SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 29, 1998
Spice Entertainment Companies, Inc.
(Exact Name of Registrant as specified in its Charter)
Delaware 0-21150 11-2917462
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
536 Broadway, New York, NY 10012
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number,
including area code: (212) 941-1434
Item 5. Other Events.
On May 29, 1998, Playboy Enterprises, Inc. ("PEI"), Spice Entertainment
Companies, Inc. ("Spice"), New Playboy, Inc. ("Holdco"), Playboy Acquisition
Corp., a wholly-owned Holdco subsidiary, and Spice Acquisition Corp., a wholly
owned Holdco subsidiary, entered into an Agreement and Plan of Merger ("Merger
Agreement") whereby PEI will acquire Spice through the merger of Spice
Acquisition Corp. with and into Spice (the "Merger"). For each share of Spice
common stock, Spice stockholders will receive the following from PEI:
-- $3.60 in cash; and
-- 0.1371 shares of PEI Class B Stock, subject to
a collar designed to provide a minimum value of $2.20 or
a maximum value of $2.88 per Spice share.
The Merger Agreement and related agreements provide that Spice will
transfer to a newly-formed subsidiary ("Subco"), among other assets, Spice's
digital operations center for video and Internet broadcasts, certain rights to a
library of adult films, and Spice's option to acquire the outstanding stock or
assets of Emerald Media, Inc. ("EMI"). EMI operates four television networks
which distribute explicit adult movies and related programming to the C-band
direct-to-home market. The Merger Agreement also provides that Spice distribute
the Subco common stock and warrants to purchase additional Subco common stock
and warrants to purchase additional Subco common stock to Spice stockholders as
part of the Merger consideration.
Consummation of the Merger and related transactions is subject to the
approval of the Spice stockholders, receipt of various consents and other
customary closing conditions. Closing of the transaction is expected to occur
during the third calendar quarter of 1998. The foregoing description is
qualified in its entirety by reference to the full text of the Merger Agreement,
a copy of which is attached as Exhibit 2.01
On March 6, 1998, R. Christopher Yates entered into a Separation and
Non-Competition Agreement with Spice and The Home Video Channel Ltd. ("HVC")
which provided for the termination of his service agreement with HVC, a
(pound)30,000 termination payment and his resignation from the Spice Board of
Directors. On June 2, 1998, Mr. Yates resigned from the Board of Directors.
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
Exhibit Number Description
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2.01 Agreement and Plan of Merger dated as of May 29, 1998 by and
among Playboy Enterprises, Inc., New Playboy, Inc. Playboy
Acquisition Corp., Spice Acquisition Corp. and Spice
Entertainment Companies, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPICE ENTERTAINMENT COMPANIES, INC.
/s/ Daniel J. Barsky
------------------------------------
By: Daniel J. Barsky
Senior Vice President,
Secretary and General Counsel
Dated: June 11, 1998
<PAGE>
EXHIBIT INDEX
Exhibit Number Document Description
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2.01 Agreement and Plan of Merger dated as of May 29, 1998 by and
among Playboy Enterprises, Inc., New Playboy, Inc. Playboy
Acquisition Corp., Spice Acquisition Corp. and Spice
Entertainment Companies, Inc.
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PLAYBOY ENTERPRISES, INC.,
NEW PLAYBOY, INC.,
PLAYBOY ACQUISITION CORP.,
SPICE ACQUISITION CORP.,
AND
SPICE ENTERTAINMENT COMPANIES, INC.
DATED AS OF MAY 29, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 THE MERGERS 2
SECTION 1.1 The Mergers 2
SECTION 1.2 Closing; Effective Time 3
SECTION 1.3 Effects of the Mergers 3
SECTION 1.4 Certificate of Incorporation 3
SECTION 1.5 By-laws 4
SECTION 1.6 Directors 4
SECTION 1.7 Officers 4
ARTICLE 2 CONVERSION OF CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS 4
SECTION 2.1 P Merger 4
SECTION 2.2 S Merger 6
SECTION 2.3 Exchange of Certificates 9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF THE COMPANY 15
SECTION 3.1 Organization and Qualification; Subsidiaries 15
SECTION 3.2 Capitalization of the Company and its Subsidiaries 16
SECTION 3.3 Authority Relative to this Agreement; Board Action 17
SECTION 3.4 SEC Filings; Financial Statements 18
SECTION 3.5 Information Supplied 19
SECTION 3.6 Consents and Approvals; No Violations 20
SECTION 3.7 No Default 21
SECTION 3.8 No Undisclosed Liabilities; Absence of Changes 21
SECTION 3.9 Litigation 22
SECTION 3.10 Compliance with Applicable Law 22
SECTION 3.11 Employees; Employee Plans 23
SECTION 3.12 Environmental Laws and Regulations 25
SECTION 3.13 Tax Matters 26
SECTION 3.14 Library Rights 26
SECTION 3.15 Marks and Patents 27
SECTION 3.16 Material Contracts 28
SECTION 3.17 Title to Properties; Real Estate 29
SECTION 3.18 Opinion of Financial Advisor 30
SECTION 3.19 Brokers 30
SECTION 3.20 Vote Required 30
SECTION 3.21 Tangible Personal Property 30
SECTION 3.22 Insurance 31
SECTION 3.23 Transactions with Affiliates 31
SECTION 3.24 Corporate Records 31
SECTION 3.25 Investment Company Act 31
SECTION 3.26 Transaction Fees and Expenses 31
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PLAYBOY
ENTITIES 32
SECTION 4.1 Organization and Qualification; Subsidiaries 32
SECTION 4.2 Capitalization of Playboy and its Subsidiaries 33
SECTION 4.3 Authority Relative to this Agreement 34
SECTION 4.4 SEC Filings; Financial Statements 35
SECTION 4.5 Information Supplied 36
SECTION 4.6 Consents and Approvals; No Violations 37
SECTION 4.7 No Default 37
SECTION 4.8 No Undisclosed Liabilities; Absence of Changes 38
SECTION 4.9 Litigation 39
SECTION 4.10 Compliance with Applicable Law 39
SECTION 4.11 Tax Matters 39
SECTION 4.12 Brokers 40
SECTION 4.13 Investment Company Act 40
SECTION 4.14 Ownership of Holdco, Merger Sub P and Merger Sub S;
No Prior Activities 40
ARTICLE 5 COVENANTS 41
SECTION 5.1 Conduct of Business of the Company 41
SECTION 5.2 Conduct of Business of Playboy 44
SECTION 5.3 Other Actions 45
SECTION 5.4 Preparation of the S-4 Registration Statement and
Proxy Statement; Preparation of the S-1
Registration Statement; Company Stockholders
Meeting 45
SECTION 5.5 No Solicitation of Transactions by the Company 46
SECTION 5.6 Letters of the Company's Accountants 47
SECTION 5.7 Access to Information; Confidentiality 47
SECTION 5.8 Reasonable Commercial Efforts 49
SECTION 5.9 Public Announcements 50
SECTION 5.10 Indemnification 50
SECTION 5.11 Notification of Certain Matters 51
SECTION 5.12 Tax Treatment 52
SECTION 5.13 Company Affiliates 52
SECTION 5.14 SEC and Other Governmental Filings 52
SECTION 5.15 Related Transactions; Related Agreements 53
SECTION 5.16 Emerald Media Option 53
SECTION 5.17 Tax Treatment of Related Transactions 54
SECTION 5.18 Employee Benefit Plans. 54
SECTION 5.19 Optional Services Agreement. 54
ARTICLE 6 CONDITIONS TO CONSUMMATION OF THE MERGERS 54
SECTION 6.1 Conditions to Each Party's Obligations to Effect
the Mergers 54
SECTION 6.2 Conditions to the Obligations of the Company 55
SECTION 6.3 Conditions to the Obligations of Playboy 57
ARTICLE 7 TERMINATION; AMENDMENT; WAIVER 59
SECTION 7.1 Termination 59
SECTION 7.2 Effect of Termination 61
SECTION 7.3 Procedure for Termination 62
SECTION 7.4 Amendment; Extension; Waiver 62
SECTION 7.5 Fees and Expenses 63
ARTICLE 8 MISCELLANEOUS 63
SECTION 8.1 Non-Survival of Representations, Warranties
and Agreements 63
SECTION 8.2 Entire Agreement; Assignment 63
SECTION 8.3 Validity 64
SECTION 8.4 Notices 64
SECTION 8.5 Parties in Interest 65
SECTION 8.6 Severability 65
SECTION 8.7 Specific Performance 65
SECTION 8.8 Brokers 65
SECTION 8.9 Counterparts 65
SECTION 8.10 Interpretation 65
SECTION 8.11 Certain Definitions 66
SECTION 8.12 Governing Law and Venue 67
SECTION 8.13 Waiver of Jury Trial 67
<PAGE>
EXHIBITS
--------
EXHIBIT A Transfer and Redemption Agreement
EXHIBIT B Mandatory Services Agreement
EXHIBIT C-1 Subco Non-Compete Agreement
EXHIBIT C-2 Faherty Non-Compete Agreement
SCHEDULES
---------
SCHEDULE 3.2(a) Capitalization of the Company and the Company
Subsidiaries; Company Option Holders
SCHEDULE 3.2(b) Company Liens on Capital Stock
SCHEDULE 3.4(a) Company Filed SEC Reports
SCHEDULE 3.6 Company Consents and Approvals; Violations
SCHEDULE 3.7 Company Defaults
SCHEDULE 3.8 Company Undisclosed Liabilities; Absence of Changes
SCHEDULE 3.9 Company Material Litigation
SCHEDULE 3.11 Company Employees; Employee Benefit Plans
SCHEDULE 3.14(a) Library Pictures of the Company
SCHEDULE 3.14(b) Copyrights of the Company
SCHEDULE 3.15(a) Marks and Patents of the Company
SCHEDULE 3.15(b) Liens and Litigation Relating to the Marks and Patents
of the Company
SCHEDULE 3.16(a) Company Material Contracts
SCHEDULE 3.16(b) Company Defaults under Material Contracts
SCHEDULE 3.17(a) Permitted Title Encumbrances
SCHEDULE 3.17(b) Real Property Leases
SCHEDULE 3.19 Company Financial Advisor Fees and Commissions
SCHEDULE 3.21 Tangible Personal Property of the Company
SCHEDULE 3.22 Insurance of the Company
SCHEDULE 3.23 Transactions with Affiliates of the Company
SCHEDULE 3.26 Company Transaction Fees and Expenses
SCHEDULE 4.2(a) Capitalization of Playboy and the Playboy Subsidiaries
SCHEDULE 4.6 Playboy Consents and Approvals
SCHEDULE 4.7 Playboy Defaults or Violations
SCHEDULE 4.8 Playboy Undisclosed Liabilities; Absence of Changes
SCHEDULE 4.9 Playboy Material Litigation
SCHEDULE 5.13 Company Affiliates
<PAGE>
TABLE OF DEFINED TERMS
Cross Reference
Term in Agreement
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Affiliate Section 8.11
Affiliate Letter Section 5.13
Aggregate Cash Consideration Section 2.3(a)
Aggregate Company Option Consideration Section 2.2(f)
Agreement Preamble
Average Playboy Stock Price Section 2.2(d)
Cash Consideration Section 2.2(b)
Certificate of Incorporation of the
S Surviving Corporation Section 1.4(b)
Certificates of Merger Section 1.2
Claim Section 5.10
Closing Section 1.2
Closing Date Section 1.2
Code Recitals
Commonly Controlled Entity Section 3.11(c)
Company Preamble
Company Affiliate Section 5.13
Company Balance Sheet Section 3.17(a)
Company Board Section 3.3(a)
Company Certificates Section 2.3(b)
Company Charter Documents Section 3.1(b)
Company Common Stock Section 3.2(a)
Company Convertible Preferred Section 3.2(a)
Company Filed SEC Reports Section 3.4(a)
Company Financial Advisor Section 3.18
Company Material Adverse Effect Section 3.1(a)
Company Material Contracts Section 3.16(a)
Company Option Section 2.2(f)
Company Options Section 2.2(f)
Company Option Holder Section 2.2(f)
Company Permits Section 3.10
Company Plans Section 3.11(a)
Company Preferred Stock Section 3.2(a)
Company SEC Reports Section 3.4(a)
Company Securities Section 3.2(a)
Company Stockholders Meeting Section 5.4(b)
Company Stock Option Plans Section 8.11
Company Subsidiaries Section 3.1(a)
Confidentiality Agreement Section 5.7(a)
Control Section 8.11
Conversion Ratio Section 2.2(c)
DGCL Recitals
Dissenting Shares Section 2.3(j)
Effective Time of the Mergers Section 1.2
Environmental Claim Section 3.12(a)
Environmental Laws Section 3.12(a)
ERISA Section 3.11(a)
Excess Amount Section 2.2(f)
Exchange Act Section 3.2(c)
Exchange Agent Section 2.3(a)
Exchange Fund Section 2.3(a)
GAAP Section 3.4(a)
Governmental Entity Section 3.6
Holdco Preamble
HSR Act Section 5.8
Indemnified Parties Section 5.10(b)
Investment Company Act Section 3.25
Junior Preferred Section 3.2(a)
Leases Section 3.17(a)
Library Pictures Section 8.11
Liens Section 3.2(b)
Mandatory Services Agreement Recitals
Mark Section 8.11
Mergers Recitals
Merger Sub P Preamble
Merger Sub S Preamble
Merger Consideration Section 2.2(b)
NASDAQ Section 5.9
Newco Agreements Section 8.11
Newco Transactions Section 5.15(b)
New Playboy Class A Common Stock Section 4.2(b)
New Playboy Class B Common Stock Section 4.2(b)
New Playboy Common Stock Section 4.2(b)
Non-Compete Agreements Recitals
NYSE Section 2.2(d)
Old Playboy Class A Common Stock Section 4.2(a)
Old Playboy Class B Common Stock Section 4.2(a)
Old Playboy Common Stock Section 4.2(a)
Optional Services Agreement Recitals
P Merger Recitals
P Surviving Corporation Section 1.1(a)
Patent Section 8.11
Person Section 8.11
Playboy Preamble
Playboy Board Section 4.3
Playboy Charter Documents Section 4.1(b)
Playboy Entities Preamble
Playboy Filed SEC Filings Section 4.4(a)
Playboy Financial Advisor Section 4.12
Playboy Material Adverse Effect Section 4.1(a)
Playboy Option Section 2.1(d)
Playboy Options Section 2.1(d)
Playboy Permits Section 4.10
Playboy SEC Filings Section 4.4(a)
Playboy Securities Section 4.2(a)
Playboy Stock Option Plans Section 8.11
Playboy Subsidiaries Section 4.1(a)
Preferred Certificate Section 2.2(h)
Proxy Statement Section 3.5(a)
Qualified Transaction Proposal Section 5.5
Redemption Ratio Section 8.11
Related Agreements Recitals
Related Transactions Section 5.15(a)
Restated Certificate of Incorporation Section 1.4(a)
S Merger Recitals
S Merger Securities Section 2.3(a)
S Surviving Corporation Section 1.1(b)
S-1 Section 3.5(b)
S-4 Section 3.5(a)
Scheduled Marks and Patents Section 3.15(a)
SEC Section 3.4(a)
Securities Act Section 3.4(a)
Services Agreements Recitals
Stock Consideration Section 2.2(b)
Subco Recitals
Subco Common Stock Section 2.2(b)
Subco Consideration Section 2.2(b)
Subco Warrants Section 2.2(b)
Tangible Personal Property Section 3.21(a)
Taxes Section 3.13(c)
Tax Returns Section 3.13(c)
Terminating Company Breach Section 7.1(e)
Terminating Playboy Breach Section 7.1(f)
Transaction Litigation Section 3.9
Transaction Proposals Section 5.5
Transfer and Redemption Agreement Recitals
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 29, 1998 (this "Agreement"),
by and among Playboy Enterprises, Inc., a Delaware corporation ("Playboy"), New
Playboy, Inc., a Delaware corporation and a wholly-owned subsidiary of Playboy
("Holdco"), Playboy Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Holdco ("Merger Sub P"), Spice Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Holdco ("Merger Sub S" and,
together with Playboy, Holdco and Merger Sub P, the "Playboy Entities"), and
Spice Entertainment Companies, Inc., a Delaware corporation (the "Company").
WHEREAS, the respective boards of directors of Playboy, Holdco and Merger
Sub P have approved this Agreement pursuant to which, among other things, Merger
Sub P will be merged with and into Playboy (the "P Merger") on the terms and
conditions contained herein and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL");
WHEREAS, the respective boards of directors of Holdco, Merger Sub S and the
Company have approved this Agreement pursuant to which, among other things,
Merger Sub S will be merged with and into the Company (the "S Merger" and,
together with the P Merger, the "Mergers") on the terms and conditions contained
herein and in accordance with the DGCL;
WHEREAS, the Playboy Entities and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Mergers and to prescribe various conditions to the Mergers;
WHEREAS, pursuant to the Mergers, as part of the Merger Consideration, each
holder of shares of Company Common Stock shall be entitled to receive Cash
Consideration, Stock Consideration and Subco Consideration in exchange for each
share of Company Common Stock held by such holder;
WHEREAS, pursuant to the Mergers, as part of the Merger Consideration, each
holder of shares of Company Convertible Preferred shall be entitled to receive
Cash Consideration, Stock Consideration and Subco Consideration for each share
of Company Convertible Preferred held by such holder as if such share had been
converted into Company Common Stock immediately prior to the Effective Time of
the Mergers;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition to the willingness of each of the Playboy Entities and the
Company to enter into this Agreement, the Company and certain of the Company
Subsidiaries have agreed to enter into, and to cause a to-be-formed Delaware
corporation that shall be a wholly-owned subsidiary of the Company ("Subco"), to
enter into, on or prior to the Closing Date, the Transfer and Redemption
Agreement, a copy of which is attached hereto as Exhibit A (the "Transfer and
Redemption Agreement"), the Satellite Services Agreement, a copy of which is
attached hereto as Exhibit B (the "Mandatory Services Agreement"), and an
Optional Services Agreement, referred to in Section 5.19, to be negotiated (the
"Optional Services Agreement," and together with the Mandatory Services
Agreement, "Services Agreements"); and
WHEREAS, for Federal income tax purposes, the transactions contemplated by
the Transfer and Redemption Agreement are intended to be treated as a redemption
of Company Common Stock under Section 302(b) of the Internal Revenue Code of
1986, as amended (the "Code"), and the Mergers are intended to qualify as
exchanges under Section 351 of the Code;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition to the willingness of the Playboy Entities to enter into this
Agreement, the Playboy Entities, the Company and J. Roger Faherty have agreed to
enter into the non-competition agreements, in the forms attached hereto as
Exhibits C-1 and C-2 (the "Non-Compete Agreements" and, collectively with the
Transfer and Redemption Agreement, the Services Agreements, and all other
agreements and documents included as exhibits to the foregoing or otherwise
contemplated to be delivered thereunder or in connection with the closing of the
transactions contemplated thereby, the "Related Agreements");
NOW, THEREFORE, in consideration of the premises and representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the Playboy Entities and the Company hereby agree as
follows:
ARTICLE 1
THE MERGERS
SECTION 1.1 The Mergers. (a) Upon the terms and subject to the conditions
of this Agreement, at the Effective Time of the Mergers and in accordance with
the DGCL, Merger Sub P shall be merged with and into Playboy. Following the P
Merger, the separate corporate existence of Merger Sub P shall cease and Playboy
shall continue as the surviving corporation (the "P Surviving Corporation") and
shall succeed to and assume all rights, properties, liabilities and obligations
of Merger Sub P in accordance with the DGCL.
(b) Upon the terms and subject to the conditions of this Agreement, at the
Effective Time of the Mergers and in accordance with the DGCL, Merger Sub S
shall be merged with and into the Company. Following the S Merger, the separate
corporate existence of Merger Sub S shall cease and the Company shall continue
as the surviving corporation (the "S Surviving Corporation") and shall succeed
to and assume all rights, properties, liabilities and obligations of the Company
in accordance with the DGCL.
SECTION 1.2 Closing; Effective Time. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.1 and subject to the satisfaction or waiver of the
conditions set forth in Article 6, the closing of the Mergers (the "Closing")
shall take place in New York City at the offices of Paul, Weiss, Rifkind,
Wharton & Garrison, as soon as practicable, but in no event later than 10:00
a.m. New York City time on the fifth Business Day after the date on which the
conditions set forth in Article 6 have been satisfied or waived by the party or
parties entitled to the benefit of such conditions, or at such other place, at
such other time or on such other date as the parties may mutually agree. The
date on which the Closing actually occurs is hereinafter referred to as the
"Closing Date". At the Closing, the parties shall cause to be filed with the
Secretary of State of the State of Delaware such certificates of merger or other
appropriate documents (such certificates and other documents being hereinafter
referred to as the "Certificates of Merger") executed in accordance with the
relevant provisions of the DGCL, and shall make all other filings, recordings or
publications required by the DGCL in connection with the Mergers. Each of the
Mergers shall become effective at the time specified in the Certificates of
Merger, which specified time shall be the same in each Certificate of Merger
(the time the Mergers become effective being the "Effective Time of the
Mergers").
SECTION 1.3 Effects of the Mergers. The Mergers shall have the effects set
forth in Section 259 of the DGCL, the Certificates of Merger and this Agreement.
SECTION 1.4 Certificate of Incorporation. (a) The Restated Certificate of
Incorporation of Playboy, as in effect immediately prior to the Effective Time
of the Mergers (the "Restated Certificate of Incorporation"), shall become, from
and after the Effective Time of the Mergers, the certificate of incorporation of
the P Surviving Corporation, until thereafter altered, amended or repealed as
provided therein and in accordance with applicable law, except that the first
article of such Restated Certificate of Incorporation shall be amended to read
"THE NAME OF THE CORPORATION IS PLAYBOY ENTERPRISES INTERNATIONAL, INC."
(b) The certificate of incorporation of the Company, as in effect
immediately prior to the Effective Time of the Mergers (the "Certificate of
Incorporation of the S Surviving Corporation"), shall become, from and after the
Effective Time of the Mergers, the Certificate of Incorporation of the S
Surviving Corporation, until thereafter altered, amended or repealed as provided
therein and in accordance with applicable law.
SECTION 1.5 By-laws. (a) The By-laws of Playboy, as in effect immediately
prior to the Effective Time of the Mergers, shall become, from and after the
Effective Time of the Mergers, the By-laws of the P Surviving Corporation, until
thereafter altered, amended or repealed as provided therein, in the Restated
Certificate of Incorporation of the P Surviving Corporation and in accordance
with applicable law.
(b) The By-laws of the Company, as in effect immediately prior to the
Effective Time of the Mergers, shall become, from and after Effective Time of
the Mergers, the By-laws of the S Surviving Corporation, until thereafter
altered, amended or repealed as provided therein, in the Certificate of
Incorporation of the S Surviving Corporation and in accordance with applicable
law.
SECTION 1.6 Directors. The directors of Playboy and Merger Sub S at the
Effective Time of the Mergers shall be the directors of the P Surviving
Corporation and the S Surviving Corporation, respectively, until the earlier of
their death, resignation or removal or until their respective successors are
duly elected or appointed and qualified, as the case may be.
SECTION 1.7 Officers. The officers of Playboy and Merger Sub S at the
Effective Time of the Mergers shall be the officers of the P Surviving
Corporation and the S Surviving Corporation, respectively, until the earlier of
their death, resignation or removal or until their respective successors are
duly elected or appointed and qualified, as the case may be.
ARTICLE 2
CONVERSION OF CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS
SECTION 2.1 P Merger. As of the Effective Time of the Mergers, by virtue of
the P Merger and without any action on the part of the holder of any shares of
Old Playboy Common Stock or any shares of capital stock of Merger Sub P:
(a) Conversion of Capital Stock of Merger Sub P. Each share of common
stock, par value $.01 per share, of Merger Sub P issued and outstanding
immediately prior to the Effective Time of the Mergers shall be converted into
one (1) fully paid and non-assessable share of common stock, par value $.01 per
share, of the P Surviving Corporation.
(b) Conversion of Old Playboy Class A Common Stock. Each share of Old
Playboy Class A Common Stock issued and outstanding immediately prior to the
Effective Time of the Mergers shall be converted into one (1) fully paid and
nonassessable share of New Playboy Class A Common Stock. As of the Effective
Time of the Mergers, all such shares of Old Playboy Class A Common Stock shall
no longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist. As of the Effective Time of the Mergers, each certificate
theretofore representing such shares of Old Playboy Class A Common Stock,
without any action on the part of Holdco, Playboy, Merger Sub P or the holders
thereof, shall be deemed to represent a number of shares of New Playboy Class A
Common Stock equivalent to that number of shares of Old Playboy Class A Common
Stock formerly represented by such certificate and shall cease to represent any
rights in any shares of Old Playboy Class A Common Stock.
(c) Conversion of Old Playboy Class B Common Stock. Each share of Old
Playboy Class B Common Stock issued and outstanding immediately prior to the
Effective Time of the Mergers shall be converted into one (1) fully paid and
nonassessable share of New Playboy Class B Common Stock. As of the Effective
Time of the Mergers, all such shares of Old Playboy Class B Common Stock shall
no longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist. As of the Effective Time of the Mergers, each certificate
theretofore representing such shares of Old Playboy Class B Common Stock,
without any action on the part of Holdco, Playboy, Merger Sub P or the holders
thereof, shall be deemed to represent a number of shares of New Playboy Class B
Common Stock equivalent to that number of shares of Old Playboy Class B Common
Stock formerly represented by such certificate and shall cease to represent any
rights in any shares of Old Playboy Class B Common Stock.
(d) Exchange of Playboy Options. (i) At the Effective Time of the
Mergers, each holder of an issued and outstanding option exercisable for shares
of either Old Playboy Class A Common Stock or Old Playboy Class B Common Stock
(each a "Playboy Option" and, collectively, the "Playboy Options") will
receive, by virtue of the P Merger and without any action on the part of the
holder thereof, options exercisable for shares of New Playboy Class A
Common Stock or New Playboy Class B Common Stock, respectively, with
substantially similar terms and conditions as Playboy Options, immediately
prior to the Effective Time of the Mergers.
(ii) As of the Effective Time of the Mergers, Holdco shall enter
into an assumption agreement with respect to each Playboy Option which shall
provide for Holdco's assumption of the obligations of Playboy under the
relevant Playboy Stock Option Plans (and any related agreement pursuant to
which options may have been granted). Prior to the Effective Time of the
Mergers, Playboy shall make such amendments, if any, to the Playboy Stock
Option Plans as shall be necessary to permit such assumption in accordance with
this Section 2.1(d).
(iii) It is the intention of the Playboy Entities that, to the
extent that ny of the Playboy Options constitutes an "incentive stock option"
(within the meaning of Section 422 of the Code) immediately prior to the
Effective Time of the Mergers, such Playboy Option shall continue to qualify as
an incentive stock option to the maximum extent permitted by Section 422 of
the Code, and that the assumption of the Playboy Option provided by this
Section 2.1 shall satisfy the conditions of Section 424(a) of the Code.
(e) Conversion of Certain New Playboy Common Stock Held by Playboy.
At the Effective Time of the Mergers, each share of New Playboy Common Stock
held by Playboy shall be converted to the right to receive $1.00 per share
payable to Playboy upon surrender of the certificate representing each such
share of New Playboy Common Stock to Holdco, and no shares of stock or other
securities of Holdco, or any other corporation shall be issuable, and no
other payment or other consideration shall be made, with respect thereto.
(f) Treasury Shares of Playboy. Each share of Old Playboy Common Stock
held in treasury by Playboy immediately prior to the Effective Time of the
Mergers shall, by virtue of the P Merger, be cancelled and retired and cease
to exist, without any conversion thereof.
SECTION 2.2 S Merger. As of the Effective Time of the Mergers, by virtue of
the S Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of the capital stock of Merger Sub S:
(a) Conversion of Capital Stock of Merger Sub S. Each share of common
stock of Merger Sub S, par value $.01 per share, issued and outstanding
immediately prior to the Effective Time of the Mergers shall be converted into
one (1) fully paid and nonassessable share of common stock, par value $.01 per
share, of the S Surviving Corporation.
(b) Conversion of Company Common Stock. Each share of Company Common
Stock (other than shares of Company Common Stock as to which dissenters' rights
are exercised and perfected under Section 262 of the DGCL and Section 2.3(j) or
are cancelled pursuant to Section 2.2(g)) issued and outstanding immediately
prior to the Effective Time of the Mergers shall be converted into and
represent the right to receive in exchange therefor (X) from Holdco,
(i) the Cash Consideration (as defined below), and (ii) the number of
fully paid and nonassessable shares of New Playboy Class B Common Stock equal
to the Conversion Ratio (as such Conversion Ratio may be adjusted in
accordance with Section 2.2(c)) (the "Stock Consideration"), and (Y) from
the Company (as described in the Transfer and Redemption Agreement), (i)
the number of fully paid and non-assessable shares of common stock of Subco,
par value $.01 per share ("Subco Common Stock"), equal to the Redemption
Ratio and (ii) warrants to purchase additional shares of Subco Common Stock
(such warrants to be in such amounts and on such terms as shall be determined by
the Company) (the "Subco Warrants", and together with the Subco Common Stock,
the "Subco Consideration"), payable to the holder thereof, without, in the
case of the Cash Consideration, interest thereon, upon surrender of the
certificate representing such share of Company Common Stock to the S Surviving
Corporation; provided, however, that each holder of Company Common Stock shall
receive, in lieu of any fractional shares of New Playboy Class B Common Stock
that such holder would otherwise receive pursuant to this Section 2.2(b), cash
equal to the proportionate liquidation value of any such fractional shares
pursuant to terms set forth in Section 2.3; and further provided, that in any
event, if, between the date of this Agreement and the Effective Time of the
Mergers, the outstanding shares of Old Playboy Class B Common Stock shall
have been changed, reclassified or converted into a different number of shares
or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination, conversion
or exchange of shares, the Conversion Ratio shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination, conversion or exchange of shares. The aggregate
consideration provided to holders of Company Common Stock pursuant to this
Section 2.2(b) shall be referred to as the "Merger Consideration". At the
Effective Time of the Mergers, all such shares of Company Common Stock shall no
longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each certificate which immediately prior to the Effective
Time of the Mergers evidenced any such shares shall thereafter represent the
right to receive, upon surrender of such certificate in accordance with the
provisions of Section 2.3, the Merger Consideration into which such shares have
been converted in accordance herewith. The holders of certificates previously
evidencing shares of Company Common Stock outstanding immediately prior to the
Effective Time of the Mergers shall cease to have any rights with respect
thereto (including, without limitation, any rights to vote or to receive
dividends and distributions in respect of such shares), except as otherwise
provided herein or by law. For purposes of this Agreement, the term "Cash
Consideration" shall mean $3.60.
(c) Conversion Ratio. For purposes of this Agreement, the term
"Conversion Ratio" shall mean 0.1371 or such number as may be calculated
by the next succeeding sentence. In the event that the Average Playboy Stock
Price is either less than $16.042 or greater than $20.988, the Conversion
Ratio shall be subject to adjustment as follows:
(i) if the Average Playboy Stock Price is less than $16.042,
then the Conversion Ratio shall be equal to the quotient obtained by dividing
$2.20 by the Average Playboy Stock Price; and
(ii) if the Average Playboy Stock Price is greater than
$20.988, the Conversion Ratio shall be equal to the quotient obtained by
dividing $2.88 by the Average Playboy Stock Price.
(d) Average Playboy Stock Price. For purposes of this Agreement, the
"Average Playboy Stock Price" shall mean the average of the reported closing
sales prices per share of the Old Playboy Class B Common Stock quoted on the New
York Stock Exchange (the "NYSE"), as reported by Bloomberg L.P., for the twenty
(20) consecutive trading days immediately preceding the fifth business day prior
to the Effective Time of the Mergers; provided, however, that if the Old Playboy
Class B Common Stock does not trade on any day in such period, the closing price
per share for such day shall mean the average of the closing bid and asked
prices of Old Playboy Class B Common Stock on such day.
(e) Joint Press Release. Promptly after the close of trading on the
NYSE on the twentieth day of the twenty trading days referred to in the
immediately preceding paragraph, Playboy and the Company shall issue a joint
press release, in a form approved by Playboy and the Company, publicly
announcing the Conversion Ratio and the amount of the Cash Consideration.
(f) Conversion of Options. (i) At the Effective Time of the Mergers,
each outstanding option, warrant, call, subscription, stock appreciation
right or other right or agreement obligating the Company to issue, transfer or
sell shares of Company Common Stock (each a "Company Option" and, collectively,
the "Company Options"), shall, subject to the agreement of the holder thereof
(the "Company Option Holder"), be deemed to have been exercised and each such
Company Option Holder shall receive from Holdco against surrender of the Company
Option and in settlement and cancellation of each such Company Option, an amount
of consideration per Company Option calculated as follows:
(A) if the exercise price of such Company Option is
less than the Cash Consideration, (x) an amount of cash equal to the Cash
Consideration less the exercise price of such Company Option, and (y) the Stock
Consideration; and
(B) if the exercise price of such Company Option is
greater than or equal to the Cash Consideration, an amount of shares of New
Playboy Class B Common Stock equal to (x) the Stock Consideration less (y) the
amount by which the exercise price of such Company Option exceeds the value of
the Cash Consideration.
Notwithstanding the foregoing, (1) if any Person holds Company Options,
certain of which have an exercise price that is less than the aggregate Cash
Consideration payable to such holder with respect to such Company Options and
certain of which have an exercise price that is more than the aggregate Cash
Consideration payable to such holder with respect to such Company Options, the
aggregate exercise price of all of such Company Option Holder's Company Options
shall first be applied to reduce the aggregate Cash Consideration payable to
such holder pursuant to this Section 2.2(f) prior to the reduction, if any, of
the Stock Consideration payable to such holder and (2) if the exercise price of
a Company Option is greater than the aggregate Cash Consideration (such excess
being referred to as the "Excess Amount"), the holder of such Company Option may
elect to pay to the Company an amount equal to the Excess Amount in cash in
order to receive the full amount of the Stock Consideration to which such holder
is entitled pursuant to this Section 2.2(f) without any reduction thereof
pursuant to clause (B) of this Section 2.2(f)(i).
(ii) In addition, each Company Option Holder shall receive
from the Company with respect to each share of Company Common Stock subject
to such Company Option against receipt of the Company Option, the number of
fully paid and non-assessable shares of Subco Common Stock equal to the
Redemption Ratio and such number of Subco Warrants to be issued in accordance
with Section 2.2(b) with respect to each share of Company Common Stock. The
aggregate consideration provided to all Company Option Holders pursuant to this
Section 2.2(f) shall be referred to as the "Aggregate Company Option
Consideration".
(iii) With respect to those Company Option Holders who do
not agree to the exercise of any Company Options, such Company Options
shall, upon exercise thereof and against receipt of the Company Option, receive
in settlement and cancellation therefor an amount of consideration calculated
pursuant to clauses (i) and (ii) of this Section 2.2(f).
(g) Treasury Shares. Each share of Company Common Stock and Company
Convertible Preferred held in treasury by the Company and each share of Company
Common Stock and Company Convertible Preferred owned by any of the Playboy
Entities or any direct or indirect wholly-owned subsidiary of any of the Playboy
Entities immediately prior to the Effective Time of the Mergers shall, by virtue
of the S Merger and without any action on the part of the holder thereof, be
cancelled and retired and cease to exist without any conversion thereof.
(h) Conversion of Company Convertible Preferred. Each share of
Company Convertible Preferred (other than shares of Company Convertible
Preferred as to which dissenters' rights are exercised and perfected under
Section 262 of the DGCL and Section 2.3(j) or are cancelled pursuant to Section
2.2(g)) issued and outstanding immediately prior to the Effective Time of the
Mergers shall be converted into and represent the right to receive in exchange
therefor the amount of Merger Consideration pursuant to Section 2.2(b) as such
holder would have been entitled to receive had such shares of Company
Convertible Preferred been converted into shares of Company Common Stock
immediately prior to the Effective Time of the Mergers.
SECTION 2.3 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time of the Mergers,
Playboy shall appoint Harris Trust and Savings Bank to act as exchange
agent in the Mergers (the "Exchange Agent") pursuant to an exchange agent
agreement on terms reasonably satisfactory to each of Playboy and the Company,
for purposes of effecting the exchange for the Merger Consideration. At the
Effective Time of the Mergers, Holdco shall deposit with the Exchange Agent, for
the benefit of the holders of shares of Company Common Stock and Company
Convertible Preferred, for exchange in accordance with this Article 2, through
the Exchange Agent: (i) cash in the aggregate amount equal to the product of (x)
the Cash Consideration multiplied by (y) the number of shares of Company Common
Stock outstanding immediately prior to the Effective Time of the Mergers
(including such number of shares of Company Common Stock as the holders of
Company Convertible Preferred would have been entitled to receive if such shares
of Company Convertible Preferred had been converted into Company Common Stock
immediately prior to the Effective Time of the Merger) (the "Aggregate Cash
Consideration"), and (ii) certificates representing the aggregate number of
shares of New Playboy Class B Common Stock as determined pursuant to Section 2.2
and (iii) cash in lieu of fractional shares pursuant to Section 2.3(e)(i). At
the Effective Time of the Mergers, the Company shall deposit with the Exchange
Agent, for the benefit of the holders of the shares of Company Common Stock and
Company Convertible Preferred, for exchange in accordance with this Article 2,
through the Exchange Agent, certificates representing shares of Subco Common
Stock in an amount equal to the aggregate number of shares of Company Common
Stock multiplied by the Redemption Ratio and certificates representing the Subco
Warrants to be issued pursuant to Section 2.2(b). For purposes of this
Agreement, the Cash Consideration, such shares of New Playboy Class B Common
Stock, cash in lieu of fractional shares of New Playboy Class B Common Stock,
such shares of Subco Common Stock, together with any dividends or distributions
with respect thereto, and such Subco Warrants are hereinafter referred to as the
"Exchange Fund" and such shares of New Playboy Class B Common Stock and Subco
Common Stock and such Subco Warrants are hereinafter collectively referred to as
the "S Merger Securities". The Exchange Agent shall, pursuant to irrevocable
instructions, make the payments provided for in Section 2.2(b) out of the
Exchange Fund. The Exchange Agent shall deliver the S Merger Securities out of
the Exchange Fund as directed by Playboy or Holdco.
(b) Exchange Procedures. Promptly after the Effective Time of the
Mergers, Playboy or Holdco shall instruct the Exchange Agent to mail to
each holder of record of (i) a certificate or certificates which immediately
prior to the Effective Time of the Mergers represented outstanding shares of the
Company Common Stock and (ii) a certificate or certificates which immediately
prior to the Effective Time of the Mergers represented outstanding shares of
Company Convertible Preferred (collectively, the "Company Certificates") (other
than those holders who have exercised dissenters' rights pursuant to Section 262
of the DGCL and have not subsequently withdrawn or lost such rights) whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.2(b), (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon delivery of the Company Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Playboy or Holdco may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Company Certificates in exchange for the Merger
Consideration. Upon surrender of a Company Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed, and
such other documents as reasonably may be required by the Exchange Agent
pursuant to such instructions, and acceptance thereof by the Exchange Agent,
each holder of a Company Certificate shall be entitled to receive in exchange
therefor, (A) the Cash Consideration that such holder has the right to receive
pursuant to Section 2.2(b) or 2.2(h), (B) certificates representing the S Merger
Securities that such holder has the right to receive pursuant to the provisions
of this Article 2, (C) any dividends or other distributions to which such holder
is entitled pursuant to Section 2.3(c) and (D) cash in respect of fractional
shares of New Playboy Class B Common Stock as provided in Section 2.3(e)(i), and
the Company Certificate so surrendered shall forthwith be cancelled. The
Exchange Agent shall accept such Company Certificate upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices. After the
Effective Time of the Mergers, there shall be no further transfer on the books
and records of the Company or its transfer agent of Company Certificates, and if
such Company Certificates are presented to the Company or its transfer agent for
transfer, they shall be cancelled against delivery of the Cash Consideration,
certificates representing the S Merger Securities and cash in respect of
fractional shares of New Playboy Class B Common Stock. If any certificates for S
Merger Securities are to be issued in a name other than that in which the
Company Certificate surrendered for exchange is registered, it shall be a
condition of such exchange that the Company Certificate so surrendered shall be
properly endorsed, with the signature guaranteed, or otherwise in proper form
for transfer and that the Person requesting such exchange shall pay to the
Company or its transfer agent any transfer or other taxes required by reason of
the issuance of certificates representing such S Merger Securities in the name
other than that of the registered holder of the Company Certificate surrendered,
or establish to the satisfaction of the Company or its transfer agent that such
tax has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.3, each Company Certificate shall be deemed at any time after the
Effective Time of the Mergers to represent only the right to receive upon such
surrender the Cash Consideration, certificates representing the S Merger
Securities to which such holder is entitled, cash in respect of fractional
shares of New Playboy Class B Common Stock and other dividends, distributions or
payments as contemplated by this Article 2 or to perfect such holder's right to
receive payment for such holder's shares pursuant to Section 262 of the DGCL and
Section 2.3(j) hereof if such holder has validly exercised and not withdrawn or
lost such holder's right to receive payment for such holder's shares pursuant to
Section 262 of the DGCL. Subject to applicable law, following surrender of any
such Company Certificate, there shall be paid to the record holder thereof, the
Cash Consideration and the certificates representing the shares of the S Merger
Securities issued in exchange therefor, as well as, (x) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of New
Playboy Class B Common Stock to which such holder is entitled pursuant to
Section 2.3(e)(i), (y) at the time of such surrender, the amount of dividends or
other distributions or payments with a record date after the Effective Time of
the Mergers theretofore paid with respect to such shares of S Merger Securities,
and (z) at the appropriate payment date, the amount of dividends or other
distributions or payments with a record date after the Effective Time of the
Mergers but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of S Merger Securities. In no event
shall Persons entitled to receive such dividends, distributions or payments be
entitled to receive any interest thereon.
(c) Distributions with Respect to Unexchanged Shares of Company
Common Stock. No dividends or other distributions or payments declared or
made after the Effective Time of the Mergers with respect to shares of New
Playboy Class B Common Stock with a record date after the Effective Time of the
Mergers shall be paid to the holder of any unsurrendered Company Certificate
with respect to the shares of New Playboy Class B Common Stock represented
thereby and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to this Section 2.3 until the holder of record of such
Company Certificate shall surrender such Company Certificate.
(d) Further Ownership Rights. The Cash Consideration and the S
Merger Securities comprising the Merger Consideration issued upon the
surrender for exchange of Company Certificates in accordance with the terms of
this Article 2, together with any dividends, distributions or payments
contemplated by Section 2.3(b) and any cash in lieu of fractional shares as
contemplated by Section 2.3(e)(i), shall be deemed to have been issued (and
paid) in full satisfaction of all rights pertaining to the shares of Company
Common Stock or Company Convertible Preferred theretofore represented by such
Company Certificates. If, after the Effective Time of the Mergers, Company
Certificates are presented to the S Surviving Corporation or the Exchange Agent
for any reason, they shall be cancelled and exchanged as provided in this
Article 2.
(e) No Fractional Shares. (i) No certificates or scrip
evidencing fractional shares of New Playboy Class B Common Stock shall be
issued upon the surrender for exchange of the Company Certificates, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of the S Surviving Corporation. In lieu of any such
fractional share, each holder of shares of Company Common Stock or Company
Convertible Preferred who would otherwise have been entitled to a fraction of a
share of New Playboy Class B Common Stock upon surrender of Company Certificates
for exchange shall be paid upon such surrender cash (without interest) in an
amount equal to such fraction multiplied by the closing price per share of Old
Playboy Class B Common Stock on the date of the Effective Time of the Mergers.
(ii) No certificates or scrip evidencing fractional shares of
Subco Common Stock or fractional Subco Warrants shall be issued upon the
surrender for exchange of the Company Certificates, and such fractional
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Subco. In lieu of any such fractional share, any fractional
interest of a share of Subco Common Stock or a Subco Warrant shall be rounded up
to one (1) share of Subco Common Stock or one (1) Subco Warrant, respectively,
and each holder of shares of Company Common Stock or Company Convertible
Preferred who would otherwise have been entitled to a fraction of a share of
Subco Common Stock upon surrender of Company Certificates for exchange shall be
entitled to one (1) share of Subco Common Stock or one (1) Subco Warrant,
respectively, on the date of the Effective Time of the Mergers.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the former stockholders of the Company for
twelve months after the Effective Time of the Mergers shall be delivered to
Playboy, upon demand, and any former stockholders of the Company who have not
theretofore complied with this Article 2 shall thereafter look only to Playboy
for payment of their claim for any Merger Consideration and any dividends or
distributions or other payments with respect to Company Common Stock or any
payments pursuant to Section 262 of the DGCL.
(g) Withholding Rights. Playboy or the Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock,
Company Convertible Preferred or Company Options such amounts as Playboy or the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of applicable state, local or
foreign tax law; provided, that (i) any such deduction and withholding shall
first be made from the Cash Consideration payable to such holder and (ii) to the
extent that the aggregate amount of such deduction and withholding exceeds the
aggregate amount of the Cash Consideration payable to such holder, such
deduction and withholding shall then be made from the Stock Consideration
payable to such holder (except to the extent that such holder makes a cash
payment to the Company to be applied to such deduction and withholding in lieu
of deducting and withholding from the Stock Consideration). A schedule of
deductions and withholdings pursuant to this Section 2.3(g) shall be prepared by
the Company and delivered to Playboy for Playboy's review and comments;
provided, that the final determination of such deductions and withholdings shall
be made by Playboy. To the extent that amounts are so withheld by Playboy or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common
Stock or Company Convertible Preferred in respect of which such deduction and
withholding was made by the S Surviving Corporation or the Exchange Agent.
(h) No Liability. None of the Playboy Entities, the Company,
or the Exchange Agent shall be liable to any Person in respect of any Cash
Consideration or the S Merger Securities comprising the Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(i) Lost, Stolen or Destroyed Certificates. If any Company
Certificate shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Company Certificate,
upon the making of an affidavit of that fact by the holder thereof, such shares
of New Playboy Class B Common Stock as may be required pursuant to Section 2.2;
provided, however, that Playboy may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Company Certificate to deliver a bond in such sum as it may reasonably
direct as indemnity against any claim that may be made against Playboy or the
Exchange Agent with respect to the Company Certificate alleged to have been
lost, stolen or destroyed.
(j) Dissenters' Rights. Notwithstanding any provision of this
Agreement to the contrary, any shares of Company Common Stock or Company
Convertible Preferred outstanding immediately prior to the Effective Time of the
Mergers held by a holder who has demanded and perfected the right, if any, for
appraisal of those shares in accordance with the provisions of Section 262 of
the DGCL and as of the Effective Time of the Mergers has not withdrawn or lost
such right to such appraisal ("Dissenting Shares") shall not be converted into
or represent a right to receive the Merger Consideration pursuant to Section
2.2, but the holder shall only be entitled to such rights as are granted by the
DGCL. If a holder of shares of Company Common Stock who demands appraisal of
those shares under the DGCL shall effectively withdraw or lose (through failure
to perfect or otherwise) the right to appraisal, then, as of the Effective Time
of the Mergers or the occurrence of such event, whichever last occurs, those
shares shall be converted into and represent only the right to receive the
Merger Consideration as provided in Section 2.2, without interest, upon
compliance with the provisions, and subject to the limitations, of Section 2.3.
The Company shall give Playboy (i) prompt notice of any written demands for
appraisal of any shares of Company Common Stock or Company Convertible
Preferred, attempted withdrawals of such demands, and any other instruments
served pursuant to the DGCL and received by the Company relating to
stockholders' rights of appraisal, and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Playboy,
voluntarily make any payment with respect to any demands for appraisal of
Company Common Stock or Company Convertible Preferred, offer to settle or settle
any such demands or approve any withdrawal of any such demands.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Playboy Entities as
follows:
SECTION 3.1 Organization and Qualification; Subsidiaries.
(a) Each of the Company and each of the Persons in which the Company
owns or controls, directly or indirectly, at least a fifty percent voting
or economic interest (collectively, the "Company Subsidiaries") has been duly
organized, and is validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as the case may be, and has
the requisite power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted, except where the failure
to be so organized, existing or in good standing or to have such power,
authority and governmental approvals could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Each of the
Company and the Company Subsidiaries is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. For purposes of this Agreement, "Company Material Adverse Effect" means
any change, event or effect (i) in, on or relating to the business of the
Company and the Company Subsidiaries that is, or is reasonably likely to be,
materially adverse to the business, assets (including intangible assets),
liabilities (contingent or otherwise), condition (financial or otherwise),
prospects or results of operations of the Company and the Company Subsidiaries
taken as a whole, other than (A) any change or effect arising out of general
economic conditions in the United States or (B) a change in the market price of
the Company Common Stock not accompanied by one or more other changes, events or
effects of the type described above in this clause (i); or (ii) that may prevent
or materially delay the performance of this Agreement or the Related Agreements
by the Company or any of the Company Subsidiaries or the consummation of the
transactions contemplated by this Agreement or the Related Agreements
(including, without limitation, the Mergers and the Related Transactions).
(b) The copies of the Company's Certificate of Incorporation, as
amended to the date hereof, and the Company's Amended and Restated By-laws,
as amended to the date hereof (collectively, the "Company Charter Documents"),
that are exhibits to the Company's annual report on Form 10-K for the year ended
December 31, 1997, are complete and correct copies thereof. The Company Charter
Documents and all comparable organizational documents of the Company
Subsidiaries are in full force and effect.
SECTION 3.2 Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of
(i) 25,000,000 shares of common stock, par value $.01 per share ("Company
Common Stock"), of which, as of April 30, 1998, approximately 11,666,438 shares
were issued and outstanding, and (ii) 10,000,000 shares of preferred stock, par
value $.01 per share (the "Company Preferred Stock"), 50,000 of which have been
designated Convertible Preferred Stock Series 1997-A (the "Company Convertible
Preferred") and 300,000 of which have been designated Series B Junior
Participating Preferred Stock (the "Junior Preferred") and, of which, as of
April 30, 1998, approximately 26,850 shares of Company Convertible Preferred
were issued and outstanding and no shares of Junior Preferred were issued and
outstanding. All of the issued and outstanding shares of Company Common Stock
and Company Preferred Stock have been duly authorized, validly issued and are
fully paid, nonassessable and free of preemptive rights. As of April 30, 1998,
approximately 4,457,528 shares of Company Common Stock were reserved for
issuance and issuable upon or otherwise deliverable in connection with the
exercise of outstanding Company Options issued pursuant to the Company Stock
Option Plans. Schedule 3.2(a) to this Agreement sets forth, as of the date
hereof, (i) the Persons to whom Company Options have been granted, (ii) the
exercise price for the Company Options held by each such Person and (iii) the
number of vested and unvested Company Options. Except as disclosed in the
Company Filed SEC Reports and as set forth on Schedule 3.2(a) to this Agreement,
since April 1, 1998, no shares of the Company's capital stock have been issued
other than pursuant to the exercise of Company Options already in existence on
such date, and, since April 1, 1998, no stock options have been granted by the
Company to any Person. Except as set forth above, as set forth on Schedule
3.2(a) to this Agreement, or as contemplated in the Related Transactions, as of
the date hereof, there are outstanding (i) no shares of capital stock or other
voting securities of the Company, (ii) no securities of the Company or any
Company Subsidiary convertible into or exchangeable for shares of capital stock
or voting securities of the Company, (iii) no options, warrants or other rights
to acquire from the Company or any Company Subsidiary, and no obligations of the
Company or any Company Subsidiary to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of the Company, (iv) no equity equivalents, interests in the
ownership or earnings of the Company or any Company Subsidiary or other similar
rights (including stock appreciation rights) (the items listed in subclauses
(i), (ii), (iii) and (iv) being referred to, collectively, as "Company
Securities") and (v) no obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any Company Securities. Except as set
forth on Schedule 3.2(a) to this Agreement, there are no stockholder agreements,
voting trusts or other agreements or understandings to which the Company is a
party or by which it is bound relating to the voting or registration of any
shares of capital stock of the Company.
(b) Each outstanding share of capital stock of each Company
Subsidiary is duly authorized, validly issued, fully paid and nonassessable
and each such share owned by the Company or a Company Subsidiary is free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, limitations on voting rights, charges and other encumbrances of
any nature whatsoever (collectively, "Liens"), except as set forth on Schedule
3.2(b) to this Agreement or where failure to own such shares free and clear
could not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. There are no outstanding contractual
obligations of the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in or make any other investment (in the form of a loan, capital
contribution of otherwise) in any Company Subsidiary or any other Person.
(c) The Company Common Stock constitutes the only class of securities
of the Company or any Company Subsidiary registered or required to be
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
SECTION 3.3 Authority Relative to this Agreement; Board Action.
(a) The Company has, or will have, all necessary corporate
power and authority to execute and deliver this Agreement and the Related
Agreements to which it is a party and to consummate the transactions
contemplated by this Agreement or the Related Agreements (including, without
limitation, the Mergers and the Related Transactions). The execution and
delivery of this Agreement and the Related Agreements to which it is a party and
the consummation of the transactions contemplated by this Agreement or the
Related Agreements (including, without limitation, the Mergers and the Related
Transactions) have been duly and unanimously approved by the board of directors
of the Company (the "Company Board"), and no other corporate proceedings on the
part of the Company are, or will be, necessary to authorize this Agreement or
the Related Agreements to which it is a party or to consummate the transactions
contemplated by this Agreement or the Related Agreements (including, without
limitation, the Mergers and the Related Transactions) (other than, with respect
to the Mergers, the approval and adoption of this Agreement by the holders of a
majority of the then outstanding shares of Company Common Stock). This Agreement
and the Related Agreements to which it is a party have been, or will be,
assuming the due authorization, execution and delivery of the same by each of
the other parties hereto or thereto, duly and validly executed and delivered by
the Company constitute, or will constitute, valid, legal and binding agreements
of the Company, enforceable against the Company in accordance with their
respective terms, subject to (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and
(ii) general principles of equity (regardless of whether considered in a
proceeding at law or in equity).
(b) The Company Board has recommended that the stockholders of the
Company approve and adopt this Agreement.
SECTION 3.4 SEC Filings; Financial Statements.
(a) Since December 31, 1994, the Company has filed all forms,
reports and documents (including all exhibits thereto) (the "Company SEC
Reports") required to be filed with the Securities and Exchange Commission (the
"SEC") each of which has complied in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Exchange Act, each as in effect on the dates such forms, reports and
documents were filed other than as set forth on Schedule 3.4(a). The Company has
heretofore delivered to or made available to Playboy, in the form filed with the
SEC (including any amendments and all exhibits thereto) the following (the
"Company Filed SEC Reports"): (i) its Annual Reports on Form 10-K for each of
the fiscal years ended December 31, 1995, December 31, 1996, and December 31,
1997, (ii) all definitive proxy statements relating to the Company's meetings of
stockholders (whether annual or special) held since December 31, 1994 and prior
to the date of this Agreement and (iii) all other reports or registration
statements filed prior to the date of this Agreement by the Company with the SEC
since December 31, 1994 (other than reports on Form 10-Q or on Form 8-K filed
before May 15, 1998). None of the Company SEC Reports contained, when filed, any
untrue statement of a material fact or omitted to state a material fact required
to be stated or incorporated by reference therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Company
included or incorporated by reference in the Company SEC Reports complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto and all of such
financial statements fairly present, in all material respects, in conformity
with generally accepted accounting principles applied on a consistent basis
("GAAP") (except as may be indicated in the notes thereto and except that the
unaudited financial statements may not include all notes thereto required by
GAAP), the consolidated financial position of the Company and the Company
Subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject, in the case of
the unaudited interim financial statements, to normal year-end adjustments),
except as set forth on Schedule 3.4(a). Since March 31, 1998, there has not been
any change, or any application or request for any change, by the Company or any
Company Subsidiary in accounting principles, methods or policies for financial
accounting or tax purposes.
(b) The Company has heretofore made available to Playboy a
complete and correct copy of any material amendments or modifications,
which have not yet been filed with the SEC, to agreements, documents or other
instruments which prior to the date of this Agreement had been filed by the
Company with the SEC pursuant to the Securities Act or the Exchange Act.
SECTION 3.5 Information Supplied.
(a) None of the information supplied or to be supplied by the
Company concerning the Company, Subco or the Company Subsidiaries for
inclusion or incorporation by reference in (i) the Registration Statement on
Form S-4 to be filed with the SEC by Playboy in connection with the issuance of
shares of New Playboy Class B Common Stock in the Mergers and the prospectus
contained therein (the "S-4") will, at the time the S-4 is filed with the SEC
and at the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and (ii) the proxy statement, including the prospectus referred to in clause (i)
above, relating to the Company Stockholders Meeting to be held in connection
with the transactions contemplated by this Agreement and the Related Agreements
(the "Proxy Statement") will, at the date mailed to stockholders and at the time
of the Company Stockholders Meeting to be held in connection with such
transactions, 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. If, at any time prior to the Effective Time of the Mergers, any
event with respect to the Company, the Company Subsidiaries or any of their
respective officers and directors should occur which is required to be described
in an amendment of, or a supplement to, the S-4 or the Proxy Statement, the
Company shall promptly so advise Playboy and such event shall be so described,
and such amendment or supplement (which Playboy shall have a reasonable
opportunity to review and comment upon) shall be promptly filed with the SEC
and, as required by law, disseminated to the stockholders of the Company. The
Proxy Statement, insofar as it relates to the Company Stockholders Meeting to
vote on the Mergers and, if necessary, the Related Transactions, will comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to any information supplied by
any of the Playboy Entities which is contained or incorporated by reference in,
or furnished in connection with the preparation of, the S-4 or the Proxy
Statement.
(b) None of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in the registration
statement on Form S-1, or any other appropriate form, to be filed with the SEC
by the Company in connection with the registration of shares of Subco (the
"S-1") will, at the time the S-1 is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. If at any time prior to
the Effective Time of the Mergers, any event with respect to the Company, the
Company Subsidiaries, Subco or any of their respective officers and directors
should occur which is required to be described in an amendment of, or a
supplement to, the S-1, the Company shall promptly so advise Playboy and such
event shall be so described, and such amendment or supplement (which Playboy
shall have a reasonable opportunity to review and approve) shall be promptly
filed with the SEC and, as required by law, disseminated to the stockholders of
the Company.
SECTION 3.6 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the filing and recordation of the Certificates of
Merger as required by the DGCL, or as set forth on Schedule 3.6 to this
Agreement, no filing, registration or submission with or notice to, and no
permit, authorization, consent or approval of or with, any court or tribunal or
administrative, governmental or regulatory body, agency or authority (each a
"Governmental Entity") is, or will be, necessary for the execution and delivery
by the Company of this Agreement or the Related Agreements to which the Company
is a party, or the consummation by the Company of the transactions contemplated
by this Agreement or the Related Agreements (including, without limitation, the
Mergers and the Related Transactions), except consents or approvals the failure
of which to obtain could not reasonably be expected to have a Company Material
Adverse Effect. Except as set forth on Schedule 3.6 to this Agreement, no
consent or approval of any third party is, or will be, necessary for the
execution and delivery by the Company of this Agreement or the Related
Agreements to which the Company or any of the Company Subsidiaries is a party or
the consummation by the Company of the transactions contemplated by this
Agreement or the Related Agreements (including, without limitation, the Mergers
and the Related Transactions). Except as set forth on Schedule 3.6 to this
Agreement, none of the execution, delivery and performance by the Company of
this Agreement or the Related Agreements to which the Company or any of the
Company Subsidiaries is a party, or the consummation by the Company or any of
the Company Subsidiaries of the transactions contemplated by this Agreement or
the Related Agreements (including, without limitation, the Mergers and the
Related Transactions) will (a) conflict with or result in any breach of any
provision of the Company Charter Documents or any comparable organizational
document of any Company Subsidiary, (b) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration
or Lien) under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which the Company or any of the Company Subsidiaries is a party or
by which any of them or any of their respective properties or assets may be
bound, or (c) assuming that all consents, permits, approvals, authorizations and
other actions described in the preceding sentence have been obtained and all
filings described in the preceding sentence have been made, violate any order,
writ, injunction, decree, law, statute, rule or regulation applicable to the
Company or any of the Company Subsidiaries or any of their respective properties
or assets, except in the case of clause (b) or (c) for violations, breaches or
defaults which could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
SECTION 3.7 No Default. Except as set forth on Schedule 3.7 to this
Agreement, none of the Company or any Company Subsidiary is in default or
violation (and no event has occurred which with due notice or the lapse of time
or both would constitute a default or violation) of any term, condition or
provision of (i) the Company Charter Documents or comparable organizational
documents of any Company Subsidiary, (ii) any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company or any Company Subsidiary is now a party or by which any of them or
any of their respective properties or assets may be bound or (iii) any order,
writ, injunction, decree, law, statute, rule or regulation applicable to the
Company, any Company Subsidiary or any of their respective properties or assets,
except in the case of clause (ii) or (iii) for violations, breaches or defaults
that could not reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect.
SECTION 3.8 No Undisclosed Liabilities; Absence of Changes. Except as and
to the extent disclosed in the Company Filed SEC Reports or on Schedule 3.8 to
this Agreement, as of March 31, 1998, neither the Company nor any Company
Subsidiary had any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, and whether due or to become due or asserted
or unasserted, which would be required by GAAP to be reflected in, reserved
against or otherwise described in the consolidated balance sheet of the Company
(including the notes thereto) as of such date or which could reasonably be
expected to have a Company Material Adverse Effect. Except as disclosed by the
Company in the Company Filed SEC Reports or on Schedule 3.8 to this Agreement,
since March 31, 1998, the business of the Company and the Company Subsidiaries
has been carried on only in the ordinary and usual course and in a manner
consistent with past practice, neither the Company nor any Company Subsidiary
has incurred any liabilities of any nature, whether or not accrued, contingent
or otherwise and whether due or to become due or asserted or unasserted, which
could reasonably be expected to have, and there have been no events, changes or
effects with respect to the Company or any Company Subsidiary having or which
could reasonably be expected to have, a Company Material Adverse Effect. Except
as disclosed in the Company Filed SEC Reports or on Schedule 3.8 to this
Agreement, since March 31, 1998, there has not been (i) any material change by
the Company in its accounting methods, principles or practices, (ii) any
declaration, setting aside or payment of any dividend or distribution in respect
of shares of the capital stock of the Company or any redemption, purchase or
other acquisition of any of the Company Securities or (iii) any increase in the
compensation or benefits or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of the
Company or any Company Subsidiary except in the ordinary course of business
consistent with past practice or except as required by applicable law.
SECTION 3.9 Litigation. Except as disclosed in the Company Filed SEC
Reports or on Schedule 3.9, 3.14(b) or 3.15(b) to this Agreement, there is no
suit, claim, action, proceeding or investigation pending or, to the knowledge of
the Company, threatened against the Company or any Company Subsidiary or any of
their respective properties or assets which (a) if adversely determined, could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, or (b) questions the validity of this Agreement or any
of the Related Agreements or any action to be taken by the Company in connection
with the consummation of the transactions contemplated by this Agreement or the
Related Agreements (including, without limitation, the Mergers and the Related
Transactions) or could otherwise prevent or delay the consummation of such
transactions (any suit, claim, action, proceeding or investigation described in
this clause (b) being herein referred to as "Transaction Litigation"). Except as
disclosed by the Company, neither the Company nor any Company Subsidiary is
subject to any outstanding order, writ, injunction or decree which, to the
knowledge of the Company or any Company Subsidiary, could reasonably be expected
to have a Company Material Adverse Effect.
SECTION 3.10 Compliance with Applicable Law. Except as disclosed in the
Company Filed SEC Reports, the Company and all Company Subsidiaries have made or
have obtained and hold all registrations, filings, submissions, certificates,
determinations, permits, licenses, variances, exemptions, orders and approvals
of all Governmental Entities necessary for the lawful conduct of their
respective businesses (collectively, the "Company Permits"), except where the
failure to obtain any such Company permit would not have a Company Material
Adverse Effect. Except as disclosed in the Company Filed SEC Reports, the
Company and all Company Subsidiaries are in compliance, in all material
respects, with the terms of the Company Permits. To the knowledge of the
Company, no material deficiencies have been asserted by any Governmental Entity
with respect to such registrations, filings or submissions. Except as disclosed
by the Company in the Company Filed SEC Reports, the businesses of the Company
and the Company Subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity and except for violations or
possible violations which could not reasonably be expected to have a Company
Material Adverse Effect. Except as disclosed in the Company Filed SEC Reports,
no material investigation or review by any Governmental Entity with respect to
the Company or any Company Subsidiary is pending or, to the knowledge of the
Company, threatened, nor, to the knowledge of the Company, has any Governmental
Entity indicated an intention to conduct the same.
SECTION 3.11 Employees; Employee Plans.
(a) Schedule 3.11 to this Agreement contains a true and complete
list of each "employee benefit plan" (within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including, without limitation, multiemployer plans within the meaning of ERISA
Section 3(37)), stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, welfare benefit, collective bargaining,
bonus, incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject to
ERISA (including any funding mechanism therefor now in effect or required in the
future as a result of the transactions contemplated by this Agreement or the
Related Agreements or otherwise), whether formal or informal, oral or written,
under which any employee or former employee of the Company or any Company
Subsidiary has any present or future right to benefits or under which the
Company has any present or future liability. All such plans, agreements,
programs, policies and arrangements shall be collectively referred to as the
"Company Plans".
(b) With respect to each Company Plan, the Company has delivered or
made available to Playboy a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the extent
applicable: (i) any related trust agreement or other funding instrument; (ii)
the most recent determination letter, if applicable; (iii) any summary plan
description and other written communications (or a description of any oral
communications) by the Company or any Company Subsidiary to its employees
concerning the extent of the benefits provided under a Company Plan; and (iv)
for the three most recent years (A) the Form 5500 and attached schedules, (B)
audited financial statements, (C) actuarial valuation reports and (D) attorneys'
response or responses to an auditor's request for information.
(c) Except as disclosed on Schedule 3.11 to this Agreement,
(i) each Company Plan has been established and administered in all material
respects (A) in accordance with its terms, and (B) in compliance with the
applicable provisions of ERISA, the Code and other applicable laws, rules and
regulations; (ii) each Company Plan which is intended to be qualified within the
meaning of Code Section 401(a) is so qualified and has received a favorable
determination letter as to its qualification, and, to the Company's knowledge,
nothing has occurred, whether by action or failure to act, that could reasonably
be expected to cause the loss of such qualification; (iii) for each Company Plan
that is a "welfare plan" within the meaning of ERISA Section 3(1), neither the
Company nor any Company Subsidiary has nor will have any material liability or
obligation under any plan which provides medical or death benefits with respect
to current or former employees of the Company beyond their termination of
employment (other than coverage mandated by law); (iv) to the Company's
knowledge, no event has occurred and no condition exists that would subject the
Company, either directly or by reason of its affiliation with any Commonly
Controlled Entity (as defined below), to any material tax, fine, lien, penalty
or other liability imposed by ERISA, the Code or other applicable laws, rules
and regulations; (v) for each Company Plan with respect to which a Form 5500 has
been filed, no change has occurred with respect to the matters covered by the
most recent Form since the date thereof other than such change as would not be
reasonably likely to result in a material liability to the Company; and (vi) no
"reportable event" (as such term is defined in ERISA Section 4043), "prohibited
transaction" (as such term is defined in ERISA Section 406 and Code Section
4975) or "accumulated funding deficiency" (as such term is defined in ERISA
Section 302 and Code Section 412 (whether or not waived)) has occurred with
respect to any Company Plan. For the purposes of this Section 3.11, "Commonly
Controlled Entity" means any entity (whether or not incorporated) other than the
Company that, together with the Company, is or was a member of a controlled
group of corporations or organizations within the meaning of Section 414(b) of
the Code, of a group of trades or businesses under common control within the
meaning of Section 414(c) of the Code, or of an affiliated service group within
the meaning of Section 414(m) of the Code.
(d) Except as disclosed on Schedule 3.11 to this Agreement, with
respect to each Company Plan that is not a multiemployer plan within the
meaning of Section 4001(a)(3) of ERISA but is subject to Title IV of ERISA, no
material adverse change has occurred subsequent to the most recent actuarial
valuation report.
(e) Except as disclosed on Schedule 3.11 to this Agreement, with
respect to any multiemployer plan (within the meaning of ERISA Section
4001(a)(3)) to which the Company or any Commonly Controlled Entity has any
liability or contributes (or has contributed or had an obligation to contribute
within the past five years): (i) no Commonly Controlled Entity has incurred
within the past five years any withdrawal liability under Title IV of ERISA or
would be subject to such liability if, as of the date of the Closing, any
Commonly Controlled Entity were to engage in a complete withdrawal (as defined
in ERISA section 4203) or partial withdrawal (as defined in ERISA section 4205)
from any such multiemployer plan; and (ii) no such multiemployer plan is in
reorganization or insolvent (as those terms are defined in ERISA sections 4241
and 4245, respectively).
(f) Except as disclosed on Schedule 3.11 to this Agreement or as
would not be reasonably likely to result in a material liability to the
Company, with respect to any Company Plan that is not a multiemployer plan
within the meaning of section 4001(a)(3) of ERISA, (i) no actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or, to the knowledge of the Company, threatened, (ii) no facts or
circumstances exist that could give rise to any such actions, suits or claims,
and (iii) no written or oral communication has been received from the PBGC in
respect of any Company Plan subject to Title IV of ERISA concerning the funded
status of any such plan or any transfer of assets and liabilities from any such
plan in connection with the transactions contemplated herein.
(g) Except as disclosed on Schedule 3.11 to this Agreement, no Company
Plan exists that could result in the payment to any present or former
employee of the Company or any Company Subsidiary of any money or other property
or accelerate or provide any other rights or benefits to any present or former
employee of the Company or any Company Subsidiary as a result of the
transactions contemplated by this Agreement whether or not such payment would
constitute a parachute payment within the meaning of Code section 280G.
(h) Except as disclosed on Schedule 3.11 to this Agreement,
neither the Company nor any Company Subsidiary is a party to any collective
bargaining or other labor union contract applicable to employees of the Company
or any Company Subsidiary and no collective bargaining agreement or other labor
union contract is being negotiated by the Company or any Company Subsidiary. As
of the date of this Agreement, there is no labor dispute, strike or work
stoppage against the Company or any Company Subsidiary pending or threatened in
writing which will materially interfere with the respective business activities
of the Company or any Company Subsidiary. As of the date of this Agreement, none
among the Company, any Company Subsidiary, or their respective representatives
or employees, has committed within the past five years any unfair labor
practices in connection with the operation of the respective businesses of the
Company or any Company Subsidiary, and there is no charge or complaint against
the Company or any Company Subsidiary by the National Labor Relations Board or
any comparable state or foreign agency pending or threatened in writing.
(i) Except as disclosed on Schedule 3.11 to this Agreement,
as of the Effective Time of the Mergers, none among the Company or the
Company Subsidiaries has incurred any liability or obligation under the Worker
Adjustment and Retraining Notification Act, as it may be amended from time to
time, and, to the Company's knowledge, within the 90-day period immediately
following the Effective Time of the Mergers will not incur any such liability or
obligation if, during such 90-day period, only terminations of employment in the
normal course of operations occur.
SECTION 3.12 Environmental Laws and Regulations.
(a) Except as disclosed in the Company Filed SEC Reports, (i) each
of the Company and each Company Subsidiary is in compliance, in all
material respects, with all applicable federal, state and local laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) (collectively, "Environmental Laws"),
which compliance includes, but is not limited to, the possession by the Company
and the Company Subsidiaries of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof; (ii) neither the Company nor any Company
Subsidiary has received written notice of, or, to the knowledge of the Company,
is the subject of, any material action, cause of action, claim, investigation,
demand or notice by any Person or entity alleging liability under or
non-compliance with any Environmental Law (an "Environmental Claim"); and (iii)
to the knowledge of the Company, there are no circumstances that are reasonably
likely to prevent or interfere with such material compliance in the future.
(b) Except as disclosed in the Company Filed SEC Reports, to the
knowledge of the Company, there are no material Environmental Claims that
are pending or threatened against any Person whose liability for any
Environmental Claim the Company or any Company Subsidiary has or may have
retained or assumed either contractually or by operation of law.
SECTION 3.13 Tax Matters. (a) The Company and each Company Subsidiary have
timely filed (or have had timely filed on their behalf), or will timely file or
cause to be timely filed, all material Tax Returns required by applicable law to
be filed by or with respect to any of them prior to or as of the Effective Time
of the Mergers. All such Tax Returns are, or will be at the time of filing,
true, correct and complete in all material respects.
(b) The Company and each Company Subsidiary have paid (or have had
paid on their behalf), or where payment is not yet due have established (or
have had established on their behalf) or will establish or cause to be
established, on or prior to the Effective Time of the Mergers, an adequate
accrual for the payment of, all material Taxes due with respect to any period
ending prior to or as of the Effective Time of the Mergers.
(c) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Taxes" shall mean all federal, state, local and foreign
taxes, and other assessments of a similar nature (whether imposed directly
or through withholding), including any interest, additions to tax or penalties
applicable thereto.
(ii) "Tax Returns" shall mean all federal, state, local and
foreign returns, declarations, statements, reports, schedules, forms and
information returns and any amended returns relating to Taxes.
SECTION 3.14 Library Rights. (a) Schedule 3.14(a) sets forth a list of all
Library Pictures, which is true and complete in all material respects. The
Company or one or more of the Company Subsidiaries owns, is licensed or
otherwise possesses any part or all of the copyrights therein or otherwise has
exploitative rights in the Library Pictures in the territories, for the terms
and in the forms of media reflected in Schedule 3.14(a).
(b) Schedule 3.14(b) sets forth a true and complete list in all
material respects of the following information as of the date hereof with
respect to copyrights registered (or for which application for registration has
been filed) with the United States Copyright Office relating to the Library
Pictures owned by the Company or any of the Company Subsidiaries: (i) owner(s)
of record; (ii) year of copyright registration (or filing date of the
application for registration if registration is not yet complete) and, if
applicable, renewal; and (iii) copyright registration numbers and, if
applicable, renewal numbers. All copyrights owned by the Company or the Company
Subsidiaries with respect to the Library Pictures have been duly registered or
applied for, as the case may be, in the United States Copyright Office and are
valid and subsisting in the United States, except where the failure to be so
valid and subsisting would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. With respect to all of the
Library Pictures as to which rights of exploitation have been licensed to the
Company or any of the Company Subsidiaries, (x) to the best of the Company's
knowledge, the Person granting the respective license thereof to the Company or
any of the Company Subsidiaries holds or has applied for, as the case may be, a
duly registered copyright on such Library Picture and (y) to the best of the
Company's knowledge, all of the copyrights referred to in clause (x) above are
valid and subsisting, except where the failure to be so valid and subsisting
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. There are no Liens or lawsuits, whether pending
or, to the best of the Company's knowledge, threatened, involving or against any
of the copyrights identified on Schedule 3.14(b) which would, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect.
To the best knowledge of the Company and the Company Subsidiaries, there are no
registrations for copyright that conflict with the copyrights identified in
Schedule 3.14(b), nor any infringement or potential infringement of such
copyrights by a third party, nor third party claims against such copyrights
which would, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. To the best knowledge of the Company and the
Company Subsidiaries, none of the Library Pictures is in the public domain in
the United States.
SECTION 3.15 Marks and Patents. (a) Each Mark and each Patent that
currently is registered or applied for in the United States Patent and Trademark
Office or other similar office in any foreign jurisdiction and owned by the
Company or a Company Subsidiary is identified in Schedule 3.15(a) (the
"Scheduled Marks and Patents"). All Scheduled Marks and Patents are valid and
subsisting except where the failure to be so valid and subsisting, individually
or in the aggregate, would not reasonably be expected to have a Company Material
Adverse Effect. Other than as set forth in Schedule 3.15(a), the Company and the
Company Subsidiaries own or license all Marks and Patents used in connection
with the Company's business.
(b) Except as set forth on Schedule 3.15(b) or as would not
reasonably be expected to have a Company Material Adverse Effect, there are
no Liens or lawsuits, whether pending or, to the best of the Company's
knowledge, threatened, involving or against any of the Scheduled Marks and
Patents. To the best knowledge of the Company and the Company Subsidiaries,
there are no Marks or Patents that infringe on the Scheduled Marks and Patents
or third party claims against the Scheduled Marks and Patents which would,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
SECTION 3.16 Material Contracts.
(a) Set forth on Schedule 3.16(a) is a correct and complete list of
each of the following contracts and agreements (and all amendments,
modifications and supplements thereto and all related letters to which the
Company is a party affecting the obligations of any party thereunder) to which
the Company or any Company Subsidiaries is a party or by which any of its or
their properties or assets are bound, true and correct copies of which have been
delivered or otherwise made available to Playboy: (i) each employment,
consulting, non-competition, severance, golden parachute or indemnification
contract (including, without limitation, any contract to which the Company is a
party involving employees of the Company) which contemplates payments equal to
or in excess of $50,000; (ii) each licensing (including each license, sublicense
or other agreement under which the Company or any of the Company Subsidiaries is
either licensor or licensee of any Marks or Patents), production, output,
merchandising, distribution, affiliation or service agreement, except for
licensing agreements (x) no one of which contemplates payments of more than
$2,000 and (y) for which payments do not, in the aggregate, exceed $100,000;
(iii) contracts granting a right of first refusal or first negotiation; (iv)
each partnership or joint venture agreement; (v) each agreement for the
acquisition, sale or lease of properties or assets of the Company (by merger,
purchase or sale of assets or stock or otherwise) in which the aggregate amount
to be paid or received by the Company and the Company Subsidiaries is equal to
or in excess of $50,000; (vi) each material contract or agreement with any
Governmental Entity; (vii) each agreement relating to indebtedness of the
Company or any Company Subsidiary or guarantees of indebtedness by the Company
or any Company Subsidiary in excess of $50,000; (viii) each noncompetition,
exclusivity or other agreement restricting the ability of the Company or any
Company Subsidiary to operate its business as now, or contemplated to be,
conducted, except for any such agreement which could not reasonably be expected
to have a Company Material Adverse Effect; (ix) each material agreement between
the Company and any of its officers, its directors, holders of 5% of the
outstanding Company Common Stock or other Affiliates of the Company or any
Company Subsidiary; and (x) all commitments and agreements to enter into any of
the foregoing, or, with respect to affiliation agreements, all material
commitments and agreements to enter into any affiliation agreements
(collectively, the "Company Material Contracts").
(b) Except as set forth on Schedule 3.16(b) to this Agreement:
(i) Each Company Material Contract is in full force and effect
and there is no default under any Company Material Contract either by the
Company or, to the knowledge of the Company, by any other party thereto, except
as set forth on Schedule 3.7, 3.9 or 3.15(b), and no event has occurred that
with the lapse of time or the giving of notice or both would constitute a
default thereunder by the Company or, to the knowledge of the Company, any other
party, in any such case in which such default or event could reasonably be
expected to have a Company Material Adverse Effect.
(ii) No party to any such Company Material Contract has given
notice to the Company of or made a claim against the Company with respect
to any breach or default thereunder, in any such case in which such breach or
default could reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.17 Title to Properties; Real Estate. (a) The Company and each
Company Subsidiary has valid leasehold title to all real property leased by it,
and good title to its owned properties and assets, tangible and intangible,
including, without limitation, the properties and assets reflected in the
December 31, 1997 balance sheet previously delivered to Playboy (the "Company
Balance Sheet") (except personal properties since sold or otherwise disposed of
in the ordinary course of business and except for personal properties and assets
not material to the operation of its business), free and clear of all Liens
whatsoever, except as set forth on Schedule 3.17(a) to this Agreement or (i) as
reflected in the Company Balance Sheet, (ii) Liens in respect of pledges or
deposits under workmen's compensation, unemployment insurance, social security
and pubic liability laws and other similar legislation, (iii) Liens imposed by
law, such as carriers', warehousemen's or mechanics' liens incurred in good
faith in the ordinary course of business, (iv) Liens for taxes not yet due and
payable, and (v) such imperfections of title and other Liens, if any, which do
not individually or in the aggregate materially interfere with the value or the
use of such properties or assets or otherwise could not reasonably be expected
to have a Company Material Adverse Effect. The Company does not own any real
property.
(b) The Company has previously made available to Playboy correct
and complete copies of all leases or agreements under which the Company or
any Company Subsidiary is lessee of, or holds or operates, any real property
owned by any third party which is material to the operation of its business,
which leases are set forth on Schedule 3.17(b) to this Agreement (the "Leases").
The Leases have not been modified or amended (orally or in writing) except as
set forth on Schedule 3.17(b). The Leases are in full force and effect and
neither the Company nor any Company Subsidiary is in default under the terms of
any such lease or agreement. The Company or the applicable Company Subsidiary
and, to the knowledge of the Company, each lessor, have in all material respects
performed all the obligations required to be performed by it or them to date
under the Leases. The Company or any applicable Company Subsidiary has not given
any notice of default to any lessor under the Leases and, to the knowledge of
the Company or the applicable Company Subsidiary, there are no defaults by any
lessor under the Leases.
(c) All structures and other improvements located on such real
property are in sufficient condition to enable the Company to conduct its
business as now being conducted.
SECTION 3.18 Opinion of Financial Advisor. Furman Selz LLC (the "Company
Financial Advisor") has delivered to the Company its opinion to the effect that,
as of the date of this Agreement, the Cash Consideration and Stock Consideration
is fair to the Company's stockholders from a financial point of view, which
opinion has been confirmed in writing and accompanied by an authorization to
include a copy of such opinion in the Proxy Statement. The Company has delivered
a signed copy of such written opinion to Playboy.
SECTION 3.19 Brokers. Except as set forth on Schedule 3.19 to this
Agreement, no broker, finder or investment banker other than the Company
Financial Advisor is entitled to any brokerage, finder's or other fee or
commission in connection with the Mergers or the other transactions contemplated
by this Agreement or the Related Agreements (including, without limitation, the
Related Transactions) based upon arrangements made by or on behalf of the
Company. The Company has heretofore made available to Playboy a complete and
correct copy of all agreements between the Company and the Company Financial
Advisor pursuant to which the Company Financial Advisor would be entitled to any
payment relating to the Mergers or such other transactions.
SECTION 3.20 Vote Required. The affirmative vote of at least a majority of
the outstanding shares of Company Common Stock is the only vote of the holders
of any class or series of the Company's capital stock necessary (under
applicable law or otherwise) to approve this Agreement and the Related
Agreements and the transactions contemplated by this Agreement or the Related
Agreements (including, without limitation, the Mergers and the Related
Transactions).
SECTION 3.21 Tangible Personal Property. (a) The machinery, equipment,
furniture, fixtures and other tangible personal property ("Tangible Personal
Property") owned, leased or used by the Company or any of the Company
Subsidiaries (including, without limitation, the Company's studio and uplinking
facilities and assets) is in the aggregate sufficient and adequate to carry on
their respective businesses as currently conducted and is, in the aggregate, in
good operating condition and repair, normal "wear and tear" excepted.
SECTION 3.22 Insurance. Schedule 3.22 to this Agreement sets forth a list
of all policies or binders of fire, liability, workmen's compensation or other
insurance held by or on behalf of the Company or any of the Company Subsidiaries
(specifying the insurer, the policy number or covering note number with respect
to binders). Correct and complete copies of such policies or binders have been
delivered or made available to Playboy. None of the Company or any of the
Company Subsidiaries (i) is in default with respect to any material provision
contained in any such policy or binder, or (ii) has received a notice of
cancellation or non-renewal of any such policy or binder. All of such insurance
is in full force and effect and all premiums due and payable thereon have been
paid.
SECTION 3.23 Transactions with Affiliates . Except as set forth on Schedule
3.23 to this Agreement or the Company SEC Reports, since April 1, 1998, no event
has occurred that would be required to be reported as a Certain Relationship or
Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by the
SEC.
SECTION 3.24 Corporate Records. The minute books of the Company and each of
the Company Subsidiaries heretofore have been made available to Playboy for its
inspection and contain true and complete, in all material respects, records of
all meetings and consents in lieu of meetings of the Company Board (or any
committee of the Company Board), stockholders of the Company and the board of
directors of each of the Company Subsidiaries.
SECTION 3.25 Investment Company Act. Neither the Company nor any of the
Company Subsidiaries is an "investment company" or to the Company's knowledge a
company "controlled" by, or an "affiliated company" with respect to, an
"investment company" required to register under the Investment Company Act of
1940, as amended (the "Investment Company Act").
SECTION 3.26 Transaction Fees and Expenses. Set forth on Schedule 3.26 is a
correct and complete list of all fees and expenses paid by the Company, the
Company Subsidiaries and Subco in connection with the transactions contemplated
by this Agreement and by the Related Agreements as of the date of this
Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE PLAYBOY ENTITIES
The Playboy Entities, jointly and severally, hereby represent and warrant
to the Company as follows:
SECTION 4.1 Organization and Qualification; Subsidiaries.
(a) Each of Playboy and each of the Persons in which Playboy owns or
controls directly or indirectly at least a fifty percent voting or economic
interest (collectively, the "Playboy Subsidiaries"), has been duly organized and
is validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization, as the case may be, and has the requisite
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals could not
reasonably be expected to have, individually or in the aggregate, a Playboy
Material Adverse Effect (as defined below). Each of Playboy and the Playboy
Subsidiaries is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that could not reasonably be expected to have, individually
or in the aggregate, a Playboy Material Adverse Effect. For purposes of this
Agreement, "Playboy Material Adverse Effect" means any change, event or effect
(i) in, on or relating to the business of Playboy and the Playboy Subsidiaries
that is, or is reasonably likely to be, materially adverse to the business,
assets (including intangible assets), liabilities (contingent or otherwise),
condition (financial or otherwise), prospects or results of operations of
Playboy and the Playboy Subsidiaries taken as a whole, other than (A) any change
or effect arising out of general economic conditions in the United States or (B)
a change in the market price of the Old Playboy Class B Common Stock not
accompanied by one or more other changes, events or effects of the type
described above in this clause (i); or (ii) that may prevent or materially delay
the performance of this Agreement or the Related Agreements by any of the
Playboy Entities or the consummation of the transactions contemplated by this
Agreement or the Related Agreements (including, without limitation, the Mergers
and the Related Transactions).
(b) The copies of Playboy's Certificate of Incorporation and By-laws
(collectively, the "Playboy Charter Documents") that are set forth as Exhibits
to Playboy's Transitional Report on Form 10-K dated December 31, 1997, and the
Certificate of Incorporation and By-laws of Holdco, Merger Sub P and Merger Sub
S in the forms previously delivered to the Company, are complete and correct
copies thereof. The Playboy Charter Documents and all comparable organizational
documents of the Playboy Subsidiaries are in full force and effect. Playboy is
not in violation of any of the provisions of the Playboy Charter Documents.
Simultaneously with the Closing, Holdco will amend its Certificate of
Incorporation to change its name to "Playboy Enterprises, Inc."
SECTION 4.2 Capitalization of Playboy and its Subsidiaries.
(a) The authorized capital stock of Playboy consists of
(i) 7,500,000 shares of Playboy Class A Common Stock, par value $.01 per
share ("Old Playboy Class A Common Stock"), of which, as of April 30, 1998,
approximately 4,748,954 shares were issued and outstanding, and (ii) 30,000,000
shares of Class B Common Stock, par value $.01 per share ("Old Playboy Class B
Common Stock" and, together with the Playboy Class A Common Stock, "Old Playboy
Common Stock"), of which, as of April 30, 1998, approximately 15,792,588 shares
were issued and outstanding. All of the issued and outstanding shares of Old
Playboy Common Stock have been duly authorized and validly issued, and are fully
paid, nonassessable and free of preemptive rights. As of April 30, 1998,
approximately 2,066,500 shares of Old Playboy Common Stock were reserved for
issuance and issuable upon or otherwise deliverable in connection with the
exercise of outstanding options and warrants. Except as disclosed in the Playboy
Filed SEC Filings and as set forth on Schedule 4.2(a) to this Agreement, since
March 31, 1998, no shares of Playboy's capital stock have been issued other than
pursuant to the exercise of stock options already in existence on such date,
and, since March 31, 1998, no stock options have been granted by Playboy to any
Person. Except as disclosed in the Playboy Filed SEC Filings, as set forth above
and as contemplated by this Agreement and the Related Agreements, as of the date
hereof, there are outstanding (i) no shares of capital stock or other voting
securities of Playboy, (ii) no securities of Playboy or any Playboy Subsidiaries
convertible into or exchangeable for shares of capital stock or voting
securities of Playboy, (iii) no options, warrants or other rights to acquire
from Playboy or any Playboy Subsidiary, and no obligations of Playboy or any
Playboy Subsidiary to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Playboy, (iv) no equity equivalents, interests in the ownership or earnings of
Playboy or any Playboy Subsidiary or other similar rights (including stock
appreciation rights) (the items listed in subclauses (i), (ii), (iii) and (iv)
being referred to, collectively, as "Playboy Securities") and (v) no obligations
of Playboy or any Playboy Subsidiary to repurchase, redeem or otherwise acquire
any Playboy Securities. Except as set forth on Schedule 4.2(a), there are no
stockholders agreements, voting trusts or other agreements or understandings to
which Playboy is a party or to which it is bound relating to the voting or
registration of any shares of capital stock of Playboy.
(b) The authorized capital stock of Holdco consists (i) of 7,500,000
shares of Class A common stock, par value $.01 per share ("New Playboy
Class A Common Stock"), none of which are issued and outstanding, and (ii)
30,000,000 shares of Class B common stock, par value $.01 per share ("New
Playboy Class B Common Stock" and, together with the New Playboy Common Stock,
"New Playboy Common Stock"), 100 of which have been validly issued, are fully
paid and non-assessable and owned by Playboy, free and clear of any Liens, other
than Liens imposed by Federal and state securities laws. The shares of New
Playboy Class B Common Stock that will be issued as part of the Merger
Consideration, will be, when issued in accordance with the terms of this
Agreement, duly authorized, validly issued, fully paid and non-assessable and
listed for trading on the NYSE. The authorized capital stock of Merger Sub P
consists of 100 shares of common stock, par value $.01 per share, all of which
have been validly issued, are fully paid and nonassessable and owned by Holdco
free and clear of any Liens, other than Liens imposed by Federal or state
securities laws. The authorized capital stock of Merger Sub S consists of 100
shares of common stock, par value $.01 per share, all of which have been validly
issued and are fully paid and non-assessable and owned by Holdco free and clear
of any Liens, other than Liens imposed by Federal and state securities laws.
(c) Each outstanding share of capital stock of each Playboy Subsidiary
is duly authorized, validly issued, fully paid and nonassessable and each
such share owned by Playboy or a Playboy Subsidiary is free and clear of any
Lien or any other limitation or restriction (including any restriction on the
right to vote or sell the same, except as may be provided as a matter of law)
except where failure to own such shares free and clear could not reasonably be
expected to have, individually or in the aggregate, a Playboy Material Adverse
Effect. There are no securities of Playboy or any Playboy Subsidiary convertible
into or exchangeable for, no options or other rights to acquire from Playboy or
any Playboy Subsidiary, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly, of, any capital stock or other securities of, or other
ownership interests in, any Playboy Subsidiary. There are no outstanding
contractual obligations of Playboy or any Playboy Subsidiary to repurchase,
redeem or otherwise acquire any outstanding shares of capital stock or other
ownership interests in any Playboy Subsidiary.
(d) The Old Playboy Class B Common Stock constitute the only class of
equity securities of Playboy or any Playboy Subsidiary registered or required to
be registered under the Exchange Act.
SECTION 4.3 Authority Relative to this Agreement. Each of the Playboy
Entities has, or will have, all necessary corporate or other power and authority
to execute and deliver this Agreement and the Related Agreements to which it is
a party and to consummate the transactions contemplated by this Agreement or the
Related Agreements (including, without limitation, the Mergers and the Related
Transactions). The execution and delivery of this Agreement and the Related
Agreements to which each of the Playboy Entities is a party and the consummation
of the transactions contemplated by this Agreement or the Related Agreements
(including, without limitation, the Mergers and the Related Transactions) have
been duly and validly authorized by the Board of Directors of Playboy (the
"Playboy Board"), the Board of Directors of each of Holdco, Merger Sub P and
Merger Sub S and the sole stockholder of each of Merger Sub P and Merger Sub S,
and no other corporate or other proceedings on the part of Playboy or any of the
other Playboy Entities are, or will be, necessary to authorize this Agreement
and the Related Agreements to which any of them is a party or to consummate the
transactions contemplated by this Agreement or the Related Agreements
(including, without limitation, the Mergers and the Related Transactions). Each
of this Agreement and the Related Agreements to which any of the Playboy
Entities is a party has been, or will be, assuming the due authorization,
execution and delivery of the same by each of the other parties hereto or
thereto, duly and validly executed and delivered by the Playboy Entities and
constitutes a valid, legal and binding agreement of each of the Playboy
Entities, enforceable against such parties in accordance with its terms, subject
to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium and other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and (ii) general principles of
equity (regardless of whether considered in a proceeding at law or in equity).
SECTION 4.4 SEC Filings; Financial Statements.
(a) Since December 31, 1994, Playboy has filed all forms, reports
and documents (including all exhibits thereto) (the "Playboy SEC Filings")
required to be filed with the SEC, each of which has complied in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act, each as in effect on the dates such forms, reports and documents were
filed. Playboy has heretofore delivered to or made available to the Company, in
the form filed with the SEC (including any amendments and all exhibits thereto),
the following (the "Playboy Filed SEC Filings"): (i) the Annual Reports on Form
10-K for each of the fiscal years ended June 30, 1995, June 30, 1996 and June
30, 1997, (ii) the Transitional Report on Form 10-K for the six months ended
December 31, 1997, (iii) all definitive proxy statements relating to Playboy's
meetings of stockholders (whether annual or special) held since December 31,
1994 and prior to the date of this Agreement and (iv) all other forms, reports
or registration statements filed prior to the date of this Agreement by Playboy
with the SEC since December 31, 1994 (other than reports on Form 10-Q or on Form
8-K filed before May 15, 1998). None of the Playboy SEC Filings or documents,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained, when filed, any untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstance under which they were made, not
misleading. The consolidated financial statements of Playboy included or
incorporated by reference in the Playboy SEC Filings complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto and all of such financial
statements fairly present in all material respects, in conformity with GAAP
(except as may be indicated in the notes thereto and except that the unaudited
financial statements may not include all notes thereto required by GAAP), the
consolidated financial position of Playboy and the Playboy Subsidiaries as of
the dates thereof and their consolidated results of operations and cash flows
for the periods then ended (subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments). Since March 31, 1998,
there has not been any change, or any application or request for any change, by
Playboy or any Playboy Subsidiary in accounting principles, methods or policies
for financial accounting or tax purposes.
(b) Playboy has heretofore made available to the Company a
complete and correct copy of any material amendments or modifications,
which have not yet been filed with the SEC, to agreements, documents or other
instruments which prior to the date of this Agreement had been filed by Playboy
with the SEC pursuant to the Securities Act or the Exchange Act.
SECTION 4.5 Information Supplied. None of the information supplied or to be
supplied by Playboy concerning any of the Playboy Entities for inclusion or
incorporation by reference in (a) the S-4 will, at the time the S-4 is filed
with the SEC and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (b) the Proxy Statement will, at the date mailed to
stockholders and at the time of the Company Stockholders Meeting to be held in
connection with the transactions contemplated hereby, 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. If, at any time
prior to the Effective Time of the Mergers, any event with respect to Playboy or
any Playboy Subsidiary or any of their respective officers and directors should
occur which is required to be described in an amendment of, or a supplement to,
the S-4 or the Proxy Statement, Playboy shall promptly so advise the Company and
such event shall be so described, and such amendment or supplement (which the
Company shall have a reasonable opportunity to review) shall be promptly filed
with the SEC and, as required by law, disseminated to the stockholders of the
Company and Playboy. The S-4 will comply as to form in all material respects
with the provisions of the Securities Act and the rules and regulations
thereunder. Notwithstanding the foregoing, Playboy makes no representation or
warranty with respect to any information supplied by the Company or the Company
Subsidiaries which is contained in or incorporated by reference in, or furnished
in connection with the preparation of, the S-4 or the Proxy Statement.
SECTION 4.6 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, and the filing and recordation of the Certificates
of Merger as required by the DGCL or as set forth on Schedule 4.6, no filing,
registration or submission with or notice to, and no permit, authorization,
consent or approval of, any Governmental Entity is, or will be, necessary for
the execution and delivery by any of the Playboy Entities of this Agreement or
any of the Related Agreements to which any of them are a party or the
consummation by any of the Playboy Entities of the transactions contemplated by
this Agreement or the Related Agreements to which it is a party (including,
without limitation, the Mergers and the Related Transactions), except where the
failure to obtain such permits, authorizations, consents or approvals or to make
such filings or give such notice could not reasonably be expected to have a
Playboy Material Adverse Effect nor prevent or materially delay the performance
of this Agreement by any of the Playboy Entities or the consummation of the
transactions contemplated by this Agreement or the Related Agreements. Except as
set forth on Schedule 4.6 to this Agreement, no consent or approval of any third
party is, or will be, necessary for the execution and delivery by any of the
Playboy Entities of this Agreement or any of the Related Agreements to which it
is a party or consummation by any of the Playboy Entities of the transactions
contemplated by this Agreement or any of the Related Agreements to which it is a
party (including, without limitation, the Mergers and the Related Transactions).
Except as set forth on Schedule 4.6 to this Agreement, none of the execution,
delivery and performance of this Agreement or any of the Related Agreements to
which any of the Playboy Entities are a party, or the consummation by any of the
Playboy Entities of the transactions contemplated by this Agreement or the
Related Agreements to which it is a party (including, without limitation, the
Mergers and the Related Transactions) will (a) conflict with or result in any
breach of any provision of the Playboy Charter Documents or any comparable
organizational documents of any of the Playboy Entities, (b) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which any of the Playboy Entities
is a party or by which any of the Playboy Entities or any of their respective
properties or assets may be bound or (c) assuming that all consents, permits,
approvals, authorizations and other actions described in the preceding sentence
have been made and all filings in the preceding sentence have been made, violate
any order, writ, injunction, decree, law, statute, rule or regulation applicable
to any of the Playboy Entities or any of their respective properties or assets,
except in the case of clause (b) or (c) for violations, breaches or defaults
which could not reasonably be expected to have, individually or in the
aggregate, a Playboy Material Adverse Effect.
SECTION 4.7. No Default. Except as set forth on Schedule 4.7 to this
Agreement, none of Playboy or any Playboy Subsidiary is in default or violation
(and no event has occurred which with due notice or the lapse of time or both
would constitute a default or violation) of any term, condition or provision of
(i) the Playboy Charter Documents or comparable organizational documents of any
Playboy Subsidiary, (ii) any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Playboy or any
Playboy Subsidiary is now a party or by which any of them or any of their
respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to Playboy, any
Playboy Subsidiary or any of their respective properties or assets, except in
the case of clause (ii) or (iii) for violations, breaches or defaults that could
not reasonably be expected to have, individually or in the aggregate, a Playboy
Material Adverse Effect nor prevent or materially delay the performance of this
Agreement by Playboy or any of the other Playboy Entities, the performance of
the Related Agreements by Playboy or any of the other Playboy Entities or the
consummation of the transactions contemplated by this Agreement and the Related
Agreements (including, without limitation, the Mergers and the Related
Transactions).
SECTION 4.8 No Undisclosed Liabilities; Absence of Changes. Except as and
to the extent disclosed in the Playboy Filed SEC Reports or on Schedule 4.8 to
this Agreement, as of March 31, 1998, neither Playboy nor any Playboy Subsidiary
had any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, and whether due or to become due or asserted or
unasserted, which would be required by GAAP to be reflected in, reserved against
or otherwise described in the consolidated balance sheet of Playboy (including
the notes thereto) as of such date or which could reasonably be expected to have
a Playboy Material Adverse Effect. Except as disclosed in the Playboy Filed SEC
Reports, since March 31, 1998, the business of Playboy and the Playboy
Subsidiaries has been carried on only in the ordinary and usual course and in a
manner consistent with past practice, neither Playboy nor any Playboy Subsidiary
has incurred any liabilities of any nature, whether or not accrued, contingent
or otherwise and whether due or to become due or asserted or unasserted, which
could reasonably be expected to have, and there have been no events, changes or
effects with respect to Playboy or any Playboy Subsidiary having or which could
reasonably be expected to have, a Playboy Material Adverse Effect. Except as
disclosed in the Playboy Filed SEC Reports, since March 31, 1998, there has not
been (i) any material change by Playboy in its accounting methods, principles or
practices, (ii) any declaration, setting aside or payment of any dividend or
distribution in respect of shares of the capital stock of Playboy or any
redemption, purchase or other acquisition of any of the Playboy Securities or
(iii) any increase in the compensation or benefits or establishment of any
bonus, insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any executive officers of
Playboy or any Playboy Subsidiary except in the ordinary course of business
consistent with past practice or except as required by applicable law.
SECTION 4.9 Litigation. Except as disclosed in the Playboy Filed SEC
Reports or on Schedule 4.9 to this Agreement, there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of Playboy, threatened
against Playboy or any Playboy Subsidiary or any of their respective properties
or assets which (a) if adversely determined, could reasonably be expected to
have, individually or in the aggregate, a Playboy Material Adverse Effect, or
(b) questions the validity of this Agreement or any of the Related Agreements or
any action to be taken by any of the Playboy Entities in connection with the
consummation of the transactions contemplated by this Agreement or the Related
Agreements (including, without limitation, the Mergers and the Related
Transactions) or could otherwise prevent or delay the consummation of such
transactions. Except as disclosed by Playboy, neither Playboy nor any Playboy
Subsidiary is subject to any outstanding order, writ, injunction or decree
which, to the knowledge of Playboy or any Playboy Subsidiary, could reasonably
be expected to have a Playboy Material Adverse Effect or would prevent or delay
the consummation of the transactions contemplated by this Agreement or the
Related Agreements (including, without limitation, the Mergers and the Related
Transactions).
SECTION 4.10 Compliance with Applicable Law. Except as disclosed in the
Playboy Filed SEC Reports, Playboy and all Playboy Subsidiaries have made or
have obtained and hold all material registrations, filings, submissions,
certificates, determinations, permits, licenses, variances, exemptions, orders
and approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (collectively, the "Playboy Permits"). Except as
disclosed in the Playboy Filed SEC Reports, Playboy and all Playboy Subsidiaries
are in compliance, in all material respects, with the terms of the Playboy
Permits. To the knowledge of Playboy, no material deficiencies have been
asserted by any Governmental Entity with respect to such registrations, filing
or submissions. Except as disclosed by Playboy in the Playboy Filed SEC Reports,
the businesses of Playboy and the Playboy Subsidiaries are not being conducted
in violation of any law, ordinance or regulation of any Governmental Entity and
except for violations or possible violations which could not reasonably be
expected to have a Playboy Material Adverse Effect. Except as disclosed in the
Playboy Filed SEC Reports, no material investigation or review by any
Governmental Entity with respect to Playboy or any Playboy Subsidiary is pending
or, to the knowledge of Playboy, threatened, nor, to the knowledge of Playboy,
has any Governmental Entity indicated an intention to conduct the same.
SECTION 4.11 Tax Matters. (a) Playboy and each Playboy Subsidiary have
timely filed (or have had timely filed on their behalf), or will timely file or
cause to be timely filed, all material Tax Returns required by applicable law to
be filed by or with respect to any of them prior to or as of the Effective Time
of the Mergers. All such Tax Returns are, or will be at the time of filing,
true, correct and complete in all material respects.
(b) Playboy and each Playboy Subsidiary have paid (or have had
paid on their behalf), or where payment is not yet due have established (or
have had established on their behalf) or will establish or cause to be
established, on or prior to the Effective Time of the Mergers, an adequate
accrual for the payment of, all material Taxes due with respect to any period
ending prior to or as of the Effective Time of the Mergers.
SECTION 4.12 Brokers. No broker, finder or investment banker, other than
Bear, Stearns & Co., Inc. (the "Playboy Financial Advisor"), is entitled to any
brokerage, finder's or other fee or commission in connection with the Mergers or
the other transactions contemplated by this Agreement or the Related Agreements
(including, without limitation, the Mergers and the Related Transactions) based
upon arrangements made by or on behalf of Playboy.
SECTION 4.13 Investment Company Act. Neither Playboy nor any of the Playboy
Subsidiaries is an "investment company" or to Playboy's knowledge a company
"controlled" by, or an "affiliated company" with respect to, an "investment
company" required to register under the Investment Company Act.
SECTION 4.14 Ownership of Holdco, Merger Sub P and Merger Sub S; No Prior
Activities. (a) Holdco is a direct, wholly-owned subsidiary of Playboy and each
of Merger Sub P and Merger Sub S is a direct, wholly-owned subsidiary of Holdco.
Each of Holdco, Merger Sub P and Merger Sub S was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement.
(b) As of the date hereof and the Effective Time of the Mergers,
except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by this
Agreement and the Related Agreements and except for this Agreement and the
Related Agreements, each of Holdco, Merger Sub P and Merger Sub S has not and
will not have incurred, directly or indirectly, through any subsidiary or
Affiliate, any obligations or liabilities or engaged in any business activities
of any type or kind whatsoever or entered into any agreements or arrangements
with any Person.
ARTICLE 5
COVENANTS
SECTION 5.1 Conduct of Business of the Company. Except as contemplated by
this Agreement, the Related Agreements and the Newco Agreements, during the
period from the date hereof and continuing until the earlier of the termination
of this Agreement and the abandonment of the transactions herein contemplated
pursuant to Section 7.1 or the Effective Time of the Mergers, the Company will,
and will cause each of the Company Subsidiaries to, conduct its operations in
the ordinary course of business consistent with past practice and, to the extent
consistent herewith, other than actions taken by the Company or any of the
Company Subsidiaries in order to facilitate the negotiation and execution of
this Agreement, the Related Agreements or the Newco Agreements and the
consummation of the transactions contemplated hereunder or thereunder which
actions would not breach any of the Company's representations, warranties,
covenants or agreements herein, with no less diligence and effort than would be
applied in the absence of this Agreement, seek to preserve substantially intact
its reputation and current business organizations, keep available the service of
its current officers and employees and preserve its relationships with
customers, suppliers, and others having significant business dealings with it to
the end that goodwill and ongoing businesses shall be unimpaired at the
Effective Time of the Mergers. Without limiting the generality of the foregoing,
and except as otherwise expressly provided in or contemplated by this Agreement,
the Related Agreements or the Newco Agreements (including, without limitation,
the Mergers, the Related Transactions and the Newco Transactions), during the
period from the date of this Agreement and prior to the earlier of the
termination of this Agreement and the abandonment of the transactions herein
contemplated pursuant to Section 7.1 or the Effective Time of the Mergers, the
Company will not and will cause the Company Subsidiaries not to, without the
prior consent of Playboy:
(a) amend the Company Charter Documents or the comparable
organizational documents of any Company Subsidiary;
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting
of options, warrants, commitments, subscriptions, rights to purchase (whether or
not contingent) or otherwise) any stock of any class or any other securities or
equity equivalents (including, without limitation, any stock options or stock
appreciation rights), except for the issuance or sale of shares of Company
Common Stock pursuant to the exercise of (i) options granted to employees or
consultants under the Company Stock Option Plans (in the ordinary course of
business and consistent with past practice) or (ii) warrants outstanding on the
date of this Agreement;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock (other than dividends or distributions made by wholly-owned Company
Subsidiaries), make any other actual, constructive or deemed distribution in
respect of any shares of its capital stock or otherwise make any payments to
stockholders in their capacity as such (other than dividends or distributions
made by wholly-owned Company Subsidiaries), or redeem or otherwise acquire any
of its securities;
(d) other than pursuant to the Related Transactions, adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any
Company Subsidiaries;
(e) other than pursuant to the Related Transactions, alter through
merger, liquidation, recapitalization, restructuring or in any other
fashion the corporate structure or ownership of any Company Subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings under existing lines of credit in the
ordinary course of business and not in excess of $250,000; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person except in the
ordinary course of business consistent with past practice and in amounts not
material to the Company and the Company Subsidiaries, taken as a whole, except
for obligations of the wholly-owned Company Subsidiaries; (iii) make any loans,
advances or capital contributions to, or investments in, any other Person (other
than to the wholly-owned Company Subsidiaries and other than pursuant to the
Newco Transactions); (iv) pledge or otherwise encumber shares of capital stock
of the Company or any Company Subsidiary; or (v) mortgage or pledge any of the
Company Subsidiaries' material assets, tangible or intangible, or create or
suffer to exist any material Lien thereupon other than in the ordinary course of
business;
(g) except as may be required by law or as contemplated by this
Agreement, any of the Related Agreements or any of the Newco Agreements,
enter into, adopt or amend (other than to accelerate the vesting of the Company
Options and to provide for the deemed exercise of them contemplated by Section
2.2(f)) or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreement, trust, plan, fund, award or other arrangement for the benefit
or welfare of any director, officer, employee or consultant in any manner, or
(except for normal increases in the ordinary course of business consistent with
past practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company or the Company Subsidiaries, or
as required under existing agreements or in the ordinary course of business
generally consistent with past practice) increase in any manner the compensation
or fringe benefits of any director, officer or employee or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock options, warrants or stock
appreciation rights);
(h) acquire, sell, lease or dispose of any assets outside the
ordinary course of business or with a value in excess of $100,000 in the
aggregate, or enter into any commitment or transaction outside the ordinary
course of business consistent with past practice (other than pursuant to the
Related Transactions and the Newco Transactions);
(i) except as may be required as a result of a change in law or in
GAAP, change any of the accounting principles or practices used by it;
(j) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory or writing-off
notes or accounts receivable other than in the ordinary course of business,
except in connection with Emerald Media, Inc. or as may be required by the SEC,
the Financial Accounting Standards Board or GAAP;
(k) (i) acquire (by merger, consolidation, or acquisition of stock,
debt securities or assets) any Person or any division thereof, any equity
interest therein or indebtedness thereof; (ii) enter into any contract,
agreement or understanding, other than in the ordinary course of business
consistent with past practice, unless such contract or agreement is terminable
at the sole option of the Company, without penalty or premium, on less than six
months' notice; (iii) authorize any new capital expenditure or expenditures
which, individually, is in excess of $25,000 or, in the aggregate, are in excess
of $100,000; or (iv) otherwise enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action that would be
prohibited by this Section 5.1(k);
(l) make (inconsistent with past practice) or revoke any tax
election or settle (except to the extent any such settlement has been
reserved for in the financial statements contained in the Company SEC Reports)
or compromise any tax liability material to the Company and the Company
Subsidiaries taken as a whole or change (or make a request to any taxing
authority to change) any material aspect of its method of accounting for tax
purposes;
(m) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than as is required to satisfy the condition set forth in
Section 6.2(h) and other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes thereto) of
the Company and the Company Subsidiaries or incurred in the ordinary course of
business consistent with past practice;
(n) enter into or amend or otherwise modify any agreement or
arrangement with Persons that are Affiliates of the Company or any Company
Subsidiary;
(o) settle or compromise any pending or threatened suit, action or
claim relating to the transactions contemplated by this Agreement, the
Related Agreements or the Newco Agreements (including, without limitation, the
Mergers, the Related Transactions and the Newco Transactions);
(p) pay more than an aggregate of $2.5 million in fees and expenses
in connection with the transactions contemplated by this Agreement and the
Related Agreements; or
(q) take, propose to any third party to take or agree in
writing or otherwise to take, any of the actions described in Sections
5.1(a) through 5.1(p) or any action which would make any of the representations
or warranties of the Company or the Company Subsidiaries contained in this
Agreement untrue or incorrect.
SECTION 5.2 Conduct of Business of Playboy. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement and the abandonment of the transactions herein contemplated pursuant
to Section 7.1 or the Effective Time of the Mergers, Playboy covenants and
agrees that Playboy shall conduct its business, and cause the businesses of the
Playboy Subsidiaries to be conducted only in, and Playboy and the Playboy
Subsidiaries shall not take any action except in the ordinary course of business
and consistent with past practice, except for actions taken by Playboy or the
Playboy Subsidiaries in order to facilitate the negotiation and execution of
this Agreement and the consummation of the transactions contemplated hereunder
which actions would not breach any of the representations, warranties, covenants
and agreements of any of the Playboy Entities herein, and shall not directly or
indirectly do, or propose to do, any of the following without the prior written
consent of the Company:
(a) amend or otherwise chang Playboy's Restated Certificat of
Incorporation or By-Laws in such a manner as to negatively affect the rights of
the holders of Old Playboy Class B Common Stock;
(b) declare, set aside, make or pay any extraordinary dividend in
respect of any of its capital stock;
(c) take any action to delist a security of Playboy from any
securities exchange; or
(d) take or agree in writing or otherwise to take any action
described in Sections 5.2(a) through (c).
SECTION 5.3 Other Actions. Each of Company and Playboy shall not and shall
cause its respective subsidiaries not to take any action or agree in writing or
otherwise to take any action that would result in (i) any of the representations
and warranties of such party (without giving effect to any "knowledge"
qualification) set forth in this Agreement that are qualified as to materiality
becoming untrue or incorrect, (ii) any of such representations and warranties
(without giving effect to any "knowledge" qualification) that are not so
qualified becoming untrue or incorrect in any material respect, (iii) any of the
conditions to the consummation the Mergers set forth in Article 6 and the
transactions contemplated by the Related Agreements (including, without
limitation, the Related Transactions) not being satisfied, or (iv) the Mergers
failing to qualify as exchanges under Section 351 of the Code.
SECTION 5.4 Preparation of the S-4 Registration Statement and Proxy
Statement; Preparation of the S-1 Registration Statement; Company Stockholders
Meeting. (a) As soon as practicable following the date of this Agreement, the
Company and Playboy shall prepare and file with the SEC a preliminary Proxy
Statement in form and substance reasonably satisfactory to each of Playboy and
the Company, Playboy shall prepare and file with the SEC the S-4, in form and
substance reasonably satisfactory to each of Playboy and the Company, in which
the Proxy Statement will be included as a prospectus, and the Company shall
prepare and file with the SEC the S-1, in form and substance reasonably
satisfactory to Playboy. Each of the Company and Playboy shall use its
reasonable commercial efforts to (i) respond to any comments of the SEC and (ii)
have the S-4 and the S-1 declared effective under the Securities Act and the
rules and regulations promulgated thereunder as promptly as practicable after
such filing or filings, and to keep the S-4 and the S-1 effective as long as is
necessary to consummate the Mergers and the Related Transactions. Each of the
Company and Playboy will use its reasonable commercial efforts to cause the
Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable after the S-4 is declared effective under the Securities Act. Each
party will notify the other promptly of the receipt of any comments from the SEC
and of any request by the SEC for amendments or supplements to the S-4, the S-1
or the Proxy Statement or for additional information and will supply the other
with copies of all correspondence between such party or any of its
representatives and the SEC, with respect to the S-4, the S-1 or the Proxy
Statement. The S-4, the S-1 and the Proxy Statement shall comply in all material
respects with all requirements of applicable law. Whenever any event occurs
which is required to be set forth in an amendment or supplement to the S-4, the
S-1 or the Proxy Statement, Playboy or the Company, as the case may be, shall
promptly inform the other of such occurrences and cooperate in filing with the
SEC or mailing to stockholders of the Company such amendment or supplement. The
Proxy Statement shall include the recommendations of the Company Board in favor
of this Agreement and the Related Agreements and the transactions contemplated
by this Agreement or the Related Agreements (including, without limitation, the
Mergers and the Related Transactions). Playboy shall also take any action
required to be taken under any applicable state securities or "blue sky" laws in
connection with the issuance of New Playboy Class B Common Stock pursuant to the
Mergers and the Company shall furnish all information concerning the Company and
the holders of the Company Common Stock and rights to acquire Company Common
Stock pursuant to the Company Stock Option Plans as may be reasonably requested
in connection with any such action.
(b) The Company will, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of
its stockholders (the "Company Stockholders Meeting") for the purpose of
obtaining the requisite approval by such stockholders of this Agreement and the
transactions contemplated by this Agreement or the Related Agreements
(including, without limitation, the Mergers, but excluding the Related
Transactions). The Company shall, through the Company Board, recommend to its
stockholders approval of this Agreement and all of such transactions.
SECTION 5.5 No Solicitation of Transactions by the Company. From the date
hereof until the earlier of the termination of this Agreement and the
abandonment of the transactions herein contemplated pursuant to Section 7.1 or
the Effective Time of the Mergers, neither the Company nor any Company
Subsidiaries shall, nor shall it or any of its subsidiaries authorize or permit
any of their respective officers, directors, employees, attorneys, accountants,
investment bankers, financial advisors, representatives, agents or other
authorized Persons to directly or indirectly (i) solicit, initiate, encourage
(including by way of furnishing information) or take any other action to
facilitate any inquiry or the making of any proposal which constitutes, or may
reasonably be expected to lead to, any acquisition or purchase of a substantial
amount of assets of, or any equity interest (other than pursuant to the exercise
of existing stock options and warrants) in, the Company or any Company
Subsidiaries or any tender offer (including a self tender offer) or exchange
offer, merger, consolidation, business combination, sale of substantially all
assets, sale of securities, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any Company Subsidiaries (other
than the transactions contemplated by this Agreement) or any other material
corporate transaction the consummation of which would or could reasonably be
expected to impede, interfere with, prevent or materially delay the transactions
contemplated by this Agreement, the Related Agreements and the Newco Agreements
(collectively, "Transaction Proposals") or agree to or endorse any Transaction
Proposal, or (ii) propose, enter into or participate in any discussions or
negotiations regarding any of the foregoing, or furnish to any other Person any
information with respect to its business, properties or assets or any of the
foregoing, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other Person to do or seek
any of the foregoing; provided, however, that the foregoing clauses (i) and (ii)
shall not apply to the extent that the Company Board shall receive a Qualified
Transaction Proposal and shall conclude in good faith on the basis of advice
from outside counsel, that such action is necessary in order for the Company
Board to act in a manner which is consistent with its fiduciary obligations
under applicable law. The Company shall notify Playboy in writing (as promptly
as practicable but within two business days) of all of the relevant details
relating to all inquiries and proposals (including, without limitation, the
identity of the Person making the Qualified Transaction Proposal and the steps
it is taking in response to such proposal) which it or any Company Subsidiary or
any such officer, director, employee, agent, investment banker, financial
advisor, attorney, accountant, broker, finder or other representative may
receive relating to any of such matters and if such inquiry or proposal is in
writing, the Company shall deliver to Playboy a copy of such inquiry or
proposal. For purposes of this Agreement, the term "Qualified Transaction
Proposal" means a Transaction Proposal that (x) the Company Board determines in
good faith, after consultation with its outside financial advisor, is reasonably
capable of being consummated and (y) is not subject to any material
contingencies relating to financing, or, if it is subject to any such material
contingencies, the Company Board determines in good faith, after consultation
with its outside financial advisor, that such financing is likely to be
obtained.
SECTION 5.6 Letters of the Company's Accountants.
(a) The Company shall use its best efforts to cause to be delivered to
Playboy a "comfort" letter of Grant Thorton L.L.P., the Company's independent
auditors, dated a date within two business days before the date on which the S-4
shall become effective and addressed to Playboy, in form and substance
reasonably satisfactory to Playboy and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the S-4.
(b) Playboy shall use its best efforts to cause to be delivered
to the Company a "comfort letter" of Coopers & Lybrand L.L.P., Playboy's
independent auditors, dated as of a date within two business days before the
date on which the S-4 shall become effective and addressed to the Company, in
form and substance reasonably satisfactory to the Company and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the S-4.
SECTION 5.7 Access to Information; Confidentiality.
(a) Upon reasonable notice during normal business hours and subject
to the restrictions contained in confidentiality agreements to which such
party is subject, between the date hereof and the Effective Time of the Mergers,
the Company will give Playboy and its authorized representatives reasonable
access to all employees, offices and other facilities and to all books and
records of the Company and the Company Subsidiaries, will permit Playboy to make
such inspections as Playboy may reasonably require and will cause the Company's
officers and those of the Company Subsidiaries to furnish Playboy with such
financial and operating data and other information with respect to the business,
properties and personnel of the Company and the Company Subsidiaries as Playboy
may from time to time reasonably request; provided, however, that no
investigation pursuant to this Section 5.7(a) shall affect or be deemed to
modify any of the representations or warranties made by the Company in this
Agreement or by any executive officer of the Company in any certificate required
to be delivered pursuant to Section 6.3(a). Playboy shall keep such information
confidential in accordance with the terms of the confidentiality agreement dated
July 16, 1997 between Playboy and the Company (the "Confidentiality Agreement").
(b) Upon reasonable notice during normal business hours and subject
to the restrictions contained in confidentiality agreements to which such
party is subject, between the date hereof and the Effective Time of the Mergers,
Playboy will give the Company and its authorized representatives reasonable
access to Christie Hefner, Linda Havard and Anthony J. Lynn, and to the
organizational documents of Playboy and the Playboy Subsidiaries, will permit
the Company to make such inspections as the Company may reasonably require and
will cause Playboy's officers and those of the Playboy Subsidiaries to furnish
the Company with such financial and operating data with respect to the business
of Playboy and the Playboy Subsidiaries as the Company may from time to time
reasonably request; provided, however, that no investigation pursuant to this
Section 5.7(b) shall affect or be deemed to modify any of the representations or
warranties made by Playboy in this Agreement or by any executive officer of
Playboy in any certificate required to be delivered pursuant to Section 6.2(a).
The Company shall keep such information confidential in accordance with the
terms of the Confidentiality Agreement.
(c) Between the date hereof and the Closing Date, the Company shall
furnish to Playboy within 45 days after the end of each fiscal quarter, an
unaudited balance sheet, income statement and statement of cash flows of the
Company on a consolidated basis, prepared in accordance with GAAP in conformity
with the practices consistently applied by the Company with respect to its
quarterly financial statements. All the foregoing in all material respects,
subject to year-end adjustments, shall be in accordance with the books and
records of the Company and fairly present the consolidated financial position of
the Company as of the last day of the period then ended.
(d) Between the date hereof and the Closing Date, Playboy shall
furnish to the Company within 45 days after the end of each fiscal quarter,
an unaudited balance sheet, income statement and statement of cash flows of
Playboy on a consolidated basis, prepared in accordance with GAAP in conformity
with the practices consistently applied by Playboy with respect to its quarterly
financial statements. All the foregoing in all material respects, subject to
year-end adjustments, shall be in accordance with the books and records of
Playboy and fairly present the consolidated financial position of Playboy as of
the last day of the period then ended.
(e) Between the date hereof and the Closing Date, the Company shall,
upon Playboy's request, furnish to Playboy a list, to be certified at
Closing by an executive officer of the Company, of each item and all information
that would, on the date of this Agreement, have been required to be disclosed to
Playboy on the Schedules to this Agreement if such item had existed or such
information had been available on such date; provided, however, that no
disclosure pursuant to this Section 5.7(e) shall affect or be deemed to modify
any of the representations or warranties made by the Company or the Company
Subsidiaries in this Agreement.
(f) Between the date hereof and the Closing Date, Playboy shall, upon
the Company's request, furnish to the Company a list, to be certified at
Closing by an executive officer of Playboy, of each item and all information
that would, on the date of this Agreement, have been required to be disclosed to
the Company on the Schedules to this Agreement if such item had existed or such
information had been available on such date; provided, however, that no
disclosure pursuant to this Section 5.7(f) shall affect or be deemed to modify
any of the representations or warranties made by the Playboy Entities in this
Agreement.
SECTION 5.8 Reasonable Commercial Efforts. Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties hereto agrees to
use its reasonable commercial 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 fulfill all
conditions applicable to such party pursuant to this Agreement, the Related
Agreements and the Newco Agreements and to consummate and make effective, in the
most expeditious manner practicable, the Mergers, the Related Transactions, the
Newco Transactions and the other transactions contemplated by this Agreement,
the Related Agreements and the Newco Agreements, including, but not limited to,
(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 filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and all other
filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to obtain an approval, waiver or exemption from, or to
avoid an action or proceeding by, any Governmental Entity; (ii) the obtaining of
all necessary consents, approvals, waivers or exemption from non-governmental
third parties; (iii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement, any Related
Agreement, any Newco Agreement or the consummation of the transactions
contemplated by this Agreement, the Related Agreements or the Newco Agreements,
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 contemplated by, and to fully carry out the purposes of, this
Agreement, the Related Agreements and the Newco Agreements.
SECTION 5.9 Public Announcements. Playboy and the Company, as the case may
be, will consult with one another before issuing any press release or otherwise
making any public statements with respect to the transactions contemplated by
this Agreement, the Related Agreements or the Newco Agreements (including,
without limitation, the Mergers, the Related Transactions and the Newco
Transactions) 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 or by obligations pursuant to any listing agreement with the NYSE or the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"), as determined by Playboy or the Company, as the case may be, but
only upon the advice of its independent counsel.
SECTION 5.10 Indemnification. (a) Playboy agrees that all rights to
indemnification or exculpation now existing in favor of each present and future
director, officer, employee or agent of the Company or any of the Company
Subsidiaries as provided in their respective charters or by-laws (or other
comparable organizational documents) or otherwise in effect as of the date
hereof against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, administrative or investigative, arising out of or
pertaining to the transactions contemplated by this Agreement or otherwise, with
respect to matters occurring at or prior to the Effective Time of the Mergers
shall survive the Mergers and shall continue in full force and effect for a
period of six (6) years from the Effective Time of the Mergers and shall not be
amended or otherwise modified in any manner that would adversely affect such
rights; provided, however, that all rights to indemnification in respect of any
claim (a "Claim") asserted or made within such period shall continue until the
disposition of such Claim. To the maximum extent permitted by the DGCL, such
indemnification shall be mandatory rather than permissive and the S Surviving
Corporation shall advance expenses in connection with such indemnification to
the fullest extent permitted under applicable law; provided, however, that the
Person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such Person is not entitled to
indemnification.
(b) The provisions of this Section 5.10 shall survive the consummation
of the Mergers at the Effective Time of the Mergers, are intended to
benefit the Company, the S Surviving Corporation and each present and former
director, officer, employee or agent of the Company or any of the Company
Subsidiaries (collectively, the "Indemnified Parties"), shall be binding on all
successors and assigns of the S Surviving Corporation and shall be enforceable
by the Indemnified Parties.
(c) For a period of six (6) years after the Effective Time of the
Mergers, Playboy shall cause the S Surviving Corporation to maintain in
effect, if available, directors' and officers' liability insurance covering
those Persons who are currently covered by the Company's directors' and
officers' liability insurance policy (a correct and complete copy of which has
been made available to Playboy) on terms comparable to those now applicable to
directors and officers of the Company; provided, however, that in no event shall
the S Surviving Corporation be required to expend in excess of 175% of the
annual premium currently paid by the Company for such coverage; and provided
further, that if the premium for such coverage exceeds such amount, Playboy or
the S Surviving Corporation shall purchase a policy with the greatest coverage
available for such 175% of such annual premium.
(d) Playboy shall indemnify and hold harmless the Company from and
against any losses, claims (including, without limitation, any third party
claims), damages, expenses or other liabilities or obligations (including,
without limitation, interest, penalties and reasonable fees and expenses
(including costs of investigation and preparation) of attorneys, experts and
consultants incurred in any cause of action, proceeding or arbitration) arising
out of or in connection with the Newco Transactions (including, without
limitation, the Newco Agreements); provided, however, that such losses, claims,
damages, expenses or other liabilities or obligations shall not includes fees
and expenses incurred by the Company in connection with the preparation of the
Newco Agreements.
SECTION 5.11 Notification of Certain Matters. The Company shall give prompt
notice to Playboy and Playboy shall give prompt notice to the Company, of (i)
the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to the
Effective Time of the Mergers, (ii) any material failure of the Company or any
of the Playboy Entities, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement or any Related Agreement, (iii) any notice of, or other
communication relating to, a default or event which, with notice or lapse of
time or both, would become a default, received by it or any of its subsidiaries
subsequent to the date of this Agreement and prior to the Effective Time of the
Mergers, under any contract or agreement material to the financial condition,
properties, businesses, prospects or results of operations of it and its
subsidiaries taken as a whole to which it or any of its subsidiaries is a party
or is subject, (iv) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement or the Related
Agreements (including, without limitation, the Mergers and the Related
Transactions), or (v) any Playboy Material Adverse Effect (in the case of
Playboy) or Company Material Adverse Effect (in the case of the Company);
provided, however, that the delivery of any notice pursuant to this Section 5.10
shall not cure such breach or non-compliance or limit or otherwise affect the
remedies, if any, available hereunder to the party receiving such notice.
SECTION 5.12 Tax Treatment. Each of Playboy, Holdco, Merger Sub P, Merger
Sub S and the Company shall use its reasonable best efforts to cause the Mergers
to qualify as exchanges governed by Section 351 of the Code and to obtain the
opinions of counsel referred to in Sections 6.2(d) and 6.3(c). The Company and
Playboy shall execute and deliver to each of Kramer, Levin, Naftalis & Frankel,
counsel to the Company, and Paul, Weiss, Rifkind, Wharton & Garrison, counsel to
Playboy, certificates executed by authorized officers of the Company and
Playboy, as applicable, as to tax matters in form reasonably satisfactory to
each of Kramer, Levin, Naftalis & Frankel and Paul, Weiss, Rifkind, Wharton &
Garrison, respectively, at such time or times as reasonably requested by such
law firm in connection with its delivery of its opinion referred to in Section
6.2(d) or 6.3(c), as the case may be, and the Company and Playboy shall each
provide a copy thereof to the other party. Prior to the Effective Time of the
Mergers, neither the Company nor Playboy shall take or cause to be taken any
action which would cause to be untrue (or fail to take or cause not to be taken
any action which would cause to be untrue) any of the representations in the
certificates. Following the Effective Time of the Mergers, no party shall, nor
shall any party permit any of its subsidiaries to, take any actions which would,
or would be reasonably likely to, adversely affect the ability of the Mergers to
qualify as exchanges under Section 351 of the Code including, but not limited
to, the liquidation or merger of P Surviving Corporation or S Surviving
Corporation or the issuance of additional shares of Holdco resulting in a "loss
of control" (as defined in Section 368(c) of the Code) by the stockholders of
the Company and the stockholders of Playboy.
SECTION 5.13 Company Affiliates. The Company has identified to Playboy on
Schedule 5.13 to this Agreement each Person (each a "Company Affiliate") who is,
as of the date hereof, an "affiliate" of the Company for the purposes of Rule
145 under the Securities Act. The Company shall use its best efforts to cause
each Company Affiliate to deliver prior to the Effective Time of the Mergers to
Playboy a written agreement (the "Affiliate Letter") that such Company Affiliate
will not sell, pledge, transfer or otherwise dispose of any shares of New
Playboy Class B Common Stock issued to such Company Affiliate pursuant to the
Mergers, except in compliance with Rule 145 promulgated under the Securities Act
or an exemption from the registration requirements of the Securities Act.
SECTION 5.14. SEC and Other Governmental Filings. Each of Playboy and the
Company shall promptly provide the other party (or its counsel) with copies of
all filings made by it or any of its subsidiaries with the SEC or any other
local, state, Federal or foreign Governmental Entity in connection with this
Agreement or any of the Related Agreements and the transactions contemplated by
this Agreement or the Related Agreements (including, without limitation, the
Mergers and the Related Transactions).
SECTION 5.15. Related Transactions; Related Agreements. (a) The Company
shall (i) take all action necessary to effect (and to cause Subco and the
Company Subsidiaries to effect) the Related Transactions prior to the Effective
Time of the Mergers, and (ii) use its commercially reasonable best efforts to
obtain all consents, approvals, waivers and agreements of Governmental Entities
and nongovernmental third parties necessary or desirable to effect the Related
Transactions. "Related Transactions" means (X) the contribution by the Company
and, as necessary, one or more Company Subsidiaries, to Subco, of certain assets
and liabilities of the Company or Company Subsidiaries as contemplated by the
Transfer and Redemption Agreement and the other Related Agreements, and (Y) the
distribution by the Company to the holders of outstanding shares of Company
Common Stock and Company Preferred Stock on the date of such distribution of all
of the capital stock of Subco, allocated to each such share of Company Common
Stock on a pro rata basis in accordance with the terms of this Agreement and the
Transfer and Redemption Agreement.
(b) The Company shall (i) take all action necessary to enter into the
Newco Agreements and effect the Newco Transactions on the Closing Date
prior to the Effective Time of the Mergers, and (ii) use its commercially
reasonable best efforts to obtain all consents, approvals, waivers and
agreements of Governmental Entities and nongovernmental third parties necessary
or desirable to effect the Newco Transactions. "Newco Transactions" means the
transactions contemplated by the Newco Agreements.
(c) Prior to the Effective Time of the Mergers, none of the Company,
Subco or the other Company Subsidiaries shall take any action under or as
contemplated by the Related Agreements or the Newco Agreements or otherwise in
connection with the Related Transactions or the Newco Transactions without the
prior consent of Playboy, including, without limitation, taking any action to
amend or otherwise modify any Related Agreement or Newco Agreement or waive any
provision thereof. The Company furthermore agrees that Playboy may, in its sole
discretion, cause the Company to waive any condition of the Company to close the
transactions contemplated by the Related Agreements or the Newco Agreements;
provided that nothing in this Section 5.15(c) shall permit Playboy to cause any
action to be taken by Subco; provided, further, that nothing in this Section
5.15(c) shall prevent Subco or the Company on behalf of Subco (in each case
without the consent of Playboy) from waiving any conditions of Subco to close
the transactions contemplated by the Related Agreements.
SECTION 5.16 Emerald Media Option. Neither the Company nor any of the
Company Subsidiaries shall exercise the Company's option to purchase the
outstanding capital stock or assets of Emerald Media, Inc.; provided, however,
that Subco may exercise such option following, and only following, the
consummation of the Related Transactions.
SECTION 5.17 Tax Treatment of Related Transactions. The Related
Transactions are intended to be treated as (i) a transfer of assets to, and the
assumption of liabilities by, Subco and (ii) a distribution of Subco by the
Company that is taxable both to the Company and to the holders of Company Common
Stock that receive shares of Subco pursuant to the Related Transactions.
SECTION 5.18 Employee Benefit Plans. Playboy agrees that employees of the
Company or any of the Company Subsidiaries shall be given credit under each
employee benefit plan, program, policy or arrangement of the Playboy Entities
(or the S Surviving Corporation) in which the employees are eligible to
participate for all service with the Company and any of the Company Subsidiaries
(to the extent such credit was given by the Company or any of the Company
Subsidiaries) for purposes of eligibility and vesting.
SECTION 5.19 Optional Services Agreement. Playboy and the Company agree to
use their commercially reasonable efforts to negotiate in good faith the terms
of the Optional Services Agreement referred to in the Mandatory Services
Agreement, as contemplated by Section 12 of the Mandatory Services Agreement.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGERS
SECTION 6.1 Conditions to Each Party's Obligations to Effect the Mergers.
The respective obligations of each party hereto to effect the Mergers and the
other transactions contemplated by this Agreement or the Related Agreements
(including, without limitation, the Related Transactions) are subject to the
satisfaction at or prior to the Effective Time of the Mergers of the following
conditions:
(a) this Agreement and the Related Agreements shall have been approved
and adopted by the requisite vote of the boards of directors of the Playboy
Entities, the Company Board, the board of directors of any of the Company
Subsidiaries which is a party to any of the Related Agreements, and the
stockholders of the Company;
(b) no statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, restrains, enjoins or
restricts the consummation of the transactions contemplated by this Agreement or
the Related Agreements (including, without limitation, the Mergers and the
Related Transactions) or which subjects any party to substantial damages as a
result of the consummation of the transactions contemplated by this Agreement or
the Related Agreements (including, without limitation, the Mergers and the
Related Transactions);
(c) any Person required in connection with the transactions
contemplated by this Agreement or the Related Agreements (including,
without limitation, the Mergers and the Related Transactions) to file a
notification and report form in compliance with the HSR Act shall have filed
such form and any applicable waiting period with respect to each such form
(including any extension thereof by reason of a request for additional
information) shall have terminated or expired;
(d) the S-4 and the S-1 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order;
(e) all governmental or regulatory notices (other than those in
connection with the HSR Act) or approvals required with respect to the
transactions contemplated by this Agreement or the Related Agreements shall have
been either filed or received; and
(f) the Related Agreements shall have been executed and delivered
and the Related Transactions shall have been consummated in accordance with the
terms of the Related Agreements.
SECTION 6.2 Conditions to the Obligations of the Company. The obligation of
the Company to effect the Mergers and the other transactions contemplated by
this Agreement or the Related Agreements (including, without limitation, the
Related Transactions) is subject to the satisfaction at or prior to the
Effective Time of the Mergers of the following conditions:
(a) the representations and warranties of Playboy, Holdco, Merger Sub
P and Merger Sub S set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
Playboy, Holdco, Merger Sub P and Merger Sub S set forth in this Agreement that
are not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Effective Time of the
Mergers, as though made on and as of the Effective Time of the Mergers, except
to the extent the representation or warranty is expressly limited by its terms
to another date or except for changes contemplated by this Agreement, and the
Company shall have received a certificate (which certificate may be qualified by
knowledge to the same extent as the representations and warranties of Playboy,
Holdco, Merger Sub P and Merger Sub S contained herein are so qualified) signed
on behalf of Playboy by an executive officer of Playboy or signed on behalf of
Holdco by an executive officer of Holdco, to such effect;
(b) each of the Playboy Entities shall have obtained the consent,
approval or waiver of each non-governmental Person whose consent, approval
or waiver shall be required in order for such Playboy Entity to consummate the
transactions contemplated by this Agreement or the Related Agreements, except
those for which the failure to obtain such consent, approval or waiver,
individually or in the aggregate, is not reasonably likely to have, a Playboy
Material Adverse Effect and is not reasonably likely to adversely affect the
ability of Playboy to consummate the transactions contemplated by this Agreement
or the Related Agreements;
(c) each of the obligations of the Playboy Entities to be performed
at or before the Effective Time of the Mergers pursuant to the terms of
this Agreement and the Related Agreements shall have been duly performed in all
material respects at or before the Effective Time of the Mergers and at the
Closing, Playboy shall have delivered to the Company a certificate of an
executive officer of Playboy to such effect;
(d) the Company shall have received the opinion of Kramer, Levin,
Naftalis & Frankel, counsel to the Company, dated the Closing Date, to the
effect that the Mergers will be treated for federal income tax purposes as
exchanges governed by the provisions of Section 351 of the Code;
(e) the Company shall have received a certificate, in form and
substance reasonably satisfactory to it, signed by the Secretary of
Playboy, certifying (i) that full and complete copies of the following are
attached thereto: (X) resolutions or similar documents evidencing the
authorization and approval by the Playboy Board and the boards of directors of
the other Playboy Entities of this Agreement and the Related Agreements and the
transactions contemplated by this Agreement or the Related Agreements
(including, without limitation, the Mergers and the Related Transactions), (Y)
the Restated Certificate of Incorporation of Playboy and the Certificates of
Incorporation (or other organizational documents) of each of the Playboy
Entities, each as amended to the date hereof and (Z) such other documents or
instruments as the Company may reasonably request in connection with the
transactions contemplated by this Agreement or the Related Agreement (including,
without limitation, the Mergers and the Related Transactions); and (ii) as to
the incumbency and specimen signature of each representative of Playboy and the
other Playboy Entities signing this Agreement, the Related Agreements and any
other document in connection herewith or therewith;
(f) the New Playboy Class B Common Stock shall be listed for trading
on the NYSE;
(g) the Company shall have received the opinion of a nationally
recognized solvency firm, dated the Closing Date and in form and substance
satisfactory to the Company, to the effect that Subco will be solvent upon
consummation of the Mergers and the Related Transactions;
(h) contemporaneously with the Closing, all outstanding amounts due
under the Loan and Security Agreement dated as of January 15, 1997, as
amended, between the Company and Darla L.L.C. shall have been repaid; and
(i) since December 31, 1997, no change or event shall have occurred
which has had or could reasonably be expected to result in a Playboy Material
Adverse Effect.
SECTION 6.3 Conditions to the Obligations of Playboy. The obligation of
Playboy to effect the Mergers and the other transactions contemplated by this
Agreement or the Related Agreements (including, without limitation, the Related
Transactions) is subject to the satisfaction at or prior to the Effective Time
of the Mergers of the following conditions:
(a) the representations and warranties of the Company and the
Company Subsidiaries set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
the Company set forth in this Agreement that are not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement and as of the Effective Time of the Mergers, as though made on and as
of the Effective Time of the Mergers, except to the extent the representation or
warranty is expressly limited by its terms to another date, and Playboy shall
have received a certificate (which certificate may be qualified by knowledge to
the same extent as the representations and warranties of the Company contained
herein are so qualified) signed on behalf of the Company by an executive officer
of the Company or signed on behalf of a Company Subsidiary, to such effect;
(b) each of the obligations of the Company to be performed at or
before the Effective Time of the Mergers pursuant to the terms of this
Agreement and the obligations of the Company and each other party (other than
the Playboy Entities) to each of the Related Agreements to be performed at or
before the Effective Time of the Mergers pursuant to the terms of each such
Related Agreement shall have been duly performed in all material respects at or
before the Effective Time of the Mergers and at the Closing, the Company shall
have delivered to Playboy a certificate of an executive officer of the Company
to such effect;
(c) Playboy shall have received the opinion of Paul, Weiss,
Rifkind, Wharton & Garrison, counsel to Playboy, dated the Closing Date, to
the effect that the Mergers will be treated for federal income tax purposes as
exchanges governed by the provisions of Section 351 of the Code;
(d) the Company shall have obtained the consent, approval or waiver of
each non-governmental Person whose consent, approval or waiver shall be
required in order for the Company to consummate the transactions contemplated
hereby and by the Related Agreements (including, without limitation, all
consents required by lessors under the Leases and all consents required by
either the Company or any of the Company Subsidiaries under any transponder
service agreement, including, without limitation, the Transponder Services
Agreement, dated February 7, 1995, between the Company and Loral Skynet (as
successor to AT&T Corp.), as amended), except those for which the failure to
obtain such consent, approval or waiver, individually or in the aggregate, is
not reasonably likely to have, a Company Material Adverse Effect (and Playboy
shall have received evidence thereof satisfactory to it);
(e) Playboy shall have received a certificate, in form and
substance reasonably satisfactory to it, signed by the Secretary of the
Company, certifying (i) that full and complete copies of the following are
attached thereto: (X) resolutions or similar documents evidencing the
authorization and approval by the Company Board and the board of directors of
the Company Subsidiaries of this Agreement and the Related Agreements and the
transactions contemplated by this Agreement or the Related Agreements
(including, without limitation, the Mergers and the Related Transactions), (Y)
the Certificate of Incorporation of the Company and the Company Subsidiaries (or
other organizational documents), each as amended to the date hereof and (Z) such
other documents or instruments as Playboy may reasonably request in connection
with the transactions contemplated by this Agreement or the Related Agreement
(including, without limitation, the Mergers and the Related Transactions); and
(ii) as to the incumbency and specimen signature of each representative of the
Company and the Company Subsidiaries signing this Agreement, the Related
Agreements and any other document in connection herewith or therewith.
(f) since December 31, 1997, no change or event shall have occurred
which has had or could reasonably be expected to result in a Company Material
Adverse Effect;
(g) the Average Playboy Stock Price shall be equal to or greater
than $13.00;
(h) Playboy shall have received an Affiliate Letter from each
of the Company Affiliates set forth on Schedule 5.13 to this Agreement;
(i) (X) each of the Related Agreements (including, without limitation,
all of the documents to be exercised and delivered in connection with the
closing of the transactions contemplated by the Transfer and Redemption
Agreement) shall be in form and substance satisfactory to Playboy and shall
have been duly executed and delivered; (Y) all of the conditions to the
closing of the transactions contemplated by the Transfer and Redemption
Agreement shall have been waived or satisfied to the satisfaction of Playboy;
and (Z) all of the transactions contemplated by the Related Agreements shall
have otherwise been consummated to the satisfaction of Playboy.
(j) the Company shall have amended, to the extent necessary, the
Company Stock Option Plans and any agreements entered into in connection
therewith to permit the Company to cancel or accelerate all Company Options
solely for the payment provided herein;
(k) the aggregate number of shares of Company Common Stock at the
Effective Time of the Mergers that constitute Dissenting Shares shall be
less than 5% of the shares of Company Common Stock outstanding as of the
Effective Time of the Mergers; and
(l) the Company shall have received the agreements contemplated by
Section 2.2(f), and shall have delivered to Playboy evidence of such
agreements satisfactory to Playboy, (i) of all of the holders of Company
Options granted outside the Company Option Plans and (ii) of the holders of at
least 95% of the Company Options granted under the Company Option Plans.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER; FEES AND EXPENSES
SECTION 7.1 Termination. This Agreement may be terminated and the Mergers
may be abandoned at any time, but prior to the Effective Time of the Mergers,
notwithstanding approval thereof by the stockholders of the Company:
(a) by mutual written consent duly authorized by the Playboy Board
and the Company Board;
(b) by either Playboy or the Company, if the Effective Time of the
Mergers shall not have occurred on or before December 31, 1998; provided,
however, that (i) if the Effective Time of the Mergers has not occurred prior to
such date solely as a result of any Transaction Litigation or suit, action, or
proceeding pending or threatened which could reasonably be expected to result in
material damages to Playboy, the Company, Holdco, the P Surviving Corporation or
the S Surviving Corporation or any of their subsidiaries or Affiliates if the
transactions contemplated hereby (including the Mergers and Related
Transactions) were consummated, then the Company's right to terminate this
Agreement under this Section 7.1(b) shall not be available unless and until the
Effective Time of the Mergers shall not have occurred on or before December 31,
1998; (ii) the Company's right to terminate this Agreement under this Section
7.1(b) shall not be available if the failure of the Company (or any Company
Subsidiary) to effect the Related Transactions shall have been the cause of, or
resulted in, the failure of the Effective Time of the Mergers to occur before
December 31, 1998, other than due to events or circumstances which are beyond
the control of the Company; and (iii) the right to terminate this Agreement
under this Section 7.1(b) shall not be available to the party whose failure to
fulfill any obligation under this Agreement shall have been the cause of, or
resulted in, the failure of the Effective Time of the Mergers to occur on or
before December 31, 1998;
(c) by either Playboy or the Company, if any final order, decree or
ruling permanently restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement or the Related
Agreements (including, without limitation, the Mergers and the Related
Transactions) shall have been entered by any court of competent jurisdiction or
Governmental Entity and shall have become final and nonappealable;
(d) by either Playboy or the Company, if this Agreement shall
fail to receive the requisite vote for adoption at the Company Stockholders
Meeting or any adjournment or postponement thereof;
(e) by Playboy, upon a breach by the Company of any material
representation or warranty of the Company set forth in this Agreement, or
if any such representation or warranty shall have become untrue (either, a
"Terminating Company Breach"), in either case such that the conditions set forth
in Section 6.3(a) could not be satisfied within 30 days of such Terminating
Company Breach upon the Company's exercise of its reasonable best efforts or
such breach has not in any event been cured within 30 days of such Terminating
Company Breach;
(f) by the Company, upon breach by Playboy of any material
representation or warranty of Playboy set forth in this Agreement, or if
any such representation or warranty shall have become untrue (either, a
"Terminating Playboy Breach"), in either case such that the conditions set forth
in Section 6.2(a) could not be satisfied within 30 days of such Terminating
Playboy Breach upon Playboy's exercise of its reasonable best efforts or such
Terminating Playboy Breach has not in any event been cured within 30 days of
such Terminating Playboy Breach;
(g) by Playboy, upon the breach by the Company of any material
covenant or agreement of the Company set forth in this Agreement which is
not able to be cured within 30 days of such breach upon the Company's exercise
of its reasonable best efforts or has not, in any event, been cured within 30
days of such breach;
(h) by the Company, upon the breach by Playboy of any material
covenant or agreement of Playboy set forth in this Agreement which is not
able to be cured within 30 days of such breach upon Playboy's exercise of its
reasonable best efforts or has not, in any event, been cured within 30 days of
such breach;
(i) by Playboy, if any event happens which could reasonably be
expected to result in a Company Material Adverse Effect;
(j) by the Company, if any event happens which could reasonably be
expected to result in a Playboy Material Adverse Effect; and
(k) by the Company, if the Company Board shall concurrently approve,
and the Company shall concurrently enter into, a definitive agreement
providing for the implementation of the transactions contemplated by a
Transaction Proposal; provided, however, that (i) the Company is not then in
breach of Section 5.1, (ii) the Company Board shall have complied with Section
7.3 in connection with such Transaction Proposal, and (iii) no termination
pursuant to this Section 7.1(k) shall be effective unless the Company shall
simultaneously make the payment required by Section 7.2.
SECTION 7.2 Effect of Termination. (a) In the event that any Person shall
make a Transaction Proposal and thereafter (i) this Agreement is terminated
pursuant to Section 7.1(k), and (ii) a definitive agreement with respect to a
Transaction Proposal is executed, or a Transaction Proposal is consummated, at
or within eighteen months after such termination, then the Company shall pay to
Playboy a fee of $3,000,000, plus the fees and expenses incurred by the Playboy
Entities in connection with the transactions contemplated by this Agreement and
the Related Agreements, which amounts shall be payable by wire transfer of same
day funds on the date such agreement is executed, or such Transaction Proposal
is consummated, as applicable. In the event that any Person shall make a
Transaction Proposal and thereafter (i) this Agreement is terminated pursuant to
Section 7.1(k), and (ii) no definitive agreement with respect to a Transaction
Proposal is executed, and no Transaction Proposal is consummated, at or within
eighteen months after such termination, then the Company shall pay to Playboy an
amount equal to the fees and expenses incurred by the Playboy Entities in
connection with the transactions contemplated by this Agreement and the Related
Agreements, which amount shall be payable promptly in cash. The Company
acknowledges that the agreements contained in this Section 7.2(a) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Playboy would not enter into this Agreement;
accordingly, if the Company fails to promptly pay the amount due pursuant to
this Section 7.2(a), and, in order to obtain such payment, Playboy commences a
suit which results in a judgment against the Company for the fee set forth in
this Section 7.2(a), the Company shall also pay to Playboy its costs and
expenses (including reasonable attorneys' fees, disbursements and other charges)
in connection with such suit.
(b) Except as provided in Sections 7.2(a) and 7.5, in the
event of termination of this Agreement pursuant to Section 7.1, this
Agreement, except for the provisions of Sections 7.2, 7.5 and Article 8, shall
forthwith become void, there shall be no liability under this Agreement on the
part of any of Playboy, any Playboy Subsidiary, the Company or any Company
Subsidiary, and all rights and obligations of each party hereto shall cease,
subject to the remedies of the parties set forth in Section 7.5; provided,
however, that nothing herein shall relieve any party from liability for the
wilful breach of any of its representations and warranties or the breach of any
of its covenants or agreements set forth in this Agreement.
SECTION 7.3 Procedure for Termination. The Company shall provide to Playboy
written notice prior to any termination of this Agreement pursuant to Section
7.1(k) advising Playboy (i) that the Company Board, after receipt of advice of
outside legal counsel and a nationally recognized investment banking firm, in
the exercise of its good faith judgment as to its fiduciary duties to the
stockholders of the Company under applicable law, has determined (on the basis
of such Transaction Proposal and the terms of this Agreement, as then in effect)
that such termination is required in connection with a Transaction Proposal that
is more favorable to the stockholders of the Company than the transactions
contemplated by this Agreement (taking into account all terms of such
Transaction Proposal and this Agreement, including all conditions) and (ii) as
to the material terms of any such Transaction Proposal. At any time after two
business days following receipt of such notice, the Company may terminate this
Agreement as provided in Section 7.1(k) only if the Company Board determines
that such proposal is a Qualified Transaction Proposal and is more favorable to
the stockholders of the Company than the transactions contemplated by this
Agreement (taking into account all terms of such Transaction Proposal and this
Agreement, including all conditions, and which determination shall be made in
light of any revised proposal made by Playboy prior to the expiration of such
two business day period) and concurrently enters into a definitive agreement
providing for the implementation of the transactions contemplated by such
Transaction Proposal.
SECTION 7.4 Amendment; Extension; Waiver. (a) This Agreement may be amended
by action taken by the Company and the Playboy Entities at any time before or
after approval of the Mergers by the stockholders of the Company but, after any
such approval, no amendment shall be made which requires the approval of such
stockholders under applicable law without such approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of the parties
hereto.
(b) At any time prior to the Effective Time of the Mergers, each
party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of either party hereto 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 either party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
SECTION 7.5 Fees and Expenses. Except as specifically provided in Sections
7.2 and 7.5, Playboy shall bear its own and, in an amount not in excess of $2.5
million, the Company shall bear its own, the Company Subsidiaries' and Subco's
expenses in connection with this Agreement and the transactions contemplated
hereby; provided, however, that expenses incurred by the Company, the Company
Subsidiaries and Subco in excess of $2.5 million shall be (as specifically
provided in the Transfer and Redemption Agreement) borne by Subco; provided
further, however, that if this Agreement is terminated pursuant to any of
Section 7.1(a) through 7.1(i), each of Playboy and the Company shall bear its
own expenses in connection with this Agreement and the Related Agreements and
the transactions contemplated hereby and thereby (including, without limitation,
the Related Transactions). Notwithstanding anything to the contrary contained
herein, (i) the cost of printing and filing the S-4 and the Proxy Statement
shall be borne equally by the Company and Playboy, and (ii) any expenses, other
than legal fees, incurred by the Company in fulfilling its obligations under any
of the Newco Agreements shall be borne by Playboy.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 Non-Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement and in any
certificate delivered pursuant hereto shall terminate at the Effective Time of
the Mergers or upon the termination of this Agreement pursuant to Section 7.1,
as the case may be, except that the agreements set forth in Article 1, Section
5.9 and Article 7 shall survive the Effective Time of the Mergers, those set
forth in Sections 5.10(d), 7.2 and 7.5 and this Article 8 shall survive
termination of this Agreement and those set forth in Sections 5.10(a), 5.10(b)
and 5.10(c) shall survive for a period of one year after termination of this
Agreement. Each party agrees that, except for the representations and warranties
contained in this Agreement, any Certificate delivered pursuant hereto and the
respective disclosure schedules of Playboy and the Company, no party hereto has
made any other representations and warranties, and each party hereby disclaims
any other representations and warranties, made by itself or any of its officers,
directors, employees, agents, financial and legal advisors or other
representatives with respect to the execution and delivery of this Agreement or
the transactions contemplated hereby, notwithstanding the delivery of disclosure
to any other party or any party's representatives of any documentation or other
information with respect to any one or more of the foregoing.
SECTION 8.2 Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all other prior agreements and understandings
(other than the Confidentiality Agreement), both written and oral, between the
parties with respect to the subject matter hereof and (b) shall not be assigned
by operation of law or otherwise; provided, however, that the Playboy Entities
may assign any or all of their respective rights and obligations under this
Agreement to any wholly-owned Playboy Subsidiary; provided that no such
assignment shall relieve the assigning party of its obligations hereunder.
Playboy guarantees the full and punctual performance by each of the other
Playboy Entities of all the obligations hereunder of the other Playboy Entities,
the S Surviving Corporation and any such assignees.
SECTION 8.3 Validity. If any provision of this Agreement, or the
application thereof to any Person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other Persons or circumstances, shall not be affected thereby, and,
to such end, the provisions of this Agreement are agreed to be severable.
SECTION 8.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in Person, by cable,
telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested), to the other party as follows:
if to the Playboy Entities: Playboy Enterprises, Inc.
680 North Lake Shore Drive
Chicago, Illinois 60611
Attention: Howard Shapiro, Esq.
General Counsel
Facsimile:(312) 266-2042
with a copy to: Paul, Weiss, Rifkind, Wharton
& Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: James M. Dubin, Esq.
Facsimile: (212) 757-3990
if to the Company to: Spice Entertainment Companies, Inc.
536 Broadway
New York, New York 10012
Attention: Daniel Barsky, Esq.
General Counsel
Facsimile: (212) 226-6354
with a copy to: Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Paul S. Pearlman, Esq.
Facsimile: (212) 715-8000
or to such other address as the Person to whom notice is given may have
previously furnished to the other in writing in the manner set forth
above.
SECTION 8.5 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and, except as provided in Sections 5.10 and 8.2, nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other Person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 8.6 Severability. If any term or other provision of this Agreement
is invalid, illegal or unenforceable, all other provisions of this Agreement
shall remain in full force and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
SECTION 8.7 Specific Performance. The parties hereto acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
SECTION 8.8 Brokers. Except as otherwise provided in Section 7.5, the
Company agrees to indemnify and hold harmless Playboy and Playboy agrees to
indemnify and hold harmless the Company, from and against any and all liability
to which Playboy, on the one hand, or the Company, on the other hand, may be
subjected by reason of any brokers, finders or similar fees or expenses with
respect to the transactions contemplated by this Agreement or any Related
Agreement to the extent such similar fees and expenses are attributable to any
action undertaken by or on behalf of the Company or Playboy, as the case may be.
SECTION 8.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 8.10 Interpretation. The table of contents and headings herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section, schedule, exhibit or
annex, such reference shall be to a Section of or schedule, exhibit or annex to
this Agreement unless otherwise indicated. Where the reference "hereby" or
"herein" appears in this Agreement, such reference shall be deemed to be a
reference to 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 8.11 Certain 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.
"Company Stock Option Plans" means, collectively, the stock option plans
set forth on Schedule 3.11(a).
"Control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of stock, as trustee or executor, by
contract or credit arrangement or otherwise.
"Library Pictures" means any and all audio, visual and/or audio-visual
works of any kind or character, including without limitation motion pictures,
television programs, series, mini-series, pilots, specials, video games,
documentaries, compilations, promotional films, trailers and shorts, whether
animated, live action or both, whether produced for theatrical, non-theatrical,
home video, multi-media, interactive, computer, videogame set, pay-per-view,
television, pay or basic cable, direct broadcast satellite, internet or any
other form of exhibition or distribution now known or hereafter devised,
completed as of the date hereof in which the Company or any of the Company
Subsidiaries owns, is licensed or otherwise possesses any part or all of the
copyrights therein or otherwise has exploitative rights.
"Mark" means a brand name, service mark, trademark, tradename, logo, design
or other word or symbol used to identify the source of goods or services,
whether registered or unregistered, and all registrations and applications for
registration and renewals of any of the foregoing.
"Newco" means Califa Entertainment Group, Inc., a California corporation.
"Newco Agreements" means the Asset Purchase Agreement between the Company
and Newco dated the date hereof, and each of the Stock Pledge Agreement and
Guarantee in favor of the Company, the Security Agreement between Newco and the
Company, the Promissory Note made by Newco in favor of the Company, the Services
Agreement (and the Optional Services Agreement, if any) between Newco and Subco,
and the Non-Competition Agreement between Newco and Subco, in each case
substantially in the form of the draft of such document dated May 29, 1998
delivered to the Company and Playboy. "Patent" means a patent or patent
application, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.
"Person" means an individual, corporation, partnership, limited liability
company, limited liability partnership, joint venture, association, trust,
unincorporated organization or other entity.
"Playboy Stock Option Plans" means, collectively, the Playboy Enterprises,
Inc. 1989 Stock Option Plan, the Playboy Enterprises, Inc. 1991 Non-Qualified
Stock Option Plan for Non-Employee Directors, the Playboy Enterprises, Inc. 1995
Stock Incentive Plan, and the 1997 Equity Plan for Non-Employee Directors of
Playboy Enterprises, Inc.
"Redemption Ratio" means such number as is determined by Subco to be the
number of shares of Subco Common Stock to be issued for each share of Company
Common Stock as part of the Merger Consideration.
SECTION 8.12 Governing Law and Venue. THIS AGREEMENT SHALL BE DEEMED TO BE
MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICT OF LAW PRINCIPLES THEREOF, EXCEPT THAT DELAWARE LAW SHALL APPLY TO THE
EXTENT REQUIRED IN CONNECTION WITH THE EFFECTUATION OF THE MERGERS.
SECTION 8.13 Waiver of Jury Trial. EACH OF THE PLAYBOY ENTITIES AND THE
COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
PLAYBOY ENTERPRISES, INC.
By /s/ Anthony J. Lynn
------------------------------------
Name: Anthony J. Lynn
Title: Executive Vice President
NEW PLAYBOY, INC.
By /s/ Howard Shapiro
------------------------------------
Name: Howard Shapiro
Title: Secretary
PLAYBOY ACQUISITION CORP.
By /s/ Howard Shapiro
------------------------------------
Name: Howard Shapiro
Title: Secretary
SPICE ACQUISITION CORP.
By /s/ Howard Shapiro
------------------------------------
Name: Howard Shapiro
Title: Secretary
SPICE ENTERTAINMENT COMPANIES, INC.
By /s/ J. Roger Faherty
------------------------------------
Name: J. Roger Faherty
Title: Chairman, Chief Executive Officer
and President
