EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION PAGE
2 Agreement and Plan of Merger, dated October 17, 1995, among CUC International
Inc., Retreat Acquisition Corporation and Advance Ross Corporation.
4 Form of Stock Certificate evidencing shares of CUC International Common Stock
(filed as Exhibit 4.1 to CUC International's Registration Statement, No.
33-44453, on Form S-4 dated December 19, 1991).*
5 Opinion of Robert T. Tucker, Esq. as to the legality of the Registrant's
Common Stock to be registered.
8 Opinion re: tax matters of Katten Muchin & Zavis.
9 Stockholders Agreement, dated October 17, 1995, among CUC International Inc.
and the holders of Advance Ross Common Stock party thereto.
15.1 Letter re: Unaudited Interim Financial Information from Ernst & Young LLP.
23.1 Consent of Robert T. Tucker, Esq. (included in Exhibit 5).
23.2 Consent of Ernst & Young LLP, independent auditors for the Registrant.
23.3 Consent of Deloitte & Touche LLP, independent auditors for Advance Ross
Corporation.
23.4 Consent of Katten Muchin & Zavis (included in Exhibit 8).
24 Power of Attorney (included as part of the signature page of this Registration
Statement).
27.1 Financial Data Schedules of the Registrant.
27.2 Financial Data Schedules of Advance Ross Corporation.
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* Incorporated herein by reference.
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
CUC INTERNATIONAL INC.,
RETREAT ACQUISITION CORPORATION
AND
ADVANCE ROSS CORPORATION
DATED OCTOBER 17, 1995
TABLE OF CONTENTS
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ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING
1.1. The Merger..................................................................... 1
1.2. Effective Time................................................................. 2
1.3. Closing........................................................................ 2
1.4. Effects of the Merger.......................................................... 2
ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION
2.1. Certificate of Incorporation................................................... 2
2.2. The By-Laws.................................................................... 2
ARTICLE III
DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
3.1. Directors...................................................................... 2
3.2. Officers....................................................................... 2
ARTICLE IV
MERGER CONSIDERATION;
CONVERSION OR CANCELLATION
OF SHARES IN THE MERGER
4.1. Share Consideration for the Merger; Conversion or Cancellation of Shares in the
Merger......................................................................... 3
4.2. Payment for Shares in the Merger............................................... 5
4.3. Fractional Shares.............................................................. 6
4.4. Transfer of Shares after the Effective Time.................................... 6
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company.................................. 6
(a) Corporate Organization and Qualification................................. 6
(b) Capitalization........................................................... 6
(c) Approvals; Fairness Opinion.............................................. 7
(d) Authority Relative to this Agreement..................................... 7
(e) Consents and Approvals; No Violation..................................... 8
(f) Litigation............................................................... 9
(g) SEC Reports; Financial Statements........................................ 9
(h) Absence of Certain Changes or Events..................................... 9
(i) Employment Agreements.................................................... 10
(i)
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(j) Brokers and Finders...................................................... 10
(k) S-4 Registration Statement and Proxy Statement/Prospectus................ 10
(l) Taxes.................................................................... 10
(m) Employee Benefits........................................................ 11
(n) Intangible Property...................................................... 12
(o) Certain Contracts........................................................ 13
(p) Accounting Matters....................................................... 14
(q) Unlawful Payments and Contributions...................................... 14
(r) Commission Rates......................................................... 14
(s) Listings................................................................. 14
(t) Environmental Matters.................................................... 14
(u) Disclosure............................................................... 15
5.2. Representations and Warranties of Parent and Merger Sub........................ 15
(a) Corporate Organization and Qualification................................. 15
(b) Capitalization........................................................... 15
(c) Authorization for Parent Common Shares................................... 16
(d) Authority Relative to this Agreement..................................... 16
(e) Consents and Approvals; No Violation..................................... 16
(f) Ownership of Merger Sub; No Prior Activities; Assets of Merger Sub....... 17
(g) SEC Reports; Financial Statements........................................ 17
(h) Absence of Certain Changes or Events..................................... 18
(i) Litigation............................................................... 18
(j) S-4 Registration Statement and Proxy Statement/Prospectus................ 18
(k) Brokers and Finders...................................................... 18
(l) Ownership of Shares...................................................... 18
(m) Accounting Matters....................................................... 18
(n) Disclosure............................................................... 18
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
6.1. Conduct of Business............................................................ 19
6.2. No Solicitation................................................................ 20
6.3. Meeting of Stockholders........................................................ 21
6.4. Registration Statement......................................................... 22
6.5. Best Efforts................................................................... 22
6.6. Access to Information.......................................................... 22
6.7. Publicity...................................................................... 23
6.8. Indemnification of Directors and Officers...................................... 23
6.9. Affiliates of the Company...................................................... 24
6.10. Taxes.......................................................................... 24
6.11. Maintenance of Insurance....................................................... 24
6.12. Representations and Warranties................................................. 24
6.13. Filings; Other Action.......................................................... 24
(ii)
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6.14. Notification of Certain Matters................................................ 24
6.15. Pooling Accounting............................................................. 25
6.16. Blue Sky Permits............................................................... 25
6.17. NYSE Listing................................................................... 25
6.18. Pooling Letter................................................................. 25
6.19. Comfort Letter................................................................. 25
6.20. Tax-Free Reorganization Treatment.............................................. 25
6.21. Combined Operations............................................................ 25
6.22. Employment Agreements.......................................................... 25
ARTICLE VII
CONDITIONS
7.1. Conditions to the Obligations of Parent and Merger Sub......................... 26
(a) Certificate.............................................................. 26
(b) Company Stockholder Approval............................................. 26
(c) Injunction............................................................... 26
(d) S-4 Registration Statement; "Blue Sky" Permits........................... 26
(e) Listing of Parent Common Shares.......................................... 26
(f) Governmental Filings and Consents; HSR Act............................... 26
(g) Pooling Letter........................................................... 26
(h) Third Party Consents..................................................... 26
(i) Delivery of Comfort Letter............................................... 27
(j) Termination of Options................................................... 27
(k) Affiliate Letters........................................................ 27
(l) Termination of Advisory Agreement........................................ 27
7.2. Conditions to the Obligations of the Company................................... 27
(a) Certificate.............................................................. 27
(b) Company Stockholder Approval............................................. 27
(c) Injunction............................................................... 27
(d) S-4 Registration Statement; "Blue Sky" Permits........................... 27
(e) Listing of Parent Common Shares.......................................... 27
(f) HSR Act.................................................................. 28
(g) Tax Opinion.............................................................. 28
ARTICLE VIII
TERMINATION
8.1. Termination by Mutual Consent.................................................. 28
8.2. Termination by either Parent or the Company.................................... 28
8.3. Termination by Parent.......................................................... 28
8.4. Termination by the Company..................................................... 29
8.5. Effect of Termination and Abandonment.......................................... 29
(iii)
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ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1. Payment of Expenses............................................................ 30
9.2. Survival of Representations and Warranties..................................... 30
9.3. Modification or Amendment...................................................... 30
9.4. Waiver of Conditions........................................................... 30
9.5. Counterparts................................................................... 30
9.6. Governing Law.................................................................. 30
9.7. Notices........................................................................ 30
9.8. Entire Agreement; Assignment................................................... 31
9.9. Parties in Interest............................................................ 31
9.10. Certain Definitions............................................................ 31
(a) "Significant Subsidiary"................................................. 31
(b) "subsidiary"............................................................. 31
(c) "Material Adverse Effect"................................................ 31
9.11. Obligation of Parent........................................................... 32
9.12. Arbitration.................................................................... 32
9.13. Severability................................................................... 32
9.14. Specific Performance........................................................... 32
9.15. Recapitalization............................................................... 32
9.16. Captions....................................................................... 32
EXHIBITS
Stockholders Agreement.......................................................... Exhibit A
Form of Stockholder Certificate................................................. Exhibit B
Form of Company, Parent and Merger Sub Certificate.............................. Exhibit C
(iv)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated October 17, 1995,
among CUC International Inc., a Delaware corporation ("Parent"), Retreat
Acquisition Corporation, a Delaware corporation and a direct wholly-owned
subsidiary of Parent ("Merger Sub"), and Advance Ross Corporation, a Delaware
corporation (the "Company").
RECITALS
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company each
have determined that it is in the best interests of their respective
stockholders for Merger Sub to merge with and into the Company upon the terms
and subject to the conditions of this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the Merger (as
defined in Section 1.1) shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, concurrently with the execution hereof, certain holders (each, a
"Stockholder" and, collectively, the "Stockholders") of Shares (as defined in
Section 4.1(b)) are entering into the Stockholders Agreement, a copy of which is
attached as Exhibit A hereto (the "Stockholders Agreement");
WHEREAS, it is intended that the Merger shall be recorded for accounting
purposes as a pooling-of-interests;
WHEREAS, the Company has delivered to Parent a letter identifying all
persons (each, a "Company Affiliate") who are, at the date hereof, "affiliates"
of the Company for purposes of Rule 145 under the Securities Act of 1933, as
amended (the "Securities Act"), and each Company Affiliate has delivered to
Parent a letter (each, an "Affiliate Letter") relating to (i) the transfer,
prior to the Effective Time (as defined in Section 1.2), of the Shares
beneficially owned by such Company Affiliate on the date hereof, (ii) the
transfer of the Parent Common Shares (as defined in Section 4.1(a)) to be
received by such Company Affiliate in the Merger and (iii) the obligations of
each such Company Affiliate to deliver to Katten Muchin & Zavis, counsel to the
Company, a certificate substantially in the form attached hereto as Exhibit B;
and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, Parent, Merger Sub and the Company
hereby agree as follows:
ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING
1.1. The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the General Corporation Law of the State
of Delaware (the "DGCL"), at the Effective Time the Company and Merger Sub shall
consummate a merger (the "Merger") in which (a) Merger Sub shall be merged with
and into the Company and the separate corporate existence of Merger Sub shall
thereupon cease, (b) the Company shall be the successor or surviving corporation
in the Merger and shall continue to be governed by the laws of the State of
Delaware and (c) the separate corporate existence of the Company with all its
rights, privileges, immunities, powers and franchises shall
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continue unaffected by the Merger. The corporation surviving the Merger is
sometimes hereinafter referred to as the "Surviving Corporation." The name of
the Surviving Corporation shall be "Advance Ross Corporation." At the election
of Parent, any direct wholly-owned subsidiary of Parent may be substituted for
Merger Sub as a constituent corporation in the Merger. In such event, the
parties agree to execute an appropriate amendment to this Agreement in order to
reflect the foregoing.
1.2. Effective Time. Subject to the provisions of this Agreement, Parent,
Merger Sub and the Company shall cause the Merger to be consummated by filing an
appropriate Certificate of Merger or other appropriate documents (the
"Certificate of Merger") with the Secretary of State of the State of Delaware in
such form as required by, and executed in accordance with, the relevant
provisions of the DGCL, as soon as practicable on or after the Closing Date (as
defined in Section 1.3). The Merger shall become effective upon such filing or
at such time thereafter as is provided in the Certificate of Merger (the
"Effective Time").
1.3. Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Article
VIII, and subject to the satisfaction or waiver of the conditions set forth in
Article VII, the closing of the Merger (the "Closing") shall take place at 10:00
a.m., New York City time, on the second business day after satisfaction of the
conditions set forth in Article VII (or as soon as practicable thereafter
following satisfaction or waiver of the conditions set forth in Article VII)
(the "Closing Date"), at the offices of Weil, Gotshal & Manges, 767 Fifth
Avenue, New York, New York 10153, unless another date, time or place is agreed
to in writing by the parties hereto.
1.4. Effects of the Merger. At the Effective Time, the effects of the merger
shall be as provided in the Certificate of Merger and the applicable provisions
of the DGCL.
ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION
2.1. Certificate of Incorporation. At the Effective Time, the Certificate of
Incorporation of the Company immediately prior to the Effective Time shall
become the Certificate of Incorporation of the Surviving Corporation.
2.2. The By-Laws. At the Effective Time, the by-laws of the Company
immediately prior to the Effective Time shall become the by-laws of the
Surviving Corporation.
ARTICLE III
DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
3.1. Directors. The directors of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws.
3.2. Officers. The officers of the Company at the Effective Time shall, from
and after the Effective Time, be the officers of the Surviving Corporation until
their successors have been duly elected
2
or appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation and
By-Laws.
ARTICLE IV
MERGER CONSIDERATION;
CONVERSION OR CANCELLATION
OF SHARES IN THE MERGER
4.1. Share Consideration for the Merger; Conversion or Cancellation of
Shares in the Merger. The manner of converting or canceling shares of the
Company and Merger Sub in the Merger shall be as follows:
(a) At the Effective Time, each share of common stock, $.01 par value
per share, of the Company (the "Common Shares") issued and outstanding
immediately prior to the Effective Time (other than Common Shares owned by
Parent, Merger Sub or any direct or indirect wholly-owned subsidiary of
Parent (collectively, "Parent Companies") or any of the Company's direct or
indirect wholly-owned subsidiaries) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into
five-sixths ( 5/6) (the "Exchange Ratio") of one share of common stock, par
value $0.01 per share, of Parent ("Parent Common Shares"); provided,
however, that (x) if the Average Stock Price (as defined below) is greater
than $38.00, the Exchange Ratio shall be reduced so as to equal the product
of (i) five-sixths ( 5/6) and (ii) a fraction, the numerator of which shall
be $38.00 and the denominator of which shall be the Average Stock Price and
(y) if the Average Stock Price is less than $30.00, the Exchange Ratio shall
be increased so as to equal the product of (i) five-sixths ( 5/6) and (ii) a
fraction, the numerator of which shall be $30.00 and the denominator of
which shall be the Average Stock Price. The term "Average Stock Price" means
a fraction, the numerator of which is the sum of the Weighted Amount (as
defined below) for each trading day during the period of ten consecutive
trading days commencing eleven trading days prior to the date of the
Stockholder Meeting (as defined in Section 6.3) and ending on the second
trading day prior to the date of the Stockholder Meeting, and the
denominator of which is the total reported volume in trading in Parent
Common Shares on the New York Stock Exchange ("NYSE") during such ten-day
period. For purposes hereof, with respect to any trading day, the "Weighted
Amount" shall be equal to the product of (A) the per share closing price on
the NYSE of Parent Common Shares on such day and (B) the total reported
volume of trading in Parent Common Shares on the NYSE for such day, in each
case as reported in the New York Stock Exchange Composite Transactions.
(b) At the Effective Time, each share of 5% cumulative preferred stock,
$25.00 par value per share, of the Company (the "Preferred Shares" and,
together with the Common Shares, the "Shares") issued and outstanding
immediately prior to the Effective Time (other than Preferred Shares owned
by any of the Parent Companies or any of the Company's direct or indirect
wholly-owned subsidiaries) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into a number of
Parent Common Shares equal to the quotient obtained by dividing (x) the sum
of $27.50 plus all dividends accumulated, accrued and unpaid on such
Preferred Shares to the Effective Time (excluding any such dividends that,
as of the Effective Time, have been declared with a record date prior to the
Effective Time but a payment date after the Effective Time) by (y) the
Average Stock Price. Notwithstanding the prior sentence or any other
provision of this Agreement, if, in the reasonable determination of the
Company, the amount of cash to be received by the holders of Preferred
Shares would exceed 20% of the total consideration to be received by such
holders at the Effective Time, then the Company shall redeem the Preferred
Shares prior to the Effective Time in accordance with Article Fourth of the
Restated Certificate of Incorporation of the Company.
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(c) All Shares to be converted into Parent Common Shares pursuant to
this Section 4.1 shall, by virtue of the Merger and without any action on
the part of the holders thereof, cease to be outstanding, be canceled and
retired and cease to exist, and each holder of a certificate representing
any such Shares shall thereafter cease to have any rights with respect to
such Shares, except the right to receive for each of the Shares, upon the
surrender of such certificate in accordance with Section 4.2, the number of
Parent Common Shares specified above (the "Share Consideration") and cash in
lieu of fractional Parent Common Shares as contemplated by Section 4.3.
(d) At the Effective Time, each share of common stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Merger Sub or the
holder thereof, be converted into the same number of shares of common stock
of the Surviving Corporation.
(e) At the Effective Time, each outstanding option to purchase Common
Shares (each, an "Option") issued pursuant to the Advance Ross Corporation
Stock Option Plan, effective October 26, 1992 (the "1992 Plan"), the 1993
Advance Ross Corporation Stock Option Plan, effective June 15, 1993 (the
"1993 Plan"), and each of the Stock Option Agreements set forth in Section
5.1(b) of the Company Disclosure Schedule (collectively, the "Option Plans")
and the Warrant Certificate to purchase 480,000 Common Shares (after giving
effect to all amendments and stock splits) issued to Allen & Company
Incorporated, dated as of February 19, 1992 and amended pursuant to the
Amendment to Warrant Certificate dated as of December 1, 1992 and the
addendum, dated the date hereof, between the Company and Allen & Company
Incorporated (the "Warrant") shall be assumed by Parent and shall be deemed
to constitute an option or warrant, as the case may be, to acquire, on the
terms and conditions as were applicable under such Option or Warrant, the
same number of Parent Common Shares as the holder of such Option or Warrant
would have been entitled to receive pursuant to the Merger had such holder
exercised such Option or Warrant in full immediately prior to the Effective
Time (not taking into account whether such option or warrant was in fact
exercisable at such time), at a price per share equal to (x) the aggregate
exercise price for the Common Shares subject to such Option or Warrant
divided by (y) the number of full Parent Common Shares deemed purchasable
pursuant to such Option or Warrant; provided, however, that the number of
Parent Common Shares that may be purchased upon exercise of such Option or
Warrant shall not include any fractional share and, upon exercise of the
Option or Warrant, a cash payment shall be made for any fractional share
based upon the closing price of a Parent Common Share on the trading day
immediately preceding the date of exercise. As soon as practicable after the
Effective Time, Parent shall deliver to each holder of an Option an
appropriate notice setting forth such holder's right to acquire Parent
Common Shares and the Option agreements of such holder shall be deemed to be
appropriately amended so that such Options shall represent rights to acquire
Parent Common Shares on substantially the same terms and conditions as
contained in the outstanding Options (subject to any adjustments required by
the preceding sentence); provided, however, that notwithstanding anything to
the contrary contained herein, Parent shall not be obligated (x) to grant
any incentive stock options (within the meaning of Section 422 of the Code)
or (y) to grant options on terms more favorable than options to be assumed
pursuant to this Section 4.1(e).
(f) Parent shall use its best efforts to cause there to be effective as
of a date as soon as practicable after the Effective Time a registration
statement on Form S-8 (or any successor form) or another appropriate form,
with respect to the Parent Common Shares subject to such 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 Options
remain outstanding.
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4.2. Payment for Shares in the Merger. The manner of making payment for
Shares in the Merger shall be as follows:
(a) At the Effective Time, Parent shall make available to The Bank of
Boston (the "Exchange Agent"), or such other exchange agent selected by
Parent and reasonably acceptable to the Company for the benefit of the
holders of Shares, a sufficient number of certificates representing Parent
Common Shares required to effect the delivery of the aggregate Share
Consideration required to be issued pursuant to Section 4.1 (the
certificates representing Parent Common Shares comprising such aggregate
Share Consideration being hereinafter referred to as the "Stock Merger
Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the Parent Common Shares contemplated to be issued
pursuant to Section 4.1 and effect the sales provided for in Section 4.3 out
of the Stock Merger Exchange Fund. The Stock Merger Exchange Fund shall not
be used for any other purpose.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each holder of record (other than holders of certificates for Shares
referred to in Section 4.1(c)) of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"Certificates") (i) a form of 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) and (ii) instructions for use in effecting the surrender
of the Certificates for payment therefor. Upon surrender of Certificates for
cancellation to the Exchange Agent, together with such letter of transmittal
duly executed and any other required documents, the holder of such
Certificates shall be entitled to receive for each of the Shares represented
by such Certificates the Share Consideration and the Certificates so
surrendered shall forthwith be canceled. Until so surrendered, such
Certificates shall represent solely the right to receive the Share
Consideration and any cash in lieu of fractional Parent Common Shares as
contemplated by Section 4.3 with respect to each of the Shares represented
thereby. No dividends or other distributions that are declared after the
Effective Time on Parent Common Shares and payable to the holders of record
thereof after the Effective Time will be paid to persons entitled by reason
of the Merger to receive Parent Common Shares until such persons surrender
their Certificates. Upon such surrender, there shall be paid to the person
in whose name the Parent Common Shares are issued any dividends or other
distributions having a record date after the Effective Time and payable with
respect to such Parent Common Shares between the Effective Time and the time
of such surrender. After such surrender there shall be paid to the person in
whose name the Parent Common Shares are issued any dividends or other
distributions on such Parent Common Shares which shall have a record date
after the Effective Time and prior to such surrender and a payment date
after such surrender and such payment shall be made on such payment date. In
no event shall the persons entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions. If any certificate representing Parent Common Shares is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange
that the Certificate so surrendered shall be properly endorsed and otherwise
in proper form for transfer and that the person requesting such exchange
shall pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of certificates for such Parent Common Shares in a
name other than that of the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not applicable. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto shall be liable
to a holder of Shares for any Parent Common Shares or dividends thereon, or,
in accordance with Section 4.3, cash in lieu of fractional Parent Common
Shares, delivered to a public official pursuant to applicable escheat law.
The Exchange Agent shall not be entitled to vote or exercise any rights of
ownership with respect to the Parent Common Shares held by it from time to
time hereunder, except that it shall receive and hold all
5
dividends or other distributions paid or distributed with respect to such
Parent Common Shares for the account of the persons entitled thereto.
(c) Any portion of the Stock Merger Exchange Fund and the Fractional
Securities Fund (as defined in Section 4.3) which remains unclaimed by the
former stockholders of the Company for two years after the Effective Time
shall be delivered to Parent, upon demand of Parent, and any former
stockholders of the Company shall thereafter look only to Parent for payment
of their claim for the Share Consideration for the Shares or for any cash in
lieu of fractional shares of Parent Common Shares.
4.3. Fractional Shares. No fractional Parent Common Shares shall be issued
in the Merger. Each holder of Shares shall be entitled to receive in lieu of any
fractional Parent Common Shares to which such holder otherwise would have been
entitled pursuant to Section 4.2 (after taking into account all Shares then held
of record by such holder) a cash payment in an amount equal to the product of
(i) the fractional interest of a Parent Common Share to which such holder
otherwise would have been entitled and (ii) the closing price of a Parent Common
Share on the NYSE on the trading day immediately prior to the Effective Time
(the cash comprising such aggregate payments in lieu of fractional Parent Common
Shares being hereinafter referred to as the "Fractional Securities Fund").
Merger Sub shall make available to the Exchange Agent cash in an amount
sufficient to make the payments in lieu of fractional shares as aforesaid.
4.4. Transfer of Shares after the Effective Time. No transfers of Shares
shall be made on the stock transfer books of the Company after the close of
business on the day prior to the date of the Effective Time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Merger Sub that (except to the extent set
forth on the Disclosure Schedule previously delivered by the Company to Parent
(the "Company Disclosure Schedule")):
(a) Corporate Organization and Qualification. Each of the Company and
its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of incorporation
and is qualified and in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased or operated, or the business
conducted, by it require such qualification, except where failure to so
qualify or be in good standing would not have a Material Adverse Effect (as
defined in Section 9.10). Each of the Company and its subsidiaries has all
requisite power and authority (corporate or otherwise) to own its properties
and to carry on its business as it is now being conducted. All of the
subsidiaries of the Company, together with an organizational chart, are set
forth in Section 5.1(a) of the Company Disclosure Schedule. The Company has
heretofore made available to Parent complete and correct copies of its
Certificate of Incorporation and By-Laws.
(b) Capitalization. The authorized capital stock of the Company consists
of (i) 12,000,000 Common Shares of which, as of October 10, 1995, 7,075,370
Shares were issued and outstanding and 493,138 Shares were held in treasury,
(ii) 1,000,000 shares of preferred stock, $1 par value per share, none of
which are shares issued or outstanding and (iii) 200,000 Preferred Shares,
of which, as of October 10, 1995, 16,923 Preferred Shares were issued and
outstanding and 3,324 Preferred Shares were held in treasury. All of the
outstanding shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. The Company has no
6
outstanding stock appreciation rights. Except as set forth in Section 5.1(b)
of the Company Disclosure Schedule, no Shares are owned by any subsidiary of
the Company. Except as set forth in Section 5.1(b) of the Company Disclosure
Schedule, all outstanding shares of capital stock or other equity interests
of the subsidiaries of the Company are owned by the Company or a direct or
indirect wholly-owned subsidiary of the Company, free and clear of all
liens, charges, encumbrances, claims and options of any nature. Except for
(i) options outstanding on the date hereof to purchase 1,923,096 Common
Shares under the Option Plans and 10,000 Common Shares under the Advance
Ross Corporation 1995 Directors Deferred Plan, (ii) the Warrant, a true,
complete and correct copy of which the Company has delivered to Parent prior
to the date hereof, and (iii) as set forth in Section 5.1(b) of the Company
Disclosure Schedule there are not as of the date hereof and there will not
be at the Effective Time any outstanding or authorized options, warrants,
calls, rights (including preemptive rights), commitments or any other
agreements of any character which the Company or any of its subsidiaries is
a party to, or may be bound by, requiring it to issue, transfer, sell,
purchase, redeem or acquire any shares of capital stock or any securities or
rights convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of capital stock of the Company or any of its
subsidiaries. There are not as of the date hereof and there will not be at
the Effective Time any stockholder agreements (other than the Stockholders
Agreement), voting trusts or other agreements or understandings to which the
Company is a party or to which it is bound relating to the voting of any
shares of the capital stock of the Company. Except as otherwise agreed to by
Parent, there will not be at the Effective Time any outstanding options
under the Advance Ross Corporation 1995 Directors Deferral Plan.
(c) Approvals; Fairness Opinion.
(i) The Board of Directors of the Company has unanimously approved
the Merger and this Agreement. Except for the approval of the holders of
Common Shares required by the DGCL, no other approval of the stockholders
of the Company is required in order to consummate the transactions
contemplated by this Agreement.
(ii) The Board of Directors of the Company has received an opinion
from Allen & Company Incorporated to the effect that the consideration to
be received by the holders of Common Shares in the Merger is fair to such
holders from a financial point of view. As of the date hereof, such
opinion has not been withdrawn, revoked or modified.
(d) Authority Relative to this Agreement. The Board of Directors of the
Company has declared the Merger advisable and the Company has the requisite
corporate power and authority to approve, authorize, execute and deliver
this Agreement and to consummate the transactions contemplated hereby
(subject to the approval of the Merger by the stockholders of the Company in
accordance with the DGCL). This Agreement and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors 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 contemplated hereby (other than
the approval of the Merger by the holders of the Common Shares in accordance
with the DGCL). This Agreement has been duly and validly executed and
delivered by the Company and, assuming this Agreement constitutes the valid
and binding agreement of Parent and Merger Sub, constitutes the valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting creditors' rights and to general principles of equity.
7
(e) Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement nor the consummation by the Company of the
transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective Certificate of Incorporation (or
other similar documents) or By-Laws (or other similar documents) of the
Company or any of its subsidiaries; (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except (A) in connection with the
applicable requirements, if any, of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (B) pursuant to the
applicable requirements of the Securities Act, and the rules and regulations
promulgated thereunder, and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations promulgated thereunder,
(C) the filing of the Certificate of Merger pursuant to the DGCL and
appropriate documents with the relevant authorities of other states in which
the Company is authorized to do business, (D) as may be required by any
applicable state securities or takeover laws, (E) such filings and consents
as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or the transactions contemplated by this Agreement,
(F) the consents, approvals, orders, authorizations, registrations,
declarations and filings required under the laws of foreign countries, as
set forth in Section 5.1(e) of the Company Disclosure Schedule or (G) where
the failure to obtain such consent, approval, authorization or permit, or to
make such filing or notification, would not in the aggregate have a Material
Adverse Effect or adversely affect the ability of the Company to consummate
the transactions contemplated hereby; (iii) except as set forth in Section
5.1(e) of the Company Disclosure Schedule, result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration or lien or other charge or encumbrance) under any of the terms,
conditions or provisions of any note, license, agreement or other instrument
or obligation to which the Company or any of its subsidiaries or any of
their assets may be bound, except for such violations, breaches and defaults
(or rights of termination, cancellation or acceleration or lien or other
charge or encumbrance) as to which requisite waivers or consents have been
obtained or which, in the aggregate, would not have a Material Adverse
Effect or adversely affect the ability of the Company to consummate the
transactions contemplated hereby; or (iv) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in this
Section 5.1(e) are duly and timely obtained or made and the approval of the
Merger and the approval of this Agreement by the Company's stockholders has
been obtained, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of its subsidiaries or to any of
their respective assets, except for violations which would not in the
aggregate have a Material Adverse Effect or adversely affect the ability of
the Company to consummate the transactions contemplated hereby. Except as
set forth in Section 5.1(e) of the Company Disclosure Schedule, the Company
does not know of any pending or proposed legislation, regulation or order
(other than those affecting businesses generally) applicable to the Company
or any of its subsidiaries or to the conduct of the business or operations
of the Company or any of its subsidiaries which, if enacted or adopted,
could have a material adverse effect on the Company or any of its
subsidiaries. As of the date hereof, none of the Company or any of its
subsidiaries are subject to any laws governing lending or factoring
businesses. Except as set forth in Section 5.1(e) of the Company Disclosure
Schedule, (x) neither the Company nor any of its subsidiaries has ceased
doing business in any country which has a value-added or similar tax and
where the Company or any such subsidiary previously conducted business and
(y) the Company and its subsidiaries are not prohibited from conducting
business, as presently conducted, in any place in the world which has a
value-added or similar tax where the Company and its subsidiaries conduct
business or are (as described in Section 5.1(e) of the Company Disclosure
Schedule) considering conducting business. Section 5.1(e) of the Company
Disclosure Schedule also contains true, correct and complete copies of
studies prepared for the Company by Price Waterhouse and Ernst & Young. To
the actual knowledge of the Company (without independent verification), the
information contained in such studies with respect to those
8
countries in which the Company and its subsidiaries presently conduct
business is accurate in all material respects as of the date hereof (it
being acknowledged and agreed that neither of such studies has been updated,
nor has the Company consulted with either of such firms or any third party
in making the representation set forth in this sentence).
(f) Litigation. Except as disclosed in the Company SEC Reports (as
defined in Section 5.1(g)) or as disclosed in writing by the Company to
Parent prior to the date hereof, there are no actions, suits, investigations
or proceedings pending or, to the best knowledge of the Company, threatened
against the Company or any of its subsidiaries that (i) if adversely
determined, would be reasonably likely to result in any claims against or
obligations or liabilities of the Company or any of its subsidiaries that,
alone or in the aggregate, would have a Material Adverse Effect or (ii)
question the validity of this Agreement or any action to be taken by the
Company in connection with the consummation of the transactions contemplated
hereby.
(g) SEC Reports; Financial Statements.
(i) Since January 1, 1992, the Company has filed all forms, reports
and documents with the Securities and Exchange Commission (the "SEC")
required to be filed by it pursuant to the federal securities laws and
the SEC rules and regulations thereunder, all of which complied in all
material respects with all applicable requirements of the Securities Act
and the Exchange Act and the rules and regulations promulgated thereunder
(collectively, the "Company SEC Reports"). None of the Company SEC
Reports, including, without limitation, any financial statements or
schedules included therein, at the time filed contained any untrue
statement of a material fact or omitted 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.
(ii) The consolidated balance sheets and the related consolidated
statements of income, stockholders' equity (deficit) and cash flows
(including the related notes thereto) of the Company included in the
Company SEC Reports complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a
basis consistent with prior periods (except as otherwise noted therein),
and present fairly the consolidated financial position of the Company and
its consolidated subsidiaries as of their respective dates, and the
consolidated results of their operations and their cash flows for the
periods presented therein (subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments). Except as set
forth in Section 5.1(g) of the Company Disclosure Schedule, since
November 2, 1992, there has not been any material change, or any
application or request for any material change, by the Company or any of
its subsidiaries in accounting principles, methods or policies for
financial accounting purposes that have affected or will affect the
Company's consolidated financial statements included in the Company SEC
Reports or for tax purposes.
(h) Absence of Certain Changes or Events. Neither the Company nor any of
its subsidiaries has any material indebtedness, obligations or liabilities
of any kind (whether accrued, absolute, contingent or otherwise, and whether
due or to become due or asserted or unasserted), and, to the best knowledge
of the Company, there is no basis for the assertion of any claim or
liability of any nature against the Company or any of its subsidiaries,
which is not fully reflected in, reserved against or otherwise described in
the financial statements included in the Company SEC Reports. Except as
disclosed in the Company SEC Reports or as disclosed in writing by the
Company to Parent prior to the date hereof or in Section 5.1(h) of the
Company Disclosure Schedule, since January 1, 1995, the business of the
Company and its subsidiaries has been carried on only in the ordinary and
usual course and there has not been any material adverse change in its
business,
9
properties, operations or financial condition and no event has occurred and
no fact or set of circumstances has arisen which has resulted in or could
reasonably be expected to result in a Material Adverse Effect with respect
to the Company and its subsidiaries.
(i) Employment Agreements. Except as set forth in Section 5.1(i) of the
Company Disclosure Schedule, the Company is not a party to any employment,
consulting, non-competition, severance, golden parachute, indemnification
agreement or any other agreement providing for payments or benefits or the
acceleration of payments or benefits upon the change of control of the
Company (including, without limitation, any contract to which the Company is
a party involving employees of the Company).
(j) Brokers and Finders. Except for the fees and expenses payable to
Allen & Company Incorporated, which fees and expenses are reflected in its
agreement with the Company, a true and complete copy of which (including all
amendments) has been furnished to Parent, the Company has not employed any
investment banker, broker, finder, consultant or intermediary in connection
with the transactions contemplated by this Agreement which would be entitled
to any investment banking, brokerage, finder's or similar fee or commission
in connection with this Agreement or the transactions contemplated hereby.
(k) S-4 Registration Statement and Proxy Statement/Prospectus. None of
the information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the S-4 Registration Statement or the Proxy
Statement (as such terms are defined in Section 6.4) will (i) in the case of
the S-4 Registration Statement, at the time it becomes effective or at the
Effective Time, 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 not misleading, or (ii) in the case of the
Proxy Statement, at the time of the mailing of the Proxy Statement and at
the time of the Stockholder Meeting (as such term is defined in Section
6.3), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time any event
with respect to the Company, its officers and directors or any of its
subsidiaries should occur which is required to be described in an amendment
of, or a supplement to, the Proxy Statement or the S-4 Registration
Statement, such event shall be so described, and such amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Company. The Proxy Statement will
(only with respect to the Company) comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
(l) Taxes. The Company and each subsidiary of the Company has (x) filed
all returns, declarations, reports, information returns and statements of
whatsoever kind ("Tax Returns") in respect of all federal and all material
state, county, local, foreign and other Taxes (as defined below), that it is
required to file through the date hereof, and (y) paid or provided for the
payment of all Taxes shown due on such Tax Returns and all Taxes, if any,
required to be paid for which no return is required. True and complete
copies of all federal, state, local and foreign Tax Returns relating to the
last three taxable years of the Company and its subsidiaries have been
delivered or made available to Parent. True and complete copies of the
foreign income tax returns for the last taxable year of the Company's
subsidiaries for Germany, Italy, Sweden and the United Kingdom have been
delivered to Parent. Except as otherwise set forth in Section 5.1(l) of the
Company Disclosure Schedule, the Company and its subsidiaries have not been
audited, or received written notice (and are not otherwise aware) of a
pending or proposed audit, by the Internal Revenue Service or any state,
local or foreign taxing jurisdiction since the year ended December 31, 1990
and no agreements or consents extending the period during which any Taxes
may be assessed or collected are now in force. No material adjustments have
been proposed by, or discussed with, the
10
Internal Revenue Service or by, or with, any other taxing authority with
respect to any open tax years or tax returns. Neither the Company nor any of
its subsidiaries nor any predecessor of the foregoing has, during the past 5
years or, to the best knowledge of the Company and its subsidiaries, at any
time prior thereto, filed a consent under section 341(f)(1) of the Code, or
agreed under section 341(f)(3) of the Code to have the provisions of section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by the Company or such
subsidiary. Set forth in Section 5.1(l) of the Company Disclosure Schedule
is a complete list of all material differences for the Company and any
subsidiary between their financial statements and income tax returns which
have the effect of deferring the realization of an item of income to a
period after the period for which such item of income was reported on the
Company's financial statements or accelerating an item of deduction to a
period prior to the period for which the corresponding item of loss or
expense was reported on the Company's financial statements. Except as set
forth in Section 5.1(l) of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries has entered into within the last five
(5) years, or otherwise is a party to or bound by, any agreement providing
for the allocation or sharing of Taxes with any entity which is not, either
directly or indirectly, a subsidiary of the Company. The Company is not a
"United States real property holding corporation" as defined in Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. Except as set forth in Section 5.1(l) of the
Company Disclosure Schedule, no closing agreement pursuant to Section 7121
of the Code or compromise pursuant to Section 7122 of the Code or any
similar provision of state, local or foreign law has been entered into by,
or with respect to, the Company or any of its subsidiaries or any assets
thereof that would be binding on, or affect the computation or reporting of
any Tax liability of, the Company or any subsidiary thereof for (i) any of
the last three taxable years of the Company or any subsidiary thereof ending
on or prior to the Closing Date or (ii) any taxable year of the Company or
any subsidiary thereof ending after the Closing Date. For the purpose of
this Agreement, the term "Tax" (and, with correlative meaning, the terms
"Taxes and "Taxable") shall include all federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
value added, property, withholding, excise and other taxes, duties or
assessments of any nature whatsoever, together with all interest, penalties
and additions imposed with respect to such amounts.
(m) Employee Benefits. Section 5.1(m) of the Company Disclosure Schedule
contains an accurate and complete list of all Company Benefit Plans (as
defined below). None of the Company Benefit Plans is a "multiemployer plan"
as defined in Section 3(37) of ERISA or a multiple employer plan covered by
Sections 4063 or 4064 of ERISA.
(i) Except as disclosed in Section 5.1(m) of the Company Disclosure
Schedule, each Company Benefit Plan intended to qualify under Section 401
of the Code does so qualify and the trust maintained pursuant thereto is
exempt from federal income taxation under Section 501 of the Code. To the
best knowledge of the Company, nothing has occurred with respect to the
operation of such plans which could cause the loss of such qualification
or exemption or the imposition of any liability, penalty, or tax under
ERISA or the Code.
(ii) True and correct copies of the following documents with respect
to each Company Benefit Plans have been made available or delivered to
Parent by the Company: (1) any plans, and amendments thereto, (2) the
most recent forms 5500 and any financial statements attached thereto, (3)
the last Internal Revenue Service determination letter (if any), (4)
summary plan descriptions, (5) the two most recent actuarial reports,
including any such reports for purposes of FASB 87, 106 and 112, and (6)
written descriptions of all material, non-written agreements relating to
the Company Benefit Plans.
(iii) The Company Benefit Plans have been maintained, in all material
respects, in accordance with their terms and with all provisions of ERISA
and other applicable law.
11
Neither the Company nor any of its subsidiaries has any liability with
respect to a non-exempt prohibited transaction within the meaning of
Section 4975 of the Code or Section 406 of ERISA.
(iv) There has been no transaction involving an ERISA Affiliate while
any Company Benefit Plan subject to Title IV of ERISA has unfunded
benefit liabilities, as defined in Section 4001(a)(18) of ERISA.
(v) Except as disclosed in Section 5.1(m) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries maintains
retiree life insurance or retiree health plans which are "welfare benefit
plans" within the meaning of Section 3(1) of ERISA and which provide for
continuing benefits or coverage for any participant or any beneficiary of
a participant after such participant's termination of employment where
such participant was an employee of the Company or any subsidiary of the
Company, other than as required by Part 6 of Title I of ERISA and at the
sole expense of the participant or beneficiary.
(vi) Except as disclosed in Section 5.1(m) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (1) result in
any payment (including, without limitation, bonus or other compensation
severance, unemployment compensation, golden parachute or otherwise)
becoming due to any employee of the Company under any Company Benefit
Plan or otherwise, (2) increase any benefits otherwise payable under any
Company Benefit Plan, or (3) result in the acceleration of the time of
payment or vesting of any such benefits.
(vii) (A) None of the employees of the Company or any of its
subsidiaries is represented in his or her capacity as an employee of such
company by any labor organization; (B) neither the Company nor any of its
subsidiaries has recognized any labor organization nor has any labor
organization been elected as the collective bargaining agent of any of
their employees, nor has the Company or any of its subsidiaries signed
any collective bargaining agreement or union contract recognizing any
labor organization as the bargaining agent of any of their employees; and
(C) to the best knowledge of the Company, there is no active or current
union organization activity involving the employees of the Company or any
subsidiary of the Company, nor has there ever been union representation
involving employees of the Company and/or its subsidiaries.
(viii) For the purposes of this Agreement: (A) the term "Company
Benefit Plan" shall include all employee benefit plans (as defined in
Section 3(3) of ERISA) and all other employee benefit arrangements or
payroll practices, including, without limitation, severance pay, sick
leave, vacation pay, salary continuation for disability, scholarship
programs, stock option or restricted stock plans maintained by the
Company or any ERISA Affiliate of the Company (whether formal or
informal, whether for the benefit of a single individual or for more than
one individual and whether for the benefit of current or former employees
or their beneficiaries) on behalf of the Company or any of the employees
of the Company or any of its subsidiaries or to which or under which or
pursuant to which the Company or any ERISA Affiliate of the Company has
contributed or is obligated to make contributions on behalf of the
Company or any employees of the Company or any of its subsidiaries; (B)
the term "ERISA" shall refer to the Employee Retirement Income Security
Act of 1974, as amended; (C) the term "ERISA Affiliate" shall refer to
any trade or business (whether or not incorporated) under common control
or treated as a single employer with the Company within the meaning of
Section 414(b), (c), (m) or (o) of the Code.
(n) Intangible Property. (i) Section 5.1(n) of the Company Disclosure
Statement sets forth a list of each patent, trademark, trade name, service
mark, brand mark, brand name, industrial design and copyright owned or used
in business by the Company and its subsidiaries, as well as all
12
registrations thereof and pending applications therefor, and each license or
other contract relating thereto (collectively with any other intellectual
property owned or used in the business by the Company and its subsidiaries,
and all of the goodwill associated therewith, the "Intangible Property") and
indicates, with respect to each item of Intangible Property listed thereon,
the owner thereof and, if applicable, the name of the licensor and licensee
thereof and the terms of such license or other contract relating thereto.
Except as set forth in Section 5.1(n) of the Company Disclosure Schedule,
each of the foregoing is owned free and clear of any and all liens,
mortgages, pledges, security interests, levies, charges, options or any
other encumbrances, restrictions or limitations of any kind whatsoever and
none of the Company or any of its subsidiaries has received any notice to
the effect that any other entity has any claim of ownership with respect
thereto. To the best knowledge of the Company, the use of the foregoing by
the Company and its subsidiaries does not conflict with, infringe upon,
violate or interfere with or constitute an appropriation of any right,
title, interest or goodwill, including, without limitation, any intellectual
property right, patent, trademark, trade name, service mark, brand mark,
brand name, computer program, industrial design, copyright or any pending
application therefor of any other entity. Except as set forth in Section
5.1(n) of the Company Disclosure Schedule, no claims have been made, and
none of the Company or any of its subsidiaries has received any notice, that
any of the foregoing is invalid, conflicts with the asserted rights of other
entities, or has not been used or enforced (or has failed to be used or
enforced) in a manner that would result in the abandonment, cancellation or
unenforceability of any item of the Intangible Property.
(ii) The Company and each of its subsidiaries possesses all Intangible
Property, including, without limitation, all know-how, formulae and other
proprietary and trade rights necessary for the conduct of their businesses
as now conducted. None of the Company or any of its subsidiaries has taken
or failed to take any action that would result in the forfeiture or
relinquishment of any such Intangible Property used in the conduct of their
respective businesses as now conducted.
(o) Certain Contracts. Section 5.1(o) of the Company Disclosure Schedule
lists all of the following contracts to which the Company or a subsidiary is
a party or by which any one of them or any of their properties or assets may
be bound ("Listed Agreements"): (i) all employment or other contracts with
any employee, consultant, officer or director of the Company or any
subsidiary of the Company (or any company which is controlled by any such
individual) whose total rate of annual remuneration is estimated to exceed
$100,000 in 1995; (ii) union, guild or collective bargaining contracts
relating to employees of the Company or any subsidiary; (iii) instruments
for money borrowed (including, without limitation, any indentures,
guarantees, loan agreements, sale and leaseback agreements, or purchase
money obligations incurred in connection with the acquisition of property
other than in the ordinary course of business) in excess of $500,000; (iv)
underwriting, purchase or similar agreements entered into in connection with
the Company's or any of its subsidiaries' currently existing indebtedness;
(v) agreements for acquisitions or dispositions (by merger, purchase or sale
of assets or stock or otherwise) of material assets entered into within the
last two years, as to which the transactions contemplated have been
consummated or are currently pending; (vi) joint venture or partnership
agreements entered into; (vii) material licensing, merchandising and
distribution contracts; (viii) contracts granting any person or other entity
registration rights; (ix) guarantees, suretyships, indemnification and
contribution agreements, in excess of $500,000; (x) contracts between the
Company and its subsidiaries and their ten largest retailers, as measured as
a percent of Company sales to the customers of such retailers; (xi)
contracts with respect to duty-free arrangements including any lease or
revenue-sharing or profit-sharing arrangements; (xii) contracts with any
governmental or quasi-governmental entity concerning refunds or advances;
and (xiii) other contracts which materially affect the business, properties
or assets of the Company and its subsidiaries taken as a whole, and are not
otherwise disclosed in this Agreement or were entered into other than in the
ordinary course of business. A true and complete copy (including all
amendments) of each Listed Agreement and each contract
13
with a retailer listed on Exhibit D to Section 5.1(o) of the Company
Disclosure Schedule, has been made available to Parent. Neither the Company
nor any subsidiary (i) to the knowledge of the Company is in breach or
default in any material respect under any of the Listed Agreements or (ii)
has any knowledge of any other material breach or default under any Listed
Agreement by any other party thereto or by any other person or entity bound
thereby, except in the case of (i) or (ii) breaches or defaults which would
not, individually or in the aggregate, have a Material Adverse Effect with
respect to the Company. At the Effective Time, no person will have the
right, by contract or otherwise, to become, nor does any entity have the
right to designate or cause the Company to appoint a person as, a director
of the Company.
(p) Accounting Matters. Neither the Company nor, to the best of its
knowledge, any of its affiliates, has taken or agreed to take any action
that would prevent the Parent from accounting for the business combination
to be effected by the Merger as a "pooling-of-interests." The Company has
not failed to bring to the attention of Parent any actions, or agreements or
understandings, whether written or oral, to act that would be reasonably
likely to prevent Parent from accounting for the Merger as a
pooling-of-interests.
(q) Unlawful Payments and Contributions. To the best knowledge of the
Company, neither the Company, any subsidiary of the Company nor any of their
respective directors, officers or, any of their respective employees or
agents has, with respect to the businesses of the Company and its
subsidiaries, (i) used any funds for any unlawful contribution, endorsement,
gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment to any foreign
or domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment to any person or entity.
(r) Commission Rates. Set forth in Section 5.1(r) of the Company
Disclosure Statement is a list of the commissions earned by the Company and
its subsidiaries in percentages of invoiced VAT and the Swedish Krona amount
of invoiced VAT processed by the Company and its subsidiaries from January
1, 1993 to July 31, 1995.
(s) Listings. The Company's securities are not listed, or quoted, for
trading on any U.S. domestic or foreign securities exchange, except as set
forth in Section 5.1(s) of the Company Disclosure Schedule.
(t) Environmental Matters. Except as disclosed in the Company's SEC
Reports or as disclosed in writing by the Company to Parent prior to the
date hereof, (i) the Company and its subsidiaries and the operations thereof
are in material compliance with all Environmental Laws (as defined below);
(ii) there are no judicial or administrative actions, suits, proceedings or
investigations pending or, to the knowledge of the Company, threatened
against the Company or any subsidiary of the Company alleging the violation
of any Environmental Law and neither the Company nor any subsidiary of the
Company has received notice from any governmental body or person alleging
any violation of or liability under any Environmental Laws, in either case
which could reasonably be expected to result in material Environmental Costs
and Liabilities; and (iii) to the knowledge of the Company, there are no
facts, circumstances or conditions relating to, arising from associated with
or attributable to the Company or its subsidiaries or any real property
currently or previously owned, operated or leased by the Company or its
subsidiaries that could reasonably be expected to result in material
Environmental Costs and Liabilities. For the purpose of this Section 5.1(t),
the following terms have the following definitions: (X) "Environmental Costs
and Liabilities" means any losses, liabilities, obligations, damages, fines,
penalties, judgments, actions, claims, costs and expenses (including,
without limitation, fees, disbursements and expenses of legal counsel,
experts, engineers and consultants and the costs of investigation and
feasibility
14
studies, remedial or removal actions and cleanup activities) arising from or
under any Environmental Law; (Y) "Environmental Laws" means any applicable
federal, state, local, or foreign law (including common law), statute, code,
ordinance, rule, regulation or other requirement relating to the
environment, natural resources, or public or employee health and safety; (Z)
"Hazardous Material" means any substance, material or waste regulated by
federal, state or local government, including, without limitation, any
substance, material or waste which is defined as a "hazardous waste,"
"hazardous material," "hazardous substance," "toxic waste" or "toxic
substance" under any provision of Environmental Law and including but not
limited to petroleum and petroleum products.
(u) Disclosure. No representation or warranty by the Company in this
Agreement and no statement contained in the Schedules to this Agreement or
any certificate delivered by the Company to Merger Sub or Parent pursuant to
this Agreement, contains any untrue statement of a material fact or omits
any material fact necessary to make the statements herein or therein not
misleading when taken together in light of the circumstances in which they
were made, it being understood that as used in this Section 5.1(u)
"material" means material to the Company and its subsidiaries taken as a
whole.
5.2. Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub each represents and warrants to the Company that (except to the
extent set forth on the Disclosure Schedule previously delivered by Parent to
the Company (the "Parent Disclosure Schedule")):
(a) Corporate Organization and Qualification. Each of Parent and its
Significant Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation and is qualified and in good standing as a foreign corporation
in each jurisdiction where the properties owned, leased or operated, or the
business conducted, by it require such qualification, except where the
failure to so qualify or be in such good standing would not have a Material
Adverse Effect. Each of Parent and its Significant Subsidiaries has all
requisite power and authority (corporate or otherwise) to own its properties
and to carry on its business as it is now being conducted. Parent and Merger
Sub have heretofore made available to the Company complete and correct
copies of their Certificate of Incorporation, as the case may be, and their
respective By-Laws.
(b) Capitalization. The authorized capital stock of Parent consists of
(i) 400,000,000 Parent Common Shares of which, as of September 30, 1995,
approximately 181,000,000 Parent Common Shares were issued and outstanding
and 3,000,000 Parent Common Shares were held in treasury and (ii) 1,000,000
shares of preferred stock, $.01 par value per share (the "Parent Preferred
Shares"), none of which is issued or outstanding. All of the outstanding
shares of capital stock of Parent have been duly authorized and validly
issued and are fully paid and nonassessable. All outstanding shares of
capital stock or other equity interests of the subsidiaries of Parent are
owned by Parent or a direct or indirect wholly-owned subsidiary of Parent,
free and clear of all liens, charges, encumbrances, claims and options of
any nature. Except as set forth in Parent SEC Reports (as defined in Section
5.2(g)) or as contemplated by this Agreement, there are not, as of the date
hereof, any outstanding or authorized options, warrants, calls, rights
(including preemptive rights), commitments or any other agreements of any
character which Parent or any of its subsidiaries is a party to, or may be
bound by, requiring it to issue, transfer, sell, purchase, redeem or acquire
any Parent Common Shares or any shares of capital stock or any of its
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of capital stock of Parent or any of its
subsidiaries. There are not as of the date hereof and there will not be at
the Effective Time any stockholder agreements, voting trusts or other
agreements or understandings to which Parent is a party or to which it is
bound relating to the voting of any shares of the capital stock of Parent.
Parent has reserved for issuance under a stock option plan or
15
plans of Parent a sufficient number of Parent Common Shares to cover the
exercise of the Options and Warrant assumed by Parent in accordance with
Section 4.1(d).
(c) Authorization for Parent Common Shares. Parent has taken all
necessary action to permit it to issue the number of Parent Common Shares
required to be issued pursuant to Article IV. Parent Common Shares issued
pursuant to Article IV will, when issued, be validly issued, fully paid and
nonassessable and no person will have any preemptive right of subscription
or purchase in respect thereof. Parent Common Shares will, when issued, be
registered under the Securities Act and the Exchange Act and registered or
exempt from registration under any applicable state securities laws and
will, when issued, be listed on the NYSE, subject to official notice of
issuance.
(d) Authority Relative to this Agreement. The Board of Directors of
Parent and Merger Sub have each declared the Merger advisable and each of
Parent and Merger Sub has the requisite corporate power and authority to
approve, authorize, execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement and the consummation by
Parent and Merger Sub of the transactions contemplated hereby have been duly
and validly authorized by the respective Boards of Directors of Parent and
Merger Sub and by Parent as sole stockholder of Merger Sub, and no other
corporate proceedings on the part of Parent and Merger Sub are necessary to
authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
each of Parent and Merger Sub and, assuming this Agreement constitutes the
valid and binding agreement of the Company, constitutes valid and binding
agreements of Parent and Merger Sub, enforceable against them in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.
(e) Consents and Approvals; No Violation. Except as set forth in Section
5.2(e) of the Parent Disclosure Schedule, neither the execution and delivery
of this Agreement by Parent or Merger Sub nor the consummation by Parent and
Merger Sub of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective Certificate of
Incorporation and the respective By-Laws of Parent and Merger Sub; (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except (A) in
connection with the applicable requirements, if any, of the HSR Act, (B)
pursuant to the applicable requirements of the Securities Act and the
Exchange Act, (C) the filing of the Certificate of Merger pursuant to the
DGCL and appropriate documents with the relevant authorities of other states
in which Parent is authorized to do business, (D) as may be required by any
applicable state securities or takeover laws, (E) such filings and consents
as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or the transactions contemplated by this Agreement,
(F) such filings, consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the laws of
any foreign country, (G) filings with, and approval of, the NYSE or, (H)
where the failure to obtain such consent, approval, authorization or permit,
or to make such filing or notification, would not in the aggregate have a
Material Adverse Effect or adversely affect the ability of Parent or Merger
Sub to consummate the transactions contemplated hereby; (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration or lien or other charge or encumbrance) under
any of the terms, conditions or provisions of any note, license, agreement
or other instrument or obligation to which Parent or any of its subsidiaries
or any of their assets may be bound, except for such violations, breaches
and defaults (or rights of termination, cancellation, or acceleration or
lien or other charge or encumbrance) as to which requisite waivers or
consents have been obtained or which, in the aggregate, would not have a
Material Adverse Effect or adversely affect the ability of Parent and Merger
Sub to consummate
16
the transactions contemplated hereby; or (iv) assuming the consents,
approvals, authorizations or permits and filings or notifications referred
to in this Section 5.2(e) are duly and timely obtained or made, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Parent or any of its subsidiaries or to any of their respective assets,
except for violations which would not in the aggregate have a Material
Adverse Effect or adversely affect the ability of Parent and Merger Sub to
consummate the transactions contemplated hereby.
(f) Ownership of Merger Sub; No Prior Activities; Assets of Merger Sub.
(i) Merger Sub was formed solely for the purpose of the Merger and
engaging in the transactions contemplated hereby.
(ii) As of the date hereof and the Effective Time, the capital stock
of Merger Sub is and will be directly owned 100% by Parent. Further,
there are not as of the date hereof and there will not be at the
Effective Time any outstanding or authorized options, warrants, calls,
rights, commitments or any other agreements of any character which Merger
Sub is a party to, or may be bound by, requiring it to issue, transfer,
sell, purchase, redeem or acquire any shares of capital stock or any
securities or rights convertible into, exchangeable for, or evidencing
the right to subscribe for or acquire, any shares of capital stock of
Merger Sub.
(iii) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation
or organization and the transactions contemplated hereby, Merger Sub has
not and will not have incurred, directly or indirectly through any
subsidiary or affiliate, any obligations or liabilities or engaged in any
business or activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person or entity.
(g) SEC Reports; Financial Statements.
(i) Since January 1, 1992, Parent has filed all forms, reports and
documents with the SEC required to be filed by it pursuant to the federal
securities laws and the SEC rules and regulations thereunder, all of
which complied in all material respects with all applicable requirements
of the Securities Act and the Exchange Act (the "Parent SEC Reports").
None of Parent SEC Reports, including, without limitation, any financial
statements or schedules included therein, at the time filed contained any
untrue statement of a material fact or omitted 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.
(ii) The consolidated balance sheets and the related statements of
income, stockholders' equity and cash flow (including the related notes
thereto) of Parent included in Parent SEC Reports comply as to form in
all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting principles
applied on a basis consistent with prior periods (except as otherwise
noted therein), and present fairly the consolidated financial position of
Parent and its consolidated subsidiaries as of their respective dates,
and the results of its operations and its cash flow for the periods
presented therein (subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments).
17
(h) Absence of Certain Changes or Events. Except as disclosed in Parent
SEC Reports filed by Parent and as set forth in Section 5.2(h) of the Parent
Disclosure Schedule, since January 1, 1995, the business of Parent has been
carried on only in the ordinary and usual course and there has not been any
adverse change in its business, properties, operations or financial
condition and no event has occurred and no fact or set of circumstances has
arisen which has resulted in or could reasonably be expected to result in a
Material Adverse Effect.
(i) Litigation. Except as disclosed in the Parent SEC Reports, there are
no actions, suits, investigations or proceedings pending or, to the best
knowledge of Parent threatened against Parent or any of its subsidiaries
that (i) if adversely determined, would be reasonably likely to result in
any claims against or obligation or liabilities of Parent or any of its
subsidiaries that, alone or in the aggregate, would have a Material Adverse
Effect or (ii) question the validity of the Agreement or any action to be
taken by Parent in connection with the consummation of the transactions
contemplated hereby.
(j) S-4 Registration Statement and Proxy Statement/Prospectus. None of
the information to be supplied by Parent or Merger Sub for inclusion or
incorporation by reference in the S-4 Registration Statement will, at the
time it becomes effective and at the Effective Time, 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 not
misleading. If at any time prior to the Effective Time any event with
respect to Parent, its officers and directors or any of its subsidiaries
shall occur which is required to be described in the S-4 Registration
Statement, such event shall be so described, and an amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated
to the stockholders of the Parent. The S-4 Registration Statement will
comply (only with respect to Parent and Merger Sub) as to form in all
material respects with the provisions of the Securities Act and the rules
and regulations promulgated thereunder.
(k) Brokers and Finders. Parent has not employed any investment banker,
broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby.
(l) Ownership of Shares. As of the date hereof, none of the Parent
Companies owns any Shares.
(m) Accounting Matters. Neither Parent nor, to the best of its
knowledge, any of its affiliates, has taken or agreed to take any action
that would prevent Parent from accounting for the business combination to be
effected by the Merger as a "pooling-of-interests." Parent has not failed to
bring to the attention of the Company any actions, or agreements or
understandings, whether written or oral, to act that would be reasonably
likely to prevent Parent from accounting for the Merger as a
pooling-of-interests.
(n) Disclosure. No representation or warranty by Parent or Merger Sub in
this Agreement and no statement contained in the Schedules to this Agreement
or any certificate delivered by Parent or Merger Sub to the Company pursuant
to this Agreement, contains any untrue statement of a material fact or omits
any material fact necessary to make the statements herein or therein not
misleading when taken together in light of the circumstances in which they
were made, it being understood that as used in this Section 5.2(m)
"material" means material to Parent or Merger Sub and their subsidiaries
taken as a whole.
18
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
6.1. Conduct of Business.
(a) The Company covenants and agrees that, during the period from the
date of this Agreement to the Effective Time (unless Parent shall otherwise
agree in writing and except as otherwise contemplated by this Agreement),
the Company will, and will cause each of its subsidiaries to, conduct its
operations according to its ordinary and usual course of business consistent
with past practice and, to the extent consistent therewith, with no less
diligence and effort than would be applied in the absence of this Agreement,
seek to preserve intact its current business organizations, keep available
the service of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings
with it to the end that goodwill and ongoing businesses shall be unimpaired
at the Effective Time. Without limiting the generality of the foregoing, and
except as otherwise permitted in this Agreement, prior to the Effective
Time, neither the Company nor any of its subsidiaries will, without the
prior written consent of Parent (i) except (x) as otherwise provided in this
Agreement or as set forth in Section 6.1(a) of the Company Disclosure
Schedule and (y) for shares to be issued upon exercise of the outstanding
Options and the Warrant, as the case may be, issue, deliver, sell, dispose
of, pledge or otherwise encumber, or authorize or propose the issuance,
sale, disposition or pledge or other encumbrance of (A) any additional
shares of capital stock of any class, or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for
any shares of capital stock, or any rights, warrants, options, calls,
commitments or any other agreements of any character to purchase or acquire
any shares of capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of
capital stock, or (B) any other securities in respect of, in lieu of, or in
substitution for, Shares outstanding on the date hereof, (ii) except as
provided in Section 4.1(b), redeem, purchase or otherwise acquire, or
propose to redeem, purchase or otherwise acquire, any of its outstanding
securities (including the Shares), (iii) split, combine, subdivide or
reclassify any shares of its capital stock or declare, set aside for payment
or pay any dividend, or make any other actual, constructive or deemed
distribution in respect of any shares of its capital stock or otherwise make
any payments to stockholders in their capacity as such, except for regular
quarterly dividends on the Preferred Shares not in excess of $.3125 per
share in accordance with customary record and payment dates, (iv) adopt a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or
any of its subsidiaries not constituting an inactive subsidiary (other than
the Merger), (v) adopt any amendments to its Certificate of Incorporation or
By-Laws or alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of any
subsidiary not constituting an inactive subsidiary of the Company, (vi) make
any acquisition, by means of merger, consolidation or otherwise, or
disposition, of assets or securities, except for joint venture agreements
under negotiation in the countries set forth in Section 6.1(a) of the
Company Disclosure Schedule, (vii) other than in the ordinary course of
business consistent with past practice and except to the extent required
under any joint venture agreement listed in Section 5.1(b) of the Company
Disclosure Schedule or as set forth in Section 6.1(a) of the Company
Disclosure Schedule, incur any indebtedness for borrowed money or guarantee
any such indebtedness or make any loans, advances or capital contributions
to, or investments in, any other person, other than to the Company or any
wholly owned subsidiary of the Company, (viii) take any action with respect
to the Warrant other than as contemplated by the Warrant Amendment, dated
the date hereof, between the Company and Allen & Company Incorporated, (ix)
except as set forth in Section 6.1(a) of the Company Disclosure Schedule,
make or revoke any material Tax election, settle or compromise any material
federal, state, local or foreign Tax liability or change (or make a request
to any taxing authority to
19
change) any material aspect of its method of accounting for Tax purposes
(except that the Company and its subsidiaries may make Tax elections that
are consistent with prior such elections (in past years) so long as the
Company provides Parent with reasonable prior notice, to the extent
possible, of its intention to do so (it being understood that the giving of
such notice shall not be deemed a request for, or give Parent a right of,
approval of such election)), (x) incur any liability for Taxes other than in
the ordinary course of business, or (xi) authorize, recommend, propose or
announce an intention to do any of the foregoing, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing.
(b) The Company and its subsidiaries shall not (without the prior
written consent of Parent) grant any material increases in the compensation
of any of its directors, officers or key employees, except in the ordinary
course of business and in accordance with its customary past practices; (A)
pay or agree to pay any pension, retirement allowance or other employee
benefit not required or contemplated by any of the existing benefit,
severance, pension or employment plans, agreements or arrangements as in
effect on the date hereof to any such director, officer or key employee,
whether past or present; (B) enter into any new or materially amend any
existing employment or severance agreement with any such director, officer
or key employee; or (C) except as may be required to comply with applicable
law, become obligated under any new pension plan, welfare plan,
multi-employer plan, employee benefit plan, severance plan, benefit
arrangement, or similar plan or arrangement, which was not in existence on
the date hereof, or amend any such plan or arrangement in existence on the
date hereof if such amendment would have the effect of enhancing any
benefits thereunder.
6.2. No Solicitation. (a) The Company, its subsidiaries and their respective
officers, directors, employees, representatives, agents or affiliates
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of its subsidiaries) (collectively, the
"Company's Representatives") shall immediately cease any discussions or
negotiations with any party that may be ongoing with respect to a Competing
Transaction (as defined below). From and after the date hereof until the
termination of this Agreement, neither the Company nor any of its subsidiaries
will, nor will the Company authorize or permit any of its subsidiaries or any of
the Company Representatives to, directly or indirectly, initiate, solicit or
knowingly encourage (including by way of furnishing non-public information), or
take any other action to facilitate knowingly, any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
Competing Transaction, or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain a Competing Transaction or agree to or endorse any Competing Transaction,
and the Company shall notify Parent orally (within one business day) and in
writing (as promptly as practicable) of all of the relevant details relating to
all inquiries and proposals which it or any of its subsidiaries or any such
Company Representative may receive relating to any of such matters and, if such
inquiry or proposal is in writing, the Company shall deliver to Parent a copy of
such inquiry or proposal promptly provided, however, that the Company shall not
be obligated to deliver to Parent a copy of such written inquiry or proposal if
the Board of Directors of the Company, after consultation with and based upon
the advice of independent legal counsel (who may be the Company's regularly
engaged independent legal counsel), determines in good faith that delivery to
Parent of such written inquiry or proposal would cause the Board of Directors of
the Company to breach its fiduciary duties to stockholders under applicable law;
provided, further, that nothing contained in this Section 6.2 shall prohibit the
Company or its Board of Directors from (i) taking and disclosing to its
stockholders a position contemplated by Exchange Act Rule 14e-2 or (ii) making
any disclosure to its stockholders that, in the good faith judgment of its Board
of Directors, after consultation with and based upon the advice of independent
legal counsel (who may be the Company's regularly engaged independent legal
counsel), is required under applicable law; provided, further, however, that
nothing contained in this Section 6.2 shall prohibit the Company from (A)
furnishing information to, or entering into discussions or negotiations with,
any person or entity that after the date hereof states in an unsolicited writing
that
20
it has a bona fide serious interest to make a Superior Proposal (as defined
below) if (1) (x) the Board of Directors of the Company, after consultation with
and based upon the advice of independent legal counsel (who may be the Company's
regularly engaged independent legal counsel), determines in good faith that such
action is necessary for the Board of Directors of the Company to comply with its
fiduciary duties to stockholders under applicable law and (y) after consultation
with and based upon the advice of an independent financial advisor (who may be
the Company's regularly engaged independent financial advisor) determines in
good faith that such person or entity is capable of making, financing and
consummating a Superior Proposal and (2) prior to taking such action, the
Company (x) provides reasonable notice to Parent to the effect that it is taking
such action and (y) receives from such person or entity an executed
confidentiality agreement in reasonably customary form or (B) failing to make or
withdrawing or modifying its recommendation referred to in Section 6.2(b) if
there exists a Competing Transaction and the Board of Directors of the Company,
after consultation with and based upon the advice of independent legal counsel
(who may be the Company's regularly engaged independent counsel), determines in
good faith that such action is necessary for the Board of Directors of the
Company to comply with its fiduciary duties to stockholders under applicable
law. For purposes of this Agreement, "Competing Transaction" shall mean any of
the following (other than the transactions between the Company, Parent and
Merger Sub contemplated hereunder) involving the Company: (i) any merger,
consolidation, share exchange, recapitalization, business combination, or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of all or a substantial portion of the assets of the
Company and its subsidiaries, taken as a whole, or of more than 25% of the
equity securities of the Company or any of its subsidiaries, in any case in a
single transaction or series of transactions; (iii) any tender offer or exchange
offer for 25% or more of the outstanding shares of capital stock of the Company
or the filing of a registration statement under the Securities Act in connection
therewith; or (iv) any public announcement of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the foregoing.
(b) Except as set forth in this Section 6.2, the Board of Directors of
the Company shall not approve or recommend, or cause the Company to enter
into any agreement with respect to, any Competing Transaction.
Notwithstanding the foregoing, if the Board of Directors of the Company,
after consultation with and based upon the advice of independent legal
counsel (who may be the Company's regularly engaged independent legal
counsel), determines in good faith that it is necessary to do so in order to
comply with its fiduciary duties to stockholders under applicable law, the
Board of Directors of the Company may approve or recommend a Superior
Proposal (as defined below) or cause the Company to enter into an agreement
with respect to a Superior Proposal, but in each case only after providing
reasonable written notice to Parent (a "Notice of Superior Proposal")
advising Parent that the Board of Directors of the Company has received a
Superior Proposal, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal.
In addition, if the Company proposes to enter into an agreement with respect
to any Competing Transaction, it shall concurrently with entering into such
an agreement pay, or cause to be paid, to Parent the fee required by Section
8.5(a) hereof. For purposes of this Agreement, a "Superior Proposal" means
any bona fide proposal to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, all or substantially all the Shares
then outstanding or all or substantially all the assets of the Company and
otherwise on terms which the Board of Directors of the Company determines in
its good faith judgment (based on the advice of a financial advisor of
nationally recognized reputation) to be more favorable to the Company's
stockholders than the Merger.
6.3. Meeting of Stockholders. The Company will take all action necessary in
accordance with applicable law and its Certificate of Incorporation and By-Laws
to convene a meeting of its stockholders (the "Stockholder Meeting") as promptly
as practicable to consider and vote upon the approval of the Merger. Subject to
the fiduciary duties of the Company's Board of Directors under applicable law
after consultation with and based upon the advice of independent legal counsel
the Board of Directors of the
21
Company shall recommend and declare advisable such approval and the Company
shall take all lawful action to solicit, and use its best efforts to obtain,
such approval.
6.4. Registration Statement. Parent will, as promptly as practicable,
prepare and file with the SEC a registration statement on Form S-4 (the "S-4
Registration Statement"), containing a proxy statement/prospectus and a form of
proxy, in connection with the registration under the Securities Act of Parent
Common Shares issuable upon conversion of the Shares and the other transactions
contemplated hereby. The Company will, as promptly as practicable, prepare and
file with the SEC a proxy statement that will be the same proxy
statement/prospectus contained in the S-4 Registration Statement and a form of
proxy, in connection with the vote of the Company's stockholders with respect to
the Merger (such proxy statement/prospectus, together with any amendments
thereof or supplements thereto, in each case in the form or forms mailed to the
Company's stockholders, is herein called the "Proxy Statement"). Parent and the
Company will, and will cause their accountants and lawyers to, use their best
efforts to have or cause the S-4 Registration Statement declared effective as
promptly as practicable, including, without limitation, causing their
accountants to deliver necessary or required instruments such as opinions and
certificates, and will take any other action required or necessary to be taken
under federal or state securities laws or otherwise in connection with the
registration process, it being understood and agreed that Katten Muchin & Zavis,
counsel to the Company, will render the tax opinion referred to in Section
7.2(g) on (i) the date the preliminary Proxy Statement is filed with the SEC and
(ii) the date the S-4 Registration Statement is filed with the SEC. The Company
will use its best efforts to cause the Proxy Statement to be mailed to
stockholders of the Company at the earliest practicable date and will coordinate
and cooperate with Parent with respect to the timing of the Stockholder Meeting
and shall use its best efforts to hold such Stockholder Meeting as soon as
practicable after the date hereof.
6.5. Best Efforts. The Company and Parent shall: (i) promptly make their
respective filings and thereafter make any other required submissions under all
applicable laws with respect to the Merger and the other transactions
contemplated hereby; and (ii) use their best efforts to promptly take, or cause
to be taken, all other actions and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable.
6.6. Access to Information. Upon reasonable notice, the Company shall (and
shall cause each of its subsidiaries to) afford to officers, employees, counsel,
accountants and other authorized representatives of Parent ("Parent's
Representatives") reasonable access, during normal business hours throughout the
period prior to the Effective Time, to its properties, books and records and,
during such period, shall (and shall cause each of its subsidiaries to) furnish
promptly to Parent's Representatives all information concerning its business,
properties and personnel as may reasonably be requested, provided that no
investigation pursuant to this Section 6.6 shall affect or be deemed to modify
any of the representations or warranties made by the Company. Parent agrees that
it will not, and will cause Parent's Representatives not to, use any information
obtained pursuant to this Section 6.6 for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement. In connection
with the foregoing, the Company agrees to use its best efforts to cause the
Company's independent accountants to provide their workpapers to Parent, subject
to the confidentiality provisions of this Section 6.6. Subject to the
requirements of law, Parent will keep confidential, and will cause Parent's
Representatives to keep confidential, all information and documents obtained
pursuant to this Section 6.6 except as otherwise consented to by the Company;
provided, however, that Parent shall not be precluded from making any disclosure
which it deems required by law in connection with the Merger. In the event
Parent is required to disclose any information or documents pursuant to the
immediately preceding sentence, Parent shall give prompt prior notice of such
disclosure to the Company. Upon any termination of this Agreement, Parent will
collect and deliver to the Company all documents obtained pursuant to this
Section 6.6 by it or any of Parent's Representatives then in their
22
possession and any copies thereof. Notwithstanding anything to the contrary
contained herein, in the event this Agreement is terminated and the Merger
abandoned pursuant to Article VIII, the terms of the Confidentiality Agreement,
dated August 23, 1995 (the "Confidentiality Agreement"), between Parent and the
Company shall survive such termination subject to the conditions and limitations
set forth in such Confidentiality Agreement.
6.7. Publicity. The parties hereto agree that they will consult with each
other concerning any proposed press release or public announcement pertaining to
the Merger in order to seek to agree upon the text of any such press release or
the making of such public announcement.
6.8. Indemnification of Directors and Officers.
(a) From and after the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, indemnify, defend and hold harmless the present
and former officers, directors and employees of the Company and any of its
subsidiaries against all losses, expenses, claims, damages or liabilities
arising out of actions or omissions occurring on or prior to the Effective
Time (including, without limitation, the transactions contemplated by this
Agreement) to the full extent (not otherwise covered by insurance) permitted
or required under applicable law (and shall also advance expenses as
incurred to the fullest extent permitted under applicable law, provided that
the person to whom expenses are advanced provides an undertaking to repay
such advances if it is ultimately determined that such person is not
entitled to indemnification); provided, however, the indemnification
provided hereunder by Parent shall not be greater than (x) the
indemnification permissible pursuant to the Company's Certificate of
Incorporation and By-Laws, as in effect as of the date hereof or (y) the
indemnification actually provided by the Company as of the date hereof.
Parent and Merger Sub agree that all rights to indemnification, including
provisions relating to advances of expenses incurred in defense of any
action or suit, existing in favor of the present or former directors,
officers, employees, fiduciaries and agents of the Company or any of its
subsidiaries (collectively, the "Indemnified Parties") as provided in the
Company's Certificate of Incorporation or By-Laws or pursuant to other
agreements, or certificates of incorporation or by-laws or similar documents
of any of the Company's subsidiaries, as in effect as of the date hereof,
with respect to matters occurring through the Effective Time, shall survive
the Merger and shall continue in full force and effect for a period of five
(5) years from the Effective Time; provided, however, that all rights to
indemnification in respect of any claim (a "Claim") asserted or made within
such period shall continue until the disposition of such Claim.
(b) Parent shall cause to be maintained in effect for not less than
three (3) years the current policies of directors' and officers' liability
insurance and fiduciary liability insurance maintained by the Company and
the Company's subsidiaries with respect to matters occurring prior to the
Effective Time to the extent required to cover the types of actions and
omissions currently covered by such policies; provided, however, that (i)
Parent may substitute therefor policies of substantially the same coverage
containing terms and conditions which are not less advantageous, in any
material respect, to the Indemnified Parties and (ii) Parent shall not be
required to pay an annual premium for such insurance in excess of $150,000
but in such case shall purchase as much coverage as possible for such
amount.
(c) In the event that any action, suit, proceeding or investigation
relating hereto or to the transactions contemplated by this Agreement is
commenced, whether before or after the Closing, the parties hereto agree to
cooperate and use their respective best efforts to vigorously defend against
and respond thereto.
(d) This Section 6.8 is intended to benefit the Indemnified Parties and
shall be binding on all successors and assigns of Parent, Merger Sub, the
Company and the Surviving Corporation.
23
6.9. Affiliates of the Company. The Company has identified to Parent each
Company Affiliate and each Company Affiliate has delivered to Parent on or prior
to the date hereof, a written agreement (i) that such Company Affiliate will not
sell, pledge, transfer or otherwise dispose of any Parent Common Shares issued
to such Company Affiliate pursuant to the Merger, except in compliance with Rule
145 promulgated under the Securities Act or an exemption from the registration
requirements of the Securities Act and (ii) that on or prior to the earlier of
(x) the mailing of the Proxy Statement/Prospectus or (y) the thirtieth day prior
to the Effective Time such Company Affiliate will not thereafter sell or in any
other way reduce such Company Affiliate's risk relative to any Parent Common
Shares received in the Merger (within the meaning of the SEC's Financial
Reporting Release No. 1, "Codification of Financing Reporting Policies," Sec.
201.01 47 F.R. 21028 (April 15, 1982)), until such time as financial results
(including combined sales and net income) covering at least 30 days of post-
merger operations have been published, except as permitted by Staff Accounting
Bulletin No. 76 issued by the SEC.
6.10. Taxes. In respect of Tax Returns of the Company or any subsidiary not
required to be filed prior to the date hereof, the Company shall, to the extent
permitted by law without any penalty, delay (or cause such subsidiary to delay)
the filing of any such Tax Returns until after the Effective Time; provided,
however, that the Company shall notify Parent of its intention to delay (or
cause such subsidiary to delay) any such filing and shall not so delay the
filing of a Tax Return if Parent and the Company agree that so delaying the
filing of such Tax Return is not in the best interests of either the Company or
Parent. If any such Tax Return is required to be filed on or prior to the
Effective Time, the Company or its subsidiaries, as the case may be, shall
prepare and timely file such Tax Return in a manner consistent with prior years
and all applicable laws and regulations; provided, however, that Parent shall be
notified and given an opportunity to review and to comment, prior to the filing
thereof, on any such Tax Return (a) which relates to a Tax which is based upon
or measured by income, (b) which is not regularly filed by the Company or a
subsidiary thereof in connection with the conduct of its business in the
ordinary course, or (c) for which Parent requests such opportunity, although
neither Parent's approval nor consent shall be required prior to the filing of
any such Tax Return.
6.11. Maintenance of Insurance. Between the date hereof and through the
Effective Time the Company will use its best efforts to maintain in full force
and effect all of its presently existing policies of insurance or insurance
comparable to the coverage afforded by such policies.
6.12. Representations and Warranties. Neither the Company on the one hand,
nor Parent or Merger Sub on the other, will take any action that would cause any
of the representations and warranties set forth in Section 5.1 or 5.2, as the
case may be, not to be true and correct in all material respects at and as of
the Effective Time.
6.13. Filings; Other Action. Subject to the terms and conditions herein
provided, the Company, Parent and Merger Sub shall: (a) promptly make their
respective filings and thereafter make any other required submissions under the
HSR Act, the Securities Act and the Exchange Act with respect to the Merger; and
(b) use best efforts promptly to take, or cause to be taken, all other actions
and do, or cause to be done, all other things necessary, proper or appropriate
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable.
6.14. Notification of Certain Matters. Each of the Company and Parent shall
give prompt notice to the other of (a) any notice of, or other communication
relating to, a default or event which, with notice or lapse of time or both,
would become a default, received by it or any of its subsidiaries subsequent to
the date of this Agreement and prior to the Effective Time, under any contract
material to the financial condition, properties, businesses or results of
operations of it and its subsidiaries taken as a whole to which it or any of its
subsidiaries is a party or is subject, (b) any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection
24
with the transactions contemplated by this Agreement, or (c) any material
adverse change in their respective financial condition, properties, businesses
or results of operations, taken as a whole, other than changes resulting from
general economic conditions.
6.15. Pooling Accounting. None of the Company, any of its subsidiaries,
Parent nor Merger Sub will take any action that could prevent the Merger from
being accounted for as a pooling-of-interests and the Company will bring to the
attention of Parent, and Parent will bring to the attention of the Company, any
actions, or agreements or understandings, whether written or oral, to act that
could be reasonably likely to prevent Parent from accounting for the Merger as a
pooling-of-interests.
6.16. Blue Sky Permits. Parent shall use its best efforts to obtain, prior
to the effective date of the S-4 Registration Statement, all necessary state
securities laws or "blue sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Merger, and will pay all
expenses incident thereto.
6.17. NYSE Listing. Parent shall use its best efforts to cause the Parent
Common Shares constituting the Share Consideration to be listed on the NYSE,
subject to notice of official issuance thereof.
6.18. Pooling Letter. Parent shall use commercially reasonable efforts to
cause Ernst & Young LLP ("E&Y") to deliver to Parent a letter to the effect that
pooling-of-interests accounting is appropriate for the Merger if it is closed
and consummated in accordance with the terms of this Agreement, and the Company
shall use commercially reasonable efforts to cause Deloitte & Touche LLP
("Deloitte") to cooperate fully with E&Y (including, without limitation, sharing
information, analysis and work product, engaging in active discussions and
delivering to the Company a letter substantially similar to E&Y's letter to
Parent) in connection with E&Y's delivery of such letter.
6.19. Comfort Letter. The Company shall use its best efforts to cause to be
delivered to Parent a letter of Deloitte, independent public accountants to the
Company, dated a date within two business days before the date on which the S-4
Registration Statement shall become effective and addressed to Parent, in form
and substance reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the S-4 Registration Statement.
6.20. Tax-Free Reorganization Treatment. The Company, Parent and Merger Sub
shall execute and deliver to Katten Muchin & Zavis, counsel to the Company, a
certificate substantially in the form attached hereto as Exhibit C at such time
or times as reasonably requested by such law firm in connection with its
delivery of an opinion with respect to the transactions contemplated hereby, and
shall provide a copy thereof to Parent and the Company. Prior to the Effective
Time, none of the Company, Parent or Merger Sub shall take or cause to be taken
any action which would cause to be untrue (or fail to take or cause not to be
taken any action which would cause to be true) any of the representations in
Exhibit C.
6.21. Combined Operations. Parent agrees to make publicly available
financial statements reflecting at least 30 days of combined operations of
Parent and the Company on or prior to March 5, 1996.
6.22. Employment Agreements. At the Closing, Parent shall offer or cause the
Surviving Corporation to offer to enter into employment agreements with each of
the individuals listed in Section 6.22 of the Company Disclosure Schedule (the
"Employment Agreements"), each such agreement to be substantially in the form
previously agreed to among Parent, the Company and each such individual on or
prior to the date hereof.
25
ARTICLE VII
CONDITIONS
7.1. Conditions to the Obligations of Parent and Merger Sub. The respective
obligations of Parent and Merger Sub to consummate the Merger are subject to the
fulfillment at or prior to the Effective Time of the following conditions, any
or all of which may be waived in whole or in part by Parent or Merger Sub, as
the case may be, to the extent permitted by applicable law.
(a) Certificate. The representations and warranties of the Company set
forth in this Agreement shall be true and correct in all material respects
on and as of the Effective Time with the same force and effect as though the
same had been made on and as of the Effective Time (except to the extent
they relate to a particular date), the Company shall have performed in all
material respects all of its material obligations under this Agreement
theretofore to be performed, and Parent shall have received at the Effective
Time a certificate to that effect dated the Effective Time and executed by
the President of the Company.
(b) Company Stockholder Approval. This Agreement shall have been duly
approved by the holders of a majority of the outstanding Common Shares, in
accordance with applicable law and the Certificate of Incorporation and
By-Laws of the Company.
(c) Injunction. There shall be in effect no preliminary or permanent
injunction or other order of a court or governmental or regulatory agency of
competent jurisdiction directing that the transactions contemplated herein
not be consummated; provided, however, that prior to invoking this condition
Parent shall use its best efforts to have such injunction or order vacated.
(d) S-4 Registration Statement; "Blue Sky" Permits. The S-4 Registration
Statement shall have become effective and no stop order suspending the
effectiveness of the S-4 Registration Statement shall have been issued and
no proceedings for such purpose shall have been initiated and be continuing
or threatened by the SEC. Parent shall have received all state securities
laws or "blue sky" permits and other authorizations necessary to issue
Parent Common Shares in exchange for the Shares in the Merger.
(e) Listing of Parent Common Shares. The Parent Common Shares
constituting the aggregate Share Consideration and the other such shares
required to be reserved for issuance in connection with the Merger shall
have been authorized for listing on the NYSE, subject to notice of official
issuance.
(f) Governmental Filings and Consents; HSR Act. (i) All governmental
filings required to be made prior to the Effective Time by the Company with,
and all governmental consents required to be obtained prior to the Effective
Time from, governmental and regulatory authorities in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been made or obtained, except
where the failure to make such filing or obtain such consent would not
reasonably be expected to have a Material Adverse Effect on Parent (assuming
the Merger had taken place) and (ii) the waiting periods under the HSR Act
shall have expired or been terminated.
(g) Pooling Letter. Parent shall have received from E&Y a letter to the
effect that pooling-of-interests accounting is appropriate for the Merger
pursuant to 6.18 of this Agreement.
(h) Third Party Consents. All required authorizations, consents and
approvals of any third party (other than a governmental authority), the
failure to obtain which would have a Material Adverse Effect on Parent
(assuming the Merger had taken place), shall have been obtained.
26
(i) Delivery of Comfort Letter. Deloitte shall have delivered to the
Company, for delivery by it to Parent, one or more letters with respect to
the financial information contained in the Proxy Statement as contemplated
by Section 6.19.
(j) Termination of Options. The Option Plans shall have been terminated
or substituted in a manner satisfactory to Parent. The Advance Ross
Corporation 1995 Directors Deferral Plan shall have been duly and validly
terminated by action of the Company's Board of Directors and all outstanding
options thereunder shall have been terminated without further liability on
the part of the Company or Parent to the holders thereof.
(k) Affiliate Letters. Each Company Affiliate shall have performed all
of their respective obligations under their respective Affiliate Letters,
Allen & Company Incorporated shall have performed all of its obligations
under the letter, dated the date hereof, from such firm to the Company and
Parent, and Parent shall have received certificates signed by each of them
to such effect.
(l) Termination of Advisory Agreement. The agreement between the Company
and Allen & Company Incorporated referred to in Section 5.1(i) of the
Company Disclosure Schedule shall have been terminated without further
liability thereunder for advisory fees for future periods on the part of the
Company, and Parent shall have received satisfactory evidence thereof except
that the indemnification provisions of such agreement shall survive the
Merger.
7.2. Conditions to the Obligations of the Company. The obligation of the
Company to consummate the Merger is subject to the fulfillment at or prior to
the Effective Time of the following conditions, any or all of which may be
waived in whole or in part by the Company to the extent permitted by applicable
law.
(a) Certificate. The representations and warranties of Parent and Merger
Sub set forth in this Agreement shall be true and correct in all material
respects on and as of the Effective Time with the same force and effect as
though the same had been made on and as of the Effective Time (except to the
extent they relate to a particular date), Parent and Merger Sub shall have
performed all material respects all of their respective obligations under
this Agreement theretofore to be performed, and the Company shall have
received at the Effective Time a certificate to that effect dated the
Effective Time and executed by the President of Parent.
(b) Company Stockholder Approval. This Agreement shall have been duly
approved by the holders of a majority of the outstanding Common Shares, in
accordance with applicable law and the Certificate of Incorporation and
By-Laws of the Company.
(c) Injunction. There shall be in effect no preliminary or permanent
injunction or other order of a court or governmental or regulatory agency of
competent jurisdiction directing that the transactions contemplated herein
not be consummated; provided, however, that prior to invoking this condition
the Company shall use its best efforts to have such injunction or order
vacated.
(d) S-4 Registration Statement; "Blue Sky" Permits. The S-4 Registration
Statement shall have become effective and no stop order suspending the
effectiveness of the S-4 Registration Statement shall have been issued and
no proceedings for such purpose shall have been initiated and be continuing
or threatened by the SEC. Parent shall have received all state securities
laws or "blue sky" permits and other authorizations necessary to issue
Parent Common Shares in exchange for the Shares in the Merger.
(e) Listing of Parent Common Shares. The Parent Common Shares
constituting the aggregate Share Consideration and such other shares
required to be reserved for issuance in connection
27
with the Merger shall have been authorized for listing on the NYSE, subject
to official notice of issuance.
(f) HSR Act. The waiting periods under the HSR Act shall have expired or
been terminated.
(g) Tax Opinion. The Company shall have received an opinion of Katten
Muchin & Zavis, dated the Closing Date, to the effect that (i) the Merger
will be treated for federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Code; (ii) each of the Parent, Merger
Sub and the Company will be a party to the reorganization within the meaning
of Section 368(b) of the Code; and (iii) no gain or loss will be recognized
by a shareholder of the Company as a result of the Merger with respect to
Shares converted solely into shares of Parent Common Stock. In rendering
such opinion, Katten Muchin & Zavis may receive and rely upon
representations contained in certificates of Parent, Merger Sub and the
Company, and certain shareholders of the Company as requested by Katten
Muchin & Zavis.
ARTICLE VIII
TERMINATION
8.1. Termination by Mutual Consent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by holders of Common Shares, either by the mutual written consent
of Parent and the Company, or by mutual action of their respective Boards of
Directors.
8.2. Termination by either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either Parent or the Company if (i) the Merger shall not have been
consummated by January 31, 1996 (provided that the right to terminate this
Agreement under this Section 8.2(i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date); (ii) any
court of competent jurisdiction in the United States or some other governmental
body or regulatory authority shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable; or (iii) the Merger shall have been voted on by
stockholders of the Company at a meeting duly convened therefor and the vote
shall not have been sufficient to satisfy the conditions set forth in Sections
7.1(b) and 7.2(b).
8.3. Termination by Parent. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after the
approval by holders of Shares, by action of the Board of Directors of Parent, if
(i) the Company shall have failed to comply in any material respect with any of
the covenants, conditions or agreements contained in this Agreement to be
complied with or performed by the Company at or prior to such date of
termination, which failure to comply has not been cured within five business
days following receipt by the Company of notice of such failure to comply, (ii)
any representation or warranty of the Company contained in the Agreement shall
not be true in all material respects when made (provided such breach has not
been cured within five business days following receipt by the Company of notice
of the breach) or (except to the extent they relate to a particular date) on and
as of the Effective Time as if made on and as of the Effective Time, or (iii)
(A) the Board of Directors of the Company shall withdraw, modify or change its
recommendation of this Agreement or the Merger in a manner adverse to Parent or
Merger Sub, or shall have approved or recommended to the stockholders of the
Company any Competing Transaction or (B) the Company shall have entered into any
agreement with respect to any Competing Transaction or (C) the Board of
Directors of the Company shall resolve to do any of the foregoing.
28
8.4. Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by holders of Shares, by action of the Board of Directors of the
Company, if (i) Parent or Merger Sub shall have failed to comply in any material
respect with any of the covenants, conditions or agreements contained in this
Agreement to be complied with or performed by Parent or Merger Sub at or prior
to such date of termination, which failure to comply has not been cured within
five business days following receipt by the breaching party of notice of such
failure to comply, (ii) any representation or warranty of Parent or Merger Sub
contained in this Agreement shall not be true in all material respects when made
(provided such breach has not been cured within five business days following
receipt by the breaching party of notice of the breach) or on and as of the
Effective Time as if made on and as of the Effective Time (except to the extent
they relate to a particular date) or (iii) the Company enters into a definitive
agreement relating to a Superior Proposal in accordance with Section 6.2(b),
provided it has complied with all of the provisions thereof and has made payment
of the fees required by Section 8.5 hereof.
8.5. Effect of Termination and Abandonment. (a) In the event of termination
of this Agreement by either the Company or Parent as provided in this Article
VIII, this Agreement shall forthwith become void and there shall be no liability
or obligation on the part of Parent, Merger Sub or the Company or their
respective affiliates, officers, directors or stockholders except (x) with
respect to this Section 8.5 and Section 9.1 and (y) to the extent that such
termination results from the breach of a party hereto or any of its
representations or warranties, or any of its covenants or agreements, in each
case, as set forth in this Agreement; provided, that, the Company agrees that if
this Agreement shall be terminated pursuant to (i) Section 8.2(iii), if at or
prior to the time of the Stockholder Meeting (x) a Competing Transaction shall
have been commenced, publicly proposed or publicly disclosed and (y) the Company
has not rejected such Competing Transaction, (ii) Section 8.3(iii), or (iii)
Section 8.4(iii), then the Company shall pay to Parent an amount equal to
$2,500,000; provided, however, that no such fee shall be payable upon a
termination by Parent pursuant to Section 8.3(iii)(A) or Section 8.3(iii)(C) (to
the extent subparagraph (C) relates to subparagraph (A)) if (x) the Company gave
to Parent prior to Parent's termination of this Agreement pursuant to Section
8.3(iii)(A) or Section 8.3(iii)(C) (to the extent subparagraph (C) relates to
subparagraph (A)) a termination notice pursuant to Section 8.4(i) or Section
8.4(ii) (the "Company Termination Notice") setting forth in reasonable detail
the reason therefor and (y) at the time Parent terminates this Agreement
pursuant to Section 8.3(iii)(A) or 8.3(iii)(C) (to the extent subparagraph (C)
relates to subparagraph (A)) the Company is entitled to terminate this Agreement
pursuant to the reasons set forth in the Company Termination Notice; provided,
further, that the Company shall pay to Parent an additional $2,500,000 if the
Company consummates any Competing Transaction within one year after (A) in the
case of clause (i) of this Section 8.5(a), the earlier of the Stockholder
Meeting or payment of the first $2,500,000, (B) in the case of clause (ii) of
this Section 8.5(a), the termination of this Agreement by Parent and (C) in the
case of clause (iii) of this Section 8.5(a), the termination of this Agreement
by the Company.
(b) Any payment required to be made pursuant to Section 8.5(a) shall be made
as promptly as practicable but not later than five business days after the
occurrence of the event giving rise to such payment and shall be made by wire
transfer of immediately available funds to an account designated by Parent
except that any payment to be made pursuant to Section 8.5(a)(i) shall be made
not later than the termination of this Agreement by the Company pursuant to
Section 8.4(iii).
(c) Each of the parties hereto agrees that the payment in full of
immediately available funds by the Company to Parent shall be Parent's exclusive
remedy for an action taken by the Company which (x) is permitted under this
Agreement and (y) results in the payment to Parent of the fee set forth in
Section 8.5(a). Except as set forth in the immediately preceding sentence and
subject to Section 9.12, all rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any such right, power or
remedy by any party shall not preclude the simultaneous or later exercise of any
other such right, power or remedy by such party.
29
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1. Payment of Expenses. Whether or not the Merger shall be consummated,
each party hereto and the stockholders of the Company shall pay their own
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby, provided
that the Surviving Corporation shall pay, with funds of the Company and not with
funds provided by any of Parent Companies, any and all property or transfer
taxes imposed on the Surviving Corporation. The cost of printing the S-4
Registration Statement and the Proxy Statement shall be borne equally by the
Company and the Parent.
9.2. Survival of Representations and Warranties. The representations and
warranties made herein shall not survive beyond the Effective Time or a
termination of this Agreement. This Section 9.2 shall not limit any covenant or
agreement of the parties hereto which by its terms contemplates performance
after the Effective Time.
9.3. Modification or Amendment. Subject to the applicable provisions of the
DGCL, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after
approval of the Merger by the stockholders of the Company, no amendment shall be
made which changes the consideration payable in the Merger or adversely affects
the rights of the Company's stockholders hereunder without the approval of such
stockholders.
9.4. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.5. Counterparts. For the convenience of the parties hereto, this Agreement
may be executed in any number of counterparts, each such counterpart being
deemed to be an original instrument, and all such counterparts shall together
constitute the same agreement.
9.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
9.7. Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the other parties shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile transmission (with a confirming copy sent by overnight courier), as
follows:
(a) if to the Company, to
Advance Ross Corporation
233 South Wacker Drive
Suite 9700
Chicago, Illinois 60606-6502
Attention: Paul G. Yovovich
Facsimile: (312) 382-1109
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
30
Suite 1600
Chicago, Illinois 60661-3693
Attention: Herbert S. Wander, Esq.
Facsimile: (312) 902-1061
(b) if to Parent or Merger Sub, to
CUC International Inc.
707 Summer Street
Stamford, Connecticut 06901
Attention: Amy N. Lipton, Esq.
Facsimile: (203) 348-1982
with a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Howard Chatzinoff, Esq.
Facsimile: (212) 310-8007
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
9.8. Entire Agreement; Assignment. This Agreement, including the Disclosure
Schedules, (i) constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof, and (ii) shall not be assigned by
operation of law or otherwise, provided that Parent may assign its rights and
obligations or those of Merger Sub to any direct wholly owned subsidiary of
Parent, but no such assignment shall relieve Parent of its obligations hereunder
if such assignee does not perform such obligations.
9.9. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their respective successors and
assigns. Nothing in this Agreement, express or implied, other than the right to
receive the consideration payable in the Merger pursuant to Article IV hereof,
is intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement;
provided, however, that the provisions of Section 6.8 shall inure to the benefit
of and be enforceable by the Indemnified Parties.
9.10. Certain Definitions. As used herein:
(a) "Significant Subsidiary" shall have the meaning ascribed to it under
Rule 12b-1 of the Exchange Act.
(b) "subsidiary" shall mean, when used with reference to any entity, any
entity fifty percent (50%) or more of the outstanding voting securities or
interests of which are owned directly or indirectly by such former entity.
(c) "Material Adverse Effect" shall mean any adverse change in the
properties, financial condition, business or results of operations of the
Company or any of its subsidiaries or Parent or any of its subsidiaries, as
the case may be, which is material to the Company and its subsidiaries,
taken as a whole, or Parent and its subsidiaries, taken as a whole, as the
case may be.
(d) "Knowledge" with respect to the Company shall mean the knowledge of
any of the executive officers or directors of the Company, any of the
managing or deputy managing directors
31
of Europe Tax-Free Shopping ETS AB, and the managing directors of the
subsidiaries listed in Section 9.10(d) of the Company Disclosure Schedule,
after due inquiry.
9.11. Obligation of Parent. Whenever this Agreement requires Merger Sub to
take any action, such requirement shall be deemed to include an undertaking on
the part of Parent to cause Merger Sub to take such action.
9.12. Arbitration. Any controversy, dispute or claim arising out of or
relating to this Agreement or the breach hereof which cannot be settled by
mutual agreement (except for actions by Parent or the Company seeking equitable,
injunctive or other relief under Section 9.14) shall be finally settled by
arbitration as follows: Any party who is aggrieved shall deliver a notice to
other party setting forth the specific points in dispute. Any points remaining
in dispute twenty (20) days after the giving of such notice shall be submitted
to arbitration in New York, New York, to Endispute, before a single arbitrator
appointed in accordance with Endispute's Arbitration Rules, modified only as
herein expressly provided. The arbitrator may enter a default decision against
any party who fails to participate in the arbitration proceedings. The decision
of the arbitrator on the points in dispute will be final, unappealable and
binding and judgment on the award may be entered in any court having
jurisdiction thereof. The arbitrator will be authorized to apportion its fees
and expenses and the reasonable attorney's fees and expenses of Parent and the
Company as the arbitrator deems appropriate. In the absence of any such
apportionment, the fees and expense of the arbitrator will be borne equally by
each party, and each party will bear the fees and expenses of its own attorney.
The parties agree that this clause has been included to rapidly and
inexpensively resolve any disputes between them with respect to this Agreement,
and that this clause shall be grounds for dismissal of any court action
commenced by either party with respect to this Agreement, other than
post-arbitration actions seeking to enforce an arbitration award. The parties
shall keep confidential, and shall not disclose to any person, except as may be
required by law, the existence of any controversy hereunder, the referral of any
such controversy to arbitration or the status or resolution thereof.
9.13. Severability. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement shall
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
9.14. Specific Performance. The parties hereto acknowledge that irreparable
damage would result if this Agreement were not specifically enforced, and they
therefore consent that the rights and obligations of the parties under this
Agreement may be enforced by a decree of specific performance issued by a court
of competent jurisdiction. Such remedy shall, however, not be exclusive and,
subject to Section 9.12, shall be in addition to any other remedies, including
arbitration, which any party may have under this Agreement or otherwise.
9.15. Recapitalization. Whenever (a) the number of outstanding Parent Common
Shares is changed by reason of a subdivision or combination of shares, whether
effected by a reclassification of shares or otherwise or (b) Parent pays a cash
or stock dividend or makes a similar distribution, each specified number of
shares referred to in this Agreement and each specified per share amount (other
than par values) shall be adjusted accordingly.
9.16. Captions. The Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
32
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto and shall be effective as of
the date first hereinabove written.
CUC INTERNATIONAL INC.
By: /s/ Cosmo Corigliano
..................................
Name: Cosmo Corigliano
Title: Senior Vice President and
Chief Financial Officer
RETREAT ACQUISITION CORPORATION
By: /s/ Cosmo Corigliano
..................................
Name: Cosmo Corigliano
Title: President
ADVANCE ROSS CORPORATION
By: /s/ Harve A. Ferrill
..................................
Name: Harve A. Ferrill
Title: Chairman and Chief
Executive Officer
33
Exhibit 5
ROBERT T. TUCKER
ATTORNEY AT LAW
61 PURCHASE ST. (914) 967-8105
RYE, N.Y. 10580 FAX: (914) 967-8161
December 7, 1995
CUC International Inc.
707 Summer Street
Stamford, CT 06901
Ladies and Gentlemen:
I refer to the Registration Statement (the "Registration Statement") on
Form S-4 being filed by CUC International Inc. ("CUC") Under the Securities Act
of 1933, as amended (the "Securities Act") with the Securities and Exchange
Commission (the "Commission"), relating to the registration of up to 7,520,000
shares of common stock par value $ .01 per share of CUC (the "Shares") to be
issued to the shareholders of Advance Ross Corporation ("Advance") in connection
with the merger of CUC's wholly owned subsidiary Retreat Acquisition Corporation
("Merger Sub"), into and with Advance, all as set forth in the Agreement and
Plan of Merger dated October 17, 1995, among CUC, Advance and Merger Sub (the
"Merger Agreement")
I have examined copies of (i) the Registration Statement; (ii) the Restated
Certificate of Incorporation and By-Laws of the Company, each as amended to
date; (iii) certain resolutions of the Board of Directors of the Company
relating to the issuance of the Shares pursuant to the terms of the Agreement
and Plan of Merger; and (iv) the Agreement and Plan of Merger. I have also
examined originals, or photostatic or certified copies, of such records of the
Company, certificates of officers of the Company and of public officials and
such other documents as I have deemed relevant and necessary as the basis for
the opinions set forth below. In such examinations, I have assumed the
genuineness of all signatures, the authenticity of all documents submitted to me
as originals, the conformity to original documents of all copies submitted to me
as certified, conformed or photostatic copies, and the authenticity of all
originals of such copies.
Based upon the foregoing, I am of the opinion that the issuance of the
Shares has been duly authorized by CUC and that the Shares, when issued and
delivered to the Shareholders of Advance in accordance with the Merger
Agreement, will be legally issued, fully paid and non-assessable.
Page 2
I hereby consent to the filing of this opinion with the Commission as an
Exhibit to the Registration Statement and to the reference to the undersigned
under the caption "Legal Matters" in the Registration Statement.
Very truly yours,
/s/ Robert T. Tucker
-----------------------------------
Robert T. Tucker
RTT/kau
Exhibit 8
OPINION OF KATTEN MUCHIN & ZAVIS
Advance Ross Corporation
233 South Wacker Drive
Sears Tower, Suite 9700
Chicago, Illinois 60606-6502
Attention: Board of Directors
Ladies and Gentlemen:
We have been requested to render this opinion concerning certain matters of
federal income tax law in connection with the proposed merger of Retreat
Acquisition Corp., a newly-formed corporation, organized and existing under the
laws of the State of Delaware ("Merger Sub") which is a wholly owned subsidiary
of CUC International Inc. organized and existing under the laws of the State of
Delaware ("Parent"), with and into Advance Ross Corporation organized and
existing under the laws of the State of Delaware (the "Company") with the
Company surviving the merger and becoming a wholly owned subsidiary of Parent,
pursuant to the applicable corporate laws of the State of Delaware (the
"Merger"), and in accordance with that certain Agreement and Plan of Merger
between and among the Company, Parent and Merger Sub (the "Agreement") and
related Articles of Merger and a Plan of Merger (together with the Agreement,
the "Merger Agreements"). Our opinion is being delivered to you pursuant to
Section 7.2(g) of the Agreement.
Except as otherwise provided, capitalized terms referred to herein have the
meanings set forth in the Merger Agreements. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
We have acted as legal counsel to the Company in connection with the Merger.
As such, and for the purpose of rendering this opinion, we have examined (or
will examine on or prior to the Effective Time of the Merger) and are relying
(or will rely) upon (without any independent investigation or review thereof)
the truth and accuracy, at all relevant times, of the statements, covenants,
representations and warranties contained in the following documents (including
all schedules and exhibits thereto):
1. The Merger Agreements;
2. Representations made to us by Parent and Merger Sub;
3. Representations made to us by the Company;
4. The Company Affiliate Certificates;
5. The Registration Statement on Form S-4; and
6. Such other instruments and documents related to the formation,
organization and operation of the Company, Parent and Merger Sub or the
consummation of the Merger and the transactions contemplated thereby as we
have deemed necessary or appropriate.
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that:
1. Original documents (including signatures) are authentic; documents
submitted to us as copies conform to the original documents, and there has
been (or will be by the Effective Time of
1
the Merger) due execution and delivery of all documents where due execution
and delivery are prerequisites to the effectiveness thereof;
2. Any representation or statement referred to above made "to the
knowledge of" or otherwise similarly qualified is correct without such
qualification;
3. The Merger will be consummated pursuant to the Merger Agreements and
will be effective under the applicable state law;
4. There is no plan or intention by the Company stockholders who own 5%
or more of the Company stock to sell, exchange or otherwise dispose of their
stock in the Company;
5. Following the Merger, the Company will continue its historic business
or use a significant portion of its historic business assets in a business;
6. No outstanding indebtedness of the Company, Parent or Merger Sub has
or will represent equity for tax purposes (including, without limitation,
any loans from Parent to the Company); no outstanding equity of the Company,
Parent or Merger Sub has represented or will represent indebtedness for tax
purposes; no outstanding security other than the Company's Stock Option
Plans, instrument, agreement or arrangement that provides for, contains, or
represents either a right to acquire the Company stock or to share in the
appreciation thereof constitutes or will constitute "stock" for purposes of
Section 368(c) of the Code;
7. To the extent any expenses relating to the Merger (or the "plan of
reorganization" within the meaning of Treas. Reg. Sec.1.368-1(c) with
respect to the Merger) are funded directly or indirectly by a party other
than the party incurring such expenses, such expenses will be within the
guidelines established in Revenue Ruling 73-54, 1973-1 C.B. 187; and
8. Neither Parent, the Company or Merger Sub is, or will be at the time
of the Merger: (a) an "investment company" within the meaning of Section
368(a)(2)(F) of the Code; or (b) under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion, for federal income tax purposes, that (1) the Merger will
constitute a "reorganization" as defined in Section 368(a) of the Code, (2) each
of Parent, Merger Sub and the Company will be a party to the reorganization
within the meaning of Section 368(b) of the Code, and (3) no gain or loss will
be recognized by a shareholder of the Company as a result of the Merger with
respect to Company common shares converted solely into Parent common shares.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below:
1. This opinion represents and is based upon our best judgment regarding
the application of existing federal income tax laws arising under the Code,
judicial decisions, administrative regulations and published rulings and
procedures. Our opinion is not binding upon the Internal Revenue Service or
the courts, and the Internal Revenue Service is not precluded from asserting
a contrary position. Furthermore, no assurance can be given that future
legislative, judicial or administrative changes, on either a prospective or
retroactive basis, would not adversely affect the accuracy of the opinion
expressed herein. Nevertheless, we undertake no responsibility to advise you
of any new developments in the application or interpretation of the federal
income tax laws after the date of this opinion.
2
2. Our opinion concerning certain of the federal tax consequences of the
Merger is limited to the specific federal tax consequences presented above.
No opinion is expressed as to any transaction other than the Merger,
including any transaction undertaken in connection with the Merger. In
addition, this opinion does not address any other federal, estate, gift,
state, local or foreign tax consequences that may result from the Merger. In
particular, we express no opinion regarding:
(a) whether and the extent to which any Company stockholder who has
provided or will provide services to the Company, Parent or Merger Sub
will have compensation income under any provision of the Code;
(b) the effects of such compensation income, including, but not
limited to, the effect upon the basis and holding period of the Parent
stock received by any such stockholder in the Merger;
(c) the effects of the Merger and Parent's assumption of outstanding
options to acquire the Company Common Stock on the holders of such
options under any of the Company Stock Option Plans;
(d) the effects of the Merger on any pension or other employee
benefit plan maintained by Parent or the Company;
(e) the potential application of the "golden parachute" provisions of
Sections 280G, 3121(v)(2) and 4999 of the Code, the alternative minimum
tax provisions of Sections 55, 56 and 57 of the Code or the regulations
promulgated thereunder;
(f) the tax consequences of the Merger to Parent, Merger Sub or the
Company, including without limitation the recognition of any gain and the
survival and/or availability, after the Merger, of any of the federal
income tax attributes or elections of the Company or Parent (including,
without limitation, foreign tax credits or net operating loss
carryforwards, if any, of the Company or Parent), after application of
any provision of the Code, as well as the regulations promulgated
thereunder and judicial interpretations thereof;
(g) the basis of any equity interest in the Company acquired by
Parent in the Merger; and
(h) the tax consequences of the Merger (including the opinion set
forth above) as applied to specific stockholders of the Company and/or
holders of options or warrants for the Company stock or that may be
relevant to particular classes of the Company stockholders and/or holders
of options or warrants for the Company stock, including, without
limitation, dealers in securities, corporate shareholders subject to the
alternative minimum tax, foreign persons, and holders of shares acquired
upon exercise of stock options or in other compensatory transactions.
3. No opinion is expressed if all the transactions described in the
Merger Agreements are not consummated in accordance with the terms of such
Merger Agreements and without waiver or breach of any material provision
thereof or if all of the representations, warranties, statements and
assumptions upon which we relied are not true and accurate at all relevant
times. In the event any one of the statements, representations, warranties
or assumptions upon which we have relied to issue this opinion is incorrect,
our opinion might be adversely affected and may not be relied upon.
4. If the facts vary from those relied upon (including if any
representation, covenant, warranty or assumption upon which we have relied
is inaccurate, incomplete, breached or ineffective), our opinion contained
herein could be inapplicable. You should be aware that an opinion of counsel
represents only counsel's best legal judgment, and has no binding effect or
official status of any kind, and that no assurance can be given that
contrary positions will not be
3
taken by the Internal Revenue Service or that a court considering the issues
would not hold otherwise. No ruling has been or will be requested from the
Internal Revenue Service concerning the federal income tax consequences of
the Merger.
5. This opinion is being delivered solely for the purpose of satisfying
the condition set forth in Section 7.2(g) of the Agreement. This opinion may
not be relied upon or utilized for any other purpose or by any other person
or entity, and may not be made available to any other person or entity,
without our prior written consent. We do, however, consent to the filing of
this opinion as an exhibit to the Proxy Statement and Form S-4. We further
consent to the use of our name in the Registration Statement wherever it
appears.
Very truly yours,
4
Exhibit 9
STOCKHOLDERS AGREEMENT
AGREEMENT, dated October 17, 1995 (this "Agreement"), by and among CUC
International Inc., a Delaware corporation ("Parent"), and each of the other
parties signatory hereto (each, a "Stockholder", and collectively, the
"Stockholders").
WITNESSETH:
WHEREAS, concurrently herewith, Parent, Retreat Acquisition Corporation, a
Delaware corporation and a direct wholly-owned subsidiary of Parent ("Merger
Sub"), and Advance Ross Corporation, a Delaware corporation (the "Company"), are
entering into an Agreement and Plan of Merger (as such agreement may hereafter
be amended from time to time, the "Merger Agreement"; capitalized terms used and
not defined herein have the respective meanings ascribed to them in the Merger
Agreement) pursuant to which Merger Sub will be merged with and into the Company
(the "Merger");
WHEREAS, each of the Stockholders owns the number of shares, par value $.01
per share, of common stock of the Company (the "Shares" or "Company Common
Stock") of the Company set forth opposite such Stockholder's name on Schedule I
hereto;
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholders agree, and the Stockholders
have agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
1. Provisions Concerning Company Common Stock. Each Stockholder hereby
agrees that during the period commencing on the date hereof and continuing until
the first to occur of the Effective Time and termination of the Merger Agreement
in accordance with its terms, at any meeting of the holders of Company Common
Stock, however called, or in connection with any written consent of the holders
of Company Common Stock, such Stockholder shall vote (or cause to be voted) the
Shares held of record or Beneficially Owned (as defined below) by such
Stockholder, whether heretofore owned or hereafter acquired, (i) in favor of
approval of the Merger Agreement and any actions required in furtherance thereof
and hereof; (ii) against any action or agreement that would result in a breach
in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement (after giving
effect to any materiality or similar qualifications contained therein); and
(iii) except as otherwise agreed to in writing in advance by Parent, against the
following actions (other than the Merger and the transactions contemplated by
the Merger Agreement): (A) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company; (B) a
sale, lease or transfer of a material amount of assets of the Company, or a
reorganization, recapitalization, dissolution or liquidation of the Company; (C)
(1) any change in a majority of the persons who constitute the board of
directors of the Company; (2) any change in the present capitalization of the
Company or any amendment of the Company's Certificate of Incorporation or
By-Laws; (3) any other material change in the Company's corporate structure or
business; or (4) any other action which, in the case of each of the matters
referred to in clauses C (1), (2), (3) or (4), is intended, or could reasonably
be expected, to impede, interfere with, delay, postpone, or materially adversely
affect the Merger and the transactions contemplated by this Agreement and the
Merger Agreement. Such Stockholder shall not enter into any agreement or
understanding with any Person (as defined below) the effect of which would be
inconsistent or violative of the provisions and agreements contained in Section
1 or 2 hereof. For purposes of this Agreement, "Beneficially Own" or "Beneficial
Ownership" with respect to any securities shall mean having "beneficial
ownership" of such securities
1
(as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities Beneficially
Owned by a Person shall include securities Beneficially Owned by all other
Persons with whom such Person would constitute a "group" as within the meanings
of Section 13(d)(3) of the Exchange Act. For purposes of this Agreement,
"Person" shall mean an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.
2. Other Covenants, Representations and Warranties. Each Stockholder hereby
represents and warrants to Parent as follows:
(a) Ownership of Shares. Such Stockholder is the record and Beneficial
Owner of the number of Shares set forth opposite such Stockholder's name on
Schedule I hereto. On the date hereof, the Shares set forth opposite such
Stockholder's name on Schedule I hereto constitute all of the Shares owned
of record or Beneficially Owned by such Stockholder. Such Stockholder has
sole voting power and sole power to issue instructions with respect to the
matters set forth in Section 1 hereof, sole power of disposition, sole power
of conversion, sole power to demand appraisal rights and sole power to agree
to all of the matters set forth in this Agreement, in each case with respect
to all of the Shares set forth opposite such Stockholder's name on Schedule
I hereto, with no limitations, qualifications or restrictions on such
rights.
(b) Power; Binding Agreement. Such Stockholder has the legal capacity,
power and authority to enter into and perform all of such Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by such Stockholder will not violate any other agreement to
which such Stockholder is a party including, without limitation, any voting
agreement, stockholders agreement or voting trust. This Agreement has been
duly and validly executed and delivered by such Stockholder and constitutes
a valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms. There is no beneficiary or holder
of a voting trust certificate or other interest of any trust of which such
Stockholder is Trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by such stockholder of the
transactions contemplated hereby. If such Stockholder is married and such
Stockholder's Shares constitute community property, this Agreement has been
duly authorized, executed and delivered by, and constitutes a valid and
binding agreement of, such Stockholder's spouse, enforceable against such
person in accordance with its terms.
(c) No Conflicts. (A) No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by such Stockholder and the
consummation by such Stockholder of the transactions contemplated hereby and
(B) none of the execution and delivery of this Agreement by such
Stockholder, the consummation by such Stockholder of the transactions
contemplated hereby or compliance by such Stockholder with any of the
provisions hereof shall (1) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or
give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which such Stockholder is a party or by which such
Stockholder or any of such Stockholder's properties or assets may be bound,
or (2) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to such Stockholder or any of such
Stockholder's properties or assets.
(d) No Finder's Fees. Other than existing financial advisory and
investment banking arrangements and agreements between the Company and Allen
& Company Incorporated, no broker, investment banker, financial adviser or
other person is entitled to any broker's, finder's,
2
financial adviser's or other similar fee or commission in connection with
the transactions contemplated by the Merger Agreement based upon
arrangements made by or on behalf of such Stockholder.
(e) No Solicitation. From and after the date hereof until termination of
the Merger Agreement, such Stockholder shall not, in his, her or its
capacity as such, directly or indirectly, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or
assistance), or take any other action to facilitate knowingly, any inquiries
or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Competing Transaction, or enter into or maintain or
continue discussions or negotiate with any person or entity in furtherance
of such inquiries or to obtain a Competing Transaction or agree to or
endorse any Competing Transaction, or authorize or permit any of such
Stockholder's agents, and such Stockholder shall promptly notify Parent
orally (in all events within two business days) and in writing (as promptly
thereafter as practicable) of the material terms and status of all inquiries
and proposals which he, she or it, or any such agent, may receive after the
date hereof relating to any of such matters and, if such inquiry or proposal
is in writing, such Stockholder shall deliver to Parent a copy of such
inquiry or proposal promptly. Such Stockholder will immediately cease and
cause to be terminated any existing activities, discussions or negotiations,
with any parties conducted heretofore with respect to any of the foregoing.
(f) Restriction on Transfer, Proxies and Non-Interference. Such
Stockholder shall not, directly or indirectly: (i) except as contemplated by
the Merger Agreement, offer for sale, sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter into any contract, option
or other arrangement or understanding with respect to or consent to the
offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or
other disposition of, any or all of such Stockholder's Shares or any
interest therein; (ii) except as contemplated by this Agreement, grant any
proxies or powers of attorney, deposit any Shares into a voting trust or
enter into a voting agreement with respect to any Shares; or (iii) take any
action that would make any representation or warranty of such Stockholder
contained herein untrue or incorrect or have the effect of preventing or
disabling such Stockholder from performing such Stockholder's obligations
under this Agreement.
(g) Reliance by Parent. Such Stockholder understands and acknowledges
that Parent is entering into, and causing Merger Sub to enter into, the
Merger Agreement in reliance upon such Stockholder's execution and delivery
of this Agreement.
3. Further Assurances. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver such
additional documents and take all such further lawful action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
4. Stop Transfer. Each Stockholder agrees with, and covenants to, Parent
that such Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of such Stockholder's Shares, unless such transfer is made in
compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall be deemed to refer to and include the Shares as
well as all such stock dividends and distributions and any shares into which or
for which any or all of the Shares may be changed or exchanged.
5. Termination. Except as otherwise provided herein, the covenants and
agreements contained herein with respect to the Shares shall terminate upon the
earlier of (a) termination of the Merger Agreement in accordance with its terms
and (b) the Effective Time.
3
6. Stockholder Capacity. No person executing this Agreement who is or
becomes during the term hereof a director of the Company makes any agreement or
understanding herein in his or her capacity as such director. Each Stockholder
signs solely in his or her capacity as the record and beneficial owner of such
Stockholder's Shares.
7. Confidentiality. The Stockholders recognize that successful consummation
of the transactions contemplated by this Agreement may be dependent upon
confidentiality with respect to the matters referred to herein. In this
connection, pending public disclosure thereof, each Stockholder hereby agrees
not to disclose or discuss such matters with anyone not a party to this
Agreement (other than such Stockholder's counsel and advisors, if any) without
the prior written consent of Parent, except for disclosures such Stockholder's
counsel advises are necessary in order to fulfill such Stockholder's obligations
imposed by law, in which event such Stockholder shall give notice of such
disclosure to Parent as promptly as practicable so as to enable Parent to seek a
protective order from a court of competent jurisdiction with respect thereto.
8. Release. Each of the Stockholders, solely in such person's capacity as a
stockholder of the Company, hereby releases and discharges the Company and its
officers, directors, stockholders, employees, agents, attorneys,
representatives, successors and assigns (and the respective heirs, executors,
administrators, representatives, successors and assigns of such officers,
directors, stockholders, employees, agents, attorneys and representatives) from
any and all claims, actions, causes of action, suits, debts, sums of money,
controversies, agreements, promises, damages, judgments, claims and demands
whatsoever, at law or in equity, which any of the Stockholders, as a result of
such person's status as a stockholder of the Company, had, now have or hereafter
can, shall or may have for, upon, or by reason of any matter, cause or thing
whatsoever relating, directly or indirectly, to the Company or the Surviving
Corporation, as the case may be.
9. Miscellaneous.
(a) Entire Agreement. This Agreement and the Merger Agreement constitute
the entire agreement between the parties with respect to the subject matter
hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter
hereof.
(b) Certain Events. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to such Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of
such Shares shall pass, whether by operation of law or otherwise, including,
without limitation, such Stockholder's heirs, guardians, administrators or
successors. Notwithstanding any transfer of Shares, the transferor shall
remain liable for the performance of all obligations under this Agreement of
the transferor.
(c) Assignment. This Agreement shall not be assigned by operation of law
or otherwise without the prior written consent of the other party, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned subsidiary of Parent, but
no such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
(d) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, with
respect to any one or more Stockholders, except upon the execution and
delivery of a written agreement executed by the relevant parties hereto;
provided that Schedule I hereto may be supplemented by Parent by adding the
name and other relevant information concerning any Stockholder of the
Company who agrees to be bound by the terms of this Agreement without the
agreement of any other party hereto, and thereafter such added stockholder
shall be treated as a "Stockholder" for all purposes of this Agreement.
4
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly received if so given) by hand delivery,
telegram, telex or telecopy, or by mail (registered or certified mail,
postage prepaid, return receipt requested) or by any courier service, such
as Federal Express, providing proof of delivery. All communications
hereunder shall be delivered to the respective parties at the following
addresses:
If to Any Stockholder: At the Addresses Set Forth
on Schedule I Hereto
with a copy to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
Attention: Herbert S. Wander, Esq.
Telephone: (312) 902-5200
Facsimile: (312) 902-1061
If to Parent or Merger Sub: CUC International Inc.
707 Summer Street
Stamford, Connecticut 06901
Telephone: (203) 324-9261
Facsimile: (203) 977-8501
Attention: Amy N. Lipton, Esq.
with a copy to: Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Facsimile: (212) 310-8007
Attention: Howard Chatzinoff, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such jurisdiction,
and this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision or
portion of any provision had never been contained herein.
(g) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore
each of the parties hereto agrees that in the event of any such breach the
aggrieved party shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in
equity.
(h) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by
any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
5
(i) No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.
(j) No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any person or entity
who or which is not a party hereto.
(k) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
(l) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN CONNECTION WITH ANY SUCH ACTION, SUIT OR PROCEEDING.
(m) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
6
IN WITNESS WHEREOF, Parent and each Stockholder have caused this Agreement
to be duly executed as of the day and year first above written.
CUC INTERNATIONAL INC.
By: /s/ COSMO CORIGLIANO
..............................
Name: Cosmo Corigliano
Title: Senior Vice President
and Chief Financial
Officer
By: /s/ HARVE A. FERRILL
..............................
Harve A. Ferrill
By: /s/ DUANE R. KULLBERG
..............................
Duane R. Kullberg
By: /s/ THOMAS J. PETERSON
..............................
Thomas J. Peterson
By: /s/ HERBERT S. WANDER
..............................
Herbert S. Wander
By: /s/ PAUL G. YOVOVICH
..............................
Paul G. Yovovich
By: /s/ ROGER E. ANDERSON
..............................
Roger E. Anderson
By: /s/ HAROLD E. GUENTHER
..............................
Harold E. Guenther
By: /s/ RANDY M. JOSEPH
..............................
Randy M. Joseph
AGREED TO AND ACKNOWLEDGED
(with respect to Section 2):
ADVANCE ROSS CORPORATION
By: /s/ HARVE A. FERRILL
.................................
Name: Harve A. Ferrill
Title: Chairman of the Board and
Chief Executive Officer
7
SCHEDULE I TO
STOCKHOLDERS AGREEMENT
----------------------
NAME AND ADDRESS NUMBER OF SHARES OWNED
---------------- ----------------------
Roger E. Anderson...................................... 9,432
14 Oriole Avenue
Broxville, NY 10708
Harve A. Ferrill....................................... 142,600
1300 N. Lakeshore Drive, Apt. 26B
Chicago, IL 60610
Harold E. Guenther..................................... 6,000
417 Dana Lane
Barrington, IL 60010
Randy M. Joseph........................................ 1,200(1)
130 Bentley Court
Deerfield, IL 60015
Duane R. Kullberg...................................... 5,000
179 East Lake Shore Drive, Apt. 1001
Chicago, IL 60611
Thomas J. Peterson..................................... 16,000(2)
1649 N. Russell Road
Bloomington, IN 47407
Paul G. Yovovich....................................... 6,400
1007 Forest
Wilmette, IL 60091
Herbert S. Wander...................................... 20,000
2023 Linden Avenue
Highland Park, IL 60035
- ------------
(1) Mr. Joseph's wife owns 200 shares for which he disclaims beneficial
ownership.
(2) Shares voting power on 12,000 shares. Mr. Peterson's wife owns 4,000 shares
for which he disclaims beneficial ownership.
8
Exhibit 15
Letter Re: Unaudited Interim Financial Information
December 6, 1995
Securities and Exchange Commission
Washington, D.C. 20549
We are aware of the incorporation by reference in the Registration
Statement (Form S-4) of CUC International Inc. of our reports dated May 31,
1995 and August 29, 1995, relating to the unaudited condensed consolidated
interim financial statements of CUC International Inc. which are included
in its Forms 10-Q for the quarters ended April 30, 1995 and July 31, 1995.
Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not a
part of the registration statement prepared or certified by accountants
within the meaning of Section 7 or 11 of the Securities Act of 1933.
Ernst & Young LLP
Stamford, Connecticut
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 21, 1995, included in the Proxy Statement
of Advance Ross Corporation that is made a part of the Registration
Statement (Form S-4) and Prospectus of CUC International Inc.
Ernst & Young LLP
Stamford, Connecticut
December 6, 1995
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
We consent to the incorporation by reference in this Registration Statement
of CUC International, Inc. on Form S-4 of our report dated March 13, 1995,
appearing in the Annual Report on Form 10-K of Advance Ross Corporation
for the year ended December 31, 1994 and to the reference to us under the
heading "Experts" in the Proxy Statement/Prospectus of Advance Ross Corporation,
which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
- ------------------------------
DELOITTE & TOUCHE LLP
Chicago, Illinois
December 6, 1995
5
0000723612
CUC INTERNATIONAL INC.
1,000
6-MOS
JAN-31-1995
JUL-31-1995
134,204
0
224,355
0
0
530,161
108,387
60,697
870,214
102,744
14,031
1,813
0
0
553,073
870,214
613,275
616,175
0
498,643
0
0
(128)
117,660
44,770
72,890
0
0
0
72,890
.395
.395
5
1,000
9-MOS
DEC-31-1995
JAN-01-1995
SEP-30-1995
19,601
0
27,699
1,846
1,196
53,084
6,521
3,927
76,262
24,490
7,256
76
0
506
41,789
76,262
7,291
53,321
4,935
35,577
689
450
771
10,952
5,338
6,661
0
0
0
6,661
0.76
0.75
