securities
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
David H. Bernstein 1,057,069 Shares 734 Shares 190,000 shares
6691 Baymeadow Dr. indirectly subject to
Glen Burnie, MD 21060; owned option (148,334
through exercisable)
employer
401(k) plan;
John A. Couri 704,000 Shares 274,000 As trustee 202,000 shares
41 Mulberry Street for the subject to
Ridgefield, CT 06877 Couri option (148,334
Charitable exercisable)
Remainder
Trust
32,485 As trustee
with wife
for children
63,000 As trustee
for the
Couri
Charitable
Remainder
Trust
Carl Reimerdes 200 Shares 498,213 As trustee 202,666 shares
c/o Fenton Hill for the subject to
America Limited Reimerdes option (140,000
B-3 East Annuity exercisable)
Airport Ind. Trust
Office Park
145 Hook Creek 250,000 As trustee
Rd. for the
Valley Stream, Reimerdes
NY 11581 Annuity
Trust
101,535 As trustee
for the
Reimerdes
Annuity
Trust
1,156.7 Shares
indirectly
owned
through
employer
401(k) plan;
</TABLE>
<PAGE>
-2-
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Name and Address Derivative
of Shareholder Existing Shares Other Shares Securities
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gebr. Heinemann 4,571,664 Shares None
Madgeburger Str. 3
2000 Hamburg 11,
Germany
Heribert Diehl 895,422 Shares 52,334 shares
Madgeburger Str. 3 subject to
2000 Hamburg 11, option (40,334
Germany exercisable)
Alfred Carfora 175,895 Shares 700.9 Shares 225,000 shares
c/o Duty Free indirectly subject to
International owned option (133,334
63 Copps Hill Road through exercisable)
Ridgefield, CT employer
06877 401(k) plan
</TABLE>
<PAGE>
Exhibit 99.4
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "Agreement"), dated as of July 2, 1997,
by and between BAA plc, a company organized and existing under the laws of
England (the "Parent"), and Duty Free International, Inc., a company organized
and existing under the laws of Maryland (the "Company").
RECITALS
Concurrently herewith, Parent, W & G Acquisition Corporation (the
"Purchaser"), a company organized under the laws of Maryland and a direct,
wholly owned subsidiary of Parent, and the Company are entering into an
Agreement and Plan of Merger (the "Merger Agreement") dated as of the date
herewith (capitalized terms used but not defined herein shall have the meanings
set forth in the Merger Agreement), pursuant to which Purchaser agrees to make a
tender offer (the "Offer") for all outstanding common shares with par value $.01
per share (the "Common Shares"), of the Company, at $24 per share, net to the
seller in cash.
As a condition to their willingness to enter into the Merger Agreement
and make the Offer, Parent and Purchaser have required that the Company agree,
and believing it to be in the best interests of the Company, the Company has
agreed, among other things, to grant to Parent the Option (as hereinafter
defined).
AGREEMENT
To implement the foregoing and in consideration of the mutual
representations and agreements contained herein, the parties agree as follows:
1. OPTION TO PURCHASE SHARES.
1.1 GRANT OF OPTION. The Company hereby grants to Parent an
irrevocable option to purchase up to 5,434,367 newly issued common shares (the
"Shares"), on the terms and subject to the conditions set forth herein (the
"Option").
1.2 EXERCISE OF OPTION.
(a) The Option may be exercised by Parent, in whole or in part, at
any time, or from time to time, commencing upon the Exercise Date and prior to
the Expiration Date (as herein-
<PAGE>
-2-
after defined). As used herein, the term "Exercise Date" means the date or
dates of the first to occur of any of the following events:
(i) any corporation (including the Company or any of its
Subsidiaries or affiliates), partnership, person, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act) other than Parent, Sub or
any of their respective Affiliates or other Persons with whom any of the
foregoing are a part of a group (collectively, "Persons") shall have become
the beneficial owner of more than 20% of the outstanding Shares and the
Merger Agreement is terminated pursuant to Section 9.01(c) or (d) (but only
in the case of paragraph (d) to Exhibit A to the Merger Agreement) thereof;
(ii) (x) any Person other than Parent, Sub, any of their respective
affiliates or other Persons with whom any of the foregoing is part of a
group shall have commenced or publicly proposed a Takeover Proposal and (y)
the Merger Agreement is terminated pursuant to Section 9.01 (c) or (d) (but
only in the case of paragraph (d) to Exhibit A to the Merger
Agreement)thereof; or
As used herein, the term "Expiration Date" means the FIRST to occur of
any of the following dates:
(w) the date the Minimum Condition is satisfied;
(x) 120 days after the later of (i) the termination of the Merger
Agreement in accordance with its terms and (ii) the expiration or
termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), applicable
to the exercise of the Option;
(y) December 31, 1997; or
(z) the date on which written notice of termination of this Agreement
is made by Parent to the Company.
(b) In the event Parent wishes to exercise the Option, Parent shall
send a written notice to the Company of its intention to so exercise the Option
(a "Notice"), specifying the number of Shares to be purchased (and the
denominations of the certificates, if more than one) and the place, time and
date of the closing of such purchase (the "Closing Date" or the "Closing"),
which date shall not be less than 5 business days
<PAGE>
-3-
nor more than ten business days from the date on which a Notice is delivered;
PROVIDED, that the Closing shall be held only if (i) such purchase would not
otherwise violate, or cause the violation of, any applicable law or regulations
(including, without limitation, the HSR Act and the Exon-Florio Amendment) or
the rules of the NYSE, and (ii) no United States or United Kingdom statute,
rule, regulation, decree, order or injunction shall have been promulgated,
enacted, entered into, or enforced by any United States or United Kingdom
government, governmental agency or authority or court which prohibits delivery
of the Shares, whether temporary, preliminary or permanent (PROVIDED, HOWEVER,
that the parties hereto shall use their best efforts to have any such order,
decree or injunction vacated or reversed). In the event the Closing is delayed
pursuant to clause (i) or (ii) above, the Closing Date shall be within five
business days following the cessation of such restriction, violation, potential
violation, order, decree or injunction, as the case may be, provided that no
other such restriction, violation, potential violation, order, decree or
injunction, as the case may be, shall have occurred.
(c) Subject to Section 1.3, at any Closing, the Company shall deliver
to Parent all of the Shares to be purchased in accordance with the Company's
Restated Articles of Incorporation and at such Closing the Company shall issue
share certificates representing the Shares in the name of the Purchaser and
shall further amend its Register of Shareholders in accordance with its Restated
Articles of Incorporation pursuant to the exercise of the Option.
1.3 PAYMENTS. The purchase and sale of the Shares pursuant to
Section 1.2 of this Agreement shall be at a cash purchase price per Share equal
to $24 per Share (the "Exercise Price"). At any Closing, Parent shall pay to
the Company by certified or bank check payable in same-day funds or a wire
transfer of same-day funds to the order of the Company an amount equal to the
Exercise Price multiplied by the number of Shares purchased pursuant to this
Section 1 (the "Aggregate Purchase Price").
2. REPRESENTATIONS AND WARRANTIES.
2.1 REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby
represents and warrants to the Company as follows:
(a) DUE AUTHORIZATION. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby (including the
exercise of the Option)
<PAGE>
-4-
have been duly and validly authorized by the Board of Directors of Parent,
and no other corporate proceedings on the part of Parent are necessary to
authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Parent and constitutes a valid and binding agreement of the Parent,
enforceable against Parent in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to enforcement of creditors'
rights generally and (ii) is subject to general principles of equity.
(b) NO CONFLICTS. Except for (i) filings under the HSR Act, if
applicable, (ii) the applicable requirements of the Exchange Act and the
United States Securities Act of 1933, as amended (the "Securities Act"),
(iii) the applicable requirements of United States state securities,
takeover or Blue Sky laws, and (iv) listing requirements of the NYSE, (A)
no filing with, and no permit, authorization, consent or approval of, any
state, federal or foreign public body or authority is necessary for the
execution of this Agreement by Parent and the consummation by Parent of the
transactions contemplated hereby (including the exercise of the Option) and
(B) neither the execution and delivery of this Agreement by Parent nor the
consummation by Parent of the transactions contemplated hereby nor
compliance by Parent with any of the provisions hereof shall (1) conflict
with or result in any breach of any provision of the articles of
association, certificate of incorporation or the by-laws (or similar
documents) of Parent, or (2) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Parent, or any of its properties
or assets, except in the case of (2) for violations, breaches or defaults
which would not in the aggregate materially impair the ability of Parent to
perform its obligations hereunder.
(c) GOOD STANDING. Parent is a corporation duly organized, validly
existing and in good standing under the laws of England and has all
requisite corporate power and authority to execute and deliver this
Agreement.
(d) DISTRIBUTION. Any Shares acquired by Parent upon exercise of the
Option will not be sold, assigned, transferred or otherwise disposed of
except in a transaction registered or exempt from registration under the
Se-
<PAGE>
-5-
curities Act and applicable state and Blue Sky securities laws.
2.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to Parent as follows:
(a) DUE AUTHORIZATION. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby (including the
exercise of the Option) have been duly and validly authorized by the Board
of Directors of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that such enforceability (i) may be
limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally, (ii)
is subject to general principles of equity.
(b) OPTION SHARES. Subject to Section 2.2(c), the Company has taken
all necessary corporate and other action to authorize and reserve for
issuance, and to permit it to issue, and at all times from the date hereof
until such time as the obligation to deliver Shares hereunder terminates
will have reserved for issuance, upon exercise of the Option Shares. All
of such Shares, upon issuance and payment pursuant hereto, shall be duly
authorized, validly issued, fully paid and nonassessable with no personal
liability attached to the ownership thereof, shall be delivered free and
clear of all claims, liens, encumbrances, security interests and charges of
any nature whatsoever, and shall not be subject to any preemptive right of
any shareholder of the Company or to rescission by the Company.
(c) NO CONFLICTS. Except for (i) filings under the HSR Act, if
applicable, (ii) the applicable requirements of the Exchange Act and the
Securities Act, (iii) the applicable requirements of state securities,
takeover or Blue Sky laws, (iv) voluntary notification to be made pursuant
to the Exon-Florio Amendment, and (v) listing requirements of the NYSE, (A)
no filing with, and no permit, authorization, consent or approval of, any
state, federal or foreign public body or authority is necessary for the
<PAGE>
-6-
execution of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby (including the exercise of
the Option) and (B) neither the execution and delivery of this Agreement by
the Company nor the consummation by the Company of the transactions
contemplated hereby (including the exercise of the Option) nor compliance
by the Company with any of the provisions hereof shall (x) conflict with or
result in any breach of, or require any vote under any provision of the
Restated Articles of Incorporation of the Company, (y) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which any
of them or any of their properties or assets may be bound, or (z) violate
any order, writ, injunction, decree, statute, rule or regulation applicable
to the Company, and of its subsidiaries or any of the properties or assets,
except in the case of (y) or (z) for violations, breaches or defaults which
would not, in the aggregate, have a Company Material Adverse Effect.
(d) STATUS. The Company is a corporation duly organized and validly
existing under the laws of Maryland and has all requisite corporate power
and authority to execute and deliver this Agreement.
3. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any
change to the Restated Articles of Incorporation of the Company and/or in the
number of issued and outstanding Common Shares by reason of any options granted
to third parties, stock dividend, split-up, merger, recapitalization,
combination, exchange of shares, spin-off or other change in the corporate or
capital structure of the Company which could have the effect of diluting
Parent's rights hereunder, the number and kind of Shares or other securities
subject to the Option and the Exercise Price therefor shall be appropriately
adjusted so that Parent shall receive upon exercise (or, if such a change occurs
between exercise and Closing, upon Closing) of the Option the number and kind of
shares or other securities or property that Parent would have received in
respect of the Shares that Parent is entitled to purchase upon exercise of the
Option if the Option had been exercised (or the purchase thereunder had been
consummated, as the case may be)
<PAGE>
-7-
immediately prior to such event; PROVIDED, HOWEVER, that if securities are
issued in bona fide arms length transactions to parties that are not affiliates
of the Company, the Exercise Price shall be adjusted based on a weighted average
price antidilution formula and there shall be a corresponding increase in the
number of Shares subject to purchase pursuant to this Option. The rights of
Parent under this Section shall be in addition to, and shall in no way limit,
its rights against the Company for breach of the Merger Agreement.
4. REGISTRATION OF SHARES UNDER THE SECURITIES ACT. If the Option is
exercised and if Parent shall request in writing on or before December 31, 1997,
the Company shall use its reasonable efforts to effect the registration under
the Securities Act or any successor statute then in effect, and any applicable
state law (a "Registration"), of such number of Shares owned by Parent and its
subsidiaries as Parent shall request and to keep such Registration effective for
a period of not less than one year. If the Option is exercised, the Company and
the Parent hereby agree to enter into a registration rights agreement with
customary terms and conditions, including but not limited to, those relating to
indemnification of Parent. In addition, the Company shall use its reasonable
efforts to cause such Shares to be approved for listing on the NYSE, subject to
official notice of issuance, which notice shall be given by the Company upon
issuance. The out-of-pocket expenses incurred by the Company in connection with
any such Registration pursuant to this Section 4 shall be borne by the Company,
excluding legal and underwriting fees, expenses and commissions. The Company
shall have no obligation hereunder after two Registrations pursuant to this
Section 4 has been effected.
5. FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take al1 such further action as may be
necessary or desirable to consummate the transactions contemplated by this
Agreement, including, without limitation, to vest in Parent good title to any
Shares purchased hereunder.
6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of the Company and Parent contained herein or in
any certificates or other documents delivered at or prior to the Closing shall
survive the closing of the transactions contemplated hereby for one year, and
the agreements contained in Sections 4, 6 and 7 shall survive the closing of the
transactions contemplated hereby.
<PAGE>
-8-
7. MISCELLANEOUS.
7.1 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (i) constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and (ii) shall not
be assigned by operation of law or otherwise, provided that Parent may assign
its rights and obligations hereunder to any direct or indirect wholly owned
subsidiary of Parent, but no such assignment shall relieve Parent of its
obligations hereunder if such assignee does not perform such obligations.
7.2 AMENDMENTS. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
7.3 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, providing proof of delivery. All
communications hereunder shall be delivered to the respective parties at the
following addresses:
If to Company: 63 Copps Hill Road
Ridgefield, CT 06877
Attention: Larry Caputo, Esq.
copy to: Morgan Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: Stephen P. Farrell, Esq.
Telecopy: (212) 309-6273
If to Parent: BAA plc
Stockley House
130 Wilton Road
London SW1V 1LQ
Attention: Robert Herga
copy to: Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Stephen A. Greene, Esq.
<PAGE>
-9-
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
7.4 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Maryland, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
7.5 CONSENT TO JURISDICTION. The parties hereto agree that the
appropriate and exclusive forum for any dispute between any of the parties
hereto arising out of this Agreement or the transactions contemplated hereby
shall be in any state or federal court in the State of Maryland. The parties
hereto further agree that the parties will not bring suit with respect to any
dispute arising out of this Agreement or the transactions contemplated hereby,
except as expressly set forth below for the execution or enforcement of
judgment, in any court or jurisdiction other than the above specified court.
The foregoing shall not limit the rights of any party to obtain execution of
judgment in any other jurisdiction. The parties further agree, to the extent
permitted by law, that final and unappealable judgment against any of them in
any action or proceeding contemplated above shall be conclusive and may be
enforced in any other jurisdiction within or outside the United States by suit
on the judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and amount of such judgment.
7.6 CERTAIN FILINGS. If so requested by Parent, promptly after the
date hereof, the Company shall make all filings which are required under the HSR
Act and the parties shall furnish to each other such necessary information and
reasonable assistance as may be requested in connection with the preparation of
filings and submissions to any governmental agency, including, without
limitation, filings under the provisions of the HSR Act and the Exon-Florio
Amendment. The Company and Parent shall supply each other with copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between the Company or Parent, as the case may be, and its
representatives and the Federal Trade Commission, the Department of Justice, and
any other governmental agency or authority and members of their respective
staffs with respect to this Agreement and the transactions contemplated hereby.
7.7 SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any
<PAGE>
-10-
covenants or agreements contained in this Agreement will cause the other party
to sustain damages for which it would not have an adequate remedy at law for
money damages, and therefore, each of the parties hereto agrees that in the
event of any such breach the aggrieved party shall be entitled to the remedy of
specific performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which it may be entitled, at
law or in equity.
7.8 COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original, but both of which
shall constitute one and the same Agreement.
7.9 DESCRIPTIVE HEADINGS. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
7.10 SEVERABILITY. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
<PAGE>
IN WITNESS WHEREOF, the Company and Parent have caused this Agreement
to be duly executed as of the day and year first above written.
BAA PLC
By: /s/ Barry Gibson
-------------------------------
Name: J M BARRY GIBSON
Title: DIRECTOR
DUTY FREE INTERNATIONAL, INC.
By: /s/ Alfred Carfora
-------------------------------
Name: ALFRED CARFORA
Title: PRESIDENT
<PAGE>
Exhibit 99.5
DUTY FREE INTERNATIONAL, INC
63 Copps Hill Road
Ridgefield
CT 06877
USA
Attention: Mr Alfred Carfora January 1997
Gentlemen
In connection with your consideration of a possible negotiated transaction with
BAA plc (the "Company"), you will be requesting certain non-public or
confidential information and documents from the Company. As a condition to your
being furnished such information and documents, you agree to treat any
information and documents relating to the Company (whether prepared by the
Company, its advisors or otherwise) which are furnished to you by or on behalf
of the Company, whether furnished before or after the date hereof, whether oral
or written, and regardless of the manner in which they are furnished, together
with any analyses, compilations and synopses which incorporate or reflect such
information and documents (herein collectively referred to as the "Evaluation
Material") in accordance with the provisions of this letter and to take or
abstain from taking certain other actions herein set forth. The term
"Evaluation Material" does not include information and documents which (i) are
already in your possession, provided that such information and documents are not
known by you to be subject to another confidentiality agreement with or other
obligation of secrecy to the Company or another party, or (ii) become generally
available to the public other than as a result of a disclosure by you or your
directors, officers, employees, agents or advisors, or (iii) become available to
you on a non-confidential basis from a source other than the Company or its
advisors, provided that such source is not known by you to be bound by a
confidentiality agreement with or other obligation of secrecy to the Company or
another party.
<PAGE>
-2-
You agree that the Evaluation Material will be used solely for the purpose of
evaluating a possible negotiated transaction between the Company and you, and
that the Evaluation Material will be kept confidential by you and your advisors;
provided, however, that (i) any of the Evaluation Material may be disclosed to
your directors, officers and employees and representatives of your advisors who
are actively and directly participating in, and need to know such information
for the purpose of, evaluating any such possible transaction between the Company
and you (it being understood that such directors, officers, employees and
advisors shall be informed by you of the confidential nature of such information
and shall be required by you to observe the terms of this letter agreement), and
(ii) any disclosure of such information and documents may be made to which the
Company consents in writing. You agree to be responsible for any breach of this
letter agreement by your directors, officers, employees and advisors.
In the event you are requested by law or regulation, by any court or
governmental authority (by way of a subpoena or otherwise) or by the rules of
any stock exchange on which the shares of your company are listed to disclose
any Evaluation Material or any other information concerning the Company or such
negotiated transaction, you will (to the extent permitted by law) give us prompt
notice of such request and cooperate with us in contesting such request (to the
extent appropriate) and in attempting to preserve appropriate confidentiality
protections for the Evaluation Material or other information that is sought.
You understand that neither the Company nor any of its officers, directors,
partners or employees, has made or make any express or implied representation or
warranty as to the accuracy or completeness of the Evaluation Material. You
agree that (i) neither the Company nor any of such other persons, shall have any
liability to you or any of your representatives or advisors relating to the
Evaluation Material or for any errors therein or omissions therefrom; and (ii)
you will be entitled to rely only upon such representations and warranties as
are made to you by the Company in any definitive agreement which the Company and
you may execute.
In the event that you do not proceed with a negotiated transaction or upon
earlier request, you and your advisors shall promptly redeliver to the Company
all written Evaluation Material and any other written material containing or
reflecting any information in the Evaluation Material (whether prepared by the
Company, its advisors or otherwise) and will not retain any copies, extracts or
other reproductions in whole or in part of such written material. All
documents, memoranda, notes and other writings whatsoever prepared by you or
your advisors based on the information in the Evaluation Material shall be
destroyed, and such destruction shall be certified in writing to the Company by
an authorized officer supervising such destruction.
Until the earliest of (i) the execution by you of a definitive agreement between
the Company and you; (ii) an acquisition of the Company by a third party; or
(iii) two years from the date of this letter agreement, you agree not to
initiate or maintain contact (except for those contacts made in the ordinary
course of business) with any officer, director or employee of the Company or its
<PAGE>
-3-
subsidiaries regarding its business, operations, prospects or finances, except
with the express permission of the Company. You further agree that for a period
of two years from the date hereof, you will not hire any of the employees of the
Company or its subsidiaries with whom you have contact during the period of your
investigation of the Company.
You agree that until the expiration of two years from the date of this
agreement, you shall not, and you will ensure that your associates (as defined
in Section 435 of the English Insolvency Act 1986) or advisors, and any person
acting on behalf of or in concert with you or any of your associates or
advisors, (provided that no sources of financing shall be deemed to be acting on
behalf of or in concert with you or any of your associates or advisors), shall
not, without the prior written approval of the Company (i) in any manner
acquire, agree to acquire or make any proposal to acquire, directly or
indirectly, any securities or direct or indirect rights to acquire any
securities of the Company or any of its subsidiaries, (ii) propose to enter
into, directly or indirectly, any merger or business combination involving the
Company or any of its subsidiaries or to purchase, directly or indirectly, a
material portion of the assets of the Company or any of its subsidiaries, (iii)
otherwise act, alone or in concert with others, to seek to control or influence
the management, Board of Directors or policies of the Company, (iv) disclose any
intention, plan or arrangement inconsistent with the foregoing, or (v) advise,
assist or encourage any other persons in connection with any of the foregoing.
You also agree during such period not to (i) request the Company (or its
directors, officers, employees or agents), directly or indirectly, to amend or
waive any provisions of this paragraph (including this sentence) or (ii) take
any action which might require the Company to make a public announcement
regarding any of the matters specified in this paragraph. You will promptly
advise the Company of any inquiry or proposal made to you with respect to any of
the foregoing.
You acknowledge that the Evaluation Material may comprise or include unpublished
price sensitive information in relation to the Company. Accordingly, you
hereby: (a) consent to being made an "insider" and to receiving information as
an Insider (within the meaning of and for the purposes of Part V of the
(English) Criminal Justice Act 1993); and (b) understand that you may not deal
in the Company's securities before all of the Evaluation Material (or such of it
as constitutes Inside Information) is made public or otherwise ceases to be
Inside Information.
You agree that unless and until a definitive agreement between the Company and
you has been executed and delivered, neither the Company nor you will be under
any legal obligation of any kind whatsoever with respect to such a transaction
by virtue of this letter agreement or any written or oral expression with
respect to such transaction by the Company or any of its directors, officers,
employees, agents, representatives or advisors except, in the case of this
letter, for our respective obligations hereunder. For purposes hereof, the term
"definitive agreement" does not include any executed letter of intent, heads of
agreement or other preliminary agreement, nor does it include any written or
oral acceptance of any offer or proposal on your part.
<PAGE>
-4-
The Company agrees to disclose the fact that discussions or negotiations are
taking place only to such of its officers, employees or advisors as are actually
and directly participating in, and need to know such fact for the purposes of,
advising or assisting the Company with such discussions or negotiations.
Without the prior written consent of the other party, neither you nor the
Company will, and each of the Company and you will direct its respective
directors, officers, employees and advisors not to, disclose to any person
either the fact that discussions or negotiations are taking place between the
Company and you or any of the terms, conditions or other facts with respect to
any possible transaction, including the status thereof. If, however, pursuant
to any law or regulation or the requirements of any stock exchange upon which
the shares of the Company or of your company are listed, it becomes necessary to
make a public announcement or other disclosure of our discussions or
negotiations, the text thereof will be mutually reviewed by the Company and you
prior to its dissemination.
You agree that the Company shall be entitled to equitable relief, including
injunctive relief, in the event of any breach of the provisions of this letter
agreement and that you shall not oppose the granting of such relief. This
letter agreement may be modified or waived only by a separate writing by the
Company and you expressly so modifying or waiving such agreement.
This letter shall be governed by, and construed in accordance with English Law.
You irrevocably consent to the jurisdiction of the courts of England for the
purpose of any suit involving the subject matter of this letter agreement.
It is understood and agreed that no failure or delay by us in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any right, power or privilege hereunder.
Any assignment of this letter agreement by you without the Company's prior
written consent shall be void.
This letter agreement contains the entire agreement between you and the Company
concerning confidentiality of the Evaluation Material. Please confirm your
agreement with the foregoing by signing and returning to the undersigned the
duplicate copy of this letter enclosed herewith.
Very truly yours By: /s/ J.M. Barry Gibson
BAA plc -------------------------------------
J.M. Barry Gibson, Group Retail
Director
<PAGE>
-5-
Confirmed and Agreed to:
DUTY FREE INTERNATIONAL, INC
By: /s/ Alfred Carfora
------------------------------
Alfred Carfora
Date:----------------------------
<PAGE>
Exhibit 99.6
DUTYFREE INTERNATIONAL, INC.
63 Copps Hill Road
Ridgefield CT
06877 USA
(203) 431-6057
Fax: (203) 438-1356
Fax: (203) 438-1218
Buyer's Fax: (203) 894-8599
January 6, 1997
CONFIDENTIAL
BAA plc
130 Wilton Road
London SW1V 1LQ
Attention: Mr. J.M. Barry Gibson
Gentlemen:
In connection with your consideration of a possible negotiated transaction
with Duty Free International, Inc. (the "Company"), you will be requesting
certain non-public or confidential information and documents from the Company.
As a condition to your being furnished such information and documents, you agree
to treat any information and documents relating to the Company (whether prepared
by the Company, its advisors or otherwise) which are furnished to you by or on
behalf of the Company, whether furnished before or after the date hereof,
whether oral or written, and regardless of the manner in which they are
furnished, together with any analyses, compilations and synopses which
incorporate or reflect such information and documents (herein collectively
referred to as the "Evaluation Material") in accordance with the provisions of
this letter and to take or abstain from taking certain other actions herein set
forth. The term "Evaluation Material" does not include information and
documents which (i) are already in your possession, provided that such
information and documents are not known by you to be subject to another
confidentiality agreement with or other obligation of secrecy to the Company or
another party, or (ii) become generally available to the public other than as a
result of a disclosure by you or your directors, officers, employees, agents or
advisors, or (iii) become available to you on a non-confidential basis from a
source other than the Company or its advisors, provided that such source is not
known by you to be bound by a confidentiality agreement with or other obligation
of secrecy to the Company or another party.
You agree that the Evaluation Material will be used solely for the purpose
of evaluating a possible negotiated transaction between the Company and you, and
that the Evaluation Material will be kept confidential by you and your advisors;
provided, however, that (i) any of the
<PAGE>
BAA plc
January 6, 1997
Page 2
Evaluation Material may be disclosed to your directors, officers and employees
and representatives of your advisors who are actively and directly participating
in, and need to know such information for the purpose of, evaluating any such
possible transaction between the Company and you (it being understood that such
directors, officers, employees and advisors shall be informed by you of the
confidential nature of such information and shall be required by you to observe
the terms of this letter agreement), and (ii) any disclosure of such information
and documents may be made to which the Company consents in writing. You agree
to be responsible for any breach of this letter agreement by your directors,
officers, employees and advisors.
In the event you are requested by law or regulation, by any court or
governmental authority (by way of a subpoena or otherwise) or by the rules of
any stock exchange on which the shares of any company in your group are listed
to disclose any Evaluation Material or any other information concerning the
Company or such negotiated transaction, you will (to the extent permitted by
law) give us prompt notice of such request and cooperate with us in contesting
such request (to the extent appropriate) and in attempting to preserve
appropriate confidentiality protections for the Evaluation Material or other
information that is sought.
You understand that neither the Company nor Compass Partners International,
L.L.C., nor any of their respective officers, directors, partners or employees,
have made or make any express or implied representation or warranty as to the
accuracy or completeness of the Evaluation Material. You agree that (i) neither
the Company nor Compass Partners International, L.L.C., nor any of such other
persons, shall have any liability to you or any of your representatives or
advisors relating to the Evaluation Material or for any errors therein or
omissions therefrom; and (ii) you will be entitled to rely only upon such
representations and warranties as are made to you by the Company in any
definitive agreement which the Company and you may execute.
In the event that you do not proceed with a negotiated transaction or upon
earlier request, you and your advisors shall promptly redeliver to the Company
all written Evaluation Material and any other written material containing or
reflecting any information in the Evaluation Material (whether prepared by the
Company, its advisors or otherwise) and will not retain any copies, extracts or
other reproductions in whole or in part of such written material. All
documents, memoranda, notes and other writings whatsoever prepared by you or
your advisors based on the information in the Evaluation Material shall be
destroyed, and such destruction shall be certified in writing to the Company by
an authorized officer supervising such destruction.
Until the earliest of (i) the execution by you of a definitive agreement
between the Company and you; (ii) an acquisition of the Company by a third
party; or (iii) two years from the date of this letter agreement, you agree not
to initiate or maintain contact (except for those
<PAGE>
BAA plc
January 6, 1997
Page 3
contact made in the ordinary course of business) with any officer, director or
employee of the Company or its subsidiaries regarding its business, operations,
prospects or finances, except with the express permission of the Company. It is
understood that Compass Partners International, L.L.C. will arrange for
appropriate contacts for due diligence purposes. It is further understood that
all (i) communications regarding a possible transaction, (ii) requests for
additional information, (iii) requests for facility tours or management
meetings, and (iv) discussions or questions regarding procedures, will be
submitted or directed to Compass Partners International, L.L.C. You further
agree that for a period of two years from the date hereof, you will not hire any
of the employees of the Company or its subsidiaries with whom you have contact
during the period of your investigation of the Company.
You agree that until the expiration of two years from the date of this
agreement, you shall not, and you will ensure that your affiliates (as defined
in Rule 12b-2 under the Securities Exchange Act of 1934) or advisors, and any
person acting on behalf of or in concert with you or any of your affiliates or
advisors, (provided that no sources of financing shall be deemed to be acting on
behalf of or in concert with you or any of your affiliates or advisors), shall
not, without the prior written approval of the Company (i) in any manner
acquire, agree to acquire or make any proposal to acquire, directly or
indirectly, any securities or direct or indirect rights to acquire any
securities of the Company or any of its subsidiaries, (ii) propose to enter
into, directly or indirectly, any merger or business combination involving the
Company or any of its subsidiaries or to purchase, directly or indirectly, a
material portion of the assets of the Company or any of its subsidiaries, (iii)
make, or in any way participate, directly or indirectly, in any "solicitations"
of "proxies" (as such terms are used in the proxy rules of the U.S. Securities
and Exchange Commission) to vote, or seek to advise or influence any person with
respect to the voting of any securities of the Company or any of its
subsidiaries, (iv) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) with respect
to any securities of the Company or any of its subsidiaries, (v) otherwise act,
alone or in concert with others, to seek to control or influence the management,
Board of Directors or policies of the Company, (vi) disclose any intention, plan
or arrangement inconsistent with the foregoing, or (vii) advise, assist or
encourage any other persons in connection with any of the foregoing. You also
agree during such period not to (i) request the Company (or its directors,
officers, employees or agents), directly or indirectly, to amend or waive any
provisions of this paragraph (including this sentence) or (ii) take any action
which might require the Company to make a public announcement regarding any of
the matters specified in this paragraph. You will promptly advise the Company
of any inquiry or proposal made to you with respect to any of the foregoing.
You acknowledge that you are (i) aware that the United States securities
laws prohibit any person who has material nonpublic information about a company
from purchasing or selling
<PAGE>
BAA plc
January 6, 1997
Page 4
securities of such company, or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities, and (ii) familiar with the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder and agree that you will neither use, nor cause any third party to
use, any Evaluation Material in contravention of such Act or any such rules and
regulations, including Rules 10b-5 and 14e-3.
You agree that unless and until a definitive agreement between the Company
and you has been executed and delivered, neither the Company nor you will be
under any legal obligation of any kind whatsoever with respect to such a
transaction by virtue of this letter agreement or any written or oral expression
with respect to such transaction by the Company or any of its directors,
officers, employees, agents, representatives or advisors except, in the case of
this letter, for our respective obligations hereunder. For purposes hereof, the
term "definitive agreement" does not include any executed letter of intent,
heads of agreement or other preliminary agreement, nor does it include any
written or oral acceptance of any offer or proposal on your part.
The Company agrees to disclose the fact that discussions or negotiations
are taking place only to such of its officers, employees or advisors as are
actually and directly participating in, and need to know such fact for the
purposes of, advising or assisting the Company with such discussions or
negotiations.
Without the prior written consent of the other party, neither you nor the
Company will, and each of the Company and you will direct its respective
directors, officers, employees and advisors not to, disclose to any person
either the fact that discussions or negotiations are taking place between the
Company and you or any of the terms, conditions or other facts with respect to
any possible transaction, including the status thereof. If, however, pursuant
to any law or regulation or the requirements of any stock exchange upon which
the shares of the Company or of any company in your group is listed, it becomes
necessary to make a public announcement or other disclosure of our discussions
or negotiations, the text thereof will be mutually reviewed by the Company and
you prior to its dissemination.
You agree that the Company shall be entitled to equitable relief, including
injunctive relief, in the event of any breach of the provisions of this letter
agreement and that you shall not oppose the granting of such relief. This
letter agreement may be modified or waived only by a separate writing by the
Company and you expressly so modifying or waiving such agreement.
This letter shall be governed by, and construed in accordance with, the
laws of the State of New York. You irrevocably consent to the jurisdiction of
the federal and state courts located
<PAGE>
BAA plc
January 6, 1997
Page 5
in the City, County and State of New York for the purpose of any suit involving
the subject matter of this letter agreement.
It is understood and agreed that no failure or delay by us in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any right, power or privilege hereunder.
Any assignment of this letter agreement by you without the Company's prior
written consent shall be void.
This letter agreement contains the entire agreement between you and the
Company concerning confidentiality of the Evaluation Material. Please confirm
your agreement with the foregoing by signing and returning to the undersigned
the duplicate copy of this letter enclosed herewith.
Very truly yours,
DUTY FREE INTERNATIONAL, INC.
By: /s/ Alfred Carfora
--------------------------------
Alfred Carfora
President and Chief
Executive Officer
Confirmed and Agreed to:
BAA plc
By: /s/ J.M. Barry Gibson
---------------------------
J.M. Barry Gibson
Date:_________________
<PAGE>
Exhibit 99.7
DUTY FREE INTERNATIONAL, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
Duty Free International, Inc., a Maryland corporation, having its principal
place of business at 6471 Baymeadow Drive, Glen Burnie, Maryland 21061
(hereinafter called the "Corporation"), hereby certifies to the State Department
of Assessments and Taxation of the State of Maryland (the "Department") that:
1. The Corporation was incorporated on January 6, 1983 under the name
Duty-Free International, Inc. The name of the Corporation was changed to Duty
Free International, Inc. by a Certificate of Correction filed on August 3, 1984.
This Amended and Restated Charter has been duly adopted in accordance with the
provisions of Sections 2-408 and 2-505 of the Maryland General Corporation Law.
The Corporation's Charter is hereby amended and restated to read in its entirety
as hereinafter set forth by deleting Articles FIRST therefrom and by
substituting in lieu thereof, new Articles FIRST through THIRTEENTH, as follows:
FIRST: The undersigned, Shale D. Stiller, 1300 Mercantile Bank &
Trust Building, Baltimore, Maryland 21201, being at least twenty-one
(21) years of age, does hereby form a corporation under and by virtue
of the General Laws of the State of Maryland authorizing the formation
of corporations.
SECOND: The name of the Corporation (which is hereinafter called the
"Corporation") is
<PAGE>
DUTY FREE INTERNATIONAL, INC.
THIRD: The address of the Corporation's principal office is 6741
Baymeadow Drive, Glen Burnie, Maryland 21061. The name and address of
the Corporation's registered agent is James S. Jacobs, Esq., 300 East
Lombard Street, Baltimore, Maryland 21202. Said Resident Agent is a
citizen of the State of Maryland, and actually resides therein.
FOURTH: The purposes for which the Corporation is formed are:
(a) To own and operate stores which sell duty free merchandise
in accordance with appropriate United States laws and regulations.
(b) To carry on the aforesaid business and any related or
unrelated business and activity in the State of Maryland, in any
state, territory, district or dependency of the United States, or in
any foreign county.
(c) To do anything permitted in Section 2-103 of the Maryland
General Corporation Law, as amended from time to time.
FIFTH: The total number of shares of capital stock which the
Corporation has authority to issue is Twenty Million (20,000,000)
shares with a par value of one cent
<PAGE>
($.01) per share and an aggregate par value of Two Hundred Thousand
Dollars ($200,000).
The Corporation, it subsidiaries, and their subsidiaries, hold certain
licenses, permits, certificates and bonds necessary for the operation
of their businesses pursuant to the authority and regulation of the
United States Customs Service and the Bureau of Alcohol, Tobacco and
Firearms. In the event that (1) any holder of any class of stock of
the Corporation acquires shares of any class of the issued and
outstanding stock of the Corporation, which shares represent over nine
percent (9%) of the issued and outstanding stock of the Corporation
giving voting power, and (2) (a) such stockholder fails to cooperate
fully with any request for information from or for submission to the
Customs Service or the Bureau of Alcohol, Tobacco and Firearms (or any
successor or similar agency whose authority to grant licenses,
permits, bonds or certificates is critical to the operation of the
business of the Corporation, or its subsidiaries or their
subsidiaries), or (b) the Customs Service or the Bureau of Alcohol,
Tobacco and Firearms (or any successor or similar agency whose
authority to grant, licenses, permits, bonds or certificates is
critical to the operation of the business of the Corporation or its
subsidiaries or their subsidiaries), because of such stockholder's
ownership (whether record or beneficial) of shares representing over
nine percent (9%) of the issued and outstanding stock of the
Corporation having voting power, refuses to issue or continue in
force, or threatens to refuse to issue or continue in force, any
permit, license, certificate, bond or other grant of authority
<PAGE>
necessary for the operation of the Corporation's business or the
business of any of its subsidiaries or their subsidiaries without a
material change therein, then, in such event (as determined in the
sole and absolute discretion of the Board of Directors), the
Corporation, in the sole and absolute discretion of its Board of
Directors, as it may deem advisable and in the best interests of the
Corporation, shall have the unqualified right and power to (y) redeem,
upon not less than five (5) days prior written notice to the
stockholder, at a price per share equal to the last reported sale
price on the American Stock Exchange on the last business day prior to
the date of redemption established in the notice (or, if no such sale
is made on such day, the mean of the closing bid and asked prices for
such date), all or any portion of the shares of stock of any class
owned by such stockholder, and/or (z) require such stockholder to
promptly dispose of such stockholder's interest in all or any portion
of the shares of stock of any class owned by such stockholder. Since
money damages will be inadequate to protect the Corporation in the
event the stockholder does not comply with the provisions of this
Article FIFTH, the Corporation shall be entitled to injunctive relief
to enforce the foregoing provisions.
SIXTH: The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors, which shall
consist of seven (7) Directors, which number may be increased or
decreased pursuant to the By-Laws of the Corporation from time to time
but shall never be less than the minimum number permitted by the
Maryland General Corporation Law now or hereafter in force. The
<PAGE>
names of the Directors, who shall act until the first annual meeting
or until their successors are duly chosen and qualified are: John A.
Couri, David H. Bernstein, Carl Reimerdes, Alfred Carfora, Seymour S.
Yaffe, William E. Hurst, Sr. and Heribert Diehl.
Unless the Board of Directors elects to classify the Board as
hereinafter provided:
(a) Any director may be removed from office, with or without
cause, by the affirmative vote of the holders of a majority of the
votes entitled to be cast on the matter, and, to the extent permitted
by law, any director may be removed for cause by the affirmative vote
of the majority of the remaining directors, although such directors
are less than a quorum, or by the sole remaining director.
(b) Each director shall serve until his successor is elected and
qualified or until his earlier death, retirement, resignation or
removal. Should a vacancy occur or be created, whether arising
through death, resignation or removal of a director or through an
increase in the number of directors, such vacancy shall be filled by a
majority vote of the remaining directors in office, even though such
directors are less than a quorum, or by the sole remaining director.
A director so elected to fill a vacancy shall hold office until the
next annual meeting of stockholders and thereafter until his successor
shall be duly elected and qualified.
<PAGE>
The Board of Directors shall have the power pursuant to the By-Laws of
the Corporation to elect to classify the Board of Directors by
dividing the directors into three (3) classes, as described below. In
the event that the Board exercises its power to classify the Board of
Directors, it shall not have the power to de-classify the Board of
Directors, except by amendment of the Corporation's Charter. In the
event that the Board of Directors exercises its power to classify the
Board of Directors, then, notwithstanding anything to the contrary
contained herein:
(a) The Board of Directors shall be divided into three classes,
Class A, Class B and Class C. Each class of directors shall consist
of any equal number of directors, or as nearly equal in number as
possible. Each director shall serve for a term ending on the date of
the third annual meeting following the annual meeting at which such
director was elected; provided, however, that each director initially
designated as a Class A director shall hold office until the first
annual meeting of stockholders after such designation; each director
initially designated as Class B shall hold office until the second
annual meeting of stockholders after such designation; and each
director initially designated as Class C shall hold office until the
third annual meeting of stockholders after such designation.
(b) In the event of any increase or decrease in the authorized
number of directors, (i) each director then serving as such shall
nevertheless continue as a director of the class of which he is a
member until the expiration of his current term,
<PAGE>
or his prior death, retirement, resignation, or removal, and (ii) the
newly created or eliminated directorships resulting from such increase
or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to maintain such classes as nearly
equal as possible and any vacancies so created shall be filled by a
majority vote of the directors in office of the class in which such
vacancy occurs, and a director as elected to fill a vacancy shall
serve for the remainder of the then present team of office of the
class to which he was elected and until his successor shall be duly
elected and qualified.
(c) Any director may be removed from office, with or without
cause, only by the affirmative vote of a majority of the entire Board
of Directors, and any director may be removed from office, only with
cause, by the affirmative vote of the holders of a majority of the
votes entitled to be cast on the matter, a vacancy which results from
the removal of a director as set forth herein, or which arises through
the death or resignation of a director, shall be filled by a majority
vote of the remaining directors in office of the class of such removed
director (or if there are no such directors, by a majority vote of the
entire Board of Directors), and a director so elected to fill a
vacancy shall serve for the remainder of the then present term of
office of the class to which he has elected and until his successor
shall be duly elected and qualified.
<PAGE>
SEVENTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Maryland, the Board of Directors shall
have the power to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
EIGHTH: The Board of Directors of the Corporation is hereby empowered
to authorize the issuance from time to time of shares of its stock of
any class, whether now or hereafter authorized, or securities
convertible into shares of its stock of any class or classes, whenever
deemed advisable by the Board of Directors and for such consideration
as the Board of Directors may deem advisable and without any action by
the stockholders.
NINTH: No holder of any stock or any other securities of the
Corporation, whether now or hereafter authorized, shall have any
preemptive right to subscribe for or purchase any stock or any other
securities of the Corporation; and any stock or other securities which
the Board of Directors may determine to offer for subscription may, as
the Board of Directors in its sole discretion shall determine, be
offered to the holders of any class, series or type of stock or other
securities at the time outstanding to the exclusion of the holders of
any or all other classes, series or types of stock or other securities
at the time outstanding.
TENTH: The Board of Directors of the Corporation shall have power
from time to time and in its sole discretion to determine in
accordance with sound accounting
<PAGE>
practice what constitutes annual or other net profits, earnings,
surplus, or net assets in excess of capital; to fix and vary from time
to time the amount to be reserved as working capital, or determine
that retained earnings or surplus shall remain in the hands of the
Corporation; to set apart out of any funds of the Corporation such
reserve or reserves in such amount or amounts and for such proper
purpose or purposes as it shall determine and to abolish any such
reserve or any part thereof; to dis-distribute and pay distributions
or dividends in stock, cash or other securities or property, out of
surplus or any other funds or amounts legally available therefor, at
such times and to the stockholders of records on such dates as it may,
from time to time, determine; and to determine whether and to what
extent and at what times and places and under what conditions and
regulations the books, accounts and documents of the Corporation, or
any of them, shall be open to the inspection of stockholders, except
as otherwise provided by statute or by the By Laws, and, except as so
provided, no stockholder shall have any right to inspect any book,
account or document of the Corporation unless authorized to do so by
resolution of the Board of Directors.
ELEVENTH: A contract or other transaction between the Corporation and
any of its directors or between the Corporation and any other
corporation, firm or other entity in which any of its directors is a
director or has a material financial interest is not void or voidable
solely because of any one or more of the following: the common
directorship or interest; the presence of the director at the meeting
of the
<PAGE>
Board of Directors which authorizes, approves, or ratifies the
contract or transaction; or the counting of the vote of the director
for the authorization, approval, or ratification of the contract or
transaction. This Article applies if:
(a) the fact of the common directorship or interest is disclosed
or known to: the Board of Directors and the Board authorizes,
approves, or ratifies the contract or transaction by the affirmative
vote of a majority of disinterested directors, even if the
disinterested directors constitute less than a quorum; or the
stockholders entitled to vote, and the contract or transaction is
authorized, approved, or ratified by a majority of the votes cast by
the stockholders entitled to vote other than the votes of shares owned
of record or beneficially by the interested director or Corporation,
firm, or other entity; or
(b) the contract or transaction is fair and reasonable to the
Corporation.
Common or interested directors or the stock owned by them or by an
interested corporation, firm, or other entity may be counted in
determining the presence of a quorum at a meeting of the Board of
Directors or at a meeting of the stockholders, as the case may be, at
which the contract or transaction is authorized, approved, or
ratified. If a contract or transaction is not authorized, approved,
or ratified in one of the ways provided for in clause (a) of the
second sentence of this Article, the person asserting the validity of
the contract or transaction bears the burden of proving that
<PAGE>
the contract or transaction was fair and reasonable to the Corporation
at the time it was authorized, approved, or ratified. The procedures
in this Article do not apply to the fixing by the Board of Directors
of reasonable compensation for a director, whether as a director or in
any other capacity.
TWELFTH: (1) Except for contracts, transactions, or acts required to
be approved under the provisions of Section (4) of this Article, any
contract, transaction, or act of the Corporation or of the Board of
Directors which shall be ratified by a majority of a quorum of the
stockholders having voting powers at any annual meeting, or at any
special meeting called for such purpose, shall so far as permitted by
law be as valid and as binding as though ratified by every stockholder
of the Corporation.
(2) Unless the By-Laws otherwise provide, any officer or
employee of the Corporation (other than a director may be removed at
any time with or without cause by the Board of Directors or by any
committee or superior officer upon whom such power of removal may be
conferred by the By-Laws or by authority of the Board of Directors.
(3) Notwithstanding any provision of law requiring the
authorization of any action by a greater proportion than a majority of
the total number of shares of all classes of capital stock or of the
total number of shares of any class of capital stock, such action
shall be valid and effective if authorized by the affirmative vote of
the
<PAGE>
holders of a majority of the total number of shares of all classes
outstanding and entitled to vote thereon, except as otherwise provided
in the charter.
(4) The Corporation reserves the right from time to time to make
any amendments of its charter which may now or hereafter be authorized
by law, including any amendments changing the terms or contract
rights, as expressly set forth in its charter, of any of its
outstanding stock by classification, reclassification or otherwise but
no such amendment which changes such terms or contract rights of any
of its outstanding stock shall be valid unless such amendment shall
have been authorized by not less than a majority of the aggregate
number of the votes entitled to be cast thereon, by a vote at a
meeting or in writing with or without a meeting.
The enumeration and definition of particular powers of the Board of
Directors included in the foregoing shall in no way be limited or
restricted by reference to or inference from the terms of any other
clause of this or any other Article of the charter of the Corporation,
or construed as or deemed by inference or otherwise in any manner to
exclude or limit any powers conferred upon the Board of Directors
under the General Laws of the State of Maryland now or hereafter in
force.
THIRTEENTH: The Corporation shall indemnify to the full extent
permitted by, and in the manner permissible under, the laws of the
State of Maryland, any person made or threatened to be made a party to
an action or proceeding, whether criminal, civil,
<PAGE>
administrative or investigative, by reason of the fact that he is or
was a director or officer of the Corporation or served any other
enterprise as a director or officer at the request of this
corporation. The foregoing rights of indemnification shall not be
deemed exclusive of any other rights to which any director or officer
or his legal representative may be entitled apart from the provisions
of this Article THIRTEENTH. The Corporation shall have no power or
authority to amend this charter so as to limit the indemnification
provided by this Article with respect to any event or circumstance
arising prior to the date of such amendment.
2. Prior to the filing of this Amended and Restated Charter, the
Corporation had authority to issue Five Thousand (5,000) shares of common stock,
having no par value. Subsequent to the filing of this Amended and Restated
Charter, the Corporation shall have authority to issue Twenty Million
(20,000,000) shares of common stock having a par value of $.01 per share and an
aggregate par value of Two Hundred Thousand Dollars ($200,000.00).
3. Effective upon the acceptance of this Amended and Restated Charter by
the Department for record, each one (1) share of heretofore authorized and
issued Common Stock, no par value, outstanding on the effective date hereof,
shall automatically convert into one thousand one hundred seventy-one and eight
hundred seventy-five one-thousandths (1,171.875) shares of Common Stock, $.01
par value, newly authorized hereby.
<PAGE>
4. The Board of Directors of the Corporation, by unanimous written consent
in accordance with Section 2-408 of the Maryland General Corporation Law, on
July 28 1987, adopted a resolution which approved the foregoing Amended and
Restated Charter, declaring that said amendment and restatement to the
Corporation's Charter was advisable and directing that said amendment and
restatement to the Corporation's Charter be submitted for consideration by the
stockholders of the Corporation.
5. The amendment and restatement to the Corporations Charter, as
hereinabove set forth, was duly approved by the stockholders of the Corporation,
on July 28, 1987, by unanimous written consent pursuant to Section 2-505 of the
Maryland General Corporation Law.
6. The amendment and restatement to the Corporation's Charter as
hereinabove set forth has been duly advised by the Board of Directors and
approved by the stockholders of the Corporation.
IN WITNESS WHEREOF, DUTY FREE INTERNATIONAL, INC. has caused these presents
to be signed in its name and on its behalf by its President and attested by its
Secretary, this 28 day of July, 1987, and its said President acknowledges under
the penalties of perjury that this Amended and Restated Charter is the corporate
act of said Corporation and that, to the best of his knowledge, information and
belief, the matters and facts set forth herein are true in all material
respects.
ATTEST: DUTY FREE INTERNATIONAL, INC.
<PAGE>
/s/ Alfred Carfora BY: /s/ John A. Couri
---------------------------- -------------------------
Alfred Carfora, Secretary John A. Couri, President
<PAGE>
DUTY FREE INTERNATIONAL, INC.
ARTICLES OF AMENDMENT
DUTY FREE INTERNATIONAL, INC., a Maryland corporation, having its principal
office in Anne Arundel County, Maryland (hereinafter called the "Corporation")
hereby certifies to the State Department of Assessments and Taxation that:
FIRST: The Charter of the Corporation is amended by adding the following
Article Fourteenth:
"FOURTEENTH: To the full extent permitted under the Maryland
General Corporation Law is in effect on February 18, 1989, or as
thereafter from time to time amended, no Director or Officer shall be
liable to the Corporation or to its Stockholders for money damages for
any breach of any duty owed by such Director or Officer to the
Corporation or any of its Stockholders. This Article shall apply only
to actions arising from events or omissions occurring on or after
February 18, 1988. Neither the amendment or repeal of this Article,
nor the adoption of any provision of this charter inconsistent with
this Article, shall eliminate or reduce the protection afforded by
this Article to a Director or Officer of the Corporation with respect
to any matter which occurred, or any cause of action, suit or claim
which but for this Article would have accrued or arisen, prior to such
amendment, repeal or adoption."
SECOND: The amendment to the Charter of the Corporation set forth in
these Articles of Amendment has been duly advised by the Board of Directors, by
unanimous written consent in accordance with Section 2-408 of the Maryland
General Corporation Law, and approved by the
<PAGE>
Stockholders of the Corporation, by unanimous written consent pursuant to
Section 2-505 of the Maryland General Corporation Law.
IN WITNESS WHEREOF, these Articles of Amendment were signed and
acknowledged this 19th day of March, 1988 in the name and on behalf of the
Corporation by its President or Vice President and attested by its Secretary and
its President or Vice President acknowledges this document to be the corporate
act of the Corporation and states under the penalties of perjury that the
matters and facts set forth herein with respect to approval are true in all
material respects to the best of his knowledge, information and belief.
ATTEST: DUTY FREE INTERNATIONAL, INC.
/s/ Alfred Carfora By: /s/ John A. Couri (SEAL)
- -------------------------- -----------------------
Alfred Carfora, Secretary John A. Couri, President
<PAGE>
DUTY FREE INTERNATIONAL, INC.
ARTICLES OF AMENDMENT
Duty Free International, Inc. (the "Corporation"), a Maryland corporation,
having its principal office in this State in Anne Arundel County, Maryland
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Charter of the Corporation is hereby amended by striking out
in its entirety Article FIFTH of the Articles of Incorporation and substituting
the following:
FIFTH: The total number of shares of capital stock which the
Corporation has authority to issue is Twenty Million (20,000,000) shares
with a par value of one cent ($.01) per share and an aggregate par value of
Two Hundred Thousand Dollars ($200,000.00).
The Corporation, it subsidiaries, and their subsidiaries, hold certain
licenses, permits, certificates and bonds necessary for the operation of
their businesses pursuant to the authority and regulation of the United
States Customs Service and the Bureau of Alcohol, Tobacco and Firearms. In
the event that (1) any holder of any class of stock of the Corporation
acquires shares of any class of the issued and outstanding stock of the
Corporation, which shares represent over nine percent (9%) of the issued
and outstanding stock of the Corporation having voting power, and (2) (a)
such stockholder fails to cooperate fully with any request for information
from or for submission to the Customs Service or the Bureau of Alcohol,
Tobacco and Firearms (or any successor or similar agency whose authority to
grant licenses, permits, bonds or Certificates is critical to the operation
of the business of the Corporation, or its subsidiaries or their
subsidiaries), or (b) the Customs Service or the Bureau of Alcohol, Tobacco
and Firearms (or any successor or similar agency whose authority to grant
licenses, permits, bonds or certificates is critical to the operation of
the business of the Corporation, or its subsidiaries or their
subsidiaries), because of such stockholder's ownership (whether record or
beneficial) of shares representing over nine percent (9%) of the issued and
outstanding stock of the Corporation having voting power, refuses to issue
or continue in force, or threatens to refuse to issue or continue in force,
any permit, license, certificate, bond or other grant of authority
necessary for the operation of the Corporation's business or the business
of any of its subsidiaries ____ their subsidiaries without a material
<PAGE>
change therein, then, i such event (as determined in the sole and absolute
discretion of the Board of Directors), the Corporation, in the sole and
absolute discretion of its Board of Directors, as it may deem advisable and
in the best interests of the Corporation, shall have the unqualified right
and power to (y) redeem, upon not less than five (5) days prior written
notice to the stockholder, at a price per share equal to the reported "bid"
price of the Common Stock in the over-the-counter market as reported by the
National Association of Securities Dealers, Inc. (or if the stock is listed
on an established stock exchange or exchanges, the highest closing price of
the Corporation's Common Stock on that stock exchange or exchanges) on the
last business day prior to the date of redemption established in the notice
(or, if no such sale is made on such day, the mean of the closing bid and
asked prices for such date), all or any portion of the shares of stock of
any class owned by such stockholder, and/or (z) require such stockholder to
promptly dispose of such stockholder's interest in all or any portion of
the shares of stock of any class owned by such stockholder. Since money
damages will be inadequate to protect the Corporation in the event the
stockholder does not comply with the provisions of this Article FIFTH, the
Corporation shall be entitled to injunctive relief to enforce the foregoing
provisions.
SECOND: This amendment of the Corporation's Charter was duly advised on
March 17, 1989, by the unanimous written consent of all the Directors of the
Corporation pursuant to Section 2-408(c) of the Corporations and Associations
Article of the Annotated Code of Maryland.
THIRD: This amendment of the Corporation's Charter was duly approved on
March 23, 1989, by unanimous written Consent of all of the Stockholders of the
Corporation entitled to vote pursuant to Section 2-505 of the Corporations and
Associations Article of the Annotated Code of Maryland.
IN WITNESS WHEREOF, Duty Free International, Inc. has caused these
presents to be signed in its name and on its behalf by its President and
attested to by its Secretary, this __ day of March, 1989. Each of the
undersigned officers of Duty Free International, Inc. acknowledges, under the
penalties for perjury, that these Articles of Amendment are the corporate act
of the Corporation and that the matters and facts set forth herein are true
in all material aspects, to the best of his or her knowledge, information and
belief.
ATTEST: DUTY FREE INTERNATIONAL, INC.
/s/ Alfred Carfora By: /s/ John A. Couri
- ---------------------------- ---------------------------
Alfred Carfora, Secretary John A. Couri, President
<PAGE>
CERTIFICATE OF CHANGE OF PRINCIPAL OFFICE
OF
DUTY FREE INTERNATIONAL, INC.
RESOLUTION OF DIRECTORS
RESOLVED: That the post office address of the principal office of this
Corporation in the State of Maryland is hereby changed to 6691 Baymeadow
Drive, Glen Burnie, Maryland 21060-6485.
CERTIFICATION
I HEREBY CERTIFY, that the foregoing resolution was duly adopted by
the Board of Directors of Duty Free International, Inc. on September 13, 1990.
/s/ John A. Couri
--------------------------
John A. Couri, President
Dated:
September 13, 1990
<PAGE>
DUTY FREE INTERNATIONAL, INC.
ARTICLES OF AMENDMENT
Duty Free International, Inc. (the "Corporation"), a Maryland
corporation, having its principal office in this State in Anne Arundel County,
Maryland hereby certifies to the State Department of Assessments and Taxation of
Maryland that:
FIRST: The Charter of the Corporation is hereby amended by striking
out in its entirety Article FIFTH of the Articles of Incorporation and
substituting the following:
FIFTH: The total authorized capital stock of the Corporation
is Seventy-Five Million (75,000,000) shares with a par value of one
cent ($0.01) per share and an aggregate pare value of Seven Hundred
Fifty Thousand Dollars ($750,000).
The Corporation, its subsidiaries, and their subsidiaries, hold
certain licenses, permits, certificates and bonds necessary for the
operation of their businesses pursuant to the authority and regulation
of the United States Customs Service and the Bureau of Alcohol,
Tobacco and Firearms. In the event that (1) any holder of any class
of stock of the Corporation acquires shares of any class of the issued
and outstanding stock of the Corporation, which shares represent over
nine percent (9%) of the issued and outstanding stock of the
Corporation having voting power, and (2) (a) such stockholder fails to
cooperate fully with any request for information from or for
submission to the Customs Service or the Bureau of Alcohol, Tobacco
and Firearms (or any successor or similar agency whose authority to
grant licenses, permits, bonds or certificates is critical to the
operation of the business of the Corporation, or its subsidiaries or
their subsidiaries), or (b) the Customs Service or the Bureau of
Alcohol, Tobacco and Firearms (or any successor or similar agency
whose authority to grant licenses, permits, bonds or certificates is
critical to the operation of the business of the Corporation, or its
subsidiaries or their subsidiaries), because of such stockholder's
ownership (whether record or beneficial) of shares representing over
nine percent (9%) of the issued and outstanding stock of the
Corporation having voting power, refuses to issue or continue in
<PAGE>
force, or threatens to refuse to issue or continue in force, any
permit, license, certificate, bond or other grant of authority
necessary for the operation of the Corporation's business or the
business of any of its subsidiaries or their subsidiaries without a
material change therein, then, in such event (as determined in the
sole and absolute discretion of the Board of Directors), the
Corporation, in the sole and absolute discretion of its Board of
Directors, as it may deem advisable and in the best interests of the
Corporation, shall have the unqualified right and power to (y) redeem,
upon not less than five (5) days prior written notice to the
stockholder, at a price per share equal to the reported "bid" price of
the Common Stock in the over-the-counter market as reported by the
National Association of Securities Dealers, Inc. (or if the stock is
listed on an established stock exchange or exchanges, the highest
closing price of the Corporation's Common Stock on that stock exchange
or exchanges) on the last business day prior to the date of
redemption established in the notice (or, if no such sale is made on
such day, the mean of the closing bid and asked prices for such date),
all or any portion of the shares of stock of any class owned by such
stockholder, and/or (z) require such stockholder to promptly dispose
of such stockholder's interest in all or any portion of the shares of
stock of any class owned by such stockholder. Since money damages
will be inadequate to protect the Corporation in the event the
stockholder does not comply with the provisions of this Article FIFTH,
the Corporation shall be entitled to injunctive relief to enforce the
foregoing provisions.
SECOND: Prior to the filing of these Articles of Amendment, the
Corporation had authority to issue Twenty Million (20,000,000) shares of common
stock, having a par value of one cent ($0.01) per share, all of one class.
THIRD: Upon the filing of these Articles of Amendment, the total
number of shares of capital stock that the Corporation has authority to issue
pursuant to its Charter, as amended by these Articles of Amendment, is
Seventy-Five Million (75,000,000) shares of common stock, with a par value of
one cent ($0.01) per share, all of one class. The aggregate par value of all
shares of all classes having par value is Seven Hundred Fifty Thousand Dollars
($750,000.00).
<PAGE>
FOURTH: This amendment of the Corporation's Charter ws duly advised
on April 22, 1991, by the unanimous written consent of all the Directors of the
Corporation pursuant to Section 2-408(c) of the Corporations and Associations
Article of the Annotated Code of Maryland.
FIFTH: This amendment of the Corporation's Charter was duly
approved on May 31, 1991, by a majority of all the votes cast at the Annual
Meeting of the Stockholders of the Corporation, at which a quorum was present in
person or by proxy.
IN WITNESS WHEREOF, Duty Free International, Inc. has caused these
presents to be signed in its name and on its behalf by its President and
attested to by its Secretary, this 31st day of May, 1991. Each of the
undersigned officers of Duty Free International, Inc. acknowledges, under the
penalties for perjury, that these Articles of Amendment are the corporate act of
the Corporation and that the matters and facts set forth herein are true in all
material respects, to the best of his or her knowledge, information and belief.
ATTEST: DUTY FREE INTERNATIONAL, INC.
/s/ Alfred Carfora By: /s/ John A. Couri
- ------------------------- ----------------------------
Alfred Carfora, Secretary John A. Couri, President
<PAGE>
Exhibit 99.8
Amended to
May 22, 1997
BY-LAWS
AS AMENDED
OF
DUTY FREE INTERNATIONAL, INC.
ARTICLE I
STOCKHOLDERS
------------
Section 1. ANNUAL MEETING. The annual meeting of the Stockholders of
the Corporation shall be held each year during the fourth month after the close
of the Corporation's fiscal year, on a day to be duly designated by the Board of
Directors, for the purpose of electing Directors and for the transaction of any
other corporate business as may come before the meeting.
Section 2. SPECIAL MEETINGS. Special meetings of the Stockholders
may be called, at any time and for any purpose or purposes, only by the Chairman
of the Board of Directors, by the Chief Executive Officer or by the President,
or at the request in writing of a majority of the Board of Directors. Special
meetings of the Stockholders shall he called forthwith by the
<PAGE>
Chairman of the Board, by the Chief Executive Officer, by the President, by a
Vice President, by the Secretary, or by any Director of the Corporation at any
time, upon the request in writing of the Stockholders entitled to cast at least
a majority of all the votes entitled to be cast at such meeting; provided, that
no such special meeting shall be called to consider any matter which is
substantially the same as a matter voted on at any special meeting of the
Stockholders held during the preceding twelve (12) months, unless requested by
the Stockholders entitled to cast a majority of all votes entitled to be cast at
the meetings. In any case in which a special meeting is called by written
request of the Stockholders, such request shall state the purpose or purposes of
the meeting. Business transacted at all special meetings of Stockholders shall
be confined to the purpose or purposes stated in the notice of the meeting.
Section 3. PLACE OF HOLDING MEETINGS. All meetings of Stockholders
shall be held at the principal office of the Corporation, or elsewhere in the
United States as may be designated by the Board of Directors.
Section 4. NOTICE OF MEETINGS. Written notice of each meeting of the
Stockholders shall be mailed, postage prepaid, by the Secretary, to each
Stockholder at his post office address, as
-2-
<PAGE>
it appears upon the books of the Corporation, at least ten (10) days and not
more than ninety (90) days before the meeting. Each such notice shall state the
place, day, and hour at which the meeting is to be held and, in the case of any
special meeting, shall state briefly the purpose or purposes thereof.
Section 5. QUORUM. The presence in person or by proxy of the holders
of record of a majority of the shares of the capital stock of the Corporation
issued and outstanding and entitled to vote thereat shall constitute a quorum at
all meetings of the Stockholders, except as may be otherwise specifically
provided by law, by the Corporation's Charter or by these By-Laws. If less than
a quorum shall be in attendance at the time for which the meeting shall have
been called, the meeting may be adjourned from time to time by a majority vote
of the Stockholders present or represented, without any notice other than by
announcement at the meeting, until a quorum shall attend. At any adjourned
meeting at which a quorum shall attend, any business may be transacted which
might have been transacted if the meeting had been held as originally called.
Section 6. CONDUCT OF MEETINGS. Meetings of Stockholders shall be
presided over by the Chairman of the Board, or if he is not present, by the
President, or, if neither of said
-3-
<PAGE>
Officers is present, by a chairman to be elected at the meeting. The Secretary
of the Corporation, or if he is not present, any Assistant Secretary, shall act
as secretary of such meetings; in the absence of the Secretary and any Assistant
Secretary, the presiding officer may appoint a person to act as secretary of the
meeting.
Section 7. VOTING. At all meetings of Stockholders, every
Stockholder entitled to vote thereat shall have one (1) vote for each share of
stock standing in his name on the books of the Corporation on the date
established for the determination of Stockholders entitled to vote at such
meeting. Such vote may be cast either in person or by proxy duly appointed by
an instrument in writing subscribed by such Stockholder, or his duly authorized
attorney, and bearing a date not more than eleven (11) months prior to said
meeting unless said instrument expressly provides for a longer period. Such
proxy shall be dated, but need not be sealed, witnessed or acknowledged. Except
as may be otherwise specifically provided by law, by the Corporation's Charter
or by these By-Laws, Directors shall be elected by a plurality of all the votes
cast at a meeting at which a quorum is present and, whenever any corporate
action other than the election of Directors is to be taken, it shall be
authorized by a majority of
-4-
<PAGE>
all the votes cast at a meeting at which a quorum is present. If the Chairman
of the meeting shall so determine, a vote by ballot may be taken upon any
election or matter; a vote by ballot also shall be taken upon the request of the
holders of ten percent (10%) of the stock entitled to vote on such election or
matter. The Chairman may appoint one or more tellers of election. In such
event, the proxies and ballots shall be held by the tellers, and all questions
as to the qualification of voters, the validity of proxies and the acceptance or
rejection of votes shall be decided by the tellers. If no teller is appointed,
the foregoing duties shall be performed by the Chairman.
ARTICLE II
BOARD OF DIRECTORS
------------------
Section 1. GENERAL POWERS. The property and business of the
Corporation shall be managed under the direction of the Board of Directors of
the Corporation.
Section 2. NUMBER AND TERM OF OFFICE. The number of Directors shall
be that number set forth in the Charter of the Corporation, or such other number
as may be designated from time to time by resolution of a majority of the entire
Board of Directors, provided, however, that the number of directors shall never
be less than the minimum required under Section 2-402 of
-5-
<PAGE>
the Maryland General Corporation Law nor more than fifteen (15). Directors need
not be Stockholders. Except as otherwise provided by law or in the Charter or
these By-laws, Directors shall be elected each year at the annual meeting of
Stockholders and each Director shall serve until his successor shall be duly
elected and qualified.
Section 3. CLASSIFICATION. In the event that the Board of Directors
shall, by resolution of a majority of the entire Board of Directors, exercise
the power granted to the Board in the Charter to classify the Board of
Directors, then the Board of Directors shall be divided into three classes,
Class A, Class B and Class C. Each class of Directors shall consist of an equal
number of Directors, or as nearly equal in number as possible, with the term of
office of one class expiring each year. The Board of Directors shall designate
which Directors shall serve in each class of Directors at the time it elects to
be a classified Board of Directors. Directors of Class A shall be elected to
hold office for a term expiring at the succeeding annual meeting of
Stockholders, Directors of Class B shall be elected to hold office for a term
expiring at the second succeeding annual meeting of Stockholders and Directors
of Class C shall be elected to hold office for a term expiring at the
-6-
<PAGE>
third succeeding annual meeting of Stockholders. Subject to the foregoing, at
each annual meeting of Stockholders the successors to the class of Directors
whose term shall then expire shall be elected to hold office for a term expiring
at the third succeeding annual meeting and each Director so elected shall hold
office until his successor is elected and qualified, or until his earlier
resignation or removal. If the number of Directors is changed, any increase or
decrease in the number of Directors shall be apportioned among the three classes
so as to make all classes as nearly equal in number as possible.
Section 4. FILLING OF VACANCIES. In the event of vacancy in the
Board of Directors, whether by reason of a Director's death, resignation,
disqualification or removal, or by reason of an increase in the number of
Directors of the Corporation in accordance with these By-Laws, or by any other
reason or cause, such vacancy shall be filled in accordance with the Charter of
the Corporation.
Section 5. REMOVAL OF DIRECTORS. Any Director may be removed from
office, with or without cause, only in accordance with the Charter of the
Corporation.
Section 6. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held, without notice, at such time and
-7-
<PAGE>
place as shall from time to time be determined by resolution of the Board,
provided that notice of every resolution of the Board fixing or changing the
time or place for the holding of regular meetings of the Board shall be mailed
to each Director at least ten (10) days before the first meeting held pursuant
thereto. The annual meeting of the Board of Directors shall be held immediately
following the annual Stockholders' meeting at which Directors whose terms have
expired are elected. Any business may be transacted at any regular meeting of
the Board.
Section 7. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called, at any time and for any purpose or purposes, by the
Chairman of the Board of Directors, by the Chief Executive Officer or by the
President. Special meetings of the Board of Directors shall be called by the
Secretary upon request in writing of a majority of the Board of Directors. The
Secretary shall give notice of each special meeting of the Board of Directors by
mailing the same at least three (3) days prior to the meeting, or by
telegraphing the same at least one (1) day prior to the meeting, to each
Director. Any and all business may be transacted at any special meeting. Any
Director may, in writing, waive notice of the time, place and objects of any
special meeting. Any meeting of the Board of Directors, regular
-8-
<PAGE>
or special, may adjourn from time to time to reconvene at the same or some other
place, and no notice need be given of any such adjourned meeting other than by
announcement at the adjourned meeting.
Section 8. PLACE OF MEETING AND OFFICES. The Board of Directors may
hold their meetings, have one or more offices, and keep the books of the
Corporation at such place or places, either within or without the State of
Maryland, as they may, from time to time, determine by resolution or by written
consent of all of the Directors.
Section 9. QUORUM. A majority of all of the Directors (but in no
event less than two (2) Directors) shall constitute a quorum for the transaction
of business at all meetings of the Board of Directors, but, if at any meeting
less than quorum shall be present, a majority of those present may adjourn the
meeting from time to time. The act of a majority of the Directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by law, by the
Corporation's Charter or by these By-Laws.
Section 10. COMPENSATION OF DIRECTORS. The Board may, by resolution,
fix a stated salary to be paid to Directors as
-9-
<PAGE>
compensation for their services and may also fix a sum for attendance at each
regular or special meeting of the Board, or of committees thereof, and such
reimbursement and compensation shall be payable whether or not an adjournment be
had because of the absence of a quorum; and each Director shall be entitled to
receive from the Corporation reimbursement of the expenses incurred by him in
attending any regular or special meeting of the Board, or of committees thereof.
Nothing herein contained shall be construed to preclude any Director from
serving the Corporation in any other capacity and receiving compensation
therefor.
Section 11. EXECUTIVE COMMITTEE. The Board of Directors may appoint
an Executive Committee consisting of two or more Directors. The Executive
Committee shall have and may exercise all powers of the Board of Directors
between the meetings of the Board, excepting, however, the power or authority to
alter or amend the By-Laws, to declare dividends or distributions on stock, to
issue stock (except as authorized by law), to fill vacancies in the Board of
Directors or in its own membership (which vacancies shall be filled by the Board
of Directors), to recommend to the Stockholders any action requiring Stockholder
approval, or to approve any merger or share exchange
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<PAGE>
which does not require Stockholder approval. The Executive Committee shall meet
at stated times or on notice to all by any of their own number. It shall fix
its own rules of procedure. Unanimous vote or consent shall be necessary in
every case. The Executive Committee shall keep regular minutes of its
proceedings and report the same to the Board of Directors. Without limiting the
generality of the foregoing, the Executive Committee is specifically authorized
to execute customary banking resolutions for corporate accounts and for
borrowing.
Section 12. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the Directors of the Corporation, which,
to the extent provided in the resolution, shall have and may exercise the powers
of the Board of Directors, excepting, however, the power to declare dividends or
distributions on stock, to issue stock (except as authorized by law), to alter
or amend the By-Laws, to fill vacancies in the Board of Directors or in their
own membership, which vacancies shall be filled by the Board of Directors, to
recommend to the Stockholders any action requiring Stockholder approval, or to
approve any merger or share exchange which does not require Stockholder
approval. Such committee or
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committees shall have such designations as may be determined from time to time
by resolution adopted by the Board of Directors.
Section 13. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting pursuant to the provisions of
Section 2-408 of the Maryland General Corporation Law.
ARTICLE III
OFFICERS
--------
Section 1. ELECTION, TENURE, AND COMPENSATION. The Officers of the
Corporation shall be a Chairman of the Board, one or more Vice Chairmen of the
Board, a Chief Executive Officer or Co-Chief Executive Officers, a President, a
Chairman of the Executive Committee, one or more Vice Presidents, a Secretary,
and a Treasurer, and such other Officers--e.g., one or more Assistant
Secretaries or Assistant Treasurers--as the Board of Directors from time to time
may consider necessary for the proper conduct of the business of the
Corporation. The Officers shall be elected by the Board of Directors and shall
serve at the pleasure of the Board. The Chairman of the Board, each Vice
Chairman of the Board, the Chief Executive Officer, the President and the
Chairman of the Executive Committee shall be Directors
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and the other Officers may, but need not be, Directors. Any two or more of the
above offices, except those of President and Vice President, may be held by the
same person, but no Officer shall execute, acknowledge or verify any instrument
in more than one capacity if such instrument is required by law or by these
By-Laws to be executed, acknowledged or verified by any two or more Officers.
The compensation or salary paid all Officers of the Corporation may be fixed by
resolutions adopted by the Board of Directors. Except where otherwise expressly
provided in a contract duly authorized by the Board of Directors, every Officer
and agent of the Corporation shall be subject to removal at any time by the
affirmative vote of a majority of the whole Board of Directors, and all
Officers, agents, and employees shall hold office at the discretion of the Board
of Directors or of the Officers appointing them.
Except as otherwise provided by these By-Laws, any reference to the
Chief Executive Officer in these By-Laws shall be deemed to mean, if there are
Co-Chief Executive Officers, either Co-Chief Executive Officer, each of whom may
severally exercise the full power and authority of the office of Chief Executive
Officer.
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Section 2. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. If
elected by the Board of Directors, the Chairman of the Board shall preside at
all meetings of the Stockholders and of the Board of Directors and, if present
and in the absence of the Chairman of the Executive Committee, preside at
meetings of the Executive Committee. The Chairman of the Board may sign and
execute all authorized bonds, contracts or other obligations in the name of the
Corporation. He shall do and perform such other duties as may, from time to
time, be assigned to him by the Board of Directors.
Section 3. POWERS AND DUTIES OF THE VICE CHAIRMAN OF THE BOARD. In
the absence of the Chairman of the Board and the President, the Vice Chairman of
the Board, or if there shall be more than one, a Vice Chairman as designated by
the Chairman or the President, or, in the absence of such designation, as
designated by the Board of Directors, shall, if present, preside at meetings of
the Board. The Vice Chairman may sign and execute all authorized bonds,
contracts or other obligations in the name of the Corporation. He shall do and
perform such other duties as may, from time to time, be assigned by the Board of
Directors.
Section 4. POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER. The
Chief Executive Officer of the Corporation shall
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have general charge and control of all its business affairs and properties. The
Chief Executive Officer may sign and execute all authorized bonds, contracts or
other obligations in the name of the Corporation. He shall have the general
powers and duties of supervision and management usually vested in the office of
chief executive officer of a corporation. He shall do and perform such other
duties as may, from time to time, be assigned to him by the Board of Directors.
Section 5. POWERS AND DUTIES OF THE PRESIDENT. The President shall
perform such senior executive duties as the Board of Directors shall from time
to time determine. The President shall, if present and in the absence of the
Chairman of the Board, preside at meetings of the Stockholders and of the Board
of Directors and, if present and in the absence of the Chairman of the Executive
Committee and the Chairman of the Board, preside at meetings of the Executive
Committee. The President may sign and execute all authorized bonds, contracts
or other obligations in the name of the Corporation. He shall do and perform
such other duties as may, from time to time, be assigned to him by the Board of
Directors.
Section 6. POWERS AND DUTIES OF THE CHAIRMAN OF THE EXECUTIVE
COMMITTEE. The Chairman of the Executive Committee
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shall, if present, preside at meetings of the Executive Committee. The Chairman
of the Executive Committee shall perform such other duties as the Board of
Directors or the Executive Committee may from time to time determine.
Section 7. POWERS AND DUTIES OF THE VICE PRESIDENT. The Board of
Directors may appoint a Vice President or more than one Vice President. Any
Vice President (unless otherwise provided by resolution of the Board of
Directors) may sign and execute all authorized bonds, contracts, or other
obligations in the name of the Corporation, provided that such bonds, contracts
or other obligations have been approved by the Board of Directors, the Chairman
of the Board, the Chief Executive Officer or the President. Each Vice President
shall have such other powers and shall perform such other duties as may be
assigned to him by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer or the President.
Section 8. SECRETARY. The Secretary shall give, or cause to be
given, notice of all meetings of Stockholders and Directors and all other
notices required by law or by these By-Laws; in case of his absence or refusal
or neglect to do so, any such notice may be given by any person so directed by
the President, or by the Directors or Stockholders upon whose written
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requisition as provided in these By-Laws the meeting is called. The Secretary
shall record all of the proceedings of the meetings of the Stockholders and of
the Board of Directors in books provided for that purpose and he shall perform
such other duties as may be assigned to him by the Board of Directors, the
Chairman of the Board, the Chief Executive Officer or the President. When
authorized by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer or the President, he shall attest to, or witness all
instruments requiring same. In general, the Secretary shall perform all the
duties generally incident to the office of Secretary, subject to the control of
the Board of Directors, the Chairman of the Board, the Chief Executive Officer
and the President.
Section 9. TREASURER. The Treasurer shall have custody of all the
funds and securities of the Corporation, and he shall keep full and accurate
account of receipts and disbursements in books belonging to the Corporation. He
shall deposit all monies and other valuables in the name and to the credit of
the Corporation in such depository or depositories as may be designated by the
Board of Directors. The Treasurer shall disburse the funds of the Corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
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disbursements. He shall render to the Board of Directors, the Chairman of the
Board, the Chief Executive Officer and the President, whenever any of them so
requests, an account of all his transactions as Treasurer and of the financial
condition of the Corporation. The Treasurer shall give the Corporation a bond,
if required by the Board of Directors, in a sum, and with one or more sureties,
satisfactory to the Board of Directors, for the faithful performance of the
duties of his office and for the restoration to the Corporation in case of his
death, resignation, retirement or removal from office of all books, papers,
vouchers, monies, and other properties of whatever kind in his possession or
under his control belonging to the Corporation. In general, the Treasurer shall
perform all the duties generally incident to the office of the Treasurer,
subject to the control of the Board of Directors, the Chairman of the Board, the
Chief Executive Officer and the President.
Section 10. ASSISTANT SECRETARY. The Board of Directors, the
Chairman of the Board, the Chief Executive Officer or the President may appoint
one or more Assistant Secretaries. Each Assistant Secretary shall have power
(except as otherwise provided by resolution of the Board of Directors) to
perform all duties of the Secretary in the absence or disability of the
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Secretary and shall have such other powers and shall perform such other duties
as may be assigned to him by the Board of Directors, the Chairman of the Board,
the Chief Executive Officer or the President. In case of the absence or
disability of the Secretary, the duties of the office shall be performed by any
Assistant Secretary; the taking of any action by any Assistant Secretary in
place of the Secretary shall be conclusive evidence of the absence or disability
of the Secretary.
Section 11. ASSISTANT TREASURER. The Board of Directors may appoint
one or more Assistant Treasurers. Each Assistant Treasurer shall have power
(except as otherwise provided by resolution of the Board of Directors) to
perform all duties of the Treasurer in the absence or disability of the
Treasurer and shall have such other powers and shall perform such other duties
as may be assigned to him by the Board of Directors, the Chairman of the Board,
the Chief Executive Officer or the President. In case of the absence or
disability of the Treasurer, the duties of the office shall be performed by any
Assistant Treasurer; the taking of any action by any Assistant Treasurer in
place of the Treasurer shall be conclusive evidence of the absence or disability
of the Treasurer.
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Section 12. SUBORDINATE OFFICERS. The Corporation may have such
subordinate officers as the Board of Directors may from time to time deem
advisable. Each such officer shall hold office for such period and perform such
duties as the Board of Directors, the Chairman of the Board, the Chief Executive
Officer, the President or the committee or officer designated pursuant to this
Article III may prescribe.
ARTICLE IV
CAPITAL STOCK AND OTHER SECURITIES
----------------------------------
Section 1. ISSUE OF CERTIFICATES OF STOCK. The certificates for
shares of the stock of the Corporation shall be of such form, not inconsistent
with the Charter of the Corporation, as shall be approved by the Board of
Directors. All certificates shall be signed by the President or by the Vice
President and counter-signed by the Secretary or by an Assistant Secretary;
provided, that any signature or counter signature may be either manual or
facsimile signature. All certificates for each class of stock shall be
consecutively numbered. The name of the person owning the shares issued, and
the address of the said holder, shall be entered in the Corporation's books.
All certificates surrendered to the Corporation for transfer shall be cancelled
and no new certificates representing the same number of
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shares shall be issued until the former certificate or certificates for the same
number of shares shall have been so surrendered and cancelled.
Section 2. TRANSFER OF SHARES. Shares of the capital stock of the
Corporation may be transferred on the books of the Corporation only by the
holder thereof, in person or by his attorney, and upon surrender and
cancellation, as hereinabove provided, of certificates for a like number of
shares.
Section 3. REGISTERED STOCKHOLDERS. The Corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to, or interest in, such shares in the name of any
other person, whether or not it shall have express or other notice thereof, save
as expressly provided by the laws of the State of Maryland.
Section 4. RECORD DATE AND CLOSING OF TRANSFER BOOKS. The Board of
Directors may set a record date or direct that the stock transfer books be
closed for a stated period for the purpose of making any proper determination
with respect to stockholders, including which stockholders are entitled to
notice of a meeting, vote at a meeting, receive a dividend or be allotted other
rights. The record date may not be more than
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ninety (90) days before the date on which the action requiring the determination
will be taken; the transfer books may not be closed for a period longer than
twenty (20) days; and, in the case of a meeting of stockholders, the record date
or the closing of the transfer books shall be at least ten (10) days before the
date of the meeting.
Section 5. LOST CERTIFICATES. The Board of Directors may direct a
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been stolen, lost or destroyed upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be stolen, lost or destroyed. When authorizing such issuance of a new
certificate, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of the certificate or his
legal representative to give bond, with sufficient surety, to indemnify the
Corporation against any loss or claim which may arise by reason of the issuance
of a new certificate.
ARTICLE V
BANK ACCOUNTS AND LOANS
-----------------------
Section 1. BANK ACCOUNTS. Such Officers or agents of the Corporation
as from time to time shall be designated by the
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Board of Directors shall have authority to deposit any funds of the Corporation
in such banks or trust companies as from time to time shall be designated by the
Board of Directors. Such Officers or agents of the Corporation as from time to
time shall be authorized by the Board of Directors may withdraw any or all of
the funds of the Corporation so deposited in any bank or trust company, upon
checks, drafts or other instruments or orders for the payment of money, drawn
against the account or in the name or on behalf of the Corporation, and made or
signed by such Officers or agents; and each bank or trust company with which
funds of the Corporation are so deposited is authorized to accept, honor, cash
and pay, without limit as to amount, all checks, drafts or other instruments or
orders for the payment of money, when drawn, made or signed by Officers or
agents so designated by the Board of Directors until written notice of the
revocation of the authority of such Officers or agents by the Board of Directors
shall have been received by such bank or trust company. From time to time there
shall be certified to the banks or trust companies in which funds of the
Corporation are deposited, the signatures of the Officers or agents of the
Corporation so authorized to draw against the same. In the event that the Board
of Directors shall fail to designate the persons by whom checks, drafts and
other
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instruments or orders for the payment of money shall be signed, as hereinabove
provided in this Section, all of such checks, drafts and other instruments or
orders for the payment of money shall be signed by the Chairman of the Board,
the Chief Executive Officer, the Vice Chairman of the Board, the President or a
Vice President and countersigned by the Secretary, the Treasurer, an Assistant
Secretary or an Assistant Treasurer.
Section 2. LOANS. Such Officers or agents of the Corporation as from
time to time shall be designated by the Board of Directors shall have authority
to effect loans, advances or other forms of credit at any time or times for the
Corporation from such banks, trust companies, institutions, corporations, firms
or persons, in such amounts and subject to such terms and conditions as the
Board of Directors from time to time shall designate; and, as security for the
repayment of any loans, advances, or other forms of credit so authorized, to
assign, transfer, endorse and deliver, either originally or in addition or
substitution, any or all personal property, real property, stocks, bonds,
deposits, accounts, documents, bills and accounts receivable and other
commercial paper and evidences of debt or other securities or any rights or
interest at any time held by the Corporation; and, in connection with any of the
foregoing,
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for any loans, advances or other forms of credit so authorized, such Officers or
agents shall have authority to make, execute and deliver one or more notes,
mortgages, deeds of trust, financing statements, security agreements,
acceptances or written obligations of the Corporation, on such terms, and with
such provisions as to the security or sale or disposition thereof as such
Officers or agents shall deem proper, and, also, to sell to, or discount or
rediscount with, such banks, trust companies, institutions, corporations, firms
or persons any and all commercial paper, bills and accounts receivable,
acceptances and other instruments and evidences of debt at any time held by the
Corporation, and to that end to endorse, transfer and deliver the same. From
time to time there shall be certified to each bank, trust company, institution,
corporation, firm or person so designated, the signatures of the Officers or
agents so authorized; and each such bank, trust company, institution,
corporation, firm or person is authorized to rely upon such certification until
written notice of the revocation by the Board of Directors of the authority of
such Officers or agents shall be delivered to such bank, trust company,
institution, corporation, firm or person.
ARTICLE VI
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MISCELLANEOUS PROVISIONS
------------------------
Section 1. FISCAL YEAR. The fiscal year of the Corporation shall be
such as shall be duly designated by the Board of Directors.
Section 2. NOTICES. Whenever, under the provisions of these By-Laws,
notice is required to be given to any Stockholder, Director or Officer, it shall
be construed to mean either written notice personally served against written
receipt, or notice in writing transmitted by mail, by depositing the same in a
post office or letter box, in a post-paid sealed wrapper, addressed to each
Stockholder, Director or Officer at such address as appears on the books of the
Corporation or, in default of any other address, to such Stockholder, Director
or Officer at the general post office situated in the city or county of his
residence, and such notice shall be deemed to be given at the time the same
shall be thus mailed. Any Stockholder, Director or Officer may waive any notice
required to be given under these By-Laws.
Section 3. CORPORATE SEAL. The Board of Directors may provide a
suitable seal, bearing the name of the Corporation, which shall be in the charge
of the Secretary. The Board of Directors may authorize one or more duplicate
seals and provide for the custody thereof. Whenever the Corporation is required
to
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place its corporate seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a corporate seal to
place the word "(seal)" adjacent to the signature of the authorized officer.
Section 4. BOOKS AND RECORDS. The Corporation shall keep correct and
complete books and records of its accounts and transactions and minutes of the
proceedings of its stockholders and Board of Directors and of any executive or
other committee when exercising any of the powers of the Board of Directors.
The books and records of the Corporation may be in written form or in any other
form which can be converted within a reasonable time into written form for
visual inspection. Minutes shall be recorded in written form but may be
maintained in the form of a reproduction.
Section 5. BONDS. The Board of Directors may require any officer,
agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his duties, with one or more sureties
and in such amount as may be satisfactory to the Board of Directors.
Section 6. SEVERABILITY. The invalidity of any provision of these
By-Laws shall not affect the validity of any
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other provision, and each provision shall be enforced to the extent permitted by
law.
Section 7. GENDER. Whenever used herein, the masculine gender
includes all genders.
ARTICLE VII
AMENDMENTS
----------
Unless otherwise provided in the Charter, the Board of Directors shall
have full power and authority to amend, alter or repeal these By-Laws or any
provision thereof, and may from time to time make additional By-Laws, at any
regular or special meeting as part of the general business of such meeting;
provided that the Corporation shall have no power or authority to amend these
By-Laws so as to limit the indemnification provided by Article VIII below with
respect to any event or circumstance arising prior to the date of such
amendment.
ARTICLE VIII
INDEMNIFICATION
---------------
Section 1. INDEMNIFICATION TO EXTENT PERMITTED BY LAW. The
Corporation shall indemnify as set forth in the Charter of the Corporation and
to the full extent permitted by, and in the manner permissible under, the laws
of the State of Maryland, any person who was or is a party, or is threatened to
be made a
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party, to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a Director, Officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or is or was serving at the request of the Corporation as a
trustee or administrator or in any other fiduciary capacity under any pension,
profit sharing or other deferred compensation plan, or any employee welfare
benefit plan of the Corporation. The provisions of this Section shall
constitute a contract with each Director, Officer, employee or agent of the
Corporation who serves as such at any time while these provisions are in effect
and may be modified only with such Director's, Officer's, employee's or agent's
consent, and each such Director, Officer, employee or agent shall be deemed to
be serving as such in reliance on these provisions. The provisions hereof shall
inure to the benefit of the heirs and legal representatives of persons entitled
to indemnification or relief from liability hereunder.
Section 2. PAYMENT OF EXPENSES IN ADVANCE OF FINAL DISPOSITION OF
ACTION. Expenses (including attorneys' fees)
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incurred in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition thereof on the
conditions and to the extent permitted by the laws of the State of Maryland.
Section 3. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, Officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or is or was serving at the request of
the Corporation as a trustee or administrator or in any other fiduciary capacity
under any pension, profit sharing or other deferred compensation plan, or any
employee welfare benefit plan of the Corporation, against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power or would be
required to indemnify him against the liability under the provisions of this
Article or the laws of the State of Maryland.
Section 4. CERTAIN PERSONS NOT TO BE INDEMNIFIED. Notwithstanding
the foregoing provisions of this Article VII, the Corporation shall not
indemnify any bank, trust company,
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investment adviser or any actuary against any liability which they may have by
reason of their acting as a "fiduciary" of any employee benefit plan (as that
term is defined in the Employee Retirement Income Security Act, as amended from
time to time) established for the benefit of this Corporation's employees.
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Exh. 99.9
INDEMNITY AGREEMENT
AGREEMENT, effective as of September 18, 1987, between DUTY FREE
INTERNATIONAL, INC., a Maryland corporation (the "Company"), and JACK AFRICK
(the "Director"), a director-elect of the Company who is intended to become a
director of the Company upon the completion of the Company's initial public
offering:
WHEREAS, the Director has been named, with his consent, as a
"director-elect" of the Company in the Company's Registration Statement on
Form S-1 filed with the Securities and Exchange Commission on August 27, 1987
(the "Registration Statement") and intends to become a director of the
Company upon the completion of the Company's initial public offering; and
WHEREAS, in recognition of Director's need for substantial
protection against personal liability in order to enhance Director's
continued service to the Company in an effective manner and Director's
reliance on the provisions of the Company's Articles of Incorporation and
By-Laws ("charter documents") requiring indemnification of the Dirctor under
certain circumstances, and in part to provide Director with specific
contractual assurance that the protection promised by such charter documents
will be available to Director, the Company wishes to proivde in this
Agreement for the indemnification of and the advancing of expenses to
Director to the full extent (whether partial or complete) permitted by law
and as set forth in this Agreement, and, to the extent insurance is
maintained, if at all, for the continued coverage of Director under the
Company's directors' and officers' liability insurance policies.
NOW THEREFORE, in consideration of the premises and of Director
agreeing to be named on the Registration Statement as a director-elect of the
Company and to serve or continuing to serve the Company directly or, at its
request, with another enterprise, and intending to be legally bound hereby,
the parties hwereto agree as follows:
(1) BASIC INDEMNIFICATION ARRANGEMENT. (a) In the event Director
was, is or becomes a party to or witness or other participant in, or is
threatened to be made a party to or witness or other participant in, a Claim
by reason of (or arising in part out of) an Indemnifiable Event, the Company
shall indemnify Director to the fullest extent permitted by law as soon as
practicable but in any event no later than 30 days after written demand is
presented to the Company, against any and all Expenses, judgments, fines,
penalties and amounts paid in settlement (including all interest, assessments
and other charges paid or payable in connection therewith) of such Claim and
any federal, state, local or foreign taxes imposd on Director as a result of
the actual or deemed receipt of any payments under this Agreement. If so
requested by Director, the Company shall advance (within two business days of
such written request) any and all Expenses to Director (an "Expense
Advance"). Notwithstanding anything in this Agreement to the contrary, and
except as provided in Section 2, Director shall not be entitled to
indemnification pursuant to this Agreement in connection with any Claim
initiated by Director against the Company or any director or officer of the
Company unless the Company has joined in or consented to the initiation of
such Claim.
<PAGE>
(b) Notwithstanding the foregoing, (i) the obligations of the
Company under Section 1(a) shall be subject to the condition that the
Reviewing Party shall not have determined that Director would not be
permitted to be indemnified under applicable law, and (ii) the obligation of
the Company to make an Expense Advance pursuant to Section 1(a) shall be
subject to the condition that, if, when and to the extent that the Reviewing
Party determines that Director would not be permitted to be so indemnified
under applicable law, the Company shall be entitled to be reimbursed by
Director (who hereby agrees to reimburse the Company) for all such amounts
theretofore paid; provided, however, that if Director has commenced legal
proceedings in a court of competent jurisdiction to secure a determination
that Director should be indemnified under applicable law, any determination
made by the Reviewing Party that Director would not be permitted to be
indemnified under applicable law shall not be binding and Director shall not
be required to reimburse the Company for any Expense Advance until a final
judicial determination is made with respect thereto (as to which all rights
of appeal therefrom have been exhausted or lapsed). Director's obligation to
reimburse the Company for Expense Advances shall be unsecured and no interest
shall be charged thereon. The Reviewing Party shall be selected by the Board
of Directors. If there has been no determination by the Reviewing Party or
if the Reviewing Party determines that Director substantively would be
permitted to be indemnified in whole or in part under applicable law,
Director shall have the right to commence litigation in any court in the
state of Maryland having subject matter jurisdiction thereof and in which
venue is proper seeking an initial determination by the court or challenging
any such determination by the Reviewing Party or any aspect thereof, and the
Company hereby consents to service of process and to appear in any such
proceeding. Any determination by the Reviewing Party otherwise shall be
conclusive and binding on the Company and Director.
(2) INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Company shall
indemnify Director against any and all expenses (including attorneys' fees)
and, if requested by Director, shall (within two business days of such
written request) advance such expenses to Director, which are incurred by
Director in connection with any claim asserted against or action brought by
Director for (i) indemnification or advance payment of Expenses by the
Company under this Agreement or any other agreement or charter document now
or hereafter in effect relating to Claims for Indemnifiable Events and/or
(ii) recovery under any directors' and officers' liability insurance policies
maintained by the Company, regardless of whether Director ultimately is
determined to be entitled to such indemnification, advance expense payment or
insurance recovery, as the case may be.
(3) PARTIAL INDEMNITY, ETC. If Director is entitled under any
povision of this Agreement to indemnification by the Company of some portion
of the Expenses, judgments, fines, penalies and amounts paid in settlement of
a Claim but not, however, for all of the total amount thereof, the Company
shall nevertheless indemnify Director for the portion thereof to which
Director is entitled. Moreover, notwithstanding any other provision of this
Agreement, to the extent that Director has been successful on the merits or
otherwise in defense of any or all Claims relating in whole or in part to an
Indemnifiable Event or in defense of any issue or matter therein, including
dismissal without prejudice, Director shall be indemnified against all
Expenses incurred in connection therewith. In connection with any
determination by the Reviewing Party or otherwise as to whether
2
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Director is entitled to be indemnified hereunder the burden of proof shall be
on the Comopany to establish that Director is not so entitled.
(4) NO PRESUMPTION. For purposes of this Agreement, the
termination of any action, suit or proceeding by judgment, order, settlement
(whether with or without court approval) or conviction, or upon a plea of
nolo contendere, or its equivalent, shall not create a presumption that
Director did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law.
(5) NON-EXCLUSIVITY, ETC. The rights of Director hereunder shall
be in addition to any other rights Director may have under the charter
documents or the Maryland General Corporation Law or otherwise. To the
extent that a change in the Maryland General Corporation Law (whether by
statute of judicial decision), or the charter documents, permits greater
indemnification by agreement than would be afforded currently under the
charter documents and this Agreement, it is the intent of the parties hereto
that Director shall enjoy by this Agreement the greater benefits so afforded
by such change.
(6) LIABILITY INSURANCE. To the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Director shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any Company director.
(7) CERTAIN DEFINITIONS
(a) CLAIM: any threatened, pending or completed action,
suit, proceeding or alternative dispute resolution mechanism, or any inquiry,
hearing or investigation whether conducted by the Company or any other party,
whether civil, criminal, administrative investigative or other.
(b) EXPENSES: include attorneys' fees and all other costs,
fees, expenses and obligations of any nature whatsoever paid or incurred in
connection with investigating, defending, being a witness in or participating
in (including on appeal), or preparing to defend, be a witness in or
participate in any Claim relating to any Indemnifiable Event.
(c) INDEMNIFIABLE EVENT: any event or occurrence related to
or arising out of the fact that Director, with his consent, was named as a
"director-elect" in the Company's Registration Statement on Form S-1 filed
with the Securities and Exchange Commission on August 27, 1987 (and
amendments or supplements thereto).
(d) REVIEWING PARTY: any appropriate person or body
consisting of a member or members of the Company's Board of Directors or any
other person or body appointed by the Board who is not a party to the
particular Claim for which Director is seeking indemnification.
3
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(8) AMENDMENTS AND WAIVER. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by
both parties thereto. No waiver of any of the provisions of this Agreeent
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
(9) SUBROGATION. In the event of a payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including
the execution of such documents necessary to enable the Company effectively
to bring suit to enforce such rights.
(10) NO DUPLICATION OF PAYMENTS. The Company shall not be liable
under this Agreement to make any payment in connection with any claim made
against Director to the extent Director has otherwise actually received a
payment (under any insurance policy, charter document or otherwise) of the
amounts otherwise indemnifiable hereunder.
(11) BINDING EFFECT, ETC. The Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns, including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of
the business and/or assets of the Company, spouses, heirs and personal and
legal representatives. This Agreement shall continue in effect regardless of
whether Director serves or continues to serve as a director of the Company or
of any other enterprise at the Company's request.
(12) SEVERABILITY. The provisions of this Agreement shall be
severable in the event that any of the provisions hereof (including any
provisions within a single section, paragraph or sentence) are held by a
court of competent jurisdiction to be invalid, void or otherwise enforceable,
and the remaining provisions shall remain enforceable to the fullest extent
permitted by law.
(13) GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Maryland
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws.
(14) SECTION 2-418 OF THE MARYLAND GENERAL CORPORATION LAW. It is
intended that this Agreement and the Indemnifiable Event be consistent with
Section 2-418 of the Maryland General Corporation Law. Accordingly,
ratification of this Agreement by the Company's Board of Directors (the
"Board") shall constitute a determination by the Board, pursuant to Sections
2-418(e) and 2-418(f)(3) of the Maryland General Corporation Law, that the
indemnification provided for herein is permissible under the circumstances
because Director has met the standard of conduct set forth in Section
2-418(b) of the Maryland General Corporation Law. In addition, by this
execution thereof, Director affirms his belief (in accordance with Section
2-418(f)(i)) that his standard of conduct necessary for indemnification by
the Company has been met and, pursuant to Section 1(b) hereof, has provided a
written undertaking (in accordance with Section 2-418(f)(ii)) to repay the
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<PAGE>
amount of payments of expenses in advance of a final disposiion of an action
if it shall ultimately be determined that the standard of conduct has not
been met.
Executed this 17th day of September, 1987.
DUTY FREE INTERNATIONAL, INC.
By: /s/ David H. Bernstein
---------------------------
Name: David H. Bernstein
Title: Chairman
/s/ Jack Africk
---------------------------
Director
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April 1, 1997
Compass Partners International, L.L.C.
599 Lexington Avenue
New York, New York 10022
Gentlemen:
We (the "Company") have engaged Compass Partners International, L.L.C.
("Compass") to advise and assist us as further described in our letter agreement
dated April 1, 1997 (the "Engagement Letter"). In consideration of Compass'
agreements contained in the Engagement Letter, the Company agrees to indemnify
Compass and its affiliates and their respective members, partners, principals,
directors, officers, employees, agents and controlling persons (Compass and each
such person being an "Indemnified Party") from and against any and all losses,
claims, damages and liabilities, joint or several, to which such Indemnified
Party may become subject under any applicable law, or otherwise, and related to,
arising out of, or in connection with, any transaction contemplated by the
Engagement Letter (a "Transaction") or the engagement of Compass pursuant
thereto, and the performance by Compass of the services contemplated thereby,
and will reimburse each Indemnified Party for all reasonable expenses (including
counsel fees and expenses) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or threatened claim
or any action or proceeding arising therefrom, whether or not such Indemnified
Party is a party and whether or not such claim, action or proceeding is
initiated or brought by or on behalf of the Company. The Company will not be
liable under the foregoing to the extent that any loss, claim, damage, liability
or expense is found in a final nonappealable judgment by a court of competent
jurisdiction to have resulted from Compass's bad faith or gross negligence. The
Company also agrees that no Indemnified Party shall have any liability (whether
direct or indirect, in contract or tort or otherwise) to the Company or its
security holders or creditors related to, arising out of, or in connection with,
any Transaction or the engagement of Compass pursuant to, or the performance by
Compass of the services contemplated by, the Engagement Letter except to the
extent that any loss, claim, damage or liability is found in a final
nonappealable judgment by a court of competent jurisdiction to have resulted
from Compass's bad faith or gross negligence.
If the indemnification of an Indemnified Party provided for in this
letter agreement is for any reason held unenforceable, the Company agrees to
contribute to the losses, claims, damages and liabilities for which such
indemnification is held unenforceable (i) in such proportion as is appropriate
to reflect the relative benefits to the Company, on the one hand, and
<PAGE>
Compass, on the other hand, of the contemplated Transaction (whether or not such
Transaction is consummated) or (ii) if (but only if) the allocation provided for
in clause (i) is for any reason held unenforceable, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
but also the relative fault of the Company, on the one hand, and Compass, on the
other hand, as well as any other relevant equitable considerations. The Company
agrees that for the purposes of this paragraph the relative benefits to the
Company and Compass of the contemplated Transaction (whether or not such
Transaction is consummated) shall be deemed to be in the same proportion that
the total value received or contemplated to be received or, as the case may be,
paid or issued or contemplated to be paid or issued by, as the case may be, the
Company or its security holders, as a result of or in connection with such
Transaction, bears to the fees paid or to be paid to Compass under the
Engagement Letter; PROVIDED, HOWEVER, that, to the extent permitted by
applicable law, in no event shall the Indemnified Parties be required to
contribute an aggregate amount in excess of the aggregate fees actually paid to
Compass under the Engagement Letter.
Promptly after receipt by an Indemnified Party of written notice of
any claim, action or proceeding as to which such Indemnified Party may seek
indemnification hereunder, such Indemnified Party shall notify the Company in
writing of such claim, action or proceeding; PROVIDED, HOWEVER, that the failure
so to notify the Company shall not relieve the Company from any liability that
it may have to such Indemnified Party under this letter agreement except to the
extent the Company is materially prejudiced by such failure and shall not
relieve the Company from any other liability that it may have to such
Indemnified Party. In the event that any such claim, action or proceeding shall
be brought against any Indemnified Party and such Indemnified Party shall notify
the Company of the commencement thereof, the Company shall assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Party, and
shall pay the fees and expenses of such counsel; PROVIDED, HOWEVER, that if (i)
there exists or is reasonably likely to exist a conflict of interest that would
make it inappropriate in the reasonable judgment of such Indemnified Party for
the same counsel to represent both the Indemnified Party and the Company, (ii)
the defendants in any such claim, action or proceeding include both such
Indemnified Party and the Company, and such Indemnified Party shall have
reasonably concluded that there may be legal defenses available to it or to
other Indemnified Parties that are different from or in addition to those
available to the Company or (iii) the Company has not employed counsel
satisfactory to such Indemnified Party, in the exercise of such Indemnified
Party's reasonable judgment, to represent such Indemnified Party within a
reasonable time after notice of the commencement of such claim, action or
proceeding, such Indemnified Party shall be entitled to retain its own counsel
at the expense of the Company. In respect of any claim, action or proceeding
the defense of which shall have been assumed by the Company, each Indemnified
Party shall have the right to participate in such litigation and to retain its
own counsel at its own expense.
The Company agrees that it will not settle, compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding in respect of which indemnification could be sought under this letter
agreement (whether or not Compass or any
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other Indemnified Party is an actual or potential party to such claim, action or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Party from all liability arising out
of such claim, action or proceeding.
This letter agreement shall continue to apply and shall remain in full
force and effect regardless of any modification or termination of the Engagement
Letter or the completion of Compass's services thereunder. No waiver, amendment
or other modification of this letter agreement shall be effective unless in
writing and signed by each party to be bound thereby.
This agreement shall be governed by the laws of the State of New York.
Each of the Company (in its own behalf and, to the extent permitted by
applicable law, on behalf of its shareholders) and Compass waives all right to
trial by jury in any action, proceeding or counterclaim (whether based upon
contract, tort or otherwise) related to or arising out of this letter agreement.
Very truly yours,
DUTY FREE INTERNATIONAL, INC.
By /s/ Alfred Carfora
-------------------------------
Title: President and
Chief Executive Officer
Accepted and Agreed to as of the
date first written above:
COMPASS PARTNERS INTERNATIONAL, L.L.C.
By /s/ Stephen M. Waters
-----------------------------------
Title: Founding Partner
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Exhibit 99.11
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement"), dated as of the ______ day of
_____________, 1994, is made by and between DUTY FREE INTERNATIONAL, INC., a
Maryland corporation (the "Company"), and JOHN A. COURI (the "Consultant").
The Company desires to retain the services of the Consultant, and the
Consultant is willing to render such services, in accordance with the terms
hereinafter set forth. Accordingly, the Company and the Consultant agree as
follows:
ARTICLE I
Duties
1.01 DUTIES. The Consultant shall advise and consult with the
Company as to matters pertaining to the Business (as defined in Section 7.08)
and shall render such services of an advisory or consultative nature to the
Company or its affiliates, all as requested by the Board of Directors of the
Company (the "Board") or the Chief Executive Officer, provided that such
additional services and any business travel shall not be inconsistent with the
Consultant's services with the Company immediately prior to the Effective Date.
Consultant shall not be required to devote more than 48 days in any one year to
the performance of his duties hereunder. The Consultant shall report solely to
the Board and to the Chief Executive Officer of the Company.
1.02 SERVICE ON BOARD. The Consultant shall not be required to serve
on the Board or the Board of Directors of any subsidiary of the Company, or any
committee of any such Board, provided, however, that if requested by the
Consultant, the Board shall nominate the Consultant to serve on the Board and
the Executive Committee of the Board. In such a case, the Consultant agrees to
waive any fee (but not stock options) to which he might otherwise be entitled by
reason of serving as a non-employee director of the Company.
ARTICLE II
<PAGE>
Term of Agreement
2.01 TERM. Subject to the termination provisions hereinafter
provided, the term (the "Contract Term) of this Agreement shall commence on
January 1, 1995 (the "Effective Date") and end on December 31, 1999, but the
Contract Term shall automatically be extended for successive one year periods
thereafter, unless on or before the September 30 prior to the beginning of any
such one year period, either party provides written notice to the other of its
intention not to further extend the Agreement.
ARTICLE III
Compensation
3.01 FEE. During the Contract Term, the Company shall pay or cause
to be paid to the Consultant in cash in installments not less frequently than
monthly, an annual fee ("Annual Fee") equal to $150,000 for each year of the
Contract Term.
3.02 BONUS. The Company may, in its discretion, pay to the
Consultant an annual bonus for any fiscal year of the Company and any portion
thereof during the Contract Term ("Bonus") based upon such criteria as the
Company, in its sole discretion, shall determine.
3.03 OUTSTANDING STOCK OPTIONS. The parties agree that the Company
will recommend to the Compensation Committee of its Board of Directors (the
"Committee") that options that were granted to the Consultant under the
Company's 1989 Stock Option Plan (the "Option Plan") and were outstanding and
exercisable immediately prior to the Effective Date remain outstanding and
exercisable until the earliest occurrence of any of the following: (1) December
31, 1997, (2) termination of this Agreement by the Company for Cause of by the
Executive for other than Good Reason, and (3) expiration of the 10 year option
term. The Company will further recommend to the Committee that options that
were granted to the Consultant under the Plan and were outstanding but
unexercisable immediately prior to the Effective Date shall remain outstanding
and become exercisable in accordance with the vesting schedule applicable to
such options,
<PAGE>
and once exercisable shall remain exercisable for the period specified in the
preceding sentence.
ARTICLE IV
Other Benefits
4.01 WELFARE BENEFITS. During the Contract Term, the Consultant and
the Consultant's family, as applicable, shall receive medical and life insurance
coverage that is comparable to such coverage to which the Consultant and the
Consultant's family were entitled immediately prior to the Effective Date.
After the Contract Term, the Consultant shall continue to receive such medical
and life insurance coverage for the remainder of his lifetime, provided,
however, that the Consultant shall reimburse the Company for its cost of
providing such coverage.
4.02 EXPENSES. During the Contract Term, the Consultant shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Consultant in the performance of his duties hereunder upon the Company's
receipt of accountings in accordance with practices, policies and procedures
applicable to executives of the Company.
4.03 OFFICE AND SUPPORT STAFF. During the Contract Term, the
Consultant shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to personal secretarial and other
assistance, provided with respect to executives of the Company, and appropriate
to the Consultant's position and responsibilities.
4.04 AUTOMOBILE. The Company will provide an automobile of the
Consultant's choice (which choice may include a reasonable domestic or foreign
car consistent with past practice for Consultant) and all expenses of operation
and maintenance, including the appropriate insurance. The automobile provided
hereunder shall be replaced, upon the timely request of the Consultant, with a
new such car every two years. The Consultant shall maintain adequate
contemporaneous records concerning the use of the automobile.
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<PAGE>
ARTICLE V
Termination
5.01 TERMINATION FOR CAUSE OR OTHER THAN FOR GOOD REASON. If, before
the end of the Contract Term, the Company terminates this Agreement for Cause or
the Consultant terminates this Agreement other than for Good Reason, then the
Company shall pay immediately on the Date of Termination to the Consultant that
portion of the Consultant's Annual Fee which is accrued but unpaid as of such
Date of Termination, but the Consultant will not be entitled to receive any
other compensation, benefits or rights under this Agreement. If the Company
terminates this Agreement for Cause, it shall provide the Consultant with a
statement of the Date of Termination and the reason for such termination.
5.02 TERMINATION FOR DEATH OR DISABILITY. If, before the end of the
Contract Term, the Consultant dies or suffers a Disability, the Company shall
pay to the Consultant (a) within 30 days after the Date of Termination an amount
which is equal to the sum of (i) that portion of the Consultant's Annual Fee
which is accrued but unpaid as of the Date of Termination and (ii) the amount of
any Bonus accrued for any fiscal year which ended during the Contract Term prior
to the Date of Termination, but which is unpaid as of the Date of Termination,
and (b) within 30 days after the determination of the performance for the fiscal
year in which the Date of Termination ("Termination Year") occurs, a pro rata
bonus ("Pro Rata Bonus") which shall be equal to the product of:
(1) the Bonus to which the Consultant would have been entitled for
the Termination Year if the Agreement had remained in effect for the entire
year, multiplied by
(2) a fraction, the numerator of which is the number of days in the
Termination Year which elapsed through the Date of Termination, and the
denominator of which is the total number of days in the Termination Year;
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<PAGE>
but the Consultant will not be entitled to receive any other compensation,
benefits or rights under this Agreement.
5.03 TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If, before the end
of the Contract Term, this Agreement is terminated by the Company without Cause,
or by the Consultant for Good Reason at a time at which facts supporting a
determination of Cause do not exist, the Company shall pay to the Consultant the
following: (a) immediately on the Date of Termination in a lump sum in cash an
amount equal to the sum of (1) that portion of the Consultant's Annual Fee which
is accrued but unpaid as of the Date of Termination, (2) any Bonus accrued
during any fiscal year which ended during the Contract Term and prior to the
Date of Termination, but which is unpaid as of the Date of Termination, (3) the
Consultant's Pro Rata Bonus determined under the provisions of Section 5.02(b),
and (4) the present value (determined using the "applicable Federal rate
(short-term)" within the meaning of Section 1274(d) of the Internal Revenue Code
of 1986 (the "Code")) of the Consultant's Annual Fee and Bonus that would have
been paid during the remaining unexpired Contract Term had the Consultant's
engagement continued until the end of the Contract Term, assuming that the Bonus
that would have been paid is equal to the average of the annual Bonuses payable
for all prior fiscal years that ended within the Contact Term, and (b) the
continuation during the remainder of the Contract Term of the benefits not
specifically dealt with in Section 5.03(a) to which the Consultant is entitled
during the Contract Term under Sections 4.01, 4.03 and 4.04 hereof; but the
Consultant will not be entitled to receive any other compensation, benefits or
rights under this Agreement. Notwithstanding the foregoing, the amount of any
medical benefits provided by Section 5.03(b) shall be reduced, except as
otherwise provided by law, by the amount of any medical benefits to which the
Consultant is otherwise entitled on or after the Date of Termination.
5.04 OTHER TERMINATION BENEFITS. In addition to any amounts or
benefits payable upon termination of this Agreement and except as otherwise
provided herein, the Consultant shall be entitled to any payments or benefits
explicitly provided under the terms of any plan, policy or program of the
Company or as otherwise required by applicable law. Notwithstanding the
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<PAGE>
foregoing, the period of medical coverage provided hereunder shall offset the
period of coverage required by "COBRA" pursuant to Section 4980B of the Code and
Part 6 of Title I of the Employee Retirement Income Security Act of 1974, as
amended.
ARTICLE VI
Certain Definitions
6.01 "DISABILITY" means any medically determinable physical or mental
impairment that can be expected to last for a continuous period of not less than
six months, and that renders the Consultant unable to perform all material
duties required under this Agreement, or that renders the Consultant unable to
perform all material duties required under this Agreement for at least 180 days
during any 360-day period. The date of the determination of Disability is the
date on which the Consultant is certified as having incurred a Disability by a
physician acceptable to the Company; provided that the Consultant shall be
examined by such a physician for these purposes at the reasonable request of the
Company.
6.02 "CAUSE" means a finding by the Board or, if directed by the
Board to consider whether or not such a finding should be made, the Compensation
Committee of the Board or any other Board committee consisting of directors who
are not employees of the Company ("Committee"), to the effect that:
(a) the Consultant has been convicted of any felony or other crime
involving dishonesty;
(b) the Consultant engaged in any serious misconduct (excluding (A)
the failure of the Consultant to achieve business goals and objectives, (B)
other actions by the Consultant which are reasonably believed by the Consultant
to be in the best interests of the Company and (C) any act or omission with
respect to which a determination could properly have been made by the Board that
the Consultant met the applicable standard of conduct for indemnification or
reimbursement under the By-Laws of the Company, any applicable indemnification
agreement or the laws and regulations under which the Company is governed, in
each case in
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<PAGE>
effect at the time of such act or omission) in the course of the Consultant's
engagement which, in the reasonable judgment of the Board (or, if applicable,
Committee), materially injures the Company, financially or otherwise;
(c) the Consultant habitually neglected his duties (other than on
account of physical or mental incapacity), excluding bad judgment or negligence,
provided that either (A) he received from the Company notice of habitual neglect
of duties ("Notice of Neglect") where no prior notice of any instance of neglect
of duties was given, and he failed to cure such habitual neglect within 15 days
of receiving such notice, or (B) the Consultant received notice of an instance
of neglect of duties and failed to cure before such neglect became habitual; or
(d) the Consultant materially breached this Agreement, provided that,
if such breach is both inadvertent and nonrecurring, the Consultant received
written notice by the Company of such breach ("Notice of Breach") and failed to
cure full such breach within 15 days after receiving such notice.
6.03 "GOOD REASON" means the occurrence of any one of the following
events, but only if the Company fails to cure such event within 15 days after
written notice from the Consultant:
(a) assignment to the Consultant of any duties materially and
adversely inconsistent with those contemplated by Article I hereof.
(b) the failure of the Company to assign this Agreement to a
successor to the Company by merger or similar transaction or sale of all or
substantially all of the assets of the Company,
(c) the material failure by the Company to comply with the
provisions of this Agreement,
(d) the Company's requiring the Consultant to be based at any office
or location more than 50 miles from his office or location as of the Effective
Date,
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(e) any material adverse change to the terms and conditions of the
Consultant's engagement under this Agreement.
6.04 "DATE OF TERMINATION" means the date as of which the
Consultant's engagement by the Company is terminated by the Company or by the
Consultant for any reason including, but not limited to, death or Disability.
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<PAGE>
ARTICLE VII
Miscellaneous
7.01 INDEMNIFICATION. The Company shall indemnify and hold the
Consultant harmless to the same extent as officers or directors of the Company
against judgements, fines, amounts paid in settlement and reasonable attorneys
fees incurred by the Consultant in connection with the defense or as a result of
any action, proceeding (or appeal of any action or proceeding) in which the
Consultant is made or is threatened to be made a party by reason of the fact
that he is a consultant of the Company, but in no event shall this indemnity
extend to any act that would constitute "Cause" hereunder.
7.02 ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement, or any breach thereof (other than those arising under Section
7.08, to the extent necessary for the Company to avail itself of the rights and
remedies provided under Section 7.08), shall be submitted to arbitration in [New
York] in accordance with the Rules of the American Arbitration Association, and
judgment upon the award may be entered in any court having jurisdiction thereof.
7.03 BENEFICIARY. If the Consultant dies prior to receiving all of
the fees and bonuses payable hereunder, such fees and bonuses shall be paid in a
lump sum payment to the beneficiary designated in writing by the Consultant
("Beneficiary") or if no such Beneficiary is designated, to the Consultant's
estate.
7.04 NONALIENATION OF BENEFITS. Benefits payable under this
Agreement shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution or
levy of any kind, either voluntary or involuntary, prior to actually being
received by the Consultant, and any such attempt to dispose of any right to
benefits payable hereunder shall be void.
7.05 SEVERABILITY. If all or any part of this Agreement is declared
by any court or governmental authority to
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<PAGE>
be unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any portion of this Agreement not declared to be unlawful or invalid.
Any paragraph or part of a paragraph so declared to be unlawful or invalid
shall, if possible, be construed in a manner which will give effect to the terms
of such paragraph or part of a paragraph to the fullest extent possible while
remaining lawful and valid. If any court determines that any of the covenants
contained in Section 7.08 is unenforceable because of the duration or
geographical scope of such provisions, the duration or scope of such provisions,
as the case may be, shall be reduced so that such provision becomes enforceable
and, in its reduced form, such provision shall then be enforceable and shall be
enforced.
7.06 AMENDMENT AND WAIVER. This Agreement shall not be altered,
amended or modified except by written instrument executed by the Company and the
Consultant. A waiver of any term, covenant, agreement or condition contained in
this Agreement shall not be deemed a waiver of any other term, covenant,
agreement or condition, and any waiver of any default in any such term,
covenant, agreement or condition shall not be deemed a waiver of any later
default thereof or of any other term, covenant, agreement or condition.
7.07 NOTICES. All notices and other communications hereunder shall
be in writing and delivered by hand or by firstclass registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company:
Duty Free International, Inc.
63 Copps Hill Road
Ridgefield, CT 06877
Attn: Chief Consultant Officer
If to the Consultant:
John A. Couri
44 Mulberry Street
Ridgefield, CT 06877
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<PAGE>
Either party may from time to time designate a new address by notice given in
accordance with this Section 7.07. Notice and communications shall be effective
when actually received by the addressee.
7.08 CONFIDENTIAL INFORMATION; NON-COMPETE. The Consultant
acknowledges that (1) the principal business of the Company and its affiliates
is the sale of duty free merchandise at retail and wholesale (the "Business");
(2) the Consultant's work for the Company has given and will continue to give
him access to the confidential and proprietary information of the Company and
its affiliates not readily available to the public; and (3) the agreements and
covenants of the Consultant contained in this Section 7.08 are essential to the
business and goodwill of the Company and its affiliates. Accordingly, the
Consultant covenants and agrees that:
(a) The Consultant shall at all times keep secret and retain in
strictest confidence, and shall not use for the benefit of himself or others,
except in connection with the business and affairs of the Company and its
affiliates, all confidential matters relating to the Business and to the Company
and its affiliates learned by the Consultant heretofore or hereafter, directly
or indirectly, from the Company or any of its affiliates, including, without
limitation, all software systems, trade secrets, customer lists and similar
property (the "Confidential Information") and shall not, except in connection
with the business and affairs of the Company, disclose the Confidential
Information to anyone outside of the Company and its affiliates except with the
express written consent of the Company and except for Confidential Information
which (1) is at the time of receipt or thereafter becomes publicly known through
no wrongful act of the Consultant, (2) is received from a third party not under
an obligation to keep such information confidential and without breach of this
Agreement or (3) is required to be disclosed by legal order or subpoena.
(b) During the period commencing on the date of this Agreement and
terminating on the fifth anniversary of the date of the end of the Contract Term
(the "Restricted Period"), the Consultant shall not in any geographical area in
which the Company during the Contract Term engages in the Business,
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directly or indirectly: (1) engage in the Business for the Consultant's own
account; (2) render any services which constitute engaging in the Business in
any capacity to any person (other than as provided herein or at the direction of
the Company or its affiliates); or (3) become interested in any person engaged
in the Business (other than the Company or its affiliates) as a partner,
shareholder, principal, agent, trustee, consultant or in any other relationship
or capacity; PROVIDED, HOWEVER, that notwithstanding anything to the contrary
set forth above the Consultant may own, directly or indirectly, solely as a
passive investment, securities of any person which are traded on any national
securities exchange or NASDAQ if the Consultant (A) is not a controlling person
of, or a member of a group which controls, such person and (B) does not,
directly or indirectly, own five percent (5%) or more of any class of securities
of such person.
7.09 CERTAIN TAX CONSEQUENCES. Anything in this Agreement to the
contrary notwithstanding, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Consultant (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 7.09) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Consultant with respect to such excise tax (such excise tax,
together with any such interest and penalties are hereinafter collectively
referred to as the "Excise Tax"), then the Consultant shall be entitled to
receive an additional payment (an "Excise Gross-Up Payment") in an amount such
that after payment by the Consultant of all taxes (including any interest and
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and interest and penalties imposed with respect thereto), and
Excise Tax imposed on the Excise Gross-Up Payment, the Consultant retains an
amount of the Excise Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. All determinations required to be made under this Section 7.09,
including whether and when an Excise Gross-Up Payment is required and the amount
of such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the Company's accounting firm, which shall
- 12 -
<PAGE>
provide detailed supporting calculations both to the Company and to the
Consultant within fifteen business days of the receipt of notice from the
Consultant that there has been a Payment, or such earlier time as is requested
by the Company. In the event that the accounting firm is serving as accountant
or auditor for the individual, entity or group effecting the change of control,
the Consultant shall appoint another nationally recognized accounting firm to
make the determinations required hereunder. All fees and expenses of the
accounting firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 7.09, shall be paid by the Company to the
Consultant within five days of the receipt of the accounting firm's
determination. Any determination by the accounting firm shall be binding upon
the Company and the Consultant.
7.10 COUNTERPART ORIGINALS. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
7.11 ENTIRE AGREEMENT. This Agreement forms the entire agreement
between the parties hereto with respect to any severance payment and with
respect to the subject matter contained in this Agreement.
7.12 SURVIVAL. Anything contained in this Agreement to the contrary
notwithstanding, the provisions of Section 7.08, and the other provisions of
this Agreement relevant to the enforcement thereof (to the extent necessary to
effectuate the survival of Section 7.08), shall survive any termination of this
Agreement.
7.13 APPLICABLE LAW. The provisions of this Agreement shall be
interpreted and construed in accordance with the laws of the State of
Connecticut, without regard to its choice of law principles.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
DUTY FREE INTERNATIONAL, INC.
- 13 -
<PAGE>
By: /s/ Alfred Carfora
--------------------------------
/s/ John A. Couri
--------------------------------
JOHN A. COURI
- 14 -
<PAGE>
Exhibit 99.12
FORM OF
NON-NEGOTIABLE PROMISSORY NOTE
$700,000 April 28, 1994
FOR VALUE RECEIVED, FENTON HILL FLORIDA, INC., a Florida corporation (the
"Borrower"), promises to pay to Fenton Hill American Limited, a Maryland
corporation (the "Lender"), the principal amount of Seven Hundred Thousand
Dollars ($700,000) (the "Principal Amount") in five (5) equal principal
installments (the "Principal Installments") in the amount of One Hundred Forty
Thousand Dollars ($140,000) each, payable on the 30th day of each April in each
year beginning on April 30, 1997 and ending on April 30, 2001, it being
acknowledged and agreed that subject to the terms of this Note, interest only
shall be payable until April 30, 1997.
Additionally, the Borrower promises to pay to the Lender interest on the
unpaid balance of the Principal Amount from the date hereof until the maturity
of this Note (whether by acceleration, declaration, extension, or otherwise) at
a floating and fluctuating per annum rate of interest equal at all times to the
Prime Rate of Interest (as defined below) in effect from time to time. Interest
accrued on the unpaid balance of the Principal Amount of this Note from the date
hereof until the maturity of this Note (whether by acceleration, declaration,
extension, or otherwise) during each year or portion thereof shall be paid by
the Borrower to the Lender on January 31, April 30, July 31 and October 31 of
each year, commencing with July 31, 1994 and on each July 31, October 31,
January 31 and April 30 thereafter until the maturity of this Note (whether by
acceleration, declaration, extension, or otherwise).
The term "Prime Rate of Interest" as used herein means the floating and
fluctuating per annum prime rate of interest of The First National Bank of
Maryland (the "Bank") as established and declared by the Bank from time to time,
adjusted quarterly on each February 1, May 1, August 1 and November 1. Each
time the Prime Rate of Interest shall change, the rate of interest on the unpaid
balance of the Principal Amount shall change effective as of such February 1,
May 1, August 1 or November 1, as the case may be. Interest shall be computed
on the basis of a 360-day year and the actual number of days elapsed.
The Lender's rights under this Note shall not be assignable in whole or in
part by the Lender without the express written consent of the Borrower.
After the maturity of this Note (whether by acceleration, declaration,
extension, or otherwise), the Borrower promises to pay to the Lender upon demand
interest on the unpaid balance of the Principal Amount from the date of such
maturity until the Principal Amount together with all accrued and unpaid
interest has been paid in full, at a rate equal at all times to the Prime Rate
of Interest in effect from time to time, plus two percent (2%) per annum.
If the Borrower fails to make any payments as and when due and payable of
any principal of or interest on the Note, the Borrower shall pay to the Lender
on demand a late charge equal to five percent (5%) of the amount of any such
payment.
<PAGE>
All payments on account of this Note, when paid, shall be applied first to
the payment of all interest then due on the unpaid balance of the Principal
Amount and the balance, if any, shall be applied in reduction of the unpaid
balance of the Principal Amount.
The Borrower may prepay the unpaid balance of the Principal Amount at any
time or in part from time to time without premium or penalty; provided that any
such prepayment is accompanied by interest accrued and unpaid on the unpaid
balance of the Principal Amount to the date of such prepayment. Partial
prepayments of this Note shall be applied first to accrued and unpaid interest
and then to the Principal Installments in the inverse order of their maturity.
All payments of the unpaid balance of the Principal Amount and interest
thereon shall be paid in lawful money of the United States of America during
regular business hours at the address of the Lender at 6691 Baymeadow Drive,
Glen Burnie, Maryland 21061 or at such other place as the Lender or may at any
time or from time to time designate in writing to the Borrower.
The Borrower waives (a) presentment or demand for payment of this Note, (b)
notice of dishonor of this Note, (c) protest of dishonor of this Note, and (d)
notice of non-payment of this Note.
Any one of the following events constitutes an event of default ("Event of
Default") under this Note: (a) failure of the Borrower to make any payment of
principal or interest within five (5) days after receiving written notice of any
payment being overdue; (b) failure of the Borrower to perform, observe, or
comply with any other provisions of this Note; (c) failure of the Borrower
generally to pay is debts when those debts become due; (d) filing by the
Borrower of any petition for relief under the Bankruptcy Code or any similar
federal or sate statute; (e) service upon the Borrower of any petition for
relief under the Bankruptcy Code or under any federal or state bankruptcy,
reorganization, arrangement, insolvency, receivership, or similar law, if that
petition is not dismissed within 60 days after service upon the Borrower; (f)
application by the Borrower for, or consent by the Borrower to, the appointment
of a receiver, trustee, liquidator, or custodian of, for, or over the Borrower
or any of its assets; (g) an assignment for the benefit of the creditors of the
Borrower; (h) insolvency of the Borrower or attempt by the Borrower to take
advantage of any insolvency law; (i) performance by the Borrower of any act of
bankruptcy; or (j) dissolution, merger, consolidation, or reorganization of the
Borrower or transfer of all or substantially all of the assets of the Borrower.
Upon the occurrence of any Event of Default, the Lender may at the Lender's
option declare the entire unpaid balance of the Principal Amount, together with
all accrued and unpaid interest, to become immediately due and payable. The
Lender's failure to exercise this option upon an Event of Default, however, does
not constitute a waiver of the Lender's right to exercise this option in the
event of a subsequent Event of Default.
This Note shall be governed and construed under the internal laws, not the
law of conflicts, of the State of Maryland.
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<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
in its name, under its seal, and on its behalf the day and year first written
above.
WITNESS/ATTEST: FENTON HILL FLORIDA, INC.
By: /s/ Susan H. Stackhouse(SEAL)
- ------------------ ------------------------------
Susan H. Stackhouse, President
<PAGE>
FORM OF
NON-NEGOTIABLE PROMISSORY NOTE
$700,000 April 28, 1994
FOR VALUE RECEIVED, FENTON HILL FLORIDA, INC., a Florida corporation (the
"Borrower"), promises to pay to Fenton Hill American Limited, a Maryland
corporation (the "Lender"), the principal amount of Seven Hundred Thousand
Dollars ($700,000) (the "Principal Amount") in five (5) equal principal
installments (the "Principal Installments") in the amount of One Hundred Forty
Thousand Dollars ($140,000) each, payable on the 30th day of each April in each
year beginning on April 30, 1997 and ending on April 30, 2001, it being
acknowledged and agreed that subject to the terms of this Note, interest only
shall be payable until April 30, 1997.
Additionally, the Borrower promises to pay to the Lender interest on the
unpaid balance of the Principal Amount from the date hereof until the maturity
of this Note (whether by acceleration, declaration, extension, or otherwise) at
a floating and fluctuating per annum rate of interest equal at all times to the
Prime Rate of Interest (as defined below) in effect from time to time. Interest
accrued on the unpaid balance of the Principal Amount of this Note from the date
hereof until the maturity of this Note (whether by acceleration, declaration,
extension, or otherwise) during each year or portion thereof shall be paid by
the Borrower to the Lender on January 31, April 30, July 31 and October 31 of
each year, commencing with July 31, 1994 and on each July 31, October 31,
January 31 and April 30 thereafter until the maturity of this Note (whether by
acceleration, declaration, extension, or otherwise).
The term "Prime Rate of Interest" as used herein means the floating and
fluctuating per annum prime rate of interest of The First National Bank of
Maryland (the "Bank") as established and declared by the Bank from time to time,
adjusted quarterly on each February 1, May 1, August 1 and November 1. Each
time the Prime Rate of Interest shall change, the rate of interest on the unpaid
balance of the Principal Amount shall change effective as of such February 1,
May 1, August 1 or November 1, as the case may be. Interest shall be computed
on the basis of a 360-day year and the actual number of days elapsed.
The Lender's rights under this Note shall not be assignable in whole or in
part by the Lender without the express written consent of the Borrower.
After the maturity of this Note (whether by acceleration, declaration,
extension, or otherwise), the Borrower promises to pay to the Lender upon demand
interest on the unpaid balance of the Principal Amount from the date of such
maturity until the Principal Amount together with all accrued and unpaid
interest has been paid in full, at a rate equal at all times to the Prime Rate
of Interest in effect from time to time, plus two percent (2%) per annum.
If the Borrower fails to make any payments as and when due and payable of
any principal of or interest on the Note, the Borrower shall pay to the Lender
on demand a late charge equal to five percent (5%) of the amount of any such
payment.
<PAGE>
All payments on account of this Note, when paid, shall be applied first to
the payment of all interest then due on the unpaid balance of the Principal
Amount and the balance, if any, shall be applied in reduction of the unpaid
balance of the Principal Amount.
The Borrower may prepay the unpaid balance of the Principal Amount at any
time or in part from time to time without premium or penalty; provided that any
such prepayment is accompanied by interest accrued and unpaid on the unpaid
balance of the Principal Amount to the date of such prepayment. Partial
prepayments of this Note shall be applied first to accrued and unpaid interest
and then to the Principal Installments in the inverse order of their maturity.
All payments of the unpaid balance of the Principal Amount and interest
thereon shall be paid in lawful money of the United States of America during
regular business hours at the address of the Lender at 6691 Baymeadow Drive,
Glen Burnie, Maryland 21061 or at such other place as the Lender or may at any
time or from time to time designate in writing to the Borrower.
The Borrower waives (a) presentment or demand for payment of this Note, (b)
notice of dishonor of this Note, (c) protest of dishonor of this Note, and (d)
notice of non-payment of this Note.
Any one of the following events constitutes an event of default ("Event of
Default") under this Note: (a) failure of the Borrower to make any payment of
principal or interest within five (5) days after receiving written notice of any
payment being overdue; (b) failure of the Borrower to perform, observe, or
comply with any other provisions of this Note; (c) failure of the Borrower
generally to pay is debts when those debts become due; (d) filing by the
Borrower of any petition for relief under the Bankruptcy Code or any similar
federal or sate statute; (e) service upon the Borrower of any petition for
relief under the Bankruptcy Code or under any federal or state bankruptcy,
reorganization, arrangement, insolvency, receivership, or similar law, if that
petition is not dismissed within 60 days after service upon the Borrower; (f)
application by the Borrower for, or consent by the Borrower to, the appointment
of a receiver, trustee, liquidator, or custodian of, for, or over the Borrower
or any of its assets; (g) an assignment for the benefit of the creditors of the
Borrower; (h) insolvency of the Borrower or attempt by the Borrower to take
advantage of any insolvency law; (i) performance by the Borrower of any act of
bankruptcy; or (j) dissolution, merger, consolidation, or reorganization of the
Borrower or transfer of all or substantially all of the assets of the Borrower.
Upon the occurrence of any Event of Default, the Lender may at the Lender's
option declare the entire unpaid balance of the Principal Amount, together with
all accrued and unpaid interest, to become immediately due and payable. The
Lender's failure to exercise this option upon an Event of Default, however, does
not constitute a waiver of the Lender's right to exercise this option in the
event of a subsequent Event of Default.
This Note shall be governed and construed under the internal laws, not the
law of conflicts, of the State of Maryland.
2
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed in its
name, under its seal, and on its behalf the day and year first written above.
WITNESS/ATTEST: FENTON HILL FLORIDA, INC.
By: /s/ Susan H. Stackhouse(SEAL)
- ------------------ ------------------------------
Susan H. Stackhouse, President
<PAGE>
Exhibit 99.13
1989 STOCK OPTION PLAN
OF
DUTY FREE INTERNATIONAL, INC.
(Unofficial Restatement as of May 20, 1994)
1. PURPOSE
This plan, which shall be known as the "1989 Stock Option Plan" (the
"Plan"), is intended to attract, retain and motivate key employees and/or
directors of Duty Free International, Inc. (the "Parent Company") and of any
subsidiaries presently existing or which may be formed in the future, by
providing them with a means to acquire a proprietary interest or to increase
their proprietary interest in the Company's success.
The term "key employee(s)" when used in this Plan shall include all
executive officers and managerial staff of the Company, as well as any other
employees who make a valuable contributions to the Company.
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee")
appointed from and by the Board of Directors of the members, each of whom shall
be a director of the Company who is a "disinterested person" within the meaning
of Rule 16b-3(c)(2)(i) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Directors who serve on the Committee shall not be
eligible for grants of options under the Plan, except for grants of Non-Employee
Director Options under Section 4 hereof. The Board of Directors may from time
to time remove members from or add members to the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by additions made by the Board of
Directors. The Committee shall select one of its members as Chairman, and shall
hold meetings at such times and places as it may determine. The Committee shall
act by majority agreement of its members or by consents or approvals reduced to
writing and signed by a majority of its members.
Except as limited under Section 4 hereof, the Committee is authorized,
subject to the provisions of the Plan, from time to time to establish such rules
and regulations and to appoint such agents as it deems appropriate for the
proper administration of the Plan, and to make such determinations under, and
such interpretations of, and to take such steps in connection with the Plan or
the options granted hereunder as it deems necessary or advisable. The Committee
shall, from time to time, award options under Section 3 hereof upon such terms
and conditions as it deems necessary or desirable, subject to the provisions of
the plan.
The total amount of Common Stock which may be delivered on exercise of
options granted under the Plan, including portions granted under Section 3
hereof (the
<PAGE>
"Employee Options") and options granted under Section 4 hereof (the
"Non-Employee Director Options," and, together with Employee Options, the
"Options"), shall not exceed in the aggregate Two Million Six Hundred Thousand
(2,600,000) shares (which amount reflects adjustments through May 20, 1994) of
the Company's Common Stock, par value $.01 per share, subject to adjustment
under Section 10 hereof. The stock to be delivered upon exercise of any Option
shall be shares of the Parent Company's Common Stock, which may be either
authorized and unissued shares or treasury shares (including shares reacquired
for the purpose of delivery upon exercise of Plan options). Shares subject to
the unexercised portion of any terminated or expired Options may again become
subject to Options under the Plan. Other provisions of the Plan
notwithstanding, the number of shares with respect to which Employee Options may
be granted to any one person during any fiscal year of the Company shall be
250,000.
3. EMPLOYEE OPTIONS
3.1. AWARD OF EMPLOYEE OPTIONS. The Committee, at any time and from
time to time, may grant Employee Options under the Plan to any key employee (an
"Optionee"), including an employee who also serves as a director or officer of
the Company, exercisable for such number of shares of Common Stock as the
Committee shall designate (the "Option Shares"), subject to the provisions of
this Section 3. The date on which an Employee Option shall be granted shall be
the date of the Committee's authorization of such grant or such later date as
may be determined by the Committee at the time such grant is authorized (a
"Grant Date"). Any Optionee at any one time and from time to time may hold more
than one option granted under the Plan or under any other stock plan of the
Parent Company. Each Employee Option shall be a non-qualified stock option and
shall be evidenced by a stock option agreement in such form and containing such
provisions not inconsistent with the provisions of the Plan as the Committee
from time to time shall approve.
3.2. EMPLOYEE OPTION PRICE. The purchase price per share upon
exercise (the "Option Price") of each Employee Option granted pursuant to this
Plan shall be determined by the Committee in its sole and absolute discretion,
but shall not be less than the fair market value per share on the date of the
grant. During any time the Parent Company's Common Stock is not listed on an
established stock exchange, the fair value per share shall be the reported "bid"
price of the Common Stock in the over-the-counter market on the date preceding
the date of the grant as reported by the National Association of Securities
Dealers, Inc. If the stock is listed on an established stock exchange or
exchanges, its fair market value shall be deemed to be the highest closing price
of the Parent Company's Common Stock on that stock exchange or exchanges on the
date preceding the date of the grant, or, if no sale of the Parent Company's
Common Stock shall have been made on any stock exchange on that day, then on the
next preceding day on which there was a sale.
3.3. TERM OF EMPLOYEE OPTION; VESTING. Subject to the provisions of
Section 5, any Employee Option granted pursuant to this Plan shall be
exercisable by an Optionee only as follows:
2
<PAGE>
(a) on or after the first anniversary of the Grant Date, the
Optionee may exercise the option for up to one-third (1/3) of the Option Shares;
(b) on or after the second anniversary of the Grant Date, the
Optionee may exercise the option for up to two-thirds (2/3) of the Option
Shares, reduced by the amount of any Option Shares already purchased by the
Optionee; and
(c) on or after the third anniversary of the Grant Date, the
Optionee may exercise the option for up to the entire amount of the Option
Shares, reduced by the number of Option Shares already purchased by the
Optionee.
Any Employee Option granted pursuant to this Plan shall terminate no
later than ten years after the Grant Date. Notwithstanding anything in this
Plan to the Contrary, no fractional shares shall be issued, sold or otherwise
transferred by the Parent Company, and any computations relating to shares
subject to an Employee Option shall be rounded either up or down to the nearest
whole number in the sole and absolute discretion of the Committee.
3.4. PAYMENTS FOR OPTIONS. The Option Price of an Employee Option
shall become immediately due upon exercise of the Option and shall be payable in
full in cash or cash equivalents; provided, however, that the Committee shall
have the authority, exercisable at its discretion, either at the time the Option
is granted or at the time it is exercised, to make the Option Price payable in
one or more of the alternative forms specified below:
(a) full payment in shares of Common Stock having a fair market
value on the date of exercise equal to the Option Price; or
(b) a combination of shares of Common Stock valued at fair market
value on the date of exercise and cash or cash equivalents, equal in the
aggregate to the Option Price.
4. NON-EMPLOYEE DIRECTOR OPTIONS
4.1. AUTOMATIC ANNUAL AWARD OF NON-EMPLOYEE DIRECTOR OPTIONS. An
Option to purchase the number of shares of Common Stock determined in accordance
with this Section 4.1 will be granted each year at the close of business on the
date on which directors (or a class of directors if the Company then has a
classified Board) are elected or reelected by the Company's stockholders (a
"Grant Date"), to each person who is then a Non-Employee Director (as defined in
Section 4.2 hereof) (an "Optionee"); provided, however, that a person may be
granted Non-Employee Director Options under this Section 4 only one time during
any one calendar year. The number of shares of Common Stock purchasable upon
exercise of the Option granted to a Non-Employee Director pursuant to this
Section 4.1 shall be 1,000, plus an additional 5,000 if the Non-Employee
Director then serves on any of the Audit, Compensation, Executive, or Nominating
Committees of the Board of Directors, plus an additional 2,500 if the
Non-Employee Director serves on three or more of such Committees. Non-Employee
Director Options granted
3
<PAGE>
under the Plan shall be non-qualified stock options which shall be evidenced by
a stock option agreement in such form and containing such provisions not
inconsistent with the Plan as the Committee from time to time shall approve.
4.2. ELIGIBLE NON-EMPLOYEE DIRECTORS. Each director of the Parent
Company who, on any date on which a Non-Employee Director Options is to be
granted (as specified in Section 4.1 hereof), is not an employee of the Company
will be eligible to receive such Option. The foregoing notwithstanding, no
director who is serving on the Board as a result of a nomination or appointment
pursuant to the terms of any debt instrument, preferred stock, underwriting
agreement, or other contract entered into by the Parent Company will be eligible
to participate in the Plan. No person other than those specified in this
Section 4.2 may receive Non-Employee Director Options under the Plan.
4.3. NON-EMPLOYEE DIRECTOR OPTION PRICE. The Option Price of each
Non-Employee Director Option granted pursuant to this Plan shall be equal to the
fair market value per share on the date of the grant, determined in the manner
specified in the second and third sentences of Section 3.2 hereof.
4.4. TERM OF NON-EMPLOYEE DIRECTOR OPTION; VESTING. Subject to the
provisions of Section 5, any Non-Employee Director Option granted pursuant to
this Plan shall be exercisable by an Optionee only at the times set forth in
paragraphs (a), (b), and (c) of Section 3.3 hereof, and each Non-Employee
Director Option granted pursuant to this Plan shall terminate ten years after
the Grant Date. Notwithstanding anything in this Plan to the contrary, no
fractional shares shall be issued, sold or otherwise transferred by the Parent
Company, and any computations relating to shares subject to a Non-Employee
Director Option shall be rounded down to the nearest whole number of shares.
4.5. PAYMENTS FOR OPTIONS. The Option Price of a Non-Employee
Director Option shall become immediately due upon exercise of the Option and
shall be payable in full in cash or cash equivalents; provided, however, that
the Option Price may be paid in one or more of the alternative forms specified
below:
(a) full payment in shares of Common Stock having a fair market
value on the date of exercise equal to the Option Price; or
(b) a combination of shares of Common Stock valued at fair market
value on the date of exercise and cash or cash equivalents, equal in the
aggregate to the Option Price.
4.6. LIMITATION ON COMMITTEE AUTHORITY. The Committee shall have no
authority under the Plan to make any determination or take any other action
affecting or relating to Non-Employee Director Options, except for ministerial
or administrative actions that would
4
<PAGE>
not cause Non-Employee Director Options to fail to qualify as "formula" awards
under Rule 16b-3(c)(2)(ii) under the Exchange Act.
5. EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE AS A DIRECTOR, DEATH OR
DISABILITY
5.1. TERMINATION OF EMPLOYMENT OR SERVICE AS A DIRECTOR. Except as
otherwise provided by the Committee in connection with grants of Employee
Options to persons not then required to file reports under Section 16(a) of the
Exchange Act, in the event of the termination of employment or, in the case of a
Non-Employee Director, cessation of service on the Board of Directors of an
Optionee (otherwise than by reason of death or disability of the Optionee, as
described below), any Option or Options granted to the Optionee under the plan
to the extent not theretofore exercised shall be deemed canceled and terminated
forthwith. The transfer of an Optionee from the employ of the Parent Company to
a subsidiary corporation or vice versa or from one subsidiary corporation of the
Parent Company to another shall not be deemed to constitute a termination of
employment for purposes of this Plan.
5.2. DEATH. In the event that an Optionee shall die while employed
by the Company or serving as a Non-Employee Director, any Option or Options
granted to the Optionee under the Plan and theretofore exercised or expired
shall be exercisable in full by the estate of the Optionee or by any person who
has acquired such Option by bequest or inheritance from the Optionee at any time
within one (1) year after the death of the Optionee (but in no event shall such
Option be exercisable after its stated expiration date).
5.3. DISABILITY. In the event of the termination of an Optionee's
employment or service as a Non-Employee Director by reason of the Optionee's
disability, the Optionee shall have the right to exercise in full all Options
held to the extent that Options have not previously expired or been exercised,
at any time within one (1) year after such termination (but in no event shall
such Option be exercisable after its stated expiration date). The term
"disability" shall, for the purposes of the Plan, be defined in the same manner
as such term is defined in Section 105(d)(4) of the Internal Revenue Code of
1986, as amended (the "Code").
5.4. LEAVE OF ABSENCE. Whether any leave of absence shall constitute
termination of employment for the purposes of any Employee Option granted under
the Plan shall be determined in each case by the Committee in its sole
discretion.
5.5. ADDITIONAL POST-TERMINATION EXERCISE PROVISION. The provisions
of Sections 5.1, 5.2, and 5.3 notwithstanding, the Committee may specify as a
term of any Employee Option (i) that, upon termination of employment of the
Optionee for any reason that the Committee may specify, death, or disability,
such Employee Option to the extent not theretofore exercised may be exercised at
any time within a period of three (3) years (or such lesser period as the
Committee may specify) after such termination, death, or disability (but in no
event shall such Option be exercisable after its stated expiration date), and
(ii) that, during such
5
<PAGE>
period following termination, death, or disability, such Employee Option either
shall be exercisable only to the extent it was exercisable on the date of
termination, death, or disability, shall continue to vest and become exercisable
in accordance with Section 3.3 hereof, or shall be fully exercisable as of the
date of termination, death, or disability, the provisions of Section 3.3
notwithstanding. No Option granted under the Plan may be exercised by an
Optionee who is not then employed by the Company or serving as a director except
within a period specified in or under Sections 5.1, 5.2, 5.3, or 5.5 hereof.
6. NON-TRANSFERABILITY
6.1. GENERALLY. Except as provided in Section 6.2, no Option granted
pursuant to the Plan or other right under the Plan that constitutes a
"derivative security" as defined in Rule 16a-1(c) under the Exchange Act shall
be transferable by an Optionee and any such Option or right granted pursuant to
the Plan will shall be exercisable only by such Optionee except as set forth in
Section 5.2.
6.2. PERMITTED TRANSFERS. Notwithstanding anything to the contrary
set forth in Section 6.1, any Optionee to whom an Option is granted pursuant to
the Plan, other than an Optionee who, at the time a transfer is to be made under
this Section 6.2, is required to report transactions in Common Stock under
Section 16(a) of the Exchange Act, shall have the right to transfer such Option
to the spouse of the Optionee (a "Permitted Transferee"), provided, however,
that an Option transferred by any Optionee to any Permitted Transferee shall
continue to be subject to all of the terms and conditions of the Plan and, as a
condition to the effectiveness of the transfer of such Option, any Permitted
Transferee to whom an Option is transferred shall execute an acknowledgment to
the effect that any such Option and such Permitted Transfer shall thereafter be
subject to all of the terms and conditions of the Plan, and provided further
that no such transfers shall be authorized if such authority would cause Options
to be treated as "transferable" for purposes of the registration requirements
under the Securities Act of 1933, as amended. No such Permitted Transferee
shall be deemed an "Optionee" for purposes of the Plan, and the Options of such
Permitted Transferee shall be subject to all of the provisions of the Plan,
including but not by way of limitation the provisions relating to the term,
vesting, exercise, termination and payment of the Options of the "Optionee" from
whom those Options were acquired.
7. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN
The Board of Directors, upon recommendation of the Committee or at its
own discretion, at any time may terminate, and at any time from time to time,
and in any respect, may amend or modify, the Plan, except that such action will
be subject to the approval of the Company's stockholders within one year after
such Board action if such stockholder approval is required by any federal or
state law or regulation or the rules of any stock exchange or automated
quotation system on which the Common Stock may then be listed or quoted, or if
the Board in its discretion determines that obtaining such stockholder approval
is advisable. No amendment,
6
<PAGE>
modification or termination of the Plan shall in any manner adversely affect any
Option theretofore granted under the Plan without the consent of the Optionee.
The foregoing notwithstanding, any Plan provision that specifies the persons who
may be granted Non-Employee Director Options, the amount and price of
Non-Employee Director Options, and the timing of grants of Non-Employee Director
Options, or is otherwise a "plan provision" within the meaning of Rule
16b-3(c)(2)(ii)(B) under the Exchange Act, shall not be amended more than once
every six months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.
8. FINALITY OF DETERMINATIONS
The interpretation and construction by the Committee of any provisions
of the Plan or of any Option under it shall be final, unless otherwise
determined by the Board of Directors with respect to Employee Options not then
held by persons required to report transactions in Common Stock under Section
16(a) of the Exchange Act or with respect to Non-Employee Director Options. No
members of the Board of Directors or the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
Option granted under it and all members of the Committee shall be entitled to
indemnification and limits on their personal liability as set forth in the
Parent Company's Charter and By-Laws.
9. WITHHOLDING
The Company shall withhold any and all employment taxes required to be
withheld by Federal, State or local law from, or with respect to, any stock,
cash or other property distributed or paid to any Optionee under this Plan. The
Company shall have the right to withhold a sufficient amount of such Optionee's
wages or other cash compensation, or require that the Optionee make a direct
cash payment to the Company, sufficient to discharge the Company's withholding
obligations under applicable law. Until the Company has discharged its
withholding obligations, it shall have the right to refuse the issuance of, or
delivery of, the stock for which the option has been exercised. The Company may
make such other arrangements as it deems reasonable or convenient, consistent
with this Plan, to discharge its withholding obligations under applicable law.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The total number of shares of Common Stock which may be purchased on
exercise of Options granted under the Plan, the total number of shares of Common
Stock for which Options may be granted under the Plan, the maximum number of
shares with respect to which Employee Options may be granted to any one person
during any fiscal year, the number of shares to be subject to Non-Employee
Director Options granted automatically under Section 4 hereof, and other rights
relating to Options (both as to number of shares of Common Stock and the Option
Price) shall be appropriately adjusted by the Committee for any increase or
decrease in the number of outstanding shares of Common Stock resulting from a
stock dividend, stock
7
<PAGE>
split or combination of shares or reclassification. In the event of a merger or
consolidation of the Parent Company, the Committee may make such adjustments or
take such other action with respect to Employee Options as it deems necessary or
appropriate to reflect such merger or consolidation or to act in anticipation of
or in connection with such merger or consolidation including, without
limitation, the substitution of new options; in such event, Non-Employee
Director Options shall be automatically adjusted in the same manner as Employee
Options if and to the extent that such adjustments (and authorization thereof)
would not cause Non-Employee Director Options to fail to qualify as "formula"
awards under Rule 16b-3(c)(2)(ii) under the Exchange Act. The foregoing
notwithstanding, all adjustments under this Section 10 shall be made so as to
prevent dilution or enlargement of the rights of Optionees, and in no event
shall an adjustment be made relating to a Non-Employee Director Option except as
shall be necessary to maintain the proportionate interest of the Non-Employee
Director with respect to such Option and to preserve, without exceeding, the
value of such Option.
11. COMPLIANCE WITH RULE 16b-3
11.1. ADDITIONAL RESTRICTIONS UNDER RULE 16B-3. Unless an Optionee
then required to report transactions under Section 16(a) of the Exchange Act
could otherwise transfer Common Stock issued upon exercise of an Option without
incurred liability under Section 16(b) of the Exchange Act, at least six months
must elapse from the date of acquisition of the Option to the date of
disposition of the Common Stock issued upon exercise of the Option. If the
Committee authorizes the withholding of shares issued upon exercise of an
Employee Option in payment of tax liabilities under Section 9 hereof, no
Optionee then required to report transactions under Section 16(a) may engage in
such a "cashless withholding" transaction within six months after such
authorization becomes effective. These restrictions will apply in addition to
any other restriction under the Plan.
11.2. REFORMATION TO CONFORM TO RULE 16b-3. It is the intent of the
Company that this Plan comply in all respects with applicable provisions of Rule
16b-3 under the Exchange Act, such that grants of Options (and related rights)
to persons then required to report transactions under Section 16(a) will be
exempt and Non-Employee Directors will qualify as "disinterested persons" under
Rule 16b-3(c)(2). Accordingly, if any provision of this Plan or any agreement
relating to an Option does not comply with the requirements of Rule 16b-3 as
then applicable to any such person, or would cause any Non-Employee Director to
no longer be deemed a "disinterested person" within the meaning of Rule 16b-3,
such provision will be construed or deemed amended to the extent necessary to
conform to such requirements with respect to such person. In addition, the
Board and the Committee shall have no authority to make any amendment,
alteration, suspension, discontinuation, or termination of the Plan or any
agreement hereunder or take other action if such authority or action would cause
transactions under the Plan to constitute non-exempt purchases subject to
Section 16(b), or cause Non-Employee Directors to no longer be deemed
"disinterested persons" under Rule 16b-3(c)(2) under the Exchange Act.
8
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12. RIGHT TO CONTINUED EMPLOYMENT
Nothing in this Plan shall confer on an Optionee any right to
employment or continued employment with the Company or any subsidiary, or affect
in any way the right of the Company to terminate such person's employment at any
time.
13. GOVERNING LAW
The Plan and all agreements hereunder shall be construed in accordance
with and governed by the internal laws of the State of Maryland.
14. EFFECTIVE DATE
The effective date of the Plan shall be March 31, 1989. The effective
date of the Amendment and Restatement of the Plan shall be February 11, 1993.
Options granted under the Plan prior to February 11, 1993 shall be subject to
the provisions of the Plan in effect at the time such Options were granted,
except that the provisions of Section 6, as amended and restated, shall apply to
such Options. The amendments to the Plan adopted as of April 12, 1994 shall be
submitted to a vote of stockholders of the Company at the 1994 Annual Meeting of
Stockholders of the Company, and shall become effective only upon approval
thereof by the affirmative votes of the holders of a majority of voting
securities present in person or represented by proxy and entitled to vote at
such Meeting, or any adjournment thereof.
9
<PAGE>
Exhibit 99.14
DUTY FREE INTERNATIONAL, INC.
1994 STOCK OPTION PLAN FOR EMPLOYEES
1. PURPOSE
This plan, which shall be known as the "1994 Stock Option Plan for
Employees" (the "Plan"), is intended to attract, retain and motivate employees
and consultants of Duty Free International, Inc. (the "Company") and of any
subsidiaries, by providing them with a means to acquire a proprietary interest
or to increase their proprietary interest in the Company's success, through the
grant of options to purchase Common Stock ("Options").
The word "subsidiary" when used herein shall mean any corporation
presented existing or which may be formed in the future, a majority of the
voting stock of which is owned directly or indirectly by the Company.
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee")
appointed from and by the Board of Directors of the Company. The Committee
shall consist of not less than two members, each of whom shall be a director of
the Company. Directors who serve on the Committee shall not be eligible for
grants of Options under the Plan. The Board of Directors may from time to time
remove members from or add members to the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by additions made by the Board of
Directors. The Committee shall select one of its members as Chairman, and shall
hold meetings at such times and places as it may determine. The Committee shall
act by majority agreement of its members or by consents or approvals reduced to
writing and signed by a majority of its members. The Committee may, to the
extent permitted under applicable law, delegate to officers or other employees
of the Company or any subsidiary the authority, subject to such terms as the
Committee shall specify, to perform such functions as the Committee may
determine.
The Committee is authorized, subject to the provisions of the Plan,
from time to time to establish such rules and regulations and to appoint such
agents as it deems appropriate for the proper administration of the Plan, and to
make such determinations under, and such interpretations of, and to take such
steps in connection with the Plan or the Options granted hereunder as it deems
necessary or advisable. The Committee shall, from time to time, award options
under Section 3 hereof upon such terms and conditions as it deems necessary or
desirable, subject to the provisions of the plan.
The total amount of Common Stock which may be delivered on exercise of
Options granted under the Plan shall not exceed in the aggregate one million
(1,000,000) shares of the Company's Common Stock, par value $.0l per share,
subject to adjustment under Section
<PAGE>
10 hereof. The stock to be delivered upon exercise of any Option shall be
shares of the Company's Common Stock, which may include shares reacquired for
the purpose of delivery upon exercise of options, subject to Section 3.5 hereof.
Shares subject to the unexercised portion of any terminated or expired Options
may again become subject to options under the Plan.
3. OPTIONS
3.1 AWARD OF OPTIONS. The Committee, at any time and from time to
time, may grant Options under the Plan to any person eligible under Section 4
(an "Optionee"), exercisable for such numbers of shares of Common Stock as the
Committee shall designate (the "Option Shares"), subject to the provisions of
this Section 3. The date on which an option shall be granted shall be the date
of the Committee's authorization of such grant or such later date as may be
determined by the Committee at the time such grant is authorized (a "Grant
Date") Any Optionee at any one time and from time to time may hold more than one
Option granted under the Plan or under any other plan of the Company. Each
Option shall be a non-qualified stock option and shall be evidenced by an option
agreement in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve
(including amendments to outstanding option agreements).
3.2 OPTION PRICE. The purchase price per share upon exercise (the
"Option Price") of each Option granted pursuant to this Plan shall be determined
by the Committee in its sole and absolute discretion, but shall not be less than
the fair market value per share on the date of the grant; provided, however,
that, in the case of Options granted in substitution for options or awards of
any company or other entity acquired by the Company or its subsidiaries, the
Option Price may be reduced to the extent of the "in-the-money" value of such
option or award or as otherwise deemed appropriate by the Committee, and options
assumed in connection with such an acquisition may have such Option Price as the
Committee deems appropriate, subject in each case to Section 10 hereof. During
any time the Company's Common Stock is not listed on an established stock
exchange, the fair market value per share for purposes of the Plan shall be the
reported "bid" price of the Common Stock in the over-the-counter market on the
date preceding the date of the grant as reported by the National Association of
securities Dealers, Inc. If the Common Stock is listed on an established stock
exchange or exchanges, its fair market value for purposes of the Plan shall be
deemed to be the highest closing price of the Company's Common Stock on that
stock exchange or exchanges on the date preceding the date of the grant, or, if
no sale of the Company's Common Stock shall have been made on any stock exchange
on that day, then on the next preceding day on which there was a sale.
3.3 TERM OF OPTION; VESTING. Unless otherwise determined by the
Committee, and subject to the provisions of Section 5, any option granted
pursuant to this Plan shall be exercisable by an Optionee only as follows:
(a) on or after the first anniversary of the Grant Date, the optionee
may exercise the Option for up to one-third (1/3) of the Option Shares;
-2-
<PAGE>
(b) on or after the second anniversary of the Grant Date, the
optionee may exercise the Option for up to two-thirds (2/3) of the Option
Shares, reduced by the amount of any Option Shares already purchased by the
Optionee; and
(c) on or after the third anniversary of the Grant Date, the optionee
may exercise the Option for up to the entire amount of the Option Shares,
reduced by the number of Option Shares already purchased by the Optionee.
Any Option, granted pursuant to this Plan shall terminate no later
than ten years after the Grant Date. Notwithstanding anything in this Plan to
the contrary, no fractional shares shall be issued, sold or otherwise
transferred by the Company, and any computations relating to shares subject to
an Option shall be rounded either up or down to the nearest whole number in the
sole and absolute discretion of the Committee.
3.4. PAYMENTS FOR OPTIONS. The Option Price of an Option shall become
immediately due upon exercise of the Option and shall be payable in full in cash
or cash equivalents; provided, however, that the Committee shall have the
authority, exercisable at its discretion, either at the time the option is
granted or at the time it is exercised, to make the Option Price payable in one
or more of the alternative forms specified below:
(a) full payment in shares of Common Stock having
a fair market value on the date of exercise equal to the Option Price; or
(b) a combination of shares of Common Stock valued at fair
market value on the date of exercise and cash or cash equivalents, equal in the
aggregate to the Option Price.
3.5. EXERCISE BY DIRECTOR OR OFFICER. If, at the time an Optionee
exercises an Option, the optionee is a "director" or "officer" of the Company
within the meaning of Sections 312.03 and 703.09 of the Listed Company Manual of
the New York Stock Exchange, such that the Optionee's receipt of Common Stock
originally issued by the Company would be subject to the requirement of
shareholder approval thereunder, the Stock to be delivered to the Optionee shall
be deemed to consist only of shares reacquired by the Company. The Company
shall be obligated to use its best efforts to obtain and have available, at any
time that such option is exercisable and the exercise of such Option would
require delivery of such reacquired shares, a sufficient number of such
reacquired shares, not reserved for other uses, to be able to make delivery upon
exercise of such option.
4. ELIGIBILITY.
Employees of the Company and its subsidiaries, and persons who provide
consulting or other services to the Company or its subsidiaries deemed by the
Committee to be of
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<PAGE>
substantial value to the Company, are eligible to be granted Options under the
Plan. In addition, a person who has been offered employment by the Company or
its subsidiaries is eligible to be granted Options under the Plan, provided that
such Options shall be cancelled if such person fails to commence such
employment, and such person may not exercise or otherwise receive value with
respect to such option until such person has commenced such employment. The
foregoing notwithstanding, directors and officers who are then required to
report transactions under Section 16(a) of the Securities Exchange Act of 1934,
as amended, shall not be eligible to be granted Awards under the Plan.
5. EFFECT OF TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY.
5.1. TERMINATION OF EMPLOYMENT. Except as otherwise provided by the
Committee, in the event of termination of employment of an Optionee (otherwise
than by reason of death or disability of the Optionee, as described below), any
Option or Options granted to the Optionee under the Plan to the extent not
theretofore exercised shall be deemed cancelled and terminated forthwith. The
transfer of an Optionee from the employ of the Company to a subsidiary or vice
versa or from one subsidiary of the Company to another shall not be deemed to
constitute a termination of employment for purposes of this Plan.
5.2. DEATH. In the event that an optionee shall die while employed by
the Company or its subsidiaries, any Option or Options granted to the Optionee
under the Plan and not theretofore exercised or expired shall be exercisable in
full by the estate of the optionee or by any person who has acquired such Option
by bequest or inheritance from the Optionee at any time within one (1) year
after the death of the Optionee (but in no event shall such Option be
exercisable after its stated expiration date).
5.3. DISABILITY. In the event of the termination of an Optionee's
employment by reason of the Optionee's disability, the Optionee shall have the
right to exercise in full all options held to the extent that Options have not
previously expired or been exercised, at any time within one (1) year after such
termination (but in no event shall such option be exercisable after its stated
expiration date). Unless otherwise determined by the Committee, the term
"disability" shall, for the purposes of the Plan, be defined in the same manner
as such term is defined in Section 105(d) (4) of the Internal Revenue Code of
1986, as amended (the "Code").
5.4. LEAVE OF ABSENCE. Whether any leave of absence shall constitute
termination of employment for the purposes of any Option granted under the Plan
shall be determined in each case by the Committee in its sole discretion.
6. NON-TRANSFERABILITY
No Option granted pursuant to the Plan or other right under the Plan
shall be transferable by an Optionee except pursuant to the laws of descent and
distribution (or pursuant
<PAGE>
to a beneficiary designation), and any such option or right shall be exercisable
during the lifetime of an optionee only by such Optionee.
7. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN
The Board of Directors, upon recommendation of the Committee or at its
own discretion, at any time may terminate, and at any time and from time to
time, and in any respect, may amend or modify, the Plan. No amendment,
modification or termination of the Plan shall in any manner materially adversely
affect any Option theretofore granted under the Plan without the consent of the
Optionee.
8. FINALITY OF DETERMINATIONS
The interpretation and construction by the Committee of any provisions
of the Plan or of any Opt-ion under it shall be final, unless otherwise
determined by the Board of Directors. No members of the Board of Directors or
the Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it, and all members of the
Committee shall be entitled to indemnification and limits on their personal
liability as set forth in the Company is Charter and By- laws.
9. WITHHOLDING
The Company or its subsidiaries shall withhold any and all employment
taxes required to be withheld by Federal, state or local law from, or with
respect to, any stock, cash or other property distributed or paid to any
Optionee under this Plan. The Company and its subsidiaries shall have the right
to withhold a sufficient amount of such optionee's wages or other cash
compensation, or require that the optionee make a direct cash payment to the
Company, sufficient to discharge the Company's withholding obligations under
applicable law. Until the Company and its subsidiaries have discharged their
withholding obligations, the Company shall have the right to refuse the issuance
of, or delivery of, the Common Stock for which the Option has been exercised.
The Company and its subsidiaries may make such other arrangements as it deems
reasonable or convenient, consistent with this Plan, to discharge their
withholding obligations under applicable law.
10. ADJUSTMENTS UPON CORPORATE EVENTS
The total number of shares of Common Stock which may be purchased on
exercise of options granted under the Plan, the total number of shares of Common
Stock for which Options may be granted under the Plan, and other rights relating
to Options (both as to the number of shares of Common Stock and the Option
Price) shall be appropriately adjusted by the Committee for any increase or
decrease in the number of outstanding shares of Common Stock resulting from a
stock dividend, stock split or combination of shares, reclassification, or other
similar event affecting Common Stock. In the event of a merger or consolidation
of the
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<PAGE>
Company or any subsidiary, the Committee may make such adjustments or take such
other action with respect to Options as it deems necessary or appropriate to
reflect such merger or consolidation or to act in anticipation of or in
connection with such merger or consolidation including, without limitation, the
substitution of options granted under the Plan in place of options or other
awards granted by the company or other entity being acquired by the Company or
its subsidiary or the assumption of options, granted by such acquired company or
entity. In the case of an assumption of such options, such options shall become
Options and shall be governed by the terms of the Plan, except that the
Committee may specify such terms as to vesting and otherwise to the extent
deemed appropriate by the Committee to preserve the terms of the option being
assumed. All adjustments under this Section 10 shall be made so as to prevent
dilution or enlargement of the rights of optionee or optionee.
11. RIGHT TO CONTINUED EMPLOYMENT
Nothing in this Plan shall confer on an optionee any right to
employment or continued employment with, or to provide or continue to provide
consulting services to, the Company or any subsidiary, or affect in any way the
right of the Company or its subsidiaries to terminate such person's employment
or consulting contract at any time.
12. GOVERNING LAW
The Plan and all agreements hereunder shall be construed in accordance
with and governed by the internal laws of the State of Maryland and applicable
federal law.
13. EFFECTIVE DATE
The effective date of the Plan shall be March 19, 1994.
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<PAGE>
Exhibit 99.15
COMPASS PARTNERS INTERNATIONAL, L.L.C.
599 Lexington Avenue
38th Floor
New York, NY 10022
Tel. No.: (212) 702-9800
Fax No.: (212) 702-9587
July 2, 1997
Board of Directors
Duty Free International, Inc.
63 Copps Hill Road
Ridgefield, CT 06877
Members of the Board:
BAA plc ("Parent"), W&G Acquisition Corporation ("Sub"), a wholly
owned subsidiary of Parent, and Duty Free International, Inc. (the "Company")
propose to enter into an Agreement and Plan of Merger (the "Merger Agreement")
pursuant to which Sub will make a tender offer (the "Offer") for all the issued
and outstanding shares of common stock, par value $0.01 per share (the
"Shares"), of the Company and, subsequent to the consummation of the Offer, Sub
will be merged with and into the Company (the "Merger"). Each Share acquired
pursuant to the Offer will be purchased for, and each outstanding Share (other
than Shares held by Parent, Sub or any other subsidiary of Parent) will be
converted at the effective time of the Merger into the right to receive, cash
consideration of $24.00 per share. In connection with the Offer and the Merger,
Parent and the Company also propose to enter into an agreement (the "Stock
Option Agreement") pursuant to which the Company will grant to Parent an option
to acquire up to 5,434,367 newly issued Shares, representing approximately 19.9%
of the Shares outstanding, upon the occurrence of certain events. In addition,
Parent, Sub and certain holders of shares propose to enter into an agreement
(the "Shareholders' Agreement") pursuant to which such holders will agree to
take certain actions to support the consummation of the Offer and the Merger.
You have requested our opinion as to the fairness, from a financial
point of view, of the cash consideration to be received by the holders of Shares
in the Offer and the Merger.
In arriving at our opinion, we have (a) reviewed certain publicly
available financial statements and other business and financial information
relating to the Company that we believe
<PAGE>
to be relevant to our inquiry, including the Company's Forms 10-K for the three
years ended January 31, 1997 and its Form 10-Q for the fiscal quarter ended
April 30, 1997; (b) reviewed certain financial analyses, financial forecasts,
reports and other information prepared by the management of the Company; (c)
conducted discussions with members of management of the Company concerning the
Company's historical and current operations, financial condition and prospects
and such other matters we deemed relevant; (d) reviewed the historical financial
information and stock price data of the Company and compared such financial data
with similar information for certain other companies we deemed relevant; (e)
reviewed the financial terms of the Offer and the Merger and compared such
financial terms with similar information for other selected acquisitions we
deemed relevant; (f) reviewed drafts dated July 2, 1997 of the Merger Agreement,
the Stock Option Agreement and the Shareholders' Agreement; and (g) conducted
such other studies, analyses and investigations as we deemed appropriate.
In arriving at our opinion, we have, with your consent, assumed and
relied upon the accuracy and completeness of all information supplied or
otherwise made available to us or publicly available and have not assumed any
responsibility for the independent verification of any such information. In
addition, we have not assumed any obligation to conduct, nor have we conducted,
any physical inspection of the properties or assets of the Company. We have,
with your consent, assumed that the financial forecasts provided to us were
reasonably prepared by the Company's management on bases reflecting the best
currently available estimates and good faith judgments of such management as to
the future financial performance of the Company. We have not made or obtained
any independent evaluations, valuations or appraisals of the assets or
liabilities (contingent or otherwise) of the Company, nor have we been furnished
with such materials. Our opinion is necessarily based upon economic, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
Compass Partners International, L.L.C. is acting as exclusive
financial advisor to the Company in connection with the Offer and the Merger and
will receive a fee from the Company for our services.
It is understood that this letter is for the information of the Board
of Directors of the Company. Our opinion does not constitute a recommendation
to any holder of Shares as to whether such holder should tender any Shares
pursuant to the Offer or how such holder should vote on the Merger.
<PAGE>
On the basis of, and subject to, the foregoing, we are of the opinion
that, as of the date hereof, the cash consideration to be received by the
holders of Shares in the Offer and the Merger is fair, from a financial point of
view, to such holders.
Very truly yours,
COMPASS PARTNERS INTERNATIONAL, L.L.C.
<PAGE>
Exhibit 99.16
FOR IMMEDIATE RELEASE Contact: Dyan C. Cutro
Vice President Investor Relations
Phone: (212) 754-5900
Duty Free International, Inc. Announces Cash Merger Agreement with BAA plc
RIDGEFIELD, CT ; JULY 3, 1997.....Duty Free International, Inc. (NYSE: DFI)
today announced that it has entered into a definitive merger agreement with BAA
plc providing for the acquisition of all of the outstanding common stock of
Duty Free for $24.00 per share in cash.
Under the terms of the merger agreement, which has been unanimously approved by
the Board of Directors of Duty Free, a BAA subsidiary will commence a cash
tender offer for all of the issued and outstanding common stock of Duty Free by
July 10, 1997. Any common stock of Duty Free remaining outstanding after the
conclusion of the tender offer will be converted in a subsequent merger into
$24.00 per share, in cash.
Alfred Carfora, President and Chief Executive Officer of Duty Free, commented:
"We are extremely pleased with this transaction. Our Board of Directors has
determined that the proposed transaction is in the best interests of Duty Free
and its stockholders."
In connection with the transaction, Duty Free granted to BAA an option,
exercisable under certain conditions, to acquire up to 5.4 million newly issued
shares of Duty Free's common stock. In addition, certain Duty Free
stockholders, who collectively beneficially own over 8.6 million shares of the
outstanding common stock of Duty Free, have agreed to tender their shares.
London-based BAA, which is the world's largest commercial operator of airports,
owns and operates seven airports in the United Kingdom, manages the
Indianapolis, Indiana airport system as well as shops and catering facilities at
the Pittsburgh, Pennsylvania airport and is part of a consortium that leases the
airport servicing in Melbourne, Australia. It is also involved in building
outlet malls in Europe.
Duty Free operates standard and specialty retailing businesses, including news
and gift stores, book stores, regional sports-theme shops, natural personal-care
boutiques, branded athletic footwear shops, convenience stores, gourmet food and
confectionery outlets, currency exchanges and gas stations, and serves 14
international airports in the United States, including New York's John F.
Kennedy and LaGuardia, Chicago's O'Hare, Boston's Logan and Denver, as well as
several in the Caribbean islands. On board international airlines, Duty Free
operates inflight duty free shops. Duty Free is also a major supplier of duty
free merchandise to foreign diplomats in New York and Washington, D.C., as well
as to ships engaged in international travel and trade in the northeastern United
States and Miami.
<PAGE>
Exhibit 99.17
DUTY FREE INTERNATIONAL, INC.
63 Copps Hill Road
Ridgefield, Connecticut 06877
July 9, 1997
Dear Stockholder:
I am pleased to report that on July 3, 1997, Duty Free International, Inc.
entered into a merger agreement with BAA plc and one of its subsidiaries that
provides for the acquisition of Duty Free by BAA at a price of $24.00 per share.
Under the terms of the proposed transaction, the BAA subsidiary is today
commencing a tender offer for all outstanding shares of Duty Free's common stock
at $24.00 per share.
Following the successful completion of the tender offer, upon receipt of any
required stockholder approval, the BAA subsidiary will be merged with Duty Free
and all shares not purchased in the tender offer will be converted into the
right to receive $24.00 per share in cash in the merger.
Your Board of Directors has unanimously approved the BAA offer and
determined that the terms of the offer and the merger are advisable and fair to
and in the best interest of Duty Free and its stockholders. Accordingly, the
Board of Directors unanimously recommends that all Duty Free stockholders accept
the BAA offer, tender their shares of common stock and approve the merger.
In arriving at its recommendations, the Board of Directors gave careful
consideration to a number of factors. Among these was the written opinion dated
July 2, 1997 of Compass Partners International L.L.C., financial advisor to Duty
Free, that, as of such date and on the basis of and subject to the matters set
forth therein, the cash consideration to be received by the holders of Duty Free
Common Stock in the BAA offer and the merger was fair, from a financial point of
view, to such holders.
Accompanying this letter is a copy of Duty Free's Solicitation
Recommendation Statement on Schedule 14D-9. Also enclosed is BAA's Offer to
Purchase and related materials, including a Letter of Transmittal for use in
tendering shares. We urge you to read the enclosed materials carefully. The
management and directors of Duty Free thank you for the support you have given
the Company.
ON BEHALF OF THE BOARD OF DIRECTORS,
SINCERELY,
Alfred Carfora, President and Chief Executive Officer
<PAGE>
EXHIBIT 99.18
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares (as defined below). The Offer (as defined below) is made
solely by the Offer to Purchase dated July 9, 1997 and the related Letter of
Transmittal, and is being made to all holders of Shares. The Purchaser (as
defined below) is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, the Purchaser will make a good faith effort to comply with such
state statute. If after such good faith effort, the Purchaser cannot comply
with such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer
to be made by a licensed broker or dealer, the Offer shall be deemed to be
made on behalf of the Purchaser by Gleacher NatWest Inc. or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Duty Free International, Inc.
at
$24 Net Per Share
by
W&G Acquisition Corporation
a wholly owned subsidiary of
BAA plc
W&G Acquisition Corporation, a Maryland corporation (the "Purchaser") and a
wholly owned subsidiary of BAA plc, a corporation organized under the laws of
England ("Parent"), is offering to purchase all outstanding shares of the
common stock, par value $.01 per share (the "Shares"), of Duty Free
International, Inc., a Maryland corporation (the "Company"), at $24 per Share
net to the seller in cash, without any interest, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated July 9, 1997 (the
"Offer to Purchase") and in the related Letter of Transmittal (which together
constitute the "Offer"). Following the Offer, the Purchaser intends to effect
the Merger described below.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON AUGUST 5, 1997, UNLESS THE OFFER IS EXTENDED. THE OFFER IS
CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE)
A NUMBER OF SHARES OF THE COMPANY WHICH REPRESENTS AT LEAST A MAJORITY OF THE
TOTAL NUMBER OF SHARES OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM
CONDITION"). THE PURCHASER ESTIMATES THAT APPROXIMATELY 14,748,155 SHARES
WILL NEED TO BE VALIDLY TENDERED (AND NOT VALIDLY WITHDRAWN) TO SATISFY THE
MINIMUM CONDITION.
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<PAGE>
The Offer is being made pursuant to a Merger Agreement dated as of July 2,
1997 (the "Merger Agreement"), by and among the Parent, the Purchaser and the
Company. Pursuant to the Merger Agreement, and subject to the satisfaction or
waiver of the conditions set forth therein, the Purchaser has agreed to make
the Offer and purchase all Shares validly tendered and not withdrawn
following the expiration or termination of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), applicable to the Offer. After the completion of the Offer, the
Purchaser and the Company will merge (the "Merger") and each Share then
outstanding (other than Shares held by the Parent, the Purchaser, the Company
or any direct or indirect subsidiary of the Parent, the Purchaser or the
Company, and Shares with respect to which dissenter's rights under the
Maryland General Corporation Law, as amended (the "MGCL") are properly
exercised) will be converted upon effectiveness of the Merger (the "Effective
Time") into the right to receive $24 in cash, without any interest. Following
the consummation of the Merger, the surviving corporation will be a wholly
owned subsidiary of the Parent.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE
MERGER AND THE MERGER AGREEMENT, HAS DETERMINED THAT THE TERMS OF THE OFFER,
THE MERGER AND THE MERGER AGREEMENT ARE FAIR TO AND IN THE BEST INTERESTS OF
THE SHAREHOLDERS OF THE COMPANY AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE
OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
Simultaneously with entering into the Merger Agreement, the Parent entered
into a Shareholders Agreement (the "Shareholder's Agreement") with certain
shareholders of the Company (the "Tendering Shareholders"). Pursuant to the
Shareholder's Agreement, each Tendering Shareholder has agreed to tender (and
not withdraw) pursuant to the Offer and before the Expiration Date all of the
Shares owned of record or beneficially by such Tendering Shareholder on the
date of the Shareholder's Agreement, together with any Shares acquired by any
such Tendering Shareholder prior to the termination of the Shareholder's
Agreement. As of the date hereof, the Tendering Shareholders beneficially own
8,626,073 Shares or approximately 32% of all outstanding Shares.
In connection with the Merger Agreement, the Parent and the Company have
entered into a stock option agreement, dated as of July 2, 1997 (the "Option
Agreement"), pursuant to which the Company has granted to the Parent an
irrevocable option (the "Option") to purchase up to 5,434,367 newly issued
Shares (the "Option Shares"), upon the terms and subject to the conditions of
the Option Agreement, at a price of $24.00 per Option Share. The Option is
exercisable upon the occurrence of certain events.
The Offer is subject to certain conditions set forth in the Offer to
Purchase. If any such condition is not satisfied prior to the time of payment
for any Shares, the Purchaser may (i) terminate the Offer and return all
tendered shares to tendering shareholders, (ii) extend the Offer and, subject
to withdrawal rights as set forth below, retain all such Shares until the
expiration of the Offer as so extended, (iii)
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<PAGE>
waive such condition and, subject to any requirement to extend the period of
time during which the Offer is open, purchase all Shares validly tendered by
the Expiration Date and not withdrawn, or (iv) delay acceptance for payment
of or payment for Shares, subject to applicable law, until satisfaction or
waiver of the conditions of the Offer.
For purposes of the Offer, the Purchaser shall be deemed to have accepted for
payment (and thereby purchased) tendered Shares as, if and when the Purchaser
gives oral or written notice to IBJ Schroder Bank & Trust Company (the
"Depositary") of the Purchaser's acceptance of such Shares for payment
pursuant to the Offer. Payment for Shares purchased pursuant to the Offer
will be made by deposit of the purchase price with the Depositary, which will
act as agent for tendering shareholders for the purpose of receiving payment
from the Purchaser and transmitting payments to tendering shareholders. The
Purchaser will not, under any circumstances, pay interest on the purchase
price, regardless of any delay in making such payment. In all cases, payment
for Shares purchased pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) the certificates evidencing the Shares or
timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at a Book-Entry Transfer Facility (as defined in the
Offer to Purchase) pursuant to the procedures set forth in the Offer to
Purchase, (ii) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase) and (iii) any other
documents required by the Letter of Transmittal.
The Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend the period of time during which the
Offer is open (but subject to the terms and conditions of the Merger
Agreement) by giving oral or written notice of such extension to the
Depositary. Any such extension will be followed, as soon as practicable, by
public announcement thereof, no later than 9:00 a.m. New York City time, on
the next business day after the previously scheduled Expiration Date.
Tenders of Shares made pursuant to the Offer will be irrevocable, except that
Shares tendered may be withdrawn at any time prior to the Expiration Date
and, unless previously accepted for payment, may also be withdrawn after
September 6, 1997. If the Purchaser is delayed in its acceptance or purchase
of or payment for Shares or is unable to purchase or pay for Shares for any
reason, then, without prejudice to the Purchaser's rights, tendered Shares
may be retained by the Depositary on behalf of the Purchaser and may not be
withdrawn except as described in the Offer to Purchase. For a withdrawal to
be effective, a written or facsimile transmission notice of withdrawal must
be timely received by the Depositary at one of its addresses specified on the
back cover of the Offer to Purchase. Any such notice of withdrawal must
specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and, if certificates representing such
Shares have been delivered or otherwise identified to the Depositary, the
name(s) in which such certificate(s) is (are) registered, if different from
the name of the person tendering
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<PAGE>
such Shares. If certificates have been delivered or otherwise identified to
the Depositary, then prior to the physical release of such certificates, the
tendering shareholder must also submit the serial numbers shown on the
particular certificates evidencing such Shares and the signature on the
notice of withdrawal must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an
office, branch or agency in the United States or any other institution that
is a member of the Medallion Signature Guaranty Program (each being referred
to herein as an "Eligible Institution"). If Shares have been tendered
pursuant to the procedure for book-entry tender set forth in the Offer to
Purchase, the notice of withdrawal must specify the name and account
number(s) of the account(s) at the applicable Book-Entry Transfer Facility to
be credited with the withdrawn Shares. All questions as to the form and
validity (including time of receipt) of notices of withdrawal will be
determined by the Purchaser, in its sole discretion, whose determination
shall be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference. The Company has provided the Purchaser with the Company's
shareholder list and security position listings for the purpose of
disseminating the Offer to holders of Shares. The Offer to Purchase and the
related Letter of Transmittal will be mailed to record holders of Shares and
will be furnished to brokers, dealers, banks and similar persons whose names,
or the names of whose nominees, appear on the shareholder list or, if
applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain important
information which should be read carefully before any decision is made with
respect to the Offer.
Questions and requests for assistance or for additional copies of the Offer
to Purchase and the related Letter of Transmittal and other tender offer
materials may be directed to the Information Agent or the Dealer Manager at
their respective telephone numbers and locations as set forth below, and
copies will be furnished promptly at the Purchaser's expense. The Purchaser
will not pay any fees or commissions to any broker or dealer or any other
person (other than the Dealer Manager) for soliciting tenders of Shares
pursuant to the Offer.
The Information Agent for the Offer is:
[MacKenzie Logo]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll-Free (800) 322-2885
The Dealer Manager for the Offer is:
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<PAGE>
Gleacher NatWest Inc.
660 Madison Avenue
New York, New York 10021
(212) 418-4209 (call collect)
July 9, 1997
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