EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AMONG
BELL SPORTS HOLDINGS, L.L.C.,
ANDSONICA ACQUISITION CORP.
AND
BELL SPORTS CORP.
DATED AS OF JUNE 13, 2000
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TABLE OF CONTENTS
PAGE
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ARTICLE I The Merger.................................................. 1
Section 1.1 The Merger.................................................. 1
Section 1.2 Effective Time.............................................. 2
Section 1.3 Effects of the Merger....................................... 2
Section 1.4 Charter and Bylaws; Directors and Officers.................. 2
Section 1.5 Conversion of Securities.................................... 2
Section 1.6 Note Consideration; Offer for BSI Notes;
Exchange of Notes.......................................... 6
Section 1.7 Parent to Make Cash Available............................... 6
Section 1.8 Withholding................................................. 8
Section 1.9 Return of Exchange Fund..................................... 8
Section 1.10 No Further Ownership Rights in Company Stock................ 8
Section 1.11 Closing of Company Transfer Books........................... 8
Section 1.12 Lost Certificates........................................... 8
Section 1.13 Further Assurances.......................................... 8
Section 1.14 Closing; Closing Deliveries................................. 9
Section 1.15 Options..................................................... 11
ARTICLE II Representations and Warranties of Parent and Sub............ 11
Section 2.1 Organization, Standing and Power............................ 11
Section 2.2 Authority................................................... 12
Section 2.3 Consents and Approvals; No Violation........................ 12
Section 2.4 Information Statement....................................... 13
Section 2.5 Financing................................................... 13
Section 2.6 Litigation.................................................. 13
Section 2.7 Required Vote of Parent Stockholders........................ 13
Section 2.8 Brokers..................................................... 13
Section 2.9 Operations of Sub........................................... 13
Section 2.10 Representations and Warranties Insurance Policy............. 13
ARTICLE III Representations and Warranties of the Company............... 14
Section 3.1 Organization, Standing and Power............................ 14
Section 3.2 Capital Structure........................................... 14
Section 3.3 Certificates; Articles of Incorporation and Bylaws.......... 16
Section 3.4 Authority................................................... 16
Section 3.5 Consents and Approvals; No Violation........................ 16
Section 3.6 SEC Documents; Financial Statements......................... 17
Section 3.7 No Undisclosed Liabilities.................................. 18
Section 3.8 Information Statement....................................... 18
Section 3.9 Absence of Certain Changes or Events........................ 18
Section 3.10 Permits and Compliance; Defaults............................ 19
Section 3.11 Tax Matters................................................. 20
Section 3.12 Actions and Proceedings..................................... 21
Section 3.13 Certain Agreements.......................................... 22
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Section 3.14 ERISA....................................................... 23
Section 3.15 Compliance with Worker Safety and Environmental Laws........ 25
Section 3.16 Labor Matters............................................... 26
Section 3.17 Intellectual Property....................................... 26
Section 3.18 Required Vote of Company Stockholders....................... 28
Section 3.19 Brokers..................................................... 28
Section 3.20 Real Property............................................... 28
Section 3.21 State Takeover Statutes..................................... 30
Section 3.22 Deposit and Disbursement Accounts........................... 30
Section 3.23 Year 2000 Compliance........................................ 30
Section 3.24 Title to Assets; Tangible Assets............................ 30
Section 3.25 Insurance................................................... 30
Section 3.26 Expenses.................................................... 31
Section 3.27 Inventory................................................... 32
Section 3.28 Notes and Accounts Receivable............................... 32
Section 3.29 Certain Business Relationships with the Company
and its Subsidiaries....................... 32
Section 3.30 Major Customers and Suppliers............................... 32
Section 3.31 Product Warranty and Product Liability...................... 33
Section 3.32 Non-Compete Agreements...................................... 33
ARTICLE IV Covenants Relating To Conduct Of Business................... 34
Section 4.1 Conduct of Business Pending the Merger...................... 34
Section 4.2 No Solicitation............................................. 36
ARTICLE V Additional Agreements....................................... 36
Section 5.1 RESERVED.................................................... 36
Section 5.2 Preparation of the Information Statement.................... 36
Section 5.3 Access to Information....................................... 37
Section 5.4 Fees and Expenses........................................... 37
Section 5.5 Stock Incentive Plans....................................... 37
Section 5.6 Commercially Reasonable Efforts............................. 38
Section 5.7 Public Announcements........................................ 38
Section 5.8 Real Estate Transfer and Gains Tax.......................... 39
Section 5.9 Indemnification; Directors and Officers Insurance........... 39
Section 5.10 Notification of Certain Matters............................. 39
Section 5.11 Employee Matters............................................ 40
Section 5.12 State Takeover Laws......................................... 40
Section 5.13 Financial Statements........................................ 40
Section 5.14 Financing................................................... 41
ARTICLE VI Conditions Precedent To The Merger.......................... 41
Section 6.1 Conditions to Obligation of the Company to
Effect the Merger.......................................... 41
Section 6.2 Conditions to Obligations of Parent and Sub to
Effect the Merger.......................................... 41
ARTICLE VII Termination, Amendment And Waiver........................... 43
Section 7.1 Termination................................................. 43
Section 7.2 Effect of Termination....................................... 45
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Section 7.3 Amendment................................................... 45
Section 7.4 Waiver...................................................... 45
ARTICLE VIII General Provisions.......................................... 46
Section 8.1 Survival of Representations and Warranties.................. 46
Section 8.2 Notices..................................................... 46
Section 8.3 Interpretation.............................................. 47
Section 8.4 Counterparts................................................ 47
Section 8.5 Entire Agreement; No Third-Party Beneficiaries.............. 47
Section 8.6 Governing Law............................................... 47
Section 8.7 Assignment.................................................. 47
Section 8.8 Severability................................................ 48
Section 8.9 Enforcement of this Agreement............................... 48
EXHIBITS
Exhibit A - Securities Agreement
Exhibit B - Company Certificate of Incorporation, as amended
Exhibit C - Company Bylaws, as amended
Exhibit D - Form of Merger Notes
Exhibit E - Form of Company's Counsel Opinion
Exhibit F - Form of Parent and Sub's Counsel Opinion
SCHEDULES
Schedule 1 - List of Cash Only Shares, Cash-Note Shares and Rollover Shares
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TABLE OF DEFINED TERMS
DEFINED TERM SECTION
------------ -------
Affiliated Transactions.....................................................3.29
Aggregate Cash-Note Cash Consideration....................................1.5(c)
Aggregate Cash Only Consideration.........................................1.5(c)
Aggregate Common Stock Cash Consideration.................................1.5(c)
Aggregate Common Stock Consideration......................................1.5(c)
Aggregate Merger Consideration............................................1.5(c)
Aggregate Merger Note Consideration.......................................1.5(c)
Aggregate Series A Preferred Merger Consideration.........................1.5(c)
Agreement...............................................................Forepart
BSI.......................................................................1.6(b)
BSI Expenses..............................................................1.5(c)
BSI Notes.................................................................1.6(b)
Business Combination.........................................................4.2
Cash Available For Cash-Note Consideration................................1.5(c)
Cash-Note Shares..........................................................1.5(c)
Cash Only Shares..........................................................1.5(c)
Certificate of Merger........................................................1.2
Certificates..............................................................1.7(b)
Chartwell...................................................................3.26
Class C Plan..............................................................1.5(g)
Closing..................................................................1.14(a)
Closing Date.............................................................1.14(a)
Code.........................................................................1.8
Commitment Letters...........................................................2.5
Common Stock Merger Consideration.......................................Recitals
Company.................................................................Forepart
Company Bylaws............................................................1.4(a)
Company Charter...........................................................1.4(a)
Company Class A Common Stock..............................................3.2(a)
Company Class B Common Stock..............................................3.2(a)
Company Class C Common Stock..............................................3.2(a)
Company Common Stock....................................................Recitals
Company Expenses............................................................3.26
Company Incentive Plans...................................................3.2(a)
Company Intellectual Property............................................3.17(a)
Company Letter...............................................................3.1
Company Options...........................................................3.2(a)
Company Permits..........................................................3.10(a)
Company Plan.............................................................3.14(g)
Company Preferred Stock...................................................3.2(a)
Company Records..............................................................3.3
Company Representatives...................................................5.3(a)
Company SEC Documents........................................................3.6
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TABLE OF DEFINED TERMS
(continued)
DEFINED TERM SECTION
------------ -------
Company Securities........................................................3.2(a)
Company Series A Preferred Stock........................................Recitals
Company Stock...........................................................Recitals
Confidentiality Agreement.................................................5.3(b)
Consent or Consents..........................................................2.3
Constituent Corporations................................................Forepart
Contract or Contracts........................................................2.3
Convertible Notes.........................................................3.2(a)
Credit Agreement Commitment Letter...........................................2.5
DGCL....................................................................Recitals
Dissenting Shares.........................................................1.5(e)
Dissenting Stockholder....................................................1.5(e)
DLJ.........................................................................3.19
D&O Insurance................................................................5.9
Effective Time...............................................................1.2
Employees................................................................3.14(a)
Environmental Laws..........................................................3.15
ERISA....................................................................3.14(a)
ERISA Affiliate..........................................................3.14(g)
Exchange Act.................................................................2.3
Exchange Fund ............................................................1.7(a)
Exchange Discount Notes...................................................1.6(c)
Existing Credit Agreement............................................1.14(d)(vi)
Existing Discount Notes...................................................1.6(c)
Existing Senior Discount Notes............................................1.6(c)
Financial Statements.........................................................3.6
Financing....................................................................2.5
Foreign Benefit Plan.....................................................3.14(g)
Gains Taxes..................................................................5.8
Governmental Entity..........................................................2.3
HSR Act......................................................................2.3
Indebtedness..............................................................3.5(b)
Indenture.................................................................1.6(b)
Indenture Amendment.......................................................1.6(b)
Information Statement........................................................2.4
Investment................................................................3.2(b)
July 1 Financials...........................................................5.13
Knowledge of the Company....................................................3.12
Law or Laws..................................................................2.3
Leases...................................................................3.20(b)
Liens.....................................................................3.2(b)
Material Adverse Change......................................................2.1
Material Adverse Effect......................................................2.1
Merger..................................................................Recitals
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TABLE OF DEFINED TERMS
(continued)
DEFINED TERM SECTION
------------ -------
Merger Consideration......................................................1.5(f)
Merger Notes..............................................................1.6(a)
Merger Note Discount......................................................1.5(c)
Most Recent Balance Sheet....................................................3.7
Option Merger Consideration.................................................1.15
Order or Orders..............................................................2.3
Parent..................................................................Forepart
Parent Bylaws.......................................................1.14(b)(iii)
Parent Charter........................................................1.14(b)(i)
Parent Expenses..............................................................5.4
Parent Representatives....................................................5.3(a)
Paying Agent..............................................................1.7(a)
Permitted Encumbrances...................................................3.20(a)
Per Share Cash-Note Cash Consideration....................................1.5(c)
Per Share Cash-Note Consideration.........................................1.5(c)
Per Share Cash Only Consideration.........................................1.5(c)
Per Share Common Stock Consideration......................................1.5(c)
Per Share Company Expenses..................................................3.26
Per Share Merger Note Consideration.......................................1.5(c)
Person....................................................................1.5(e)
Post-Merger Offer.........................................................1.6(b)
Products.................................................................3.30(c)
Property.................................................................3.20(a)
Reinvested Stock Merger Consideration...................................Recitals
Representation and Warranties Insurance Policy..............................2.10
Restricted Payment........................................................1.5(c)
Rollover Exchange Rate....................................................1.5(c)
Rollover Shares...........................................................1.5(c)
Sales Representatives....................................................3.30(c)
SEC..........................................................................3.6
SEC Financial Statements.....................................................3.6
Securities Act............................................................3.2(b)
Securities Agreement....................................................Recitals
Series A Preferred Merger Consideration.................................Recitals
Software....................................................................3.23
Sub.....................................................................Forepart
Sub Debt Commitment Letter...................................................2.5
Subsidiary...................................................................2.1
Surviving Corporation........................................................1.1
Taxes....................................................................3.11(d)
Tax Return...............................................................3.11(d)
Third Party..................................................................4.2
Violation.................................................................3.5(a)
Worker Safety Laws..........................................................3.15
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 13, 2000 (this "AGREEMENT"),
among Bell Sports Holdings, L.L.C., a Delaware limited liability company
("PARENT"), Andsonica Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("SUB"), and Bell Sports Corp, a Delaware corporation
(the "COMPANY") (Sub and the Company being hereinafter collectively referred to
as the "CONSTITUENT CORPORATIONS").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable the merger of Sub and the Company (the
"MERGER"), upon the terms and subject to the conditions set forth herein and in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), whereby each issued and outstanding share of common stock, $.01 par
value, of the Company ("COMPANY COMMON STOCK") not owned directly or indirectly
by the Company will be converted into the right to receive the Per Share Common
Stock Consideration (as hereinafter defined) and each issued and outstanding
share of Series A Preferred Stock, $.01 par value, of the Company ("COMPANY
SERIES A PREFERRED STOCK", and together with the Company Common Stock, the
"COMPANY STOCK") not owned directly or indirectly by the Company will be
converted into the right to receive in cash, without interest, $50.99, plus any
accrued but unpaid dividends to the Effective Time (as hereinafter defined) (the
"SERIES A PREFERRED MERGER CONSIDERATION");
WHEREAS, the respective Boards of Directors of Parent and the Company have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is in the best interest of their
respective stockholders;
WHEREAS, in order to induce Parent and Sub to enter into this Agreement,
concurrently herewith certain of the stockholders of the Company and Parent are
entering into a Voting Agreement dated as of the date hereof (the "SECURITIES
AGREEMENT") in the form attached hereto as EXHIBIT A; and
WHEREAS, the parties intend that the Merger be treated as a
recapitalization for financial accounting purposes and certain existing
shareholders of the Company have agreed to accept an aggregate of approximately
5.4% of the shares of the Surviving Corporation immediately after the Effective
Time as partial consideration in the Merger;
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the DGCL, Sub shall be merged with and into the
Company at the Effective Time (defined below). From and after the Effective
Time, the separate corporate existence of Sub shall cease and the Company shall
continue as the surviving corporation (the "SURVIVING CORPORATION") and shall
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succeed to and assume all the rights and obligations of Sub in accordance with
the DGCL.
Section 1.2 EFFECTIVE TIME. The Merger shall become effective when a
Certificate of Merger (the "CERTIFICATE OF MERGER"), executed in accordance with
the relevant provisions of the DGCL, is duly filed with the Secretary of State
of the State of Delaware, or at such other time as the Constituent Corporations
shall agree upon and specify in the Certificate of Merger. When used in this
Agreement, the term "Effective Time" shall mean the date and time at which the
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware or such later time set forth in the Certificate of Merger. The
Constituent Corporations shall cause the Certificate of Merger to be executed
and filed with the Secretary of State of the State of Delaware on the date of
the Closing.
Section 1.3 EFFECTS OF THE MERGER. The Merger shall have the effect
provided in this Agreement, the Certificate of Merger and the applicable
provisions of the DGCL.
Section 1.4 CHARTER AND BYLAWS; DIRECTORS AND OFFICERS.
(a) At the Effective Time, the Certificate of Incorporation, as
amended, of the Company (the "COMPANY Charter"), shall be amended to read
in its entirety as set forth in EXHIBIT B attached hereto and is so
amended, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law. At the Effective Time, the Bylaws, as amended, of the
Company (the "COMPANY BYLAWS"), shall be amended to read in its entirety as
set forth in EXHIBIT C attached hereto and is so amended, shall be the
Bylaws of the Surviving Corporation until thereafter changed or amended as
provided therein or by the Company Charter.
(b) The directors of Sub at the Effective Time of the Merger shall be
the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly
elected and qualified, as the case may be. The officers of the Company at
the Effective Time of the Merger shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may
be.
Section 1.5 CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of Sub, the Company or the holders
of any securities of the Constituent Corporations:
(a) Each of the 1,000 issued and outstanding share of common stock,
$.01 par value, of Sub shall be converted into 943.925 validly issued,
fully paid and nonassessable shares of common stock of the Surviving
Corporation constituting approximately 94.4% of the outstanding shares of
the Surviving Corporation as of immediately following the Effective Time.
(b) All shares of capital stock of the Company that are held in the
treasury of the Company or by any wholly owned Subsidiary of the Company
shall be canceled and no capital stock of Parent or other consideration
shall be delivered in exchange therefor.
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(c) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled
in accordance with SECTION 1.5(b) or SECTION 1.5(G) and other than
Dissenting Shares (as hereinafter defined)):
(i) As to each Cash Only Share, the Per Share Cash Only
Consideration;
(ii) As to each Cash-Note Share, the Per Share Cash-Note
Consideration;
(iii) As to each Rollover Share, that fraction of a share of the
Common Stock of the Surviving Corporation equal to the Rollover
Exchange Rate. The number of shares of Common Stock of the Surviving
Corporation which any holder of Rollover Shares shall be entitled to
receive shall be rounded down to the nearest number of whole shares,
and any fraction of a share of Common Stock of the Surviving
Corporation otherwise payable to such holder shall be paid in cash in
an amount equal to the Per Share Common Stock Consideration multiplied
times that fractional share.
All such shares of Company Common Stock, when so converted, shall no
longer be outstanding and shall automatically be canceled and retired
and each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to
receive the Common Stock Merger Consideration applicable to such
shares, less any applicable withholding taxes, upon surrender of the
Certificate (as hereinafter defined) that formerly evidenced such
shares in the manner provided in SECTION 1.7(b).
For purposes of this Section 1.5, the following terms shall have the
following respective meanings ascribed thereto:
"AGGREGATE CASH-NOTE CASH CONSIDERATION" shall mean the Aggregate
Cash-Note Consideration less the Aggregate Merger Note Consideration.
"AGGREGATE CASH NOTE CONSIDERATION" shall mean the Aggregate
Non-Rollover Consideration LESS the Aggregate Cash Only Consideration.
"AGGREGATE CASH ONLY CONSIDERATION" shall mean (a) the product of
the Aggregate Non-Rollover Consideration multiplied by a fraction, the
numerator of which is the aggregate number of Cash Only Shares and the
denominator of which is the aggregate number of Non-Rollover Shares
(b) LESS the Merger Note Discount.
"AGGREGATE COMMON STOCK CASH CONSIDERATION" shall mean
$101,000,000 less the Aggregate Series A Preferred Merger
Consideration less the Company Expenses (other than the BSI Expenses)
less the Parent Expenses (not to exceed $3,000,000) plus the
Restricted Payment.
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"AGGREGATE COMMON STOCK CONSIDERATION" means the Aggregate Merger
Consideration less the Aggregate Series A Preferred Merger
Consideration less the Company Expenses known as of the Effective
Time; and "PER SHARE COMMON STOCK CONSIDERATION" shall mean the
Aggregate Common Stock Consideration divided by the total number of
shares of Common Stock (excluding Class C Shares) issued and
outstanding immediately prior to the Effective Time.
"AGGREGATE MERGER CONSIDERATION" means $119,990,125.
"AGGREGATE MERGER NOTE CONSIDERATION" shall mean the greater of
(a) $5,500,000 and (b) the Aggregate Cash-Note Consideration LESS Cash
Available For Cash-Note Consideration.
"AGGREGATE NON-ROLLOVER CONSIDERATION" shall mean the Aggregate
Common Stock Consideration LESS the Aggregate Rollover Consideration.
"AGGREGATE ROLLOVER CONSIDERATION" shall mean the aggregate
number of Rollover Shares multiplied by the Per Share Common Stock
Consideration.
"AGGREGATE SERIES A PREFERRED MERGER CONSIDERATION" means the sum
of the Series A Preferred Merger Consideration for all of the Series A
Preferred Stock issued and outstanding immediately prior to the
Effective Time plus the Option Merger Consideration, if any.
"BSI EXPENSES" shall mean those Company Expenses to be paid on
behalf of BSI so designated on SECTION 3.26 of the Company Letter and
any other expenses which the Company and Parent mutually agree in
writing to so designate.
"CASH AVAILABLE FOR CASH-NOTE CONSIDERATION" shall mean the
Aggregate Common Stock Cash Consideration less the Aggregate Cash Only
Consideration;
"CASH-NOTE SHARES" shall mean those shares of Common Stock issued
and outstanding immediately prior to the Effective Time listed on
Schedule 1 hereto indicated to receive Cash and Merger Notes in the
Merger.
"CASH ONLY SHARES" shall mean those shares of Common Stock issued
and outstanding immediately prior to the Effective Time listed on
SCHEDULE 1 hereto indicated to receive only cash consideration in the
Merger.
"MERGER NOTE DISCOUNT" shall mean $250,000.
"NON-ROLLOVER SHARES" shall mean the total number of shares of
Common Stock (excluding Class C Shares) issued and outstanding
immediately prior to the Effective Time LESS the Rollover Shares.
"PER SHARE CASH-NOTE CASH CONSIDERATION" shall mean the Aggregate
Cash-Note Cash Consideration divided by the aggregate number of
Cash-Note Shares.
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"PER SHARE CASH-NOTE CONSIDERATION" shall mean the sum of the Per
Share Cash-Note Cash Consideration PLUS the Per Share Merger Note
Consideration.
"PER SHARE CASH ONLY CONSIDERATION" shall mean an amount of cash
equal to the Aggregate Cash Only Consideration divided by the number
of Cash Only Shares.
"PER SHARE MERGER NOTE CONSIDERATION" shall mean the Aggregate
Merger Note Consideration divided by the aggregate number of Cash-Note
Shares.
"RESTRICTED PAYMENT" shall mean a cash payment by BSI to the
Company as of the Effective Time in an amount equal to 95% of the
maximum amount which BSI may pay to the Company pursuant to Section
4.9(c) of the Indenture.
"ROLLOVER EXCHANGE RATE" shall mean the fraction determined by
dividing (a) the Aggregate Rollover Consideration multiplied by the
number of shares of Common Stock of the Surviving Corporation to be
issued and outstanding immediately after the Effective Time, divided
by $107,000,000 by (b) the aggregate number of Rollover Shares.
"ROLLOVER SHARES" shall mean the shares of Common Stock issued
and outstanding immediately prior to the Effective Time to be
converted into the right to receive Common Stock of the Surviving
Corporation, as indicated on Schedule 1 hereto; the aggregate of which
shall be the quotient of 6,000,000 divided by the Per Share Common
Stock Consideration.
(d) Each share of Company Series A Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than shares to
be canceled in accordance with SECTION 1.5(b) and other than Dissenting
Shares) shall be converted into the right to receive the Series A Preferred
Merger Consideration. All such shares of Company Series A Preferred Stock,
when so converted, shall no longer be outstanding and shall automatically
be canceled and retired and each holder of a certificate representing any
such shares shall cease to have any rights with respect thereto, except the
right to receive the Series A Preferred Merger Consideration, less any
applicable withholding taxes, upon surrender of the Certificate that
formerly evidenced such shares in the manner provided in SECTION 1.7(b).
(e) Notwithstanding anything in this Agreement to the contrary, any
issued and outstanding shares of Company Stock held by a Person (a
"DISSENTING STOCKHOLDER") who objects to the Merger and complies with all
of the provisions of the DGCL concerning the right of holders of shares of
capital stock of the Company to dissent from the Merger and obtain payment
for their shares of Company Stock ("DISSENTING SHARES"), shall not be
converted as described in SECTION 1.5(c) or SECTION 1.5(d), as the case may
be, but rather shall be converted into the right to receive such
consideration as may be determined to be due to such Dissenting Stockholder
pursuant to the DGCL. If, after the Effective Time, such Dissenting
Stockholder withdraws his demand for payment or fails to perfect or
otherwise loses his right of payment, in any case pursuant to the DGCL, the
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Dissenting Shares of such Dissenting Stockholder shall be deemed to be
converted as of the Effective Time into the right to receive the Merger
Consideration to which such Dissenting Stockholder would otherwise have
been entitled to pursuant to SECTION 1.5(c) or SECTION 1.5(d). The Company
shall give Parent prompt notice of any demands for payment received by the
Company. The Company shall not, without the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any
such demands, and, prior to the Effective Time, Parent shall have the right
to participate in all negotiations and proceedings with respect to such
demands. "PERSON" shall mean any natural person, corporation, general or
limited partnership, limited liability company, joint venture, trust,
association or entity of any kind.
(f) As used in this Agreement, the term "MERGER CONSIDERATION" shall
mean, with respect to a share of Company Common Stock, the Common Stock
Merger Consideration and, with respect to a share of Company Series A
Preferred Stock, the Series A Preferred Merger Consideration.
(g) Notwithstanding any other provision of this Agreement to the
contrary, to the extent that there are any shares of Class C Common Stock
outstanding which are not fully vested pursuant to the Company's Class C
Investment and Incentive Plan (the "CLASS C PLAN") as of the Effective
Time, such shares shall be cancelled in the Merger without payment of any
consideration to the holders thereof.
Section 1.6 NOTE CONSIDERATION; OFFER FOR BSI NOTES; EXCHANGE OF NOTES.
(a) A portion of the Common Stock Merger Consideration per share will
consist of 18% Senior Merger Notes due October 31, 2000 (the "MERGER
NOTES"), in the form attached hereto as EXHIBIT D.
(b) The Surviving Corporation shall cause Bell Sports, Inc. ("BSI") to
make a change of control offer (the "POST-MERGER OFFER") to all holders of
BSI's 11% Senior Subordinated Notes (the "BSI NOTES") in accordance with
the terms and conditions of the Indenture dated as of August 17, 1998 among
the Company, BSI and Harris Trust and Savings Bank, as Trustee relating to
the BSI Notes (the "INDENTURE"), which Post-Merger Offer shall contain a
consent solicitation seeking amendment of the Indenture to eliminate
Section 4.3 and Sections 4.7 through 4.18 thereof (the "INDENTURE
AMENDMENT").
(c) Upon consummation of the Post-Merger Offer, in the event that the
consent solicitation: (i) is approved, the Surviving Corporation shall
redeem all outstanding 14% Senior Discount Debentures due 2009 issued by
the Company on August 17, 1998 (the "EXISTING SENIOR DISCOUNT NOTES") and
the Merger Notes; or (ii) is not approved, the Company shall exchange the
Existing Senior Discount Notes and the Merger Notes for new notes (the
"EXCHANGE DISCOUNT NOTES").
Section 1.7 PARENT TO MAKE CASH AVAILABLE.
(a) DEPOSIT WITH PAYING AGENT. Parent shall authorize such Person or
Persons as shall be reasonably acceptable to Parent and the Company to act
as Paying Agent hereunder (the "PAYING AGENT"). Prior to the Effective
Time, Parent shall deposit with the Paying Agent cash in the amount
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necessary for the payment of the cash Merger Consideration upon surrender
of certificates representing shares of Company Stock as part of the Merger
pursuant to this SECTION 1.7 (such cash being hereinafter referred to as
the "EXCHANGE FUND").
The Paying Agent shall invest the Exchange Fund as directed by Parent
in obligations of, or guaranteed by, the United States of America, in
commercial paper obligations rates A-1 or P-1 or better by Moody's Investor
Services or Standard & Poor's Corporation, respectively, or in certificates
of deposit, bank repurchase agreements or bankers' acceptances of
commercial banks with capital exceeding $500 million, in each case with
maturities not exceeding five (5) days, or money market funds substantially
all the assets of which are the above types of investments (without regard
to the maturities thereof). All earnings on the Exchange Fund shall inure
to the benefit of Parent. If for any reason (including losses), the
Exchange Fund is inadequate to pay the amounts to which holders of shares
of Company Stock shall be entitled under ARTICLE I of this Agreement, the
Surviving Corporation shall in any event be liable for payment thereof. The
Exchange Fund shall not be used for any purpose except as expressly
provided in this Agreement.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall or shall cause the Paying
Agent to mail to each holder of record of a certificate or certificates
that immediately prior to the Effective Time represented shares of Company
Stock (the "CERTIFICATES"), (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Paying Agent and shall be in a form and have such other provisions as
Parent may reasonably specify, including a representation as to good and
marketable title to the shares represented by the Certificates, free and
clear of all Liens (as hereinafter defined)) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the Merger
Consideration. If requested by the Company prior to the Closing Date,
Parent shall instruct the Paying Agent to make such letters of transmittal
available at the location of the Closing, and shall cause the Paying Agent
to be available at such location to receive, from record holders of
Certificates wishing to surrender them, such letters of transmittal along
with the related Certificates. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the
Paying Agent, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration into which the shares of
Company Stock theretofore represented by such Certificate shall have been
converted pursuant to SECTION 1.5, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of shares of
Company Stock that is not registered in the transfer records of the
Company, payment may be made to a Person other than the Person in whose
name the Certificate so surrendered is registered, if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and
the Person requesting such payment shall pay any transfer or other taxes
required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable.
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Until surrendered as contemplated by this SECTION 1.7, each Certificate
(other than Certificates representing Dissenting Shares) shall be deemed at
any time after the Effective Time to represent only the right to receive
upon such surrender the amount of cash, without interest, plus any other
Merger Consideration, if any, into which the shares of Company Stock
theretofore represented by such Certificate shall have been converted
pursuant to SECTION 1.5. No interest or dividends will be paid or will
accrue on the cash payable upon the surrender of any Certificate.
Section 1.8 WITHHOLDING. Parent or the Paying Agent shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of shares of Company Stock such amounts as
Parent or the Paying Agent is required to deduct and withhold with respect
to the making of such payment under the Internal Revenue Code of 1986, as
amended (the "CODE"), or under any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by Parent or the Paying
Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of shares of Company Stock in
respect of which such deduction and withholding was made by Parent or the
Paying Agent and any such amounts deducted or withheld shall be promptly
and timely paid by Parent or the Paying Agent to the appropriate taxing
authority.
Section 1.9 RETURN OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the former stockholders of the Company for 3
months after the Effective Time shall be delivered to Parent, upon demand
of Parent, and any such former stockholders who have not theretofore
complied with this Article I shall thereafter look only to Parent for
payment of their claim for the Merger Consideration. Neither Parent nor the
Surviving Corporation shall be liable to any former holder of shares of
Company Stock for any Merger Consideration which is delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
Section 1.10 NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. The Merger
Consideration paid upon the surrender for exchange of Certificates in
accordance with the terms hereof shall be deemed to have been issued in
full satisfaction of all rights pertaining to the shares of Company Stock
represented by such Certificates.
Section 1.11 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of
shares of Company Stock shall thereafter be made on the records of the
Company. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, the Paying Agent or Parent, such Certificates shall
be canceled and exchanged as provided in this Article I.
Section 1.12 LOST CERTIFICATES. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit (reasonably
acceptable to Parent) of that fact by the Person claiming such Certificate
to be lost, stolen or destroyed, the Paying Agent will pay in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration to
which the holder thereof is entitled pursuant to this Article I.
Section 1.13 FURTHER ASSURANCES. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
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necessary, desirable or proper (a) to vest, perfect or confirm, of record
or otherwise, in the Surviving Corporation its right, title or interest in,
to or under any of the rights, privileges, powers, franchises, properties
or assets of either of the Constituent Corporations, or (b) otherwise to
carry out the purposes of this Agreement, the Surviving Corporation and its
proper officers and directors or their designees shall be authorized to
execute and deliver, in the name and on behalf of either of the Constituent
Corporations, all such deeds, bills of sale, assignments and assurances and
to do, in the name and on behalf of either Constituent Corporation, all
such other acts and things as may be necessary, desirable or proper to
vest, perfect or confirm the Surviving Corporation's right, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of such Constituent Corporation and otherwise to carry
out the purposes of this Agreement.
Section 1.14 CLOSING; CLOSING DELIVERIES.
(a) The closing of the transactions contemplated by this Agreement
(the "CLOSING") and all actions specified in this Agreement to occur at the
Closing shall take place at the offices of Akin, Gump, Strauss, Hauer &
Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Suite 400, Washington, D.C.
20036, at 10:00 a.m., local time, no later than the third business day
following the day on which the last of the conditions set forth in ARTICLE
VI shall have been fulfilled or waived (if permissible) or at such other
time and place as Parent and the Company shall agree (the date of the
Closing is referred to herein as the "CLOSING Date").
(b) Subject to fulfillment or waiver of the conditions for its benefit
set forth in ARTICLE VI, at the Closing Parent shall deliver to the Company
all of the following:
(i) a copy of the Certificate of Incorporation of Parent (the
"PARENT CHARTER"), certified as of a recent date by the Secretary of
State of the State of Delaware;
(ii) a certificate of good standing of Parent, issued as of a
recent date by the Secretary of State of the State of Delaware;
(iii) a certificate of the Secretary or an Assistant Secretary of
Parent, dated as of the Closing Date, in form and substance reasonably
satisfactory to the Company, as to (A) no amendments to the Parent
Charter since a specified date; (B) the Bylaws of Parent (the "PARENT
BYLAWS"); (C) the resolutions of the Board of Directors of Parent
authorizing the execution and performance of this Agreement and the
transactions contemplated herein; and (D) the incumbency and
signatures of the officers of Parent executing this Agreement;
(iv) the certificate contemplated by SECTION 6.1(a), duly
executed by the Chief Executive Officer and the Chief Financial
Officer of Parent; and
(v) all Consents (as hereinafter defined) obtained by Parent with
respect to the consummation of the transactions contemplated by this
Agreement.
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(c) Subject to fulfillment or waiver of the conditions set forth in
ARTICLE VI, at the Closing Sub shall deliver to the Company all of the
following:
(i) a copy of the Certificate of Incorporation of Sub certified
as of a recent date by the Secretary of State of the State of
Delaware;
(ii) a certificate of good standing of Sub, issued as of a recent
date by the Secretary of State of the State of Delaware; and
(iii) a certificate of the Secretary or an Assistant Secretary of
Sub, dated as of the Closing Date, in form and substance reasonably
satisfactory to the Company, as to (A) no amendments to the
Certificate of Incorporation of Sub since a specified date; (B) the
Bylaws of Sub; (C) the resolutions of the Board of Directors of Sub
authorizing the execution and performance of this Agreement and the
transactions contemplated herein and the written consent of Parent in
its capacity as sole stockholder of Sub adopting this Agreement in
accordance with the DGCL; and (D) the incumbency and signatures of the
officers of Sub executing this Agreement.
(d) Subject to fulfillment or waiver of the conditions for its benefit
set forth in ARTICLE VI, at the Closing the Company shall deliver to Parent
all of the following:
(i) a copy of the Company Charter, certified as of a recent date
by the Secretary of State of the State of Delaware, and a copy of
BSI's Articles of Incorporation, certified as of a recent date by the
Secretary of State of the State of California;
(ii) a certificate of good standing and tax certificates of the
Company, issued as of a recent date by the Secretary of State of the
State of Delaware, a certificate of good standing of each Subsidiary
of the Company issued as of a recent date by the Secretary of State of
the jurisdiction of its incorporation or organization and certificates
of good standing of the Company and each of its Subsidiaries for each
jurisdiction where it is registered or qualified to conduct business
as a foreign corporation;
(iii) a certificate of the Secretary or an Assistant Secretary of
the Company, dated as of the Closing Date, in form and substance
reasonably satisfactory to Parent, as to (A) no amendments to the
Company Charter since a specified date; (B) the Company Bylaws; (C)
the resolutions of the Board of Directors of the Company authorizing
the execution and performance of this Agreement and the transactions
contemplated herein and the resolutions of the stockholders of the
Company adopting this Agreement in accordance with the DGCL; and (D)
the incumbency and signatures of the officers of the Company executing
this Agreement;
(iv) all Consents obtained by the Company with respect to the
consummation of the transactions contemplated by this Agreement
including all those identified on SECTION 6.2(c) of the Company
Letter;
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(v) the certificate contemplated by SECTION 6.2(a), duly executed
by the Chief Executive Officer and the Chief Financial Officer of the
Company; and
(vi) all of the Company Records (as hereinafter defined) and all
original stock certificates evidencing all of the outstanding shares
of each Subsidiary of the Company other than shares identified on
SECTION 3.3 of the Company Letter as being owned by third Persons,
assuming repayment by the Company of all obligations outstanding under
the Credit Agreement dated as of August 17, 1998 among Bell Sports,
Inc., as Borrower, Bell Sports Corp., as a Guarantor and the Lenders
party thereto (the "EXISTING CREDIT AGREEMENT").
Section 1.15 OPTIONS. The holder of any option to purchase Company Stock
that is not exercised prior to the Effective Time will, at the Effective Time,
be entitled to receive, in consideration thereof, for each share subject
thereto, the Merger Consideration applicable to such share net of the exercise
price therefor (the aggregate for all such option shares being the "OPTION
MERGER CONSIDERATION") and all applicable withholding taxes. The surrender of
any option for the consideration contemplated by this Section 1.15 shall be
deemed a release of any and all rights the holder thereof had or may have had in
respect thereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 2.1 ORGANIZATION, STANDING AND POWER. Parent is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Each of Parent and
Sub has the requisite power and authority to carry on its business as now being
conducted. Parent is duly qualified to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. For purposes of this
Agreement, (a) "Material Adverse Change" or "Material Adverse Effect" means,
when used with respect to Parent or the Company, as the case may be, any event,
occurrence, fact, circumstance, change or effect that is or reasonably could be
expected to be materially adverse to the business, assets, prospects, financial
condition or results of operations of Parent and its Subsidiaries (as
hereinafter defined), taken as a whole, or the Company and its Subsidiaries,
taken as a whole, as the case may be; provided, however, that in determining
whether a Material Adverse Change or Material Adverse Effect has occurred with
respect to either referenced party, any change or effect, to the extent it is
attributable to (i) any change in general economic conditions, or (ii) the
execution, public announcement or existence of this Agreement, shall not be
considered when determining whether a Material Adverse Change or Material
Adverse Effect has occurred; and (b) "Subsidiary" means any corporation,
partnership, limited liability company, joint venture or other legal entity of
which Parent or the Company, as the case may be (either alone or through or
together with any other Subsidiary), owns, directly or indirectly, 50% or more
of the stock or other equity interests the holders of which are generally
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entitled to vote for the election of the board of directors or other governing
body of such corporation, partnership, limited liability company, joint venture
or other legal entity.
As of the date hereof and the Closing Date, the issued and outstanding
capitalization of Sub is and will consist of 1,000 shares of Common Stock.
Section 2.2 AUTHORITY. On or prior to the date of this Agreement, the
Boards of Directors of Parent and Sub declared the Merger advisable and fair to
and in the best interest of Parent and Sub, respectively, and their respective
stockholders, and approved and adopted this Agreement in accordance with the
DGCL. Each of Parent and Sub has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Parent and Sub,
subject to the filing of appropriate Merger documents as required by the DGCL.
This Agreement and the consummation of the transactions contemplated hereby have
been approved by the sole stockholder of Sub. This Agreement has been duly
executed and delivered by Parent and Sub, and (assuming the valid authorization,
execution and delivery of this Agreement by the Company and the validity and
binding effect hereof on the Company) this Agreement constitutes the valid and
binding obligation of Parent and Sub enforceable against each of them in
accordance with its terms.
Section 2.3 CONSENTS AND APPROVALS; NO VIOLATION. The execution and
delivery of this Agreement do not and will not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, conflict with, result in any violation or breach of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
payment or of termination, amendment, cancellation or acceleration of any
obligation or the loss of a benefit under, or result in the creation of any Lien
(as defined herein) upon any of the properties or assets of Parent or any of its
Subsidiaries under, any (i) provision of the Parent Charter or the Parent Bylaws
or the Certificate of Incorporation or Bylaws of Sub, (ii) provision of the
comparable charter or organization documents of any of Parent's Subsidiaries,
(iii) loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license (each a
"CONTRACT" and collectively, "CONTRACTS") applicable to Parent or any of its
Subsidiaries or (iv) judgment, order, writ, injunction, ruling or decree (each
an "ORDER" and collectively, "ORDERS"), or any statute, law, ordinance, rule or
regulation (each a "LAW" and collectively, "LAWS") applicable to Parent or any
of its Subsidiaries or any of their respective properties or assets. No filing
or registration with, notification to, or authorization, consent or approval of
(each a "CONSENT" and collectively, "CONSENTS"), any government or subdivision
thereof, or any domestic (federal and state), foreign or supranational court,
commission or governmental or regulatory body, agency, authority or tribunal (a
"GOVERNMENTAL ENTITY") is required by or with respect to Parent or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
Parent or Sub or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement, except for (i) in connection, or in
compliance, with the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR ACT"), and the Securities Exchange Act of
1934, as amended (together with the rules and regulations promulgated
thereunder, the "EXCHANGE ACT") and (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware.
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Section 2.4 INFORMATION STATEMENT. None of the information to be supplied
by Parent or Sub for inclusion or incorporation by reference in the information
statement relating to the transactions contemplated by this Agreement to be sent
to the holders of Company Common Stock (together with any amendments or
supplements thereto, the "INFORMATION STATEMENT") will, at the time of the
mailing of the Information Statement, 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.
Section 2.5 FINANCING. Parent has entered into commitment letters with
respect to senior debt (the "CREDIT AGREEMENT COMMITMENT LETTER") and the
subordinated indebtedness (the "SUB DEBT COMMITMENT LETTER" and together with
the Credit Agreement Commitment Letter, the "COMMITMENT LETTERS") pursuant to
which BSI or Sub is to obtain, subject to the terms and conditions therein, up
to $235 million of debt financing (the "FINANCING"). Parent has delivered true,
correct and complete copies of the Commitment Letters to the Company. Each of
the Commitment Letters is in full force and effect and has not been amended or
terminated in any manner adverse to the Company. Parent will have on hand,
assuming consummation of the Financing, funds necessary to pay the aggregate
Merger Consideration and all of its fees and expenses related to this Agreement.
Section 2.6 LITIGATION. As of the date of this Agreement, there is no suit,
claim, action, proceeding or investigation pending or, to the best knowledge of
Parent, threatened against Parent or any of its subsidiaries that would prevent
or materially delay the consummation of the Merger. As of the date of this
Agreement, neither Parent nor any of its Subsidiaries is subject to any
outstanding Order that would prevent or materially delay the consummation of the
Merger.
Section 2.7 REQUIRED VOTE OF PARENT STOCKHOLDERS. No vote of the security
holders of Parent is required by law, the Parent Charter or the Parent Bylaws or
otherwise in order for Parent to consummate the Merger and the transactions
contemplated hereby.
Section 2.8 BROKERS. No broker, investment banker or other person, other
than Chartwell Investments II LLC, the fees and expenses of which will be paid
by Parent (or the Company and/or BSI if the Merger is consummated), is entitled
to any broker's, finder's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent.
Section 2.9 OPERATIONS OF SUB. Sub is a direct, wholly owned subsidiary of
Parent, was formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
Section 2.10 REPRESENTATIONS AND WARRANTIES INSURANCE POLICY. The
Representations and Warranties Insurance Policy obtained by Parent in respect of
this Agreement (the "REPRESENTATIONS AND WARRANTIES INSURANCE POLICY") provides
that the insurer writing such policy shall not have any claim, right or recourse
against any stockholder, director, officer or other employee, Affiliate, agent,
representative or advisor of the Company for breaches of representations or
warranties under this Agreement, nor any present or former stockholder,
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director, officer or other employee, partner, Affiliate, agent, representative
or advisor of any of the foregoing. Parent agrees that it will not, and that the
Surviving Corporation will not, grant any right of subrogation or enter into any
other agreement inconsistent with the immediately preceding sentence.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 ORGANIZATION, STANDING AND POWER. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate power and
authority to carry on its business as now being conducted. Except as set forth
in Section 3.1 of the letter dated the date hereof from the Company to Parent
which relates to this Agreement and is designated therein as the Company Letter
(the "COMPANY LETTER"), the Company and each of its Subsidiaries are duly
qualified to do business, and are in good standing, in each jurisdiction where
the character of their properties owned or held under lease or the nature of
their activities makes such qualification necessary.
Section 3.2 CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company is 2,607,500 shares
consisting of (i) 1,107,500 shares of Company Common Stock, including
900,000 shares of Class A Common Stock ("COMPANY CLASS A COMMON STOCK"),
150,000 shares of Class B Common Stock ("COMPANY CLASS B COMMON STOCK") and
57,500 shares of Class C Common Stock ("COMPANY CLASS C COMMON STOCK") and
(ii) 1,500,000 shares of Preferred Stock, $.01 par value ("COMPANY
PREFERRED STOCK") all of which have been designated as Company Series A
Preferred Stock. As of the date hereof (i) 869,155 shares of Company Class
A Common Stock, 129,750 shares of Company Class B Common Stock, 46,350
shares of Company Class C Common Stock and 1,032,967 shares of Company
Series A Preferred Stock are issued and outstanding, all of which are
validly issued, fully paid and nonassessable and free of preemptive rights,
(ii) no shares of Company Common Stock are held in the treasury of the
Company or by Subsidiaries of the Company and (iii) 2,343 shares of Company
Class A Common Stock, 4,350 shares of Company Class B Common Stock, 11,150
shares of Company Class C Common Stock and 2,343 shares of Company Series A
Preferred Stock are reserved for issuance pursuant to the Company's
Investment and Incentive Plan and the Class C Plan (collectively, the
"COMPANY INCENTIVE Plans"). The Company has issued options to purchase
Company Stock ("COMPANY OPTIONS") and 41/4% Convertible Notes ("CONVERTIBLE
NOTES"), in the amounts set forth in SECTION 3.2 of the Company Letter.
SECTION 3.2 of the Company Letter also sets forth the exercise or
conversion price for all outstanding Company Options and Convertible Notes
and the holder of each outstanding Company Option. As of the date of this
Agreement, except as set forth above or in SECTION 3.2 of the Company
Letter, no shares of capital stock or other voting securities of the
Company are issued, reserved for issuance or outstanding. SECTION 3.2 of
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the Company Letter sets forth a list of each holder of Company Stock and
Company Preferred Stock as of the date hereof and the number (and class) of
shares of Company Common Stock and Company Preferred Stock held by such
holder (and indicates whether such shares are vested or unvested). Except
as set forth in SECTION 3.2 of the Company Letter and except as set forth
above, there are no (i) options, warrants, calls, rights, puts or
agreements obligating the Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, any additional
shares of capital stock (or other securities or equity equivalents) of the
Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right, put or agreement, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or other securities of the
Company, (iii) restricted stock or other stock based compensation awards of
the Company, or (iv) stock appreciation, phantom stock, or profit
participation rights or other securities of the Company (the items in
clauses (i), (ii) and (iv) being referred to collectively as the "COMPANY
SECURITIES"). Except as set forth above or in SECTION 3.2 of the Company
Letter, there are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities and there are no voting trusts, proxies or other agreements or
understandings with respect to the voting of the capital stock of the
Company.
(b) SECTION 3.2 of the Company Letter sets forth for each Subsidiary
of the Company (i) its name and jurisdiction of incorporation, (ii) the
number of shares of authorized capital stock of each class of its capital
stock, (iii) the number of issued and outstanding shares of each class of
its capital stock, the names of the beneficial and record holders thereof,
and the number of shares held by each such holder, and (iv) the number of
shares of its capital stock held in treasury. All of the issued and
outstanding shares of capital stock of each Subsidiary of the Company have
been duly authorized and are validly issued, fully paid and non-assessable.
Except as set forth in SECTION 3.2 of the Company Letter, the outstanding
shares of each Subsidiary of the Company are owned free and clear of any
restrictions on transfer (other than restrictions under the Securities Act
of 1933, as amended (together with the rules and regulations promulgated
thereunder, the "SECURITIES ACT"), and state securities laws), warrants,
purchase rights, contracts, commitments, equities, security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on voting rights, charges and other encumbrances of any nature
whatsoever (collectively, "LIENS"). Except as set forth in this SECTION
3.2(b) or in SECTION 3.2 of the Company Letter, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights or other contracts or commitments that
could require any of the Company or any of its Subsidiaries to sell,
transfer or otherwise cause to become outstanding any of the capital stock
of any of the Subsidiaries of the Company. Except as set forth in this
SECTION 3.2(b) or in SECTION 3.2 of the Company Letter, there are no
outstanding stock appreciation, phantom stock, profit participation,
similar rights or other securities of or with respect to any Subsidiary of
the Company. There are no voting trusts, proxies or other agreements or
understandings with respect to the voting of any capital stock of any
Subsidiary of the Company. Except as set forth in SECTION 3.2 of the
Company Letter, none of the Company nor any of its Subsidiaries (i)
controls directly or indirectly or has any direct or indirect equity
participation in any corporation, partnership, trust, business association
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or other Person which is not a Subsidiary of the Company, (ii) has engaged
in any joint venture with any other Person, or (iii) has entered into any
agreement or arrangement with respect to any matters referred to in clauses
(i) and (ii) above (any of the foregoing being an "INVESTMENT"). Each such
Investment is owned by the Company free and clear of any Liens (other than
those arising under the Existing Credit Agreement), is fully paid and
non-assessable and does not require the future payment of any money or
property by the Company or any of its Subsidiaries. SECTION 3.2 of the
Company Letter lists Contracts relating to the Investments.
Section 3.3 CERTIFICATES; ARTICLES OF INCORPORATION AND BYLAWS. The Company
has heretofore delivered to Parent a complete and correct copy of the
certificate/articles of incorporation, the bylaws and stock record books and
stock ledgers of each of the Company and its Subsidiaries, each as amended to
the date hereof (the "COMPANY RECORDS"). The minute books (containing the
records of meetings of the stockholders, the board of directors, and any
committees of the board of directors) evidence all board of directors and
stockholder actions, and the stock certificate books and the stock record books
of each of the Company and its Subsidiaries (copies of which have been delivered
to Parent) are correct and complete.
Section 3.4 AUTHORITY. On or prior to the date of this Agreement, the Board
of Directors of the Company declared the Merger advisable and fair to and in the
best interest of the Company and its stockholders, approved and adopted this
Agreement in accordance with the DGCL, resolved to recommend the approval and
adoption of this Agreement by the Company's stockholders and directed that this
Agreement be submitted to the Company's stockholders for approval and adoption.
The Company has all requisite corporate power and authority to enter into this
Agreement, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject, in the case of this
Agreement, to filing of appropriate Merger documents and the delivery of any
notice required to be given to stockholders of the Company, in each case as
required by the DGCL. This Agreement has been duly executed and delivered by the
Company and (assuming the valid authorization, execution and delivery of this
Agreement by Parent and Sub and the validity and binding effect of the Agreement
on Parent and Sub) constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
Section 3.5 CONSENTS AND APPROVALS; NO VIOLATION.
(a) Except as set forth in SECTION 3.5 of the Company Letter, the
execution and delivery of this Agreement do not and will not, and the
consummation of the transactions contemplated hereby and compliance with
the provisions hereof will not, conflict with, result in any violation or
breach of, or default (with or without notice or lapse of time, or both)
under, or give to others a right of payment or of termination, amendment,
cancellation or acceleration of any Indebtedness obligation or the loss of
a benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries under (any
of the foregoing being a "VIOLATION"), (i) any provision of the Company
Charter or the Company Bylaws, (ii) any provision of the comparable charter
or organization documents of any of the Company's Subsidiaries, (iii) any
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Contract applicable to the Company or any of its Subsidiaries or (iv) any
Order or Law applicable to the Company or any of its Subsidiaries or any of
their respective properties or assets. Except as set forth in SECTION 3.5
of the Company Letter, no Consent of any Governmental Entity or filing with
any Governmental Entity is required by or with respect to the Company or
any of its Subsidiaries in connection with the execution and delivery of
this Agreement or is necessary for the consummation of the Merger and the
other transactions contemplated by this Agreement, except for (i) in
connection, or in compliance, with the provisions of the HSR Act, (ii) the
filing of the Certificate of Merger with the Secretary of State of the
State of Delaware and in other states where the Company is qualified to do
business, (iii) such filings as may be required in connection with the
taxes described in SECTION 5.8, or (iv) applicable requirements, if any, of
Blue Sky Laws.
(b) For purposes of this Agreement "Indebtedness" of any Person shall
mean without duplication (A) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property payment for which is
deferred six (6) months or more, but excluding obligations to trade
creditors incurred in the ordinary course of business that are not overdue
by more than six (6) months unless being contested in good faith and only
to the extent reserved for on the Most Recent Balance Sheet, (B) all
reimbursement and other obligations with respect to letters of credit,
bankers' acceptances and surety bonds, whether or not matured, (C) all
obligations evidenced by notes, bonds, debentures or similar instruments,
(D) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of
such property), (E) all capital lease obligations, (F) all obligations of
such Person under commodity purchase or option agreements or other
commodity price hedging arrangements, in each case whether contingent or
matured, (G) all obligations of such Person under any foreign exchange
contract, currency swap agreement, interest rate swap, cap or collar
agreement or other similar agreement or arrangement designed to alter the
risks of that Person arising from fluctuations in currency values or
interest rates, in each case whether contingent or matured, (H) all accrued
interest, prepayment penalties and premiums and expenses of prepayment with
respect to all of the Indebtedness referred to above, and (I) all
Indebtedness referred to above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien upon or in property or other assets (including accounts and
contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness.
Section 3.6 SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as set forth in
SECTION 3.6 of the Company Letter, the Company has timely filed all required
documents with the Securities and Exchange Commission (the "SEC") since June 28,
1997 (the "COMPANY SEC DOCUMENTS"). As of their respective filing dates (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing), and during any period of effectiveness, the Company
SEC Documents complied with the requirements of the Securities Act or the
Exchange Act, as the case may be, each as in effect on the date so filed, and at
the time filed with the SEC (or if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing), none of the
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Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Company SEC Documents, including any financial statements included in any
Company SEC Documents to be delivered prior to the Closing Date (collectively,
the "SEC FINANCIAL STATEMENTS"), comply (or will comply as the case may be) as
of their respective dates as to form in all material respects with the then
applicable accounting requirements and published rules and regulations of the
SEC with respect thereto. The (i) SEC Financial Statements, (ii) unaudited
consolidated balance sheets at April 29, 2000 and May 27, 2000 and the related
statements of income of the Company and its Subsidiaries for the months then
ended, and (iii) the financial statements to be delivered pursuant to Section
5.13 hereof (collectively, the "FINANCIAL STATEMENTS"), have been prepared in
accordance with United States generally accepted accounting principles (except,
in the case of the unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly present the consolidated
financial position of the Company and its consolidated Subsidiaries as at the
dates thereof and the consolidated results of their operations and their
consolidated cash flows for the periods then ended (subject in the case of
unaudited statements, to normal recurring year-end audit adjustments and to any
other adjustments described therein).
Section 3.7 NO UNDISCLOSED LIABILITIES. There are no liabilities or
Indebtedness of the Company or its Subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, due, to become due, determined, determinable or
otherwise, except for (a) liabilities accrued or reserved against the most
recent balance sheet included in the Company SEC Documents containing financial
statements filed most recently on or prior to the date of this Agreement (the
"MOST RECENT BALANCE SHEET"), (b) liabilities which have arisen after the date
of the Most Recent Balance Sheet in the ordinary course of business consistent
with past practice (none of which results from, arises out of, relates to, is in
the nature of, or was caused by any breach of contract, breach of warranty,
tort, infringement, or violation of law), (c) liabilities or obligations to
perform or pay under the executory portion of any Contract of the Company or its
Subsidiaries, (d) expenses incurred in connection with the negotiation of, and
obligations of the Company arising under, this Agreement and (e) any guarantees
of the contingent obligations of the Company or its Subsidiaries supporting the
Indebtedness of the Company and its Subsidiaries described in the foregoing
clauses (a) through (d).
Section 3.8 INFORMATION STATEMENT. None of the information to be supplied
by the Company for inclusion or incorporation by reference in the Information
Statement will, at the time of the mailing of the Information Statement, 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.
Section 3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
SECTION 3.9 of the Company Letter, since July 3, 1999: (a) the Company and its
Subsidiaries have not incurred any material liability or obligation (indirect,
direct or contingent), or entered into any material oral or written agreement or
other transaction, that is not in the ordinary course of business or that has
had or could reasonably be expected to result in a Material Adverse Effect on
the Company, (b) the Company and its Subsidiaries have not sustained any loss or
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interference with their business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance) that has had a
Material Adverse Effect on the Company; (c) other than any Indebtedness incurred
by the Company after the date hereof as permitted by Section 4.1(f), there has
been no material change in the consolidated Indebtedness of the Company and its
Subsidiaries, no change in the capital stock of the Company (except for the
issuance of shares of the Company Stock pursuant to Company Incentive Plans) and
no dividend or distribution of any kind declared, paid, set aside or made by the
Company on the Company Stock, (d) there has been no Material Adverse Change with
respect to the Company and (e) there has not been (i) any redemption or other
acquisition by the Company of any shares of its capital stock or any split,
combination or reclassification of the Company's capital stock or any issuance
or the authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock; (ii)(x) any granting
by the Company or any of the Subsidiaries to any officer or key employee of the
Company or any of the Subsidiaries of any increase in compensation, except in
the ordinary course of business or as was required under employment agreements
set forth on SECTION 3.9 of the Company Letter or (y) any entry into, or
amendment or modification to, by the Company or any Subsidiary, any employment,
severance or termination agreement with any such officer or key employee or any
grant by the Company or any Subsidiary to any such officer or key employee of
any increase in severance or termination pay, except as was required under
employment, severance or termination agreements set forth on SECTION 3.9 of the
Company Letter or any adoption, amendment or modification to any bonus, profit
sharing, severance, incentive or other Company Plan for the benefit of any
officers, directors or employees of the Company or any of its Subsidiaries;
(iii) any change in accounting methods, principles or practices by the Company
or any Subsidiary materially affecting its assets, liabilities or business,
except insofar as may have been required by a change in generally accepted
accounting principles; (iv) any delay or postponement of the payment of accounts
payable and other liabilities outside the ordinary course of business consistent
with past practice by the Company or its Subsidiaries; (v) any entry by the
Company or any of its Subsidiaries into any transaction with, any of its
directors, officers and employees outside the ordinary course of business
consistent with past practice; or (vi) any making of any other change in the
employment terms for any of the directors, officers and employees of the Company
or any of its Subsidiaries except in the case of non-officer employees in the
ordinary course of business consistent with past practice.
Section 3.10 PERMITS AND COMPLIANCE; DEFAULTS.
(a) Each of the Company and its Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements,
variances, exceptions, consents, certificates, approvals and Orders of any
Governmental Entity (including those under any Environmental Laws (as
hereinafter defined)) necessary for the Company or any of its Subsidiaries
to own, lease and operate its properties or to carry on its business as it
is now being conducted (the "COMPANY PERMITS"), and all such Company
Permits are valid and in full force and effect. The Company and its
Subsidiaries are in substantial compliance in all respects with their
respective obligations under the Company Permits.
(b) Neither the Company nor any of its Subsidiaries is in violation of
(i) its charter, bylaws or other organizational documents, (ii) any
applicable Law, and neither the Company nor any of its Subsidiaries has
received any written notice of any asserted past or present failure to
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comply with any applicable Law, which notice remains unresolved or
unsettled, or (iii) any Order of any Governmental Entity having
jurisdiction over the Company or any of its Subsidiaries, nor has the
Company or any of its Subsidiaries received any written notice of any
asserted past or present failure to comply with any such Order. Except as
set forth in SECTION 3.10 of the Company Letter, no event of default or
event that, but for the giving of notice or the lapse of time or both,
would constitute an event of default exists under any Contract to which the
Company or any of its Subsidiaries is a party or by which the Company or
any such Subsidiary is bound or to which any of the properties, assets or
operations of the Company or any such Subsidiary is subject.
Section 3.11 TAX MATTERS.
(a) Except as otherwise set forth in SECTION 3.11 of the Company
Letter, (i) the Company and each of its Subsidiaries have timely filed all
federal, and all material state, local and foreign, Tax Returns (as
hereinafter defined) required to have been filed, and such Tax Returns are
correct and complete; (ii) all Taxes (as hereinafter defined) owed by the
Company or any of its Subsidiaries (whether or not shown to be due on such
Tax Returns) have been timely paid or accrued for on the Most Recent
Balance Sheet; (iii) any Tax Returns referred to in clause (i) relating to
income Taxes have been examined by the Internal Revenue Service or other
relevant Governmental Entity having oversight with respect thereto or the
period for assessment of the Taxes in respect of which such Tax Returns
were required to be filed has expired; (iv) all deficiencies asserted or
assessments made as a result of any examination of such Tax Returns by any
taxing authority have been paid in full or are being timely and properly
contested; and (v) no withholding is required under Section 1445 of the
Code in connection with the Merger; (vi) neither the Company nor any of its
Subsidiaries currently is the beneficiary of any extension of time within
which to file any Tax Return; (vii) no claim is pending by a Governmental
Entity with respect to Taxes relating to the Company or any of its
Subsidiaries in a jurisdiction where any of the Company and its
Subsidiaries does not file Tax Returns; (viii) there are no Liens on any of
the assets of any of the Company or its Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax except
Liens relating to current Taxes not yet due; (ix) each of the Company and
its Subsidiaries has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party; and
(x) there is no dispute or claim concerning any Tax liability of any of the
Company or any of its Subsidiaries either (A) claimed or raised by any
authority in writing or (B) as to which any of the Company (or employees
responsible for Tax matters of the Company and its Subsidiaries) has
Knowledge (as hereinafter defined) based upon personal contact with any
agent of such authority.
(b) SECTION 3.11 of the Company Letter lists those Tax Returns that
have been audited since January 1, 1996, and indicates those Tax Returns
currently that are the subject of audit and any assessments or assessments
threatened in writing in connection with such audit, or otherwise currently
outstanding. The Company has delivered or made available to Parent correct
and complete copies of all federal, state and foreign income Tax Returns,
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examination reports and statements of deficiencies assessed against or
agreed to by any of the Company and its Subsidiaries since January 1, 1996.
(c) Except as otherwise set forth in SECTION 3.11 of the Company
Letter, (i) neither the Company nor any of its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency; (ii) neither the
Company nor any of its Subsidiaries has filed a consent under Code Section
341(f) concerning collapsible corporations; (iii) neither the Company nor
any of its Subsidiaries has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under
Code Section 280G; (iv) neither the Company nor any of its Subsidiaries has
been a United States real property holding corporation within the meaning
of Code Section 897(c)(1)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii); (v) neither the Company nor any of its
Subsidiaries is a party to any Tax allocation or sharing agreement; (vi)
neither the Company nor any of its Subsidiaries has agreed or been
requested to make any adjustment under Code Section 481(a), by reason of a
change in accounting method or otherwise; (vii) neither the Company nor any
of its Subsidiaries (A) has been a member of an affiliated group within the
meaning of Code Section 1504(a) filing a consolidated federal income Tax
Return (other than a group the common parent of which was the Company) or
(B) has any liability for the Taxes of any Person (other than any of the
Company or its Subsidiaries), as a transferee or successor, by Contract, or
otherwise.
(d) For purposes of this Agreement, "Taxes" shall mean any and all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, real or personal property,
sales, withholding, social security, occupation, use, service, service use,
value added, license, net worth, payroll, franchise, transfer and recording
taxes, fees and charges, imposed by the United States Internal Revenue
Service or any taxing authority (whether domestic or foreign including,
without limitation, any state, local or foreign government or any
subdivision or taxing agency thereof (including a United States
possession), whether computed on a separate, consolidated, unitary,
combined or any other basis; and such term shall include any interest,
penalties or additional amounts attributable to, or imposed upon, or with
respect to, any such taxes, charges, fees, levies or other assessments.
"Tax Return" shall mean any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes.
Section 3.12 ACTIONS AND PROCEEDINGS. Except as set forth in SECTION 3.12
of the Company Letter, there are no outstanding Orders or awards of any
Governmental Entity (including under any Worker Safety (as hereinafter defined)
or Environmental Laws) against the Company or any of its Subsidiaries or any of
its or their properties, assets or business or any Company Plan (as hereinafter
defined), or, to the Knowledge of the Company, against any of the present or
former directors or officers of the Company or any of its Subsidiaries, as such.
Except as set forth in SECTION 3.12 of the Company Letter, there are no actions,
suits or claims or legal, administrative or arbitration, demands, proceedings,
litigation or investigations pending or, to the Knowledge of the Company,
threatened involving the Company, any of its Subsidiaries or any of its or their
properties, assets or business or, to the Knowledge of the Company, any of its
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or their present or former directors or officers. For purposes of this
Agreement, "Knowledge of the Company" means the actual knowledge of the
executive officers of the Company and the other individuals identified on
SECTION 3.12 of the Company Letter.
Section 3.13 CERTAIN AGREEMENTS. Except as set forth in SECTION 3.13 of the
Company Letter, neither the Company nor any of its Subsidiaries is a party to or
bound by:
(a) any oral or written Contract or plan, including any employment
agreement, severance agreement, stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement;
(b) any Contract that is material to the business, properties, assets,
liabilities, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole;
(c) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $100,000 per annum;
(d) any agreement (or group of related agreements) other than ordinary
course purchase orders consistent with past practice for the purchase or
sale of raw materials, commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services, the performance of
which will extend over a period of more than one year, or involve total
consideration in excess of $500,000;
(e) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any Indebtedness in excess of
$100,000, including any capital lease obligation, or under which it has
imposed a Lien on any of its assets, tangible or intangible;
(f) any agreement concerning confidentiality, noncompetition or any
other similar agreement which restricts or may hereafter restrict the
geographic or operational scope of the business of the Company or any of
its Subsidiaries or the ability of the Company or any of its Subsidiaries
to enter into new lines of business;
(g) any collective bargaining agreement;
(h) any agreement for the employment of any individual on a full-time,
part-time, consulting, or other basis providing annual compensation in
excess of $100,000 or providing severance benefits;
(i) any agreement under which it has advanced or loaned in an amount
in excess of $50,000 to any of its directors, officers, and employees
outside the ordinary course of business consistent with past practices;
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(j) any other agreement (or group of related agreements) other than
ordinary course purchase orders consistent with past practice, the
performance of which involves consideration in excess of $250,000.
The Company has delivered to Parent a correct and complete copy of each written
agreement listed in SECTION 3.13 of the Company Letter (as amended to date).
There are no oral material agreements to which the Company or any of its
Subsidiaries is a party. Each Contract to which the Company or any of its
Subsidiaries is a party is valid and binding on the Company or its Subsidiary,
as applicable, and in full force and effect and the Company and each Subsidiary
have performed the obligations required to be performed by them to the date
hereof under each such Contract in all material respects. Except as set forth in
SECTION 3.13 of the Company Letter, with respect to each such Contract: (i) to
the Knowledge of the Company, no party is in breach, and no event has occurred
which with notice or lapse of time would constitute a breach, or permit
termination, modification, or acceleration, under the agreement; (ii) to the
Knowledge of the Company, no party has repudiated any provision of the
agreement; and (iii) no 280(g) liability under the Code would be triggered under
such agreement in connection with the transactions contemplated by this
Agreement.
Section 3.14 ERISA.
(a) Each Company Plan and Foreign Benefit Plan is listed in SECTION
3.14 of the Company Letter. Each "change in control" or similar provision
contained therein are specifically identified on SECTION 3.14 of the
Company Letter. True and complete copies of all (i) Company Plans, Foreign
Benefit Plans including, but not limited to, any trust instruments and
insurance contracts forming a part of any Company Plans, and all amendments
thereto; (ii) the three (3) most recent actuarial valuations, if any,
prepared for each Company Plan; (iii) the three (3) most recent reports
(Series 5500 and all schedules thereto), if any, required under ERISA (as
hereinafter defined) or the Code in connection with each Company Plan or
related trust; (iv) the most recent determination letters received from the
Internal Revenue Service, if any, for each Company Plan and related trust
which is intended to satisfy the requirements of Section 401(a) of the
Code; (v) the most recent summary plan description together with the most
recent summary of material modifications, if any, required under ERISA with
respect to each Company Plan; and (vi) all material communications to any
current or former employees of the Company and its Subsidiaries
("EMPLOYEES") relating to each Company Plan have been provided or made
available to Parent. Each Company Plan has been maintained and administered
in accordance with its terms and with the requirements of all applicable
laws and final regulations, including, without limitation, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code.
Each Company Plan that is an "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) intended to be qualified under Section 401(a) of the
Code has been determined by the Internal Revenue Service to be so qualified
and no such determination has been revoked and the Company is not aware of
any circumstances likely to result in such revocation. There is no material
pending or threatened litigation relating to the Company Plans. Neither the
Company nor any of its Subsidiaries has engaged in a transaction with
respect to any Company Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject the Company or any
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Subsidiary to a tax or penalty imposed by either Section 4975 of the Code
or Section 502(i) of ERISA in an amount which would be material.
(b) With respect to the Company Plans, no event has occurred and, to
the Knowledge of the Company, there exists no condition or set of
circumstances in connection with which the Company or any ERISA Affiliate
(as hereinafter defined) could be subject to any liability under the terms
of such Company Plans, ERISA, the Code or any other applicable law, other
than liabilities for benefits payable in the normal course of business. At
no time during the six-year period ending on the date hereof has the
Company or any of its ERISA Affiliates maintained or had any obligation to
contribute to a plan covered by Title IV of ERISA or Section 412 of the
Code or Section 302 of ERISA. Neither the Company, any of its Subsidiaries
nor an ERISA Affiliate has contributed to a "multiemployer plan," within
the meaning of Section 3(37) of ERISA, at any time on or after September
26, 1980. Neither the Company nor any of its ERISA Affiliates has any
liability or obligation under any Company Plan to provide post-retirement
welfare benefits to any employee or dependent other than as required by
statute or regulation or has ever represented, promised or contracted
(whether in oral or written form) to any Employee(s) that such Employee(s)
would be provided with retiree health or life benefits. All contributions
required to be made under the terms of any Company Plan have been timely
made or have been reflected on the audited Financial Statements of the
Company.
(c) All Foreign Benefit Plans are maintained and administered in
compliance with their terms and all laws applicable thereto. No unfunded
liabilities exist with respect to any Foreign Benefit Plan.
(d) The consummation of the transactions contemplated by this
Agreement will not (x) entitle any Employees of the Company or any of the
Subsidiaries to severance pay, (y) accelerate the time of payment or
vesting or trigger any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount payable
or trigger any other material obligation pursuant to, any of the Company
Plans or (z) result in any breach or violation of, or a default under, any
of the Company Plans.
(e) Any amount that could be received (whether in cash, property, or
vesting of property), as a result of the transaction contemplated by this
Agreement (including changes in status of the following individuals
following such transaction), by any officer, director, employee or
independent contractor of the Company or any of its Subsidiaries, who is a
"disqualified individual" (as defined in proposed Treasury Regulation
Section 1.280G-1), under any employment arrangement or Company Plan would
not be characterized as an "excess parachute payment" (as defined in
Section 280G of the Code).
(f) Except as set forth on SECTION 3.14 of the Company Letter, since
January 1, 1996, the Company and each Subsidiary (i) has correctly
categorized all Employees as either employees or independent contractors
for federal tax purposes, and is in compliance with all applicable federal,
state and local laws, rules and regulations (domestic and foreign)
respecting their employment, employment practices, labor, terms and
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conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to
be withheld from the wages, salaries and other payments to Employees; (iii)
is not liable for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing; (iv) is not liable for any
payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social
security or other benefits for Employees; and (v) has provided Employees
with the benefits to which they are entitled pursuant to the terms of all
Company Plans.
(g) As used herein, "COMPANY PLAN" means a "pension plan" (as defined
in Section 3(2) of ERISA), a "welfare plan" (as defined in Section 3(1) of
ERISA), or any bonus, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
holiday pay, vacation, severance, death benefit, sick leave, fringe
benefit, insurance or other plan, change in control or employment
agreement, arrangement or understanding, in each case established or
maintained by the Company or any of its ERISA Affiliates or as to which the
Company or any of its ERISA Affiliates has contributed or otherwise may
have any liability, excluding any such plan, arrangement or understanding
established or maintained outside of the United States of America primarily
for the benefit of employees residing outside the United States of America
and not subject to the laws of the United States (a "FOREIGN BENEFIT
PLAN"). "ERISA Affiliate" means any trade or business (whether or not
incorporated) which is under common control or would be considered a single
employer with such person pursuant to Section 414(b), (c), (m) or (o) of
the Code and the regulations promulgated under those sections or pursuant
to Section 4001(b) of ERISA and the regulations promulgated thereunder.
(h) SECTION 3.14 of the Company Letter contains a list of all
employment agreements with employees of the Company and each of its
Subsidiaries.
Section 3.15 COMPLIANCE WITH WORKER SAFETY AND ENVIRONMENTAL LAWS. The
properties, assets and operations of the Company and its Subsidiaries are in
compliance with all applicable federal, state, local and foreign laws, rules and
regulations, orders, decrees, judgments, permits and licenses relating to public
and worker health and safety (collectively, "WORKER SAFETY LAWS") and the
protection and clean-up of the environment and activities or conditions related
thereto, including, without limitation, those relating to the generation,
handling, disposal, transportation or release of hazardous materials
(collectively, "ENVIRONMENTAL LAWS"). With respect to such properties, assets
and operations, including any previously owned, leased or operated properties,
assets or operations, there are no events, conditions, circumstances,
activities, practices, incidents, actions or plans of the Company or any of its
Subsidiaries that interfere with or prevent compliance or continued compliance
with applicable Worker Safety Laws and Environmental Laws, except as set forth
in SECTION 3.15 of the Company Letter, neither the Company nor any of its
Subsidiaries has any liabilities or contingent liabilities for any on-site or
off-site release of hazardous materials under the Environmental Laws. There are
no underground storage tanks in or on any of the property presently or
previously operated by the Company or its Subsidiaries.
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Section 3.16 LABOR MATTERS. Except as set forth in SECTION 3.16 of the
Company Letter, neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or labor contract covering its employees or
has experienced any collective bargaining disputes. Neither the Company nor any
of its Subsidiaries has engaged in any unfair labor practice, and there is no
unfair labor practice complaint or grievance against the Company or any of its
Subsidiaries by the National Labor Relations Board or any other Governmental
Entity pending or, to the Knowledge of the Company, threatened. There is no and
there has not been since January 1, 1996 any labor strike, dispute, slowdown or
stoppage pending or, to the Knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries. To the Knowledge of the
Company, no executive, key employee or group of employees has any plans to
terminate employment with any of the Company and its Subsidiaries. The Company
has no Knowledge of any organizational effort presently being made or threatened
by or on behalf of any labor union with respect to employees of any of the
Company and its Subsidiaries. All payments due from the Company and it
Subsidiaries for employee health and welfare insurance have been paid or accrued
as a liability on the books of such Company or Subsidiary.
Section 3.17 INTELLECTUAL PROPERTY.
(a) The Company and its Subsidiaries have, through ownership or
licensing, all patents, trademarks, trade names, service marks, trade
secrets, copyrights and other intellectual property rights as are necessary
to conduct the business of the Company and its Subsidiaries as currently
conducted by the Company and its Subsidiaries ("COMPANY INTELLECTUAL
PROPERTY").
(b) Except as set forth on SECTION 3.17(b) of the Company Letter, each
item of Company Intellectual Property owned or used by any of the Company
and its Subsidiaries immediately prior to the Closing will be owned or
available for use by the Company or the Subsidiaries on identical terms and
conditions immediately subsequent to the Closing. Each of the Company and
its Subsidiaries has taken all necessary action to maintain and protect
each item of Company Intellectual Property that it owns or uses.
(c) Except as set forth on SECTION 3.17(c) of the Company Letter:
(i) there is no presently pending or unresolved charge,
complaint, asserted claim, demand, or notice alleging that the Company
or any of its Subsidiaries has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any intellectual
property rights of third parties and no basis exists for any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation; and
(ii) there is no presently pending or unresolved charge,
complaint, asserted claim, demand, or notice alleging that any third
party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any intellectual property rights of
the Company or any of its Subsidiaries and, to the Knowledge of the
Company, no basis exists for any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation,
or violation.
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(d) SECTION 3.17(d) of the Company Letter identifies each patent,
trademark registration or copyright registration which has been issued to
the Company or any of its Subsidiaries with respect to any of the Company
Intellectual Property, identifies each pending patent application,
trademark application or copyright application which any of the Company or
its Subsidiaries has made with respect to any of the Company Intellectual
Property, and identifies each license, agreement, or other permission which
any of the Company or any of its Subsidiaries has granted to any third
party with respect to any of the Company Intellectual Property. The Company
has made available to Parent correct and complete copies of all such
patents, trademark registrations, copyright registrations, applications,
licenses, agreements, and permissions (as amended to date). Except as set
forth on SECTION 3.17(d) of the Company Letter, with respect to each item
of Company Intellectual Property either required to be identified in
SECTION 3.17(d) of the Company Letter or used by the Company or any of its
Subsidiaries in connection with any of its businesses (excluding those
items of Company Intellectual Property identified in SECTION 3.17(e) of the
Company Letter):
(i) the Company and its Subsidiaries possess all right, title,
and interest in and to the item, free and clear of any Lien, license,
or other restriction;
(ii) the item is not subject to any outstanding Order; and
(iii) none of the Company or its Subsidiaries has ever expressly
agreed to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to the
item.
(e) SECTION 3.17(e) of the Company Letter identifies each item of
Company Intellectual Property that any third party owns and that any of the
Company and its Subsidiaries uses pursuant to license, sublicense,
agreement, or permission. The Company has made available to Parent correct
and complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each item of Company
Intellectual Property required to be identified in SECTION 3.17(e) of the
Company Letter:
(i) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and
effect;
(ii) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration thereunder; and
(iii) none of the Company nor any of its Subsidiaries has granted
any sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(f) To the Knowledge of the Company, except as set forth on SECTION
3.17(c) of the Company Letter, none of the Company and its Subsidiaries
will interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any intellectual property rights of third parties as a
result of the continued operation of its businesses as presently conducted.
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(g) None of the patents or patent applications owned, licensed or used
by the Company or any of its Subsidiaries is material, individually or in
the aggregate, to the business, operations, financial condition or
prospects of the Company or any of its Subsidiaries.
Section 3.18 REQUIRED VOTE OF COMPANY STOCKHOLDERS. The affirmative vote of
the holders of a majority of the outstanding shares of Company Common Stock
voting together as a single class is required to adopt this Agreement. No other
vote of the security holders of the Company is required by law, the Company
Charter or the Company Bylaws or otherwise in order for the Company to
consummate the Merger and the transactions contemplated hereby.
Section 3.19 BROKERS. No broker, investment banker or other Person, other
than Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), the fees and
expenses of which will be paid by the Company, is entitled to any broker's,
finder's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company, its Subsidiaries or their affiliates or representatives.
Section 3.20 REAL PROPERTY.
(a) TITLE. The Company and/or its Subsidiaries, as the case may be,
has good and marketable fee and leasehold title, as applicable, to the real
property described on SECTION 3.20 of the Company Letter (collectively, the
"PROPERTY") subject only to the Permitted Encumbrances. The Property is all
the real property owned or leased by the Company and/or its Subsidiaries,
as applicable. The term "Permitted Encumbrances" means: (i) encumbrances
for assessments, taxes, water, sewer and other similar charges not yet due
and payable or that the Company and/or its Subsidiaries (as applicable) is
contesting in good faith through appropriate proceedings; (ii) recorded
easements, rights of way, highway and railroad crossings, vault rights,
sewers, electric and other utility lines, telegraph and telephone lines,
and other recorded covenants, conditions and restrictions as to the use of
the Property; (iii) the Leases (as hereinafter defined); (iv) all recorded
encumbrances relating to Liens securing borrowed money to be released at or
prior to the Effective Time; (v) rights of assignees, subtenants and
licensees of the Property as set forth in SECTION 3.20 of the Company
Letter; PROVIDED, THAT, such encumbrances referred to in clauses (i), (ii),
(iii) and (v) above do not materially impair the use, value or
marketability of the Property.
(b) LEASES. There are no leases, subleases, tenancies, licenses or
other rights of occupancy or use or any amendments thereto, for any portion
of the Property in effect on the date hereof other than those listed on
SECTION 3.20 of the Company Letter (collectively, "LEASES"). The Company
and/or its Subsidiaries, as the case may be, has heretofore delivered to
Parent true and complete copies of each of the Leases. Each of the Leases
is presently in full force and effect. The Company and/or its Subsidiaries,
as the case may be, has performed all obligations required to be performed
by it under the Leases and is not in default under any Lease. No landlord
under any of the Leases is currently in default or has been in default
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within the past twelve (12) months under the respective Leases. Except as
set forth in SECTION 3.20 of the Company Letter, there are no parties in
possession or parties who have a right to possess the Property or any
portion thereof other than the Company and/or its Subsidiaries, as the case
may be. Except as set forth in SECTION 3.20 of the Company Letter, there
are no brokerage or leasing commissions or other compensation agreements
binding on the Company or any of its Subsidiaries.
(c) ASSIGNMENTS AND GUARANTIES. Except as set forth in SECTION 3.20 of
the Company Letter, neither the Company nor any of its Subsidiaries has
assigned or guaranteed any lease of real property.
(d) DEFAULTS. No default or breach exists under any Permitted
Encumbrance affecting the Property, or any portion thereof.
(e) ASSESSMENTS. Neither the Company nor any of its Subsidiaries has
received written notice that any portion of the Property is subject to any
proposed or pending special assessments.
(f) CONDEMNATION. There is no pending, nor to the Knowledge of the
Company, threatened, condemnation or eminent domain proceeding affecting
any portion of the Property.
(g) PERMITS. The Company and its Subsidiaries possesses all permits,
certificates of occupancy, licenses and approvals necessary to occupy the
Property and conduct their respective businesses thereon as currently
conducted, and all such permits have been fully paid for and are in full
force and effect.
(h) DEFECTS. Except as set forth in SECTION 3.20 of the Company
Letter, to the Knowledge of the Company there are no latent defects in
either the structural components or the electrical, HVAC, plumbing,
mechanical or security systems of any Property that would cost more than
Fifty Thousand Dollars ($50,000) per site to repair or remedy such defects,
or more than Three Hundred Thousand Dollars ($300,000) in the aggregate for
all of the Property to repair. As used herein, a "latent defect" is one
that would not normally be discovered by reasonable and customary
inspection of the Property.
(i) ACCESS. All means of access to the Property (A) are permanent and
no special access or other permits from the applicable governmental
authorities are required to operate and maintain such means of access, and
(B) are obtained from public streets, sidewalks, alleys or other public
space without the need for easements, rights-of-way, or licenses, or across
lands or premises not included within the Property.
(j) BINDING COMMITMENTS. Neither the Company nor any of its
Subsidiaries has made nor will the Company or any of its Subsidiaries make
any commitments or representations to the applicable Governmental Entities,
any adjoining or surrounding property owners, any civic association, any
utility, or any other Person that would in any manner be binding upon
Parent, the Surviving Corporation or the Property. To the Knowledge of the
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Company, no such commitments or representations were made by any of the
Company's or its Subsidiaries' predecessors in title.
(k) COMPLIANCE WITH LAWS. No improvements on the Property constitute
non-conforming structures under applicable zoning laws, and the present use
of the Property is not a non conforming use, a use permitted by variance or
special exception or a use permitted pursuant to any conditions that have
not been fully performed. Neither the Company nor any of its Subsidiaries
has received written notice of any violations or pending zoning change from
any governmental authority.
Section 3.21 STATE TAKEOVER STATUTES. The Board of Directors of the Company
has unanimously approved the terms of this Agreement and the consummation, the
Merger and the other transactions contemplated by this Agreement, and such
approval constitutes approval of this Agreement and the transactions
contemplated hereby by such Board. Section 203 of the DGCL is inapplicable to
the transactions contemplated by this Agreement. No other state takeover statute
is applicable to the Merger or there other transactions contemplated hereby.
Section 3.22 DEPOSIT AND DISBURSEMENT ACCOUNTS. The Company has heretofore
provided to Parent lists of all banks and other financial institutions at which
either the Company or any of its Subsidiaries maintains deposits and/or other
accounts as of the Closing Date including the name of each depository, the name
in which the account is held and the complete account number.
Section 3.23 YEAR 2000 COMPLIANCE. To the extent materially necessary to
operate the business of the Company, all computer hardware, software, databases,
systems and other computer equipment (collectively, "Software") used by the
Company or the Subsidiaries can be used during and after the calendar year 2000,
and shall operate during each such time period, without error relating to the
processing, calculating, comparing, sequencing or other use of date data, except
to the extent that a failure to do so would not reasonably be expected to have a
Material Adverse Effect.
Section 3.24 TITLE TO ASSETS; TANGIBLE ASSETS.
(a) Except as set forth in SECTION 3.24 of the Company Letter, the
Company and its Subsidiaries have good and marketable title to, or a valid
leasehold interest in, the personal property and assets used by them,
located on their premises, or shown on the Most Recent Balance Sheet, free
and clear of all Liens, except for Permitted Encumbrances.
(b) The Company and its Subsidiaries own or lease all buildings,
machinery, equipment, and other tangible assets necessary for the conduct
of their businesses as presently conducted. Each such tangible asset has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear).
Section 3.25 INSURANCE. SECTION 3.25 of the Company Letter sets forth a
complete and correct list of all insurance policies (other than welfare benefit
insurance policies) that are held by the Company or which name the Company as an
insured (or loss payee). Except as set forth on SECTION 3.25 of the Company
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Letter, all such insurance policies are in full force and effect and the Company
has not received written notice of cancellation of any such insurance policies.
With respect to each such insurance policy:
(a) the policy is legal, valid, binding and enforceable;
(b) the policy will continue to be legal, valid, binding, enforceable,
and in full force and effect following the consummation of the transactions
contemplated hereby;
(c) neither the Company nor any of its Subsidiaries, nor to the
Company's Knowledge, any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of
notices), and no event has occurred, to the Company's knowledge, which,
with notice or the lapse of time, would constitute such a breach or
default, or permit termination, modification, or acceleration, under the
policy;
(d) to the Company's knowledge, no party to the policy has repudiated
any provision thereof; and
(e) no notice of termination or notice of work/changes required to
continue the insurance at present premium levels has been received by the
Company or any of its Subsidiaries.
Section 3.26 EXPENSES. The expenses incurred or to be incurred by the
Company or any of its Subsidiaries in connection with the transactions
contemplated by this Agreement, including the Merger, the Information Statement
and the Post-Merger Offer (except as otherwise agreed in writing by the Company
and Parent), including but not limited to prepayment fees on outstanding debt,
broker and investment banker fees and expenses, accountants and legal fees,
internal out-of-pocket expenses of the Company, transaction bonuses, any fees
and expenses associated with termination of all Affiliated Transactions (as
hereinafter defined) and amounts payable pursuant to Sections 3.19 and 5.9
(collectively, the "COMPANY EXPENSES") will, unless incurred thereafter, be paid
at or prior to the Closing by the Company. SECTION 3.26 of the Company Letter
lists the Company Expenses. Notwithstanding anything else to the contrary
contained herein, Company Expenses shall not include: (a) any legal, accounting,
environmental, consulting, due diligence or other advisory, consulting or
professional fees or expenses incurred by, or on behalf of, Parent or Sub in
connection with the transactions contemplated by this Agreement; (b) any fees
payable to financing sources or financial advisors, including, without
limitation, Fleet National Bank, First Union National Bank, First Union
Investors Inc., Garmark Advisors LLC and Fleet Corporate Finance, Inc. or
Robertson Stephens, in connection with providing, arranging or syndicating the
financing for the transactions contemplated by this Agreement; (c) any indemnity
payments made to Chartwell Investments II LLC ("CHARTWELL") or its affiliates
pursuant to the Advisory Fee letters between BSI and Chartwell and between Sub
and Chartwell or (d) any portion of fees and expenses of foreign counsel
incurred on behalf of, or at the direction of, Chartwell in connection with this
Agreement and the transactions contemplated hereby. For purposes of this
Agreement, "Per Share Company Expenses" known as of the Closing Date shall mean
the aggregate Company Expenses divided by the number of shares of Company Common
Stock issued and outstanding immediately prior to the Effective Time (excluding
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unvested shares of Company Class C Common Stock to be cancelled without
consideration in the Merger).
Section 3.27 INVENTORY. The inventory of the Company and its Subsidiaries
consists of raw materials and supplies, manufactured and purchased parts, goods
in process, and finished goods, all of which is merchantable and fit for the
purpose for which it was procured or manufactured, and none of which is
slow-moving, obsolete, damaged or defective, subject only to the reserve for
inventory writedown set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the Company
and its Subsidiaries.
Section 3.28 NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts
receivable of the Company and its Subsidiaries have arisen from arm's length
bona fide transactions and are reflected properly on their books and records,
are valid receivables subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Effective Time in accordance with
the past custom and practice of the Company and its Subsidiaries.
Section 3.29 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY AND ITS
SUBSIDIARIES. Except as set forth in SECTION 3.29 of the Company Letter, none of
the officers or directors of the Company or any of its Subsidiaries nor any of
their respective Affiliates has been involved in any business arrangement or
relationship with the Company or its Subsidiaries within the past 12 months, and
none of the officers or directors of the Company or any of its Subsidiaries nor
any of their respective Affiliates owns any asset, tangible or intangible, which
is used in the business of any of the Company and its Subsidiaries (all of the
foregoing being "AFFILIATED TRANSACTIONS").
Section 3.30 MAJOR CUSTOMERS AND SUPPLIERS.
(a) MAJOR CUSTOMERS. SECTION 3.30(a) of the Company Letter contains a
list of the ten largest customers of each of the business segments,
including distributors, of the Company and its Subsidiaries for each of the
two (2) most recent fiscal years (determined on the basis of the total
dollar amount of net sales) showing the total dollar amount of net sales to
each such customer during each such year. As of the date of this Agreement,
the Company has no Knowledge that any of the customers listed on SECTION
3.30(a) of the Company Letter will not continue to be customers of the
Company after the Closing at substantially the same level of purchases as
heretofore.
(b) MAJOR SUPPLIERS. SECTION 3.30(b) of the Company Letter contains a
list of the ten largest suppliers to the Company and its Subsidiaries for
each of the two (2) most recent fiscal years (determined on the basis of
the total dollar amount of purchases) showing the total dollar amount of
purchases from each such supplier during each such year. Except as set
forth in SECTION 3.30(b) of the Company Letter, as of the date of this
Agreement, the Company has no Knowledge that any of the suppliers listed on
SECTION 3.30(b) of the Company Letter will not continue to be suppliers to
the Company after the Merger Closing and will not continue to supply the
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Company with substantially the same quantity and quality of goods at
competitive prices.
(c) SALES REPRESENTATIVES. Neither the Company nor any of its
Subsidiaries has, nor has had in the last twelve months, any franchisees.
SECTION 3.30(c) of the Company Letter contains (i) a list of all Persons
that currently sell the Company's Products (as hereinafter defined) on a
commission basis pursuant to a Contract with the Company (collectively,
"SALES REPRESENTATIVES"), and identifies such Sales Representatives with
whom the Company currently has a written Contract regarding the sale of the
Company's Products, (ii) a sample copy of all written sales representative
or dealer Contracts, and (iii) a description of all material oral Contracts
with any Sales Representative. The Company has paid all commissions due any
Sales Representative where the failure to pay such amount would cause such
obligation to be in default of the Company's Contract with such Sales
Representative. Except as set forth on SECTION 3.30(c) of the Company
Letter, the Company has not terminated any Sales Representative in the last
eighteen months. Each Sales Representative which has been terminated in the
last eighteen months (i) has been paid all commissions due such Sales
Representative which were accrued in the ordinary course, (ii) was
terminated in accordance with all applicable Laws and with any Contract the
Company had with such Sales Representative and (iii) is not currently
involved in any dispute with the Company relating to such termination. As
used herein, the term "Products" means any and all products currently or at
any time previously manufactured, distributed or sold by the Company, or by
any predecessor of the Company under any brand name or mark under which
products are or have been manufactured, distributed or sold by the Company
and its Subsidiaries.
Section 3.31 PRODUCT WARRANTY AND PRODUCT LIABILITY. SECTION 3.31 of the
Company Letter contains a true, correct and complete copy of the Company's
standard warranties, guarantees or indemnities with respect to sales of Products
(including applicable guaranty, warranty and indemnity provisions) and, except
as stated therein, there are no warranties, guarantees, commitments or
obligations with respect to the return, repair or replacement of Products
(except as implied by law). SECTION 3.31 of the Company Letter contains a
description of all Product liability claims and similar litigation relating to
Products manufactured, leased, delivered or sold, or services rendered, which
are presently pending or which to the Knowledge of the Company since July 3,
1997 have been threatened (whether or not covered by insurance). There are no
defects in design, construction or manufacture of Products which would adversely
affect performance or create any unusual risk of injury to persons or property.
Except as set forth in SECTION 3.31 of the Company Letter, within the past five
years, none of the Products has been the subject of any replacement, field fix,
retrofit, modification or recall campaigns or to the Knowledge of the Company
have any of the foregoing been threatened, involving the Company or its
Products. The Products have been designed and manufactured so as to meet and
comply with all governmental standards and specifications in effect at the time
of sale and have received all governmental and industry association approvals
necessary or appropriate for their sale and use.
Section 3.32 NON-COMPETE AGREEMENTS. Except as set forth on SECTION 3.32 of
the Company Letter, the Company has enforced non-compete agreements to which it
or any of its Subsidiaries is a party in all instances in which the Company has
been made aware of a violation of the non-competition covenant set forth in a
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particular non-compete agreement. To the Knowledge of the Company, no executive
employee is subject to any non-compete employment or other agreement with any
third party relating to or affecting his or her ability to perform employment
services.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 CONDUCT OF BUSINESS PENDING THE MERGER. Except as expressly
permitted by paragraphs (a) through (o) of this Section 4.1, during the period
from the date of this Agreement through the Effective Time, the Company shall,
and shall cause each of its Subsidiaries to, in all material respects carry on
its business in the ordinary and usual course as currently conducted and, to the
extent consistent therewith, use commercially reasonable efforts to preserve
intact its current business organization, keep available the services of its
current officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it. Without limiting the
generality of the foregoing, and except as otherwise contemplated by this
Agreement or as set forth in SECTION 4.1 of the Company Letter, the Company
shall not, and shall not permit any of its Subsidiaries to, without the prior
written consent of Parent:
(a) (i) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their
capacity as such, other than dividends by the Company's wholly-owned
Subsidiaries to the Company or another wholly-owned Subsidiary of the
Company, (ii) split, subdivide, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (iii)
purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities, other than in connection
with the exercise of a put option or right of first refusal in accordance
with the terms of the Company Incentive Plans;
(b) issue, reissue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire any such shares, securities, equity equivalent or
convertible securities, other than the issuance of shares of Company Common
Stock pursuant to rights heretofore granted pursuant to the Company
Incentive Plans and disclosed in SECTION 3.2 above;
(c) amend its charter or by-laws or other comparable charter or
organizational documents;
(d) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of or equity in, or by
any other manner, any business or any corporation, limited liability
company, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets, other
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than asset acquisitions that are in the ordinary course of business
consistent with past practice and not material to the Company and its
Subsidiaries taken as a whole;
(e) sell, lease, license, mortgage, encumber or otherwise dispose of
any of its properties or assets, other than in the ordinary course of
business consistent with past practice;
(f) incur any Indebtedness, guarantee any such Indebtedness or make
any loans, advances or capital contributions to, or other investments in,
any other person, other than (i) Indebtedness (and guarantees in respect
thereof) for borrowed money which shall not exceed at any one time the
amount of such indebtedness permitted under the Company Credit Agreement
incurred in the ordinary course of business consistent with past practice,
(ii) issuances of letters of credit in the ordinary course of business
consistent with past practice, (iii) Indebtedness, guarantees, loans,
advances, capital contributions and investments between the Company and any
of its wholly-owned Subsidiaries or between any of such Subsidiaries, and
(iv) cash management activities carried on in the ordinary course of
business consistent with past practice;
(g) (i) increase the compensation payable or to become payable to its
officers, directors or employees (except for increases in the ordinary
course of business consistent with past practice to non-officer employees),
(ii) grant any severance or termination pay to, or enter into, extend or
amend any employment or other agreement with or any collective bargaining
agreement governing, any current non-officer - director employee (other
than in the ordinary course of business consistent with past practice),
former employee, or current or former director or officer of the Company or
any of its Subsidiaries, (iii) establish, adopt, enter into, or, except as
may be required to comply with applicable law, amend, modify or terminate
or take action to enhance or accelerate any rights or benefits under, any
Company Plan, Foreign Benefit Plan or any other bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance, incentive or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any current or former director, officer or employee, and (iv) make any
other change in the employment terms for any of its officers, directors, or
in the employment terms of any other employee, other than in the ordinary
course of business;
(h) make any change to accounting methods, practices, policies or
procedures (other than actions required to be taken by generally accepted
accounting principles);
(i) make or agree to make any new capital expenditures other than
expenditures which in the aggregate are not in excess of $2.0 million;
(j) make any material Tax election or settle or compromise any
material income Tax liability;
(k) settle or compromise any claim (including in arbitration) or
litigation involving payments by the Company in excess of $100,000
individually, or $250,000 in the aggregate, which is not subject to
insurance reimbursement;
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(l) enter into any Contract (or series of related Contracts), either
involving more than $100,000 or outside the ordinary course of business
consistent with past practice, other than purchase orders entered into in
the ordinary course consistent with past practice;
(m) postpone the payment of accounts payable and other liabilities
outside the ordinary course of business consistent with past practice;
(n) enter into, amend, modify, waive or extend any Affiliated
Transactions; or
(o) authorize, recommend, propose or announce an intention to do any
of the foregoing prohibited acts, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing prohibited acts.
Section 4.2 NO SOLICITATION. From and after the date hereof, unless and
until this Agreement shall be terminated, the Company will not, and will not
authorize or permit any of its Subsidiaries or any of its or any of its
Subsidiaries' officers, directors, agents, attorneys, affiliates, financial
advisors or other authorized representatives to, directly or indirectly, solicit
or entertain offers from, negotiate or discuss with, supply information to, or
in any manner accept or knowingly encourage any proposal of, any other Person,
entity or group (other than Parent, Sub and their representatives) (each, a
"THIRD PARTY") relating to the direct or indirect acquisition of a material
portion of the shares of the Company or any of its Subsidiaries or all or a
substantial portion of the assets or business of the Company or any of its
Subsidiaries, whether directly or indirectly, through purchase, merger,
consolidation, tender offer or otherwise (each, a "BUSINESS COMBINATION"). The
Company shall promptly notify Parent if any proposal, offer, inquiry or contact
is received from any Third Party with respect to a Business Combination, which
notification shall indicate the terms and conditions of such proposal, offer,
inquiry or contact.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 [RESERVED.]
Section 5.2 PREPARATION OF THE INFORMATION STATEMENT. The Company and
Parent shall promptly prepare the Information Statement, and the Company shall
thereafter mail the Information Statement to its stockholders no later than
thirty (30) days after the date hereof.
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Section 5.3 ACCESS TO INFORMATION.
(a) Subject to contractual and legal restrictions applicable to the
Company or any of its Subsidiaries, the Company shall, and shall cause each
of its Subsidiaries and each of its and their respective officers,
directors, employees, counsel, advisors and other representatives
(collectively, the "COMPANY REPRESENTATIVES") to, afford to the
accountants, counsel, financial advisors, financing sources and other
representatives of Parent (collectively, the "PARENT REPRESENTATIVES")
access to, and permit them to make such inspections as they may reasonably
require of, during normal business hours and upon reasonable notice during
the period from the date of this Agreement through the Effective Time, its
properties, books, Contracts, commitments, financial statements and records
(including, without limitation, the work papers of independent accountants,
if available, subject to the consent of such independent accountants) and,
during such period, the Company shall, and shall cause each of the Company
Representatives to, furnish promptly to Parent all other information
concerning its business, properties and personnel as Parent may reasonably
request.
(b) No investigation pursuant to this SECTION 5.3 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto. All information
obtained pursuant to this SECTION 5.3 shall be kept confidential in
accordance with the Confidentiality Agreement dated as of December 13, 1999
between Parent and the Company (the "CONFIDENTIALITY AGREEMENT"), all of
the terms of which shall remain in full force and effect after the date
hereof.
Section 5.4 FEES AND EXPENSES. Except as provided in Section 1.5, this
Section 5.4 and Section 5.8 and subject to Section 7.2, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, including, without
limitation, the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and expenses.
Parent shall cause the Company to pay all such expenses of Parent (the "PARENT
EXPENSES") immediately following the Effective Time, other than those expenses
relating to the Financing, the Post-Merger Offer and the Indenture Amendment
which the Company shall cause to be so paid by BSI.
Section 5.5 STOCK INCENTIVE PLANS. The Company shall take such action as
shall be necessary to cause each share of Company Class B Common Stock issued
pursuant to a Company Incentive Plan to be fully vested at least one business
day prior to the Effective Time, free of all restrictions pursuant to such
Company Incentive Plan including, without limitation, any restrictions relating
to the performance of the Company, the passage of time or the continued
employment by the Company or the Surviving Corporation of the holder thereof;
PROVIDED, THAT, all holders of such Class B Common Stock shall have agreed in
writing to pay in full at the Effective Time (or permit the Surviving
Corporation to withhold Merger Consideration to repay the same) all outstanding
loans from the Company or BSI secured by Common Stock owed by such holders..
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Section 5.6 COMMERCIALLY REASONABLE EFFORTS.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, and to assist and cooperate with the other parties in doing all
things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including but not limited to:
(i) obtaining all necessary actions or non-actions and other Consents from
all Governmental Entities and making all necessary registrations and
filings (including filings with Governmental Entities) and taking all steps
as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity (including those in
connection with the HSR Act), (ii) defending any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement
or the consummation of the transactions contemplated hereby, including
seeking to have any stay or temporary restraining order entered into by any
court or other Governmental Entity vacated or reversed, (iii) having the
Merger be treated as a recapitalization for financial accounting purposes
(it being understood that this (iii) shall not require any stockholder of
the Company to accept any different consideration in amount or type than
set forth in this Agreement), (iv) keeping the other party informed in all
material respects of any material communication received by such party
from, or given by such party to, any Governmental Entity and of any
material communication received or given in connection with any proceeding
by a private party relating to the Merger or the transactions contemplated
by this Agreement, in each case regarding any of the transactions
contemplated hereby, (v) permitting the other party to review any material
communication delivered to, and consulting with the other party in advance
of any meeting or conference with, any Governmental Entity relating to the
Merger or the transactions contemplated by this Agreement or in connection
with any proceeding by a private party, and giving the other party the
opportunity to attend and participate in such meetings and conferences (to
the extent permitted by such Governmental Entity or private party), (vi)
obtaining of all necessary Consents or waivers from third Persons, and
(vii) executing and delivering any additional instruments necessary to
consummate the transactions contemplated by this Agreement. No party to
this Agreement shall consent to any voluntary delay of the consummation of
the Merger at the behest of any Governmental Entity without the consent of
the other parties to this Agreement, which consent shall not be
unreasonably withheld.
(b) No party shall knowingly or intentionally take any action, or
enter into any transaction, which would cause any of its representations or
warranties contained in this Agreement to be untrue in any material respect
or result in a breach in any material respect of any covenant made by it in
this Agreement.
Section 5.7 PUBLIC ANNOUNCEMENTS. Parent and the Company will not issue any
press release with respect to the transactions contemplated by this Agreement or
otherwise issue any written public statements with respect to such transactions
without prior consultation with and the written approval of the other party,
except as may be required by applicable law or by obligations pursuant to any
listing agreement with any national securities exchange.
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Section 5.8 REAL ESTATE TRANSFER AND GAINS TAX. Either the Company or the
Surviving Corporation will pay any state or local Tax which is attributable to
the transfer of the beneficial ownership of the Company's or its Subsidiaries'
real property, if any (collectively, the "GAINS TAXES"), and any penalties or
interest with respect to the Gains Taxes, payable in connection with the
consummation of the Merger. The Company and Parent agree to cooperate with the
other in the filing of any returns with respect to the Gains Taxes, including
supplying in a timely manner a complete list of all real property interests held
by the Company and its Subsidiaries and any information with respect to such
property that is reasonably necessary to complete such returns. The portion of
the consideration allocable to the real property of the Company and its
Subsidiaries shall be determined by Parent in its reasonable discretion.
Section 5.9 INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. For six
years from and after the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, indemnify and hold harmless all past and present
directors, officers, employees or agents of the Company and of its Subsidiaries
against any claim, action or investigation made against them to the full extent
permitted by law, any outstanding indemnification agreements listed on SECTION
5.9 of the Company Letter, the Company Charter and the Company Bylaws, in each
case for all acts or omissions arising from their service in such capacities
occurring at or prior to the Effective Time, and shall periodically advance
litigation expenses incurred by each such person in connection with defending
any claim, action or investigation against them arising out of such acts or
omissions (including the cost of any investigation and preparation incurred in
connection therewith). Parent shall provide, or shall cause the Surviving
Corporation to provide, for an aggregate period of not less than six years from
the Effective Time, the Company's current and former directors and officers an
insurance and indemnification "tail" policy that provides coverage for events
occurring prior to the Effective Time (the "D&O INSURANCE") that is no less
favorable than the Company's existing policy or, if substantially equivalent
insurance coverage is unavailable, the best available coverage that is similar
thereto; provided, however, that the Surviving Corporation shall not be required
to pay a premium for the "tail" D&O Insurance in excess of 150% of the last
annual premium paid by the Company prior to the date hereof, but in such case
shall purchase as much coverage as possible for such amount. In the event Parent
or any of its successors or assigns (i) consolidates with or merges into any
other person and is not the continuing or surviving corporation or entity of
such consolidation or merger or (ii) conveys all or substantially all of its
properties and assets to any person then, and in each case, proper provision
shall be made so that the successors and assigns of Parent assume the
obligations set forth in this Section 5.9.
The costs for maintaining the D&O Insurance shall be a Company Expense.
Section 5.10 NOTIFICATION OF CERTAIN MATTERS. Parent shall use its
commercially reasonable efforts to give prompt notice to the Company, and the
Company shall use its commercially reasonable efforts to give prompt notice to
Parent, of: (i) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which it is aware and which would be reasonably likely to
cause (x) any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied in
all material respects, (ii) any failure of Parent or the Company, as the case
may be, to comply in a timely manner with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder or (iii) any change
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or event which would be reasonably likely to have a Material Adverse Effect on
Parent or the Company, as the case may be; provided, however, that the delivery
of any notice pursuant to this Section 5.10 shall not (A) limit or otherwise
affect the remedies available hereunder to the party receiving such notice or
(B) affect the representations or warranties of any party or the conditions to
the obligations of any party hereunder.
Section 5.11 EMPLOYEE MATTERS.
(a) Parent shall cause the Surviving Corporation to honor, to the
extent applicable, all Company Plans and all employment, severance and
indemnification agreements to which the Company or its Subsidiaries is a
party as of the Effective Time and set forth on SECTION 3.14 of the Company
Letter; PROVIDED, THAT, the Bell Sports Corp. Long Term Incentive Plan
shall be excluded from such arrangements.
(b) Nothing in this Agreement shall be interpreted as limiting the
power of the Surviving Corporation to amend or terminate any Company Plan
or any other employee benefit plan, program, agreement or policy in
accordance with its terms or as requiring the Surviving Corporation or
Parent to offer to continue (other than as required by its terms) any
written employment contract.
(c) Parent agrees that it shall, or shall cause the Surviving
Corporation to, maintain the Company's Bonus Plan for Fiscal Year 2000 (a
copy of which is included on SECTION 5.11(c) of the Company Letter) as in
effect on the date hereof though the end of the Company's Fiscal Year 2000
and to provide, or cause the Surviving Corporation to provide, to the
participants therein all payments thereunder, PROVIDED, that to the extent
that any action taken by Parent or the Surviving Corporation after the
Effective Time, including without limitation, any restructuring and related
charges, would have the effect of reducing the amount payable to any
participant, such action and the related effect shall be disregarded in
determining the amount to be paid to such participant.
Section 5.12 STATE TAKEOVER LAWS. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby,
Parent and the Company and their respective Boards of Directors shall use their
commercially reasonable efforts to grant such approvals and take such actions as
are necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby.
Section 5.13 FINANCIAL STATEMENTS. The Company shall furnish to Parent
within (i) twenty (20) days after the end of each month, commencing with the
month ending May 27, 2000, an unaudited consolidated balance sheet and related
statements of operations of the Company and its Subsidiaries for such month and
for the period of the Company's fiscal year ended at the end of such period, in
each instance compared to the prior fiscal year and the budget and (ii) an
audited consolidated balance sheet and related statements of operations and cash
flows of the Company and its Subsidiaries for the fiscal year ended July 1, 2000
(the "JULY 1 FINANCIALS") on or before July 31, 2000.
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Section 5.14 FINANCING. Parent shall use commercially reasonable efforts to
consummate the Financing on the terms set forth in the Commitment Letters. The
Company shall cause BSI to approve and enter into the definitive Financing
documents on or in connection with the Closing.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions:
(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES. Each
of Parent and Sub shall have performed in all material respects each of its
covenants and agreements contained in this Agreement required to be
performed on or prior to the Effective Time, each of the representations
and warranties of Parent and Sub contained in this Agreement that is
qualified by materiality shall be true and correct on and as of the
Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of
such representations and warranties that is not so qualified shall be true
and correct in all material respects on and as of the Effective Time as if
made on and as of such date (other than representations and warranties
which address matters only as of a certain date which shall be true and
correct in all material respects as of such certain date), in each case
except as contemplated or permitted by this Agreement, and the Company
shall have received a certificate signed on behalf of Parent by its Chief
Executive Officer and its Chief Financial Officer to such effect.
(b) OTHER APPROVALS.
(i) The waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act shall have expired or
been terminated.
(ii) All Orders, declarations or Consents of, or filings with, or
terminations or expirations of waiting periods imposed by, any
Governmental Entity, which the failure to obtain, make or occur would
have the effect of making the Merger or any of the transactions
contemplated hereby illegal, shall have been obtained, shall have been
made or shall have occurred.
(c) NO ORDER. No court or other Governmental Entity having
jurisdiction over the Company or Parent, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered
any Law or other Order (whether temporary, preliminary or permanent) which
is then in effect and has the effect of making the Merger or any of the
transactions contemplated hereby illegal.
Section 6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE
MERGER. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
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(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES. The
Company shall have performed in all material respects each of its covenants
and agreements contained in this Agreement required to be performed on or
prior to the Effective Time. Each of the representations and warranties of
the Company contained in this Agreement shall be true and correct on and as
of the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date), in each case
except as contemplated or permitted by this Agreement unless the failure to
be so true and correct, has not had nor could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company or Parent, and Parent shall have received a certificate signed on
behalf of the Company by its Chief Executive Officer and its Chief
Financial Officer as to each of the foregoing effect.
(b) STOCKHOLDER APPROVAL. This Agreement shall have been duly approved
by the requisite vote of stockholders of the Company in accordance with
applicable law and the Company Charter and the Company Bylaws.
(c) OTHER APPROVALS.
(i) The waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act shall have expired or
been terminated.
(ii) All Consents listed on SECTION 6.2(c) of the Company Letter
shall have been obtained. All Orders, declarations or Consents of, or
filings with, or terminations or expirations of waiting periods
imposed by, any Governmental Entity, which the failure to obtain, make
or occur (i) would have the effect of making the Merger or any of the
transactions contemplated hereby illegal or (ii) has resulted or could
be reasonably likely to result in any of the consequences set forth in
clauses (i) through (iv) of clause (d) below, shall have been
obtained, shall have been made or shall have occurred.
(d) ACTIONS. No action, suit or proceedings shall be pending,
instituted or threatened in writing by any Governmental Entity wherein an
unfavorable Order would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation,
(iii) affect adversely the right of Parent to own the shares of the
Surviving Corporation and to control the Surviving Corporation and its
Subsidiaries or (iv) that would or could reasonably be expected to have a
Material Adverse Effect on the Company or Parent.
(e) NO ORDER. No court or other Governmental Entity having
jurisdiction over the Company or Parent, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered
any Law or Order (whether temporary, preliminary or permanent) (i) which is
then in effect and has the effect of making the Merger or any of the
transactions contemplated hereby illegal or (ii) has resulted or could be
reasonably likely to result in any of the consequences set forth in clause
(i) through (iv) of clause (d) above.
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(f) EBITDA. The July 1 Financials shall reflect EBITDA of at least
$40.0 million.
(g) CERTIFICATES. The Company and Parent shall have received such
certificates of officers of the Company (in form and substance reasonably
satisfactory to Parent), substantially to the effect that the value of the
Company's assets shall exceed its liabilities following the consummation
and the Merger and that the Merger shall not impair the Company's capital
within the meaning of Section 160 of the DGCL or impair the ability of the
Company to pay their respective obligations as they come due.
(h) OPINIONS. Parent shall have received from counsel to the Company
an opinion in form and substance as set forth in EXHIBIT E attached hereto,
addressed to Parent and its financing sources, and dated as of the Closing
Date.
(i) RESIGNATIONS. Parent shall have received the resignations,
effective as of the Closing, of each director and officer of the Company
and its Subsidiaries other than those whom Parent shall have specified in
writing at least two business days prior to the Closing.
(j) FINANCING. The Financing contemplated in the Commitment Letters
heretofore delivered by Parent to the Company shall have closed on terms
substantially in accordance with such Commitment Letters.
(k) CONSUMMATION. All actions to be taken by the Company in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect
the transactions contemplated hereby will be reasonably satisfactory in
form and substance to Parent.
(l) AGREEMENTS. The letter agreement between DS - Max USA, Inc. and
the Company dated June 12, 2000, the Employment Agreements substantially in
the forms previously delivered to Parent and the Company with Mary J.
George and Richard S. Willis, and the Non-Competition and Non-Solicitation
Agreements dated the date hereof with Charlesbank Capital Partners LLC and
Brentwood Associates shall all be in full force and effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
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(b) by either Parent or the Company if the other party shall have
failed to comply in any material respect with any of its covenants or
agreements contained in this Agreement required to be complied with prior
to the date of such termination, which failure to comply has not been cured
within 15 business days following receipt by such other party of written
notice from the non-breaching party of such failure to comply; PROVIDED,
HOWEVER, that if such failure to comply cannot reasonably be cured within
15 business days and such other party has promptly commenced and is
diligently proceeding to cure such failure to comply, this Agreement may
not be terminated pursuant to this subsection (b);
(c) by either Parent or the Company if there has been a breach by the
other party (in the case of Parent, including any breach by Sub) of any
representation or warranty which has the effect of making such
representation or warranty not true and correct in all respects the failure
to be so true or correct (i) in the case of a Company breach, has had a
material adverse effect on the ability of the Company, Parent or Sub to
consummate the transactions contemplated hereby or has resulted (or
evidences) or could result (or evidence) or be expected to result in a
Material Adverse Effect on the Company or Parent or (ii) in the case of a
Parent or Sub breach, has a material adverse effect on the ability of the
Company to consummate the transactions contemplated by this Agreement, in
each case which breach has not been cured within 15 business days following
receipt by the breaching party from the non-breaching party of written
notice of the breach; PROVIDED, HOWEVER, that, in either case, if such
breach cannot reasonably be cured within 15 business days and the other
party has promptly commenced and is diligently proceeding to cure such
breach, this Agreement may not be terminated pursuant to this subsection
(c); or
(d) by Parent or the Company if: (i) the Merger has not been effected
on or prior to 14 days after delivery to Parent of the July 1 Financials;
PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant to
this SECTION 7.1(d)(I) shall not be available to any party whose failure to
fulfill any of its obligations contained in this Agreement has been the
cause of, or resulted in, the failure of the Merger to have occurred on or
prior to the aforesaid date; or (ii) any court or other Governmental Entity
having jurisdiction over a party hereto shall have issued an Order, Law or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the transactions contemplated by this Agreement and such Order
Law or other action shall have become final and nonappealable.
The right of any party hereto to terminate this Agreement pursuant to
this SECTION 7.1 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto,
any person controlling any such party or any of their respective officers
or directors, whether prior to or after the execution of this Agreement.
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Section 7.2 EFFECT OF TERMINATION.
(a) Except as provided in clauses (b) and (c) below, in the event of
termination of this Agreement by either Parent or the Company, as provided
in SECTION 7.1, this Agreement shall forthwith become void and there shall
be no liability hereunder on the part of the Company, Parent, Sub or any of
their respective direct or indirect equity owners, or any officers or
directors of any of the foregoing (except for the last sentence of SECTION
5.3(b) and the entirety of SECTION 5.4, which shall survive the
termination). The Confidentiality Agreement shall remain in full force and
effect notwithstanding the termination of this Agreement.
(b) If the Agreement is terminated by Parent pursuant to SECTION
7.1(b), Parent shall be entitled to receive from the Company and BSI,
within five business days of written request therefor by Parent an amount
equal to all of Parent's expenses incurred in connection with the
transactions contemplated by this Agreement, including but not limited to
fees and expenses of accountants, attorneys and other consultants of Parent
and financing sources to Parent in connection with the due diligence,
structuring, negotiating and executing this Agreement and the other
documents contemplated hereby.
(c) If the Agreement is terminated by the Company pursuant to Section
7.1(b), the Company shall be entitled to receive from Parent, within five
business days of written request therefor by the Company an amount not to
exceed $75,000 in the aggregate, equal to all of the Company's expenses
incurred in connection with the transactions contemplated by this
Agreement, including but not limited to expenses of DLJ, fees and expenses
of accountants, attorneys and other consultants of the Company in
connection with the due diligence by Parent, structuring, negotiating and
executing this Agreement and the other documents contemplated hereby.
Section 7.3 AMENDMENT. This Agreement may be amended by the parties hereto,
by or pursuant to action taken by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the stockholders of the Company, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 7.4 WAIVER. At any time prior to the Effective Time, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a 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.
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ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time; provided, that, no stockholder,
director, officer or other employee, Affiliate, agent, representative or advisor
of the Company or of Parent, nor any stockholder, director, officer or other
employee, partner, Affiliate, agent, representative or advisor of any of the
foregoing, shall have any liability for any breach or inaccuracy of any of the
representations and warranties contained in this Agreement. Parent acknowledges
that the survival of the Company's representations and warranties pursuant to
this Section 8.1 shall be for the sole purpose of preserving claims that Parent
or the Surviving Corporation may have under the Representations and Warranties
Insurance Policy.
Section 8.2 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a confirmatory
copy sent by overnight courier) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
c/o Chartwell Investments II LLC
717 Fifth Avenue
23rd Floor
New York, New York 10022
Attention: Michael S. Shein
Facsimile No.: (212) 521-5533
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 200036
Attention: Russell W. Parks, Jr.
Facsimile No.: (202) 887-4288
(b) if to the Company, to
Bell Sports Corp.
6350 San Ignacio Avenue
San Jose, California 95119
Attention: Mary George
Facsimile: (408) 224-9129
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with a copy to:
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, Illinois 60603
Attention: Larry A. Barden
Facsimile No.: (312) 853-7036
Section 8.3 INTERPRETATION. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents, table of defined terms and headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." The words describing
the singular number shall include the plural and vice versa, and words denoting
any gender shall include all genders. The phrases "the date of this Agreement",
"the date hereof" and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to June 13, 2000. The parties have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question or intent of interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
Section 8.4 COUNTERPARTS. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Section 8.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(including the documents referred to herein), the Exhibits and Schedules
contemplated hereby and the Confidentiality Agreement constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof. This
Agreement, except for the provisions of SECTION 2.10 and SECTION 5.9, is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
Section 8.6 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 8.7 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties; PROVIDED, HOWEVER, that Parent and Sub may assign
their rights and obligations under this Agreement to one or more of their
wholly-owned Subsidiaries, but such assignment shall not relieve either Parent
or Sub of its obligations hereunder. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
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Section 8.8 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
Section 8.9 ENFORCEMENT OF THIS AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the Confidentiality Agreement were not performed in accordance with
their specific wording or were otherwise breached. It is accordingly agreed that
the parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement or the Confidentiality Agreement and to enforce
specifically the terms and provisions hereof and thereof, such remedy being in
addition to any other remedy to which any party is entitled at law or in equity.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized all as of
the date first written above.
BELL SPORTS HOLDINGS, L.L.C.
By: /s/ Michael S. Shein
------------------------
Name: Michael S. Shein
----------------------
Title: Manager
---------------------
ANDSONICA ACQUISITION CORP.
By: /s/ Michael S. Shein
------------------------
Name: Michael S. Shein
----------------------
Title: Manager
---------------------
BELL SPORTS CORP.
By: /s/ Richard S Willis
------------------------
Name: Richard S Willis
----------------------
Title: Executive Vice President
---------------------
