<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 5, 1998
ALLIED DIGITAL TECHNOLOGIES CORP.
---------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
--------
(State or other jurisdiction of incorporation)
1-13580 38-3191597
------- ----------
(Commission File Number) (IRS Employer Identification No.)
140 FELL COURT, HAUPPAUGE, NEW YORK 11788
----------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 232-2323
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. Other Events
On May 5, 1998, Allied Digital Technologies Corp. (the "Registrant")
entered into a definitive merger agreement (the "Merger Agreement") with
Analog Acquisition Corp., a corporation formed at the direction of 399 Venture
Partners, Inc., an affiliate of Citicorp Venture Capital, Ltd. ("399"). In
accordance with the terms of the Merger Agreement, an investors group
consisting of 399 and certain members of management of the Registrant will
acquire the Registrant in a transaction structured as a leveraged
recapitalization (the "Merger").
The Merger is subject to the customary conditions to closing,
including approval by a majority of the Registrant's shareholders, regulatory
review and other conditions. Under the terms of the Merger Agreement, each
outstanding share of the Registrant's common stock except for treasury shares,
shares held directly or indirectly by 399 and shares held by certain members
of management will be converted into the right to receive $5.00 in cash.
Certain shareholders who together with 399 represent approximately 68.51% of
the issued and outstanding common stock of the Registrant have executed
agreements to vote their shares in favor of the merger. Following the Merger,
the capital stock of the Registrant will no longer be publicly traded. The
Merger is expected to be completed in early August 1998.
ITEM 7. Financial Statements and Exhibits
(c) Exhibits
1. Agreement and Plan of Merger, dated May 5, 1998 between
Allied Digital Technologies Corp. and Analog Acquisition
Corp.
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ALLIED DIGITAL TECHNOLOGIES CORP.
By: /s/ George N. Fishman
-------------------------------
George N. Fishman
Co-Chairman of the Board and
Chief Executive Officer
Dated: May 14, 1998
<PAGE>
EXHIBIT 1
EXECUTION COPY
--------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER,
DATED AS OF MAY 5, 1998,
BETWEEN
ANALOG ACQUISITION CORP.
AND
ALLIED DIGITAL TECHNOLOGIES CORP.
--------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF MERGER
Table of Contents
Page
1. Definitions.............................................................1
2. Transactions...........................................................10
(a) The Merger....................................................10
(b) The Closing...................................................10
(c) Effect of Merger..............................................10
(d) Certificate of Incorporation..................................10
(e) Bylaws........................................................10
(f) Directors and Officers........................................11
(g) Conversion of Securities......................................11
(h) Employee Stock Options; Warrants..............................12
(i) Dissenting Shares.............................................12
(j) Surrender of Shares; Stock Transfer Books.....................13
3. Representations and Warranties of the Company..........................14
(a) Organization, Qualification, and Corporate Power..............14
(b) Capitalization................................................15
(c) Authorization of Transactions.................................15
(d) Noncontravention..............................................16
(e) Filings with the SEC..........................................16
(f) Financial Statements..........................................16
(g) Events Subsequent to Most Recent Fiscal Year End..............17
(h) No Undisclosed Liabilities....................................17
(i) Brokers' Fees.................................................17
(j) Absence of Certain Changes....................................17
(k) Litigation....................................................18
(l) Taxes.........................................................18
(m) Compliance with Laws..........................................19
(n) Permits.......................................................19
(o) Contracts.....................................................20
(p) Intellectual Property Rights..................................20
(q) Board Recommendation..........................................21
(r) ERISA.........................................................21
(s) Labor and Employment Matters..................................23
(t) Real Estate...................................................24
(u) Environmental Matters.........................................24
4. Representations and Warranties of AAC..................................26
(a) Organization..................................................26
(b) Debt Financing................................................27
(c) Authorization of the Transactions.............................27
(d) Noncontravention..............................................27
(e) Brokers' Fees.................................................28
(f) ..............................................................28
5. Covenants..............................................................28
<PAGE>
(a) Further Assurances............................................28
(b) Notices and Consents..........................................28
(c) Regulatory Matters and Approvals..............................29
(d) Securities Act, Securities Exchange Act, and State
Securities Laws..............................................29
(e) DGCL; Special Meeting.........................................29
(f) Accounting Treatment..........................................30
(g) Debt Financing................................................30
(h) Operation of the Company's Business...........................30
(i) Full Access...................................................31
(j) Notice of Developments........................................32
(k) No Solicitation...............................................32
(l) Insurance and Indemnification.................................34
(m) Joint Disclosure Documents....................................34
(n) Comfort Letters...............................................34
(o) Options.......................................................34
6. Conditions to Obligation to Close......................................35
(a) Conditions to Closing by AAC..................................35
(b) Conditions to Closing by the Company..........................36
7. Termination............................................................38
(a) Termination of Agreement......................................38
(b) Effect of Termination.........................................39
8. Miscellaneous..........................................................39
(a) Press Releases and Public Announcement........................39
(b) No Third Party Beneficiaries..................................39
(c) Entire Agreement..............................................39
(d) Succession and Assignment.....................................40
(e) Counterparts..................................................40
(f) General Interpretive Principles...............................40
(g) Notices.......................................................41
(h) Governing Law.................................................42
(i) Waiver of Jury Trial..........................................42
(j) Amendments and Waivers........................................42
(k) Severability..................................................42
(l) Expenses......................................................43
(m) Incorporation of Exhibits and Schedules.......................43
(n) Transfer Taxes................................................43
(o) Limited Recourse..............................................43
(p) Parties in Interest...........................................43
(q) Specific Performance..........................................43
(r) Headings......................................................43
(s) Counterparts..................................................43
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of May 5,
1998, between Analog Acquisition Corp., a Delaware corporation ("AAC"), and
Allied Digital Technologies Corp., a Delaware corporation (the "Company"). AAC
and the Company are sometimes referred to collectively herein as the
"Parties."
WITNESSETH:
WHEREAS, the Boards of Directors of AAC and the Company have each
determined that it is in the best interests of its shareholders for AAC to
acquire the Company and consummate the transactions contemplated by the
Agreement (the "Transactions") upon the terms and subject to the conditions
set forth herein; and
WHEREAS, also in furtherance of such acquisition, the Boards of
Directors of AAC and the Company have each approved the merger (the "Merger")
of AAC with and into the Company in accordance with the General Corporation
Law of the State of Delaware ("DGCL") upon the terms and subject to the
conditions set forth herein; and
WHEREAS, AAC is unwilling to enter into this Agreement unless,
contemporaneously with the execution and delivery of this Agreement, certain
beneficial and record stockholders of the Company have entered into certain
voting agreements, substantially in the form of Exhibit A-1 (the "Voting
Agreements") and certain rollover agreements, substantially in the form of
Exhibit A-2 (the "Rollover Agreements"), or combination thereof, in each case
providing for certain actions relating to certain of the shares ("Shares") of
common stock, par value $.01 per Share, of the Company ("Company Common
Stock") or Options (as hereinafter defined) owned or controlled by them;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Definitions.
"399" means 399 Venture Partners Inc., a Delaware corporation.
"AAC" has the meaning set forth in the preamble.
"Acquisition Proposals" has the meaning set forth in Section 5(k)(i).
"Acquisition Transaction" has the meaning set forth in Section 5(k)(i).
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Agreement" has the meaning set forth in the preamble.
"AMEX" means the American Stock Exchange.
"Anchor Bay Option" has the meaning set forth in Section 2(h).
<PAGE>
" Bankruptcy Code" has the meaning set forth in Section 6(b).
"Benefit Plan" means any Plan, other than a Multiemployer Plan, existing
at the Closing Date or within the 5 years prior thereto, established or to
which contributions have at any time been made by the Company or any
Subsidiary thereof, or any predecessor of the Company or any Subsidiary
thereof, under which any employee, former employee or director of the Company
or any Subsidiary thereof, or any beneficiary thereof is covered, is eligible
for coverage or has benefit rights in respect of service to the Company or any
Subsidiary thereof.
"Business Day" means any day on which the principal offices of the SEC in
Washington, D.C. are open to accept filings or, in the case of determining a
date when any payment is due, any day other than a day on which banks in New
York, New York are required or authorized to be closed.
"Capital Lease" means a Lease with respect to which the lessee is
required concurrently to recognize the acquisition of an asset and the
incurrence of a Liability in accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Person and a
Capital Lease, the amount of the obligation of such Person as the lessee under
such Capital Lease which would, in accordance with GAAP, appear as a Liability
on a balance sheet of such Person.
"Certificate of Merger" has the meaning set forth in Section 2(c).
"Certificates" has the meaning set forth in Section 2(j).
"Class A Common Stock" has the meaning set forth in Section 2(g)(iv).
"Class A Warrants" has the meaning set forth in Section 2(h).
"Class B Warrants" has the meaning set forth in Section 2(h).
"Class C Warrants" has the meaning set forth in Section 2(h).
"Closing" has the meaning set forth in Section 2(b).
"Closing Date" has the meaning set forth in Section 2(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preamble.
"Company Comfort Letter" has the meaning set forth in Section 5(n).
"Company Common Stock" has the meaning set forth in the recitals.
"Company Preferred Stock" has the meaning set forth in Section 3(b).
"Company Stockholder" means any Person who or which holds any Shares of
Company Common Stock.
-2-
<PAGE>
"Confidential Information" means any information concerning the
businesses and affairs of the Company and its Subsidiaries that is not (i)
already generally available to the public, (ii) otherwise required to be
disclosed by law or court order, or (iii) already within the possession of the
party to whom the information is proposed to be delivered without violating
the terms of any confidentiality agreement governing such information.
"Confidentiality Agreement" means the confidentiality agreement, dated as
of January 16, 1998, between CVC and the Company.
"Contracts" means, with respect to any Person, any agreement, contract,
obligation, note, bond, mortgage, indenture, option, Lease, promise or
undertaking that is legally binding on such Person or to which such Person is
a party.
"CVC" means Citicorp Venture Capital, Ltd., a New York corporation.
"Debt" with respect to any Person means, at any time, without
duplication, (a) Liabilities for borrowed money and its redemption obligations
in respect of mandatorily redeemable preferred stock; (b) Liabilities for the
deferred purchase price of property acquired by such Person (excluding
accounts payable arising in the Ordinary Course of Business but including all
Liabilities created or arising under any conditional sale or other title
retention agreement with respect to any such property); (c) Capital Lease
Obligations of such Person; (d) Liabilities for borrowed money secured by any
Lien with respect to any property owned by such Person (whether or not such
Person has assumed or otherwise become liable for such Liabilities); (e)
Liabilities in respect of letters of credit or instruments serving a similar
function issued or accepted for its account by banks and other financial
institutions (whether or not representing obligations for borrowed money); (f)
Swap Obligations of such Person; and (g) any Guaranty of such Person with
respect to Liabilities of a type described in any of clauses (a) through (f)
hereof.
"Debt Financing" has the meaning set forth in Section 4(b).
"Definitive Proxy Materials" means the definitive proxy materials
relating to the Special Meeting.
"DGCL" has the meaning set forth in the recitals.
"Dissenting Shares" has the meaning set forth in Section 2(i).
"Effective Time" has the meaning set forth in Section 2(c).
"Environment" means all air, surface water, groundwater or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
"Environmental Claim" means any and all administrative or judicial
actions, suits, orders, claims, Liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communication (written or, to the Knowledge of the Company or any Subsidiary
thereof, oral), whether criminal or civil pursuant to or relating to any
applicable Environmental Law by any Person (including but not limited to any
Governmental or Regulatory Body, private Person and citizens' group) based
upon, alleging, asserting or claiming any actual or potential (i) violation of
or Liability under any Environmental Law, (ii) violation of any Environmental
Permit, or (iii) Liability for
-3-
<PAGE>
investigatory costs, cleanup costs, removal costs, remedial costs, response
costs, natural resource damages, property damage, personal injury, fines or
penalties arising out of, based on, resulting from or related to the presence,
Release or threatened Release into the Environment, of any Hazardous Materials
at any location, including but not limited to any off-Site location to which
Hazardous Materials or materials containing Hazardous Materials were sent for
handling, storage, treatment or disposal.
"Environmental Clean-up Site" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on
any similar state list of sites requiring investigation or cleanup, or which
is the subject of any pending or threatened action, suit, proceeding or
investigation related to or arising from any alleged violation of any
Environmental Law.
"Environmental Law" means any and all current and future, federal, state,
local, provincial and foreign, civil and criminal laws, statutes, ordinances,
orders, codes, rules, regulations, Environmental Permits, policies, guidance
documents, judgments, decrees, injunctions or agreements with any Governmental
or Regulatory Body, relating to the protection of health and the Environment,
and/or governing the handling, use, generation, treatment, storage,
transportation, disposal, manufacture, distribution, formulation, packaging,
labeling or Release of Hazardous Materials, whether now existing or
subsequently amended or enacted, including but not limited to: the Clean Air
Act, 42 U.S.C. Section 7401 et seq.; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq.; the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the
Hazardous Material Transportation Act, 49 U.S.C. Section 1801 et seq.; the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 136 et
seq.; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section
6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et
seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; and the
state analogies thereto, all as amended or superseded from time to time; and
any common law doctrine, including but not limited to, negligence, nuisance,
trespass, personal injury or property damage related to or arising out of the
presence, Release or exposure to a Hazardous Material.
"Environmental Permit" means any federal, state, local, provincial or
foreign permits, licenses, approvals, consents or authorizations required by
any Governmental or Regulatory Body under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Body under
any applicable Environmental Law.
"Equity Financing Commitment" has the meaning set forth in Section 4(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any Person who is, or was, a member of a
controlled group (within the meaning of Section 412(n)(6) of the Code) that
includes, or at any time included, the Company or any Subsidiary thereof, or
any predecessor of any of the foregoing.
"Fixed Amount" has the meaning set forth in Section 5(k).
"GAAP" means United States generally accepted accounting principles as in
effect from time to time, consistently applied.
-4-
<PAGE>
"Governmental or Regulatory Body" means any government or political
subdivision thereof, whether foreign or domestic, federal, state, provincial,
county, local, municipal or regional, or any other governmental entity, any
agency, authority, department, division or instrumentality of any such
government, political subdivision, or other governmental entity, any court,
arbitral tribunal or arbitrator, and any nongovernmental regulating body, to
the extent that the rules, regulations or orders of such body have the force
of law.
"Guaranties" by any Person means all obligations (other than endorsements
in the Ordinary Course of Business of negotiable instruments for deposit or
collection) of such Person guaranteeing, or in effect guaranteeing, any Debt,
cash dividend or other monetary obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Debt or obligation or any
property or assets constituting security therefor; (ii) to advance or supply
funds for the purchase or payment of such Debt or obligation; (iii) to lease
property or to purchase securities or other property or services primarily for
the purpose of assuring the owner of such Debt or obligation of the ability of
the primary obligor to make payment of the Debt or obligation; or (iv)
otherwise to assure the owner of the Debt or obligation of the primary obligor
against loss in respect thereof. For the purposes of all computations made
under this Agreement, a Guaranty in respect of any Debt for borrowed money
shall be deemed to be Debt equal to the principal amount of such Debt for
borrowed money which has been guaranteed, and a Guaranty in respect of any
other obligation or Liability or any dividend shall be deemed to be Debt equal
to the maximum aggregate amount of such obligation, Liability or dividend
unless such Guaranty is limited.
"Hazardous Material" means petroleum, petroleum hydrocarbons or petroleum
products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls and
any other chemicals, materials, substances or wastes in any amount or
concentration which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous materials," "hazardous
wastes," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," "pollutants," "regulated substances," "solid
wastes" or "contaminants" or words of similar import, under any Environmental
Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Intellectual Property" shall mean all trademarks and trademark rights,
trade names and trade name rights, service marks and service mark rights,
service names and service name rights, copyrights and copyright rights,
patents and patent rights, brand names, trade dress, business and product
names, logos, slogans, trade secrets, inventions, processes, formulae,
industrial models, processes, designs, specifications, data, technology,
methodologies, computer programs (including all source codes), confidential
and proprietary information, whether or not subject to statutory registration,
and all related technical information, manufacturing, engineering and
technical drawings, know-how and all pending applications for and
registrations of patents, trademarks, service marks and copyrights, and the
right to sue for past payment, if any, in connection with any of the
foregoing, and all documents, disks and other media on which any of the
foregoing is stored.
"Joint Disclosure Documents" means the disclosure document combining the
Schedule 13E-3 and the Definitive Proxy Materials.
"Knowledge" means actual or constructive knowledge without independent
investigation of any
-5-
<PAGE>
current director or current executive officer.
"Liability" means all indebtedness, obligations and other liabilities (or
contingencies that have not yet become liabilities) of a Person (whether
absolute, accrued, contingent (or based upon any contingency), fixed or
otherwise, or whether due or to become due).
"Lease" means all oral and written leases, subleases, license agreements
and other use and occupancy agreements (and any amendments, renewals,
supplements, modifications or extensions thereto), in each case affecting or
relating to real property under which the Company or any Subsidiary thereof is
a party or to what it or any of its property is bound.
"Lien" means any lien, claim, restriction, security interest, preemptive
right, covenant, easement, mortgage, other encumbrance or any claim of any
Third Party other than mechanic's, materialman's and similar liens.
"Material Adverse Effect" means any material adverse effect on the
financial condition or operations, business, prospects, assets or results of
operations of the Company and its Subsidiaries taken as a whole, or AAC, as
the context in this Agreement requires.
"Merger" has the meaning set forth in the recitals.
"Merger Consideration" has the meaning set forth in Section 2(g).
"Most Recent Fiscal Year End" has the meaning set forth in Section 3(f).
"Multiemployer Plan" means a multiemployer plan within the meaning of
Section 4001(a)(3) of ERISA with respect to which the Company or any ERISA
Affiliate has an obligation to contribute or has or could have withdrawal
liability under Section 4201 of ERISA.
"Options" has the meaning set forth in Section 2(h).
"Option Plan" means Allied Digital Technologies Corp. Amended and
Restated 1994 Long Term Incentive Plan.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Parties" has the meaning set forth in the preamble.
"Paying Agent" has the meaning set forth in Section 2(j).
"Permits" means each material license (other than with respect to
Intellectual Property), franchise, permit, certificate, approval, consent or
other similar authorization affecting, or relating in any way to, the assets
or business of the Company and its Subsidiaries.
"Per Share Amount" has the meaning set forth in Section 2(g).
"Person" means an individual, a partnership, a limited liability company,
a corporation, an association, a joint stock company, a trust, an estate, a
joint venture, an unincorporated organization or
-6-
<PAGE>
other entity or a Governmental or Regulatory Body.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, or whether for the benefit of a single
individual or more than one individual including, without limitation, any
"employee benefit plan" within the meaning of Section 3(3) of ERISA (whether
or not subject thereto).
"Preliminary Proxy Materials" has the meaning set forth in Section
5(d)(i).
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of
a Hazardous Material into the Environment.
"Requisite Stockholder Approval" means the affirmative vote of at least a
majority, but less than the 66 2/3% of the Shares in favor of this Agreement
and the Merger in accordance with the DGCL.
"Requisite Super-Majority Stockholder Approval" means the affirmative
vote of at least 66 2/3% of the Shares in favor of the Merger and this
Agreement in accordance with the DGCL.
"Restricted Parties" has the meaning set forth in Section 5(k).
"Revolving Credit Facility" has the meaning set forth in Section 5(g).
"Rollover Agreements" has the meaning set forth in the recitals.
"Rollover Stockholders" has the meaning set forth in Section 2(g)(iii).
"Schedule 13E-3" has the meaning set forth in Section 3(y).
"SEC" means the Securities and Exchange Commission.
"SEC Reports" has the meaning set forth in Section 3(e).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Share(s)" has the meaning set forth in the recitals.
"Site" means any of the real properties currently or previously owned,
leased or operated by the Company or any Subsidiary thereof, including all
soil, subsoil, surface water and groundwater thereat.
"Special Meeting" has the meaning set forth in Section 3(y).
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
-7-
<PAGE>
"Superior Acquisition Proposal" has the meaning set forth in Section
7(a)(iv).
"Surviving Corporation" has the meaning set forth in Section 2(a).
"Surviving Corporation Common Stock" has the meaning set forth in Section
2(g)(iv).
"Swap Obligations" means, with respect to any Person, payment obligations
with respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
any Swap Obligation shall be the amount determined in respect thereof as of
the end of the then most recently ended fiscal quarter of such Person, based
on the assumption that such Swap Obligation had terminated at the end of such
fiscal quarter, and, in making such determination, if any agreement relating
to such Swap Obligation provides for the netting of amounts payable by and to
such Person thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such Person, then, in each such case, the amount
of such obligation shall be the net amount so determined.
"Taxes" means all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment, disability, use,
property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments of any nature whatsoever together with all
interest, penalties, fines and additions to tax imposed with respect to such
amounts and any interest in respect of such penalties and additions to tax.
"Tax Returns" means all returns and reports (including elections, claims,
declarations, disclosures, schedules, estimates, computations and information
returns) required to be supplied to a Tax authority in any jurisdiction
relating to Taxes.
"Third Party" means any "group," as described in Rule 13d-5(b)
promulgated under the Securities Exchange Act, or Person, other than AAC or
any of its Affiliates.
"Transactions" has the meaning set forth in the recitals.
"Warrants" has the meaning set forth in Section 2(h).
"Voting Agreements" has the meaning set forth in the recitals.
2. Transactions.
(1) The Merger. Subject to the terms and conditions of this Agreement and
in accordance with the DGCL, AAC will merge with and into the Company at the
Effective Time. Upon the Effective Time, the separate existence of AAC shall
cease and the Company shall be the corporation surviving the Merger and shall
continue under the name Allied Digital Technologies Corp. (the "Surviving
Corporation").
(2) The Closing. The closing of the Transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Morgan, Lewis &
Bockius LLP in New York City commencing at 9:00 a.m., local time, on the first
Business Day immediately following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the Transactions as
set forth in Article 6 (other than those conditions that by their nature are
to be satisfied at the Closing, but subject
-8-
<PAGE>
to satisfaction or waiver of those conditions) or such other date as the
Parties may mutually determine (the "Closing Date").
(3) Effect of Merger. The Merger shall become effective at the time (the
"Effective Time") the Company duly files a certificate of merger ("Certificate
of Merger") with the Secretary of State of the State of Delaware or at such
later time as is specified in the Certificate of Merger. The Merger shall have
the effect set forth in the DGCL. The Surviving Corporation may, at any time
after the Effective Time, take any action (including executing and delivering
any document) in the name and on behalf of either the Company or AAC in order
to carry out and effectuate the Transactions.
(4) Certificate of Incorporation. At the Effective Time, the certificate
of incorporation of the Surviving Corporation shall be amended to read in its
entirety as set forth in Exhibit B -1 attached hereto if the Transactions
receive the Requisite Stockholder Approval or Exhibit B-2 attached hereto if
the Transactions receive the Requisite Super-Majority Stockholder Approval, in
each case until thereafter amended as provided by law and such certificate of
incorporation.
(1)
(5) Bylaws. At the Effective Time, the bylaws of the Surviving
Corporation shall be amended to read as set forth in Exhibit C attached hereto
until thereafter amended as provided by law and such bylaws.
(6) Directors and Officers. The directors of the Company immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors
are duly elected or appointed and qualified.
(7) Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of AAC, the Company or the holders
of any of the following securities:
(1) Each Share (or fraction thereof) issued and outstanding
immediately prior to the Effective Time (other than any Shares to be canceled
pursuant to Section 2(g)(ii), any Shares to remain outstanding pursuant to
Section 2(g)(iii) and any Dissenting Shares (as defined in Section 2(i)) shall
be canceled and shall be converted automatically into the right to receive an
amount equal to $5 (the "Per Share Amount") in cash (the "Merger
Consideration") payable, without interest, to the holder of such Share, upon
surrender, in the manner provided in Section 2(j), of the Certificate that
formerly evidenced such Share.
(2) Treasury Stock and AAC-owned Shares. At and as of the Effective
Time, by virtue of the Merger and without any action on the part of the
Company or AAC or any holder of Shares of Company Common Stock, each Share of
Company Common Stock owned by the Company or any Subsidiary as treasury stock
and each Share owned by AAC held immediately prior to the Effective Time shall
be canceled and cease to exist, and no consideration shall be delivered or
deliverable with respect thereto.
(3) Certain of the Shares held by and registered in the names of
certain Company Stockholders who are members of management of the Company (the
"Rollover Stockholders"), in each case as set forth in Exhibit D shall not be
canceled as provided above, but shall remain outstanding and become shares of
Class A Common Stock (as defined below).
-9-
<PAGE>
(4) Conversion of AAC Common and Preferred Stock and Shares Held by
399. All of (A) the issued and outstanding shares of common stock, par value
$.01 per share, of AAC, (B) the issued and outstanding shares of preferred
stock, par value $.01 per share, of AAC, and (C) 1,100,110 Shares of Company
Common Stock held by and registered in the name of 399, shall be converted
into 74,000 shares of Class A common stock, $.01 par value per share, of the
Surviving Corporation ("Class A Common Stock"), 351,000 shares of Class B
Common Stock, $.01 par value per share, of the Surviving Corporation and
165,000 shares of Series A preferred stock, par value $.01 per share, of the
Surviving Corporation.
(1)
(8) Employee Stock Options; Warrants.
(1) Unless otherwise provided in the Rollover Agreements, each
option to purchase Shares that is not a Substitute Option (as defined in the
Option Plan) or the Option held by Anchor Bay Entertainment Inc. issued on
September 15, 1997 pursuant to a Modification Agreement, dated September 12,
1997, between the Company and Anchor Bay Entertainment (the "Anchor Bay
Option") and is outstanding immediately prior to the Effective Time (whether
or not vested or exercisable) shall, at the Effective Time, be canceled, and
in exchange therefor, each holder of each such Option shall receive a cash
payment which, prior to deduction for applicable withholding Taxes, is in an
amount equal to the product of (A) the excess, if any, of the Per Share Amount
over the per share exercise price of such Option and (B) the number of shares
subject to the Option (whether or not vested). If the per share exercise price
of any such Option equals or exceeds the Per Share Amount, such Option shall
be canceled without any payment required thereunder. The Option Plan will not
survive the Effective Time.
(2) The Class A warrants issued by the Company with an exercise
price of $6.75 per share of the Company Common Stock (the "Class A Warrants"),
Class B warrants issued by the Company with an exercise price of $7.50 per
share of the Company Common Stock (the "Class B Warrants") and Class C
warrants issued by the Company with an exercise price of $9.00 per share of
the Company Common Stock (the "Class C Warrants") (the Class A Warrants, Class
B Warrants and Class C Warrants collectively being referred to herein as the
"Warrants") the Substitute Options, and the Anchor Bay Option will have been
adjusted in accordance with their terms, unless any such Warrants have expired
in accordance with their terms, such that, upon exercise and payment of the
exercise price, any holder thereof shall have the right to receive only $5 per
share, and in no event shall have the right to receive any shares of capital
stock of the Company or the Surviving Corporation.
(9) Dissenting Shares. Notwithstanding any provisions of the Agreement to
the contrary, Shares of Company Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by a Company
Stockholder who has not voted such Shares in favor of the Merger, who shall
have delivered a written demand for appraisal of such Shares in the manner
provided by the DGCL and who, as of the Effective Time, shall not have
effectively withdrawn or lost such right to appraisal ("Dissenting Shares")
shall not be converted into a right to receive the Merger Consideration. The
holders thereof shall be entitled only to such rights as are granted by
Section 262 of the DGCL. Each holder of Dissenting Shares who becomes entitled
to payment for such Shares pursuant to Section 262 of the DGCL shall receive
payment therefor from the Surviving Corporation in accordance with the DGCL;
provided, however, that (i) if any such holder of Dissenting Shares shall have
failed to establish his entitlement to appraisal rights as provided in Section
262 of the DGCL, (ii) if any such holder of Dissenting Shares shall have
effectively withdrawn his demand for appraisal of such Shares or lost his
right to appraisal and payment for his Shares under Section 262 of the DGCL or
(iii) if neither any holder of Dissenting Shares nor the Surviving Corporation
shall have filed a petition demanding a
-10-
<PAGE>
determination of the value of all Dissenting Shares within the time provided
in Section 262 of the DGCL, such holder shall forfeit the right to appraisal
of such Shares and each such Share shall be treated as if such Share had been
converted, as of the Effective Time, into a right to receive the Merger
Consideration, without interest thereon, from the Surviving Corporation as
provided in this Section 2. The Company shall give AAC prompt notice of any
demands received by the Company for appraisal of Shares, and, until the
Effective Time, AAC shall have the right to participate in all negotiations
and proceedings with respect to such demands. The Company shall not, except
with the prior written consent of AAC, make any payment with respect to, or
settle or offer to settle, any such demands.
(10) Surrender of Shares; Stock Transfer Books.
(1) Prior to the Effective Time, AAC shall designate a bank or trust
company (which bank or trust company shall be reasonably acceptable to the
Company) to act as agent (the "Paying Agent") for the holders of Shares in
connection with the Merger to receive the funds to which holders of Shares
shall become entitled pursuant to Section 2(g)(i) and shall deposit with the
Paying Agent the proceeds of the Debt Financing required in order to
consummate the Transactions. Such funds shall be invested by the Paying Agent
as directed by the Surviving Corporation, provided that such investments shall
be in obligations of or guaranteed by the United States of America or of any
agency thereof and backed by the full faith and credit of the United States of
America, in commercial paper obligations rated A-1 or P-1 or better by Moody's
Investors Service, Inc. or Standard & Poor's Corporation, respectively, or in
deposit accounts, certificates of deposit or banker's acceptances of,
repurchase or reverse repurchase agreements with, or Eurodollar time deposits
purchased from, commercial banks with capital, surplus and undivided profits
aggregating in excess of $1.0 billion (based on the most recent financial
statements of such bank which are then publicly available at the SEC or
otherwise).
(2) Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each Person who was, at the Effective Time, a
holder of record of Shares entitled to receive the Merger Consideration
pursuant to Section 2(g)(i), a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates evidencing Shares (the "Certificates") shall pass, only upon
proper delivery of the Certificates to the Paying Agent) and instructions for
use in effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together
with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
required pursuant to such instructions, the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger Consideration for each
Share formerly evidenced by such Certificate, and such Certificate shall then
be canceled. No interest shall accrue or be paid on the Merger Consideration
payable upon the surrender of any Certificate for the benefit of the holder of
such Certificate. If payment of the Merger Consideration is to be made to a
Person other than the Person in whose name the surrendered Certificate is
registered on the stock transfer books of the Company, it shall be a condition
of payment that the Certificate so surrendered shall be endorsed properly or
otherwise be in proper form for transfer and that the Person requesting such
payment shall have paid all transfer and other Taxes required by reason of the
payment of the Merger Consideration to a Person other than the registered
holder of the Certificate surrendered or shall have established to the
satisfaction of the Surviving Corporation that such Taxes either have been
paid or are not applicable.
(3) At any time following the sixth month after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all
interest and other income received by the Paying Agent in respect of all funds
made available to it), and
-11-
<PAGE>
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat and other similar laws) only as
general creditors thereof with respect to any Merger Consideration that may be
payable upon due surrender of the Certificates held by them to the fullest
extent permitted by law. Notwithstanding the foregoing, to the fullest extent
permitted by law, neither the Surviving Corporation nor the Paying Agent shall
be liable to any holder of a Share for any Merger Consideration delivered in
respect of such Share to a public official pursuant to any abandoned property,
escheat or other similar law.
(4) Any portion of the Merger Consideration made available to the
Paying Agent to pay for Shares of Company Common Stock for which appraisal
rights have been perfected shall be paid to the Surviving Corporation upon
demand.
(5) At the Effective Time, the stock transfer books of the Company
shall be closed to the extent permitted by applicable law and thereafter there
shall be no further registration of transfers of Shares on the records of the
Company. From and after the Effective Time, the holders of Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares except as otherwise provided herein or by applicable
law.
(6) The Surviving Corporation shall pay all charges and expenses of
the Paying Agent.
3. Representations and Warranties of the Company. The Company represents and
warrants to AAC as follows, except as set forth in the disclosure
schedule attached hereto:
(1) Organization, Qualification, and Corporate Power. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation. Each of
the Company and its Subsidiaries has full corporate power and authority to
carry on the businesses in which it is engaged and to own and use the
properties owned and used by it. Each of the Company and its Subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect.
(2) Capitalization. (i) The authorized capital stock of the Company
consists of 25,000,000 Shares of Company Common Stock and 1,000,000 shares,
$.01 par value per share, of preferred stock (the "Company Preferred Stock").
As of the date of this Agreement: (A) 13,623,394 Shares of Company Common
Stock were issued and outstanding, (B) no shares of Company Preferred Stock
were issued or outstanding, and (C) no Shares of Company Common Stock were
held by the Company in its treasury. All of the issued and outstanding Shares
of Company Common Stock have been duly authorized and are validly issued,
fully paid, and nonassessable. Except as indicated in Schedule 3(b), there are
no outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights or other contracts or commitments
that could require the Company or any Subsidiary thereof to issue, sell, or
otherwise cause to become outstanding any of its capital stock or the capital
stock of any Subsidiary thereof. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar rights with
respect to the Company or any of its Subsidiaries. All shares of capital stock
of Subsidiaries of the Company are wholly owned directly or indirectly by the
Company and have been duly authorized and are validly issued, fully paid and
nonassessable.
-12-
<PAGE>
(ii) Except as provided in Schedule 3(b), there are no voting trusts
or shareholder agreements to which the Company or any Subsidiary thereof is a
party with respect to the voting of the capital stock of the Company or any
Subsidiary thereof.
(iii) The Class A Warrants and Class B Warrants expire on July 28,
1998 and the Class C Warrants expire on January 11, 2000. Upon consummation of
the Transactions, the Warrants, Substitute Options and Anchor Bay Option shall
have been adjusted so that, in the case of each Warrant (other than any
Warrant that has expired in accordance with its terms) or applicable Option,
upon exercise and payment of the exercise price, any holder thereof shall have
the right to receive only $5 per share, and in no event shall have the right
to receive any shares of capital stock of the Company or the Surviving
Corporation.
(3) Authorization of Transactions. The Company has, and subject to the
Requisite Stockholder Approval will have, full power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery by the Company of this Agreement and the Merger, and
the performance of the Company's obligations hereunder, have been and, subject
to the Requisite Stockholder Approval or Requisite Super-Majority Stockholder
Approval, as the case may be, will be, duly authorized by all requisite
corporate action, and this Agreement has been executed and delivered by the
Company. This Agreement constitutes the valid and legally binding obligation
of the Company, enforceable in accordance with its terms and conditions.
(4) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the Transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any Governmental or
Regulatory Body or court to which any of the Company and its Subsidiaries is
subject, including, without limitation, Section 203 of the DGCL, or any
provision of the certificate of incorporation or bylaws of any of the Company
and its Subsidiaries or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any Party the right
to accelerate, terminate, modify, or cancel or require any notice under any
Contract to which any of the Company and its Subsidiaries is a party or by
which it is bound or to which any of its assets is subject, except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation or failure to give notice would not have a Material Adverse
Effect or a material adverse effect on the ability of the Parties to
consummate the Transactions. Other than in connection with the provisions of
the HSR Act, the DGCL, the Securities Exchange Act, the Securities Act, the
state securities laws, and as set forth on Schedule 3(d), none of the Company
and its Subsidiaries needs to give any notice to, make any filing with, or
obtain any authorization, consent or approval of any Governmental or
Regulatory Body in order for the Parties to consummate the Transactions or
execute, deliver and perform its obligations under this Agreement, except
where the failure to give notice, to file, or to obtain any authorization,
consent or approval would not have a Material Adverse Effect or a material
adverse effect on the ability of the Parties to consummate the Transactions.
(5) Filings with the SEC. Since July 31, 1994, the Company and its
Subsidiaries have made all filings with the SEC that are required under the
Securities Act and the Securities Exchange Act (collectively, the "SEC
Reports"). Each of the SEC Reports has complied with the applicable provisions
of the Securities Act and the Securities Exchange Act and the rules and
regulations promulgated thereunder in all material respects. None of the SEC
Reports, as of their respective dates, contained any untrue statement of a
material fact or omitted to state a material fact necessary in order to make
the statements made therein, in light of the circumstances under which they
were made, not misleading. The Company has heretofore furnished or made
available to AAC complete and correct copies of all
-13-
<PAGE>
amendments and modifications that have not been filed by the Company with the
SEC to all agreements, documents and other instruments that previously had
been filed by the Company with the SEC and are currently in effect.
(6) Financial Statements. The Company has delivered to AAC an Annual
Report on Form 10-K of the Company for the fiscal year ended July 31, 1997
(the "Most Recent Fiscal Year End"). The financial statements included in or
incorporated by reference into such SEC Reports (including the related notes
and schedules) have been prepared in accordance with GAAP and present fairly
the financial condition of the Company and its Subsidiaries as of the
indicated dates and the results of operations of the Company and its
Subsidiaries for the indicated periods.
(7) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any Material Adverse Effect with
respect to the Company and its Subsidiaries taken as a whole.
(8) No Undisclosed Liabilities. Except for (i) liabilities incurred in
connection with the Transactions and (ii) as and to the extent disclosed in
the SEC Reports or as set forth in Schedule 3(h), since July 31, 1997, neither
the Company nor any of its Subsidiaries has incurred any Liabilities of any
nature (whether accrued, absolute, contingent or otherwise) which could
reasonably be expected to be required to be reflected in or reserved against
on a consolidated balance sheet, or in the notes thereto, of the Company and
its consolidated Subsidiaries prepared in accordance with GAAP consistent with
past practice.
(9) Brokers' Fees. Other than fees related to financial advisory services
performed for the Company to be paid to the Persons set forth on Schedule
3(i), neither the Company nor any of its Subsidiaries has any Liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the Transactions. The Company has furnished to AAC true, correct
and complete copies of engagement letters relating to such services.
(10) Absence of Certain Changes. Except as disclosed in Schedule 3(j),
since July 31, 1997, the Company and its Subsidiaries have conducted their
business in the Ordinary Course of Business and there has not been:
(1) any event, occurrence or development of a state of facts which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect;
(2) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the Company,
or (other than (A) any retirement of, or issuance of Company Common Stock
pursuant to the exercise of Options to acquire Shares of Company Common Stock
granted to employees or directors or other Option holders, or (B) as
contemplated pursuant to this Agreement) any repurchase, redemption or other
acquisition by the Company or any Subsidiary thereof of any outstanding shares
of capital stock or other securities of, or other ownership interests in, the
Company or any Subsidiary thereof;
(3) any amendment of any material term of any outstanding equity
security of the Company or any Subsidiary thereof;
(4) any incurrence, assumption or guarantee by the Company or any
Subsidiary thereof of any indebtedness for borrowed money, other than in the
Ordinary Course of Business in
-14-
<PAGE>
amounts and on terms consistent with past practices;
(5) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or any
Subsidiary thereof which, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect;
(6) any material change in any method of accounting or accounting
practice by the Company or any Subsidiary thereof which, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect;
(1)
(7) any (A) grant of any severance or termination pay to any
director, officer or employee of the Company or any Subsidiary thereof, (B)
entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of the Company or any Subsidiary thereof, (C) increase in
benefits payable under any existing severance or termination pay policies or
employment agreements or (D) increase in compensation, bonus or other benefits
payable to directors, officers or employees of the Company or any Subsidiary
thereof; in each case, other than in the Ordinary Course of Business; or
(8) any cancellation of any Permits or Contracts to which the
Company or any Subsidiary thereof is a party, or any written or oral
notification to the Company or any Subsidiary thereof that any party to any
such arrangement intends to cancel or not renew such arrangement beyond its
expiration date as in effect on the date hereof, which cancellation or
notification, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
(11) Litigation. Except as set forth on Schedule 3(k), there is no
action, suit or proceeding pending against, or, to the Knowledge of the
Company or any Subsidiary thereof, any action, suit, investigation or
proceeding threatened against or affecting, the Company or any Subsidiary
thereof or any of their respective properties before any Governmental or
Regulatory Body, (i) which could reasonably be expected to have a Material
Adverse Effect or (ii) which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the Merger or any of the other Transactions
and has a reasonable likelihood of success.
(12) Taxes. (i) The Company and each of its Subsidiaries have duly and
timely filed (taking into account any extension of time within which to file)
all material Tax Returns required to be filed by any of them and all such
filed Tax Returns are complete and accurate in all material respects; (ii)
except as set forth on Schedule 3(l), the Company and each of its Subsidiaries
have paid all Taxes required to be paid by it including Taxes that the Company
and its Subsidiaries are obligated to withhold from amounts owing to any
employee, creditor or Third Party, except with respect to matters contested in
good faith or for such amounts that, individually or in aggregate, could not
reasonably be expected to have a Material Adverse Effect; (iii) except as set
forth on Schedule 3(l), there are no pending or, to the Knowledge of the
Company, threatened in writing audits, examinations, investigations or other
proceedings in respect of Taxes or Tax matters relating to the Company or any
of its Subsidiaries which, if determined adversely to the Company or any of
its Subsidiaries, could reasonably be expected to have a Material Adverse
Effect; (iv) there are no deficiencies or claims for any Taxes that have been
proposed, asserted or assessed against the Company or any of its Subsidiaries
which, if such deficiencies or claims were finally resolved against the
Company or any of its Subsidiaries, could reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect; (v) there are no
material Liens for Taxes upon the assets of the Company or any of its
Subsidiaries, other than Liens for current Taxes not
-15-
<PAGE>
yet due and payable and Liens for Taxes that are being contested in good faith
by appropriate proceedings; (vi) none of the Company or any of its
Subsidiaries has made an election under Section 341(f) of the Code; (vii)
except as set forth in Schedule 3(l), no extension of the statute of
limitations on the assessment of any Taxes has been granted by the Company or
any of its Subsidiaries and is currently in effect; (viii) except as set forth
in Schedule 3(l), none of the Company or its Subsidiaries is a party to any
agreement or arrangement that could reasonably be expected to result,
separately or in the aggregate, in the actual or deemed payment by the Company
or a Subsidiary of any "excess parachute payments" within the meaning of
Section 280 G or 162(m) of the Code; (ix) none of the Company or its
Subsidiaries has been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code; (x) all Taxes required to
be withheld, collected or deposited by or with respect to the Company and its
Subsidiaries have been timely withheld, collected or deposited, as the case
may be, and, to the extent required, have been paid to the relevant taxing
authority, except, in each case, to the extent that failing to so withhold,
collect, deposit or pay would not have a Material Adverse Effect; (xi) none of
the Company or its Subsidiaries has issued or assumed (A) any obligations
described in Section 279(b) of the Code, (B) any applicable high yield
discount obligations, as defined in Section 163(i) of the Code, or (C) any
registration-required obligations, within the meaning of Section 163(f)(2) of
the Code, that are not in registered form; (xii) there are no requests for
information currently outstanding that could affect the Taxes of the Company
and its Subsidiaries; and (xiii) except as set forth on Schedule 3(l), there
are no proposed reassessments of any property owned by the Company or any of
its Subsidiaries or other proposals that could increase the amount of any Tax
to which the Company, its Subsidiaries or any such Person would be subject.
(13) Compliance with Laws. Except as set forth on Schedule 3(m), neither
the Company nor any Subsidiary thereof is in violation of, or has since July
31, 1997 violated, and, to the Knowledge of the Company or any Subsidiary
thereof, none of them is under investigation with respect to or has been
threatened to be charged with or given notice of any violation by any
Governmental or Regulatory Body of any applicable law, rule, regulation,
judgment, injunction, order or decree, except for violations that could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
(14) Permits. Except as set forth on Schedule 3(n) and except as could
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, (i) the Permits are valid and in full force and
effect, (ii) neither the Company nor any Subsidiary thereof is in default
under, and no condition exists that with notice or lapse of time or both would
constitute a default under, the Permits and (iii) none of the Permits will be
terminated or impaired or become terminable, in whole or in part, as a result
of the Transactions. The Company and each of its Subsidiaries have all Permits
necessary to carry on its business as currently conducted or as proposed to be
conducted, except where the failure to have any Permit would not have a
Material Adverse Effect.
(15) Contracts. Schedule 3(o) sets forth a list of all material Contracts
to which the Company or any of its Subsidiaries is a party or by or to which
it or its assets are bound or subject, including, without limitation, (i)
Contracts relating to the borrowing of money; (ii) Contracts with any current
Affiliate or current or former officer or director of the Company or any
Subsidiary thereof; (iii) joint venture agreements between the Company or any
of its Subsidiaries and an unaffiliated third party; (iv) any Contracts
providing for payments to or from the Company or any Subsidiary thereof of
$100,000 or more per year; (v) any license agreements, distribution
agreements, franchise agreements or agreements in respect of similar rights
granted to or held by the Company or any of its Subsidiaries; (vi) any
Contract that materially limits the freedom of the Company or any Subsidiary
thereof to compete in any line of business or with any Person or in any
geographical area or which would so
-16-
<PAGE>
materially limit the freedom of the Company or any Subsidiary thereof so to
compete after the Effective Time; (vii) any other Contract not made in the
Ordinary Course of Business which Contract is material to the Company and its
Subsidiaries taken as a whole; (viii) any Tax sharing agreement or other
arrangement or (ix) any Lease. The Company has heretofore made available to
AAC true and complete copies of each of the Contracts set forth in Schedule
3(o). Except for Contracts that could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, all Contracts
disclosed in Schedule 3(o) are valid and binding Contracts of the Company or a
Subsidiary thereof, are in full force and effect (except for those that have
terminated or will terminate by their own terms), and neither the Company, any
Subsidiary thereof nor, to the Knowledge of the Company or any Subsidiary
thereof, any other party thereto, is in default in any material respect under
the terms of any such Contract.
(16) Intellectual Property Rights. The Company or any Subsidiary thereof
has interests in or uses only the Intellectual Property disclosed in Schedule
3(p) in connection with the conduct of the business as currently conducted or
as proposed to be conducted. Except as set forth on Schedule 3(p), the Company
or any Subsidiary thereof either owns or has a valid and binding license to
use each item of Intellectual Property set forth on Schedule 3(p). No other
Intellectual Property is used or necessary in the conduct of the business as
currently conducted or as proposed to be conducted. Except as disclosed in
Schedule 3(p), (i) the Company or any Subsidiary thereof has the exclusive
right to use the Intellectual Property disclosed in Schedule 3(p), (ii) all
registrations with and applications to any Governmental or Regulatory Body in
respect of such Intellectual Property are valid and in full force and effect
and are not subject to the payment of any Taxes or maintenance fees or the
taking of any other actions by the Company or any Subsidiary thereof to
maintain their validity or effectiveness, (iii) there are no restrictions on
the direct or indirect transfer of any license, or any interest therein, held
by the Company or any Subsidiary thereof in respect of such Intellectual
Property, (iv) the Company or any Subsidiary thereof has delivered to AAC
prior to the execution of this Agreement documentation with respect to any
invention, process, design, computer program or other know-how or trade secret
included in such Intellectual Property, which documentation is accurate in all
material respects and reasonably sufficient in detail and content to identify
and explain such invention, process, design, computer program or other
know-how or trade secret and to facilitate its full and proper use without
reliance on the special knowledge or memory of any Person, (v) the Company or
any Subsidiary thereof has taken reasonable security measures to protect the
secrecy, confidentiality and value of its trade secrets in respect of the
business, (vi) the Company or any Subsidiary thereof is not, nor has it
received any notice that it is, in default (or with the giving of notice or
lapse of time or both, would be in default) under any license to use such
Intellectual Property and (vii) the Company or any Subsidiary thereof does not
have any Knowledge that such Intellectual Property is being infringed by any
other Person. Except as set forth on Schedule 3(p), the Company or any
Subsidiary thereof has not received notice that the Company or any Subsidiary
thereof is infringing any Intellectual Property of any other Person in
connection with the conduct of the business as currently conducted or as
proposed to be conducted; no claim is pending or, to the Knowledge of the
Company or any Subsidiary thereof, has been made to such effect that has not
been resolved; and, to the Knowledge of the Company or any Subsidiary thereof,
the Company or any Subsidiary thereof is not infringing any Intellectual
Property rights of any other Person in connection with the conduct of the
business as currently conducted or as proposed to be conducted.
(17) Board Recommendation. The Board of Directors of the Company, at a
meeting duly called and held and acting on the unanimous recommendation of the
Board of Directors of the Company, has (i) determined that this Agreement and
the Transactions, including the Merger, are fair to, and in the best interests
of, the Company Stockholders, (ii) approved this Agreement and the
Transactions, including the Merger, which approval satisfies in full the
requirements of the DGCL including, without
-17-
<PAGE>
limitation, Section 203 thereof with respect to the Transactions, and (iii)
resolved to recommend approval and adoption of this Agreement and the Merger
by the Company Stockholders. Furman Selz LLC has delivered to the Company's
Board of Directors its opinion that the consideration to be paid in the Merger
is fair to the holders of Shares of Company Common Stock from a financial
point of view.
(18) ERISA. All Benefit Plans and Multiemployer Plans are listed in
Schedule 3(r), and copies of all documentation relating to such Benefit Plans
have been delivered to AAC (including copies of written Benefit Plans, written
descriptions of oral Benefit Plans, summary plan descriptions, trust
agreements, the three most recent annual returns, employee communications, and
IRS determination letters). Except as disclosed in Schedule 3(r):
(1) each Benefit Plan has at all times been maintained and
administered in all material respects in accordance with its terms and with
the requirements of all applicable law, including ERISA and the Code, and each
Benefit Plan intended to qualify under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be qualified under Section
401(a) of the Code and nothing has occurred since the date of any such
determination which would adversely affect such qualification.
(2) no Benefit Plan is a "defined benefit plan" within the meaning
of Section 414(j) of the Code, other than a Benefit Plan described in Section
401(a)(1) of ERISA;
(3) no direct, contingent or secondary Liability has been incurred
or is expected to be incurred by the Company or any Subsidiary under Title IV
of ERISA with respect to any Benefit Plan or Multiemployer Plan, or with
respect to any other Plan presently or heretofore maintained or contributed to
during the five (5) year period prior to the Closing Date by any ERISA
Affiliate;
(4) with respect to each Multiemployer Plan, (A) no withdrawal
liability (within the meaning of Section 4201(b) of ERISA) has been incurred
by the Company or any ERISA Affiliate, and the Company has no reason to
believe that any such withdrawal liability will be incurred, prior to the
Closing Date, (B) no such Multiemployer Plan is in "reorganization" (within
the meaning of Section 4241 of ERISA), (C) no notice has been received that
increased contributions may be required to avoid a reduction in plan benefits
or the imposition of an excise tax, or that the Multiemployer Plan is or may
become "insolvent" (within the meaning of Section 4241 of ERISA), (D) the
Company or any Subsidiary thereof has no Knowledge that proceedings have been
instituted by the Pension Benefit Guaranty Corporation against the
Multiemployer Plan, (E) neither the Company or any Subsidiary thereof has sold
assets in a transaction intended to satisfy the requirements of Section 4204
of ERISA, and (F) except as disclosed in Schedule 3(r), if the Company or any
ERISA Affiliate were to have a complete or partial withdrawal under Section
4203 of ERISA as of the Closing, no withdrawal liability would exist on the
part of the Company or any ERISA Affiliate;
(5) neither the Company nor any ERISA Affiliate has incurred any
Liability for any tax imposed under Sections 4971 through 4980B of the Code or
civil Liability under Section 502(i) or (l) of ERISA;
(6) Except as set forth in Schedule 3(r), no benefit under any
Benefit Plan, including, without limitation, any severance or parachute
payment plan or agreement, will be established or become accelerated, vested
or payable by reason of any Transaction contemplated under this Agreement;
-18-
<PAGE>
(7) no tax has been incurred under Section 511 of the Code with
respect to any Benefit Plan (or trust or other funding vehicle pursuant
thereto);
(8) no Benefit Plan provides health or death benefit coverage for
claims incurred beyond the termination of an employee's employment, except as
required by Part 6 of Subtitle B of Title I of ERISA or Section 4980B of the
Code or any State laws requiring continuation of benefits coverage following
termination of employment;
(9) no suit, actions or other litigation (excluding claims for
benefits incurred in the ordinary course of Plan activities) have been brought
or, to the Knowledge of the Company, threatened against or with respect to any
Benefit Plan and there are no facts or circumstances known to the Company that
could reasonably be expected to give rise to any such suit, action or other
litigation; and
(1)
(10) all contributions to Benefit Plans and Multiemployer Plans that
were required to be made under such Plans have been made and each of the
Company and each Subsidiary has performed all material obligations required to
be performed under all such Plans.
(19) Labor and Employment Matters.
(1) Except as set forth on Schedule 3(s), (A) no employee of the
Company or any Subsidiary thereof is represented by a labor union, no labor
union has been certified or recognized as a representative of any such
employee, and neither the Company nor any Subsidiary thereof has any
obligation under any collective bargaining agreement or other agreement with
any labor union or any obligation to recognize or deal with any labor union,
and there are no such Contracts or other agreements pertaining to or which
determine the terms or conditions of employment of any employee of the Company
or any Subsidiary thereof; (B) there are no pending or threatened
representation campaigns, elections or proceedings; (C) the Company has no
Knowledge of any strikes, slowdowns or work stoppages of any kind, or threats
thereof, and no such activities occurred during the 24-month period preceding
the date hereof; (D) neither the Company nor any Subsidiary thereof has
engaged in, admitted committing or been held to have committed any unfair
labor practice; and (E) there are no controversies or grievances between the
Company or any Subsidiary thereof and any of its employees or representatives
thereof.
(2) Schedule 3(s) sets forth all Contracts under which the Company
or any Subsidiary thereof has any obligation to provide compensation or
remuneration of any kind (other than obligations to make current wage or
salary payments that are terminable at will without notice) to or on behalf of
any employee or consultant.
(3) Except as set forth on Schedule 3(s), the Company and each of
its Subsidiaries have at all times complied in all material respects, and are
in material compliance with, all applicable laws, rules and regulations
respecting employment, wages, hours, compensation, benefits, and payment and
withholding of taxes in connection with employment.
(4) Except as could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect, the Company and each of its
Subsidiaries have at all times since July 31, 1994 complied with, and are in
compliance with, all applicable laws, rules and regulations respecting
occupational health and safety, whether now existing or subsequently amended
or enacted, including, without limitation, the Occupational Safety & Health
Act of 1970, 29 U.S.C. Section 651 et
-19-
<PAGE>
seq. and the state analogies thereto, all as amended or superseded from time
to time, and any common law doctrine relating to worker health and safety.
(20) Real Estate.
(1) Neither the Company nor any of its Subsidiaries own any real
property.
(1)
(2) Except as set forth on Schedule 3(t), neither the Company nor
any Subsidiary thereof has assigned, pledged or otherwise transferred or has
sublet (as sublessor) the premises demised by any Lease. The Company or a
Subsidiary thereof is in possession of the premises demised by the Leases.
Except as set forth on Schedule 3(t), no tenant or landlord under any Lease
has exercised any option or right to (A) cancel or terminate such Lease or
shorten the term thereof, (B) lease additional premises, (C) reduce or
relocate the premises demised by such Lease, or (D) purchase any property. All
brokerage commissions payable by the Company or any Subsidiary thereof with
respect to any Lease have been fully paid.
(21) Environmental Matters. To the Knowledge of the Company or any
Subsidiary thereof, the Company or any Subsidiary thereof has obtained and
holds all necessary Environmental Permits. To the Knowledge of the Company or
any Subsidiary thereof, the Company or any Subsidiary thereof is in material
compliance with all terms, conditions and provisions of all applicable
Environmental Permits and Environmental Laws. There are no past, pending or,
to the Knowledge of the Company or any Subsidiary thereof, threatened material
Environmental Claims against the Company or any Subsidiary thereof, and the
Company or any Subsidiary thereof is not aware of any facts or circumstances
which could reasonably be expected to form the basis for any such material
Environmental Claim against the Company or any Subsidiary thereof. To the
Knowledge of the Company or any Subsidiary thereof, except as set forth on
Schedule 3(u), no Releases of Hazardous Materials have occurred at, from, in,
to, on or under any Site and no Hazardous Materials are present in, on, about
or migrating to or from any Site that constitutes a violation of any
Environmental Law. Except as set forth on Schedule 3(u), neither the Company
or any Subsidiary thereof, any predecessor of the Company or any Subsidiary
thereof, nor any entity previously owned by the Company or any Subsidiary
thereof, has transported or arranged for the treatment, storage, handling,
disposal, or transportation of any Hazardous Material to any off-Site location
which constitutes a violation of any Environmental Law. To the Knowledge of
the Company, no Site is a current or proposed Environmental Clean-up Site.
There are no Liens arising under or pursuant to any Environmental Law on any
Site and there are no facts, circumstances or conditions that could reasonably
be expected to restrict, encumber or result in the imposition of special
conditions under any Environmental Law with respect to the ownership,
occupancy, development, use or transferability of any Site. To the Knowledge
of the Company or any Subsidiary thereof, except as set forth on Schedule
3(u), no Site contains any underground storage tanks, active or abandoned,
polychlorinated biphenyl-containing equipment or asbestos-containing material.
There have been no environmental investigations, studies, audits, tests,
reviews or other analyses conducted by, on behalf of, or which are in the
possession of the Company or any Subsidiary thereof with respect to any Site
which have not been delivered to AAC or any of its representatives prior to
execution of this Agreement.
(22) Other Interests. Except as set forth in Schedule 3(v), the Company
or any Subsidiary thereof does not own, directly or indirectly, any interest
or investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or entity (other than investments in short-term
investment securities).
-20-
<PAGE>
(23) Certain Business Practices. Neither the Company nor any of its
Subsidiaries nor any of their respective directors, officers or employees or,
to the Knowledge of the Company or any Subsidiary thereof, agents or
representatives (in their capacity as directors, officers, agents,
representatives or employees) has: (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (ii) directly or indirectly, paid or delivered any fee,
commission or other sum of money or item of property, however characterized,
to any finder, agent, or other Person acting on behalf of or under the
auspices of a governmental official or Governmental or Regulatory Body, in the
United States or any other country, which is in any manner related to the
business or operations of the Company or any of its Subsidiaries, that was
illegal under any federal, state or local laws of the United States or any
other country having jurisdiction; or (iii) made any payment to any customer
or supplier of the Company or any of its Subsidiaries or any officer,
director, partner, employee or agent of any such customer or supplier for the
unlawful sharing of fees or to any such customer or supplier or any such
officer, director, partner, employee or agent for the unlawful rebating of
charges, or engaged in any other unlawful reciprocal practice, or made any
other unlawful payment or given any other unlawful consideration to any such
customer or supplier or any such officer, director, partner, employee or
agent, in respect of the business of the Company and its Subsidiaries.
(24) Insurance. Since July 31, 1992, the Company and its Subsidiaries
have obtained and maintained in full force and effect insurance with
responsible and reputable insurance companies or associations in such amounts,
on such terms, with such deductibles and covering such risks, including fire
and other risks insured against by extended coverage, as is customarily
carried by reasonably prudent Persons conducting businesses or owning assets
similar to those of the Company and its Subsidiaries, and each has maintained
in full force and effect liability insurance against claims for personal
injury or death or property damage occurring in connection with the activities
of the Company and its Subsidiaries or any properties owned, occupied or
controlled by the Company or any of its Subsidiaries in such amount as is
customarily carried by reasonably prudent Persons conducting businesses or
owning assets similar to those of the Company and its Subsidiaries. There is
no material default with respect to any provision contained in any such policy
or binder, nor has the Company or any of its Subsidiaries failed to give any
material notice or to present any material claim under any such policy or
binders in due and timely fashion. There are no billed but unpaid premiums
past due under any such policy or binder, the failure of which to be paid
would result in the cancellation of such policy or binder. Except as otherwise
set forth in the SEC Reports or in Schedule 3(x), (i) there are no outstanding
claims in excess of normal retentions that are not covered under any such
policies or binders and, to the Knowledge of the Company, there has not
occurred any event that might reasonably form the basis of any claim in excess
of normal retentions that is not covered against or relating to the Company or
any of its Subsidiaries that is not covered by any of such policies and
binders; (ii) no notice of cancellation or non-renewal of any such policies or
binders has been received; and (iii) except as set forth in Schedule 3(x),
there are no performance bonds outstanding with respect to the Company or any
of its Subsidiaries.
(25) Disclosure Documents. The Definitive Proxy Materials to be filed
with the SEC and sent to the Company Stockholders in connection with the
special meeting of the Company Stockholders (the "Special Meeting"), as of the
date first mailed to the Company Stockholders and at the time of the Special
Meeting, and the Rule 13e-3 Transaction Statement on Schedule 13E-3 (together
with all amendments and supplements thereto, the "Schedule 13E-3") at the time
filed with the SEC, or at any time thereafter when the information therein is
required to be updated pursuant to applicable law, will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The
Joint Disclosure Documents will, when filed by the
-21-
<PAGE>
Company with the SEC, comply as to form in all material respects with the
applicable provisions of the Securities Exchange Act and the SEC rules and
regulations promulgated thereunder. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to the statements made in any
of the foregoing documents based on written information supplied by or on
behalf of AAC or any of its respective Affiliates specifically for inclusion
therein.
(26) Customers and Suppliers. Since July 31, 1997, neither the Company
nor any of its Subsidiaries has received written notice that any customer or
supplier intends to cancel, terminate or otherwise modify any relationship
with the Company or any of its Subsidiaries, which constitutes a Material
Adverse Effect.
4. Representations and Warranties of AAC. AAC represents and warrants to the
Company, except as set forth in the disclosure schedule attached hereto:
(1) Organization. AAC is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation.
AAC is duly authorized to conduct business and is in good standing under the
laws of each jurisdiction where such qualification is required, except where
the lack of such qualification would not have a Material Adverse Effect or a
material adverse effect on the ability of the Parties to consummate the
Transactions. AAC has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. AAC was formed solely for the purpose of engaging in the
Transactions, has engaged in no other business activities and has conducted
its operations only as contemplated hereby. AAC has not engaged, nor prior to
the Effective Time will it engage, in any business activities other than the
business activities contemplated hereby (including business activities
contemplated by or reasonably incident to the Debt Financing). AAC has
conducted and, prior to the Effective Time, will conduct its operations only
as contemplated hereby (including activities contemplated by or reasonably
incident to the Debt Financing). AAC has no Subsidiaries and, during the
period commencing with the date hereof and ending at the Effective Time, AAC
will have no Subsidiaries. AAC does not have, nor at the Effective Time will
it have, any Liabilities or material obligations not expressly contemplated
pursuant to this Agreement or the Transactions.
(2) Debt Financing.
(1) AAC has provided to the Company true and complete copies of a
letter, dated March 31, 1998, from J.P. Morgan Securities Inc. pursuant to
which it has indicated that it is highly confident of its ability to
underwrite in the public markets senior notes of the Company in an aggregate
amount of at least $100 million to provide, together with the equity financing
referred to in Section 4(b)(ii) and the Revolving Credit Facility, all of the
financing required in order to consummate the Transactions and to fund what
AAC reasonably believes to be the working capital needs of the Company and its
Subsidiaries following the Closing. The financing to be provided pursuant to
the foregoing arrangements is hereinafter referred to as the "Debt Financing."
As of the date hereof, the highly confident letter relating to the Debt
Financing has not been withdrawn and is in full force and effect.
(ii) AAC has delivered to the Company a true and complete copy
of a commitment letter, dated as of April 21, 1998, from 399 pursuant to which
399 (together with its Affiliates) will have available $13.12445 million,
subject to the terms and conditions set forth therein, for purposes of
consummating the Transactions (the "Equity Financing Commitment"). As of the
date hereof, such commitment letter from 399 has not been withdrawn and is in
full force and effect.
-22-
<PAGE>
(3) Authorization of the Transactions. AAC has full power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by AAC, and the performance of its
obligations hereunder, have been duly authorized by all requisite corporate
action, and this Agreement has been duly executed and delivered by AAC. This
Agreement constitutes the valid and legally binding obligation of AAC,
enforceable in accordance with its terms and conditions.
(4) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the Transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any Governmental or
Regulatory Body to which AAC is subject or any provision of the certificate of
incorporation or bylaws of AAC or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any Party
the right to accelerate, terminate, modify or cancel, or require any notice or
consent under any Contract or other arrangement to which AAC is a party or by
which it is bound or to which any of its assets is subject, except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation or failure to give notice would not have a Material Adverse
Effect or a material adverse effect on the ability of the Parties to
consummate the Transactions. Other than in connection with the provisions of
the HSR Act, the DGCL, the Securities Exchange Act, the Securities Act and the
state securities laws, AAC is not required to give any notice to, make any
filing with, or obtain any authorization, consent or approval of any
Governmental or Regulatory Body in order for the Parties to consummate the
Transactions contemplated by this Agreement, except where the failure to give
notice, to file, or to obtain any authorization, consent or approval would not
have a material adverse effect on the ability of the Parties to consummate the
Transactions.
(5) Brokers' Fees. AAC has no Liability or other obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
Transactions contemplated by this Agreement for which any of the Company or
its Subsidiaries thereof could become liable.
(6) Litigation. There is no action, suit or proceeding pending against,
or, to the knowledge of AAC, any action, suit, investigation or proceeding
threatened against or affecting, AAC or any of their respective properties
before any Governmental or Regulatory Body (i) which could reasonably be
expected to have a Material Adverse Effect or (ii) which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the Merger
or any of the other Transactions and has a reasonable likelihood of success.
(7) Disclosure Documents. The information supplied by AAC for inclusion
in the Definitive Proxy Materials to be filed with the SEC and sent to the
Company Stockholders in connection with the Special Meeting, as of the date
first mailed to the Company Stockholders and at the time of the Special
Meeting, and the Schedule 13E-3 at the time filed with the SEC, or at any time
thereafter when the information therein is required to be updated pursuant to
applicable law, will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
5. Covenants. The Parties hereto hereby covenant as follows:
(1) Further Assurances. Each of the Company and AAC will use its
reasonable best efforts to take all action and to do all things necessary,
proper or advisable in order to consummate and make effective the Transactions
contemplated by this Agreement; provided, however, that no director or officer
-23-
<PAGE>
of the Company shall be required either to violate any requirement imposed by
law in connection therewith or to take any action such director or officer
deems, after consultation with outside counsel, not consistent with such
director's or officer's fiduciary duty.
(2) Notices and Consents. The Company will, and will cause each of its
Subsidiaries to, give any notices to third parties, and will, and will cause
each of its Subsidiaries to, use its reasonable best efforts to obtain any
required third party consents, that AAC reasonably may request.
(3) Regulatory Matters and Approvals. Each of AAC and the Company will,
and will cause any of its respective Subsidiaries to, give any notices to,
make any filings with, and use its reasonable best efforts to obtain any
necessary authorizations, consents and approvals of any Governmental or
Regulatory Body. Without limiting the generality of the foregoing, each of AAC
and the Company will, and will cause any of its respective Subsidiaries to,
(i) file any notification and report forms and related material that it may be
required to file with the Federal Trade Commission and the Antitrust Division
of the United States Department of Justice under the HSR Act, (ii) use its
best efforts to obtain an early termination of the applicable waiting period
and (iii) make any further filings pursuant thereto that may be necessary,
proper, or advisable.
(4) Securities Act, Securities Exchange Act, and State Securities Laws.
(1) The Company will prepare and file with the SEC preliminary proxy
materials ("Preliminary Proxy Materials") under the Securities Exchange Act
relating to the Merger. The Company will use its best efforts to respond to
the comments of the SEC thereon and will make any further filings (including
amendments and supplements) in connection therewith that may be necessary,
proper or advisable. AAC will provide the Company with information and
assistance in connection with the foregoing filings that the Company may
reasonably request.
(2) The Company and AAC shall each use its reasonable best efforts
to take, or cause to be taken, (A) all actions necessary, proper or advisable
by such Party with respect to the prompt preparation and filing of the Joint
Disclosure Documents with the SEC, (B) such actions as may be required to have
the Joint Disclosure Documents declared effective under the Securities Act as
promptly as practicable, and (C) such actions as may be required to be taken
under state securities or applicable Blue Sky laws in connection with the
issuance of the securities contemplated hereby.
(3) As soon as practicable after the date of announcement of the
execution of this Agreement, the Company shall file with the SEC a Schedule
13E-3. AAC and the Company each agrees to correct any information provided by
it for use in the Schedule 13E-3, if and to the extent that it shall have
become false and misleading in any material respect.
(5) DGCL; Special Meeting. The Company will (i) call the Special Meeting
as soon as reasonably practicable in order that such stockholders may consider
and vote upon the adoption of this Agreement and the approval of the Merger in
accordance with the DGCL and (ii) mail the Joint Disclosure Documents to the
Company Stockholders as soon as reasonably practicable, which Joint Disclosure
Documents will contain the affirmative recommendation of the Board of
Directors of the Company in favor of the adoption of this Agreement and the
approval of the Merger; provided, however, that any provision of this
Agreement to the contrary notwithstanding, the Company will not have any
obligation to call the Special Meeting or mail the Joint Disclosure Documents
to the Company Stockholders if such action would require any director or
officer of the Company either to violate any requirement imposed by law in
connection therewith or, after consultation with and advice from its
-24-
<PAGE>
outside counsel, any director or officer of the Company determines in good
faith that to take such action would be inconsistent with such director's or
officer's fiduciary duty.
(6) Accounting Treatment. Each Party hereto shall cooperate with the
other Party hereto in connection with the recording of the Merger as a
recapitalization for financial reporting purposes, including, without
limitation, providing appropriate disclosure with regard to such recording in
all filings with the SEC. In furtherance of the foregoing, the Company shall
provide AAC with a reasonable time period to review any description of the
Transactions filed with the SEC.
(7) Debt Financing.
(1) AAC shall use its reasonable best efforts to assist the Company
in obtaining the Debt Financing or other alternative financing on
substantially comparable or more favorable terms. The Company shall use its
reasonable best efforts to cooperate with AAC in the obtaining of the Debt
Financing, including, without limitation, by participating in road shows and
meeting with, and providing information to, potential sources of financing
identified by AAC.
(ii) The Company shall use its reasonable best efforts to
obtain a revolving credit facility commitment from a lending institution
designated by AAC in the amount of approximately $25 million ("Revolving
Credit Facility").
(8) Operation of the Company's Business. The Company will not (and will
not cause or permit any of its Subsidiaries to) engage in any practice, take
any action or enter into any transaction outside the Ordinary Course of
Business, including, without limitation, the following:
(1) authorizing or effecting any change in its certificate of
incorporation or bylaws (other than as contemplated by this Agreement);
(2) granting any options, warrants, or other rights to purchase or
obtain any of its capital stock or issuing, selling or otherwise disposing of
any of its capital stock (except upon the conversion or exercise of Options
and other rights and obligations currently outstanding);
(3) declaring, setting aside, or paying any dividend or distribution
with respect to its capital stock (whether in cash or in kind), or redeeming,
repurchasing or otherwise acquiring any of its capital stock, in either case,
outside the Ordinary Course of Business;
(4) except as set forth on Schedule 5(h), issuing any note, bond, or
other debt security or creating, incurring, assuming or guaranteeing any
indebtedness for borrowed money or capitalized lease obligation (except for
inter-company loans or advances from the Company to, or Guaranties on behalf
of, any one or more of its Subsidiaries), outside the Ordinary Course of
Business;
(1)
(5) except as set forth on Schedule 5(h), imposing any Lien upon any
of its assets outside the Ordinary Course of Business;
(6) other than pursuant to the Transactions, making any material
change in employment terms for any of its directors, officers and employees
outside the Ordinary Course of Business;
-25-
<PAGE>
(7) except pursuant to existing agreements or arrangements as of the
date hereof, making any capital investment in, making any loan to, or
acquiring the securities or assets of any other Person outside the Ordinary
Course of Business;
(8) adopting or amending any bonus, profit sharing, compensation,
severance, termination, stock option, pension, retirement, deferred
compensation, employment or employee Benefit Plan, agreement, trust, Plan,
fund or other arrangement for the benefit and welfare of any director, officer
or employee, except for normal increases in the Ordinary Course of Business
and that, in the aggregate, do not result in a material increase in benefits
or compensation expense to the Company or any Subsidiary thereof;
(9) revaluing in any material respect any significant portion of its
assets, including, without limitation, writing down the value of inventory in
any material amount or write-off of notes or accounts receivable in any
material amount;
(10) paying, discharging or satisfying any material Liabilities
(whether matured, unmatured, absolute, accrued, asserted or unassented,
contingent or otherwise) other than the payment, discharge or satisfaction in
the Ordinary Course of Business of Liabilities reflected or reserved against
in the consolidated financial statements of the Company and set forth in the
SEC Reports or incurred in the Ordinary Course of Business;
(11) making any Tax election with respect to or settling or
compromising any material income Tax Liability;
(12) taking any action other than in the Ordinary Course of Business
with respect to accounting policies or procedures; and
(13) committing to any of the foregoing.
(9) Full Access. Subject to the terms and conditions of the
Confidentiality Agreement, the Company will, and will cause each of its
Subsidiaries to, permit representatives of AAC and its Affiliates to have full
access at all reasonable times, and in a manner so as not to interfere with
the normal business operations of the Company and its Subsidiaries, to all
premises, properties, personnel, books, records (including Tax records),
contracts and documents of or pertaining to each of the Company and its
Subsidiaries.
(1)
(10) Notice of Developments. Each Party will give prompt written notice
to the other Party of any event which could reasonably be expected to give
rise to a Material Adverse Effect or could reasonably be expected to cause a
breach of any of its own respective representations, warranties, covenants or
other agreement contained herein. No disclosure by any Party pursuant to this
Section 5(j), however, shall be deemed to amend or supplement any Schedule, or
to prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(11) No Solicitation.
(1) The Company shall not, and shall not permit any of its
Subsidiaries to (whether directly or indirectly through advisors, agents or
other intermediaries), and the Company shall not, and shall not permit any of
its Subsidiaries to, authorize or knowingly permit any of its or their
officers,
-26-
<PAGE>
directors, agents, representatives, advisors or Subsidiaries (all of the
foregoing parties being referred to as the "Restricted Parties") to solicit,
initiate or knowingly encourage the submission of inquiries, proposals or
offers from any Third Party relating to (A) any acquisition of 5% or more of
the consolidated assets of the Company and its Subsidiaries or of over 5% of
any class of equity securities of the Company or any of its Subsidiaries, (B)
any tender offer (including a self tender offer) or exchange offer that if
consummated would result in any Third Party beneficially owning 5% or more of
any class of equity securities of the Company or any of its Subsidiaries, (C)
any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any
of its Subsidiaries whose assets, individually or in the aggregate, constitute
more than 5% of the consolidated assets of the Company, other than the
Transactions or (D) any other transaction the consummation of which would, or
could reasonably be expected to, impede, interfere with, prevent or materially
delay the Merger or which would, or could reasonably be expected to,
materially dilute the benefits to AAC of the Transactions (collectively, the
"Acquisition Proposals" and which, if consummated, will be an "Acquisition
Transaction") or enter into or participate in any discussions (except as may
be necessary to inform a Third Party of the provisions of this Section 5(k))
or negotiations regarding any of the foregoing, or furnish to any Third Party
any information with respect to the business, properties or assets of the
Company in connection with the foregoing, or otherwise cooperate in any way
with, or knowingly assist or participate in, facilitate or encourage, any
effort or attempt by any Third Party to do or seek any of the foregoing;
provided, however, that the provisions of this Section 5(k) shall not limit or
prohibit any of the Restricted Parties from (x) engaging in discussions or
negotiations with such a Third Party who has made a Superior Acquisition
Proposal, but only if the Board of Directors of the Company, after
consultation with and advice from its outside counsel, determines in good
faith that, in the exercise of its fiduciary responsibilities, such
discussions or negotiations should be commenced or such information should be
furnished or such facilitation, cooperation, encouragement or participation
undertaken; (y) furnishing information pursuant to an appropriate and
customary confidentiality letter (which shall not be substantially less
restrictive than the Confidentiality Agreement) concerning the Company or any
Subsidiary thereof and its businesses, properties or assets to a Third Party
who has made a Superior Acquisition Proposal as to which a prior determination
of the Board of Directors of the Company as contemplated under clause (x)
above has been made; provided, further, that (1) the Board of Directors of the
Company shall not, and shall not authorize any officers or representatives to,
take any of the foregoing actions until notice to AAC of the Company's intent
to take such action shall have been given; and (2) if the Board of Directors
of the Company receives a Superior Acquisition Proposal, to the extent it may
do so without breaching its fiduciary duties as determined in good faith after
consultation with its outside counsel, and without violating any of the
conditions of such Superior Acquisition Proposal, then the Company shall
promptly inform AAC of the material terms and conditions of such proposal and
the identity of the Third Party making it; or (z) taking a position on a
tender offer by a Third Party, as required by Rule 14e-2 under the Securities
Exchange Act (provided no such position shall constitute a recommendation of
such transaction if it does not constitute a Superior Acquisition Proposal) or
complying with its duties of disclosure under applicable state law. As of the
date hereof, the Company shall immediately cease and shall cause each of its
Subsidiaries and its and their advisors, agents and other intermediaries to
cease, any and all existing activities, discussions or negotiations with any
Third Party conducted heretofore with respect to any of the foregoing;
provided that the limitation set forth in this sentence shall not restrict the
Company from engaging in any such activities with such a Third Party who
hereafter makes a Superior Acquisition Proposal so long as the Company has
complied with the provisions of this Section 5(k).
(2) If (A) this Agreement shall be terminated pursuant to Section
7(a)(iv), 7(a)(vi)(B) or (B)(1) a Third Party shall have made an Acquisition
Proposal, (2) the Agreement shall be
-27-
<PAGE>
terminated pursuant to Section 7(a)(ii), Section 7(a)(vi)(A), 7(a)(vi)(C) and
(3) any Acquisition Proposal (whether or not proposed prior to the Special
Meeting and whether or not it involves the Third Party making the Acquisition
Proposal referred to in Section 5(k)(ii)(B)(1) above) shall have been
consummated within twelve months following the termination of this Agreement,
the Company shall pay to AAC, within ten (10) Business Days following such
occurrence, a fee of $3.375 million as liquidated damages and not as a penalty
together with reimbursement of all reasonable out-of-pocket costs, fees and
expenses, including, without limitation, the reasonable fees and disbursements
of banks, investment banks, accountants or legal counsel and the expenses of
any litigation incurred in connection with collecting the fees and other
amounts provided for in this Section 5(k)(ii), which out-of-pocket costs, fees
and expenses shall be no more than $1 million in the aggregate (collectively,
the "Fixed Amount"). Notwithstanding the foregoing, if the Company breaches
any representation, warranty, covenant or other agreement hereunder, the Fixed
Amount paid by Company and actually received by AAC shall be credited against
the amount of damages awarded to AAC as a result of such breach and any
damages awarded to AAC as a result of such breach shall be credited against
any subsequent payment of the Fixed Amount, to the extent the Company is also
obligated hereunder to pay the Fixed Amount.
(1)
(12) Insurance and Indemnification.
(1) For a period of 6 years after the Effective Time, the Surviving
Corporation shall indemnify and hold harmless the present and former officers
and directors of the Company and its Subsidiaries in respect of acts or
omissions occurring prior to the Effective Time to the maximum extent provided
under the Company's certificate of incorporation and bylaws, or any of its
Subsidiary's certificate of incorporation or bylaws, in either case, as in
effect on the date hereof; provided that such indemnification shall be subject
to any limitation imposed from time to time under applicable law.
(2) For a period of 6 years after the Effective Time, the Surviving
Corporation shall provide officers' and directors' liability insurance in
respect of acts or omissions occurring prior to the Effective Time covering
each such Person currently covered by the Company's or any of its Subsidiary's
officers' and directors' liability insurance policy on terms with respect to
coverage and amount no less favorable than those of such policy in effect on
the date hereof (or, if such insurance policy cannot be obtained, such
insurance policy on terms with respect to coverage and amount as favorable as
can be obtained, subject to the proviso at the conclusion of this sentence),
provided that, in satisfying its obligation under this Section, the Surviving
Corporation shall not be obligated to pay premiums in excess of 150% of the
amount per annum the Company paid in its last full fiscal year, which amount
has been disclosed to AAC.
(13) Joint Disclosure Documents. The Company shall cause the Joint
Disclosure Documents to comply with the Securities Exchange Act in all
material respects. The Company shall cause the Joint Disclosure Documents to
not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they will be made, not misleading,
other than with respect to information provided by or on behalf of AAC and its
Affiliates. AAC shall cause the Joint Disclosure Documents to not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the
circumstances under which they will be made, not misleading, with respect to
information provided by or on behalf of AAC and its Affiliates.
(14) Comfort Letters. The Company will deliver to AAC on or before the
date the Joint Disclosure Documents are mailed to the Company Stockholders a
letter from its accountants, Grant
-28-
<PAGE>
Thornton LLP, stating its conclusions as to the accuracy of certain
information derived from the financial records from the Company and its
Subsidiaries and contained in the Joint Disclosure Document (the "Company
Comfort Letter"). The Company Comfort Letter shall be reasonably satisfactory
to AAC in form and substance.
(15) Options. Prior to the Effective Time, the Company shall take such
action as may be necessary to terminate the Company's Option Plan.
(16) Debt Financing Expense. Subject to any right to reimbursement
pursuant to Section 5(k)(ii) hereof, in the event the Transactions are not
consummated, 399 and AAC shall, jointly and severally, be responsible for the
payment of any fee due to, or reimbursement of expenses incurred by, J. P.
Morgan Securities, Inc. and its affiliates or any other lender designated by
AAC pursuant to the Debt Financing, including, without limitation, the
Revolving Credit Facility.
6. Conditions to Obligation to Close.
(1) Conditions to Closing by AAC. The obligations of AAC to consummate
the Transactions are subject to satisfaction or waiver by AAC of the following
conditions:
(1) the representations and warranties set forth in Section 3 above
shall be true and correct in all respects at and as of the Effective Time,
except (A) for those representations and warranties which address matters only
as of a particular date (which shall have been true and correct as of such
date, subject to clause (B)), and (B) where the failure of any representations
and warranties set forth in Section 3, taken together without regard to any
materiality or Knowledge qualification set forth therein, to be true and
correct could not reasonably be expected to have a Material Adverse Effect,
with the same force and effect as if made on and as of the Effective Time;
(2) the Company shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(3) there shall not be any judgment, order, decree, stipulation,
injunction or charge in effect preventing consummation of any of the
Transactions;
(4) the Company shall have delivered to AAC a certificate to the
effect that each of the conditions specified above in Section 6(a)(i)-(iii) is
satisfied in all respects;
(5) this Agreement and the Merger shall have received the Requisite
Stockholder Approval;
(6) the holders of not more than 10% of the outstanding Shares of
Company Common Stock shall have demanded appraisal of such Shares in
accordance with the DGCL;
(7) the Company shall have delivered to AAC written consents to the
Transactions from the Persons who are parties to Contracts set forth on
Schedule 6(a);
(8) all applicable waiting periods (and any extensions thereof)
under the HSR Act shall have expired or otherwise been terminated and the
Parties shall have received all other authorizations, consents and approvals
of Governmental or Regulatory Bodies in connection with the execution,
delivery and performance of this Agreement;
-29-
<PAGE>
(1)
(9) AAC shall be reasonably satisfied that the Merger will be
recorded as a recapitalization for financial reporting purposes;
(10) total Debt of the Company and its Subsidiaries determined on a
consolidated basis in accordance with GAAP as of the Effective Time shall not
exceed $45 million;
(11) the Company shall have received the proceeds of the Debt
Financing and the amount to be drawn under the Revolving Credit Facility or
other proceeds on terms and conditions which are substantially equivalent
thereto;
(12) the Company shall have received and accepted the resignations
of all directors of the Company designated by AAC;
(13) each of the Voting Agreements and the Rollover Agreements shall
be in full force and effect;
(14) there shall not be instituted or pending any action or
proceeding by any Governmental or Regulatory Body, or any action or proceeding
by any other Person, that has a reasonable likelihood of success before any
Governmental or Regulatory Body, (A) challenging or seeking to make illegal,
to delay materially or otherwise directly or indirectly to restrain or
prohibit the consummation of the Merger or seeking to obtain material damages
or otherwise directly or indirectly relating to the Transactions, (B) seeking
to restrain or prohibit the ownership or operation by AAC of all or any
material portion of the business or assets of the Company and its
Subsidiaries, taken as a whole, (C) seeking to impose or confirm material
limitations on the ability of AAC to effectively control the business or
operations of the Company and its Subsidiaries, taken as a whole, or
effectively to exercise full rights of ownership of the Shares of Company
Common Stock or (D) requiring divestiture by AAC of any Shares of Company
Common Stock, and no Governmental or Regulatory Body shall have issued any
judgment, order, decree or injunction, and there shall not be any statute,
rule or regulation, that, in the reasonable judgment of AAC is likely,
directly or indirectly, to result in any of the consequences referred to in
the preceding clauses (A) through (D); and
(15) the Warrants shall have been adjusted in accordance with the
terms of such Warrants, except for such Warrants that have expired in
accordance with their terms.
(16) AAC shall have received an opinion of Warshaw Burstein Cohen
Schlesinger & Kuh LLP, counsel to the Company, in the form of Exhibit E
attached hereto.
(2) Conditions to Closing by the Company. The obligations of the Company
to consummate the Transactions are subject to satisfaction or waiver by the
Company of the following conditions:
(1)
(1) the representations and warranties set forth in Section 4 above
shall be true and correct in all respects at and as of the Effective Time,
except (A) for those representations and warranties which address matters only
as of a particular date (which shall have been true and correct as of such
date, subject to clause (B)), and (B) where the failure of any representations
and warranties set forth in Section 4 taken together without regard to any
materiality qualification set forth therein to be true and correct could not
reasonably be expected to have a Material Adverse Effect, with the same force
and
-30-
<PAGE>
effect as if made on and as of the Effective Time;
(2) AAC shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(3) there shall not be any judgment, order, decree, stipulation,
injunction or charge in effect preventing consummation of any of the
Transactions;
(4) AAC shall have delivered to the Company a certificate to the
effect that each of the conditions specified above in Section 6(b)(i)-(iii) is
satisfied in all respects;
(5) this Agreement and the Merger shall have received the Requisite
Stockholder Approval;
(6) all applicable waiting periods (and any extensions thereof)
under the HSR Act shall have expired or otherwise been terminated and the
Parties shall have received all other authorizations, consents and approvals
of Governmental or Regulatory Bodies in connection with the execution delivery
and performance of this Agreement;
(7) there shall not be instituted or pending any action or
proceeding by any Governmental or Regulatory Body, or any action or proceeding
by any other Person, that has a reasonable likelihood of success before any
Governmental or Regulatory Body, (A) challenging or seeking to make illegal,
to delay materially or otherwise directly or indirectly to restrain or
prohibit the consummation of the Merger or seeking to obtain material damages
or otherwise directly or indirectly relating to the Transaction or (B) seeking
to impose liability on any officer or director of the Company for any actions
taken in connection with the Transactions, and no Governmental or Regulatory
Body shall have issued any judgment, order, decree or injunction, and there
shall not be any statute, rule or regulation, that, in the reasonable
judgement of the Company is likely, directly or indirectly, to result in any
of the consequences referred to in the preceding clauses (A) or (B);
(8) the Company shall have received an opinion of Furman Selz LLC as
to the fairness to the Company Stockholders of the cash merger consideration
to be received by them; and
(9) the Company shall have received an opinion of Houlihan Lokey
Howard & Zukin to the effect that consummation of the Transactions
contemplated hereby will not render the Company (i) "insolvent" as that term
is defined in Section 101(32) of the United States Bankruptcy Code (the
"Bankruptcy Code"), or Section 271 of the New York Debtor and Creditor Law
(the "NYDCL") (ii) unable to pay its debts as they mature, within the meaning
of Section 548(a)(2)(B)(iii) of the Bankruptcy Code or Section 275 of the
NYDCL, or (iii) left with an unreasonably small capital.
7. Termination.
(1) Termination of Agreement. The Parties hereto may terminate this
Agreement as follows:
(1) the Parties may terminate this Agreement by mutual written
consent at any time prior to the Effective Time;
(2) AAC may terminate this Agreement by giving written notice to the
Company at any time prior to the Effective Time (A) in the event the Company
has breached any material
-31-
<PAGE>
representation, warranty or covenant contained in this Agreement when made or
at any time prior to the Closing in any material respect, AAC has notified the
Company of the breach, and the breach has continued without cure for a period
of 30 days after the notice of breach, or (B) if the Closing shall not have
occurred on or before September 30, 1998, by reason of the failure of any
condition precedent under Section 6(a) hereof (unless the failure results from
a breach by AAC of any of its representations, warranties or covenants or
other agreements contained in this Agreement);
(3) the Company may terminate this Agreement by giving written
notice to AAC at any time prior to the Effective Time (A) in the event AAC has
breached any material representation, warranty or covenant contained in this
Agreement when made or at any time prior to the Closing in any material
respect, the Company has notified AAC of the breach, and the breach has
continued without cure for a period of 30 days after the notice of breach, or
(B) if the Closing shall not have occurred on or before September 30, 1998, by
reason of the failure of any condition precedent under Section 6(b) hereof
(unless the failure results from a breach by the Company of any of its
representations, warranties, covenants or other agreements contained in this
Agreement);
(4) the Company may terminate this Agreement by giving written
notice to AAC, at any time prior to the Effective Time, in the event that a
Person has made an Acquisition Proposal that the Board of Directors of the
Company determines, in good faith, and after consultation with and advice from
its financial advisors, is reasonably likely to be subject to completion and
would, if consummated, result in a transaction more favorable, from a
financial point of view, to the Company Stockholders than the Transactions
contemplated by this Agreement and the Merger (a "Superior Acquisition
Proposal");
(1)
(5) either the Company or AAC may terminate this Agreement by giving
written notice to the other Party at any time after the Special Meeting in the
event this Agreement and the Merger fail to receive the Requisite Stockholder
Approval;
(6) AAC may terminate this Agreement by giving written notice to the
Company if (A) the Board of Directors of the Company shall have withdrawn or
modified or amended, in a manner adverse to AAC, either its approval or
recommendation of this Agreement and the Merger or its recommendation that the
Company Stockholders adopt and approve the Transactions contemplated by this
Agreement and the Merger, (B) the Board of Directors of the Company shall have
approved, recommended or endorsed any Superior Acquisition Proposal, or (C) if
the Company has failed to duly call the Special Meeting;
(7) either the Company or AAC may terminate this Agreement by giving
written notice to the other Party hereto if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining AAC or
the Company from consummating the Merger is entered and such judgment,
injunction, order or decree shall become final and nonappealable.
(2) Effect of Termination. If either Party terminates this Agreement
pursuant to Section 7(a) above, all rights and obligations hereunder shall
terminate; provided, however, that (i) this Section 7(b), Section 5(i),
Section 5(k), Section 5(p), Section 8 and the Confidentiality Agreement shall
survive any such termination and (ii) nothing herein shall release any Party
from Liability for any breach hereof.
8. Miscellaneous.
-32-
<PAGE>
(1) Press Releases and Public Announcement. Neither the Company nor AAC
shall issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of the
other Party; provided, however, that the Company or AAC may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in
which case the disclosing Party will use its reasonable best efforts to advise
the other Party prior to making the disclosure).
(2) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties hereto and their
respective successors and permitted assigns, other than Section 5(1) which
shall be for the benefit of the Persons set forth therein, which Person shall
have the independent right to enforce their rights under such Section.
(3) Entire Agreement. This Agreement (including the Exhibits and the
Schedules hereto and any attachments thereto) and the Confidentiality
Agreement constitute the entire agreement between the Parties hereto and
supersede any prior understandings, agreements or representations by or
between the Parties hereto, written or oral, to the extent they related in any
way to the subject matter hereof, including, without limitation, the
Agreement, dated March 10, 1998, between the Company and CVC, as amended.
(4) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party hereto may assign either this
Agreement or any of its rights, interests or obligations hereunder without the
prior written approval of the other Party hereto.
(5) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(6) General Interpretive Principles. For purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise
requires:
(1) the terms defined in this Agreement include the plural as well
as the singular, and the use of any gender herein shall be deemed to include
the other gender;
(2) accounting terms not otherwise defined herein have the meanings
given to them in accordance with GAAP;
(3) references herein to "articles," "sections," "Sections,"
"subsections" and other subdivisions without reference to a document are to
designated articles, sections, Sections, subsections and other subdivisions of
this Agreement;
(4) a reference to a subsection without further reference to a
section is a reference to such subsection as contained in the same section in
which the reference appears, and this rule shall also apply to paragraphs and
other subdivisions;
(5) the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
provision;
(6) the term "include" or "including" shall mean without limitation
by reason of
-33-
<PAGE>
enumeration;
(7) the headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation
of this Agreement;
(8) any reference to any federal, state, local or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context otherwise requires; and
(9) the Parties have participated jointly in the negotiation and
drafting of this Agreement, and, in the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring either Party by virtue of the authorship of any
of the provisions of this Agreement.
(7) Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (i) on the day of service if served personally on the party to whom
notice is to be given; (ii) on the day of transmission if sent via facsimile
transmission to the facsimile number given below, and telephonic confirmation
of receipt is obtained promptly after completion of transmission, provided
that a copy shall be sent via certified mail, return receipt requested,
simultaneously with any such facsimile; (iii) on the business day after
delivery to Federal Express or similar overnight courier or the Express Mail
service maintained by the United States Postal Service; or (iv) on the fifth
day after mailing, if mailed to the party to whom notice is to be given, by
first class mail, registered or certified, postage prepaid and properly
addressed, to the party as follows:
If to the Company: Allied Digital Technologies Corp.
140 Fell Court
Hauppauge, New York 11788
Facsimile: (516) 232-5370
Attention: George Fishman
Copy to: Warshaw Burstein Cohen Schlesinger & Kuh LLP
555 Fifth Avenue
New York, New York 10017
Facsimile: (212) 972-9150
Attention: Frederick R. Cummings, Jr., Esq.
If to AAC: Analog Acquisition Corp.
c/o 399 Venture Partners Inc.
399 Park Avenue
New York, New York 10043
Facsimile: (212) 888-2940
Attention: Richard M. Cashin, Jr.
Copies to: 399 Venture Partners Inc.
399 Park Avenue
New York, New York 10043
Facsimile: (212) 888-2940
-34-
<PAGE>
Attention: Richard M. Cashin, Jr.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178-0060
Facsimile: (212) 309-6273
Attention: Philip H. Werner, Esq.
Any Party may change the address to which notices, requests, demands, claims
and other communications hereunder are to be delivered by giving the other
Party notice in the manner herein set forth.
(8) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of New York,
except to the extent that the DGCL applies as a result of the Company being
incorporated in the State of Delaware, in which case the DGCL shall apply.
(9) Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS AND FOR ANY COUNTERCLAIM
RELATING THERETO.
(10) Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time with the prior
authorization of their respective Boards of Directors; provided, however, that
any amendment effected subsequent to stockholder approval will be subject to
the restrictions contained in the DGCL. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
both Parties hereto. No waiver by either Party hereto of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence. No waiver shall be valid unless the same shall be in writing and
signed by both Parties.
(11) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction; provided, however, that if the
invalidity of any covenant, agreement or provision shall deprive any Party of
the economic benefit intended to be conferred by this Agreement, the Parties
shall negotiate in good faith to amend the Agreement in a manner so that the
economic effect of the Agreement, as amended, is as nearly as possible the
same as the economic effect of this Agreement.
(12) Expenses. Other than as expressly set forth herein, each of the
Parties will bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the Transactions,
whether or not the Merger is consummated.
(13) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
-35-
<PAGE>
(14) Transfer Taxes. Any Liability arising out of any real property
transfer taxes, if applicable, and due with respect to the Merger, shall be
borne by the Surviving Corporation and expressly shall not be a Liability of
the Company Stockholders.
(15) Limited Recourse. Notwithstanding anything in this Agreement, the
Voting Agreements or the Rollover Agreements to the contrary (except as
otherwise expressly provided in the Voting Agreements or the Rollover
Agreements, as the case may be), (i) the obligations and Liabilities of the
Parties hereunder and the parties thereunder shall be without recourse to any
stockholder of such Party or any of such stockholder's Affiliates (other than
the Parties), or any of their respective directors, employees, officers,
representatives or agents (in each case, in their capacity as such) and shall
be limited to the assets of such Party and (ii) the stockholders of AAC have
made no (and shall not be deemed to have made any) representations, warranties
or covenants (express or implied) under or in connection with this Agreement,
the Voting Agreements or the Rollover Agreements.
(16) Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each Party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Section 5(1) which shall be for the benefit of the
Persons set forth therein, which Person shall have the independent right to
enforce their rights under such Section.
(17) Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
(18) Headings. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(19) Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
(1)
-36-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
ALLIED DIGITAL TECHNOLOGIES CORP.
By: /s/ George N. Fishman
-----------------------------
George N. Fishman
Co-Chairman of the Board
and Chief Executive Officer
ANALOG ACQUISITION CORP.
By: /s/ Ian D. Highet
-----------------------------
Ian D. Highet
Vice President
-37-
