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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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) June 22, 1998
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GT BICYCLES, INC.
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(Exact name of Registrant as specified in charter)
Delaware 0-26742 04-3210830
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
2001 East Dyer Road, Santa Ana, California 92705
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 481-7100
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Not Applicable
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(Former name or former address, if changed, since last report.)
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Item 5. Other Events.
On June 22, 1998, GT Bicycles, Inc., a Delaware corporation (the
"Registrant") agreed to be acquired by Schwinn Holdings Corporation, a Delaware
corporation ("Schwinn"), pursuant to the terms and conditions of an Agreement
and Plan of Merger, dated as of June 22, 1998 (the "Merger Agreement"), by and
among the Registrant, Schwinn and SPK Acquisition Corporation, a wholly-owned
subsidiary of Schwinn ("SPK"). A copy of the Merger Agreement is attached hereto
as Exhibit 2.1 and by this reference incorporated herein.
Pursuant to the Merger Agreement, SPK will be merged with and into the
Registrant (the "Merger"), and the Registrant will be the surviving corporation
in the Merger. As a result of the Merger, each outstanding share of Common
Stock, par value $.001, of the Registrant will be converted into the right to
receive $8.00 in cash without interest, less any required withholding of taxes.
Completion of the Merger is subject to the satisfaction of certain
conditions, including obtaining approval of the stockholders of the Registrant
and certain regulatory approvals.
In connection with the execution of the Merger Agreement, certain
stockholders of the Registrant (who in the aggregate are the holders of record
of 2,230,081 shares of Registrant's Common Stock, representing approximately 22%
of the issued and outstanding shares) executed a Stockholders Agreement with
Schwinn and the Registrant. Pursuant to the Stockholders Agreement, a copy of
which is attached hereto as Exhibit 99.1 and by this reference incorporated
herein, such stockholders have agreed to vote their shares of Registrant's
Common Stock in favor of the proposed Merger and the adoption of the Merger
Agreement.
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Item 7. Financial Statements and Exhibits.
(c) Exhibits.
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Exhibit
Number
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2.1 Agreement and Plan of Merger, dated as of June 22, 1998, by and among the
Registrant, Schwinn and SPK. *
99.1 Form of Stockholders Agreement by and among Schwinn, the Registrant and
certain stockholders of the Registrant.
99.2 Press Release of the Registrant dated June 22, 1998.
</TABLE>
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* Disclosure Schedules omitted. The Registrant shall furnish supplementally a
copy of any omitted schedules to the Securities and Exchange Commission upon
request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
GT BICYCLES, INC.
Dated: June 23, 1998 By: /s/ Michael C. Haynes
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Michael C. Haynes,
President, Chief Executive
Officer and Director
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INDEX TO EXHIBITS
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Exhibit Sequentially
Number Numbered Page
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2.1 Agreement and Plan of Merger dated as of June 22, 1998,
by and among the Registrant, Schwinn and SPK.
99.1 Form of Stockholders Agreement by and among Schwinn, the
Registrant and certain stockholders of the Registrant.
99.2 Press Release of the Registrant dated June 22, 1998.
</TABLE>
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
dated as of June 22, 1998
by and among
Schwinn Holdings Corporation,
SPK Acquisition Corporation
and
GT Bicycles, Inc.
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I THE MERGER...................................................................................2
Section 1.1. The Merger.........................................................................2
Section 1.2. Closing............................................................................2
Section 1.3. Effective Time of the Merger.......................................................2
Section 1.4. Effects of the Merger..............................................................2
Section 1.5. Subsequent Actions.................................................................2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS......................................................................3
Section 2.1. Conversion of Shares...............................................................3
Section 2.2. Surrender and Payment..............................................................4
Section 2.3. Dissenting Shares..................................................................6
Section 2.4. Lost Certificates..................................................................6
Section 2.5. Adjustment of Merger Consideration and Option Consideration........................7
ARTICLE III THE SURVIVING CORPORATION.....................................................................7
Section 3.1. Certificate of Incorporation.......................................................7
Section 3.2. Bylaws.............................................................................7
Section 3.3. Directors and Officers.............................................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................7
Section 4.1. Corporate Existence and Power......................................................7
Section 4.2. Corporate Authorization............................................................8
Section 4.3. Authorizations.....................................................................8
Section 4.4. Non-Contravention..................................................................8
Section 4.5. Capitalization.....................................................................9
Section 4.6. Subsidiaries......................................................................10
Section 4.7. SEC and Related Filings...........................................................11
Section 4.8. Company Financial Statements......................................................11
Section 4.9. Disclosure Documents; Information Supplied........................................11
Section 4.10. Absence of Certain Changes........................................................12
Section 4.11. Litigation........................................................................12
Section 4.12. Compliance with Laws..............................................................13
Section 4.13. Product Design....................................................................13
Section 4.14. Real Property.....................................................................13
Section 4.15. Personal Property.................................................................14
Section 4.16. Contracts.........................................................................14
Section 4.17. Insurance.........................................................................15
Section 4.18. Intellectual Property.............................................................15
Section 4.19. Taxes.............................................................................15
Section 4.20. Employee Benefits.................................................................16
Section 4.21. Labor Matters.....................................................................18
Section 4.22. Environmental Matters.............................................................19
Section 4.23. Absence of Undisclosed Liabilities................................................20
Section 4.24. Opinion of the Company's Financial Advisor........................................21
Section 4.25. Brokers...........................................................................21
</TABLE>
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TABLE OF CONTENTS
(continued)
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Section 4.26. Board Recommendation; Section 203; Required Vote..................................21
Section 4.27. Prior Negotiations................................................................22
Section 4.28. Certain Business Practices........................................................22
Section 4.29. Affiliate Transactions............................................................22
Section 4.30. Full Disclosure...................................................................22
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY...............................23
Section 5.1. Corporate Existence and Power.....................................................23
Section 5.2. Corporate Authorization...........................................................23
Section 5.3. Authorizations....................................................................23
Section 5.4. Non-Contravention.................................................................24
Section 5.5. Information Supplied..............................................................24
Section 5.6. Financing.........................................................................24
Section 5.7. Brokers...........................................................................24
Section 5.8. Parent Financial Statements.......................................................24
Section 5.9. Absence of Certain Changes........................................................24
Section 5.10. Litigation........................................................................24
Section 5.11. Solvency..........................................................................25
Section 5.12. Full Disclosure...................................................................25
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER.......................................................25
Section 6.1. Conduct of Business...............................................................25
Section 6.2. Notice of Certain Events..........................................................27
Section 6.3. No Solicitation...................................................................28
ARTICLE VII ADDITIONAL AGREEMENTS........................................................................30
Section 7.1. HSR Act...........................................................................30
Section 7.2. Company Proxy Statement...........................................................30
Section 7.3. Stockholders Meeting..............................................................31
Section 7.4. Access to Information; Confidentiality............................................31
Section 7.5. Consents; Approvals...............................................................32
Section 7.6. Indemnification and Insurance.....................................................32
Section 7.7. Employee Benefits.................................................................33
Section 7.8. Notification of Certain Matters...................................................33
Section 7.9. Further Action....................................................................33
Section 7.10. Public Announcements..............................................................34
Section 7.11. Transfer Taxes....................................................................34
Section 7.12. Accountant's Letters..............................................................34
Section 7.13. NNM Listing.......................................................................34
Section 7.14. Financing.........................................................................34
Section 7.15. Retention Policy..................................................................34
ARTICLE VIII CONDITIONS TO CLOSING........................................................................34
Section 8.1. Conditions to Obligation of Each Party to Effect the Merger.......................34
Section 8.2. Additional Conditions to Obligations of Parent and Merger Subsidiary..............35
</TABLE>
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TABLE OF CONTENTS
(continued)
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Section 8.3. Additional Conditions to Obligation of the Company................................36
ARTICLE IX TERMINATION..................................................................................37
Section 9.1. Termination.......................................................................37
Section 9.2. Effect of Termination.............................................................38
Section 9.3. Fees and Expenses.................................................................39
ARTICLE X GENERAL PROVISIONS...........................................................................40
Section 10.1. Effectiveness of Representations and Warranties...................................40
Section 10.2. Survival..........................................................................40
Section 10.3. Notices...........................................................................40
Section 10.4. Certain Definitions...............................................................41
Section 10.5. Amendment.........................................................................46
Section 10.6. Waiver............................................................................46
Section 10.7. Headings..........................................................................47
Section 10.8. Specific Performance..............................................................47
Section 10.9. Severability......................................................................47
Section 10.10.Entire Agreement..................................................................47
Section 10.11.Assignment; Guarantee of Merger Subsidiary Obligations............................47
Section 10.12.Parties In Interest...............................................................47
Section 10.13.Failure or Indulgence Not Waiver; Remedies Cumulative.............................47
Section 10.14.Governing Law.....................................................................48
Section 10.15.Counterparts......................................................................48
</TABLE>
Exhibits
Exhibit 3.1 -- Form of Certificate of Incorporation of the Surviving Corporation
Exhibit 8.2(f) -- Form of legal opinion of Stradling Yocca Carlson & Rauth
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and entered
into as of June 22, 1998, by and among GT Bicycles, Inc., a Delaware corporation
(the "Company"), Schwinn Holdings Corporation, a Delaware corporation
("Parent"), and SPK Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Subsidiary").
WHEREAS, the respective Boards of Directors of Parent, Merger Subsidiary
and the Company have approved the merger of Merger Subsidiary into the Company
(the "Merger"), upon the terms and subject to the conditions set forth in this
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), whereby each issued and outstanding share of common
stock, $.001 par value per share, of the Company (the "Company Common Stock" or
the "Shares"), excluding Shares owned, directly or indirectly, by the Company or
any Subsidiary (as defined herein) of the Company or by Parent, Merger
Subsidiary or any other Subsidiary of Parent and Dissenting Shares (as defined
herein), shall be converted into the right to receive the Merger Consideration
(as defined herein); and
WHEREAS, the Board of Directors of the Company has unanimously
determined that this Agreement and the transactions contemplated hereby,
including the Merger, are fair and in the best interests of the stockholders of
the Company, and has resolved to recommend approval and adoption of this
Agreement, the Merger and the other transactions contemplated hereby by such
stockholders; and
WHEREAS, Parent and Merger Subsidiary are unwilling to enter into this
Agreement unless, contemporaneously with the execution and delivery of this
Agreement, certain beneficial and record holders of the Company Common Stock
enter into agreements (collectively, the "Stockholders Agreement") providing for
such holders to support the transactions contemplated by this Agreement and
providing Parent with the option, under certain circumstances, to acquire the
Shares owned by such persons, and each such stockholder has executed and
delivered the Stockholders Agreement; and
WHEREAS, each of Parent, Merger Subsidiary and the Company desire to
make certain representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the consummation
thereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements herein
contained, the parties hereto, intending to be legally bound, hereby agree as
follows (certain capitalized terms used herein are defined in Section 10.4):
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ARTICLE I
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the DGCL, Merger Subsidiary
shall be merged with and into the Company at the Effective Time (as defined
herein). At the Effective Time, the separate corporate existence of Merger
Subsidiary shall cease, and the Company shall continue its corporate existence
under the laws of the State of Delaware as the surviving corporation. (Merger
Subsidiary and the Company are sometimes hereinafter referred to as "Constituent
Corporations" and the Company, after giving effect to the Merger, is sometimes
hereinafter referred to as the "Surviving Corporation.")
Section 1.2. Closing. Unless this Agreement shall have been terminated
and the transactions contemplated hereby shall have been abandoned pursuant to
Section 9.1, the closing of the Merger (the "Closing") shall take place at 10:00
a.m. (local time) on the third business day following satisfaction or, if
permissible, waiver of all of the conditions set forth in Article VIII hereof at
the offices of Stradling Yocca Carlson & Rauth at 660 Newport Center Drive,
Suite 1600, Newport Beach, California 92660, unless another date, time or place
is agreed to in writing by the parties hereto. At the time of the Closing, the
Company and Merger Subsidiary will file a certificate of merger in such form as
may be required by, and executed and acknowledged in accordance with, the DGCL
with the Secretary of State of the State of Delaware and make all other filings
or recordings required by the DGCL in connection with the Merger.
Section 1.3. Effective Time of the Merger. The Merger shall, subject to
the DGCL, become effective as of such time as the certificate of merger is duly
filed with the Secretary of State of the State of Delaware or at such time
thereafter as is provided in the certificate of merger (the "Effective Time").
Section 1.4. Effects of the Merger. From and after the Effective Time,
the Merger shall have the effects set forth in the applicable sections of the
DGCL.
Section 1.5. Subsequent Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Merger Subsidiary
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out the purposes and intents
of this Agreement, the officers and directors of the Surviving Corporation are
hereby authorized to execute and deliver, in the name and on behalf the Company
and the Merger Subsidiary, all such deeds, bills of sale, assignments and
assurances and to take, in the name and on behalf of each of such corporations
or otherwise, all such other actions and things as may be necessary or desirable
to vest, perfect or confirm any and all right, title and interest in, to or
under such rights, properties or assets in the Surviving Corporation and
otherwise to carry out the transactions contemplated by this Agreement.
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
Section 2.1. Conversion of Shares. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time, automatically by
virtue of the Merger and without any further action on the part of any party
hereto or the holder of any shares of capital stock of the Company or Merger
Subsidiary:
(a) Each Share owned by the Company, Parent, Merger Subsidiary or
any Subsidiary of any of the Company, Parent or Merger Subsidiary (which shall
not include Shares owned by the Company's Employee Stock Purchase Plan)
immediately prior to the Effective Time shall be canceled and retired and shall
cease to exist and no consideration shall be delivered or deliverable in
exchange therefor.
(b) Each share of common stock of Merger Subsidiary issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of common stock of the Surviving
Corporation and shall constitute the only outstanding shares of capital stock of
the Surviving Corporation.
(c) Each Share issued and outstanding immediately prior to the
Effective Time shall, except as otherwise provided in Section 2.1(a) or as
provided in Section 2.3 with respect to Dissenting Shares, be converted into the
right to receive $8.00 in cash without interest (the "Merger Consideration")
payable to the holder thereof upon the surrender of the certificate formerly
representing such Share, less any required withholding of Taxes.
(d) All Shares issued and outstanding immediately prior to the
Effective Time, when converted as provided in this Section 2.1, shall cease to
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each certificate previously evidencing such Shares, excluding
Shares described in Section 2.1(a) and Dissenting Shares, shall thereafter
represent only the right to receive the Merger Consideration. From and after the
Effective Time the holders of certificates evidencing Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to the Company Common Stock except as otherwise provided herein or as
required by Law.
(e) Upon the consummation of the Merger, each option to acquire
Shares outstanding immediately prior to the Effective Time under the Company's
stock option plans or similar arrangements (as listed in Section 4.5 of the
Company's Disclosure Schedule), whether vested or unvested (each, an "Option,"
and collectively, the "Options"), shall automatically become immediately
exercisable and each holder of an Option shall have the right to receive from
the Surviving Corporation in respect of each Share underlying such Option, less
any required withholding of Taxes, a cash payment in an amount equal to the
positive difference (if any) between the Merger Consideration and the exercise
price per Share applicable to such Option as stated in the applicable stock
option agreement or other document (the "Option Consideration"). The Company
shall take such other actions (including, without limitation,
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giving requisite notices to holders of Options advising them of such accelerated
exercisability and right to obtain payment for their respective Options) as are
necessary to fully advise holders of Options of their rights and to facilitate
their timely exercise of such rights. From and after the Effective Time, other
than as expressly set forth in this Section 2.1(e), the holders of Options shall
cease to have any rights in respect to such Options other than to receive
payment for his or her Options as set forth herein.
(f) If the Merger is not consummated by September 1, 1998 and the
warrant to purchase Company Common Stock issued by the Company to Bank of
America (the "Bank of America Warrant") becomes partially exercisable, upon
consummation of the Merger the holder of the Bank of America Warrant shall have
the right to receive from the Surviving Corporation in respect of each Share
then purchasable under the Bank of America Warrant, less any required
withholding of Taxes, a cash payment in an amount equal to the positive
difference (if any) between the Merger Consideration and the exercise price per
Share provided for in such warrant.
Section 2.2. Surrender and Payment.
(a) Prior to the Effective Time, Parent shall appoint a bank or
trust company (the "Exchange Agent") to act as agent for the holders of Shares
and Options for the purpose of exchanging certificates representing such Shares
for the Merger Consideration and distributing the Option Consideration. The fees
and expenses of the Exchange Agent shall be paid by the Parent. Parent shall
contribute to Merger Subsidiary, which in turn shall pay to the Exchange Agent
for the benefit of the holders of Shares and Options, at or prior to the
Effective Time, an amount equal to the aggregate Merger Consideration and Option
Consideration necessary to pay amounts due to the holders of the Shares and
Options pursuant to Section 2.1 (the "Exchange Fund"). For purposes of
determining the Merger Consideration to be paid to the Exchange Agent, Parent
shall assume that no holder of Shares will perfect his right to demand cash
payment of the fair market value of his Shares pursuant to Section 262 of the
DGCL. As promptly as practicable after the Effective Time, the Surviving
Corporation shall send, or shall cause the Exchange Agent to send, to each
record holder of Shares and/or Options, as appropriate, immediately prior to the
Effective Time, (i) notice of the effectiveness of the Merger, (ii) a letter of
transmittal, which shall be a form reasonably acceptable to the Company, for use
in effecting the surrender of certificates representing Shares in exchange for
payment of the Merger Consideration therefor and in effecting the cancellation
of Options in exchange for payment of the Option Consideration therefor (which,
with respect to certificates representing Shares, shall specify that the
delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery of such certificates to the Exchange Agent), and (iii)
instructions for use in effecting surrender of certificates representing Shares
and cancellation of Options. Upon surrender of a certificate representing Shares
for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other customary documents as may reasonably
be required pursuant to the Exchange Agent's instructions, the holder of such
certificate shall be entitled to receive in respect thereof cash in an amount
equal to the product of (x) the number of Shares represented by such certificate
and (y) the Merger Consideration, less any required withholding of Taxes, and
the certificate so surrendered shall forthwith be canceled. Upon receipt from
the holder of an Option by the Exchange Agent of a duly executed letter
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acknowledging termination and cancellation of such holder's Option, in a form
reasonably acceptable to Parent, the holder of such Option shall be entitled to
receive in respect thereof cash in an amount equal to the product of (x) the
number of Shares underlying such Option and (y) the Option Consideration, less
any required withholding of Taxes, and such Options so surrendered shall
forthwith be canceled. No interest shall be paid or accrued on the Merger
Consideration or Option Consideration. The Exchange Fund shall not be used for
any other purpose, except as provided in this Agreement.
(b) If any portion of the Merger Consideration is to be paid to a
person other than the registered holder of the Shares represented by the
certificates surrendered in exchange therefor, it shall be a condition to such
payment that the certificates so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the person requesting such
payment shall pay any transfer or other Taxes required as a result of such
payment to a person other than the registered holder of such Shares or establish
to the satisfaction of the Exchange Agent that such Taxes have been paid or are
not payable.
(c) After the Effective Time, there shall be no further transfer
on the records of the Company or its transfer agent of Shares. If, after the
Effective Time, certificates representing Shares are presented to the Surviving
Corporation for transfer, they shall be canceled and exchanged for the Merger
Consideration provided for, and in accordance with the procedures set forth in,
this Article II.
(d) Any portion of the Exchange Fund that remains unclaimed by
the holders of Shares or Options six months after the Effective Time shall be
delivered to the Surviving Corporation, upon the Surviving Corporation's demand,
and any such holder who has not exchanged his Shares or Options for the Merger
Consideration or Option Consideration in accordance with this Section 2.2 prior
to that time shall thereafter look only to the Surviving Corporation for payment
of the Merger Consideration or Option Consideration in respect of his Shares or
Options. Notwithstanding the foregoing, neither Parent nor the Surviving
Corporation shall be liable to any holder of Shares or Options for any amount
paid to a Governmental Authority pursuant to and in accordance with the
requirements of applicable abandoned property, escheat or similar Laws.
(e) Parent shall be entitled to deduct and withhold, or cause the
Exchange Agent to deduct and withhold, from the consideration otherwise payable
pursuant to this Agreement to any holder of Shares or Options such amounts as
are required to be deducted and withheld with respect to the making of such
payment under the Code, or any provision of state, local or foreign Tax Law. To
the extent that amounts are so withheld, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
Shares or Options in respect of which such deduction and withholding was made.
(f) From time to time at or after the Effective Time, the
Surviving Corporation shall take all lawful action necessary to make or cause to
be made the cash payments, if any, required to be made to holders of Dissenting
Shares.
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(g) The Exchange Agent shall invest portions of the Exchange Fund
as the Surviving Corporation directs in obligations of or guaranteed by the
United States of America, in commercial paper obligations receiving the highest
investment grade rating from both Moody's Investors Services, Inc. and Standard
& Poor's Ratings Service, or in certificates of deposit, bank repurchase
agreements or banker's acceptances of commercial banks with capital exceeding
$1,000,000,000 (collectively, "Permitted Investments"); provided, however, that
the maturities of the Permitted Investments shall be such as to permit the
Exchange Agent to make prompt payment to former holders of Shares and Options
entitled thereto as contemplated by this Article II. All earnings on the
Permitted Investments shall be paid to the Surviving Corporation. If for any
reason (including losses) the Exchange Fund is inadequate to pay the amounts to
which holders of Shares and Options shall be entitled under this Article II, the
Surviving Corporation shall in any event be liable for payment thereof.
Section 2.3. Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares outstanding immediately prior to the Effective
Time and held by a holder who is entitled to and has demanded and perfected his
right of appraisal for such Shares in accordance with Section 262 of the DGCL
(the "Dissenting Shares") shall not be converted into the right to receive the
Merger Consideration as provided in Section 2.1(c), unless and until such holder
withdraws or otherwise loses his right to an appraisal of the Shares and payment
under the DGCL. Such Shares instead shall, from and after the Effective Time,
represent only the right to receive payment of the appraised value of such
Shares in accordance with the provisions of such Section 262 of the DGCL, except
that if, after the Effective Time, any such holder withdraws or loses his right
to an appraisal of the Shares under the DGCL, such Shares shall thereupon be
treated as if they had been converted as of the Effective Time into the right to
receive the Merger Consideration, without interest thereon, upon surrender of
the certificate or certificates formerly representing such Shares, less any
required withholding of Taxes. The Company shall give all notices required under
Section 262 of the DGCL and otherwise comply with the requirements of Section
262 of the DGCL. In addition, the Company shall give Parent (i) prompt notice of
any written demands for appraisal of any Shares, withdrawals of such demands,
and any other instruments served pursuant to the DGCL and received by the
Company, and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the DGCL. The Company shall not,
except with the prior written consent of Parent, voluntarily make any payment
with respect to any demands for appraisal of the Shares or settle or offer to
settle any such demands.
Section 2.4. Lost Certificates. In the event any certificate
representing any Shares shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate to
be lost, stolen or destroyed and upon satisfaction of the conditions set forth
below, the holder of such lost, stolen or destroyed certificate shall be
entitled to receive in accordance with the terms of this Agreement the total
Merger Consideration payable in respect of the Shares evidenced by such
certificate. When authorizing such payment in exchange for any lost, stolen or
destroyed certificate, the person to whom the Merger Consideration is to be paid
shall, as a condition precedent to the payment thereof, give the Surviving
Corporation a bond satisfactory to the Surviving Corporation in such sum as it
may direct or otherwise indemnify the Surviving Corporation in a manner
satisfactory to the Surviving Corporation against any claim
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that may be made against the Company, Parent, Merger Subsidiary or the Surviving
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 2.5. Adjustment of Merger Consideration and Option
Consideration. The Merger Consideration payable pursuant to Section 2.1(c) and
the Option Consideration payable pursuant to Section 2.1(e) have been calculated
based upon the representations and warranties made by the Company in Section
4.5. Without limiting the effect of the failure of the representations and
warranties made by the Company in Section 4.5 to be true and correct, in the
event that, at the Effective Time, the actual number of shares of Company Common
Stock and Company Preferred Stock outstanding and/or the actual number of shares
of Company Common Stock and Company Preferred Stock issuable upon the exercise
of outstanding Options, warrants or similar agreements or upon conversion of
securities (including without limitation, as a result of any stock split, stock
dividend, including any dividend or distribution of securities convertible into
Shares, or a recapitalization) is more than as described in Section 4.5 (except
as contemplated by Section 2.1(f) or as may result from the exercise or
conversion of any currently outstanding Options, warrants or similar agreements
described in Section 4.5), the Merger Consideration and the Option Consideration
shall be appropriately adjusted downward.
ARTICLE III
THE SURVIVING CORPORATION
Section 3.1. Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of the Company as in effect immediately prior to
the Effective Time shall be amended in its entirety to read as provided in
Exhibit 3.1 hereto and shall be the Certificate of Incorporation of the
Surviving Corporation until amended in accordance with applicable law.
Section 3.2. Bylaws. At the Effective Time, the Bylaws of Merger
Subsidiary as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation until amended in accordance with applicable
law.
Section 3.3. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable law, the officers and directors of Merger Subsidiary immediately
prior to the Effective Time shall comprise all of the officers and directors of
the Surviving Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Subsidiary
that:
Section 4.1. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite corporate power and authority and all
material licenses, authorizations, certificates, consents and approvals of
Governmental Authorities (collectively, "Licenses")
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required to own, lease and operate its properties and assets and to carry on its
business as now conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the properties and assets owned, leased or operated by it or the
nature of its activities makes such qualification necessary, except for those
jurisdictions where the failure to be so qualified and in good standing would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. The Company has heretofore delivered to Parent
true and complete copies of the Company's Certificate of Incorporation and
Bylaws as currently in effect.
Section 4.2. Corporate Authorization. The Company has all requisite
corporate power and authority to execute, deliver and perform this Agreement and
to carry out the transactions contemplated hereby and the execution, delivery
and performance by the Company of this Agreement have been duly authorized by
all necessary corporate action, except for the affirmative vote of the holders
of a majority of the outstanding Shares entitled to vote on the Merger. This
Agreement has been duly executed and delivered by the Company and, subject to
receipt of the approvals specified in Section 4.3 herein and subject to the
approval of the Merger by a majority of the outstanding Shares entitled to vote
thereon, constitutes a valid, legal and binding agreement of the Company
enforceable against the Company in accordance with its terms, except as the
enforceability of this Agreement may be subject to or limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar Laws relating to or
affecting the rights of creditors, and (ii) general equitable principles,
regardless of whether the issue of enforceability is considered in a proceeding
in equity or at law.
Section 4.3. Authorizations. The execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby require no consent, approval, order or
authorization of, or registration, declaration or filing with or notice to any
Person by or with respect to the Company or its Subsidiaries, other than (i) the
filing of a certificate of merger in accordance with the DGCL, (ii) compliance
with any applicable requirements of the HSR Act, (iii) compliance with any
applicable requirements of the Exchange Act and the Securities Act, (iv) any
consent, approval, order or authorization of, or registration, declaration or
filing with or notice to any foreign Governmental Authority relating to the
Merger, (v) the affirmative vote of holders of a majority of the outstanding
Shares entitled to vote on the Merger, and (vi) any consent, approval, order or
authorization of, or registration, declaration or filing with or notice to any
Person the failure of which to make or obtain would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company.
Section 4.4. Non-Contravention. Except as set forth in Section 4.4 of
the Company Disclosure Schedule, the execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not and will not contravene or conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation,
enhancement or acceleration of any obligation or the loss of a benefit under, or
give rise to the creation of any Lien or any right of first refusal with respect
to, any asset or property of the Company or any of its Subsidiaries, pursuant to
(i) any provision of the Certificate of
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Incorporation, Bylaws or other organizational documents of the Company or its
Subsidiaries, (ii) assuming compliance with the matters referred to in Section
4.3, any provision of any material Law binding upon or applicable to the Company
or any of its Subsidiaries or their respective properties or assets, (iii) any
Contract binding upon the Company or any of its Subsidiaries, or (iv) any
License held by the Company or any of its Subsidiaries, except in the case of
clauses (iii) and (iv) above, as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Section 4.5. Capitalization.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Company Common Stock and 5,000,000 shares of preferred
stock, $.001 par value per share (the "Company Preferred Stock"). As of the date
of this Agreement, there were outstanding (i) 9,847,221 shares of Company Common
Stock, including all shares restricted under any compensation plan or
arrangement of the Company, (ii) no shares of Company Preferred Stock, (iii)
Options to purchase an aggregate of 666,011 shares of Company Common Stock, and
(iv) the Bank of America Warrant to purchase an aggregate of 525,765 shares of
Company Common Stock, which is not currently exercisable and will not be
exercisable at any time prior to September 1, 1998, unless on or prior to such
date the Company fails to pay, when due, its outstanding term loan from Bank of
America. As of the date of this Agreement, 551,354 shares of Company Common
Stock were reserved for issuance pursuant to the Company's Employee Stock
Purchase Plan, stock option plans and outstanding warrants and no shares of
Company Common Stock were held in treasury by the Company. As of June 30, 1998,
the Company expects that participants in the Company's Employee Stock Purchase
Plan will have accrued approximately $50,000 toward the purchase of shares of
Company Common Stock under such plan.
(b) Except as set forth in Section 4.5 of the Company Disclosure
Schedule, all outstanding shares of capital stock of the Subsidiaries of the
Company are owned by the Company or a direct or indirect Subsidiary of the
Company, free and clear of all Liens. All outstanding shares of capital stock of
the Company and its Subsidiaries (i) have been duly authorized and validly
issued and are fully paid and nonassessable, (ii) are not subject to preemptive
or other similar rights, and (iii) were issued in material compliance with all
material applicable federal and state securities Laws. Except as set forth in
this Section 4.5 and except for changes after the date of this Agreement
resulting solely from the exercise of options or warrants outstanding on such
date (and identified in Section 4.5 of the Company Disclosure Schedule), there
are outstanding (i) no shares of capital stock or other voting securities of the
Company or any of its Subsidiaries, (ii) no securities of the Company or any of
its Subsidiaries convertible into or exercisable or exchangeable for shares of
capital stock or voting securities of the Company or any of its Subsidiaries,
and (iii) no options or other rights to acquire from the Company or any of its
Subsidiaries, and no obligation of the Company or any of its Subsidiaries to
issue, any capital stock, voting securities or securities convertible into or
exercisable or exchangeable for capital stock or voting securities of the
Company or any of its Subsidiaries (the items in clauses (i), (ii) and (iii)
being referred to collectively as the "Company Securities").
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There are no outstanding obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any Company Securities.
(c) As of the date hereof, there are no outstanding bonds,
debentures, notes or other indebtedness of the Company or any of its
Subsidiaries having the right to vote (or convertible into or exercisable or
exchangeable for Company Securities having the right to vote) on any matters.
(d) Section 4.5 of the Company Disclosure Schedule sets forth, as
of the date of this Agreement, a true and correct listing of (i) each option and
warrant to purchase any Company Securities, the holder thereof, the number and
type of Company Securities purchasable thereunder, the dates upon which such
options and warrants expire, and the exercise prices at which such options and
warrants are exercisable (none of which options has been repriced since January
1, 1997, except as set forth in Section 4.5(d) of the Company Disclosure
Schedule), and (ii) a list of each other right to acquire any Company Securities
pursuant to any other agreement or instrument, describing such right and
indicating the holder thereof. There are no employment, executive termination or
other agreements providing for the issuance of any Company Securities. There are
no outstanding stock appreciation rights or other outstanding contractual rights
the value of which is derived from the financial performance of the Company or
the value of Shares of Company Common Stock.
(e) Except as set forth in Section 4.5 of the Company Disclosure
Schedule and except for the Stockholders Agreement, there are not as of the date
hereof and there will not be at the Effective Time any stockholder agreements,
voting trusts or other agreements or understandings to which the Company or any
of its Subsidiaries is a party or by which they are bound relating to the voting
or disposition of any Company Securities (including any such agreements or
understandings that may limit in any way the solicitation of proxies by or on
behalf of the Company from, or the casting votes by, the stockholders of the
Company with respect to the Merger).
Section 4.6. Subsidiaries.
(a) Each Subsidiary of the Company is identified in Section 4.6
of the Company Disclosure Schedule. All of the Company's Significant
Subsidiaries (as defined in Rule 1-02(w) of Regulation S-X of the SEC) are
indicated with an asterisk on such Schedule. Each Subsidiary of the Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, has all requisite corporate power and
authority and all material Licenses required to own, lease and operate its
properties and assets and to carry on its business as now conducted. Each
Subsidiary of the Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the properties and assets owned, leased or operated by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where failure to be so qualified and in good standing would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company. The Company has heretofore delivered to Parent true and complete
copies of the Certificate of Incorporation, Bylaws or other organizational
documents of each of the Subsidiaries of the Company as currently in effect.
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(b) Other than the Subsidiaries of the Company or as described in
Section 4.6(b) of the Company Disclosure Schedule, the Company and its
Subsidiaries (i) do not directly or indirectly own, (ii) have not agreed to
purchase or otherwise acquire, and (iii) do not hold any interest convertible
into or exercisable or exchangeable for, 5% or more of the capital stock or
other equity interest of any corporation, partnership or other business
association or entity.
Section 4.7. SEC and Related Filings.
(a) The Company has provided to Parent a true and complete copy
of (i) the Company's annual reports on Form 10-K for its fiscal years ended
December 31, 1995, 1996 and 1997 (the 1997 Form 10-K being referred to herein as
the "Company Form 10-K"), (ii) the Company's quarterly report on Form 10-Q for
its fiscal quarter ended March 31, 1998 (the "Company Form 10-Q"), (iii) the
Company's proxy or information statements relating to meetings of, or actions
taken without a meeting by, the stockholders of the Company since January 1,
1996, and (iv) all of the Company's other forms, reports, exhibits, schedules,
registration statements, definitive proxy statements and other documents filed
with the SEC since January 1, 1997 (collectively, the "Company Securities
Documents"). Each Company Securities Document required to be filed with the SEC
has been timely filed by the Company.
(b) As of their respective filing dates (or, in the case of
registration statements, their respective effective dates), the Company
Securities Documents complied in all material respects with the requirements of
the Securities Act, the Exchange Act or applicable state securities laws, as the
case may be, and the rules and regulations thereunder. None of the Company
Securities Documents at the time filed (or in the case of registration
statements, their respective effective dates) contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. No Subsidiary of the
Company has any obligation to file any forms, reports, exhibits, schedules,
registration statements, proxy statements or other documents with the SEC.
Section 4.8. Company Financial Statements. The audited consolidated
financial statements and unaudited consolidated interim financial statements of
the Company included in the Company Securities Documents have been prepared from
and are in accordance with the books and records of the Company and were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as may be otherwise noted therein) during the periods
involved ("GAAP") and fairly present in accordance with applicable requirements
of GAAP (subject, in the case of unaudited statements, to normal, recurring
year-end audit adjustments, none of which will be material) the consolidated
financial position of the Company and its Subsidiaries as of their respective
dates and the consolidated results of operations, changes in stockholders'
equity and cash flows of the Company and its Subsidiaries for the periods
presented therein.
Section 4.9. Disclosure Documents; Information Supplied.
(a) The proxy or information statement of the Company to be filed
with the SEC in connection with the Merger (the "Company Proxy Statement"), and
any amendments or
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supplements thereto will, when filed, comply as to form in all material respects
with the applicable requirements of the Exchange Act.
(b) At the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company and at the
time such stockholders vote on adoption of this Agreement, the Company Proxy
Statement, as supplemented or amended at such time, will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The representations and warranties
contained in this Section 4.9(b) will not apply to statements or omissions
included in the Company Proxy Statement to the extent relating to Parent or
Merger Subsidiary or based upon information furnished to the Company in writing
by Parent or Merger Subsidiary specifically for use in the Company Proxy
Statement.
Section 4.10. Absence of Certain Changes. Except as contemplated by this
Agreement, since the date of the Company Balance Sheet, the Company and its
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and, except as set forth in Section 4.10 of the Company
Disclosure Schedule, (i) there has not been any event, occurrence or development
of a state of circumstances or facts which has had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company (other than effects arising from or relating to conditions,
including, without limitation, economic or political developments, applicable
generally to the industry), and (ii) the Company has not taken any action which,
if taken after the date hereof, would require Parent's consent under Section
6.1.
Section 4.11. Litigation. Except as set forth in the Company Form 10-K,
the Company Form 10-Q or Section 4.11 of the Company Disclosure Schedule, and
except with respect to any claim, action, suit, investigation or proceeding
which commences after the date hereof and which is in the ordinary course of
business, there is no claim, action, suit, investigation or proceeding pending
against, or to the knowledge of the Company, threatened against or affecting,
the Company or any of its Subsidiaries, any of their respective properties or
assets or any of their respective directors and officers in their capacities as
such before any court or arbitrator or any Governmental Authority, or with
respect to which the Company or any of its Subsidiaries has retained or assumed
responsibility by contract or operation of Law. No such claim, action, suit,
investigation or proceeding if adversely determined, would, individually or in
the aggregate, have a Material Adverse Effect on the Company. There are no
judgments, decrees, orders, writs, injunctions, determinations or awards issued
by any court or arbitrator or any Governmental Authority currently outstanding
and unsatisfied against the Company or any of its Subsidiaries, or for which the
Company or any of its Subsidiaries has retained or assumed responsibility by
contract or operation of Law. Except as set forth in Section 4.11 of the Company
Disclosure Schedule, there are no indemnification agreements between the Company
or any of its Subsidiaries on the one hand, and any directors, officers,
employees or other agents of the Company or any of its current or former
Subsidiaries on the other hand. There are no indemnification or similar claims
by or against the Company or any of its Subsidiaries that are
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pending or, to the knowledge of the Company, threatened, or which could
reasonably be expected to be asserted in the future.
Section 4.12. Compliance with Laws.
(a) The Company and each of its Subsidiaries are, and at all
times during the last three years (and any former Subsidiary or operations sold
by the Company or any of its Subsidiaries within the last three years, during
such period while owned by the Company or any of its Subsidiaries) have been, in
compliance in all material respects with all applicable material Laws. Neither
the Company nor any of its Subsidiaries has any basis to expect, and has not
received during the last three years, any notice, order or other communication
from any Governmental Authority of any alleged, actual or potential violation of
or failure to comply in any material respect with any material Law.
(b) All Licenses required for the operation of the business of
the Company and each of its Subsidiaries as currently conducted are in full
force and effect without any default or violation thereunder by the Company or
any of its Subsidiaries or, to the knowledge of the Company, by any other party
thereto, except where the failure of any such License to be in full force and
effect has not and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company. Since January 1, 1996,
neither the Company nor any of its Subsidiaries has received any notice, order
or other communication from any Governmental Authority of any alleged, actual or
potential violation of or default under any such License in any material
respect.
Section 4.13. Product Design. Except as set forth in Section 4.13 of the
Company Disclosure Schedule, there are no material design, manufacturing or
other defects, latent or otherwise, with respect to any products created,
manufactured, sold, distributed or licensed by the Company or any of its
Subsidiaries (collectively, the "Products"). A copy of the general standard
warranties of the Company and each of its Subsidiaries has been delivered to
Parent. The Company has not, and no Subsidiary of the Company has, modified or
expanded in any material respect its warranty obligation to any customer or
other Person beyond that set forth in such standard warranties. Since January 1,
1996, neither the Company nor any of its Subsidiaries has received any notice or
other communication from the Consumer Products Safety Commission or other
similar state or foreign Governmental Authority regarding the safety of any
Products or mandating or requesting any modification, recall or other action
regarding any Products.
Section 4.14. Real Property. Section 4.14 of the Company Disclosure
Schedule describes each interest in real property owned or leased by the Company
or any of its Subsidiaries. The Company and each of its Subsidiaries have good
and marketable title in fee simple to all of the real property listed or
required to be listed in Section 4.14 of the Company Disclosure Schedule owned
by the Company or its Subsidiaries and own all right, title and interest in all
leasehold estates and other rights purported to be granted to them by the leases
and other agreements listed in Section 4.14 of the Company Disclosure Schedule,
in each case free and clear of any Liens except for such Liens, if any, as are
reflected on the Company Balance Sheet or such other Liens as do not detract in
any material respect from the value or
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marketability of the property subject thereto and do not materially interfere
with the use of such property.
Section 4.15. Personal Property. The Company and each of its
Subsidiaries have good and marketable title to all of their properties and
assets (not including real property) free and clear of any Liens except for
Liens reflected on the Company Balance Sheet or such other Liens, if any, as do
not detract in any material respect from the value or marketability of the
property subject thereto and do not materially interfere with the use of such
property. The material properties and assets owned or leased by the Company or
any of its Subsidiaries are in the possession or under the control of the
Company or such Subsidiaries and substantially are in good condition and repair,
ordinary wear and tear excepted, are suitable for the purposes for which they
are being used and are of a condition, nature and quantity sufficient for the
conduct of the businesses of the Company and its Subsidiaries as presently
conducted.
Section 4.16. Contracts.
(a) Except as set forth in the Company Form 10-K, the Company
Form 10-Q or in Section 4.16 of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries (i) is a party to or bound by any written
agreement for the employment of any officer, individual employee or other person
on a full-time, part-time or consulting basis, or relating to severance pay for
any person other than those terminable at will, (ii) except for Contracts
entered into in the ordinary course of business which are consistent in nature
and amount with past practice, is a party to or bound by any Contract for the
sale of any material capital asset, (iii) is a party to or bound by any Contract
which is a material contract (as defined in Item 601 of Regulation S-K) to be
performed after the date of this Agreement, (iv) is a party to or bound by any
Contract which prohibits the Company, its Subsidiaries or their respective
affiliates in any material respect from freely engaging in any business anywhere
in the world, (v) is a party to or bound by any Contract relating to the
borrowing of money or to mortgaging, pledging or otherwise placing a material
Lien on any of the assets of the Company or its Subsidiaries, (vi) is a party to
or bound by any Contract which provides for future payments by the Company or
any of its Subsidiaries in excess of $125,000 and is not terminable by the
Company within 60 days without the payment of a penalty or premium, or (vii) has
guaranteed any obligation for borrowed money.
(b) Neither the Company nor any of its Subsidiaries is and, to
the knowledge of the Company, no other party is, in violation of or in default
under (nor does there exist any condition affecting the Company or any of its
Subsidiaries, or to the Company's knowledge, other parties to such Contracts
which upon the passage of time or the giving of notice or both would reasonably
be expected to cause such a violation of or default under) any Contract to which
the Company or any of its Subsidiaries is a party or by which any of them or any
of their properties or assets are bound except for violations or defaults that
have not had and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company. Each Contract set forth
in Section 4.16 of the Company Disclosure Schedule or filed as an exhibit to the
Company Form 10-K or the Company Form 10-Q included in the Company Securities
Documents constitutes a valid and binding obligation of the Company
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and/or its Subsidiaries which is party thereto and, to the knowledge of the
Company, each other party thereto, is enforceable against such other party in
accordance with its terms.
(c) Prior to the date of this Agreement, Parent has been provided
a true and correct copy of each written Contract, and a written description of
each oral Contract, set forth in the Company Form 10-K or the Company Form 10-Q
included in the Company Securities Documents or required to be identified in
Section 4.16 of the Company Disclosure Schedule, together with all amendments,
waivers or other changes thereto.
Section 4.17. Insurance. Section 4.17 of the Company Disclosure Schedule
sets forth a true and correct listing of the policies and binders of insurance
maintained by the Company or any of its Subsidiaries, together with the
Company's experience since January 1, 1992 with respect to material product
liability claims and since January 1, 1996 with respect to material medical
claims.
Section 4.18. Intellectual Property. Except as set forth in Section 4.18
of the Company Disclosure Schedule, the Company and each of its Subsidiary owns,
or is validly licensed or otherwise has the right to use, without any obligation
to make any fixed or contingent payments, including any royalty or license
payments, as applicable, all patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, service marks, service mark rights,
copyrights, software and other proprietary intellectual property rights that are
used in and are material to the businesses of the Company and its Subsidiaries
as now operated (collectively, "Intellectual Property Rights"). Section 4.18 of
the Company Disclosure Schedule sets forth a true and correct listing of all
registered copyrights, trademarks and patents and any pending applications
therefor. There is not now, nor has there been since January 1, 1996, any claim,
action, suit or proceeding pending or, to the knowledge of the Company,
threatened that the Company or any of its Subsidiaries is or was, and to the
knowledge of the Company, neither the Company nor any of its Subsidiaries is,
infringing the rights of any person with regard to any Intellectual Property
Right. To the knowledge of the Company, no person is, or since January 1, 1996
has been, infringing the rights of the Company or any of its Subsidiaries with
respect to any Intellectual Property Right. Except as set forth in Section 4.18
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has licensed, or otherwise granted, to any third party, any rights
in or to any Intellectual Property Rights. The Intellectual Property Rights are
sufficient for the conduct of the businesses of the Company and its Subsidiaries
as presently conducted and the rights of the Company and its Subsidiaries in the
Intellectual Property Rights will not be limited or otherwise affected by reason
of any of the transactions contemplated hereby.
Section 4.19. Taxes.
(a) Each of the Company and its Subsidiaries has filed all
material Tax Returns required to be filed by any of them and has paid (or the
Company has paid on its behalf) or has set up an adequate reserve in its
financial statements for the payment of, all material Taxes required to be paid
in respect of the periods covered by such returns whether or not shown to be due
on such returns. The information contained in such Tax Returns is true and
correct in all material respects. Neither the Company nor any of its
Subsidiaries is delinquent in the payment
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of any material Tax, assessment or governmental charge. There are no Tax Liens
upon the assets of the Company or any of its Subsidiaries in any material amount
except Liens for Taxes not yet due. No material deficiency for any Taxes has
been proposed, asserted or assessed against the Company or any of its
Subsidiaries that has not been resolved or paid in full and, except as set forth
in Section 4.19 of the Company Disclosure Schedule, no audits or other
administrative proceedings or court proceedings are currently pending with
regard to any Taxes or Tax Returns of the Company or any of its Subsidiaries.
(b) Copies of all federal and state income Tax Returns of the
Company and its Subsidiaries for the taxable periods ended December 31, 1994
through December 31, 1997 have been delivered to Parent and such returns are
true and correct in all material respects. No claim has been made during the
last three years by a taxing authority in a jurisdiction where the Company or
one of its Subsidiaries does not file income or franchise Tax Returns that such
entity is or may be subject to income or franchise Tax in that jurisdiction.
Neither the Company nor any of its Subsidiaries (i) has ever filed an election
under Section 341(f) of the Code; (ii) has executed a waiver or consent, which
remains outstanding, extending any statute of limitations for any Tax liability;
(iii) has been the subject of a closing agreement with any taxing authority or
the subject of a ruling from any taxing authority with respect to Tax matters
that will have a continuing effect on the taxable income of the Company or one
of its Subsidiaries following the Closing; (iv) is required to make any
adjustment under Section 481 of the Code; (v) is a party to any Tax sharing, Tax
allocation or Tax indemnification agreement with any person other than the
Company and/or its Subsidiaries; (vi) 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; and
(vii) has granted a power of attorney that is currently in effect with respect
to any material Tax matter. All material Taxes required to be withheld,
collected and deposited with any taxing authority have been so withheld,
collected and deposited. No amount that would be received by any person (whether
in cash or property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement under any employment, severance, or
other compensation arrangement or benefit plan in effect with the Company or any
of its Subsidiaries would be a "parachute payment" within the meaning of Section
280G(b)(2) of the Code.
Section 4.20. Employee Benefits.
(a) Section 4.20 of the Company Disclosure Schedule contains a
true and correct listing of all benefit plans, arrangements and commitments
(whether or not employee benefit plans ("Employee Benefit Plans") as defined in
Section 3(2) of ERISA), including, without limitation, sick leave, vacation pay,
severance pay, salary continuation for disability, consulting or other
compensation arrangements, retirement, deferred compensation, bonus, incentive
compensation, stock purchase, stock option, health including hospitalization,
medical and dental, life insurance and scholarship programs maintained for the
benefit of any present or former employees of the Company, any of its
Subsidiaries or any ERISA Affiliate (as defined below) or to which the Company,
any of its Subsidiaries or any ERISA Affiliate has contributed or is or was
within the last three years obligated to make payments. The Company has made
available to Parent, with respect to all such plans, arrangements, commitments
and practices,
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true, complete and correct copies of the following: all plan documents,
handbooks, manuals, collective bargaining agreements and similar documents
governing employment policies, practices and procedures; the most recent summary
plan descriptions and any subsequent summaries of material modifications and all
other material employee communications discussing any employee benefit; Forms
series 5500 as filed with the IRS for the three most recent plan years; the most
recent report of the enrolled actuary for all defined benefit plans, funded
welfare plans or other plans requiring actuarial valuation; all trust agreements
with respect to employee benefit plans; plan contracts with service providers or
with insurers providing benefits for participants or liability insurance for
fiduciaries and other parties in interest or bonding; most recent annual audit
and accounting of plan assets for all funded plans; and most recent IRS
determination letter for all plans qualified under Code section 401(a). As used
herein, "ERISA Affiliate" shall refer to any trade or business, whether or not
incorporated, under common control with the Company within the meaning of
Section 414(b), (c), (m) or (o) of the Code.
(b) With respect to each Employee Benefit Plan required to be
listed in Section 4.20 of the Company Disclosure Schedule: (i) each Employee
Benefit Plan has been administered in material compliance with its terms, and is
in compliance in all material respects with the applicable provisions of ERISA,
the Code and all other applicable Laws (including, without limitation, funding,
filing, termination, reporting and disclosure and continuation coverage
obligations pursuant to Title V of COBRA), (ii) the Company has made or provided
for all contributions required under the terms of such Plans, (iii) no "Employee
Pension Benefit Plan" (as defined in Section 3(2) of ERISA) has been the subject
of a "reportable event" (as defined in Section 4043 of ERISA) and there have
been no "prohibited transactions" (as described in Section 4975 of the Code or
in Part 4 of Subtitle B of Title I of ERISA) with respect to any Employee
Benefit Plan, (iv) there are and during the past three years there have been no
claims, actions, suits, proceedings or investigations pending or, to the
knowledge of the Company, threatened by any Governmental Authority or by any
participant or beneficiary against any of the Employee Benefit Plans, the assets
of any of the trusts under such Plans or the Plan sponsor or the Plan
administrator, or against any fiduciary of any of such Employee Benefit Plans
with respect to the design or operation of the Employee Benefit Plans, (v) the
actuarial present value of accumulated benefits (both vested and unvested) of
each of the Employee Pension Benefit Plans which are defined benefit plans, are
fully funded in accordance with the actuarial assumptions used by the PBGC to
determine the level of funding required in the event of the termination of such
Plan, (vi) each Employee Pension Benefit Plan which is intended to be
"qualified" within the meaning of Section 401(a) of the Code is and has from its
inception been so qualified, and any trust created pursuant to any such Employee
Pension Benefit Plan is exempt from federal income tax under Section 501(a) of
the Code and the IRS has issued each such Plan a favorable determination letter
which is currently applicable, and (vii) neither the Company, any of its
Subsidiaries nor any ERISA Affiliate is aware of any circumstance or event which
would jeopardize the tax-qualified status of any such Employee Pension Benefit
Plan or the tax-exempt status of any related trust, or which would cause the
imposition of any material liability, penalty or tax under ERISA or the Code
with respect to any Employee Benefit Plan.
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(c) Neither the Company, any of its Subsidiaries nor any ERISA
Affiliate maintains or has ever maintained or been obligated to contribute to a
"multiemployer plan" (as such term is defined by Section 4001(a)(3) of ERISA).
(d) With respect to each Employee Benefit Plan maintained by the
Company, any of its Subsidiaries or any ERISA Affiliate: (i) no material
unsatisfied liabilities to participants, the IRS, the DOL, the PBGC or to any
other person or entity have been incurred as a result of the termination of any
Employee Benefit Plan, (ii) no Employee Pension Benefit Plan, which is subject
to the minimum funding requirements of Part 3 of subtitle B of Title I of ERISA
or subject to Section 412 of the Code, has incurred any "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section 412 of the
Code and there has been no waived funding deficiency within the meaning of
Section 303 of ERISA or Section 412 of the Code, and (iii) there has been no
event with respect to an Employee Pension Benefit Plan which would require
disclosure under Sections 4062(c), 4063(a) or 4041(e) of ERISA.
(e) All reports and information required to be filed with the
DOL, IRS and PBGC or with plan participants and their beneficiaries with respect
to each Employee Benefit Plan required to be listed in Section 4.20 of the
Company Disclosure Schedule have been filed except for any failure to file that
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company or a material adverse effect on the plan
to which such filing relates.
(f) All employee benefit plans required to be listed in Section
4.20 of the Company Disclosure Schedule may, without material liability, be
prospectively amended, terminated or otherwise discontinued except as
specifically prohibited by federal law.
(g) Any bonding required under ERISA with respect to any Employee
Benefit Plan required to be listed in Section 4.20 of the Company Disclosure
Schedule has been obtained and is in full force and effect.
(h) Neither the Company, any of its Subsidiaries nor any ERISA
Affiliate maintains any retired life and/or retired health insurance plans which
provide for continuing benefits or coverage for any employee or any beneficiary
of an employee after such employee's termination of employment, except where the
continuation of such coverage is required by Law.
(i) The consummation of the transactions contemplated by this
Agreement will not, alone or together with any other event, (i) entitle any
person to severance pay, unemployment compensation or any other payment, or (ii)
result in any material liability under Title IV of ERISA or otherwise.
Section 4.21. Labor Matters.
(a) No application or petition for certification of a collective
bargaining agent is pending or, to the knowledge of the Company, contemplated,
and none of the employees of the Company or any of its Subsidiaries are, or
during the last three years have been, represented by any union or other
bargaining representative.
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(b) No agreement restricts the Company or any of its Subsidiaries
from relocating, closing or terminating any of their operations or facilities or
any portion thereof.
Section 4.22. Environmental Matters.
(a) The Company and each of its Subsidiaries, including all of
their businesses and operations, are, and since January 1, 1996 have been,
operated in compliance with all Environmental Laws, except where the failure to
so comply has not, and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on the Company.
(b) There are no conditions on, about, beneath or arising from
any real property which is now owned, used or leased to or by the Company or any
of its Subsidiaries ("Current Real Property") which might, under any
Environmental Law, (i) give rise to a material liability or the imposition of a
statutory Lien, or (ii) which would or may require any Response, Removal or
Remedial Action or any other action, including without limitation reporting,
monitoring, cleanup or contribution, which would require a material expenditure
or commitment by the Company or its Subsidiaries.
(c) There were no conditions on, about, beneath or arising from
any real property which was, but is no longer, owned, used or leased to or by
the Company or any of its Subsidiaries ("Former Real Property"), during the
period of such ownership, use or lease, which might, under any Environmental
Law, (i) give rise to a material liability or the imposition of a statutory
Lien, or (ii) which would or may require any Response, Removal or Remedial
Action or any other action, including without limitation reporting, monitoring,
cleanup or contribution, which would require a material expenditure or
commitment by the Company or its Subsidiaries.
(d) Neither the Company nor any of its Subsidiaries has received
any notification of a release or threat of a release of a Hazardous Substance
with respect to any Current Real Property or Former Real Property.
(e) No Hazardous Substances have been used, handled, generated,
processed, treated, stored, transported to or from, released, discharged or
disposed of by the Company, any of its Subsidiaries or, to the best of the
Company's knowledge, any third party on, about or beneath any Current Real
Property in a manner which has had or is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on the Company.
(f) During the Company's or any of its Subsidiaries' ownership,
use or lease of the Former Real Property, no Hazardous Substances were used,
handled, generated, processed, treated, stored, transported to or from,
released, discharged or disposed of by the Company, any of its Subsidiaries or,
to the best of the Company's knowledge, any third party on, about or beneath the
Former Real Property in a manner which has had or is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
(g) There are no above or underground storage tanks, asbestos
containing materials, or transformers containing or contaminated with PCB's on,
about or beneath the Current Real Property. During the Company's or any of its
Subsidiaries' ownership, use or lease of the Former Real Property, there were no
above or underground storage tanks, asbestos containing materials, or
transformers containing or contaminated with PCB's on, about or beneath the
Former Real Property.
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(h) Neither the Company nor any of its Subsidiaries has received
notice or has knowledge of:
(i) any claim, demand, investigation, enforcement action,
Response, Removal, Remedial Action, statutory Lien or other governmental or
regulatory action instituted or threatened against the Company or any of its
Subsidiaries or the Current or Former Real Property pursuant to any
Environmental Law;
(ii) any claim, demand notice, suit or action, made or
threatened by any Person against the Company, any of its Subsidiaries, the
Current Real Property or the Former Real Property relating to (A) any form of
damage, loss or injury resulting from, or claimed to result from, any Hazardous
Substance on, about, beneath or arising from the Current or Former Real Property
or (B) any alleged material violation of any Environmental Law by the Company or
any of its Subsidiaries; or
(iii) any communication to or from any Governmental
Authority arising out of or in connection with Hazardous Substances on, about,
beneath, arising from or generated at the Current Real Property or Former Real
Property, including without limitation, any notice of violation, citation,
complaint, order, directive, request for information or response thereto, notice
letter, demand letter or compliance schedule.
(i) No wastes generated by the Company or any of its Subsidiaries
have ever been directly or indirectly sent, transferred, transported to,
treated, stored, or disposed of at any site listed or formally proposed for
listing on the National Priority List promulgated pursuant to CERCLA or to any
site listed on any state list of sites requiring or recommended for
investigation or clean-up. None of the Current Real Property or Former Real
Property is listed on the National Priorities List or any state list of sites
requiring or recommended for investigation or clean up.
Section 4.23. Absence of Undisclosed Liabilities. All of the material
obligations and liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise, whether due or to become due, and regardless of when asserted,
including Taxes) with respect to or based upon transactions or events
("Liabilities"), required to be reflected on the Company Balance Sheet in
accordance with GAAP, have been so reflected. Except as set forth in Section
4.23 of the Company Disclosure Schedule, the Company and its Subsidiaries have
no Liabilities which are, in the aggregate, material to the condition (financial
or otherwise), business, properties, assets, results of operations, cash flows
or prospects of the Company and its Subsidiaries, taken as a whole, except (i)
as reflected on the Company Balance Sheet, (ii) Liabilities which arose prior to
the date of the Company Balance Sheet and not required under GAAP to be
reflected on the Company Balance Sheet and which have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, or (iii) Liabilities
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which have arisen after the date of the Company Balance Sheet in the ordinary
course of business consistent in nature and amount with past practice and which
have not had and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company.
Section 4.24. Opinion of the Company's Financial Advisor. The Board of
Directors of the Company has received a written opinion of Morgan Stanley,
financial advisor to the Company, dated the date of this Agreement to the effect
that, as of such date, the Merger Consideration to be received in the Merger by
the holders of Shares is fair to such holders from a financial point of view. A
signed copy of such opinion has been delivered to Parent.
Section 4.25. Brokers. No person acting on behalf of the Company or any
of its affiliates or under the authority of any of the foregoing is or will be
entitled to any brokers' or finders' fee or any other commission or similar fee,
directly or indirectly, from any of such parties in connection with any of the
transactions contemplated by this Agreement, other than Morgan Stanley, whose
fees and expenses shall be paid by the Company. A true and correct copy of all
agreements with Morgan Stanley have been delivered to Parent.
Section 4.26. Board Recommendation; Section 203; Required Vote.
(a) The Board of Directors of the Company, at a meeting duly
called and held, have by unanimous vote of those directors present (who
constituted all of the directors then in office) (i) determined that the Merger,
this Agreement, the Stockholders Agreement and the transactions contemplated
hereby and thereby are fair to and in the best interests of the holders of
Shares of Company Common Stock, and (ii) recommended that holders of Shares of
Company Common Stock approve the Merger, this Agreement and the transactions
contemplated hereby.
(b) The Board of Directors of the Company has approved this
Agreement and the Stockholders Agreement, prior to execution and delivery of
this Agreement and the Stockholders Agreement, in accordance with Section 203 of
the DGCL, so that such Section will not apply to Parent, Merger Subsidiary, the
Merger, this Agreement, the Stockholders Agreement or the transactions
contemplated hereby or thereby. No provision of the Certificate of
Incorporation, Bylaws or other organizational documents of the Company or any of
its Subsidiaries would, directly or indirectly, restrict or impair the ability
of Parent or its affiliates to vote, or otherwise to exercise the rights of a
stockholder with respect to, securities of the Company or its Subsidiaries that
may be acquired or controlled by Parent or its affiliates or permit any
stockholder to acquire securities of the Company on a basis not available to
Parent in the event that Parent were to acquire securities of the Company, and
neither the Company nor any of its Subsidiaries has any rights plan, preferred
stock or similar arrangement which has any of the aforementioned consequences.
(c) The execution, delivery and performance of this Agreement and
the Stockholders Agreement and the consummation of the transactions contemplated
hereby or thereby will not cause to be applicable to the Company any federal,
state, local or foreign anti-takeover or similar Law.
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Section 4.27. Prior Negotiations. The Company and its officers,
directors, employees, representatives and advisors (including the Company's
financial advisor) have not been involved in substantive discussions with any
group or person or any of their respective representatives or advisors, or
furnished material confidential information to any such group or person or any
of their respective representatives or advisors in connection with a possible
Acquisition Proposal except for such groups or persons which have executed and
delivered to the Company a customary confidentiality agreement.
Section 4.28. Certain Business Practices. None of the Company, its
Subsidiaries or any directors, officers, agents or employees of the Company or
its Subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic governmental officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, (iii)
consummated any transaction, made any payment, entered into any agreement or
arrangement or taken any other action in violation of Section 1128B(b) of the
Social Security Act, as amended, or (iv) made any other unlawful payment, that
has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
Section 4.29. Affiliate Transactions. Except as set forth in the Company
Form 10-K, no director, officer, partner, key employee, "affiliate" or
"associate" (as such terms are defined in Rule 12b-2 under the Exchange Act) of
the Company or any of its Subsidiaries (or any immediate family member of any of
the foregoing persons) (i) has borrowed any monies from or has outstanding any
indebtedness or other similar obligations to the Company or any of its
Subsidiaries in excess of $60,000, (ii) to the best of the Company's knowledge,
except for shares of a publicly traded company (in an amount not in excess of 5%
of the outstanding shares of such company) owns any direct or indirect material
interest of any kind in, or is a director, officer, employee, partner, affiliate
or associate of, or consultant or lender to, or borrower from, or has the right
to participate in the management, operations or profits of, any person or entity
which since January 1, 1997 has been a material competitor, supplier, customer,
distributor, lessor, tenant, creditor or debtor of the Company or any of its
Subsidiaries, or (iii) is otherwise a party to any material Contract with the
Company or any of its Subsidiaries.
Section 4.30. Full Disclosure. All documents and other papers delivered
by or on behalf of the Company in connection with the transactions contemplated
by this Agreement are accurate and complete in all material respects and are
authentic. No representation or warranty of the Company contained in this
Agreement or the Company Disclosure Schedule, taken as a whole, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUBSIDIARY
Parent and Merger Subsidiary, jointly and severally, represent and
warrant to the Company that:
Section 5.1. Corporate Existence and Power. Parent and Merger Subsidiary
are each duly incorporated, validly existing and in good standing under the laws
of the State of Delaware and each has all requisite corporate power and
authority and all material Licenses required to own, lease and operate its
properties and assets and to carry on its business as now conducted. Parent and
Merger Subsidiary are each duly qualified to do business as a foreign
corporation and are in good standing in each jurisdiction where the character of
the properties and assets owned, leased or operated by each or the nature of
their respective activities makes such qualification necessary, except for those
jurisdictions where the failure to be so qualified and in good standing would
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
Since its date of incorporation, Merger Subsidiary has not engaged in any
material activities other than as related or incidental to the transactions
contemplated by this Agreement. Parent has delivered to the Company true and
complete copies of the Certificates of Incorporation and Bylaws of Parent and
Merger Subsidiary as currently in effect.
Section 5.2. Corporate Authorization. Parent and Merger Subsidiary each
have all requisite corporate power and authority to execute, deliver and perform
this Agreement and to carry out the transactions contemplated hereby and the
execution, delivery and performance by Parent and Merger Subsidiary of this
Agreement have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by Parent and Merger Subsidiary
and constitutes a valid, legal and binding agreement of Parent and Merger
Subsidiary enforceable against each of them in accordance with its terms, except
as the enforceability of this Agreement may be subject to or limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar Laws
relating to or affecting the rights of creditors, and (ii) general equitable
principles, regardless of whether the issue of enforceability is considered in a
proceeding in equity or at law.
Section 5.3. Authorizations. The execution, delivery and performance by
Parent and Merger Subsidiary of this Agreement and the consummation by each of
them of the transactions contemplated hereby require no consent, approval, order
or authorization of, or registration, declaration or filing with or notice to
any Person by or with respect to Parent or Merger Subsidiary, other than (i) the
filing of a certificate of merger in accordance with DGCL; (ii) compliance with
any applicable requirements of the HSR Act; (iii) compliance with any applicable
requirements of the Exchange Act and the Securities Act; (iv) any consent,
approval, order or authorization of, or registration, declaration or filing with
or notice to any foreign Governmental Authority relating to the Merger, and (v)
any consent, approval, order or authorization of, or registration, declaration
or filing with or notice to any Person the failure of which to make or obtain
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
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Section 5.4. Non-Contravention. The execution, delivery and performance
by Parent and Merger Subsidiary of this Agreement and the consummation by them
of the transactions contemplated hereby do not and will not contravene or
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation, enhancement or acceleration of any obligation or the loss of a
benefit under, or give rise to the creation of any Lien or any right of first
refusal with respect to, any asset or property of Parent or Merger Subsidiary,
pursuant to (i) any provision of the Certificate of Incorporation or Bylaws of
Parent or Merger Subsidiary, (ii) assuming compliance with the matters referred
to in Section 5.3, any provision of any material Law binding upon or applicable
to Parent or Merger Subsidiary or their respective properties or assets, (iii)
any Contract binding upon Parent or Merger Subsidiary, or (iv) any License held
by Parent or Merger Subsidiary, except in the case of clauses (iii) and (iv)
above, as would not, individually or in the aggregate, have a Material Adverse
Effect on Parent.
Section 5.5. Information Supplied. The information supplied or to be
supplied by Parent in writing specifically for inclusion or incorporation by
reference in the Company Proxy Statement or any amendment or supplement thereto
will not, at the time the Company Proxy Statement is first mailed to
stockholders of the Company, at the time such stockholders vote on adoption of
this Agreement or at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
Section 5.6. Financing. Parent has obtained and delivered complete
copies of the financing commitments Parent has received from financial
institutions and other entities with respect to the funds necessary to
consummate the transactions contemplated hereby including, but not limited to,
the funds necessary to pay the aggregate Merger Consideration and Option
Consideration to holders of Shares and Options in accordance with this
Agreement.
Section 5.7. Brokers. No person acting on behalf of Parent or any of its
affiliates or under the authority of any of the foregoing is or will be entitled
to any brokers' or finders' fee or any other commission or similar fee, directly
or indirectly, from the Company or any of its Subsidiaries in connection with
any of the transactions contemplated by this Agreement.
Section 5.8. Parent Financial Statements. Parent has delivered to the
Company a true and correct copy of the unaudited interim consolidated balance
sheet of Parent and its subsidiaries which fairly presents in all material
respects the financial position of Parent as of April 30, 1998.
Section 5.9. Absence of Certain Changes. Since April 30, 1998 there has
not been any event, occurrence or development of a state of circumstances or
facts which has had or would reasonably be expected to have, individually or in
the aggregate, a material adverse effect on Parent's ability to perform its
obligations under this Agreement.
Section 5.10. Litigation. There is no claim, action, suit, investigation
or proceeding pending against, or to the knowledge of Parent, threatened against
or affecting Parent or Merger Subsidiary, any of their respective properties or
assets or any of their respective directors and
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officers in their capacities as such before any court or arbitrator or any
Governmental Authority which has had or would reasonably be expected to have,
individually or in the aggregate, a material adverse effect on Parent's ability
to perform its obligations under this Agreement.
Section 5.11. Solvency. Parent and Merger Subsidiary are each "Solvent"
as of the date of this Agreement. For purposes of this Section, "Solvent" means
with respect to each of Parent and Merger Subsidiary that as of the date of this
Agreement:
(a) The fair saleable value of its property is greater than the
amount that will be required to pay its probable liability under its Liabilities
as they become absolute and matured;
(b) It does not have unreasonably small capital (as provided in
11 U.S.C.Section548(a)(2)(B)(II)) to carry on its business as heretofore
operated and all businesses in which it is about to engage; and
(c) It (i) is able to pay its Liabilities in the ordinary course
of business, (ii) will be able to continue to pay its Liabilities as they mature
in the ordinary course of business, and (iii) does not intend or reasonably
believe that it will incur Liabilities beyond its ability to pay as such
Liabilities mature.
Section 5.12. Full Disclosure. All documents and other papers delivered
by or on behalf of Parent in connection with the transactions contemplated by
this Agreement are accurate and complete in all material respects and are
authentic. No representation or warranty of Parent or Merger Subsidiary
contained in this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein,
in light of the circumstances under which they were made, not misleading.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. Conduct of Business. During the period from the date of
this Agreement to the Effective Time, the Company shall, and shall cause each of
its Subsidiaries to, carry on its business in the ordinary course of business in
substantially the same manner as heretofore conducted and, to the extent
consistent therewith, use all reasonable efforts to preserve intact its current
business organizations, keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with it. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time, except as disclosed in Section 6.1 of the
Company Disclosure Schedule, the Company shall not, and shall not permit any of
its Subsidiaries to, without the prior written approval of Parent:
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property) in respect of, any
Company Securities, other than dividends and distributions by any direct or
indirect wholly-owned Subsidiary of the
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Company to its parent, (ii) adjust, split, combine or reclassify any Company
Securities or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any Company Securities, except as
permitted by Section 6.1(b)(iii), or (iii) purchase, redeem or otherwise acquire
any Company Securities or any rights, warrants or options to acquire any such
Company Securities or any other securities;
(b) (i) grant any options, warrants or rights to purchase Company
Securities, (ii) amend or reprice any outstanding option, warrant or right to
purchase Company Securities, or (iii) issue, deliver or sell, or pledge or
otherwise encumber, or authorize or propose to issue, deliver or sell, or pledge
or otherwise encumber, any Company Securities, other than the issuance of
Company Common Stock upon (A) the exercise of outstanding Options set forth in
the Company Disclosure Schedule in accordance with their present terms, (B) the
exercise of outstanding warrants set forth in the Company Disclosure Schedule in
accordance with their present terms, and (C) the exercise of rights pursuant to
the Company's Employee Stock Purchase Plan in accordance with its present terms,
provided that the participants thereunder shall be entitled to purchase shares
with accumulated payroll deductions as permitted under Section 7.7(b) hereof;
(c) amend or propose to amend its Certificate of Incorporation,
Bylaws or other organizational documents;
(d) amend, modify or waive any material term of any outstanding
Company Security;
(e) (i) amend any existing agreement or instrument, or enter into
any new agreement or instrument, in each case relating to the assumption or
incurrence of indebtedness for borrowed money (except that the Company may draw
on its existing credit facilities in the ordinary course of its business
consistent in nature and amount with past practice), or to the guarantee of any
indebtedness or the issuance or sale of any debt securities or warrants or
rights to acquire any debt securities of the Company or any of its Subsidiaries
or the guarantee of any debt securities of others or enter into any lease
(whether an operating or capital lease) or create any Liens on the properties or
assets of the Company or any of its Subsidiaries, or enter into any "keep well"
or other agreement or arrangement to maintain the financial condition of another
Person, or (ii) make any loans, advances or capital contributions to, or
investments in, any other Person in excess of $50,000 in the aggregate, other
than to the Company or any direct or indirect wholly-owned Subsidiary of the
Company and other than loans or advances to customers and employees in the
ordinary course of business consistent in nature and amount with past practice;
(f) make any capital expenditures or acquisitions of properties
or assets in excess of $5,000,000, individually or in the aggregate;
(g) (i) grant any material increase in compensation or benefits
to any current or former director of the Company or any of its Subsidiaries or,
other than in the ordinary course of business consistent in nature and amount
with past practice, to any officer or employee of the Company or any of its
Subsidiaries, (ii) pay or agree to pay any pension, retirement allowance or
other employee benefit not required or contemplated by any existing Employee
Benefit Plan as in
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effect on the date hereof to any such director or, other than in the ordinary
course of business consistent in nature and amount with past practice, to any
such officer or employee, (iii) except as may be required to comply with
applicable law, become obligated under any new Employee Benefit Plan which was
not in existence on the date hereof, or amend any such plan or arrangement in
existence on the date hereof if such amendment would have the effect of
materially enhancing any benefits thereunder, or (iv) grant to any current or
former director, officer or employee any increase in severance or termination
pay (including the acceleration in the exercisability of Options or in the
vesting of Shares (or other property) except for automatic acceleration in
accordance with the terms of this Agreement or the Company's Employee Stock
Purchase Plan, or the provision of any tax gross-up);
(h) acquire (i) by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or (ii) except
in the ordinary course of business consistent in nature and amount with past
practice, any assets that are material, individually or in the aggregate, to the
Company and its Subsidiaries as a whole;
(i) other than dispositions in the ordinary course of business
consistent in nature and amount with past practice which are not material,
individually or in the aggregate, to the Company and its Subsidiaries, sell,
lease, encumber or otherwise dispose of any of its material properties or
assets;
(j) voluntarily take any action that is reasonably likely to
result in any of the Company's representations or warranties hereunder being
untrue in any material respect or in any of the Company's covenants hereunder or
any of the conditions to the Merger not being satisfied; or
(k) authorize any of, or commit or agree to take any of, the
foregoing actions.
Furthermore, during the period from the date of this Agreement to the Effective
Time, the Company shall promptly advise Parent in writing of any change or event
that has or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company, and promptly provide Parent
(or its counsel) with copies of all filings made by the Company with the SEC or
any other Governmental Authority (whether or not in connection with this
Agreement and the transactions contemplated hereby).
Section 6.2. Notice of Certain Events. The Company and Parent shall
promptly notify each other of:
(a) any notice or other written communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement, which consent, if not
obtained, could reasonably be expected to have a Material Adverse Effect on the
Company or which could reasonably be expected to affect materially and adversely
the transactions contemplated hereby;
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(b) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this Agreement;
and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to Parent's or the Company's knowledge, as the case may be,
threatened against, relating to or involving or otherwise affecting Parent or
the Company or any of its Subsidiaries which relate to the consummation of the
transactions contemplated by this Agreement or which, with respect to the
Company, if pending on the date of this Agreement, would have been required to
have been disclosed pursuant to Section 4.11.
Section 6.3. No Solicitation.
(a) From and after the date hereof until the Effective Time, the
Company shall not, and shall not authorize or permit any of its Subsidiaries, or
any of its or their officers, directors, employees, representatives, agents or
affiliates (including, without limitation, any investment banker, financial
advisor, attorney, accountant or other representative retained by the Company or
any of its Subsidiaries), to directly or indirectly initiate, solicit or
encourage (including by way of furnishing information or assistance), or take
any other action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal,
or enter into or maintain or continue discussions or negotiate with any Person
in furtherance of such inquiries with respect to an Acquisition Proposal or
agree to or endorse any Acquisition Proposal, provided, however, that, if the
Board of Directors of the Company, based on the advice of outside legal counsel,
reasonably believes that the failure to proceed in accordance with clause (i)
and/or (ii) below of this Section 6.3(a) would violate the directors' fiduciary
duties to the Company's stockholders under applicable law, the Company may,
subject to compliance with Section 6.3(c), in response to an unsolicited written
bona fide Acquisition Proposal from any Person that the Company's Board of
Directors, based on the written advice of an independent nationally recognized
financial advisor and outside legal counsel, reasonably believes would
reasonably be expected to result in a Superior Proposal, (i) furnish information
with respect to the Company to such Person making such proposal after entering
into a confidentiality agreement with such Person on terms and conditions no
less favorable in any material respect to the Company than the terms and
conditions of the confidentiality agreement dated as of May 27, 1998 executed by
Parent and (ii) participate in negotiations regarding such Acquisition Proposal;
provided that, in the case of clauses (i) and (ii) above, the Company has
provided not less than four business days prior written notice to Parent of its
intention to proceed under such clause (i) or (ii) above. Without limiting the
foregoing, it is agreed that any violation of the restrictions set forth in the
preceding sentence by any director, officer, employee, representative, agent or
affiliate of the Company or any of its Subsidiaries or any investment banker,
financial advisor, attorney, accountant or other representative of the Company
or any of its Subsidiaries shall be deemed to be a breach of this Section 6.3(a)
by the Company. For purposes of this Agreement, "Acquisition Proposal" shall
mean an inquiry, offer or proposal regarding any of the following (other than
the transactions among the Company, Parent and Merger Subsidiary contemplated
hereunder) involving the Company or any of its Significant Subsidiaries: (A) any
merger, consolidation, share exchange, recapitalization, business combination or
other similar transaction; (B) any sale, lease, exchange, mortgage,
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pledge, transfer or other disposition of 20% or more of the assets of the
Company and its Subsidiaries, taken as a whole, in a single transaction or
series of transactions; (C) any tender offer or exchange offer for outstanding
shares of capital stock of the Company or purchase from the Company of any
shares of capital stock of the Company or the filing of a registration statement
under the Securities Act in connection with any of the foregoing; or (D) any
public announcement by the Company of a proposal, plan or intention to do any of
the foregoing or any agreement to engage in any of the foregoing.
(b) Except as set forth in this Section 6.3(b), neither the Board
of Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner materially adverse to
Parent or Merger Subsidiary, the approval or recommendation by such Board of
Directors or any such committee of the Merger or this Agreement, (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or (iii)
enter into any agreement with respect to any Acquisition Proposal. If the Board
of Directors, based on the advice of outside counsel, reasonably believes that
the failure to proceed in accordance with clause (A), (B) and/or (C) below of
this Section 6.3(b) would violate its fiduciary duties to the Company's
stockholders under applicable law, the Board of Directors may (subject to the
terms of this sentence) (A) withdraw or modify its recommendation of the Merger
or this Agreement, (B) approve or recommend a Superior Proposal, or (C) cause
the Company to enter into an agreement with respect to a Superior Proposal, in
each case; provided that the Company shall not take any of the actions specified
in such clauses (A), (B) or (C) unless the Parent shall have received from the
Company written notice specifying such actions to be taken no later than 12:00
noon New York City time four business days prior to the date such actions are
proposed to be taken (a "Superior Proposal Notice").
(c) The term "Superior Proposal" shall mean any bona fide
Acquisition Proposal that has the following characteristics: (i) it is a
proposal to acquire, directly or indirectly, for consideration consisting of
cash and/or readily marketable securities, (A) shares of Company Common Stock
representing 80% of the voting power of the outstanding shares of Company Common
Stock, and the shares of Company Common Stock issuable upon the exercise of
outstanding Options, warrants and rights to purchase Company Common Stock, or
(B) substantially all the assets of the Company, (ii) the terms of such proposal
in the good faith judgment of the Board of Directors of the Company (based on
the written opinion of an independent nationally recognized financial advisor)
provide a per share value to the Company's stockholders which is higher than the
per share value provided by the Merger (after talking into account, if
applicable, the Expenses and Termination Fee and any modifications to this
Agreement proposed by Parent), (iii) the transactions envisioned by such
proposal, in the good faith judgment of the Board of Directors of the Company,
based on the opinion of an independent nationally recognized financial advisor
and the advice of outside legal counsel, is reasonably likely to be consummated
without unreasonable delay or unusual conditions compared to the transactions
contemplated by this Agreement, and (iv) financing for the proposed transaction,
to the extent required, has been committed in all material respects to the same
extent that Parent's financing referred to in Section 5.6 has been committed.
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(d) In addition to the obligations set forth in Section 6.3(b),
the Company shall promptly advise Parent orally and in writing of any
Acquisition Proposal and of any request for information which may relate to an
Acquisition Proposal, or any inquiry with respect to or which could lead to any
Acquisition Proposal, and the material terms and conditions of such request,
Acquisition Proposal or inquiry. The Company will keep Parent fully and timely
informed of the status and details (including amendments or proposed amendments)
of any such request, Acquisition Proposal or inquiry.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1. HSR Act. Within seven days after the date of this
Agreement, the Company and Parent shall each file notifications under the HSR
Act in connection with the Merger and the transactions contemplated hereby (and
make any required filings with any applicable foreign antitrust authorities) and
respond as promptly as practicable to any inquiries received from the FTC and
the Antitrust Division for additional information or documentation and to
respond as promptly as practicable to all inquiries and requests received from
any state Attorney General or other Governmental Authority in connection with
antitrust matters. The Company shall promptly take or commit to take all actions
reasonably requested by Parent to obtain all consents, waivers, approvals,
authorizations or orders from the FTC, the Antitrust Division and any state
Attorney General or other Governmental Authority in connection with the
consummation of the transactions contemplated by this Agreement, provided,
however, that the Company shall not be required to dispose of any material
assets prior to the Effective Time.
Section 7.2. Company Proxy Statement. As promptly as practicable after
the execution of this Agreement, the Company shall prepare and file with the SEC
proxy materials which shall constitute the preliminary Company Proxy Statement
relating to the adoption of the Merger Agreement and approval of the
transactions contemplated hereby by the stockholders of the Company. The Company
shall use its reasonable best efforts to respond promptly to any SEC comments
with respect to the Company Proxy Statement and to cause the Company Proxy
Statement and the form of proxy, which shall comply as to form with all
applicable laws, to be mailed to the Company's stockholders at the earliest
practicable date. The Company shall notify Parent promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff
for amendments or supplements to the Company Proxy Statement or for additional
information and will supply Parent with copies of all correspondence between the
Company or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Company Proxy Statement or the
Merger. Prior to filing the Company Proxy Statement with the SEC, the Company
shall provide reasonable opportunity for Parent to review and comment upon the
contents of the Company Proxy Statement and shall not include therein or omit
therefrom any information to which Parent shall reasonably object. The Company
Proxy Statement shall include the recommendation of the Board of Directors of
the Company in favor of the Merger, subject to Section 6.3. If at any time prior
to the Company Stockholders Meeting any event or circumstances relating to the
Company, Parent or Merger Subsidiary or any of their respective affiliates, or
their respective officers or directors, should be
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discovered by the Company, Parent or Merger Subsidiary that should be set forth
in an amendment or supplement to the Company Proxy Statement, the Company shall
promptly inform Parent, and Parent shall promptly inform the Company, as the
case may be, and the Company shall promptly prepare and file with the SEC, and
mail such amendment or supplement to the stockholders of the Company in
accordance with the procedures (including the procedures relating to review and
comment by Parent) set forth above.
Section 7.3. Stockholders Meeting. The Company shall call and hold a
stockholders meeting for the purpose of voting upon the approval of the Merger
and this Agreement as soon as practicable after the date on which the Company
Proxy Statement shall have been cleared by the SEC. Subject to the provisions of
Section 6.3, the Company shall solicit from its stockholders proxies in favor
of, necessary or advisable to obtain, approval of the Merger and this Agreement,
and the Board of Directors shall recommend that holders of Shares vote in favor
of and approve the Merger and this Agreement at the Company Stockholders
Meeting.
Section 7.4. Access to Information; Confidentiality. The Company shall
(and shall cause each of its Subsidiaries to) afford to the officers, employees,
accountants, counsel, potential lenders and other representatives of Parent
reasonable access, during the period prior to the Effective Time, to all
properties, books, Contracts and records of the Company and its Subsidiaries
and, during such period, the Company shall (and shall cause each of its
Subsidiaries to) furnish promptly to Parent all information concerning the
Company's business, properties and personnel as Parent may reasonably request,
and the Company shall make available to Parent the appropriate individuals
(including attorneys, accountants and other professionals) for discussions of
the Company's business, properties and personnel as Parent may reasonably
request. Parent acknowledges that certain of the information which may be made
available to it is proprietary and includes confidential information. Prior to
the Effective Time and for two years after any termination of this Agreement,
Parent will hold and will use its best efforts to cause its officers, directors,
employees, accountants, counsel, consultants, advisors and agents (collectively,
"Representatives") to hold, in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of Law, all
confidential documents and information concerning the Company ("Evaluation
Material") furnished in connection with the transactions contemplated by this
Agreement. In the event that Parent or any of its Representatives becomes
legally compelled (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or similar process) to disclose any of the
Evaluation Material, Parent shall provide the Company with prompt prior written
notice of such requirement so that the Company may seek a protective order or
other appropriate remedy and/or waive compliance with the terms of this
Agreement. In the event that such protective order or other remedy is not
obtained, or that the Company waives compliance with the provisions hereof,
Parent shall furnish only that portion of the Evaluation Material which Parent
is advised by written opinion of counsel is legally required and exercise best
efforts to obtain assurance that confidential treatment will be accorded such
Evaluation Material. The term "Evaluation Material" does not include any
information that (i) at the time of disclosure or thereafter is generally
available to the public (other than as a result of its disclosure directly or
indirectly by Parent or its Representatives), (ii) was available to Parent on a
non-confidential basis from a source other than the Company or its advisors,
provided that such source is not and was not
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bound by a confidentiality agreement regarding the Company, or (iii) has been
independently acquired or developed by Parent without violating any of its
obligations under this Section 7.4. At any time upon written request by the
Company, Parent shall promptly return to the Company all copies of the
Evaluation Material in its possession or in the possession of its
Representatives, and Parent will promptly destroy all copies of any analyses,
compilations, studies or other documents prepared by or for Parent or its
Representatives or for Parent's or their use which reflect or contain any
Evaluation Material.
Section 7.5. Consents; Approvals. The Company and Parent shall each use
all reasonable efforts to obtain promptly all consents, waivers, approvals,
authorizations or orders (including, without limitation, from all Governmental
Authorities), and the Company and Parent shall promptly make all filings
(including, without limitation, with all Governmental Authorities) required in
connection with the authorization, execution and delivery of this Agreement by
the parties hereto and the consummation by them of the transactions contemplated
hereby. The Company and Parent shall furnish each other with all information
required to be included in the Company Proxy Statement or any application or
other filing to be made pursuant to the rules and regulations of any
Governmental Authority in connection with the transactions contemplated by this
Agreement.
Section 7.6. Indemnification and Insurance.
(a) The Certificate of Incorporation and ByLaws of the Surviving
Corporation shall contain provisions with respect to indemnification similar in
all material respects to those set forth in the Certificate of Incorporation and
ByLaws of the Company on the date of this Agreement, which provisions shall not
be amended, repealed or otherwise modified for a period of six years after the
Effective Time in any manner that would adversely affect in any material respect
the rights thereunder of individuals who at any time prior to the Effective Time
were directors or officers of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), unless such modification is
required by law, and each of Parent and the Surviving Corporation shall assume
all of the obligations with respect to the Company's director and officer
indemnification agreements referenced in Section 4.11 of the Company Disclosure
Schedule; provided, however, that nothing in this Section 7.6 shall prevent the
Surviving Corporation from effecting any merger, reorganization or
consolidation, provided that the surviving corporation in respect of any such
merger, reorganization or consolidation is obligated to comply with this Section
7.6.
(b) For a period of six years from and after the Effective Time,
the Surviving Corporation shall use commercially reasonable efforts to cause to
be maintained in effect the liability insurance policies for directors and
officers most recently maintained by the Company; provided that the Surviving
Corporation may substitute therefor policies, including policies maintained by
an affiliate of the Surviving Corporation, providing substantially the same
combined coverage and containing terms and conditions substantially the same as
the coverage most recently maintained by the Company; and provided further that
in no event shall the Surviving Corporation be required to expend more than an
amount per year equal to 150% of the
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current annual premiums paid by the Company to maintain or procure insurance
coverage required by this Section 7.6.
Section 7.7. Employee Benefits.
(a) For a period of at least one year after the Effective Time,
Parent shall maintain employee benefits and programs, including a 401(k) plan,
for employees of the Company and its Subsidiaries that are in the aggregate not
materially less favorable than those being provided to such employees on the
date hereof. To the extent any employee benefit plan, program or policy of
Parent is made available to the employees of the Surviving Corporation or its
Subsidiaries, service with the Company and its Subsidiaries by any employee
prior to the Effective Time shall be credited in determining such employee's
eligibility and vesting levels (but not for accrual of benefits) under such
plans, programs and policies of Parent. For the remainder of the calendar year
which includes the Effective Time, Parent shall maintain each cafeteria plan
within the meaning of Section 125 of the Code so as to prevent the forfeiture of
unused participant account balances under each such plan. This Section 7.7 shall
not apply to salaries and bonuses, the amounts of which Parent shall have the
right to establish in its sole discretion, subject to any existing employment
agreements.
(b) The Company shall take such actions as are necessary to
terminate the Company's Employee Stock Purchase Plan ("ESPP") effective June 30,
1998. After such termination, employee participants in such ESPP shall not be
permitted to continue to have the Company withhold any monies for investment in
such ESPP and each such employee shall be permitted to elect to receive invested
cash or purchase Shares in accordance with the terms of such plan.
Section 7.8. Notification of Certain Matters. In the event that any
representations and warranties of the Company shall be or become materially
untrue such that the condition set forth in Section 8.2(a) would not be
satisfied, the Company shall promptly provide Parent and Merger Subsidiary with
a revised Company Disclosure Schedule, if necessary. In the event that the
representations and warranties of Parent and Merger Subsidiary shall be or
become materially untrue such that the condition set forth in Section 8.3(a)
would not be satisfied, Parent and Merger Subsidiary shall promptly notify the
Company. No such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
Section 7.9. Further Action. Upon the terms and subject to the
conditions hereof, each of the parties hereto shall use all reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement, to
obtain in a timely manner all necessary waivers, consents, approvals, orders and
authorizations and to effect all necessary registrations and filings, and
otherwise to satisfy or cause to be satisfied all conditions precedent to its
obligations under this Agreement with the objective of consummating the Merger
by September 15, 1998.
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Section 7.10. Public Announcements. The initial press release relating
to this Agreement shall be a joint press release and thereafter Parent and the
Company shall consult with each other before issuing any press release, making
any written public statement or any oral public announcement (other than
discussions with analysts in the ordinary course of business) with respect to
the Merger or this Agreement, and shall not issue any such press release or make
any such public statement without the prior consent of the other party, which
shall not be unreasonably withheld or delayed; provided, however, that any party
may, without the prior consent of the other party, issue such press release or
make such public statement as may upon the advice of counsel be required by Law
or the rules and regulations of the Nasdaq National Market ("NNM"), if it has
used all reasonable effort to consult with the other party.
Section 7.11. Transfer Taxes. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding all Taxes which become payable by the
Company or its Subsidiaries in connection with the transactions contemplated
hereby that are required or permitted to be filed on or before the Effective
Time. Parent, Merger Subsidiary and the Company agree that the Company (prior to
the Merger) and the Surviving Corporation (following the Merger) will pay any
real property transfer or gains tax, stamp tax, stock transfer tax or other
similar tax imposed on the Merger or the surrender of the Company Common Stock
pursuant to the Merger (collectively, "Transfer Taxes"), excluding any Transfer
Taxes as may result from the transfer of beneficial interests in the Shares or
Options other than as a result of the Merger, and any penalties or interest with
respect to the Transfer Taxes. The Company shall cooperate with Merger
Subsidiary and Parent in the filing of any returns with respect to the Transfer
Taxes.
Section 7.12. Accountant's Letters. Upon reasonable notice from Parent,
the Company shall use its reasonable efforts to cause KPMG Peat Marwick to
deliver to Parent, a letter covering such matters as are reasonably requested by
Parent and as are customarily addressed in accountant's "comfort" letters.
Section 7.13. NNM Listing. The Company shall use its reasonable efforts
to continue the quotation of the Company Common Stock on the NNM during the term
of this Agreement.
Section 7.14. Financing. Parent shall use its reasonable efforts to
consummate the financing contemplated in Section 5.6 hereof.
Section 7.15. Retention Policy. The Company shall adopt a retention
policy developed in consultation with, and reasonably acceptable to, Parent
providing for benefits of up to $1,100,000 to be paid to the Company's
employees.
ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.1. Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction or, to
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the extent permitted by applicable Law, waiver at or prior to the Effective Time
of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the requisite vote of the stockholders of the
Company;
(b) HSR Act. The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated and any
formal investigations relating to the Merger that may have been opened by the
FTC or the Antitrust Division or any foreign antitrust authority (by means of a
written request for additional information or otherwise) shall have been
terminated; and
(c) No Injunctions. No temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Merger shall be in effect.
Section 8.2. Additional Conditions to Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to effect the Merger
are also subject to the following conditions:
(a) Representations and Warranties. (i) The representations and
warranties of the Company contained in this Agreement that are qualified by
materiality or Material Adverse Effect shall have been true and correct, and the
representations and warranties of the Company contained in this Agreement that
are not so qualified shall have been true and correct in all material respects
as of the date of this Agreement, and (ii) the representations and warranties of
the Company contained in this Agreement that are qualified by materiality or
Material Adverse Effect shall be true and correct, and the representations and
warranties of the Company contained in this Agreement that are not so qualified
shall be true and correct, except where the failure to be true and correct has
not had and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company, as of the Effective Time,
as though made on and as of the Effective Time, except (A) for changes expressly
contemplated by this Agreement or by the Company Disclosure Schedule, (B) where
the failure to be true and correct arises from or relates to conditions
applicable generally to the Company's industry, including, without limitation,
economic and political developments, and (C) those representations and
warranties which address matters only as of a particular date (which shall have
been true and correct as of such date). Parent and Merger Subsidiary shall have
received a certificate to the effect that the foregoing condition has been
satisfied signed by the President and the Chief Financial Officer of the
Company, which certificate shall specifically indicate the manner in which any
representation or warranty of the Company contained in this Agreement, if any,
is not true and correct in all respects as of the Effective Time, as though made
on and as of the Effective Time.
(b) Agreements and Covenants. The Company shall have performed
and complied in all material respects with all material agreements and covenants
required by this Agreement to be performed or complied with by it on or prior to
the Effective Time and Parent
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and Merger Subsidiary shall have received a certificate to such effect signed by
the President and Chief Financial Officer.
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by the Company for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby,
including, without limitation, all consents required under any Contract to which
the Company or any of its Subsidiaries is a party or by which any of them or
their properties or assets are bound, shall have been obtained and made by the
Company, except where the failure to receive such consents, waivers, approvals,
authorizations or orders would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company as certified by
the President and Chief Financial Officer of the Company.
(d) No Litigation. There shall not be pending by any Governmental
Authority any claim, suit, action or proceeding (or by any other Person, any
claim, suit, action or proceeding which the Board of Directors of Parent, based
upon advice from counsel, believes has a reasonable likelihood of success) (i)
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by this Agreement or seeking material
damages in connection therewith, or (ii) seeking to prohibit or limit the
ownership or operation by Parent, the Company or any of their respective
Subsidiaries of any material portion of the business or assets of the Company,
Parent or any of their respective Subsidiaries, as a result of the Merger or any
of the other transactions contemplated by this Agreement.
(e) Financing. Parent shall have received the proceeds of the
financing pursuant to the commitment letters referred to in Section 5.6 hereof.
(f) Legal Opinion. Parent shall have received a legal opinion,
dated the Closing date, of Stradling Yocca Carlson & Rauth in substantially the
form attached as Exhibit 8.2(f).
(g) Dissenting Shares. The number of Dissenting Shares shall not
exceed 10% of the outstanding Shares.
(h) Company Proxy Statement. The Company shall have filed with
and have cleared by the SEC the Company Proxy Statement.
Section 8.3. Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. (i) The representations and
warranties of Parent and Merger Subsidiary contained in this Agreement that are
qualified by materiality or Material Adverse Effect shall have been true and
correct, and the representations and warranties of Parent and Merger Subsidiary
contained in this Agreement that are not so qualified shall have been true and
correct in all material respects as of the date of this Agreement, and (ii) the
representations and warranties of Parent and Merger Subsidiary contained in this
Agreement that
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are qualified by materiality or Material Adverse Effect shall be true and
correct, and the representations and warranties of Parent and Merger Subsidiary
contained in this Agreement that are not so qualified shall be true and correct,
except where the failure to be true and correct has not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent, as of the Effective Time, as though made on and as of
the Effective Time, except (A) for changes expressly contemplated by this
Agreement, (B) where the failure to be true and correct arises from or relates
to conditions applicable generally to Parent's industry, including, without
limitation, economic and political developments, and (C) those representations
and warranties which address matters only as of a particular date (which shall
have been true and correct as of such date). The Company shall have received a
certificate to the effect that the foregoing condition has been satisfied signed
by the President and the Chief Financial Officer of Parent, which certificate
shall specifically indicate the manner in which any representation or warranty
of Parent and Merger Subsidiary contained in this Agreement, if any, is not true
and correct in all respects as of the Effective Time, as though made on and as
of the Effective Time.
(b) Agreements and Covenants. Parent and Merger Subsidiary shall
have performed or complied in all material respects with all material agreements
and covenants required by this Agreement to be performed or complied with by
them on or prior to the Effective Time, and the Company shall have received a
certificate to such effect signed by the President and the Chief Financial
Officer of Parent.
ARTICLE IX
TERMINATION
Section 9.1. Termination. This Agreement may be terminated and the
Merger contemplated herein abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not have
been consummated by October 30, 1998; provided, however, that the right to
terminate this Agreement under this Section 9.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before such
date; or
(c) by either Parent or the Company, if any of the conditions to
such party's obligation to consummate the transactions contemplated by this
Agreement shall have become impossible to satisfy; or
(d) by either Parent or the Company if a court of competent
jurisdiction shall have issued a nonappealable final order, decree or ruling
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger (provided that the right to terminate this Agreement under this
Section 9.1(d) shall not be available to any party who has not
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complied with Section 7.9 and such noncompliance materially contributed to the
issuance of any such order, decree or ruling or the taking of such action); or
(e) by either Parent or the Company if the requisite vote of the
stockholders of the Company shall not have been obtained at the Company
Stockholders Meeting; or
(f) by Parent, if the Board of Directors of the Company shall
withdraw, modify or change its approval or recommendation of this Agreement or
the Merger in a manner adverse to Parent or approves or recommends an
Acquisition Proposal or the Company shall have entered into an agreement with
respect to an Acquisition Proposal; or
(g) by the Company if (i) the Board of Directors pursuant to
Section 6.3(b) withdraws or modifies its approval or recommendation of this
Agreement or the Merger, and (ii) the Company simultaneously with terminating
this Agreement pays Parent all Expenses and the Initial Termination Fee in cash
and otherwise complies with the provisions of Section 6.3(b); or
(h) by the Company if (i) the Company enters into a definitive
agreement in accordance with Section 6.3(b), and (ii) the Company simultaneously
with terminating this Agreement pays Parent all Expenses and the Initial
Termination Fee in cash and otherwise complies with the provisions of Section
6.3(b); or
(i) by either Parent or the Company if the Company's Board of
Directors shall have requested but not have received an opinion from Morgan
Stanley dated as of the date of the Company Proxy Statement to the effect that
the consideration to be received by the stockholders of the Company is fair from
a financial point of view; or
(j) by Parent or the Company, upon a material breach of any
covenant or agreement on the part of the Company or Parent, respectively, set
forth in this Agreement, which breach has not been cured within ten business
days following receipt by the breaching party of notice of such breach from the
other party, such that the conditions set forth in Section 8.2(b) or Section
8.3(b), as the case may be, would not be satisfied; or
(k) by Parent, if any representation or warranty of the Company
shall be untrue such that the condition set forth in Section 8.2(a) would not be
satisfied, or by the Company, if any representation or warranty of Parent shall
be untrue such that the condition set forth in Section 8.3(a) would not be
satisfied.
Any party desiring to terminate this Agreement shall give written notice thereof
and the reasons therefor to the other parties hereto.
Section 9.2. Effect of Termination.
(a) In the event of the termination of this Agreement in
accordance with Section 9.1, this Agreement shall forthwith become void and
there shall be no liability on the part of any party hereto or any of its
directors, officers, stockholders or affiliates except as set forth in Sections
6.3, 7.4 or 9.3 hereof; provided that nothing herein shall relieve any party
from
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<PAGE> 43
liability for any material breach of any covenant, agreement, representation or
warranty contained in this Agreement. The right of any party hereto to terminate
this Agreement pursuant to Section 9.1 shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any party
hereto, any Person controlling any such party or any of their respective
officers, directors, employees, accountants, consultants, legal counsel, agents
or other representatives, whether prior to or after the execution of this
Agreement.
(b) The Company shall immediately pay, or cause to be paid, by
wire transfer to Parent the sum of (i) all of Parent's out-of-pocket expenses
reasonably incurred in connection with the transactions contemplated by this
Agreement (the "Expenses"), and (ii) $2,000,000 (the "Initial Termination Fee")
upon demand if (A) Parent or the Company terminates this Agreement in accordance
with Section 9.1(e) and prior to such termination the Company shall have failed
to reaffirm publicly its recommendation regarding the approval of the Merger or
this Agreement within three business days after receipt of Parent's written
request to do so, (B) Parent terminates this Agreement in accordance with
Section 9.1(f), or (C) the Company terminates this Agreement in accordance with
Section 9.1(g), (h) or (i); provided that (x) if this Agreement is so terminated
prior to the date which is 30 days from the date hereof, Parent's Expenses shall
not exceed $500,000, (y) if this Agreement is so terminated on or after the date
which is 30 days from the date hereof but prior to the date which is 60 days
from the date hereof, Parent's Expenses shall not exceed $650,000, and (z) if
this Agreement is so terminated on or after the date which is 60 days from the
date hereof, Parent's Expenses shall not exceed $750,000. The amount of Expenses
so payable shall be the amount set forth in an estimate delivered by Parent upon
termination subject to upward or downward adjustment as provided in the next
sentence. In the event that Parent's actual out-of-pocket expenses, as
documented in reasonable detail, exceed such estimate, the amount of any such
excess (subject to the limitations in the preceding sentence) shall be payable
upon demand, and in the event that Parent's actual expenses are less than the
amount of such estimate, Parent shall promptly refund such lesser amount. If
this Agreement is terminated for the reasons set forth in the first sentence of
this Section 9.2(b), on the earlier to occur of (i) the date which is 90 days
from the date of such termination or (ii) the consummation by the Company of an
Acquisition Proposal, the Company shall immediately pay, or cause to be paid, by
wire transfer to Parent $1,000,000. In addition to all other amounts otherwise
payable under this Section 9.2(b), if the Company consummates an Acquisition
Proposal at any time prior to the second anniversary of the termination of this
Agreement for the reasons set forth in the first sentence of this Section
9.2(b), the Company shall immediately pay, or cause to be paid, by wire transfer
to Parent $1,000,000. The Initial Termination Fee and the payments referred to
in the preceding two sentences are collectively referred to herein as the
"Termination Fee."
Section 9.3. Fees and Expenses. Except as set forth in Section 9.2, all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; provided that if this
Agreement is terminated for any reason other than a breach by Parent and (i)
Parent has not been paid its Expenses pursuant to Section 9.2(b), and (ii)
within 18 months of this Agreement being so terminated the Company enters into a
definitive agreement concerning an Acquisition Proposal, the Company shall
immediately pay or cause to be paid, in same day
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<PAGE> 44
funds to Parent all of Parent's Expenses. Without limiting the generality of the
foregoing, the Company shall be responsible for and pay the reasonable fees and
expenses for its legal, financial and accounting advisors, including, without
limitation, Morgan Stanley, KPMG Peat Marwick, Stradling Yocca Carlson & Rauth
and Ropes & Gray, and all filing, printing and other fees and expenses relating
to the Company Proxy Statement and the Company Stockholders Meeting.
ARTICLE X
GENERAL PROVISIONS
Section 10.1. Effectiveness of Representations and Warranties. The
representations and warranties in this Agreement shall terminate at the
Effective Time. In the event of any inconsistency between the statements made in
the body of this Agreement and those contained in the Company Disclosure
Schedule (other than an express exception to a specifically identified
statement), those in this Agreement shall control.
Section 10.2. Survival. The provisions of this Agreement shall terminate
at the Effective Time or upon termination of this Agreement pursuant to Section
9.1, as the case may be, except that (i) if the Merger is consummated, the
agreements in Articles I and II and Sections 7.6, 7.7, 7.10 and 7.11 shall
survive the Effective Time indefinitely unless otherwise limited to specific
periods in accordance with their respective terms, and (ii) the agreements in
Sections 9.2 and 9.3 shall survive termination of this Agreement indefinitely.
Section 10.3. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made if and when delivered personally or by overnight courier to the
parties at the following addresses or sent by electronic transmission, with
confirmation received, to the telecopy numbers specified below (or at such other
address or telecopy number for a party as shall be specified by like notice):
(a) If to Parent or Merger Subsidiary:
Schwinn Holdings Corporation
c/o Questor Management Company
4000 Town Center, Suite 530
Southfield, MI 48075
(248) 213-2200
(248) 213-2215 (facsimile)
Attention: Robert E. Shields, President
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<PAGE> 45
With a copy to:
Drinker Biddle & Reath LLP
1345 Chestnut Street, Suite 1100
Philadelphia, Pennsylvania 19107-3496
215-988-2700
215-988-2757 (facsimile)
Attention: John C. Bennett, Jr., Esq.
(b) If to the Company:
GT Bicycles, Inc.
2001 East Dyer Road
Santa Ana, California 92705
(714) 481-7100
(714) 481-7115 (facsimile)
Attention: Michael C. Haynes, President and Chief
Executive Officer
With copies to:
Stradling Yocca Carlson & Rauth Ropes & Gray
660 Newport Center Drive, Suite 1600 One International Place
Newport Beach, California 92660-6441 Boston, Massachusetts 02110
949-725-4000 (617) 951-7000
949-725-4100 (facsimile) (617) 951-7050 (facsimile)
Attention: K.C. Schaaf, Esq. Attention: David C. Chapin,
Esq.
Section 10.4. Certain Definitions. The following terms, as used herein,
have the following meanings:
"Acquisition Proposal" shall have the meaning as is set forth in Section
6.3(a) of the Agreement.
"Agreement" shall have the meaning as set forth in the Preamble.
"Antitrust Division" shall mean the Antitrust Division of the Department
of Justice.
"Bank of America Warrant" shall have the meaning as set forth in Section
2.1(f)
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, as amended.
"Closing" shall have the meaning as set forth in Section 1.2 of the
Agreement.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
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<PAGE> 46
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning as set forth in the Preamble.
"Company Balance Sheet" shall mean the consolidated balance sheet of the
Company as of December 31, 1997 set forth in the Company's most recent Form 10-K
included in the Company Securities Documents.
"Company Common Stock" shall have the meaning as set forth in the
Preamble.
"Company Disclosure Schedule" shall mean the written disclosure schedule
delivered on or prior to the date hereof by the Company to Parent and Merger
Subsidiary that is arranged in paragraphs corresponding to the numbered and
lettered paragraphs corresponding to the numbered and lettered paragraphs
contained in the Agreement.
"Company Form 10-K" shall have the meaning as set forth in Section 4.7
of the Agreement.
"Company Form 10-Q" shall have the meaning as set forth in Section 4.7
of the Agreement.
"Company Preferred Stock" shall have the meaning as set forth in Section
4.5 of the Agreement.
"Company Proxy Statement" shall have the meaning as set forth in Section
4.9 of the Agreement.
"Company Securities" shall have the meaning as set forth in Section
4.5(b) of the Agreement.
"Company Securities Documents" shall have the meaning as set forth in
Section 4.7
"Company Stockholders Meeting" shall mean the meeting of the holders of
the Company Common Stock held for the purposes of approving the Agreement and
the Merger and any adjournment thereof.
"Constituent Corporations" shall have the meaning as set forth in
Section 1.1 of the Agreement.
"Contract" shall mean any legally binding contract, agreement,
indenture, arrangement, instrument, commitment or understanding, whether written
or oral.
"Current Real Property" shall have the meaning as is set forth in
Section 4.22(b) of the Agreement.
"DGCL" shall have the meaning as set forth in the Preamble.
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<PAGE> 47
"Dissenting Shares" shall have the meaning as set forth in Section 2.3
of the Agreement.
"DOL" shall mean the Department of Labor.
"Effective Time" shall have the meaning as set forth in Section 1.3 of
the Agreement.
"Employee Benefit Plans" shall have the meaning as set forth in Section
4.20(a) of the Agreement.
"Employee Pension Benefit Plan" shall have the meaning as set forth in
Section 4.20(b) of the Agreement.
"Environmental Laws" means all Laws concerning or relating to industrial
hygiene or protection of human health or the environment or to emissions,
discharges or releases of pollutants, contaminants or other Hazardous Substances
or wastes into the environment, including without limitation ambient air,
surface water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or other Hazardous Substances or wastes or
the clean-up or other remediation thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" shall have the meaning as set forth in Section 4.20(a)
of the Agreement.
"ESPP" shall have the meaning as set forth in Section 7.7(b) of the
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Agent" shall have the meaning as set forth in Section 2.2 of
the Agreement.
"Exchange Fund" shall have the meaning as set forth in Section 2.2 of
the Agreement.
"Expenses" shall have the meaning as set forth in Section 9.2(b) of the
Agreement.
"Evaluation Material" shall have the meaning as set forth in Section 7.4
of the Agreement.
"Former Real Property" shall have the meaning as is set forth in Section
4.22(c) of the Agreement.
"FTC" shall mean the Federal Trade Commission
"GAAP" shall have the meaning as set forth in Section 4.8 of the
Agreement.
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<PAGE> 48
"Governmental Authority" shall mean any Federal, state, local or foreign
government or any court, tribunal, administrative agency or commission or other
governmental or regulatory official, authority or agency.
"Hazardous Substances" shall mean any substance regulated under any
Environmental Laws including, without limitation, any substance which is: (A)
petroleum, asbestos or asbestos-containing material, or polychlorinated
biphenyls; (B) defined, designated or listed as a "Hazardous Substance" pursuant
to Sections 307 and 311 of the Clean Water Act, 33 U.S.C. Section1317, 1321,
Section 101(14) of CERCLA, 42 U.S.C. Section9601; (C) listed in the United
States Department of Transportation Hazardous Material Tables, 49 C.F.R.
Section172.101; (D) defined, designated or listed as a "Hazardous Waste" under
Section 1004(5) of the Resource and Conservation and Recovery Act, 42 U.S.C.
6903(5).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Initial Termination Fee" shall have the meaning as set forth in Section
9.2(b) of the Agreement.
"Intellectual Property Rights" shall have the meaning as set forth in
Section 4.18 of the Agreement.
"IRS" shall mean the Internal Revenue Service.
"Law" shall mean any law (including, without limitation, principles of
common law), statute, regulation, License, judgment, order, award or other
decision or requirement of any arbitrator, court or Governmental Authority
(domestic or foreign).
"Liabilities" shall have the meaning as set forth in Section 4.23 of the
Agreement.
"Licenses" shall have the meaning as set forth in Section 4.1 of the
Agreement.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect to such asset.
"Material Adverse Effect" means, with respect to any Person, any change,
effect or event that is or is reasonably likely to be (i) material and adverse
to the condition (financial or otherwise), business, properties, assets,
liabilities, results of operations, cash flows or prospects of such Person and
its Subsidiaries taken as a whole, or (ii) does or is reasonably likely to
materially impair the ability of such Person to perform its obligations under
this Agreement or otherwise materially threatens or impedes the consummation of
the Merger and the other transactions contemplated by this Agreement or the
conduct of the business of the Surviving Corporation.
"Merger" shall have the meaning as set forth in the Preamble.
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<PAGE> 49
"Merger Consideration" shall have the meaning as set forth in Section
2.1(c) of the Agreement.
"Merger Subsidiary" shall have the meaning as set forth in the Preamble.
"Morgan Stanley" shall mean Morgan Stanley & Co. Incorporated.
"NNM" shall mean the Nasdaq National Market as defined in Section 7.13
of the Agreement.
"Option" shall have the meaning as set forth in Section 2.1(e) of the
Agreement.
"Parent" shall have the meaning as set forth in the Preamble.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Investments" shall have the meaning as set forth in Section
2.2(g) of the Agreement.
"Person" means an individual, a corporation, a partnership, an
association, a trust, a limited liability company or any other entity or
organization, including a Governmental Authority.
"Products" shall have the meaning as set forth in Section 4.13 of the
Agreement.
"Representatives" shall have the meaning as set forth in Section 7.4 of
the Agreement.
"Response," "Removal" and "Remedial Action" shall have the meanings
ascribed to them in Sections 101(23)-101(25) of CERCLA, as amended by the
Superfund Amendments and Reauthorization Act, 42 U.S.C. Sections
9601(23)-9601(25).
"SEC" shall refer to the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Shares" shall have the meaning as set forth in the Preamble.
"Solvent" shall have the meaning as set forth in Section 5.11 of the
Agreement.
"Stockholders Agreement" shall have the meaning as set forth in the
Preamble.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof), (ii) any
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<PAGE> 50
partnership (a) the sole general partner or managing general partner of which is
such Person or a Subsidiary of such Person or (b) the only general partners of
which are such Person or of one or more Subsidiaries of such Person (or any
combination thereof), and (iii) with respect to the Company, any corporation,
association or other business entity which is included in the Company's
consolidated financial statements.
"Superior Proposal" shall have the meaning as is set forth in Section
6.3(b) of the Agreement.
"Superior Proposal Notice" shall have the meaning as is set forth in
Section 6.3(b) of the Agreement.
"Surviving Corporation" shall have the meaning as set forth in Section
1.1 of the Agreement.
"Tax or Taxes" shall mean any federal, foreign, state, county or local
taxes, charges, fees, levies, duties or other assessments, including, but not
limited to, all net income, gross income, sales and use, transfer, gains,
profits, excise, franchise, real and personal property, gross receipts, capital
stock, production, business and occupation, customs, disability, employment,
payroll, license, estimated, severance or withholding taxes or charges imposed
by any Governmental Authority, and includes any interest and penalties (civil or
criminal) on or additions to any such taxes.
"Tax Return" means a return or report, including accompanying schedules,
required to be supplied to a governmental entity with respect to Taxes
including, where permitted or required, combined or consolidated returns for a
group of entities and information returns.
"Termination Fee" shall have the meaning as set forth in Section 9.2(b)
of the Agreement.
"Transfer Taxes" shall have the meaning as set forth in Section 7.11 of
the Agreement.
Section 10.5. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that after approval
of the Merger by the stockholders of the Company, no amendment may be made which
by law requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
Section 10.6. Waiver. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) to the extent permitted by applicable Law,
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
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<PAGE> 51
Section 10.7. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 10.8. Specific Performance. The parties hereto agree that if for
any reason any party hereto shall have failed to perform its obligations under
this Agreement, then any other party hereto seeking to enforce this Agreement
against such nonperforming party, in addition to any damages and other remedies
available to it, shall be entitled to specific performance and injunctive and
other equitable relief, and the parties hereto further agree to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or other equitable relief.
Section 10.9. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible, in an acceptable manner, to the
end that transactions contemplated hereby are fulfilled to the extent possible.
Section 10.10. Entire Agreement. This Agreement (inclusive of the
Company Disclosure Schedule) constitutes the entire agreement and supersedes all
prior agreements and undertakings (including, without limitation, the letter
agreements between Parent and the Company dated as of December 10, 1997 and May
27, 1998) both oral and written, among the parties, or any of them, with respect
to the subject matter hereof.
Section 10.11. Assignment; Guarantee of Merger Subsidiary Obligations.
Parent and Merger Subsidiary may assign this Agreement in whole or in part to
any wholly-owned Subsidiary. The Company shall not assign this Agreement or any
rights hereunder, or delegate any obligations hereunder, without prior written
consent of Parent. Subject to the foregoing, this Agreement and the rights and
obligations set forth herein shall inure to the benefit of, and be binding upon,
the parties hereto, and each of their respective successor and assigns. Parent
guarantees the full and punctual performance by Merger Subsidiary and any
assignee of Parent or Merger Subsidiary of all the obligations hereunder of
Merger Subsidiary or such assignee.
Section 10.12. Parties In Interest. Except as expressly provided herein,
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, including, without limitation,
by way of subrogation.
Section 10.13. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
47
<PAGE> 52
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
Section 10.14. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware
applicable to contracts executed and fully performed within the State of
Delaware.
Section 10.15. 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.
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<PAGE> 53
IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
SCHWINN HOLDINGS CORPORATION
By: /s/ Kevin G. Keenley
--------------------------------
Name: Kevin G. Keenley
Title: Vice President and Treasurer
SPK ACQUISITION CORPORATION
By: /s/ Kevin G. Keenley
--------------------------------
Name: Kevin G. Keenley
Title: Vice President and Treasurer
GT BICYCLES, INC.
By: /s/ Michael Haynes
--------------------------------
Name: Michael Haynes
Title: Chief Executive Officer
49
<PAGE> 1
STOCKHOLDERS AGREEMENT
dated as of June 22, 1998
by and among
Schwinn Holdings Corporation,
GT Bicycles, Inc.
and
Each of the Individuals and Entities
Listed on the Signature Page Hereto
<PAGE> 2
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made and entered
into as of June 22, 1998, by and among Schwinn Holdings Corporation, a Delaware
corporation ("Parent"), GT Bicycles, Inc., a Delaware corporation (the
"Company"), and the individuals and entities listed on Schedule A attached
hereto (each of such individuals and entities being a "Stockholder" and,
collectively, the "Stockholders").
WHEREAS, Parent, SPK Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of Parent ("Merger Subsidiary"), and the Company,
propose to enter into an Agreement and Plan of Merger dated as of the date
hereof (as the same may be amended, the "Merger Agreement") providing for the
merger of Merger Subsidiary with and into the Company (the "Merger"), upon the
terms and subject to the conditions set forth in the Merger Agreement and in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL"); and
WHEREAS, as a condition and inducement to Parent's willingness to
enter into the Merger Agreement, Parent has requested that that each Stockholder
enter into this Agreement.
NOW, THEREFORE, to induce Parent to enter into, and in consideration
of its entering into, the Merger Agreement, and in consideration of the premises
and the representations, warranties and agreements contained herein, the
parties, intending to be legally bound, hereby agree as follows (capitalized
terms used but not defined herein shall have the meanings as set forth in the
Merger Agreement):
1. Covenants of each Stockholder. Each Stockholder, severally and not
jointly, agrees as follows:
(a) Vote for the Merger. At any meeting of stockholders of the
Company called to vote upon the Merger or the Merger Agreement or at any
adjournment thereof or in any other circumstances upon which a vote, consent or
other approval with respect to the Merger and the Merger Agreement is sought,
the Stockholder shall vote (or cause to be voted) all shares of Company Common
Stock beneficially owned by the Stockholder or over which the Stockholder has
any voting power (together with any other shares of Company Common Stock
acquired by the Stockholder or over which the Stockholder acquires voting power
after the date hereof, the "Subject Shares") in favor of the Merger, the
adoption by the Company of the Merger Agreement and the approval of the terms
thereof and, to the extent presented to the stockholders of the Company for a
vote, each of the other transactions contemplated by the Merger Agreement or
this Agreement. The Stockholder hereby waives any appraisal rights granted
pursuant to Section 262 of the DGCL (or any successor provision) to which it may
otherwise be entitled as a result of the Merger or the other transactions
contemplated by the Merger Agreement.
(b) Vote Against Acquisition Proposals. At any meeting of
stockholders of the Company or at any adjournment thereof or in any other
circumstances upon which a vote,
-1-
<PAGE> 3
consent or other approval of the stockholders of the Company is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares against (i) any
merger or merger agreement (other than the Merger and the Merger Agreement),
consolidation, combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by the Company or
any other Acquisition Proposal, (ii) against any action or agreement that would
result in a breach in any material respect of any covenant, representation or
warranty or any other obligation of the Company under the Merger Agreement, and
(iii) any amendment of the Company's certificate of incorporation or by-laws or
other proposal or transaction involving the Company or any of its subsidiaries,
which amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement or change in any manner
the voting rights of any class of capital stock of the Company. Subject to
Section 9, the Stockholder shall not commit or agree to take any action
inconsistent with the foregoing.
(c) Transfer of Subject Shares, Options and Warrants. Except pursuant
to this Agreement, the Stockholder shall not, without the prior written consent
of Parent, (i) sell or otherwise transfer or dispose of the Subject Shares, any
options or warrants to purchase shares of Company Common Stock ("Options" and
"Warrants," respectively) or any shares of Company Common Stock subject to any
Option or Warrant to any person, other than pursuant to the terms of the Merger,
(ii) enter into any voting arrangement, whether by proxy, power-of-attorney,
voting agreement, voting trust or otherwise, in connection with, directly or
indirectly, any Acquisition Proposal, or (iii) commit or agree to take any of
the foregoing actions.
(d) No Solicitation. The Stockholder shall not, nor shall it permit
any of its affiliates or any director, officer, employee, investment banker,
attorney or other adviser or representative of any of the foregoing to, (i)
directly or indirectly, solicit, initiate or encourage the submission of, any
Acquisition Proposal, or (ii) subject to the terms of Section 9, directly or
indirectly participate in any discussions or negotiations regarding, or furnish
to any person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal.
(e) Stockholder Assistance. Subject to Section 9, the Stockholder
shall use its reasonable best efforts to assist and cooperate with the parties
to the Merger Agreement to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by the Merger Agreement, subject, in each case to the requirements
of applicable laws.
(f) Termination of Covenants. The covenants and agreements set forth
in this Section 1 shall terminate and be of no further force and effect upon the
earlier to occur of (i) the Effective Time of the Merger, or (ii) the date of
termination of the Merger Agreement.
2. Option to Purchase Subject Shares.
(a) Subject to the terms and conditions set forth herein, each
Stockholder hereby grants to Parent an irrevocable option (the "Parent Option")
to purchase all of such
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<PAGE> 4
Stockholder's Subject Shares at a price per share in cash (the "Purchase Price")
equal to $8.00 per Subject Share.
(b) Parent may exercise the Parent Option in whole but not in part,
at any time after the occurrence of a Purchase Event (as defined below);
provided, however, that, to the extent the Parent Option shall not have been
previously exercised, it shall terminate and be of no further force and effect
upon the earlier to occur of (i) the Effective Time of the Merger, (ii) the date
of termination of the Merger Agreement pursuant to Sections 9.1(a) and 9.1(d)
thereof, or (iii) six months from the date of termination of the Merger
Agreement pursuant to any other Section thereof (such date, the "Termination
Date"). Notwithstanding the foregoing, if the Parent Option cannot be exercised
before the Termination Date as a result of any injunction, order or similar
restraint issued by a court of competent jurisdiction, the Parent Option shall
expire (and the Termination Date shall be so extended until the earlier of) (i)
on the 30th business day after such injunction, order or restraint shall have
been dissolved, or (ii) when such injunction, order or restraint shall have
become permanent and no longer subject to appeal, as the case may be.
(c) As used herein, a "Purchase Event" shall mean any of the
following events:
(i) any person (other than Parent or any of its
subsidiaries) shall have commenced (as such term is defined in Rule 14d-2 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), or shall
have filed a registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to, a tender offer or exchange offer to
purchase any Company Common Stock such that, upon consummation of such offer,
such person would have Beneficial Ownership (as defined below) of 50% or more of
the then outstanding shares of Company Common Stock;
(ii) the Company or any of its subsidiaries shall or shall
have entered into, authorized, recommended, proposed or publicly announced an
intention to enter into, authorize, recommend, or propose, an agreement,
arrangement or understanding with any person (other than Parent or any of its
subsidiaries) to, or any person (other than Parent or any of its subsidiaries)
shall have publicly announced a bona fide intention to effect any Acquisition
Proposal with the Company;
(iii) any person (other than Parent or any of its
subsidiaries, and other than a Stockholder) shall have acquired Beneficial
Ownership or the right to acquire Beneficial Ownership of 50% or more of the
outstanding shares of the Company Common Stock;
(iv) the Company's Board of Directors (or any committee
thereof) (A) shall have withdrawn, modified or changed its recommendation
regarding the approval of the Merger or the Merger Agreement or the transactions
contemplated thereby in a manner adverse to Parent, (B) shall have recommended
to the stockholders of the Company any Acquisition Proposal, or (C) shall have
resolved, or entered into any agreement, to do any of the foregoing;
(v) with respect to a particular Stockholder, such
Stockholder shall have breached in any material respect any of its obligations
under this Agreement;
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<PAGE> 5
(vi) the Company shall have delivered a Superior Proposal
Notice.
(d) As used herein, the terms "Beneficial Ownership," "Beneficial
Owner" and "Beneficially Own" shall have the meanings ascribed to them in Rule
13d-3 under the Exchange Act. As used herein, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(e) In the event Parent wishes to exercise the Parent Option, it
shall deliver to each Stockholder at the address set forth on Schedule A, a
written notice (the date of which being herein referred to as the "Notice Date")
specifying a place and date not earlier than two business days nor later than 30
calendar days from the Notice Date for the closing of such purchase; provided
that if the closing of the purchase and sale pursuant to the Parent Option (the
"Closing") cannot be consummated by reason of any applicable judgment, decree,
order, law or regulation, the period of time that otherwise would run pursuant
to this sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and, provided further that, without
limiting the foregoing, if prior notification to or approval of any regulatory
authority is required in connection with such purchase, Parent and, if
applicable, each Stockholder, shall promptly file the required notice or
application for approval and shall expeditiously process the same (and each
Stockholder shall cooperate in a commercially reasonable manner with Parent in
the filing of any such notice or application and the obtaining of any such
approval), and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which, as the case may be, (i) any
required notification period has expired or been terminated, or (ii) such
approval has been obtained, and in either event, any requisite waiting period
has passed.
(f) At the Closing, Parent shall pay to each Stockholder the
aggregate Purchase Price for the shares of Company Common Stock purchased from
such Stockholder pursuant to the exercise of the Parent Option. At such Closing,
simultaneously with the delivery of the Purchase Price, each Stockholder shall
transfer to Parent good, valid and marketable title to, and shall deliver to
Parent a certificate or certificates representing, the number of shares of
Company Common Stock purchased by Parent, registered in the name of Parent or a
nominee designated in writing by Parent (or if it is not possible to have such
registration completed prior to Closing, the certificates delivered shall be
accompanied by appropriate stock power(s) in form reasonably satisfactory to
Parent), which shares shall be fully paid and non-assessable and free and clear
of all Liens, rights of first refusal or offer, proxies, voting trusts or
agreements, understandings or arrangements or other encumbrances of any kind
whatsoever other than any restrictions under the Securities Act or the Exchange
Act.
(g) In the event of any change in Company Common Stock by reason of a
stock dividend, split-up, recapitalization, merger, consolidation,
reorganization, combination, exchange of shares or similar transaction, the type
and number of shares or securities subject to the Parent Option, and the
Purchase Price therefor, shall be adjusted appropriately so that Parent shall
receive upon exercise of the Parent Option the same class and number of
outstanding shares or other securities or property that Parent would have
received in respect of Company Common Stock if the Parent Option had been
exercised immediately prior to such event, or the record date therefor, as
applicable.
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<PAGE> 6
(h) In the event that Parent has purchased the Subject Shares
pursuant to the Parent Option and, within 180 days after the date of such
purchase, Parent or any affiliate thereof sells, transfers, exchanges or
disposes of any of the Subject Shares acquired upon exercise of the Parent
Option other than in connection with the consummation of an Acquisition Proposal
or a transaction with an affiliate of Parent (a "Disposition") then, within two
business days after the closing of such Disposition, Parent shall tender and pay
to each Stockholder, in immediately available funds, their respective pro rata
share (calculated based on the respective amount of the Subject Shares purchased
from each Stockholder pursuant to the Parent Option) of 50% of the Net Profit
realized by Parent in connection with such Disposition. As used in this Section
2(h), "Net Profit" shall mean an amount equal to the excess, if any, of (i) the
gross amount realized by Parent from a Disposition over (ii) the aggregate
purchase price paid by Parent with respect to the Subject Shares subject to such
Disposition, with such excess being reduced by the sum of (A) all reasonable
out-of-pocket fees, costs and expenses incurred by Parent and its affiliates in
connection with such Disposition (including, without limitation, all fees, costs
and expenses of counsel) and (B) all customary brokerage fees and commissions,
if any, incurred in connection with such Disposition.
3. Registration Rights. Upon exercise of the Parent Option, Parent shall
be entitled to have the Subject Shares purchased thereby registered under the
Securities Act of 1933, as amended, pursuant to the terms of Section 7 of the
Amendment and Restatement of Stockholders Agreement dated as of November 12,
1993 among GT Holdings, Inc., GT Acquisition Corporation, Bain Capital Fund IV,
L.P., Bain Capital Fund IV-B, L.P., BCIP Associates, BCIP Trust Associates,
L.P., Jackson National Life Insurance Company and each of the persons designated
as the Management Stockholders on the signature page of such agreement (the
"Stockholders Agreement"), which terms are incorporated herein by reference and
made a part hereof. For purposes of such registration rights, Parent shall be
deemed to own 100% of the Investor Shares (as defined in the Stockholders
Agreement).
4. Representations and Warranties of each Stockholder. Each Stockholder
hereby, severally and not jointly, represents and warrants to Parent as of the
date hereof as follows:
(a) Authority. The Stockholder has all requisite power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by the
Stockholder (or in the case of any Stockholder which is a trust, by the trustee
on behalf of such trust, or in the case of any Stockholder which is a
partnership by a general partner on behalf of such partnership) and constitutes
a valid and binding obligation of the Stockholder enforceable against the
Stockholder in accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
and compliance with the terms hereof will not, conflict with or result in any
violation of or default (with or without notice or lapse of time or both) under
any provision of, any trust agreement, loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise, license, judgment, order, notice, decree, statute, law, ordinance,
rule or regulation applicable to the
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<PAGE> 7
Stockholder. If the Stockholder is married and the Stockholder's Subject Shares,
Options or Warrants constitute community property, or the Stockholder otherwise
needs spousal approval for this Agreement to be legal, valid and binding, this
Agreement has been duly authorized, executed and delivered by, and constitutes a
valid and binding obligation of, the Stockholder's spouse, and is enforceable
against such spouse in accordance with its terms. No trust which is a
Stockholder requires the consent of any beneficiary to the execution and
delivery of this Agreement or to the consummation of the transactions
contemplated hereby.
(b) Shares, Options and Warrants. The Stockholder is the sole
beneficial and (except as set forth on Schedule A) record owner of, and has good
and marketable title to, the shares of Company Common Stock, Options and
Warrants set forth opposite such Stockholder's name on Schedule A, free and
clear of any Liens. The Stockholder does not own, of record or beneficially, any
shares of capital stock of the Company other than the shares of Company Common
Stock set forth opposite such Stockholder's name on Schedule A and the shares of
Company Common Stock subject to any Options or Warrants set forth opposite such
Stockholder's name on Schedule A. The Stockholder has the sole right to vote
such shares of Company Common Stock, and none of such shares of Company Common
Stock is subject to any voting trust or other agreement, arrangement or
restriction, except as contemplated by this Agreement or as otherwise set forth
on Schedule A. Except as set forth in Schedule A, the Stockholder does not own
or hold any rights to acquire any additional shares of capital stock of the
Company or any interest therein or any voting rights with respect to any
additional shares of Company Common Stock.
5. Representations and Warranties of Parent. Parent hereby represents
and warrants to each Stockholder that Parent has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by Parent and constitutes a valid and binding obligation of Parent
enforceable against Parent in accordance with its terms.
6. Further Assurances. Each Stockholder shall, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other instruments as Parent may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
7. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties without the
prior written consent of the other parties, except that Parent may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to any direct or indirect wholly-owned subsidiary of Parent; provided,
however, that no such assignment shall relieve Parent of its obligations
hereunder if such assignee does not perform such obligations. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties and their respective heirs, successors and
assigns.
8. General Provisions.
(a) Expenses. Each of the parties hereto shall pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder,
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<PAGE> 8
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel, except that the Company shall pay the
reasonable fees of Ropes & Gray incurred by the Stockholders in connection with
this Agreement.
(b) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(c) Notice. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (which
is confirmed) or sent by overnight courier (providing proof of delivery) to
Parent and the Company in accordance with the notification provision contained
in the Merger Agreement and to the Stockholders at their respective addresses
set forth on Schedule A (or at such other address for a party as shall be
specified by like notice).
(d) Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
each party need not sign the same counterpart.
(f) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and (ii) is not intended to confer upon any person other than the parties hereto
and Merger Subsidiary, which is an express beneficiary of this Agreement, any
rights or remedies hereunder.
(g) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware regardless of the laws
that might otherwise govern under applicable principles of conflicts of law.
(h) Public Announcements. The Stockholders and Parent shall consult
with each other and use reasonable efforts to agree upon the text of any press
release, before issuing any press release or otherwise making public statements
with respect to the transactions contemplated by this Agreement and the Merger
Agreement and shall not issue any such press release or make any such public
statement without the prior consent of the other parties hereto, which consent
shall not be unreasonably withheld or delayed, except as may be required by
applicable law (including requirements of stock exchanges and other similar
regulatory bodies).
(i) Severability. If any term, provision, covenant or restriction
herein, or the application thereof to any circumstance, shall, to any extent, be
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions herein and
the application thereof to any other circumstances, shall remain in full force
and effect, shall not in any way be affected, impaired or invalidated, and shall
be enforced to the fullest extent permitted by law, and the parties hereto shall
negotiate in good faith
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<PAGE> 9
a substitute term or provision that comes as close as possible to the
invalidated and unenforceable term or provision, and that puts each party in a
position as nearly comparable as possible to the position each such party would
have been in but for the finding of invalidity or unenforceability, while
remaining valid and enforceable.
9. Stockholder Capacity. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his or her capacity as such director or
officer and nothing herein shall limit or affect any action taken by such person
in his or her capacity as a director or officer. Each Stockholder signs solely
in his or her capacity as the record holder and beneficial owner of, or the
trustee of a trust whose beneficiaries are the beneficial owners of, or the
general partner of a partnership which is the beneficial owner of such
Stockholder's Subject Shares, Options and Warrants and nothing herein shall
limit or affect any actions taken by a Stockholder in his or her capacity as an
officer or director of the Company. Nothing in this Agreement shall be deemed,
prior to exercise of the Parent Option, to constitute a transfer of the
beneficial ownership of the Subject Shares by any Stockholder.
10. Enforcement. The parties agree, and the beneficiaries of each trust
which is a party hereto have agreed, that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to a temporary restraining
order and preliminary and permanent injunctive relief to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the Untied States located in the State of Delaware or
in a Delaware state court, this being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the parties hereto
(a) consents to submit to the personal jurisdiction of any United States court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (b) agrees that such party will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
(c) agrees that such party will not bring any action relating to this Agreement
or the transactions contemplated hereby in any court other than a United States
court sitting in the State of Delaware or a Delaware state court, and (d) waives
any right to trial by jury with respect to any claim or proceeding related to or
arising out of this Agreement or any of the transactions contemplated hereby.
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<PAGE> 10
IN WITNESS WHEREOF, Parent has caused this Agreement to be signed by
its officer thereunto duly authorized and each Stockholder has signed this
Agreement or has caused this Agreement to be signed by its officer thereunto
duly authorized, all as of the date first written above.
SCHWINN HOLDINGS CORPORATION GT BICYCLES, INC.
By: /s/ KEVIN G. KEENLEY By: /s/ MICHAEL HAYNES
- -------------------------------- --------------------------------
Name: Kevin G. Keenley Name: Michael Haynes
Title: Vice President and Treasurer Title: Chief Executive Officer
STOCKHOLDERS:
BAIN CAPITAL FUND IV, L.P. BAIN CAPITAL FUND IV-B, L.P.
By: Bain Capital Partners IV, L.P. By: Bain Capital Partners IV, L.P.
By: Bain Capital Investors, Inc. By: Bain Capital Investors, Inc.
By By:
- -------------------------------- --------------------------------
Name: Name:
Title: Managing Director Title: Managing Director
BCIP ASSOCIATES BCIP TRUST ASSOCIATES, L.P.
By: By:
- -------------------------------- --------------------------------
Name: Name:
Title: Authorized Partner Title: Authorized Partner
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<PAGE> 11
Schedule A - Stockholders
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Number of Shares of Company of Company
Name and of Company Common Stock Common Stock
Address Common Stock Underlying Options Underlying Warrants
<S> <C> <C> <C>
Bain Capital Fund IV, L.P. 969,342 0 0
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02118
Bain Capital Fund IV-B, L.P. 1,109,328 0 0
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02118
BCIP Associates 102,388 0 0
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02118
BCIP Trust Associates, L.P. 49,023 0 0
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02118
</TABLE>
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<PAGE> 1
QUESTOR PORTFOLIO COMPANY AND GT BICYCLES, INC. TO MERGE
BOULDER, Colo., June 22 -- Schwinn Holdings Corporation, a portfolio
company of Questor Partners Fund, L.P. and the parent of Schwinn Cycling &
Fitness Inc., and GT Bicycles, Inc. (Nasdaq:GTBX) announced today that a
definitive agreement has been reached providing for the merger of GT into a
subsidiary of Schwinn, and the acquisition by Schwinn or an affiliate of all of
the outstanding common stock of GT for a cash consideration of $8.00 per share.
Questor will provide equity and has received commitments to finance the debt
portion of the transaction.
The proposed merger is subject to approval by stockholders of GT and
regulatory agencies and certain other terms and conditions. Certain investment
funds affiliated with Bain Capital, Inc. which hold approximately 22% of the
outstanding shares of common stock of GT have agreed to vote their shares in
favor of the proposed merger. Such funds have also granted Schwinn an option to
purchase their shares of GT upon the occurrence of certain events. The
transaction is expected to be completed in the third quarter of 1998. GT has
about 10 million common shares outstanding.
GT, based in Santa Ana, Calif., designs, manufacturers and markets
bicycles sold under the GT, Powerlite, Robinson and Dyno brand names. Its
Riteway Products distribution network is a leading distributor of bicycles and
related parts and accessories. Approximately 30 percent of GT's 1997 revenues of
$217 million were generated outside the U.S.
The privately owned Schwinn, headquartered in Boulder, Colo., began
business in 1895. It designs, produces and markets its bicycles under the
Schwinn and Yeti brands. The company also designs and markets a wide range of
fitness equipment under the Schwinn name, including stationary bikes, steppers,
rowers, and weight equipment.
"GT perfectly complements Schwinn and has tremendous distribution
capabilities both domestically and abroad," said Dan Lufkin, a principal of
Questor and chairman of Schwinn. "A combined Schwinn and GT will be ideally
suited to meet the needs of our present dealers and will have significant growth
opportunities in the international market," Lufkin said. "The companies already
have global reputations for their quality brands, and with projected combined
1998 revenues of approximately $400 million, the consolidated company will rank
among the largest companies in the bicycle and fitness equipment market,
worldwide."
"The GT management team and employees have done a wonderful job of
building the company and the GT brand image. The two companies have known and
respected each other for many years," said Thomas J. Mason, CEO of Schwinn. "As
partners we can offer the independent dealers an unprecedented range of quality
products and world-class service."
"We have closely followed the impressive turnaround Schwinn has achieved
in the past couple of years," said Mike Haynes, CEO of GT. "We are excited about
the prospects of blending the capabilities of two of the great names in the
industry."
Lufkin said that the merged companies would maintain their own unique
identity, with separate product development, marketing, and sales organizations.
<PAGE> 2
Questor acquired Schwinn in September 1997. The company has made
significant progress since emerging from bankruptcy protection in 1994, and
Questor has accelerated the company's recovery by adopting aggressive marketing,
acquisition and expansion programs.
Questor Management Company, Southfield, Mich., manages Questor Partners
Fund, which was established in 1995 to acquire underperforming or "special
situation" companies, including the non-core divisions or subsidiaries of
Fortune 1000 corporations. In addition to Schwinn, the fund's portfolio includes
AP Automotive Systems, Toledo, Ohio, and Channel Master, Inc., Smithfield, N.C.
Questor recently sold its Ryder TRS holding to Budget Group, Inc. in a $750
million transaction.
2
