<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
GT Bicycles, Inc.
-----------------
(Name of Issuer)
Common Stock, $.001 par value per share
---------------------------------------
(Title of Class and Securities)
3622H101
-------------------------------------
(CUSIP Number of Class of Securities)
Robert E. Shields
Schwinn Holdings Corporation
c/o Questor Management Company
4000 Town Center, Suite 530
Southfield, MI 48075
(248) 213-2200
(Name and Address and Telephone Number to Person Authorized
to receive Notices and Communications)
with a copy to:
John C. Bennett, Jr.
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107-3496
(215) 988-2700
June 22, 1998
-----------------------------
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e),13d-1(f)
or 13d-(g) check the following box: [ ]
<PAGE> 2
CUSIP No. 3622H101 Page 2 of 57
(1) Names of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
Schwinn Holdings Corporation 52-2055603
(2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) | |
(b) | |
(3) SEC Use Only
(4) Source of Funds (See Instructions) OO (See Item 3 herein)
(5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) | |
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power None
Shares
Beneficially (8) Shared Voting Power 2,230,081 (See Item 5 herein)
Owned by
Each (9) Sole Dispositive Power None (See Item 5 herein)
Reporting
Person (10) Shared Dispositive Power None
With
(11) Aggregate Amount Beneficially Owned by Each Reporting Person 2,230,081
shares (See Item 5 herein)
(12) Check Box if the Aggregate Amount in Row 11 Excludes Certain Shares (See
Instructions) | |
(13) Percent of Class Represented by Amount in Row 11 22.6%
(14) Type of Reporting Person (See Instructions) CO
<PAGE> 3
Page 3 of 57
This Schedule 13D is being filed in connection with the proposed
merger (the "Merger") of SPK Acquisition Corporation, a Delaware corporation
("Merger Sub"), which is a wholly-owned subsidiary of Schwinn Holdings
Corporation, a Delaware corporation ("Schwinn"), with and into GT Bicycles,
Inc., a Delaware corporation ("GT"), pursuant to which GT is to become a
wholly-owned subsidiary of Schwinn. In connection with the execution of an
Agreement and Plan of Merger, dated as of June 22, 1998, by and among Schwinn,
GT and Merger Sub (the "Merger Agreement"), Schwinn and certain stockholders of
GT (each a "Stockholder" and collectively, the "Stockholders") have entered into
a Stockholders Agreement dated as of June 22, 1998 (the "Stockholders
Agreement"), under which the Stockholders: (i) have agreed, among other things,
to vote their shares of Common Stock, $.001 par value per share, of GT ("GT
Common Stock") for adoption and approval of the Merger Agreement and the
transactions contemplated therein and (ii) have granted Schwinn an option to
purchase their shares of GT Common Stock at $8.00 per share in certain
circumstances.
Item 1. Security and Issuer
This Schedule 13D relates to the GT Common Stock. The address of
the principal executive offices of GT is 2001 East Dyer Road, Santa Ana, CA
92705
Item 2. Identity and Background.
This Schedule 13D is being filed by Schwinn. Schwinn is a holding
company which acquired, in September 1997 and currently owns, all of the
outstanding capital stock of Schwinn Cycling & Fitness Inc. Schwinn Cycling &
Fitness Inc., headquartered in Boulder, Colorado, designs, produces and markets
bicycles under the Schwinn and Yeti brands and also designs and markets a wide
range of fitness equipment under the Schwinn name, including stationary bikes,
steppers, rowers and weight equipment.
Certain information concerning the directors and executive
officers of Schwinn and the directors, executive officers and/or general
partners of the various Questor entities controlling Schwinn (the "Questor
Entities") is set forth in Exhibit A hereto and is incorporated herein by
reference.
During the last five years, neither Schwinn nor any of the
Questor Entities nor, to the knowledge of Schwinn, any director or executive
officer of Schwinn or any director, executive officer or general partner of any
of such Questor Entities, has been convicted in any criminal proceeding
(excluding traffic violations and similar misdemeanors), or been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
as a result of which it or he was or is subject to a judgement, decree or final
order enjoining future violations of , or prohibiting or mandating activities
subject to, federal or state securities laws or which found any violation with
respect to such laws.
Each of the individuals referred to in Exhibit A is a United
States citizen
<PAGE> 4
Page 4 of 57
Item 3. Source and Amount of Funds or Other Consideration.
As set forth in the Stockholders Agreement, the consideration
given by Schwinn in connection with the execution and delivery of such Agreement
by the Stockholders who are a parties thereto was Schwinn's execution and
delivery of the Merger Agreement.
If the Option becomes exercisable and is exercised by Schwinn, it
is presently contemplated that the exercise price would be paid out of internal
funds of Schwinn and/or funds provided by the Questor Entities.
Item 4. Purpose of Transaction.
(a)-(j): As of June 22, 1998, Schwinn and GT executed the Merger
Agreement pursuant to which, among other things, upon the effective date of the
Merger: (i) the separate existence of Merger Sub will cease, (ii) each
outstanding share of GT Common Stock (other than shares held by GT, Schwinn and
its affiliates and dissenting shares) will be converted into $8.00 in cash,
(iii) GT will become a wholly-owned subsidiary of Schwinn and (iv) certain
changes will be made in the Certificate of Incorporation, By-laws and directors
and officers of GT. Consummation of the transactions contemplated by the Merger
Agreement is subject to a number of conditions set forth in Article VIII of the
Merger Agreement, including, without limitation, the securing of any necessary
regulatory approvals and consummation by Schwinn of the financing contemplated
in the Merger Agreement. As a result of the Merger, the GT Common Stock will
become eligible for termination of registration pursuant to Section 12(g)(4) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
application will be made to remove the GT Common Stock from listing on NASDAQ.
The foregoing is qualified in its entirety by reference to the Merger Agreement
(including, without limitation, Articles II, III and VIII thereof), a copy of
which Agreement is attached as Exhibit B hereto and incorporated herein by
reference in its entirety.
Pursuant to the provisions of the Merger Agreement, Bain Capital
Fund IV, L.P., Bain Capital Fund IV-B, L.P., BCIP Associates and BCIP Trust
Associates, L.P. (the "Stockholders") entered into the Stockholders Agreement
with Schwinn. A copy of the Stockholders Agreement is attached as Exhibit C
hereto and is incorporated herein by reference in its entirety. Pursuant to
Section 1 of the Stockholders Agreements, each Stockholder has agreed to vote
all shares of GT Common Stock owned by such Stockholder for adoption and
approval of the Merger Agreement and the transactions contemplated therein and
to vote against acquisition proposals of third parties. The voting provisions of
the Stockholders Agreement are to terminate upon the earlier of the
effectiveness of the Merger and the termination of the Merger Agreement.
Pursuant to Section 2 of the Stockholders Agreement, the
Stockholders also have granted to Schwinn the option to purchase all of the
Stockholders' shares of GT Common Stock at a price of $8.00 per share (the
"Option"). The Option will not become exercisable unless and until certain
specified events ("Purchase Events") occur, including: (i) commencement of a
third party tender offer, or the filing of a registration statement for
<PAGE> 5
Page 5 of 57
an exchange offer, the consummation of which would result in a third party
having beneficial ownership of 50% or more of the outstanding GT Common Stock,
(ii) GT or its Board of Directors (including any committee of the Board) shall
have taken, or evidenced the intention of taking, certain specified actions to
recommend or approve an acquisition proposal from a person other than Schwinn,
or the Board shall have withdrawn its recommendation of the Merger, (iii) any
person (other than Schwinn and the Stockholders) shall have acquired, or shall
have acquired the right to acquire, beneficial ownership of 50% or more of the
outstanding GT Common Stock or (iv) with respect to a particular Stockholder,
such Stockholder shall have materially breached its obligations under the
Stockholders Agreement.
The Option terminates on the earliest to occur of: (w) the
effective time of the Merger, (x) the termination of the Merger Agreement by
mutual consent, (y) the entry of a nonappealable court order restraining,
enjoining or prohibiting the Merger, and (z) six months following termination of
the Merger Agreement for any other reason. If Schwinn exercises the Option,
purchases the Stockholders' shares of GT Common Stock and within 180 days
thereafter sells or otherwise disposes of such shares at a net profit, Section
2(h) of the Stockholders Agreement requires Schwinn to pay the Stockholders 50%
of such net profit; provided, however, that such obligation to split the net
profits with the Stockholders will not apply to a transaction with an affiliate
of Schwinn or to a sale or other disposition by Schwinn in connection with the
consummation of an "Acquisition Proposal" (as defined in Section 6.3 of the
Merger Agreement) which would include, without limitation, the acquisition of GT
by a third party and any tender offer or exchange offer for capital stock of GT.
The Stockholders Agreement further provides, among other things,
that the Stockholders will not sell or otherwise dispose of the GT Common Stock
owned by them other than pursuant to the terms of the Merger, or enter into any
voting arrangement (whether by proxy, voting trust or otherwise) in connection
with any other Acquisition Proposal.
The foregoing is qualified in its entirely by reference to the
Stockholders Agreement (including, without limitation, Sections 1 and 2
thereof), a copy of which is attached as Exhibit C hereto and incorporated
herein by reference.
Item 5. Interest in Securities of the Issuer.
(a)-(e): Pursuant to the Stockholders Agreement, Schwinn may be
deemed to have beneficial ownership (in accordance with Rule 13d-3 under the
Exchange Act) of 2,230,081 shares, or 22.6%, of the GT Common Stock outstanding
as of June 22, 1998. Subject to the voting, option and nonalienation provisions
of the Stockholders Agreement described in response to Item 4 above, the
Stockholders have retained the right to vote and the power to direct the vote,
and the right to receive and the power to direct the receipt of dividends from,
or the proceeds from their sale of, their shares of GT Common Stock.
Other than as described in response to Item 4 above (which
description is incorporated herein by reference), there have been no
transactions in shares of GT Common Stock within the past 60 days by Schwinn or
the other persons named in response to Item 2 above.
<PAGE> 6
Page 6 of 57
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
The descriptions of the Merger Agreement and the Stockholders
Agreements set forth in response to Item 4 above and the texts of the Merger
Agreement and the Stockholders Agreement attached as exhibits hereto are
incorporated herein by reference in their entirety.
Item 7. Material to be Filed as Exhibits.
A. Certain information concerning the directors and executive
officers of Schwinn and the directors, executive officers and/or general
partners of the Questor Entities.
B. Agreement and Plan of Merger, dated as of June 22, 1998, by
and among Schwinn, Merger Sub and GT.
C. Stockholders Agreement, dated as of June 22, 1998, by and
among Schwinn, GT and the Stockholders.
<PAGE> 7
Page 7 of 57
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth is true, complete and correct.
Dated: June 30, 1998
SCHWINN HOLDINGS CORPORATION
By: /s/ Robert E. Shields
------------------------------
Name: Robert E. Shields
President
<PAGE> 8
Page 8 of 57
EXHIBIT INDEX
Exhibit A - Certain information concerning the directors and executive officers
of Schwinn and the directors, executive officers and/or general partners of the
Questor Entities.
Exhibit B - Agreement and Plan of Merger, dated as of June 22, 1998, by and
among Schwinn, Merger Sub and GT.
Exhibit C - Stockholders Agreement, dated as of June 22, 1998, by and among
Schwinn, GT and the Stockholders.
<PAGE> 9
Page 9 of 57
Exhibit A
Certain Information Concerning the Directors and Executive Officers of
Schwinn and the Directors, Executive Officers and/or
General Partners of the Questor Entities
The directors and executive officers of Schwinn are as follows:
Robert E. Shields - President and a Director
Kevin G. Keenley - Vice President, Treasurer and a Director
Frederick L. McDonald, II - Secretary and a Director
The majority of the outstanding capital stock of Schwinn is owned by
Questor Partners Fund, L.P., a Delaware limited partnership ("Questor
Partners"), and Questor Side-by-Side Partners, L.P., a Delaware Limited
Partnership ("Questor SBS").
Questor Partners and Questor SBS were formed to acquire interests in, among
others, underperforming companies and other special situations. The general
partner of Questor Partners is Questor General Partner, L.P., a limited
partnership organized under the laws of Delaware ("QGP"), whose sole business is
to act as a general partner of Questor Partners. The general partner of QGP is
Questor Principals, Inc., a Delaware corporation, the business of which is to
act as general partner of QGP and of Questor SBS. Day-to-day management of
Questor Partners and Questor SBS is conducted by Questor Management Company, a
Delaware corporation.
The sole directors and shareholders of Questor Principals, Inc. and
Questor Management Company are Jay Alix, Melvyn N. Klein, Dan W. Lufkin and
Edward L. Scarff. Mr. Alix, who also serves as President and Chief Executive
Officer of Questor Principals, Inc. and Questor Management Company, is the
founder and for the past five years has been a principal of Jay Alix &
Associates, a nationally-recognized turnaround and crisis management firm based
in Southfield, Michigan, with additional offices in New York and Chicago. Mr.
Klein is a merchant banker and attorney who currently acts, and for the past
five years has acted, as the managing general partner of GKH Investments, L.P.,
a $550 million equity investment partnership. Mr. Lufkin was a co-founder of
Donaldson, Lufkin & Jenrette and is currently, and for the past five years has
been, a private investor. Mr. Scarff is a former president of Transamerica
Corporation and is currently, and for the past five years has been, a private
investor. The executive officers of the Questor entities are Mr. Alix and Robert
E. Shields. Before joining the Questor entities in late 1994, Mr. Shields was a
partner in the Philadelphia-based law firm of Drinker Biddle & Reath LLP, where
at various times during his last five years at the firm he served as chief
financial officer, a managing partner and head of the firm's business and
finance group.
The principal offices of Questor Partners, Questor SBS, QGP and Questor
Principals, Inc. are located at 103 Springer Building, 3411 Silverside Road,
Wilmington, Delaware 19810. The principal offices of Questor Management Company
are located at 4000 Town Center, Suite 530, Southfield, Michigan 48075.
<PAGE> 10
Page 10 of 57
EXHIBIT B
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> 11
Page 11 of 57
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE MERGER...................................................... 1
Section 1.1. The Merger.................................................. 1
Section 1.2. Closing..................................................... 1
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 2
CORPORATIONS....................................................
Section 2.1. Conversion of Shares........................................ 2
Section 2.2. Surrender and Payment....................................... 3
Section 2.3. Dissenting Shares........................................... 4
Section 2.4. Lost Certificates........................................... 5
Section 2.5. Adjustment of Merger Consideration and Option 5
Consideration...............................................
ARTICLE III THE SURVIVING CORPORATION....................................... 5
Section 3.1. Certificate of Incorporation................................ 5
Section 3.2. Bylaws...................................................... 5
Section 3.3. Directors and Officers...................................... 5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... 6
Section 4.1. Corporate Existence and Power............................... 6
Section 4.2. Corporate Authorization..................................... 6
Section 4.3. Authorizations.............................................. 6
Section 4.4. Non-Contravention........................................... 6
Section 4.5. Capitalization.............................................. 7
Section 4.6. Subsidiaries................................................ 8
Section 4.7. SEC and Related Filings..................................... 8
Section 4.8. Company Financial Statements................................ 8
Section 4.9. Disclosure Documents; Information Supplied.................. 9
Section 4.10. Absence of Certain Changes.................................. 9
Section 4.11. Litigation.................................................. 9
Section 4.12. Compliance with Laws........................................ 9
Section 4.13. Product Design.............................................. 10
Section 4.14. Real Property............................................... 10
Section 4.15. Personal Property........................................... 10
Section 4.16. Contracts................................................... 10
Section 4.17. Insurance................................................... 11
Section 4.18. Intellectual Property....................................... 11
Section 4.19. Taxes....................................................... 11
Section 4.20. Employee Benefits........................................... 12
Section 4.21. Labor Matters............................................... 14
Section 4.22. Environmental Matters....................................... 14
Section 4.23. Absence of Undisclosed Liabilities.......................... 15
Section 4.24. Opinion of the Company's Financial Advisor.................. 15
Section 4.25. Brokers..................................................... 15
Section 4.26. Board Recommendation; Section 203; Required Vote............ 15
Section 4.27. Prior Negotiations.......................................... 16
</TABLE>
i
<PAGE> 12
Page 12 of 57
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 4.28. Certain Business Practices.................................. 16
Section 4.29. Affiliate Transactions...................................... 16
Section 4.30. Full Disclosure............................................. 16
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER 17
SUBSIDIARY......................................................
Section 5.1. Corporate Existence and Power............................... 17
Section 5.2. Corporate Authorization..................................... 17
Section 5.3. Authorizations.............................................. 17
Section 5.4. Non-Contravention........................................... 17
Section 5.5. Information Supplied........................................ 17
Section 5.6. Financing................................................... 18
Section 5.7. Brokers..................................................... 18
Section 5.8. Parent Financial Statements................................. 18
Section 5.9. Absence of Certain Changes.................................. 18
Section 5.10. Litigation.................................................. 18
Section 5.11. Solvency.................................................... 18
Section 5.12. Full Disclosure............................................. 18
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER.......................... 18
Section 6.1. Conduct of Business......................................... 18
Section 6.2. Notice of Certain Events.................................... 20
Section 6.3. No Solicitation............................................. 20
ARTICLE VII ADDITIONAL AGREEMENTS........................................... 22
Section 7.1. HSR Act..................................................... 22
Section 7.2. Company Proxy Statement..................................... 22
Section 7.3. Stockholders Meeting........................................ 22
Section 7.4. Access to Information; Confidentiality...................... 23
Section 7.5. Consents; Approvals......................................... 23
Section 7.6. Indemnification and Insurance............................... 23
Section 7.7. Employee Benefits........................................... 24
Section 7.8. Notification of Certain Matters............................. 24
Section 7.9. Further Action.............................................. 24
Section 7.10. Public Announcements........................................ 24
Section 7.11. Transfer Taxes.............................................. 25
Section 7.12. Accountant's Letters........................................ 25
Section 7.13. NNM Listing................................................. 25
Section 7.14. Financing................................................... 25
Section 7.15. Retention Policy............................................ 25
ARTICLE VIII CONDITIONS TO CLOSING........................................... 25
Section 8.1. Conditions to Obligation of Each Party to Effect the 25
Merger......................................................
Section 8.2. Additional Conditions to Obligations of Parent and Merger 26
Subsidiary..................................................
Section 8.3. Additional Conditions to Obligation of the Company.......... 27
ARTICLE IX TERMINATION..................................................... 27
Section 9.1. Termination................................................. 27
Section 9.2. Effect of Termination....................................... 28
Section 9.3. Fees and Expenses........................................... 29
ARTICLE X GENERAL PROVISIONS.............................................. 29
</TABLE>
ii
<PAGE> 13
Page 13 of 57
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 10.1. Effectiveness of Representations and Warranties............. 29
Section 10.2. Survival.................................................... 29
Section 10.3. Notices..................................................... 29
Section 10.4. Certain Definitions......................................... 30
Section 10.5. Amendment................................................... 33
Section 10.6. Waiver...................................................... 34
Section 10.7. Headings.................................................... 34
Section 10.8. Specific Performance........................................ 34
Section 10.9. Severability................................................ 34
Section 10.10. Entire Agreement............................................ 34
Section 10.11. Assignment; Guarantee of Merger Subsidiary Obligations...... 34
Section 10.12. Parties In Interest......................................... 34
Section 10.13. Failure or Indulgence Not Waiver; Remedies Cumulative....... 34
Section 10.14. Governing Law............................................... 34
Section 10.15. Counterparts................................................ 35
</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
iii
<PAGE> 14
Page 14 of 57
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):
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.
1
<PAGE> 15
Page 15 of 57
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.
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
2
<PAGE> 16
Page 16 of 57
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, 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
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
3
<PAGE> 17
Page 17 of 57
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.
(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,
4
<PAGE> 18
Page 18 of 57
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 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.
5
<PAGE> 19
Page 19 of 57
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") 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 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.
6
<PAGE> 20
Page 20 of 57
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").
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
7
<PAGE> 21
Page 21 of 57
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.
(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.
8
<PAGE> 22
Page 22 of 57
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 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 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
9
<PAGE> 23
Page 23 of 57
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 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.
10
<PAGE> 24
Page 24 of 57
(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 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 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
11
<PAGE> 25
Page 25 of 57
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,
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
12
<PAGE> 26
Page 26 of 57
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.
(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.
13
<PAGE> 27
Page 27 of 57
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.
(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.
(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;
14
<PAGE> 28
Page 28 of 57
(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 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,
15
<PAGE> 29
Page 29 of 57
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.
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.
16
<PAGE> 30
Page 30 of 57
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.
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
17
<PAGE> 31
Page 31 of 57
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 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. sec. 548(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
18
<PAGE> 32
Page 32 of 57
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 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 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,
19
<PAGE> 33
Page 33 of 57
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;
(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
20
<PAGE> 34
Page 34 of 57
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, 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
21
<PAGE> 35
Page 35 of 57
committed in all material respects to the same extent that Parent's financing
referred to in Section 5.6 has been committed.
(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 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
22
<PAGE> 36
Page 36 of 57
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 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),
23
<PAGE> 37
Page 37 of 57
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 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.
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
24
<PAGE> 38
Page 38 of 57
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 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.
25
<PAGE> 39
Page 39 of 57
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 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.
26
<PAGE> 40
Page 40 of 57
(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 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
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
27
<PAGE> 41
Page 41 of 57
(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 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
28
<PAGE> 42
Page 42 of 57
(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 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
29
<PAGE> 43
Page 43 of 57
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
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:
<TABLE>
<S> <C>
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.
</TABLE>
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.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning as set forth in the Preamble.
30
<PAGE> 44
Page 44 of 57
"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.
"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.
31
<PAGE> 45
Page 45 of 57
"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.
"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. sections 1317, 1321,
Section 101(14) of CERCLA, 42 U.S.C. sec. 9601; (C) listed in the United States
Department of Transportation Hazardous Material Tables, 49 C.F.R. sec. 172.101;
(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.
"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.
32
<PAGE> 46
Page 46 of 57
"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.
sec.sec. 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 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.
33
<PAGE> 47
Page 47 of 57
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.
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
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.
34
<PAGE> 48
Page 48 of 57
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.
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
35
<PAGE> 49
Page 49 of 57
EXHIBIT C
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> 50
Page 50 of 57
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, 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
-i-
<PAGE> 51
Page 51 of 57
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 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;
-ii-
<PAGE> 52
Page 52 of 57
(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;
(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.
-iii-
<PAGE> 53
Page 53 of 57
(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 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
-iv-
<PAGE> 54
Page 54 of 57
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, 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.
-v-
<PAGE> 55
Page 55 of 57
(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 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.
-vi-
<PAGE> 56
Page 56 of 57
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.
<TABLE>
<S> <C>
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: /s/ W. MITT ROMNEY By: /s/ W. MITT ROMNEY
- ------------------------------------------------ ------------------------------------------------
Name: W. Mitt Romney Name: W. Mitt Romney
Title: Managing Director Title: Managing Director
BCIP ASSOCIATES BCIP TRUST ASSOCIATES, L.P.
By: /s/ W. MITT ROMNEY By: /s/ W. MITT ROMNEY
- ------------------------------------------------ ------------------------------------------------
Name: W. Mitt Romney Name: W. Mitt Romney
Title: Authorized Partner Title: Authorized Partner
</TABLE>
-vii-
<PAGE> 57
Page 57 of 57
SCHEDULE A -- STOCKHOLDERS
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
NUMBER OF SHARES OF COMPANY OF COMPANY
OF COMPANY COMMON STOCK COMMON STOCK
NAME AND 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>
-viii-
