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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 16)
Zapata Corporation
------------------
(Name of Issuer)
Common Stock $0.01 Par Value
--------------------------------
(Title of Class of Securities)
989070R17
---------------
(CUSIP Number)
Gordon E. Forth, Esq.
WOODS, OVIATT, GILMAN, STURMAN & CLARKE
44 Exchange Street
Rochester, New York 14614
(716) 454-5370
--------------
(Name, Address and Telephone Number
of Person Authorized to Receive Notices
and Communications)
June 4, 1996
--------------------------------------
(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 which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box [ ]
Check the following box if a fee is being paid with the statement [ ]
Page 1 of 61 Pages
SCHEDULE 13D
CUSIP NO. 98907OR17 Page 2 of ___ Pages
- ---------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Malcolm I. Glazer Trust
- ---------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
(b)
- ---------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------
4 SOURCE OF FUNDS
- ---------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
- ---------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Florida
- ---------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 10,415,384
OWNED BY ------------------------------------
8 SHARED VOTING POWER
EACH
REPORTING PERSON
-0-
WITH ------------------------------------
9 SOLE DISPOSITIVE POWER
10,415,384
------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- ---------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
10,415,384
- ---------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
[ ]
- ---------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.3%
- ---------------------------------------------------------------
14 TYPE OF REPORTING PERSON
00
- ---------------------------------------------------------------
Page 2 of 61 Pages
SCHEDULE 13D
CUSIP NO. 98907OR17 Page 3 of ___ Pages
- ---------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Malcolm I. Glazer
S.S. No. ###-##-####
- ---------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
(b)
- ---------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- ---------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
- ---------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- ---------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 10,415,384
OWNED BY ------------------------------------
8 SHARED VOTING POWER
EACH
REPORTING PERSON
-0-
WITH ------------------------------------
9 SOLE DISPOSITIVE POWER
10,415,384
------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- ---------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
10,415,384
- ---------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
[ ]
- ---------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.3%
- ---------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- ---------------------------------------------------------------
Page 3 of 61 Pages
This Amendment No. 16 ("Amendment No. 16") amends and supplements the
Schedule 13D and statement attached thereto, as previously amended ("Schedule
13D"), filed on behalf of Malcolm I. Glazer ("Glazer") and The Malcolm Glazer
Trust ("Trust" and together with Glazer, the "Reporting Persons") relating to
the common stock, par value $.01 per share, of Zapata Corporation "(Zapata"),
and is hereby filed on behalf of the Reporting Persons. All capitalized terms
used in this Amendment No. 16 and not otherwise defined herein have the meanings
previously ascribed to such terms in the Schedule 13D.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to the Securities of the Issuer.
Item No. 6 is hereby amended by inserting the following paragraph
immediately after the last paragraph thereof:
Merger Agreement and Supplemental Agreement
On June 4, 1996, Zapata and Houlihan's Group, Inc. ("Houlihan's") announced
that they had entered into a definitive Plan and Agreement of Merger("Merger
Agreement") providing for Zapata's previously announced acquisition of
Houlihan's for a combination of cash and stock amounting to $8.00 per share.
Malcolm Glazer and members of his family and entites controlled by him own
approximately 73% of Houlihan's outstanding common stock. The Merger Agreement
was approved by a a special committee of Zapata directors, including Messers.
Ronald Lassiter, Robert V. Leffler, Jr. and W. George Loar (individually,
"Member" and collectively, the "Committee") and by a special committee of the
directors of Houlihan's who were not members of the Glazer family. The Merger
Agreement was also approved by the board of directors of Houlihan's.
The Merger Agreement provides that Houlihan's will be merged into a newly
organized subsidiary of Zapata. Holders of Houlihan's common stock may elect to
receive for their shares (i) $8.00 in cash, without interest, (ii) $8.00 in
market value of Zapata common stock ("Common Stock"), (iii) a combination of
$4.00 in cash, without interest, and $4.00 in market value of Common Stock or
(iv) a residual combination of cash and Common Stock (aggregating $8.00 in
value) determined so that the aggregate merger consideration to all holders of
Houlihan's common stock is equally divided between cash and Common Stock.
Page 4 of 61 Pages
Substantially contemporaneously with the execution of the Merger
Agreement, Zapata and Glazer entered into a Supplement Agreement (the
"Supplemental Agreement") pursuant to which Glazer agreed to elect to receive
under the Merger Agreement the residual combination of cash and stock with
respect to the shares owned by him and his affiliates. In the event that
stockholders not affiliated with Glazer as a group exercise elections to receive
such an amount of cash in the merger that the aggregate ownership of Common
Stock by Glazer and his affiliates after the merger would exceed 49.9% of
Zapata's then outstanding Common Stock, the cash elections of the unaffiliated
stockholders will be reduced pro rata, and the cash portion of the residual
elections will be increased pro rata, to assure that the foregoing 49.9%
ownership threshold is not exceeded. The market value of Common Stock will be
equal to the average of the closing price of Common Stock for the 20 trading
days beginning on the second trading day prior to the date of the meeting of
Houlihan's stockholders to be held to approve the transaction.
The merger is subject to, among other things, approval by the stockholders
of both companies, compliance with the Hart-Scott-Rodino Antitrust Improvements
Act, registration of the Common Stock issuable in the merger under the
Securities Act of 1933 and receipt of consent from Houlihan's lending bank or
the refinancing of Houlihan's outstanding bank debt. Subject to the
satisfaction of these conditions, it is expected that the transaction will close
in August 1996.
The Merger Agreement and the Supplemental Agreements are filed as Exhibits
17 and 18 hereto, respectively, and are incorporated herein by reference. The
foregoing descriptions are qualified in their entirety by reference to such
Exhibits.
Irrevocable Proxy
Substantially contemporaneously with the execution of the Merger Agreement,
the Reporting Persons, as required by the terms of a certain Agreement, dated
April 30, 1996, between the Reporting Persons and Zapata ("Standstill
Agreement"), executed and delivered an irrevocable proxy to the Members dated
June 4, 1996 ("Irrevocable Proxy").
Under the terms of the Irrevocable Proxy, the Members of the Committee and each
of them are authorized to vote all of the Zapata Shares held by the Reporting
Persons at the annual meeting of Zapata scheduled to be held on August 22, 1996,
and any adjournment thereof ("Meeting"), with respect to the issuance of Zapata
Common Stock in connection with Zapata's acquisition of Houlihan's pursuant to
the Merger Agreement ("Stock Issuance"). The Irrevocable Proxy empowers the
Members to vote the Reporting Persons' Shares only on the Stock Issuance. The
Irrevocable Proxy is deemed to be coupled with an interest and is irrevocable
under the terms of the Standstill Agreement until the first to occur of (a) the
adjournment of the Meeting at which the Stock Issuance is considered by the
Zapata shareholders or (b) Zapata's publicly announced abandonment of the
Houlihan's acquisition. Upon termination of the Merger Agreement or the
Standstill Agreement, the Irrevocable Proxy shall be deemed to be revoked.
Page 5 of 61 Pages
Under the Irrevocable Proxy, each Member has complete discretion to take
such action or to refrain from taking such action as he deems necessary,
appropriate or desirable under the circumstances, subject only to the caveat
that no Member is authorized or empowered to engage in intentional misconduct or
action that otherwise constitutes gross negligence ("Standard of Care"). Any
action taken by a Member pursuant to the terms of the Standstill Agreement shall
be conclusively presumed to comply with the Standard of Care. Any action taken
by a Member pursuant to the Irrevocable Proxy upon the written advice of
stipulated legal counsel shall also be conclusively presumed to comply with the
Standard of Care. All reasonable fees and expenses of any such legal counsel
shall be paid directly by Zapata.
A copy of the Irrevocable Proxy is filed as Exhibit 19 hereto and is
incorporated herein by reference. The following description of the Irrevocable
Proxy is qualified in its entirety by reference to such Exhibit.
Item 7. Materials to be Filed as Exhibits.
---------------------------------
Item No. 7 is hereby amended by inserting the following exhibits
immediately after the last exhibit appearing thereunder:
Exhibit 17 - Plan and Agreement of Merger dated as of June 4, 1996 by and
among, Zapata, Zapata Acquisition Corp. and Houlihan's
Exhibit 18 - Supplemental Agreement dated as of June 4, 1996 between
Malcolm I. Glazer and Zapata
Exhibit 19 - Irrevocable Proxy dated June 4, 1996 executed by Malcolm I.
Glazer, individually and as Trustee of the Malcolm I. Glazer
Trust in favor of Messers. Ronald Lassiter, Robert V.
Leffler, Jr. and W. George Loar, as members of Zapata
Special Committee.
Page 6 of 61 Pages
SIGNATURE PAGE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Amendment No. 16 is true,
complete and correct.
Dated: June 14, 1996
THE MALCOLM GLAZER TRUST
By: /s/ MALCOLM I. GLAZER, AS TRUSTEE
---------------------------------------
Malcolm I. Glazer, as Trustee
By: Avram Glazer, Power of Attorney
/s/ Malcolm Glazer
--------------------------------------------------
Malcolm I. Glazer
By: Avram Glazer, Power of Attorney
Page 7 of 61 Pages
EXHIBIT 17
EXECUTION COPY
--------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Dated as of June 4, 1996
by and among
ZAPATA CORPORATION,
ZAPATA ACQUISITION CORP.
and
HOULIHAN'S RESTAURANT GROUP, INC.
- --------------------------------------------------------------------------------
Page 8 of 61 Pages
TABLE OF CONTENTS
ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
Section 1.1 Effective Time of the Merger . . . . . . . . . . . . . -2-
Section 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . -2-
Section 1.3 Effects of the Merger . . . . . . . . . . . . . . . . . -2-
Section 1.4 Directors . . . . . . . . . . . . . . . . . . . . . . . -2-
Section 1.5 Officers . . . . . . . . . . . . . . . . . . . . . . . -3-
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES;DISSENTING
SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
Section 2.1 Conversion of Securities. . . . . . . . . . . . . . . . -3-
Section 2.2 Certain Definitions. . . . . . . . . . . . . . . . . . -7-
Section 2.3 Elections . . . . . . . . . . . . . . . . . . . . . . . -9-
Section 2.4 Certain Adjustments and Limitations. . . . . . . . . . -10-
Section 2.5 Exchange of Certificates . . . . . . . . . . . . . . . -10-
Section 2.6 Stock Transfer Books . . . . . . . . . . . . . . . . . -13-
Section 2.7 Dissenting Shares . . . . . . . . . . . . . . . . . . . -13-
ARTICLE III REPRESENTATIONS, WARRANTIES, COVENANTSAND AGREEMENTS OF THE COMPANY
-13-
Section 3.1 Due Incorporation, Etc. . . . . . . . . . . . . . . . . -13-
Section 3.2 Qualification as Foreign Entities . . . . . . . . . . . -14-
Section 3.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . -14-
Section 3.4 Material Company Subsidiaries . . . . . . . . . . . . . -15-
Section 3.5 Ownership of Equity Interests . . . . . . . . . . . . . -15-
Section 3.6 Corporate Power and Authority . . . . . . . . . . . . . -15-
Section 3.7 No Conflicts or Consents; Environmental Law; and Litigation
-16-
Section 3.8 SEC Reports and Financial Statements . . . . . . . . . -17-
Section 3.9 Information in Joint Proxy Statement and Registration
Statement . . . . . . . . . . . . . . . . . . . . . . . -18-
Section 3.10 No Material Adverse Change . . . . . . . . . . . . . . -18-
Section 3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . -19-
Section 3.12 DGCL Section 203 . . . . . . . . . . . . . . . . . . . -19-
Section 3.13 Vote Required . . . . . . . . . . . . . . . . . . . . . -20-
Section 3.14 Opinion of Company Financial Advisor . . . . . . . . . -20-
Section 3.15 No Undisclosed Employee Benefit Plan Liabilities . . . -20-
Section 3.16 Tax Matters . . . . . . . . . . . . . . . . . . . . . . -20-
Section 3.17 Affiliates . . . . . . . . . . . . . . . . . . . . . . -20-
Section 3.18 General . . . . . . . . . . . . . . . . . . . . . . . . -21-
Page 9 of 61 Pages
ARTICLE IV REPRESENTATIONS, WARRANTIES, COVENANTSAND AGREEMENTS OF THE PARENT
AND THE SUB . . . . . . . . . . . . . . . . . . . . . . . . . -21-
Section 4.1 Due Incorporation, Etc. . . . . . . . . . . . . . . . . -21-
Section 4.2 Qualification as Foreign Entities . . . . . . . . . . . -21-
Section 4.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . -21-
Section 4.4 Material Parent Subsidiaries . . . . . . . . . . . . . -23-
Section 4.5 Ownership of Equity Interests . . . . . . . . . . . . . -23-
Section 4.6 Corporate Power and Authority . . . . . . . . . . . . . -23-
Section 4.7 No Conflicts or Consents; Environmental Law; and Litigation
-23-
Section 4.8 SEC Reports and Financial Statements . . . . . . . . . -25-
Section 4.9 Information in Joint Proxy Statement and Registration
Statement . . . . . . . . . . . . . . . . . . . . . . . -25-
Section 4.10 No Material Adverse Change . . . . . . . . . . . . . . -26-
Section 4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . -26-
Section 4.12 Reservation of Shares. . . . . . . . . . . . . . . . . -26-
Section 4.13 DGCL Section 203. . . . . . . . . . . . . . . . . . . . -27-
Section 4.14 Vote Required . . . . . . . . . . . . . . . . . . . . . -27-
Section 4.15 Interim Operations of the Sub . . . . . . . . . . . . . -27-
Section 4.16 Opinion of Parent Financial Advisor . . . . . . . . . . -27-
Section 4.17 No Undisclosed Employee Benefit Plan Liabilities . . . -27-
Section 4.18 General . . . . . . . . . . . . . . . . . . . . . . . . -27-
ARTICLE V COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . -28-
Section 5.1 Conduct of Business of the Company . . . . . . . . . . -28-
Section 5.2 Conduct of Business of the Parent . . . . . . . . . . . -30-
Section 5.3 Reasonable Best Efforts . . . . . . . . . . . . . . . . -32-
Section 5.4 Letter of the Company's Accountants . . . . . . . . . . -33-
Section 5.5 Letter of the Parent's Accountants . . . . . . . . . . -33-
Section 5.6 Access to Information . . . . . . . . . . . . . . . . . -33-
Section 5.7 Stockholders Meetings . . . . . . . . . . . . . . . . . -34-
Section 5.8 Stock Exchange Listing . . . . . . . . . . . . . . . . -34-
Section 5.9 Company Plans . . . . . . . . . . . . . . . . . . . . . -34-
Section 5.10 Other Employee Benefit Plans . . . . . . . . . . . . . -35-
Section 5.11 Exclusivity . . . . . . . . . . . . . . . . . . . . . . -38-
Section 5.12 Fees and Expenses. . . . . . . . . . . . . . . . . . . -39-
Section 5.13 Brokers or Finders . . . . . . . . . . . . . . . . . . -39-
Section 5.14 Rule 145 . . . . . . . . . . . . . . . . . . . . . . . -39-
Section 5.15 Board Membership . . . . . . . . . . . . . . . . . . . -39-
Section 5.16 Takeover Statutes . . . . . . . . . . . . . . . . . . . -40-
ARTICLE VI CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
Section 6.1 Conditions to Each Party's Obligation To Effect the Merger
-40-
Section 6.2 Conditions of Obligations of the Parent and the Sub . . -41-
Section 6.3 Conditions of Obligations of the Company. . . . . . . . -41-
Page 10 of 61 Pages
ARTICLE VII TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . -42-
Section 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . -42-
Section 7.2 Effect of Termination. . . . . . . . . . . . . . . . . -42-
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . -43-
Section 8.1 Survival of Representations and Warranties; Enforcement of
Certain
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . -43-
Section 8.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . -43-
Section 8.3 Extension; Waiver . . . . . . . . . . . . . . . . . . . -43-
Section 8.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . -43-
Section 8.5 Interpretation. . . . . . . . . . . . . . . . . . . . . -45-
Section 8.6 Counterparts . . . . . . . . . . . . . . . . . . . . . -45-
Section 8.7 Entire Agreement; No Third Party Beneficiaries . . . . -45-
Section 8.8 Governing Law . . . . . . . . . . . . . . . . . . . . . -45-
Section 8.9 Specific Performance . . . . . . . . . . . . . . . . . -46-
Section 8.10 Publicity . . . . . . . . . . . . . . . . . . . . . . . -46-
Section 8.11 Assignment . . . . . . . . . . . . . . . . . . . . . . -46-
Section 8.12 Validity . . . . . . . . . . . . . . . . . . . . . . . -46-
Section 8.13 Conveyance Tax . . . . . . . . . . . . . . . . . . . . -46-
Page 11 of 61 Pages
SCHEDULE OF DEFINED TERMS
Defined Term Location
- ------------ --------
Acquisition Transaction . . . . . . . . . . . . . . . . . . . . . . Section 5.11
Adjusted Voting Power . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Aggregate Cash Amount . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Aggregate Stock Amount . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Beneficially Owned . . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Cash Election . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1(c)
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.5(b)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company Common Stock . . . . . . . . . . . . . . . . . . . . . . Section 2.1(a)
Company Disclosure Schedule . . . . . . . . . . . . . . . . . . . . Section 3.3
Company Financial Statements . . . . . . . . . . . . . . . . . . . Section 3.8
Company Options . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.3
Company Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.3
Company SEC Documents . . . . . . . . . . . . . . . . . . . . . . . Section 3.8
Company Stockholder Meeting . . . . . . . . . . . . . . . . . . . . Section 5.7
Compensable Expenses . . . . . . . . . . . . . . . . . . . . . . . Section 5.11
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . Section 5.6
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.7(b)
Convertible Securities . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.10(d)(ii)
Current Employees . . . . . . . . . . . . . . . . . . . . . . . Section 5.10(a)
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
DGCL Interested Stockholder . . . . . . . . . . . . . . . . . . . . Section 3.12
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.7
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Election Deadline . . . . . . . . . . . . . . . . . . . . . . . . Section 2.3(c)
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . Section 5.10(a)
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . Section 3.7(c)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.15
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.7(a)
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.5(a)
Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.5(a)
Form of Election . . . . . . . . . . . . . . . . . . . . . . . . Section 2.3(a)
Glazer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Glazer Group . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Glazer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . Section 3.7(a)
Page 12 of 61 Pages
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.7(a)
Indemnified Parties . . . . . . . . . . . . . . . . . . . . Section 5.10(d)(ii)
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.11(a)
Joint Proxy Statement . . . . . . . . . . . . . . . . . . . . . Section 3.9(a)
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.3
Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Material Advance Effect (Company) . . . . . . . . . . . . . . . . . Section 3.18
Material Adverse Effect (Parent) . . . . . . . . . . . . . . . . . Section 4.18
Material Company Subsidiary . . . . . . . . . . . . . . . . . . . Section 3.4(a)
Material Parent Subsidiary . . . . . . . . . . . . . . . . . . . . Section 4.4
Maximum Glazer Number . . . . . . . . . . . . . . . . . . . . . . Section 2.1(e)
Maximum Ownership Limits . . . . . . . . . . . . . . . . . . . . Section 2.1(e)
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Merger Filing Date . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
NASD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.3(a)
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Outstanding Share Number . . . . . . . . . . . . . . . . . . . . . Section 2.2
Outstanding Voting Securities . . . . . . . . . . . . . . . . . . . Section 2.2
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Parent Common Stock . . . . . . . . . . . . . . . . . . . . . . . Section 2.1(a)
Parent Disclosure Schedule . . . . . . . . . . . . . . . . . . . . Section 4.3
Parent Financial Statements . . . . . . . . . . . . . . . . . . . . Section 4.8
Parent Options . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.3
Parent Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.3
Parent SEC Documents . . . . . . . . . . . . . . . . . . . . . . . Section 4.8
Parent Stockholder Meeting . . . . . . . . . . . . . . . . . . . . Section 5.7
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.11
Preference Stock . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.3
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.3
Representative . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.3(a)
Residual Election . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1(d)
S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.9
SAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.4
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.8
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.8
Stock Election . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1(b)
Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1(g)
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . Section 1.3
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.11(b)
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.11(b)
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.12
Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.3
Page 13 of 61 Pages
Voting Power . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Voting Securities . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Page 14 of 61 Pages
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of June 4, 1996 (this "Agreement"),
by and among Zapata Corporation, a Delaware corporation (the "Parent"), Zapata
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the
Parent (the "Sub"), and Houlihan's Restaurant Group, Inc., a Delaware
corporation (the "Company").
WHEREAS, duly constituted and authorized special committees of the
respective Boards of Directors of the Parent and the Company comprised of
persons who are not members of the Glazer Group (as defined in Section 2.2)
have, after consulting with legal counsel and investment bankers engaged for
that purpose, approved the merger provided for herein ("Merger") as being in the
best interests of the Parent and its stockholders and the Company and its
stockholders, respectively, and have recommended that the respective
stockholders of each company approve the Merger;
WHEREAS, each of the respective Boards of Directors of the Sub and the
Company has determined that it is the best interests of each corporation and its
respective stockholders to effect the Merger upon the terms and subject to the
conditions set forth herein;
WHEREAS, in furtherance thereof, each of the respective Boards of Directors
of the Sub and the Company has approved the merger of the Company into the Sub,
with the Sub as the surviving corporation, all of the outstanding stock of which
will be owned by the Parent in accordance with the provisions of the General
Corporation Law of the State of Delaware (the "DGCL");
WHEREAS, the aforesaid special committee of the Board of Directors of the
Parent, being thereunto duly authorized by the Board of Directors of the Parent,
has approved the issuance of common stock of the Parent pursuant to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder ("Code");
WHEREAS, pursuant to the Merger, the stockholders of the Company shall have
the right to receive common stock of the Parent and cash, on and subject to the
terms and conditions set forth herein; and
WHEREAS, the Company, the Parent and the Sub desire to make certain
representations,
warranties, covenants and agreements in connection with this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
Page 15 of 61 Pages
ARTICLE I
THE MERGER
Section 1.1 Effective Time of the Merger. Upon the terms and subject to
----------------------------
the conditions set forth in this Agreement at the Effective Time (as defined in
this Section 1.1), the Company shall be merged with and into the Sub in
accordance with the DGCL and the separate corporate existence of the Company
shall thereupon cease. On the "Merger Filing Date" (as defined in this Section
1.1), the Parent, the Sub and the Company shall cause to be filed with the
Secretary of State of the State of Delaware a properly executed certificate of
merger consistent with the terms of this Agreement and the DGCL. Such
certificate of merger shall state that the effective time of the Merger (the
"Effective Time") shall be the close of business on the date such certificate of
merger is filed (the "Merger Filing Date"), and the Merger shall be effective at
that time. The Merger Filing Date shall be the same day as the Closing Date
unless the parties shall otherwise agree.
Section 1.2 Closing. Unless this Agreement is terminated and the
-------
transactions contemplated herein abandoned pursuant to Section 7.1 and assuming
the satisfaction or waiver of the conditions set forth in Article VI, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date to
be specified by the parties (the "Closing Date"), which will be no later than
the second business day following the satisfaction or waiver of the conditions
set forth in Article VI, at the offices of Baker & Botts, L.L.P., Houston,
Texas, unless another date or place is agreed to in writing by the parties
hereto.
Section 1.3 Effects of the Merger. The Sub shall be the surviving
---------------------
corporation of the Merger (the "Surviving Corporation") and shall continue its
existence under the laws of the State of Delaware. The Certificate of
Incorporation of the Sub in effect at the Effective Time will be amended in its
entirety to read as set forth in Annex I and, as such, will be the Restated
Certificate of Incorporation of the Sub, until amended in accordance with the
terms thereof and the DGCL. The Bylaws of the Sub in effect at the Effective
Time will be the Bylaws of the Surviving Corporation, until duly amended in
accordance with the terms thereof and the DGCL. The Merger will have the
effects set forth in the DGCL. Without limiting the generality of the
foregoing, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and the Sub will vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and the Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.4 Directors. The initial directors of the Surviving
---------
Corporation shall be Frederick R. Hipp and such other person or persons as shall
be designated by the Parent, each to hold office from the Effective Time in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation and until his or her successor is duly elected or appointed and
qualified.
Page 16 of 61 Pages
Section 1.5 Officers. The officers of the Company at the Effective Time
--------
will be the initial officers of the Surviving Corporation, each to hold office
from the Effective Time in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation and until his or her successor is duly
appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES;
DISSENTING SHARES
Section 2.1 Conversion of Securities. At the Effective Time, by virtue
------------------------
of the Merger and without any action on the part of the Sub, the Company or the
holders of any capital stock of the Sub or the Company:
(a) Each share of common stock, par value $.01 per share, of the
Company ("Company Common Stock") issued and outstanding immediately prior to the
Effective Time (excluding any treasury shares, shares held by the Parent and
Dissenting Shares) as to which no Cash Election, Stock Election or Residual
Election has been made shall be converted into the right to receive (x) $4.00 in
cash, without interest, plus (y) a number of shares of common stock, par value
$.25 per share ("Parent Common Stock"), of the Parent equal to $4.00 divided by
the Market Value.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time as to which the holder of record thereof
so elects as provided in Section 2.3 (a "Stock Election") shall be converted
into the right to receive a number of shares of Parent Common Stock equal to
$8.00 divided by the Market Value.
(c) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time as to which the holder of record thereof
so elects as provided in Section 2.3 (a "Cash Election") shall, unless
Section 2.1(e) applies, be converted into the right to receive $8.00 in cash,
without interest.
(d) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Date as to which the holder of record thereof
so elects as provided in Section 2.3 (a "Residual Election") shall, unless
Section 2.1(e) applies, be converted into the right to receive:
(x) a number of shares of Parent Common Stock equal to
ASA - (NES x $4.00) - (SES x $8.00)
-----------------------------------
RES x MV
where
ASA = Aggregate Stock Amount (as defined in Section 2.2)
Page 17 of 61 Pages
NES = number of shares of Company Common Stock as to which no Cash
Election, Stock Election or Residual Election has been exercised, but excluding
any Dissenting Shares
SES = number of shares of Company Common Stock as to which Stock Elections
have been exercised
RES = number of shares of Company Common Stock as to which Residual
Elections have been exercised
MV = Market Value
plus
(y) cash, without interest, in an amount equal to (i) $8.00 less
(ii) the product of the number of shares of Parent Common Stock
determined pursuant to the immediately preceding clause (x) and the
Market Value.
(e) If immediately after the Effective Time the Glazer Group would
hold in the aggregate either more than (i) 49.9% of the Voting Power of all
Voting Securities of the Parent or (ii) 49.9% of the Adjusted Voting Power of
all Outstanding Voting Securities of the Parent (such limits being referred to
as the "Maximum Ownership Limits"), then the consideration to be received in the
Merger with respect to shares of Company Common Stock covered by Cash Elections
and Residual Elections shall be adjusted as follows:
The maximum number of whole shares of Parent Common Stock which can be
issued to the Glazer Group in the Merger (the "Maximum Glazer Number") without
the Glazer Group holding in the aggregate more than either Maximum Ownership
Limit shall be calculated assuming that a number of shares equal to the
Aggregate Stock Amount divided by the Market Value is issued in the Merger.
Each share covered by a Cash Election will be converted into the right to
receive:
(x) a number of shares of Parent Common Stock equal to
MGN x RES x MV
---
ASA - (NES x $4.00) - (SES x $8.00) - GS
--------------------------------------------
CES x MV
where
ASA = Aggregate Stock Amount
NES = number of shares of Company Common Stock as to which no Cash
Election, Stock Election or Residual Election has been exercised, but excluding
any Dissenting Shares
Page 18 of 61 Pages
SES = number of shares of Company Common Stock as to which Stock Elections
have been exercised
MGN = Maximum Glazer Number
RES = number of shares of Company Common Stock as to which a Residual
Election has been exercised
GS = number of Glazer Shares
CES = number of shares of Company Common Stock as to which a Cash Election
has been exercised
MV = Market Value
plus
(y) an amount of cash, without interest, equal to (i) $8.00 less
(ii) the product of the number of shares of Parent Common Stock
determined pursuant to the immediately preceding clause (x) and
the Market Value.
Each share of Company Common Stock as to which a Residual Election has been
exercised shall be converted into the right to receive:
(1) a number of shares of Parent Common Stock equal to
MGN
---
GS
where
MGN = Maximum Glazer Number
GS = number of Glazer Shares
plus
(2) an amount of cash, without interest, equal to (i) $8.00 less
(ii) the product of the number of shares of Parent Common Stock
determined pursuant to the immediately preceding clause (1) and
the Market Value.
(f) At the Effective Time, all such shares of Company Common Stock
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each certificate previously evidencing any such
shares shall thereafter represent the right to receive the Merger Consideration.
The holders of such certificates previously evidencing such
Page 19 of 61 Pages
shares of Company Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such shares of Company
Common Stock except as otherwise provided herein or by law.
(g) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by the Parent or any
Subsidiary of the Parent or of the Company immediately prior to the Effective
Time shall be canceled and extinguished without any conversion thereof and no
payment shall be made with respect thereto. As used in this Agreement, the word
"Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner (excluding partnerships,
the general partnership interests of which held by such party or any Subsidiary
of such party do not have a majority of the voting interests in such partner-
ship) or (ii) at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party, by any
one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. References to a wholly owned Subsidiary of an entity include a
Subsidiary all of the securities having ordinary voting power to elect the Board
of Directors or others performing similar functions of which is owned directly
or through "wholly owned" Subsidiaries by such entity.
(h) Each issued and outstanding share of common stock, par value
$1.00 per share, of the Sub will continue to be one fully paid and nonassessable
share of common stock, par value $1.00 per share, of the Surviving Corporation.
Section 2.2 Certain Definitions.
-------------------
"Adjusted Voting Power" means, with respect to Outstanding Voting
Securities, the highest number of votes that the holders of all such Outstanding
Voting Securities would be entitled to cast for the election of directors or on
any other matter (except to the extent such voting rights are dependent upon
arrearages in the payment of dividends, events of default or bankruptcy),
assuming for purposes of this computation, the conversion into or exchange for
Voting Securities of Convertible Securities and the exercise of Options for the
purchase of Voting Securities or Convertible Securities, in each case to the
extent that any such action would increase the number of such votes.
"Aggregate Cash Amount" means (a) the Outstanding Share Number
multiplied by $4.00 less (b) the number of Dissenting Shares multiplied by $8.
"Aggregate Stock Amount" means the Outstanding Share Number multiplied
by $4.00.
Securities are "Beneficially Owned" by a person if such person
possesses the ability, whether through contract, arrangement, understanding,
relationship or otherwise, to exercise, directly or indirectly, the voting power
(including the power to vote or to direct the
Page 20 of 61 Pages
voting) and/or the investment power (including the power to dispose or to direct
the disposition) of such security.
"Cash Election" means an election made pursuant to Section 2.1(c).
"Convertible Securities" means securities of a corporation which are
convertible into or exchangeable for Voting Securities.
"Glazer" means Malcolm I. Glazer, individually and as trustee of the
Malcolm Glazer Trust U/A dated March 23, 1990, as amended ("Trust").
"Glazer Group" means Glazer and any corporation, person, partnership,
trust or other entity controlled, directly or indirectly, by Glazer.
"Glazer Shares" means shares of Company Common Stock which are owned
of record or Beneficially Owned by any member of the Glazer Group.
"Market Value" means the average closing price of a share of Parent
Common Stock as reported on the Composite Tape for the New York Stock Exchange,
Inc. ("NYSE") for the 20 trading days immediately preceding the 2nd trading day
prior to the date of the Company Stockholder Meeting (the "Meeting Date").
"Merger Consideration" means the consideration to be issued in the
Merger in respect of the Company Common Stock as provided in Section 2.1.
"Options" means options and rights of a corporation (whether presently
exercisable or not) to purchase Voting Securities or Convertible Securities
(except options issued under employee stock option plans).
"Outstanding Share Number" means the number of shares of Company
Common Stock outstanding immediately prior to the Effective Time (excluding any
treasury shares and shares held by the Parent).
"Outstanding Voting Securities" at any time means the then issued and
outstanding Voting Securities, Convertible Securities (which shall be counted at
the highest conversion or exchange rate at which they can be converted or
exchanged) and Options (which shall be counted at the highest rate at which they
can be exercised) of a corporation.
"Residual Election" means an election made pursuant to Section 2.1(d).
"Stock Election" means an election made pursuant to Section 2.1(b).
"Voting Power" means, with respect to Voting Securities, the highest
number of votes that the holders of all Voting Securities, issued and
outstanding on the date such determination is made, would be entitled to cast
for the election of directors or on any other
Page 21 of 61 Pages
matter (except to the extent such voting rights are dependent upon arrearages in
the payment of dividends, events of default or bankruptcy).
"Voting Securities" means the common stock and any other securities of
a corporation of any kind or class having power to vote for the election of
directors.
Section 2.3 Elections.
---------
(a) Cash Elections, Stock Elections and Residual Elections shall be
made by holders of record of Company Common Stock by mailing to the Exchange
Agent a form designated for that purpose (a "Form of Election"). The Form of
Election with respect to Cash Elections and Stock Elections shall contain a
certification that no shares of Company Common Stock covered by such Form of
Election are owned of record or Beneficially Owned by any member of the Glazer
Group. To be effective, a Form of Election must be properly completed, signed
and submitted to the Exchange Agent and accompanied by the certificates
representing the shares of Company Common Stock as to which the election is
being made (or by the guaranty of the delivery of such certificates by an
appropriate trust company in the United States or a member of a registered
national securities exchange or the National Association of Securities Dealers,
Inc. (the "NASD")). Holders of record of shares of Company Common Stock who
hold such shares as nominees, trustees or in other representative capacities (a
"Representative") may submit multiple Forms of Election, provided that such
Representative certifies that each such Form of Election covers all the shares
of Company Common Stock held by such Representative for a particular beneficial
owner or owners. The Parent will have the discretion, which it may delegate in
whole or in part to the Exchange Agent, to determine whether Forms of Election
have been properly completed, signed and submitted or revoked and to disregard
immaterial defects in Forms of Election. The decision of the Parent (or the
Exchange Agent) in such matters shall be conclusive and binding. Neither the
Parent nor the Exchange Agent will be under any obligation to notify any person
of any defect in a Form of Election submitted to the Exchange Agent. The Parent
shall make all computations contemplated by this Section 2.3 and all such
computations shall be conclusive and binding on the holders of Company Common
Stock. Glazer has agreed with the Parent pursuant to the Supplemental Agreement
of even date herewith to make or cause to be made the Residual Election with
respect to all shares of Company Common Stock owned of record or Beneficially
Owned by him and, to the extent within his actual control, any other member of
the Glazer Group.
(b) For the purposes hereof, a holder of Company Common Stock who
does not submit a Form of Election which is received by the Exchange Agent prior
to the Election Deadline or who holds Dissenting Shares shall not have made a
Cash Election, a Stock Election or a Residual Election. If the Parent or the
Exchange Agent shall determine that any purported Cash Election, Stock Election
or Residual Election was not properly made, such purported Cash Election, Stock
Election or Residual Election shall be deemed to be of no force and effect and
the stockholder making such purported Cash Election, Stock Election or Residual
Election shall for purposes hereof be deemed not to have made a Cash Election,
Stock Election or Residual Election, as applicable.
Page 22 of 61 Pages
(c) The Parent and the Company shall each use its best efforts
to mail the Form of Election to all persons who become holders of Company Common
Stock during the period between the record date for the Company's Stockholder
Meeting and 5:00 p.m. Houston time, on the date four calendar days prior to the
Meeting Date. A Form of Election must be received by the Exchange Agent by
5:00 p.m. Houston time, on the date one calendar day prior to the Meeting Date
(the "Election Deadline") in order to be effective. All elections other than
that made or caused to be made by Glazer with respect to the Glazer Shares may
be revoked until the Election Deadline.
Section 2.4 Certain Adjustments and Limitations.
-----------------------------------
(a) If between the date of this Agreement and the Effective Time the
outstanding shares of capital stock of the Parent or the Company shall have been
changed into a different number of shares or a different class, by reason of any
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Merger Consideration shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
(b) In the event that (i) the Market Value is at such a level that
the holders of the shares of Company Common Stock that exercise Cash Elections
are entitled to receive on a per share basis no cash in excess of $4 and (ii)
the Parent Company Stock issuable in respect of the Glazer Shares still would
cause the number of shares held by the Glazer Group to exceed one of the Maximum
Ownership Limits, this Agreement shall be terminated and the Merger shall not be
consummated.
Section 2.5 Exchange of Certificates.
------------------------
(a) Promptly after completion of the allocation and election
procedures set forth in Sections 2.1 and 2.3, the Parent shall deposit, or shall
cause to be deposited, with American Stock Transfer & Trust Company or another
bank or trust company designated by the Parent (the "Exchange Agent"), for the
benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Article II through the Exchange Agent, (i) certificates
evidencing a number of shares of Parent Common Stock equal to the Aggregate
Stock Amount and (ii) cash in an amount equal to the Aggregate Cash Amount (such
certificates for shares of Parent Common Stock, together with any dividends or
distributions with respect thereto, and cash, being hereinafter referred to as
the "Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the Parent Common Stock and cash contemplated to be issued
pursuant to Section 2.1 out of the Exchange Fund. Except as contemplated by
Section 2.5(e), the Exchange Fund shall not be used for any other purpose. The
Parent, the Sub and the Company will pay their respective expenses, if any,
incurred in connection with the Merger, and none of the Parent, the Sub or the
Company will pay any of the expenses of any stockholder of the Company incurred
in connection with the Merger.
(b) As soon as reasonably practicable after the Effective Time, the
Parent will instruct the Exchange Agent to mail to each holder of record of a
certificate or certificates which
Page 23 of 61 Pages
immediately prior to the Effective Time evidenced outstanding shares of Company
Common Stock (other than Dissenting Shares) (the "Certificates"), (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent, shall be in such form and have such other
provisions as the Parent may reasonably specify and shall provide a mechanism
for the surrender of shares evidenced by lost or misplaced stock certificates)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates evidencing shares of Parent Common Stock or cash. The
letter of transmittal need not be accompanied by Certificates previously
delivered to the Exchange Agent pursuant to a Form of Election and not
withdrawn. Upon surrender of a Certificate for cancellation to the Exchange
Agent together with such letter of transmittal duly executed, and such other
customary documents as may be required pursuant to such instructions, the holder
of such Certificate shall be entitled to receive in exchange therefor (A)
certificates evidencing that number of whole shares of Parent Common Stock which
such holder has the right to receive in respect of the shares of Company Common
Stock formerly evidenced by such Certificate in accordance with Section 2.1, (B)
cash to which such holder is entitled to receive in accordance with Section 2.1,
(C) cash in lieu of fractional shares of Parent Common Stock to which such
holder is entitled pursuant to Section 2.5(e) and (D) any dividends or other
distributions to which such holder is entitled pursuant to Section 2.5(c), and
the Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of shares of Company Common Stock which is not registered
in the transfer records of the Company, a certificate evidencing the proper
number of shares of Parent Common Stock and/or cash may be issued and/or paid in
accordance with this Article II to a transferee if the Certificate evidencing
such shares of Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.5, each Certificate shall be
deemed at any time after the Effective Time to evidence only the right to
receive upon such surrender the Merger Consideration. The shares of Parent
Common Stock constituting the Merger Consideration shall be deemed to have been
issued at the Effective Time.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock evidenced thereby, and no other
part of the Merger Consideration shall be paid to any such holder, until the
holder of such Certificate shall surrender such Certificate. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be paid to the holder of the certificates evidencing whole shares of
Parent Common Stock issued in exchange therefor, without interest, (i) promptly,
the amount of any cash payable with respect to a fractional share of Parent
Common Stock to which such holder is entitled pursuant to Section 2.5(e) and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender payable with respect to
such whole shares of Parent Common Stock. No interest shall be paid on the
Merger Consideration.
Page 24 of 61 Pages
(d) All shares of Parent Common Stock issued and cash paid upon
conversion of the shares of Company Common Stock in accordance with the terms
hereof shall be deemed to have been issued or paid in full satisfaction of all
rights pertaining to such shares of Company Common Stock.
(e) (i) No certificates or scrip evidencing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent. In lieu of any
such fractional shares, each holder of Company Common Stock upon surrender of a
Certificate for exchange pursuant to this Section 2.5 shall be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(a) the Market Value by (b) the fractional interest to which such holder would
otherwise be entitled (after taking into account all shares of Company Common
Stock then held of record by such holder).
(ii) As soon as practicable after the determination of the amount
of cash, if any, to be paid to holders of Company Common Stock with respect to
any fractional share interests, the Exchange Agent shall promptly pay such
amounts to such holders of the Company Common Stock subject to and in accordance
with the terms of Section 2.5(c).
(f) Any portion of the Exchange Fund which remains undistributed to
the holders of Company Common Stock on the first anniversary date of the
Effective Time shall be delivered to the Parent, upon demand, and any holders of
Company Common Stock who have not theretofore complied with this Article II
shall thereafter look only to the Parent for the Merger Consideration to which
they are entitled.
(g) Neither the Parent nor the Surviving Corporation shall be liable
to any holder of shares of Company Common Stock for any such shares of Parent
Common Stock, cash (or dividends or distributions with respect thereto) or cash
from the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) The Parent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock such amounts as the Parent is required to deduct
and withhold 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 by the Parent, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the shares of Company
Common Stock in respect of which such deduction and withholding was made by the
Parent.
Section 2.6 Stock Transfer Books. At the Effective Time, the stock
--------------------
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. On or after the Effective Time, any Certificates
presented to the Exchange Agent or the Parent for any reason shall be converted
into the Merger Consideration.
Page 25 of 61 Pages
Section 2.7 Dissenting Shares. Notwithstanding any other provisions of
-----------------
this Agreement to the contrary, shares of Company Common Stock that are
outstanding immediately prior to the Effective Time and which are held by
stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal for
such shares in accordance with Section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration. Such stockholders shall be entitled to
receive payment of the appraised value of such shares of Company Common Stock
held by them in accordance with the provisions of such Section 262, except that
all Dissenting Shares held by stockholders who shall have failed to perfect or
who effectively shall have withdrawn or lost their rights to appraisal of such
shares of Company Common Stock under such Section 262 shall thereupon be deemed
to have been converted into and to have become exchangeable, as of the Effective
Time, for the right to receive, without any interest thereon, the Merger
Consideration, as if such shares of Company Common Stock were covered by Cash
Elections, upon surrender, in the manner provided in Section 2.5, of the
Certificate or Certificates that formerly evidenced such shares of Company
Common Stock.
ARTICLE III
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF THE COMPANY
The Company represents and warrants to, and covenants and agrees with, the
Parent and the Sub as follows:
Section 3.1 Due Incorporation, Etc. Each of the Company and each
-----------------------
Material Company Subsidiary (as defined in Section 3.4) is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization, with all
requisite power and authority to own, operate and lease its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power and
authority, individually or in the aggregate, has not had, and is not reasonably
likely to have, a material adverse effect on the Company and its Subsidiaries.
The Company has delivered to the Parent true and accurate copies of the
certificate of incorporation, bylaws or other organizational documents of each
of the Company and each Material Company Subsidiary.
Section 3.2 Qualification as Foreign Entities. Each of the Company and
---------------------------------
each Material Company Subsidiary is duly licensed or qualified to do business
and, if applicable, is in good standing, in each state or other jurisdiction in
which the character of the properties owned or leased by it or the nature of the
business conducted by it requires it to be so licensed or qualified, except
where the failure to be so licensed, qualified or in good standing has not had,
and is not reasonably likely to have, a material adverse effect on the Company
and its Subsidiaries.
Section 3.3 Capital Stock. The authorized capital stock of the Company
-------------
consists of 20,000,000 shares of Company Common Stock, of which as of April 30,
1996, 9,998,012 shares of Company Common Stock were issued and outstanding and
no shares were held in the
Page 26 of 61 Pages
Company's treasury. Also, as of April 30, 1996, the Company had reserved for
issuance (a) 1,195,600 shares of Company Common Stock for issuance upon the
exercise of then-outstanding options ("Company Options") under the Company's
1994 Stock Option Plan for Outside Directors and its 1994 Executive Stock Option
Plan (collectively, the "Company Plans") and (b) 1,290,000 shares of Company
Common Stock in respect of future grants of Company Options under the Company
Plans. Since December 28, 1992, the Company has not issued any shares of its
capital stock, except for issuances of Company Common Stock upon the exercise of
Company Options granted under the Company Plans, and has not repurchased,
redeemed or otherwise retired any shares of its capital stock. All the
outstanding shares of capital stock of the Company and each of its Subsidiaries
are, and all shares of Company Common Stock that may be issued pursuant to the
Company Plans will be, when issued and paid for in accordance with the terms
thereof, duly authorized, validly issued, fully paid and nonassessable and not
subject to any preemptive rights of third parties in respect thereto. No bonds,
debentures, notes or other indebtedness having the right to vote under ordinary
circumstances (or convertible into securities having such right to vote)
("Voting Debt") of the Company or any of its Subsidiaries are issued or
outstanding. Except as disclosed above, as disclosed in the Company SEC
Documents (as defined in Section 3.8) filed prior to May 16, 1996 or as
disclosed in Section 3.3 of the Company Disclosure Schedule delivered by the
Company to the Parent pursuant to this Agreement ("Company Disclosure
Schedule"), (x) there are no existing options, warrants, calls, subscriptions,
rights, commitments or other agreements of any character obligating the Company
or any of its Subsidiaries to issue, transfer, vote, or sell or cause to be
issued, transferred, voted, or sold any shares of its capital stock, Voting Debt
or other interests of the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or other securities or
interests or obligating the Company or any of its Subsidiaries to grant, extend
or enter into any such option, warrant, call, subscription, right, agreement or
commitment; (y) there are no outstanding contractual obligations of the Company
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of the Company or any shares of capital stock or other
interests of any of the Company's Subsidiaries and any partnership interests are
not subject to current or future capital calls; and (z) each of the outstanding
shares of capital stock or other interests of the Company's Subsidiaries are
owned by the Company or by a Subsidiary of the Company free and clear of any
liens, security interests, pledges, charges, claims, encumbrances, restrictions
or legends of any kind (collectively, "Liens"), except those which, individually
or in the aggregate, have not had, and are not reasonably likely to have, a
material adverse effect on the Company and its Subsidiaries.
Section 3.4 Material Company Subsidiaries.
-----------------------------
(a) Each Material Company Subsidiary is listed in Section 3.4(a) of
the Company Disclosure Schedule.
(b) The Company has provided to the Parent full access to the minute
books and stock records of each of the Company and each Material Company
Subsidiary.
Section 3.5 Ownership of Equity Interests. Except as disclosed in
-----------------------------
Section 3.5 of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries owns or holds,
Page 27 of 61 Pages
directly or indirectly, any capital stock of, or other equity or other ownership
interest in (or any securities, rights or other interests exchangeable for,
convertible into or which otherwise relate to the acquisition of any capital
stock of), any Person or is a partner or joint venturer in any partnership or
joint venture.
Section 3.6 Corporate Power and Authority. The Company has the
-----------------------------
requisite corporate power to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, subject to the approval and
adoption of this Agreement (insofar as it relates to the Merger) and the Merger
by the affirmative vote of the holders of Company Common Stock entitled to cast
at least a majority of the total number of votes entitled to be cast by holders
of Company Common Stock and the filings referred to in Section 3.7(a). The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the Merger and of the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated, other than with respect to the Merger, the
required stockholder approval and adoption noted above, and the filing of a
certificate of merger with the Secretary of State of the State of Delaware.
This Agreement has been duly and validly executed and delivered by the Company
and, assuming this Agreement constitutes a valid an binding obligation of the
Parent and the Sub, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
Section 3.7 No Conflicts or Consents; Environmental Law; and Litigation.
-----------------------------------------------------------
(a) Other than the filings provided for in Section 1.1 and as
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), and the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), and filings with regulatory authorities with
respect to liquor licenses, no notices, reports or other filings are required to
be made by the Company with, nor any consents, registrations, approvals, permits
or authorizations required to be obtained from, any domestic governmental or
regulatory authority, agency, commission or other entity ("Governmental
Entity"), in connection with the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby, the failure to make or obtain any or all of which (i) is reasonably
likely to have a material adverse effect on the Company and its Subsidiaries or
(ii) would prevent, materially delay or materially burden the transactions
contemplated in this Agreement.
(b) The execution and delivery of this Agreement by the Company do
not, and the consummation by the Company of the transactions contemplated hereby
will not, constitute or result in (i) a breach or violation of, or a default
under, the certificate of incorporation, as amended, or bylaws of the Company or
the comparable governing instruments of any Material Company Subsidiary,
(ii) except as disclosed in Section 3.7(b) of the Company Disclosure Schedule, a
breach or violation of, a default under, or the acceleration of or the creation
of any Lien (with or without the giving of notice or the lapse of time) pursuant
to, any provision of any agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation
Page 28 of 61 Pages
("Contracts") of the Company or any of its Subsidiaries or any law, rule,
ordinance or regulation or judgment, decree, order, award or governmental or
non-governmental permit or license to which the Company or any of its
Subsidiaries is subject or (iii) any change in the rights or obligations of any
party under any such Contract, except, in the case of clauses (ii) and (iii)
above, for such breaches, violations, defaults, accelerations or changes that,
individually or in the aggregate, (x) have not had, and are not reasonably
likely to have, a material adverse effect on the Company and its Subsidiaries or
(y) would not prevent, materially delay or materially burden the transactions
contemplated by this Agreement.
(c) Except as disclosed in the Company SEC Documents filed prior to
May 16, 1996 or as disclosed in Section 3.7(c) of the Company Disclosure
Schedule, (i) the Company and its Subsidiaries are in compliance with all
applicable statutes, ordinances, rules and regulations of any Governmental
Entity relating to protection of the environment and human health including,
without limitation, with respect to air, surface water, ground water, land and
subsurface strata (collectively, "Environmental Law") except for non-compliance
which, individually or in the aggregate, has not had, and is not reasonably
likely to have, a material adverse effect on the Company and its Subsidiaries
and (ii) neither the Company nor any of its Subsidiaries has received written
notice of, or is the subject of, any action, cause of action, claim,
investigation, demand or notice by any Person alleging liability under or non-
compliance by the Company or any of its Subsidiaries with any Environmental Law
which, individually or in the aggregate, has had, or is reasonably likely to
have, a material adverse effect on the Company and its Subsidiaries.
(d) Except as disclosed in the Company SEC Documents filed prior to
May 16, 1996 or in Section 3.7(d)(i) of the Company Disclosure Schedule, there
is no suit, claim, action, proceeding or investigation pending or, to the best
knowledge of the Company, threatened, against the Company or any of its
Subsidiaries which, individually or in the aggregate, has had, or is reasonably
likely to have, a material adverse effect on the Company and its Subsidiaries or
affect adversely in any material respect the ability of the Company to
consummate the transactions contemplated by this Agreement. Except as disclosed
in the Company SEC Documents filed prior to May 16, 1996 or in Section
3.7(d)(ii) of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries is subject to any outstanding order, writ, injunction or decree
which, individually or in the aggregate, has had, or is reasonably likely to
have, a material adverse effect on the Company and its Subsidiaries or affect
adversely in any material respect the ability of the Company to consummate the
transactions contemplated hereby.
Section 3.8 SEC Reports and Financial Statements. Since January 1,
------------------------------------
1993, the Company has filed with the Securities and Exchange Commission (the
"SEC") all forms, reports and documents required to be filed by it under the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act") or the Exchange Act, and has heretofore made available to
the Parent true and complete copies of all such forms, reports and documents (as
they have been amended since the time of their filing, collectively, the
"Company SEC Documents"). The Company SEC Documents, including without
limitation any financial statements or schedules included therein, at the time
filed, and any forms, reports or other documents filed by the Company with the
SEC after the date of this Agreement, (a) did not at
Page 29 of 61 Pages
the time they were filed, or will not at the time they are filed, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (b) complied
or will be prepared in compliance in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be. The
financial statements of the Company included in the Company SEC Documents
("Company Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of the unaudited statements, to normal audit adjustments) and fairly
present (subject, in the case of the unaudited statements, to normal audit
adjustments) the consolidated financial position of the Company and its
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended. Except as reflected,
reserved against or otherwise disclosed in the Company Financial Statements or
as otherwise disclosed in the Company SEC Documents, in each case filed prior
May 16, 1996 or as disclosed in Section 3.8 of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries has any liabilities or
obligations (absolute, accrued, fixed, contingent or otherwise) other than (i)
liabilities incurred in the ordinary course of business consistent with past
practice, and (ii) liabilities and obligations that, alone or in the aggregate,
have not had, and are not reasonably likely to have, a material adverse effect
on the Company and its Subsidiaries.
Section 3.9 Information in Joint Proxy Statement and Registration
-----------------------------------------------------
Statement.
- ---------
(a) None of the information with respect to the Company or its
Subsidiaries to be included in the joint proxy statement/prospectus to be used
by the Boards of Directors of the Company and the Parent in connection with the
solicitation of proxies for use at the meetings referred to in Section 5.7
("Joint Proxy Statement") or in the registration statement on Form S-4 to be
filed with the SEC by the Parent in connection with the issuance of shares of
Parent Common Stock in the Merger to holders of Company Common Stock (the "S-4")
will, in the case of the Joint Proxy Statement or any amendment thereof or
supplement thereto, at the time of the mailing of the Joint Proxy Statement or
any amendment thereof or supplement thereto, and at the time of the Company
Stockholder Meeting (as defined in Section 5.7) or, in the case of the S-4, at
the time it becomes effective under the Securities Act and at the time of the
Closing, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Joint Proxy Statement, when filed, will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
(b) Notwithstanding Section 3.9(a), the Company makes no
representation with respect to statements made in the Joint Proxy Statement (and
any amendment thereto or supplement thereto) and in the S-4 based on information
regarding and supplied by the Parent or the Sub specifically for inclusion
therein.
Page 30 of 61 Pages
Section 3.10 No Material Adverse Change. Except as disclosed in the
--------------------------
Company SEC Documents filed prior to May 16, 1996 or as disclosed in Section
3.10 of the Company Disclosure Schedule, since December 29, 1995, the Company
and its Subsidiaries have conducted their respective businesses in the ordinary
and usual course and there has not been any change in the assets, business,
results of operations or financial condition of the Company and its Subsidiaries
that has had, or is reasonably likely to have, a material adverse effect on the
Company and its Subsidiaries.
Section 3.11 Taxes.
-----
(a) Each of the Company and its Subsidiaries has duly filed all
material federal, state, local and foreign income and other Tax Returns (as
defined in Section 3.11(b)) required to be filed by it, except as disclosed in
Section 3.11(a)(i) of the Company Disclosure Schedule. Except as disclosed in
Section 3.11(a)(ii) of the Company Disclosure Schedule, each of the Company and
its Subsidiaries has duly paid or caused to be paid all Taxes shown to be due on
such Tax Returns in respect of the periods covered by such returns and has made
adequate provision in the Company Financial Statements for payment of all Taxes
anticipated to be payable in respect of all taxable periods or portions thereof
ending on or before the date hereof. Section 3.11(a)(iii) of the Company
Disclosure Schedule discloses the periods through which the Tax Returns required
to be filed by the Company and its Subsidiaries have been examined by the
Internal Revenue Service (the "IRS") or other appropriate taxing authority, or
the period during which any assessments may be made by the IRS or other
appropriate taxing authority has expired. Except as disclosed in Section
3.11(a)(iv) of the Company Disclosure Schedule, as of the date hereof, all
material deficiencies and assessments asserted as a result of such examinations
or other audits by federal, state, local or foreign taxing authorities have been
paid, fully settled or adequately provided for in the Company Financial
Statements, and no issue or claim has been asserted in writing for Taxes by any
taxing authority for any prior period, the adverse determination of which would
result in a deficiency which is reasonably likely to have a material adverse
effect on the Company and its Subsidiaries, other than those heretofore paid or
provided for in the Company's Financial Statements. Except as disclosed in
Section 3.11(a)(v) of the Company Disclosure Schedule, as of the date hereof,
there are no material outstanding agreements or waivers extending the statutory
period of limitation applicable to any material Tax Return of the Company or its
Subsidiaries. Except as disclosed in Section 3.11(a)(vi) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries (x) has
been a member of a group filing consolidated returns for federal income tax
purposes, or (y) is a party to any material tax sharing or tax indemnity
agreement or any other material agreement of a similar nature that remains in
effect.
(b) For purposes of this Agreement, the term "Taxes" means all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, excise, property, sales, transfer, license, payroll,
withholding, capital stock and franchise taxes, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto. For purposes of this
Agreement, the term "Tax Return" means any report, return or other information
or document required to be supplied to a taxing authority in connection with
Taxes.
Page 31 of 61 Pages
Section 3.12 DGCL Section 203. To the best knowledge of the Company, the
----------------
Trust either is not an interested stockholder of the Company, as defined in
Section 203(c)(5) of the DGCL ("DGCL Interested Stockholder"), or, if a DGCL
Interested Stockholder, became such more than three years prior to the date of
this Agreement. Accordingly, the terms of Section 203 of the DGCL are not
applicable to the Company's participation in the Merger.
Section 3.13 Vote Required. The affirmative vote of the holders of a
-------------
majority of the outstanding shares of Company Common Stock entitled to vote with
respect to the Merger is the only vote of the holders of any class or series of
the Company's capital stock necessary to approve the Merger and the transactions
contemplated hereby.
Section 3.14 Opinion of Company Financial Advisor. The Special Committee
------------------------------------
of the Board of Directors of the Company has received the opinion of Donaldson,
Lufkin & Jenrette Securities Corporation, its financial advisor, to the effect
that, as of the date of such opinion, the Merger Consideration to be received
pursuant to the Merger by the holders of the Company Common Stock (other than by
Glazer and other holders affiliated with Glazer) is fair to such holders from a
financial point of view.
Section 3.15 No Undisclosed Employee Benefit Plan Liabilities. All
------------------------------------------------
"employee benefit plans," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), maintained or contributed to
by the Company or its Subsidiaries are in compliance with all applicable
provisions of ERISA and the Code, and the Company and its Subsidiaries do not
have any liabilities or obligations with respect to any such employee benefit
plans, whether or not accrued, contingent or otherwise, except (a) as described
in any of the Company SEC Documents, (b) as set forth in Section 5.10(a) of the
Company Disclosure Schedule with respect to employment arrangements and
indemnification agreements and (c) for instances of non-compliance or
liabilities or obligations that have not had, or are not reasonably be expected
to have, individually or in the aggregate, a material adverse effect on the
Company and the Subsidiaries.
Section 3.16 Tax Matters. Neither the Company nor, to the knowledge of
-----------
the Company, any of its affiliates referred to in Section 3.17 has taken or
agreed to take any action that would prevent the Merger from constituting a
reorganization under the provisions of Section 368(a) of the Code.
Section 3.17 Affiliates. Section 3.17 of the Company Disclosure Schedule
----------
identifies all persons who, to the knowledge of the Company, may be deemed to be
affiliates of the Company under Rule 145 of the Securities Act, including,
without limitation, all directors and officers of the Company. Concurrently
with the execution and delivery of this Agreement, the Company has delivered to
the Parent duplicate copies of letter agreements, each substantially in the form
of Annex II, executed by each person so identified as an affiliate of the
Company in Section 3.17 of the Company Disclosure Schedule.
Page 32 of 61 Pages
Section 3.18 General. As used in this Agreement with respect to the
-------
Company and/or its Subsidiaries, related partnerships or equity investments, the
term "material adverse effect" means an effect which is both material and
adverse with respect to the assets, business, results of operations or financial
condition of the Company taken as a whole with its Subsidiaries, which effect
shall be measured net of, and only after giving the Company and its Subsidiaries
the benefit of, any insurance, indemnity, reimbursement, contribution,
compensation or other similar right which would operate to reduce, offset,
compensate, mitigate or otherwise limit the impact thereof on the Company and/or
any of its Subsidiaries; provided, however that any adverse change or changes in
the assets, business, results of operations or financial condition of the
Company taken as a whole with its Subsidiaries attributable to changes in
general economic conditions shall not be deemed to constitute a material adverse
effect.
ARTICLE IV
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF THE PARENT AND THE SUB
The Parent and the Sub, jointly and severally, represent and warrant to, and
covenant and agree with, the Company as follows:
Section 4.1 Due Incorporation, Etc. Each of the Parent and each
-----------------------
Material Parent Subsidiary (as defined in Section 4.4) is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, with all
requisite power and authority to own, operate and lease its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power and
authority, individually or in the aggregate has not had, and is not reasonably
likely to have, a material adverse effect on the Parent and its Subsidiaries.
The Parent has made available to the Company true and accurate copies of the
certificate of incorporation, bylaws or other organizational documents of each
of the Parent and each Material Parent Subsidiary.
Section 4.2 Qualification as Foreign Entities. Each of the Parent and
---------------------------------
each Material Parent Subsidiary is duly licensed or qualified to do business
and, if applicable, is in good standing, in each state or other jurisdiction in
which the character of the properties owned or leased by it or the nature of the
business conducted by it requires it to be so licensed or qualified, except
where the failure to be so licensed, qualified or in good standing has not had,
and is not reasonably likely to have, a material adverse effect on the Parent
and its Subsidiaries.
Section 4.3 Capital Stock. The authorized capital stock of the Parent
-------------
consists of (a) 165,000,000 shares of Parent Common Stock, of which as of April
30, 1996, 29,548,507 shares were issued and outstanding and no shares were held
in the Parent's treasury, (b) 2,000,000 shares of preferred stock, no par value
per share ("Preferred Stock"), of which, as of April 30, 1996, no shares were
issued and outstanding or held in the Parent's treasury, and (c) 18,000,000
million shares of preference stock, par value $1.00 per share ("Preference
Stock"), of which, as of April 30, 1996, 242,419 shares had been designated as
$2.00 Per Cumulative Convertible Preference Stock, 3,627 shares of such series
were issued and outstanding as of that date and no
Page 33 of 61 Pages
shares of such series were held in the Parent's treasury as of that date. Also,
as of April 30, 1996, the Company had reserved for issuance (i) 165,900 shares
of Parent Common Stock upon exercise of then-outstanding stock options ("Parent
Options") under the Parent's 1981 Stock Incentive Plan, the Special Incentive
Plan and the 1990 Stock Option Plan (collectively, the "Parent Plans), (ii)
256,333 shares of Parent Common Stock in respect of future grants of Parent
Options pursuant to the Parent Plans and (iii) 5,527 shares of Parent Common
Stock upon conversion of the $2.00 Noncumulative Convertible Preference Stock.
Except as disclosed in the Parent SEC Documents (as defined in Section 4.8)
filed prior to May 16, 1996 or as disclosed in Section 4.3(a) of the Parent
Disclosure Schedule delivered by the Parent to the Company pursuant to this
Agreement ("Parent Disclosure Schedule"), since December 31, 1995, the Parent
has not issued any shares of its capital stock, except for issuances of Parent
Common Stock upon the exercise of Parent Options granted under the Parent Plans
and upon conversion of its $2.00 Noncumulative Convertible Preference Stock, and
has not repurchased, redeemed or otherwise retired any shares of its capital
stock. All the outstanding shares of capital stock of the Parent and each of
its Subsidiaries are, and all shares of Parent Common Stock that may be issued
pursuant to the Parent Plans or upon conversion of the $2.00 Noncumulative
Convertible Preference Stock will be, when issued and paid for in accordance
with the respective terms thereof, duly authorized, validly issued, fully paid
and nonassessable and not subject to any preemptive rights of third parties in
respect thereto. No Voting Debt of the Parent or any of its Subsidiaries is
issued or outstanding. Except as disclosed in the Parent SEC Documents filed
prior to May 16, 1996 or as disclosed in Section 4.3(b) of the Parent Disclosure
Schedule, (x) there are no existing options, warrants, calls, subscriptions,
rights, commitments or other agreements of any character obligating the Parent
or any of its Subsidiaries to issue, transfer, vote or sell or cause to be
issued, transferred, voted or sold any shares of its capital stock, Voting Debt
or any other interests of the Parent or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or other interests or
obligating the Parent to grant, extend or enter into any such option, warrant,
call, subscription, right, agreement or commitment; (y) there are no outstanding
contractual obligations of the Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of the Parent or any
shares of capital stock or other interests of any of the Parent's Subsidiaries
and any partnership interests are not subject to current or future capital
calls; and (z) each of the outstanding shares of capital stock or other
interests of the Parent's Subsidiaries are owned by the Parent or by a
Subsidiary of the Parent free and clear of any Liens, except those which
individually or in the aggregate have not had, and are not reasonably likely to
have, a material adverse effect on the Parent and its Subsidiaries.
Section 4.4 Material Parent Subsidiaries. (a) Each Material Parent
----------------------------
Subsidiary is listed in Section 4.4(a) of the Parent Disclosure Schedule.
(b) The Parent has provided to the Company full access to the minute
books, stock records and comparable documents of each of the Parent and each
Material Parent Subsidiary.
Section 4.5 Ownership of Equity Interests. Except as disclosed in
-----------------------------
Section 4.5 of the Parent Disclosure Schedule, neither the Parent nor any of its
Subsidiaries owns or holds, directly
Page 34 of 61 Pages
or indirectly, any capital stock of, or other equity or other ownership interest
in (or any securities, rights or other interests exchangeable for, convertible
into or which otherwise relate to the acquisition of any capital stock of), any
Person or is a partner or joint venturer in any partnership or joint venture.
Section 4.6 Corporate Power and Authority. The Parent and the Sub each
-----------------------------
has the requisite corporate power to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, subject to the approval of the
issuance of the shares of Parent Common Stock in the Merger by the affirmative
vote of the holders, voting as a class, of the Parent Common Stock and the
Preference Stock entitled to cast at least a majority of the total number of
votes voting on such matter as required by the NYSE and the filings referred to
in Section 4.7(a). The execution, delivery and performance of this Agreement by
the Parent and the Sub and the consummation by the Parent and the Sub of the
Merger and the other transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Parent and the Sub and no
other corporate proceedings are necessary to authorize this Agreement or to
consummate the transactions so contemplated, other than the required stockholder
approval by the Parent noted above, and the filing of a certificate of merger
with the Secretary of State of the State of Delaware. The Parent, as the sole
stockholders of the Sub, has approved and adopted this Agreement (insofar as it
relates to the Merger) and the Merger. This Agreement has been duly and validly
executed and delivered by the Parent and the Sub and, assuming this Agreement
constitutes a valid and binding obligation of the Company, constitutes a valid
and binding obligation of the Parent and the Sub, enforceable against the Parent
and the Sub in accordance with its terms.
Section 4.7 No Conflicts or Consents; Environmental Law; and Litigation.
-----------------------------------------------------------
(a) Other than the filing provided for in Section 1.1 and as required under the
HSR Act, the Securities Act and the Exchange Act, no notices, reports or other
filings are required to be made by the Parent or the Sub with, nor any consents,
registrations, approvals, permits or authorizations required to be obtained
from, any Governmental Entity, in connection with the execution and delivery of
this Agreement by the Parent and the Sub and the consummation by the Parent and
the Sub of the transactions contemplated hereby, the failure to make or obtain
any or all of which (i) is reasonably likely to have a material adverse effect
on the Parent and its Subsidiaries or (ii) would prevent, materially delay or
materially burden the transactions contemplated in this Agreement.
(b) The execution and delivery of this Agreement by the Parent and
the Sub do not, and the consummation by the Parent and the Sub of the
transactions contemplated hereby will not, constitute or result in (i) a breach
or violation of or a default under, the certificate of incorporation or bylaws
of the Parent or the Sub or the comparable governing instruments of any Material
Parent Subsidiary, (ii) a breach or violation of, a default under, or the
acceleration of or the creation of any Lien (with or without the giving of
notice or the lapse of time) pursuant to, any provision of any Contract of the
Parent or any of its Subsidiaries or any law, rule, ordinance or regulation or
judgment, decree, order, award or governmental or non-governmental permit or
license to which Parent or any of its Subsidiaries is subject or (iii) any
change in the rights or obligations of any party under any such Contract,
except, in the case of clause (ii) and (iii) above, for such breaches,
violations, defaults, accelerations or changes that, alone or in the
Page 35 of 61 Pages
aggregate, (x) have not had, and are not reasonably likely to have, a material
adverse effect on the Parent and its Subsidiaries or (y) would not prevent,
materially delay or materially burden the transactions contemplated by this
Agreement.
(c) Except as disclosed in the Parent SEC Documents filed prior to
May 16, 1996 or as disclosed in Section 4.7(c) of the Parent Disclosure
Schedule, (i) the Parent and its Subsidiaries are in compliance with all
applicable statutes, ordinances, rules and regulations of any Governmental
Entity relating to Environmental Law except for non-compliance which,
individually or in the aggregate, has not had, and is not reasonably likely to
have, a material adverse effect on the Parent and its Subsidiaries and (ii)
neither the Parent nor any of its Subsidiaries has received written notice of,
or is the subject of, any action, cause of action, claim, investigation, demand
or notice by any Person alleging liability under or non-compliance by the Parent
or any of its Subsidiaries with any Environmental Law which, individually or in
the aggregate, has had, or is reasonably expected to have, a material adverse
effect on the Parent and its Subsidiaries.
(d) Except as disclosed in the Parent SEC Documents filed prior to
May 16, 1996 or in Section 4.7(d)(i) of the Parent Disclosure Schedule, there is
no suit, claim, action, proceeding or investigation pending or, to the best
knowledge of the Parent, threatened, against the Parent or any of its
Subsidiaries which, individually or in the aggregate, has had, or is reasonably
likely to have, a material adverse effect on the Parent and its Subsidiaries or
affect adversely in any material respect the ability of the Parent to consummate
the transactions contemplated by this Agreement. Except as disclosed in the
Parent SEC Documents filed prior to May 16, 1996 or in Section 4.7(d)(ii) of the
Parent Disclosure Schedule, neither the Parent nor any of its Subsidiaries is
subject to any outstanding order, writ, injunction or decree which, individually
or in the aggregate has had, or is reasonably likely to have, a material adverse
effect on the Parent and its Subsidiaries or affect adversely in any material
respect the ability of the Parent to consummate the transactions contemplated
hereby.
Section 4.8 SEC Reports and Financial Statements. Since January 1,
------------------------------------
1993, the Parent has filed with the SEC all forms, reports and documents
required to be filed by it under the Securities Act or the Exchange Act, and has
heretofore made available to the Company true and complete copies of all such
forms, reports and documents (as they have been amended since the time of their
filing, collectively, the "Parent SEC Documents"). The Parent SEC Documents,
including without limitation any financial statements or schedules included
therein, at the time filed, and any forms, reports or other documents filed by
the Parent with the SEC after the date of this Agreement, (a) did not at the
time they were filed, or will not at the time they are filed, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading and (b) complied or
will be prepared in compliance in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be. The
financial statements of the Parent included in the Parent SEC Documents ("Parent
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with United
States generally accepted
Page 36 of 61 Pages
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, to normal audit adjustments) and fairly present (subject,
in the case of the unaudited statements, to normal audit adjustments) the
consolidated financial position of the Parent and its Subsidiaries as at the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended. Except as reflected, reserved against or otherwise
disclosed in the Parent Financial Statements or as otherwise disclosed in the
Parent SEC Documents, in each case filed prior to May 16, 1996 or as disclosed
in Section 4.8 of the Parent Disclosure Schedule, as of the date of this
Agreement, neither the Parent nor any of its Subsidiaries had any liabilities or
obligations (absolute, accrued, fixed, contingent or otherwise) other than (i)
liabilities incurred in the ordinary course of business consistent with past
practice and (ii) liabilities and obligations that, alone or in the aggregate,
have not had, and are not reasonably likely to have, a material adverse effect
on the Parent and its Subsidiaries.
Section 4.9 Information in Joint Proxy Statement and Registration
-----------------------------------------------------
Statement. (a) None of the information with respect to the Parent or its
- ---------
Subsidiaries to be included in the Joint Proxy Statement or the S-4 will, in the
case of the Joint Proxy Statement or any amendment thereof or supplement
thereto, at the time of the mailing of the Joint Proxy Statement or any
amendment thereof or supplement thereto, and at the time of the Parent's
Stockholder Meeting (as defined in Section 5.7), or, in the case of the S-4, at
the time it becomes effective under the Securities Act and at the time of the
Closing, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The S-4 will, when filed with the SEC by the Parent, comply as to
form in all material respects with the provisions of the Securities Act and the
rules and regulations thereunder.
(b) Notwithstanding Section 4.9(a), neither the Parent nor the Sub
makes any representation with respect to statements made in the Joint Proxy
Statement (and any amendment thereof or supplement thereto) and in the S-4 based
on information regarding the Company supplied specifically for inclusion
therein.
Section 4.10 No Material Adverse Change. Except as disclosed in the
--------------------------
Parent SEC Documents filed prior to May 16, 1996 or as disclosed in Section 4.10
of the Parent Disclosure Schedule, since September 30, 1995, the Parent and its
Subsidiaries have conducted their respective businesses in the ordinary and
usual course and there has not been any change in the assets, business, results
of operations or financial condition of the Parent and its Subsidiaries that has
had, or is reasonably likely to have, a material adverse effect on Parent and
its Subsidiaries.
Page 37 of 61 Pages
4.11 Section 4.12 Taxes. Each of the Parent and its Subsidiaries has
-----
duly filed all material federal, state, local and foreign income and other Tax
Returns required to be filed by it, except as disclosed in Section 4.11(a) of
the Parent Disclosure Schedule. Except as disclosed in Section 4.11(b) of the
Parent Disclosure Schedule, each of the Parent and its Subsidiaries has duly
paid or caused to be paid all Taxes shown to be due on such Tax Returns in
respect of the periods covered by such returns and has made adequate provision
in the Parent Financial Statements for payment of all Taxes anticipated to be
payable in respect of all taxable periods or portions thereof ending on or
before the date hereof. Section 4.11(c) of the Parent Disclosure Schedule lists
the periods through which the Tax Returns required to be filed by the Parent and
its Subsidiaries have been examined by the IRS or other appropriate taxing
authority, or the period during which any assessments may be made by the IRS or
other appropriate taxing authority has expired. Except as disclosed in Section
4.11(d) of the Parent Disclosure Schedule, as of the date hereof all material
deficiencies and assessments asserted as a result of such examinations or other
audits by federal, state, local or foreign taxing authorities have been paid,
fully settled or adequately provided for in the Parent Financial Statements, and
no issue or claim has been asserted in writing for Taxes by any taxing authority
for any prior period, the adverse determination of which would result in a
deficiency which is reasonably likely to have a material adverse effect on the
Parent and its Subsidiaries, other than those heretofore paid or provided for in
the Parent Financial Statements. Except as disclosed in Section 4.11(e) of the
Parent Disclosure Schedule, as of the date hereof, there are no material
outstanding agreements or waivers extending the statutory period of limitation
applicable to any material Tax Return of the Parent or its Subsidiaries. Except
as disclosed in Section 4.11(f) of the Parent Disclosure Schedule, neither the
Parent nor any of its Subsidiaries (i) has been a member of a group filing
consolidated tax returns for federal income tax purposes or (ii) is a party to
any material tax sharing or tax indemnity agreement or any other material
agreement of a similar nature that remains in effect.
Section 4.13 Reservation of Shares. The Parent has reserved and will
---------------------
keep available for issuance a number of authorized but unissued shares of Parent
Common Stock equal to the maximum number of shares of Parent Common Stock that
may become issuable pursuant to the Merger.
Section 4.14 DGCL Section 203.. To the best knowledge of the Parent, the
-----------------
Trust became a DGCL Interested Stockholder of the Parent more than three years
prior to the date of this Agreement. Accordingly, the terms of Section 203 of
the DGCL are not applicable to the participation by the Parent or the Sub in the
Merger.
Section 4.15 Vote Required. The affirmative vote of the holders of a
-------------
majority of the outstanding shares of Parent Common Stock and Preference Stock,
voting together as a class, on the issuance of the shares of Parent Common Stock
in the Merger, as required by the NYSE, is the only vote of the holders of any
class or series of the Parent's capital stock necessary to approve the
transactions contemplated hereby.
Section 4.16 Interim Operations of the Sub. The Sub was formed solely
-----------------------------
for the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities,
Page 38 of 61 Pages
has conducted its operations only as contemplated hereby and will not have a
negative net worth as of the Effective Time.
Section 4.17 Opinion of Parent Financial Advisor. The Special Committee
-----------------------------------
of the Board of Directors of Parent has received the opinion of CS First Boston
Corporation, its financial advisor, to the effect that, as of the date of such
opinion, the Merger Consideration is fair to the Parent from a financial point
of view.
Section 4.18 No Undisclosed Employee Benefit Plan Liabilities. All
------------------------------------------------
"employee benefit plans," as defined in Section 3(3) of ERISA maintained or
contributed to by the Parent or its Subsidiaries are in compliance with all
applicable provisions of ERISA and the Code, and the Parent and its Subsidiaries
do not have any liabilities or obligations with respect to any such employee
benefit plans, whether or no accrued, contingent or otherwise, except (a) as
described in any of the Parent SEC Documents and (b) for instances of non-
compliance or liabilities or obligations that have not had, or are not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the Parent and its Subsidiaries.
Section 4.19 General. As used in this Agreement with respect to Parent
-------
and/or its Subsidiaries, related partnerships or equity investments, the term
"material adverse effect" means an effect which is both material and adverse
with respect to the assets, business, results of operations or financial
condition of the Parent taken as a whole with its Subsidiaries, which effect
shall be measured net of, and only after giving the Parent and its Subsidiaries
the benefit of, any insurance, indemnity, reimbursement, contribution,
compensation or other similar right which would operate to reduce, offset,
compensate, mitigate or otherwise limit the impact thereof on the Parent and/or
any of its Subsidiaries; provided, however that any adverse change or changes in
the assets, business, results of operations or financial condition of the Parent
taken as a whole with its Subsidiaries attributable to changes in general
economic conditions shall not be deemed to constitute a material adverse effect.
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1 Conduct of Business of the Company. Except as contemplated
----------------------------------
by this Agreement or with the prior written consent of the Parent, which consent
shall not be unreasonably withheld and is hereby given with respect to actions
disclosed in the Company Disclosure Schedule, during the period from the date of
this Agreement to the Effective Time, the Company will, and will cause each of
its Subsidiaries to, conduct its operations only in the ordinary and usual
course of business consistent with past practice and, consistent therewith, will
use all reasonable efforts, and will cause each of its Subsidiaries to use all
reasonable efforts, to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve its
relationships with licensors, licensees, customers, suppliers, employees and any
others having business dealings with it, in each case in all material respects.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, the Company will not, and will not permit
any of the Subsidiaries to, prior to the Effective Time, without the prior
written consent of Parent, not to be unreasonably withheld:
Page 39 of 61 Pages
(a) adopt any amendment to its certificate of incorporation or by-
laws or comparable organizational documents;
(b) except for issuances of capital stock of the Company's
Subsidiaries to the Company or a wholly owned Subsidiary of the Company, issue,
reissue, sell or pledge or authorize or propose the issuance, reissuance, sale
or pledge of additional shares of capital stock of any class, or securities
convertible into capital stock of any class, or any rights, warrants or options
to acquire any convertible securities or capital stock, other than the issuance
of shares of Company Common Stock upon the exercise of Company Options
outstanding on the date of this Agreement in accordance with their present
terms;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock, except that any wholly owned
Subsidiary of the Company may pay dividends and make distributions to the
Company or any of the Company's wholly owned Subsidiaries;
(d) adjust, split, combine, subdivide, reclassify or redeem, purchase
or otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock;
(e) (i) incur, assume or pre-pay any long-term debt or incur or
assume any short-term debt, except that the Company and its Subsidiaries may
incur, assume or pre-pay debt in the ordinary course of business consistent with
past practice or as disclosed in Section 5.1(e) of the Company Disclosure
Schedule, (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other Person except in the ordinary course of business consistent with past
practice, or (iii) make any loans, advances or capital contributions to, or
investments in, any other Person except in the ordinary course of business
consistent with past practice and except for loans, advances, capital
contributions or investments between any wholly owned Subsidiary of the Company
and the Company or another wholly owned Subsidiary of the Company;
(f) settle or compromise any suit or claim or threatened suit or
claim (i) relating to the transactions contemplated hereby or (ii) involving the
payment of money or the surrender of property or other rights in an amount or
having a fair market value, in each case, in excess of $500,000;
(g) except for (i) increases in salary, wages and benefits of
employees of the Company or its Subsidiaries (other than executive or corporate
officers of the Company) in accordance with past practice, (ii) increases in
salary, wages and benefits granted to employees of the Company or its
Subsidiaries (other than executive or corporate officers of the Company) in con-
junction with promotions or other changes in job status consistent with past
practice or required under existing agreements, (iii) increases in salary, wages
and benefits to employees of the Company pursuant to collective bargaining
agreements entered into in the ordinary course of business consistent with past
practice, and (iv) matters disclosed in Section 5.1(g) of the Company Disclosure
Schedule, increase the compensation or fringe benefits payable or to become
Page 40 of 61 Pages
payable to its directors, officers or employees (whether from the Company or any
of its Subsidiaries), or pay any benefit not required by any existing plan or
arrangement (including, the granting of, or waiver of performance or other vest-
ing criteria under, stock options, stock appreciation rights, shares of
restricted stock or deferred stock or performance units) or grant any severance
or termination pay to (except pursuant to existing agreements or policies), or
enter into any employment or severance agreement with, any director, officer or
other key employee of the Company or any of its Subsidiaries or establish,
adopt, enter into, terminate or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, welfare, deferred compensation, employment, termination, severance
or other employee benefit plan, agreement, trust, fund, policy or arrangement
for the benefit or welfare of any directors, officers or current or former
employees, except to the extent such termination or amendment is required by
applicable law; provided, however, that nothing herein will be deemed to
prohibit the payment of benefits as they become payable;
(h) except as disclosed in Section 5.1(h) of the Company Disclosure
Schedule, acquire, sell, lease or dispose of any assets or securities which are
material to the Company and its Subsidiaries, taken as a whole, or enter into
any commitment to do any of the foregoing or enter into any material commitment
or transaction outside the ordinary course of business consistent with past
practice other than transactions between a wholly owned Subsidiary of the
Company and the Company or another wholly owned Subsidiary of the Company;
(i) (i) modify, amend or terminate any material Contract, (ii) waive,
release, relinquish or assign any material Contract (including any material
insurance policy) or other material right or claim, or (iii) cancel or forgive
any material indebtedness owed to the Company or any of its Subsidiaries, other
than in each case in a manner in the ordinary course of business consistent with
past practice or which is not material to the business of the Company and its
Subsidiaries taken as a whole;
(j) make any tax election not required by law or settle or compromise
any tax liability, in either case that is material to the Company and its
Subsidiaries taken as a whole; or
(k) change any of the material accounting principles or practices
used by it except as required by the SEC and the Financial Accounting Standards
Board.
Section 5.2 Conduct of Business of the Parent. Except as contemplated
---------------------------------
by this Agreement or with the prior written consent of the Company, which
consent shall not be unreasonably withheld and is hereby given with respect to
actions disclosed in the Parent Disclosure Schedule, during the period from the
date of this Agreement to the Effective Time, the Parent will, and will cause
each of its Subsidiaries to, conduct its operations only in the ordinary and
usual course of business consistent with past practice and, consistent
therewith, will use all reasonable efforts, and will cause each of its
Subsidiaries to use all reasonable efforts, to preserve intact its present
business organization, keep available the services of its present officers and
employees and preserve its relationships with licensors, licensees, customers,
suppliers, employees and any others having business dealings with it, in each
case in all material respects. Without limiting the generality of the forego-
ing, and except as otherwise expressly provided
Page 41 of 61 Pages
in this Agreement, the Parent will not, and will not permit any of the
Subsidiaries to, prior to the Effective Time, without the prior written consent
of the Company, not to be unreasonably withheld:
(a) adopt any amendment to its certificate of incorporation or by-
laws or comparable organizational documents;
(b) except for issuances of capital stock of the Parent's
Subsidiaries to the Parent or a wholly owned Subsidiary of the Parent, issue,
reissue, sell or pledge or authorize or propose the issuance, reissuance, sale
or pledge of additional shares of capital stock of any class, or securities
convertible into capital stock of any class, or any rights, warrants or options
to acquire any convertible securities or capital stock, other than the issuance
of shares of Parent Common Stock upon the exercise of Parent Options and the
conversion of shares of $2.00 Noncumulative Convertible Preference Stock
outstanding on the date of this Agreement, in each case in accordance with their
present terms;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock, except that any wholly owned
Subsidiary of the Parent may pay dividends and make distributions to the Parent
or any of the Parent's wholly owned Subsidiaries;
(d) adjust, split, combine, subdivide, reclassify or redeem, purchase
or otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock;
(e) (i) incur, assume or pre-pay any long-term debt or incur or
assume any short-term debt, except that the Parent and its Subsidiaries may
incur, assume or pre-pay debt in the ordinary course of business consistent with
past practice or as disclosed in Section 5.2(e) of the Parent Disclosure
Schedule, (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other Person except in the ordinary course of business consistent with past
practice, or (iii) make any loans, advances or capital contributions to, or
investments in, any other Person except in the ordinary course of business
consistent with past practice and except for loans, advances, capital
contributions or investments between any wholly owned Subsidiary of the Parent
and the Parent or another wholly owned Subsidiary of the Parent;
(f) settle or compromise any suit or claim or threatened suit or
claim (i) relating to the transactions contemplated hereby or (ii) involving the
payment of money or the surrender of property or other rights in an amount or
having a fair market value, in each case, in excess of $500,000;
(g) except for (i) increases in salary, wages and benefits of
employees of the Parent or its Subsidiaries (other than executive or corporate
officers of the Parent) in accordance with past practice, (ii) increases in
salary, wages and benefits granted to employees of the Parent or its
Subsidiaries (other than executive or corporate officers of the Parent) in con-
junction with
Page 42 of 61 Pages
promotions or other changes in job status consistent with past practice or
required under existing agreements, (iii) increases in salary, wages and
benefits to employees of the Parent pursuant to collective bargaining agreements
entered into in the ordinary course of business consistent with past practice,
and (iv) matters disclosed in Section 5.2(g) of the Parent Disclosure Schedule,
increase the compensation or fringe benefits payable or to become payable to its
directors, officers or employees (whether from the Parent or any of its
Subsidiaries), or pay any benefit not required by any existing plan or
arrangement (including, the granting of, or waiver of performance or other vest-
ing criteria under, stock options, stock appreciation rights, shares of
restricted stock or deferred stock or performance units) or grant any severance
or termination pay to (except pursuant to existing agreements or policies), or
enter into any employment or severance agreement with, any director, officer or
other key employee of the Parent or any of its Subsidiaries or establish, adopt,
enter into, terminate or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
welfare, deferred compensation, employment, termination, severance or other
employee benefit plan, agreement, trust, fund, policy or arrangement for the
benefit or welfare of any directors, officers or current or former employees,
except to the extent such termination or amendment is required by applicable
law; provided, however, that nothing herein will be deemed to prohibit the
payment of benefits as they become payable;
(h) except as disclosed in Section 5.2(h) of the Parent Disclosure
Schedule, acquire, sell, lease or dispose of any assets or securities which are
material to the Parent and its Subsidiaries or enter into any commitment to do
any of the foregoing or enter into any material commitment or transaction
outside the ordinary course of business consistent with past practice other than
transactions between a wholly owned Subsidiary of the Parent and the Parent or
another wholly owned Subsidiary of the Parent;
(i) (i) modify, amend or terminate any material Contract, (ii) waive,
release, relinquish or assign any material Contract (including any material
insurance policy) or other material right or claim, or (iii) cancel or forgive
any material indebtedness owed to the Parent or any of its Subsidiaries, other
than in each case in a manner in the ordinary course of business consistent with
past practice or which is not material to the business of the Parent and its
Subsidiaries;
(j) make any tax election not required by law or settle or compromise
any tax liability, in either case that is material to the Parent and its
Subsidiaries except that Parent and Sub may elect in Parent's consolidated
Federal income tax return for the year ended September 30, 1995 to waive the
carryback period for net operating losses and carry the losses forward; or
(k) change any of the material accounting principles or practices
used by it except as required by the SEC and the Financial Accounting Standards
Board.
Section 5.3 Reasonable Best Efforts. Subject to the terms and
-----------------------
conditions of this Agreement, each of the Parent, the Sub and the Company will
use its reasonable best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper
Page 43 of 61 Pages
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including (a) the
prompt preparation and filing with the SEC of the S-4 and the Joint Proxy
Statement, (b) such actions as may be required to have the S-4 declared
effective under the Securities Act and the Joint Proxy Statement cleared by the
SEC, in each case as promptly as practicable, including by consulting with each
other as to, and responding promptly to, any SEC comments with respect thereto,
(c) such actions as may be required to be taken under applicable state
securities or blue sky laws in connection with the issuance of shares of Parent
Common Stock contemplated hereby and (d) the making of any necessary filings,
and thereafter the making of any required submissions, with respect to this
Agreement and the Merger under the HSR Act or any other applicable law. Each
party will promptly consult with the other with respect to, provide any
necessary information with respect to and provide the other (or its counsel)
copies of, all filings made by such party with any Governmental Agency in
connection with this Agreement and the Merger. In addition, if at any time
prior to the Effective Time any event or circumstance relating to either the
Company or the Parent or any of their respective Subsidiaries, or any of their
respective officers or directors, is discovered by the Company or the Parent, as
the case may be, which should be set forth in an amendment or supplement to the
S-4 or the Joint Proxy Statement, the discovering party will promptly inform the
other party of such event or circumstance.
Section 5.4 Letter of the Company's Accountants. Following receipt by
-----------------------------------
Deloitte & Touche LLP, the Company's independent auditors, of an appropriate
request from the Parent pursuant to Statement on Auditing Standards ("SAS") No.
72, the Company will use its reasonable best efforts to cause to be delivered to
the Parent a letter of Deloitte & Touche LLP, dated a date within two business
days before the date on which the S-4 will become effective and addressed to the
Parent, in form and substance reasonably satisfactory to the Parent and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the S-4, which
letter will be brought down to the Closing.
Section 5.5 Letter of the Parent's Accountants. Following receipt by
----------------------------------
Coopers & Lybrand, LLP, the Parent's independent auditors, of an appropriate
request from the Parent or the Company pursuant to SAS No. 72, the Parent will
use its reasonable best efforts to cause to be delivered to the Parent and
Company a letter of Coopers & Lybrand LLP, dated a date within two business days
before the date on which the S-4 will become effective and addressed to the
Parent and Company, in form and substance reasonably satisfactory to the Parent
and Company and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the S-4, which letter will be brought down to the Closing.
Section 5.6 Access to Information. Upon reasonable notice, the Company
---------------------
and the Parent will each (and will cause each of their respective Subsidiaries
to) afford to the officers, employees, accountants, counsel and other
representatives of the other, access, during normal business hours during the
period prior to the Effective Time, to all its properties, facilities, books,
contracts, commitments and records and other information as reasonably requested
by such party and, during such period, each of the Company and the Parent will
(and will cause each of their
Page 44 of 61 Pages
respective Subsidiaries to) furnish promptly to the other (a) a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of United States federal
securities laws or regulations, and (b) all other information concerning its
business, properties and personnel as such other party may reasonably request.
The parties will hold any such information which is nonpublic in confidence in
accordance with the terms of the Confidentiality Agreement, dated December 1,
1995, between the Parent and the Company (the "Confidentiality Agreement"), and
in the event of termination of this Agreement for any reason each party will
promptly comply with the terms of the Confidentiality Agreement.
Section 5.7 Stockholders Meetings. Each of the Parent and the Company,
---------------------
consistent with applicable law and its certificate of incorporation, as amended,
and by-laws, will call a meeting of its stockholders (respectively, the "Parent
Stockholder Meeting" and the Company Stockholder Meeting") for the purpose of
voting upon this Agreement (insofar as it relates to the Merger) and the Merger,
in the case of the Company, and the issuance of the shares of Parent Common
Stock in the Merger, in the case of the Parent, and use its reasonable best
efforts to hold such meeting as promptly as practicable. Each of the Parent and
the Company will, through a special committee of its Board of Directors,
recommend to its stockholders approval of such matters; provided, however, that
nothing contained in this Section 5.7 will require the Board of Directors or the
special committee thereof of either the Parent or the Company to take any action
or refrain from taking any action which either Board determines in good faith
with advice of counsel could reasonably be expected to result in a breach of its
fiduciary duties under applicable law.
Section 5.8 Stock Exchange Listing. The Parent will use its reasonable
----------------------
best efforts to cause the Parent Common Stock to be issued in the Merger to be
approved for listing on the NYSE not later than the Effective Time, subject to
official notice of issuance, and to cause such Parent Common Stock to be duly
registered or qualified under all applicable state securities or blue sky laws.
Section 5.9 Company Plans. (a) On or prior to the Effective Time, the
-------------
Company and its Board of Directors (or a committee thereof) and the Parent will
take all action necessary to implement the provisions contained in Section
5.9(b).
(b) At the Effective Time, the Company's obligations with respect to
each outstanding Company Option under the Company Plans, as amended pursuant to
the following sentence, shall be assumed by the Parent. The Company Options so
assumed by the Parent shall continue to have, and be subject to, the same terms
and conditions set forth in the Company Plans and agreements pursuant to which
such Company Options were issued as in effect immediately prior to the Effective
Time, except that (i) each Company Option shall be exercisable for that number
of whole shares of Parent Common Stock equal to the product of the number of
shares of Company Common Stock covered by the Company Option immediately prior
to the Effective Time multiplied by the Exchange Ratio, rounded up to the
nearest whole number of shares of Parent Common Stock, and (ii) the per share
exercise price for the shares of Parent Common Stock issuable upon the exercise
of such assumed Company Option shall be equal to the quotient
Page 45 of 61 Pages
determined by dividing the exercise price per share of Company Common Stock
specified for such Company Option under the applicable Company Plan or agreement
immediately prior to the Effective Time by the Exchange Ratio, rounding the
resulting exercise price down to the nearest whole cent. For purposes hereof
"Exchange Ratio" shall mean the ratio of $8.00 to the Market Value. The date of
grant shall be the date on which each Company Option was originally granted. The
Parent shall (i) reserve for issuance the number of shares of Parent Common
Stock that will become issuable upon the exercise of such Company Options
pursuant to this Section 5.9(b), (ii) at the Effective Time, execute a document
evidencing the assumption by the Parent of the Company's obligations with
respect thereto under this Section 5.9(b) and (iii) deliver to optionees under
such Company Options appropriate notices setting forth such optionees' rights
pursuant to the Company Options. As soon as practicable after the Effective
Time, the Parent shall file a registration statement on Form S-8 (or any
successor form), or another appropriate form with respect to the shares of
Parent Common Stock subject to such Company Options and shall use its best
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Company Options remain
outstanding. With respect to those individuals who subsequent to the Merger will
be subject to the reporting requirements under Section 16(a) of the Exchange
Act, where applicable, the Parent, to the extent legally permissible, shall
administer the Company Plans assumed pursuant to this Section 5.9(b) in a manner
that complies with Rule 16b-3 promulgated by the SEC under the Exchange Act. It
is the intention of the parties that, subject to applicable law, the Company
Options assumed by the Parent qualify following the Effective Time as "incentive
stock options" (as defined in Section 422 of the Code) to the extent that the
Company Options qualified as incentive stock options prior to the Effective Time
and any conversion of incentive stock options shall be undertaken so as to
preserve such status.
(c) Except as disclosed in Section 5.9(c) of the Company Disclosure
Schedule, (i) there are no provisions in any plan, program or arrangement other
than the Company Plans, providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any of its
Subsidiaries and (ii) the Company will ensure that following the Effective Time
no holder of Company Options or any participant in the Company Plans or any
other plans, programs or arrangements will have any right thereunder to acquire
any equity securities of the Company, the Surviving Corporation or any
subsidiary thereof.
Section 5.10 Other Employee Benefit Plans. (a) Except as otherwise
----------------------------
contemplated by this Agreement, the employee benefit plans (as defined in
Section 3(3) of ERISA) and other employee or director plans, programs and
policies other than salary (collectively, the "Employee Benefit Plans") of the
Company and its Subsidiaries in effect at the date of this Agreement will remain
in effect until otherwise determined after the Effective Time and, to the extent
such Employee Benefit Plans are not continued, the Parent will maintain, for a
period of at least two years after the Effective Time, Employee Benefit Plans
with respect to employees of the Company and its Subsidiaries which are no less
favorable, in the aggregate, than the most favorable of: (i) those Employee
Benefit Plans covering employees of the Parent from time to time; (ii) those
Employee Benefit Plans of the Company and its Subsidiaries that are in effect on
the date of this Agreement (as they may be amended, supplemented or modified and
as new Employee Benefit Plans may be adopted, to the extent disclosed in Section
5.10(a) of the
Page 46 of 61 Pages
Company Disclosure Schedule); or (iii) Employee Benefit Plans that are
reasonably competitive with respect to the industry in which the employer of the
affected employees competes; provided, that in any event, until the second
anniversary of the Effective Time, the Surviving Corporation will provide
individuals who are employees of the Company and its Subsidiaries as of the
Effective Time ("Current Employees") with Employee Benefit Plans that are no
less favorable in the aggregate than those provided to Current Employees by the
Company and for its Subsidiaries immediately before the Merger Filing Date.
(b) Without limiting the generality of Section 5.10(a), the Parent
will cause the Surviving Corporation to (i) honor (x) in accordance with their
terms all individual employment, severance, termination and indemnification
agreements and (y) at least until the second anniversary of the Effective Date,
all other employee severance plans and policies, of the Company or any of its
Subsidiaries with respect to their respective past and present officers,
directors, employees and agents as of the Effective Time, (ii) waive any limi-
tations regarding pre-existing conditions of Current Employees and their
eligible dependents under any welfare or other employee benefit plans of the
Parent and its affiliates in which they participate after the Effective Time
(except to the extent that such limitations would have applied under the
analogous plan of the Company and its Subsidiaries immediately before the
Effective Time), (iii) for all purposes under the post-retirement welfare
benefit plans and policies of the Parent and its affiliates, treat Current
Employees in the same manner as similarly situated employees of the Parent who
were hired by the Parent in accordance with the terms of such plans and policies
as then in effect, as any such plans and policies are modified by the Parent or
such affiliates from time to time, and (iv) for all other purposes under all
Employee Benefit Plans applicable to employees of the Company and its
Subsidiaries, treat all service with the Company or any of its Subsidiaries by
Current Employees (or retired employees eligible for retiree medical benefits)
before the Closing as service with the Parent and its Subsidiaries, except to
the extent such treatment would result in duplication of benefits or would
violate applicable law.
(c) Except as otherwise agreed with individual restricted
stockholders, at the Effective Time, each share of Company Common Stock which
immediately prior to the Effective Time was subject to restrictions on transfer,
whether vested or unvested, will become fully vested and freely transferable and
will be exchanged for unrestricted shares of Parent Common Stock in the Merger.
It is understood and agreed that under certain of the Company Plans and the
Employee Benefit Plans, and any agreements relating thereto, the Merger shall
constitute a "Change of Control" or "Change in Control" as defined therein.
(d) (i) The Parent will cause the Surviving Corporation and its
successors to continue in full force and effect for a period of not less than
six years from the Effective Time the indemnification provisions contained in
Article Ninth of the Certificate of Incorporation of the Company as in effect on
the date of this Agreement with respect to matters existing or occurring at or
prior to the Effective Time by directors and officers of the Company serving as
such as of the Effective Time; provided that, in the event any claim is asserted
or made within
Page 47 of 61 Pages
such six year period, all rights to indemnification in respect of any such claim
will continue until disposition of any and all such claims. For a period of
six years after the Effective Time, the Parent will, or will cause the Surviving
Corporation and its successors to, provide directors and officers liability
insurance having substantially the same terms and conditions and providing at
least the same coverage and amounts (with respect to occurrences prior to the
Effective Time) as the directors and officers liability insurance maintained by
the Company at the date of this Agreement for all present and former directors
and officers of the Company and its Subsidiaries who served as such at any time
since January 1, 1993 and their respective heirs, legal representatives,
successors and assigns.
(ii) From and after the Effective Time, the Parent agrees that it
or the Surviving Corporation will indemnify and hold harmless each director or
officer of the Company serving as such as of the Effective Time (an "Indemnified
Party") against any and all costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time by reason of the fact that such Indemnified Party was then
serving as a director or officer of the Company or one of its Subsidiaries,
whether asserted or claimed prior to, at or after the Effective Time, to the
fullest extent allowed by law (and the Parent or the Surviving Corporation shall
also advance expenses as incurred to the fullest extent permitted under
applicable law provided the Person to whom expenses are advanced provides, if
required by law, an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification).
(iii) Any Indemnified Party wishing to claim indemnification
under clause (ii) above, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify the Parent and the Surviving
Corporation thereof, but the failure to so notify shall not relieve the Parent
or the Surviving Corporation of any liability it may have to such Indemnified
Party except to the extent that such failure materially prejudices the
indemnifying party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before, at or after the Effective Time), (x) the
Parent or the Surviving Corporation shall have the right to assume the defense
thereof (which it shall, in cooperation with the Indemnified Party, vigorously
defend) and neither the Parent nor the Surviving Corporation shall be liable to
such Indemnified Party for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof, except that if neither the Parent nor the Surviving Corporation
elects to assume such defense or there is a conflict of interest between the
Parent or the Surviving Corporation, on the one hand, and the Indemnified Party,
including situations in which there are one or more legal defenses available to
the Indemnified Party that are different from or additional to those available
to the Parent or the Surviving Corporation, the Indemnified Party may retain
counsel satisfactory to it, and the Parent or the Surviving Corporation shall
pay all reasonable fees and expenses of such counsel for the Indemnified Party
promptly as statements therefor are received; provided, however, that neither
the Parent nor the Surviving Corporation shall, in connection with any one such
action or proceeding or separate but substantially similar actions or
proceedings arising out of the same general allegations, be liable for the fees
and expenses of more than one separate firm of
Page 48 of 61 Pages
attorneys at any time for all Indemnified Parties except to the extent that
local counsel, in addition to such parties' regular counsel, is required in
order to effectively defend against such action or proceeding, (y) the
Indemnified Party will cooperate in the defense of any such matter and
(z) neither the Parent nor the Surviving Corporation shall be liable for any
settlement effected without its prior consent, and provided, further, that
neither the Parent nor the Surviving Corporation shall have any obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have become final, that
the indemnification of such Indemnified Party in the manner contemplated hereby
is prohibited by applicable law.
(e) If the Surviving Corporation or any of its successors or assigns
(x) consolidate with or merge into any other corporation or entity and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (y) shall transfer all or substantially all of its properties and
assets to any Person, then and in each such case, proper provisions shall be
made so that the successors and assigns of the Surviving Corporation shall
assume all of the obligations of the Surviving Corporation set forth in this
Section 5.10.
(f) The provisions of paragraphs (d) and (e) of this Section 5.10 are
intended to be for the benefit of, and shall be enforceable by, each of the
directors, officers and employees of the Company who are the beneficiaries of
the indemnification arrangements specified herein and their respective heirs,
legal representatives, successors and assigns.
Section 5.11 Exclusivity. Except as provided in this Section 5.11, after
-----------
the date of this Agreement and until the termination of this Agreement pursuant
to Section 7.1, the Company will not, nor will it permit its officers, direc-
tors, Subsidiaries, representatives or agents, directly or indirectly, to, do
any of the following: (i) solicit or initiate the submission of a proposal or
offer in respect of any transaction (other than the Merger) involving any
disposition or other change of ownership of a substantial portion of the
Company's stock or assets (an "Acquisition Transaction"); (ii) participate in
substantive discussions or engage in negotiations concerning an Acquisition
Transaction; or (iii) furnish or cause to be furnished to any corporation,
partnership, person or other entity or group (other than the Parent and its
representatives) (a "Person") any nonpublic information concerning the business,
operations, properties or assets of the Company in connection with an
Acquisition Transaction; provided, however, and notwithstanding anything else
contained in this Section 5.11 or otherwise in this Agreement, the Company and
its officers, directors, Subsidiaries, representatives and agents may engage in
activities referred to in clause (ii) above, and may furnish or cause to be
furnished nonpublic information to, any Person who, or representatives of any
Person who, makes a written proposal with respect to an Acquisition Transaction
if the Company's Board of Directors determines in good faith after consultation
with its outside counsel that it is obligated to consider such proposal in order
to satisfy its fiduciary duties under applicable law. If the Company determines
to accept a proposal for or otherwise engage in any Acquisition Transaction
(other than the Merger), it may terminate this Agreement provided it promptly
pays to the Parent in reimbursement for the Parent's expenses an amount in cash
(not to exceed $2,000,000) equal to the aggregate amount of the Parent's
documented out-of-pocket expenses reasonably incurred in connection with
pursuing the transactions contemplated by this Agreement as certified in good
faith by the Parent and with reasonable detail
Page 49 of 61 Pages
("Compensable Expenses"). If the Parent terminates this Agreement pursuant to
Section 7.1(e), the Company shall promptly reimburse the Parent for its
Compensable Expenses.
Section 5.12 Fees and Expenses. Except as set forth in Section 5.11,
-----------------
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby will be
paid by the party incurring such expenses.
Section 5.13 Brokers or Finders. Each of the Parent and the Company
------------------
represents, as to itself, its Subsidiaries and its affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or will
be entitled to any broker's, or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement,
except Donaldson, Lufkin & Jenrette Securities Corporation, whose fees and
expenses will be paid by the Company in accordance with the Company's agreement
with such firm, a copy of which has been provided to the Parent, and CS First
Boston Corporation, whose fees and expenses will be paid by the Parent in
accordance with the Parent's agreement with such firm, a copy of which has been
provided to the Company. Each of the Parent and the Company will indemnify and
hold the other harmless from and against any and all claims, liabilities or
obligations with respect to any other brokers, or finders, fees, commissions or
expenses asserted by any person on the basis of any act or statement alleged to
have been made by such party or its Subsidiary or affiliate.
Section 5.14 Rule 145. The Parent and the Surviving Corporation will use
--------
their reasonable efforts to comply with the provisions of Rule 144(c) under the
Securities Act in order that such affiliates may resell such Parent Common Stock
pursuant to Rule 145(d) under the Securities Act.
Section 5.15 Board Membership. The Parent shall take such action as may
----------------
be required to increase the size of its Board of Directors in order to enable
Frederick R. Hipp and Warren Gfeller (and any substitute person designated by
the Company prior to the Effective Time) to be appointed to Parent's Board of
Directors immediately after the Effective Time.
Section 5.16 Takeover Statutes. If any "fair price", "moratorium",
-----------------
"control share acquisition" or other form of anti-takeover statute or regulation
shall become applicable to the transactions contemplated hereby, the Parent and
the Company and their respective members of their Boards of Directors shall
grant such approvals and take such actions as are necessary so that the
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated herein and otherwise act to eliminate or
minimize the effects of such statute or regulation on the transactions
contemplated herein.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation To Effect the Merger.
----------------------------------------------------------
The respective obligations of the parties to effect the Merger will be subject
to the satisfaction, on or prior to the Merger Filing Date, of the following
conditions:
Page 50 of 61 Pages
(i) This Agreement (insofar as it relates to the Merger) and the
Merger have been approved and adopted by the affirmative vote of the holders of
Company Common Stock entitled to cast at least a majority of the total number of
votes entitled to be cast by holders of Company Common Stock;
(a) The issuance of the shares of Parent Common Stock in the Merger
has been approved by the affirmative vote of the holders of the Parent Common
Stock and the Preference Stock, voting together as a class, entitled to cast at
least a majority of the total number of votes voting on such matter as required
by the NYSE;
(b) Any waiting period under the HSR Act applicable to the Merger has
expired or been terminated;
(c) The S-4 has become effective under the Securities Act and is not
the subject of any stop order or proceeding seeking a stop order; and the Parent
has received all material state securities or blue sky permits and other
authorizations necessary to issue the shares of Parent Common Stock pursuant to
this Agreement and the Merger;
(d) 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 is in
effect (each party agreeing to use all reasonable efforts to have any such order
reversed or injunction lifted);
(e) The Parent Common Stock has been approved for listing on the
NYSE, subject to official notice of issuance;
(f) The indebtedness outstanding under the Company's credit facility
in the amount of approximately $80.6 million at April 30, 1996 has been
refinanced or otherwise repaid; or
(g) The Parent and the Company each has received the legal opinion of
Baker & Botts L.L.P., reasonably satisfactory in form and substance to the
Company and its counsel and to the Parent and its counsel, based, in each case,
upon representation letters, dated on or about the date of such opinion,
substantially in the forms of Annex III and Annex IV hereto and containing such
other facts and representations as counsel may reasonably deem relevant, to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of Section 368(a) of the Code.
Section 6.2 Conditions of Obligations of the Parent and the Sub. The
---------------------------------------------------
obligations of the Parent and the Sub to effect the Merger are further subject
to the Company not having failed to perform its material obligations required to
be performed by it under this Agreement within 10 days after written notice is
delivered by the Parent to the Company of such failure to perform, the Company's
representations and warranties in this Agreement being true and correct in all
material respects as of the Merger Filing Date and the Company having obtained
all material consents, waivers, approvals, authorizations or orders required to
be obtained by the Company
Page 51 of 61 Pages
for the authorization, execution and delivery of this Agreement and the
consummation by it of the transactions contemplated hereby (including material
consents under the leases referred to in Section 3.7(b) of the Company
Disclosure Schedule).
Section 6.3 Conditions of Obligations of the Company. The obligation of
----------------------------------------
the Company to effect the Merger is further subject to the Parent and the Sub
not having failed to perform their material obligations required to be performed
by them under this Agreement within 10 days after written notice is delivered by
the Company to the Parent of such failure to perform, the Parent's and the Sub's
representations and warranties in this Agreement being true and correct in all
material respects as of the Merger Filing Date, the Parent's having taken
action, effective immediately after the Effective Time, to appoint to Parent's
Board of Directors the persons specified in Section 5.15 and the Parent having
offered to employ William W. Moreton as the Executive Vice President and Chief
Financial Officer of the Parent on terms substantially as set forth in the form
of employment agreement previously delivered by Mr. Moreton to the Parent with
such employment agreement to be effective immediately after the Effective Time.
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of the Parent and
the Company:
(a) by mutual consent of the Parent and the Company by action of
their respective Boards of Directors or special committees thereof;
(b) by either the Parent or the Company if the Merger is not
consummated before October 1, 1996 despite the good faith effort of such party
to effect such consummation (unless the failure to so consummate the Merger by
such date is due to the action or failure to act of the party seeking to
terminate this Agreement, and such action or failure to act constitutes a breach
of this Agreement);
(c) by either the Parent or the Company if any court of competent
jurisdiction has issued an injunction permanently restraining, enjoining or
otherwise prohibiting the consummation of the Merger, which injunction has
become final and non-appealable;
(d) by the Company pursuant to Section 5.11;
(e) by the Parent if the Board of Directors of the Company or the
special committee thereof shall have withdrawn or modified, in any manner
adverse to the Parent, its recommendation for approval of this Agreement
(insofar as it relates to the Merger) and the Merger;
Page 52 of 61 Pages
(f) by the Company if the special committee of the Board of Directors
of the Parent shall have withdrawn or modified, in any manner adverse to the
Company, its recommendation for approval of the issuance of Parent Common Stock
in the Merger;
(g) by either the Parent or the Company, if one of the conditions set
forth in Article VI to its obligation to consummate the Merger has not been
satisfied; or
(h) by the Parent if more than 1,000,000 shares of Company Common
Stock represent Dissenting Shares as of the Closing Date.
Section 7.2 Effect of Termination. In the event of a termination of
---------------------
this Agreement by either the Company or the Parent as provided in Section 7.1,
this Agreement will forthwith become void and there will be no liability or
obligation on the part of the Parent, the Sub or the Company or their respective
officers or directors, other than (a) the provisions of the last sentence of
Section 5.11, which will survive for a period of one year from the date of any
such termination if and only if the Parent has not received the payment pursuant
to Section 5.11 and such termination of this Agreement is pursuant to Section
7.1(d) or (e), (b) to the extent that such termination results from the willful
breach by a party hereto of any of its covenants or agreements set forth in this
Agreement and (c) the obligations of the respective parties under the
Confidentiality Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Survival of Representations and Warranties; Enforcement of
----------------------------------------------------------
Certain Covenants.
- -----------------
(a) None of the representations and warranties in this Agreement or
in any instrument delivered pursuant to this Agreement will survive the
Effective Time.
(b) The covenants of the Parent set forth in Sections 5.9 and 5.10
hereof may be enforced after the Effective Time by any of the officers or
directors of the Company as of the Effective Time.
Section 8.2 Amendment. Subject to the DGCL, this Agreement may be
---------
amended by the parties hereto, by action taken or authorized by their respective
Boards of Directors or special committees thereof, at any time before or after
approval of the matters presented at the meetings of the stockholders of the
Company and the Parent referred to in Section 5.7. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 8.3 Extension; Waiver. At any time prior to the Effective Time,
-----------------
the parties hereto, by action taken or authorized by the respective Boards of
Directors or special committees thereof, may to the extent legally allowed, (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the
Page 53 of 61 Pages
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the covenants, agreements
or conditions contained here. Any agreement on the part of a party hereto to
any such extension or waiver will be valid only if set forth in a written
instrument signed on behalf of such party.
Section 8.4 Notices. All notices and other communications hereunder
-------
will be in writing and will be deemed given if delivered personally, telecopied
(which is confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as is specified by like notice):
(a) if to the Parent or the Sub, to
Zapata Corporation
1717 St. James Place
Houston, Texas 77253-3581
Attention: Joseph L. von Rosenberg III
General Counsel
with a copy to
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attention: C. Michael Watson
and
---
Bracewell & Patterson L.L.P.
South Tower Pennzoil Place
711 Louisiana, Suite 2900
Houston, Texas 77002-2781
Attention: Edgar J. Marston
and
(b) if to the Company, to
Houlihan's Restaurant Group, Inc.
2 Brush Creek Boulevard
Kansas City, Kansas 64112
Attention: William W. Moreton
Executive Vice President and
Chief Financial Officer
Page 54 of 61 Pages
with a copy to
Bryan Cave LLP
1200 Main Street, Suite 3500
Kansas City, Missouri 64105-2180
Attention: Kendrick T. Wallace
Section 8.5 Interpretation. When a reference is made in this Agreement
--------------
to Sections, such reference will be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and will not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are
used in this Agreement they will be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, will be deemed
to refer June 4, 1996.
Section 8.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which will be considered one and the same agreement and
will become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 8.7 Entire Agreement; No Third Party Beneficiaries. This
----------------------------------------------
Agreement (including the documents and the instruments referred to herein), and
the Confidentiality Agreement (a) constitute the entire agreement and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and thereof, and (b) other
than Sections 5.9 and 5.10 are not intended to confer upon any person other than
the parties hereto and thereto any rights or remedies hereunder or thereunder.
Section 8.8 Governing Law. This Agreement will be governed and
-------------
construed in accordance with the laws of the State of Delaware applicable to
contracts made, executed, delivered and performed wholly within the State of
Delaware, without regard to any applicable conflicts of law. The Company, the
Parent and the Sub hereby (a) submit to the jurisdiction of any State and
Federal courts sitting in the State of Delaware with respect to matters arising
out of or relating hereto, (b) agree that all claims with respect to such
matters may be heard and determined in an action or proceeding in such State or
Federal court and no other court, (c) waive the defense of an inconvenient
forum, and (d) agree that a final judgment in any such action or proceeding will
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.
Section 8.9 Specific Performance. The parties hereto agree that if any
--------------------
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine.
Accordingly, the parties agree that they will be entitled to specific
performance of the terms of this Agreement, in addition to any other remedy at
law or equity.
Page 55 of 61 Pages
Section 8.10 Publicity. Except as otherwise required by law or the rules
---------
of the NYSE, for so long as this Agreement is in effect, neither the Company nor
the Parent will, or will permit any of its Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement without having consulted with
the other party.
Section 8.11 Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations hereunder will be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other parties, except that the Sub may assign, in its sole discretion, any
or all rights, interests and obligations hereunder to any direct or indirect
wholly owned Subsidiary of the Parent incorporated under the laws of the State
of Delaware. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
Section 8.12 Validity. The invalidity or unenforceability of any
--------
provision of this Agreement will not affect the validity or enforceability of
any other provisions hereof or thereof, which will remain in full force and
effect.
Section 8.13 Conveyance Tax. The Company shall be liable for and shall
--------------
hold the holders of shares of the Company Common Stock harmless against any New
York State Real Property Gains Tax, New York State Real Estate Transfer Tax and
New York City Real Property Transfer Tax which becomes payable in connection
with the transactions contemplated by this Agreement.
Page 56 of 61 Pages
IN WITNESS WHEREOF, the Parent, the Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
ZAPATA CORPORATION
By:
-----------------------------------------------
Authorized Officer
ZAPATA ACQUISITION CORP.
By:
-----------------------------------------------
Authorized Officer
HOULIHAN'S RESTAURANT GROUP, INC.
By:
-----------------------------------------------
Authorized Officer
Page 57 of 61 Pages
EXHIBIT 18
SUPPLEMENTAL AGREEMENT
of
MALCOLM I. GLAZER
As of the date hereof, the undersigned represents, warrants, covenants and
agrees with Zapata Corporation ("Parent") as follows:
(a) Capitalized terms that are not defined herein shall have the
meanings ascribed to them in the Agreement and Plan of Merger, dated as of June
4, 1996, by and among the Parent, Zapata Acquisition Corp. and Houlihan's
Restaurant Group, Inc. ("Company") (the "Merger Agreement");
(b) The Agreement dated as of April 30, 1996 between the undersigned
and the Parent ("Standstill Agreement") is in full force and effect and neither
the undersigned nor any other member of the Glazer Group is in default
thereunder;
(c) The undersigned and the other members of the Glazer Group own of
record or beneficially an aggregate of 10,408,717 shares of Parent Company
Stock, representing all the Voting Securities and Outstanding Voting Securities
of the Parent Beneficially Owned by the Glazer Group;
(d) The undersigned and the other members of the Glazer Group own of
record or beneficially an aggregate of 7,325,815 shares of Company Common Stock,
representing all the Voting Securities and Outstanding Voting Securities of the
Company Beneficially Owned by the Glazer Group;
(e) As required by the terms of the Standstill Agreement, the
undersigned has executed and delivered, and has caused each other member of the
Glazer Group to execute and deliver, to the HOL Special Committee (as defined in
the Standstill Agreement) an irrevocable proxy covering all Voting Securities of
the Parent that the members of the Glazer Group would be entitled to vote at the
meeting of the Parent's stockholders contemplated by Section 5.7 of the
Agreement;
(f) Between the date hereof and the Effective Time, the undersigned
will not, and, to the extent within his actual control, will not permit any
other member of the Glazer Group to, take any action that would result in an
increase or decrease in the number of Voting Securities or Outstanding Voting
Securities of either the Parent or the Company that is Beneficially Owned by the
Glazer Group;
(g) The undersigned agrees to exercise, and, to the extent within his
actual control, cause all other members of the Glazer Group to exercise, the
Residual Election with respect to all Glazer Shares; and
Page 58 of 61 Pages
(h) On the Merger Filing Date, the undersigned will deliver to the
Parent and the Company a certificate confirming that each of the undersigned
and, to the extent within his actual control, the other members of the Glazer
Group has complied with its respective obligations set forth herein and that the
representations and warranties set forth herein are true and correct in all
material respects as of that date.
(i) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(j) This Agreement is not intended to, and shall not, confer upon any
person other than the parties hereto any rights or remedies.
(k) This Agreement shall terminate automatically upon any termination
of the Merger Agreement pursuant to Article VII thereof or upon termination of
the Standstill Agreement.
IN WITNESS WHEREOF, this Supplemental Agreement has been executed as of
this 4th day of June, 1996.
----------------------------
Malcolm I. Glazer, Individually and
as Trustee of the Malcolm I. Glazer
Trust U/A dated March 23, 1990, as
amended
Page 59 of 61 Pages
EXHIBIT 19
IRREVOCABLE PROXY
-----------------
Pursuant to paragraph 5(b) of the Agreement dated and effective as of April
30, 1996 ("Agreement") between Zapata Corporation, a Delaware corporation, and
Malcolm I Glazer, individually and as trustee of the Malcolm I. Glazer Trust,
the undersigned hereby agrees as follows:
1. Capitalized terms that are not defined herein shall have the
meanings set forth in the Agreement.
2. The undersigned member of the Glazer Group holds Beneficial
Ownership of 10,408,717 shares of Common Stock ("Stock") and will be entitled to
vote such shares at the Annual Meeting of Stockholders of the Company scheduled
to beheld on August 22, 1996, and at any adjournment thereof ("Meeting"), at
which meeting shareholders of the Company will be asked to vote on the issuance
of Common Stock ("Stock Issuance") in connection with the Company's acquisition
of Houlihan's Restaurant Group, Inc. ("Houlihan's"), a Glazer Controlled Entity
("Subject Acquisition"), pursuant to the terms of the Agreement and the Plan of
Merger dated as of June 4, 1996 among the Company, Zapata Acquisition Corp. and
Houlihan's ("Merger Agreement").
3. The undersigned hereby revokes any proxy heretofore given and
appoints Ronald C. Lassiter, Robert V. Leffler, Jr. and W. George Loar, the
members of the Special Committee that evaluated the Subject Acquisition, and
each of them (with full power to each of them to act as a majority of such
members shall approve), as proxies and attorneys-in-fact, in the undersigned's
name, place and stead, in any and all capacities, each with full power of
substitution and resubstitution (a "Proxy" or the "Proxies"), to exercise all
voting authority with respect to the Stock (and any other Voting Securities
Beneficially Owned by the undersigned as of the record date for the
determination of shareholders of the Company entitled to vote at the Meeting) in
connection with the Stock Issuance pursuant to the terms of the Merger
Agreement, granting to each Proxy full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises in order to effectuate the same as fully to all intents and purposes as
the undersigned might or could do if present, hereby ratifying and confirming
all that a majority of the Proxies may lawfully to or cause to be done by virtue
hereof. This proxy is coupled with an interest and shall be irrevocable during
the term of the Agreement ("Irrevocable Proxy") until the first to occur of (a)
the adjournment of the Meeting at which the Subject Acquisition is considered by
the shareholders of the Company or (b) the Company's publicly announced
abandonment of the Subject Acquisition. Upon termination of either the Merger
Agreement or the Agreement, this Irrevocable Proxy shall be deemed to be
revoked.
Page 60 of 61 Pages
4. In exercising the voting authority referred to in paragraph 3
above, each Proxy shall have complete discretion to take such action, or refrain
from taking such action, as he or she deems necessary, appropriate or desirable
under the circumstances, subject only to the caveat that no Proxy shall be
authorized and empowered to engage in intentional misconduct or action that
otherwise constitutes gross negligence ("Standard of Care"). Any action taken
by a Proxy pursuant to the express terms of the Agreement shall be conclusively
presumed to comply with the Standard of Care. Any action taken by a Proxy upon
the written advice of Richards, Layton & Finger, Wilmington, Delaware, or other
independent legal counsel reasonably acceptable to the Proxy, shall also be
conclusively presumed to comply with the Standard of Care. All reasonable fees
and expenses of such legal counsel shall be paid directly by the Company.
In Witness Whereof, this Irrevocable Proxy has been executed by the
undersigned this 4th day of June, 1996.
----------------------------------------
Malcolm I. Glazer, individually and as Trustee of the
Malcolm I. Glazer Trust
Page 61 of 61 Pages