UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant
þ
Filed by a Party other than the
Registrant
o
Check the appropriate box:
|
|
þ
|
Preliminary Proxy Statement
|
o
Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
o
Definitive
Proxy Statement
o
Definitive
Additional Materials
o
Soliciting
Material Pursuant to
Section 240.14a-12.
Centerplate, Inc.
(Name of Registrant as Specified in
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
|
|
o
|
No fee required.
|
|
þ
|
Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
|
|
|
|
|
(1)
|
Title of each class of securities to which transaction applies:
|
|
|
|
Shares of Common Stock, par value $0.01 per share
|
|
|
(2)
|
Aggregate number of securities to which transaction applies:
|
|
|
|
Common Stock: 20,981,813 shares
|
|
|
(3)
|
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(Set forth the amount on which the filing fee is calculated and
state how it was determined):
|
|
|
|
The filing fee was determined based upon
[20,981,813] shares of Common Stock multiplied by the
merger consideration of $0.01 per share. In accordance with
Section 14(g) of the Securities Exchange Act, 1934, as
amended, the filing fee was determined by multiplying
$0.00003930 by the product from the preceding sentence.
|
|
|
(4)
|
Proposed maximum aggregate value of transaction:
|
|
|
|
$209,818.13
|
|
|
(5)
|
Total fee paid:
|
|
|
|
$8.25
|
|
|
o
|
Fee paid previously with preliminary materials.
|
|
o
|
Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
|
|
|
|
|
(1)
|
Amount Previously Paid:
|
|
|
|
|
(2)
|
Form, Schedule or Registration Statement No.:
|
PRELIMINARY SUBJECT TO COMPLETION DATED
[ ],
2008
TO THE SECURITY HOLDERS OF
CENTERPLATE
YOUR VOTE IS VERY IMPORTANT
Dear Security Holder:
On September 18, 2008, Centerplate, Inc., a Delaware
corporation (the Company), entered into an Agreement
and Plan of Merger (the Merger Agreement) with KPLT
Holdings, Inc., a Delaware corporation (Parent), and
KPLT Mergerco, Inc., a Delaware corporation and a wholly owned
subsidiary of Parent (Merger Sub). Parent and Merger
Sub are entities directly and indirectly owned by Kohlberg
Investors VI, L.P., an affiliate of Kohlberg &
Company, L.L.C. Under the terms of the Merger Agreement, Merger
Sub will be merged with and into the Company, with the Company
continuing as the surviving corporation (the Merger)
at the effective time of the Merger. Each of our Income Deposit
Securities (each an IDS and collectively, the
IDSs), consists of one share of our common stock,
par value $0.01 per share, and $5.70 in principal amount of our
13.5% Subordinated Notes due 2013 (the Notes).
By this proxy statement, we are soliciting your vote as a holder
of our common stock to adopt the Merger Agreement. In connection
with the Merger, simultaneously with soliciting proxies from
security holders, we are also commencing a tender offer (the
Debt Tender) and consent solicitation (the
Consent Solicitation) to purchase up to 70% of the
Companys Notes for an amount, in cash, equal to $3.99 for
each Note, plus accrued and unpaid interest and deferred
interest, and to amend the indenture governing the Notes. Upon
completion of the Merger, you will be entitled to receive $0.01
in cash for each share of our common stock represented by an IDS
of the Company. In addition, security holders who tender Notes
underlying their IDSs will receive $3.99 for each such Note
purchased in the Debt Tender.
The attached proxy statement provides you with detailed
information about the special meeting, the Merger Agreement, the
Merger and the other transactions contemplated thereby. A copy
of the Merger Agreement is attached as Annex A to the proxy
statement. We encourage you to read the entire proxy statement
and the Merger Agreement carefully. As a holder of our IDSs you
are also being sent, in a separate mailing, an Offer to Purchase
and Letter of Transmittal and Consent dated the date hereof (the
Debt Tender Documents) regarding the Debt Tender and
Consent Solicitation. We encourage you to read the Debt Tender
Documents in their entirety carefully as they contain important
information about the Debt Tender and Consent Solicitation. You
may also obtain more information about the Company from our
public filings with the Securities and Exchange Commission.
A special meeting of our security holders will be held on
[ ] to
vote on a proposal to adopt the Merger Agreement. The special
meeting will be held at
[ ].
Notice of the special meeting and the related proxy statement is
enclosed.
After careful consideration, our Board of Directors has
unanimously determined that the Merger Agreement and the
transactions contemplated thereby are advisable and in the best
interests of the Company and our security holders, and has
approved the Merger Agreement, the Merger and the other
transactions contemplated thereby. Accordingly, our Board of
Directors unanimously recommends that you vote FOR
the adoption of the Merger Agreement.
Your vote is very important.
We cannot
complete the Merger unless holders of a majority of all
outstanding shares of our common stock entitled to vote on the
matter vote to adopt the Merger Agreement
and holders of at least 50.1% of the Notes participate in the
Debt Tender and consent to the proposed changes to the Notes as
provided in the Consent Solicitation.
The failure of any security holder to vote on the proposal to
adopt the Merger Agreement will have the same effect as a vote
AGAINST the adoption of the Merger Agreement.
Whether or not you plan to attend the special meeting, please
take the time to vote by completing, signing and dating the
enclosed proxy card and returning it in the appropriate envelope
provided. If your shares are held in street name by
a bank, brokerage firm or nominee you should follow the
instructions of your bank, brokerage firm or nominee, regarding
the voting of your shares. Security holders may also attend the
meeting and vote in person.
Thank you for your cooperation and continued support.
Sincerely yours,
David M. Williams
Chairman of the Board of Directors
Information contained in this document is subject to completion
or amendment. All references to $ or
dollars are to U.S. dollars.
THIS PROXY STATEMENT IS DATED
[ ],
2008, AND IS BEING FIRST MAILED TO SECURITY HOLDERS OF THE
COMPANY ON OR ABOUT
[ ],
2008.
CENTERPLATE, INC.
2187 ATLANTIC STREET, 6TH FLOOR
STAMFORD, CONNECTICUT 06902
NOTICE OF SPECIAL MEETING OF SECURITY HOLDERS
TO BE HELD ON
[ ],
2008
To the security holders of Centerplate, Inc.:
A special meeting of security holders of Centerplate, Inc., a
Delaware corporation (the Company), will be held on
[ ],
2008, at [ ] a.m., Eastern
Time, at
[ ],
for the following purposes:
|
|
|
|
1.
|
to consider and vote upon a proposal to adopt the Agreement and
Plan of Merger (the Merger Agreement), dated
September 18, 2008, as it is amended from time to time, by
and among the Company, KPLT Holdings, Inc., a Delaware
corporation (Parent), and KPLT Mergerco, Inc., a
Delaware corporation and wholly owned subsidiary of Parent
(Merger Sub), and the transactions contemplated
thereby, pursuant to which Merger Sub will be merged with and
into the Company, with the Company as the surviving corporation;
|
|
|
2.
|
to consider and vote upon a proposal to adjourn the special
meeting, if necessary, to solicit additional proxies; and
|
|
|
3.
|
to consider and vote on such other matters as may properly come
before the special meeting or any adjournment thereof.
|
Only security holders of record as of the close of business on
[ ],
2008 are entitled to notice of and to vote at the special
meeting and at any adjournment thereof. A list of these security
holders will be available for inspection by security holders of
record during regular business hours at the Companys
principal executive office at 2187 Atlantic Street,
6th Floor, Stamford, Connecticut 06902, for ten days prior
to the date of the special meeting. Your vote is important,
regardless of the number of shares of our common stock that you
own. The adoption of the Merger Agreement requires the approval
of the holders of a majority of the outstanding shares of our
common stock entitled to vote on the matter. The adoption of the
proposal to adjourn the special meeting, if necessary, to
solicit additional proxies requires the affirmative vote of a
majority of shares of our common stock represented in person or
by proxy at the special meeting and entitled to vote thereon.
The Board of Directors unanimously recommends that the
security holders vote FOR the proposal to adopt the
Merger Agreement and the transactions contemplated thereby. The
Board of Directors unanimously recommends that the security
holders vote FOR the proposal to adjourn the special
meeting, if necessary, to solicit additional proxies.
All security holders of record are invited to attend the special
meeting in person. However, even if you plan to attend the
meeting in person, we request that you complete, sign, date and
return the enclosed proxy card and thus ensure that your shares
will be represented at the special meeting should you become
unable to attend. If you fail to return your proxy card and do
not attend the special meeting in person, your shares will not
be counted for purposes of determining whether a quorum is
present at the meeting and will have the same effect as a vote
AGAINST the adoption of the Merger Agreement.
Because approval of the proposal to adjourn the meeting, if
necessary, to solicit additional proxies, and approval of any
other such matters as may
be properly presented incident to the conduct of the special
meeting require the affirmative vote FOR the
approval of any such matters by a majority of the shares present
in person or represented by proxy at the meeting and entitled to
vote on the matter, abstentions will count as a vote
AGAINST the proposed matters. The failure to attend
the meeting and vote in person, to submit a proxy, or to
instruct your bank, brokerage firm or nominee on how to vote
your shares will not affect the outcome of the proposal. If you
hold your shares through a bank, brokerage firm or nominee, you
should follow the instructions of your bank, brokerage firm or
nominee regarding voting your shares.
Security holders who do not vote in favor of the adoption of the
Merger Agreement will have the right to seek appraisal of the
fair value of their shares of Company common stock if they
deliver a demand for appraisal before the vote is taken on the
Merger Agreement and comply with all requirements of Delaware
law, which are summarized in the accompanying proxy statement.
Whether you attend the meeting or not, you may revoke a proxy at
any time before it is voted at the meeting. You may do so by
executing and returning a proxy card dated later than the
previous one or by attending the special meeting and voting in
person. Simply attending the meeting, however, will not revoke
your proxy. If you hold your shares through a bank, brokerage
firm or nominee, you should follow the instructions of your
bank, brokerage firm or nominee regarding revocation of proxies.
If your bank, brokerage firm or nominee allows you to submit a
proxy by telephone or the Internet, you may be able to change
your vote by submitting a subsequent proxy by telephone or the
Internet.
By Order of the Board of Directors,
-s- Rina E. Teran
Rina E. Terán
Corporate Secretary
TABLE OF
CONTENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
1
|
|
|
|
|
7
|
|
|
|
|
12
|
|
|
|
|
13
|
|
|
|
|
16
|
|
|
|
|
17
|
|
|
|
|
20
|
|
|
|
|
20
|
|
|
|
|
20
|
|
|
|
|
20
|
|
|
|
|
31
|
|
|
|
|
34
|
|
|
|
|
39
|
|
|
|
|
41
|
|
|
|
|
43
|
|
|
|
|
45
|
|
|
|
|
45
|
|
|
|
|
45
|
|
|
|
|
46
|
|
|
|
|
49
|
|
|
|
|
51
|
|
|
|
|
54
|
|
|
|
|
55
|
|
|
|
|
55
|
|
|
|
|
55
|
|
|
|
|
56
|
|
|
|
|
56
|
|
|
|
|
56
|
|
|
|
|
57
|
|
|
|
|
57
|
|
|
|
|
57
|
|
|
|
|
59
|
|
|
|
|
63
|
|
|
|
|
63
|
|
|
|
|
65
|
|
|
|
|
66
|
|
|
|
|
66
|
|
|
|
|
67
|
|
|
|
|
67
|
|
|
|
|
68
|
|
|
|
|
68
|
|
|
|
|
70
|
|
|
|
|
71
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
72
|
|
|
|
|
72
|
|
|
|
|
72
|
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
Annex C
Section 262 of
the General Corporation Law of the State of Delaware
|
|
|
|
|
SUMMARY
The following summarizes information from this proxy statement
and may not contain all of the information that may be important
to you. Accordingly, security holders are encouraged to
carefully read this entire proxy statement and its annexes. Each
item in this summary includes a page reference directing you to
a more complete description of that item.
The
Merger (Page 20)
On September 18, 2008, Centerplate, Inc., a Delaware
corporation (the Company), entered into an Agreement
and Plan of Merger (the Merger Agreement) with KPLT
Holdings, Inc., a Delaware corporation (Parent), and
KPLT Mergerco, Inc., a Delaware corporation and wholly owned
subsidiary of Parent (Merger Sub). Parent and Merger
Sub are entities directly and indirectly owned by Kohlberg
Investors VI, L.P. (the Sponsor) an affiliate of
Kohlberg & Company (Kohlberg). The Merger
Agreement contemplates that the approval of the Merger (as
defined below) will be effected through (i) a proxy
solicitation to approve the Merger and (ii) a tender offer
(the Debt Tender) and a consent solicitation (the
Consent Solicitation) to purchase up to 70% of the
Companys 13.5% Subordinated Notes due 2013 (the
Notes). Following receipt of the vote of holders of
a majority of our common stock to approve the Merger (and
satisfaction of the other conditions thereto, including the
tender of at least 50.1% of the Notes pursuant to the Debt
Tender), at the closing, Merger Sub will be merged (the
Merger) with and into the Company, with the Company
being the surviving corporation and a wholly owned subsidiary of
Parent (the Surviving Corporation).
Debt
Tender and Consent Solicitation (Page 65)
Simultaneously with this proxy solicitation, the Company is
commencing the Debt Tender and Consent Solicitation. The Company
will purchase (with funds provided by Parent at closing) up to
70% of the Notes in the Debt Tender, which means that at least
30% (and as much as 49.9% depending on the amount tendered) of
the Notes will remain outstanding after the Effective Time (as
defined below) of the Merger. If holders of more than 70% of the
Notes elect to participate in the Debt Tender, the amount of
Notes purchased will be prorated among such participating
holders. In order to tender any Notes, holders will be required
to consent to the proposed amendments (the Proposed
Amendments) to the indenture governing the Notes (the
Indenture) which will (a) eliminate
substantially all of the covenants, certain events of default
and the change of control offer, (b) modify certain
provisions relating to the defeasance of the Notes and the
manner in which the Company may extend the maturity of the Notes
and (c) provide for the automatic separation of the
Companys Income Deposit Securities (each an
IDS and collectively, the IDSs) upon the
consummation of the Merger. The consummation of the Debt Tender
is conditioned upon the tender of at least 50.1% of the Notes
pursuant to the Debt Tender and the receipt of the vote of
holders of a majority of our common stock to approve the Merger.
As a holder of our IDSs you are also being sent, in a separate
mailing, an Offer to Purchase and Letter of Transmittal and
Consent dated the date hereof (the Debt Tender
Documents) regarding the Debt Tender and Consent
Solicitation.
Merger
Consideration; Tender Consideration; Total Consideration
(Page 7)
At the closing of the Merger, each holder of an IDS will receive
an amount, in cash, equal to $3.99, plus accrued and unpaid
interest and deferred interest, for each Note properly tendered
and accepted for payment pursuant to the Debt Tender (the
Tender Consideration), and an amount in cash equal
to $0.01 per share for each share of common stock underlying an
IDS (the Merger Consideration and such amounts
together, the Total Consideration). To be eligible
to receive the Total Consideration, a security holder must
submit a valid and timely Letter of Transmittal and Consent in
the Debt Tender. Because the Debt Tender is for a maximum of 70%
of the outstanding Notes, assuming 100% of the Notes are validly
tendered the maximum amount a security holder could receive in
the Merger is $4.00 per IDS for 70% of the security
holders IDSs plus $0.01 per share for each share of common
stock underlying the remaining 30% of the security holders
IDS. The Notes underlying the remaining 30% of IDSs will
continue to be outstanding and entitle the security holder to
the rights under the Indenture governing the Notes, as amended
by the Consent Solicitation. If the Merger Agreement is adopted
by our security holders and the Merger is consummated, a
security holder who failed to
1
submit a valid and timely Letter of Transmittal and Consent in
the Debt Tender, will receive $0.01 per share of common stock
underlying such holders IDSs and will continue to own the
Notes underlying those IDSs in accordance with the Indenture, as
amended.
Recommendations
of the Board of Directors (Page 31)
The Board of Directors has determined that the Merger is in the
best interests of the Company and our security holders and has
unanimously approved the Merger Agreement and the transactions
it contemplates and has declared the Merger Agreement advisable.
For the factors considered by the Board of Directors in reaching
its decision to approve, and declare the advisability of
entering into, the Merger Agreement and the transactions it
contemplates, see Adoption of the Merger Agreement
(Proposal 1) The Merger Reasons for
the Merger; Recommendation of the Board of Directors.
The Board of Directors unanimously recommends that the
security holders vote FOR the proposal to adopt the
Merger Agreement and the transactions contemplated thereby and
FOR the proposal to adjourn the special meeting, if
necessary, to solicit additional proxies.
Reasons
for the Merger (See page 31)
The Board of Directors decision to approve the Merger was
the outcome of a six-month Board-directed process to evaluate a
range of capital structure and other alternatives to allow the
Company to operate in a competitive business environment with
rapidly deteriorating financial and credit markets. In the
course of reaching the decision to approve the Merger, the Board
of Directors considered a number of factors in its
deliberations. The primary factors considered by the Board
included: (i) the Board of Directors belief, based on
the Companys IDS capital structure, the extreme volatility
of, and the deterioration in, international and national
economic conditions, and the equity and credit markets and
discussions with the Companys lenders, that (1) in
the absence of a sale transaction or other restructuring of the
Companys debt, its lenders would not agree to further
amendments or waivers to the Companys credit agreement,
(2) the Company would not be able to comply with the
monthly financial maintenance covenants after expiration of the
amendment in September 2008, which would result in a default
under the credit agreement and (3) such default could
likely have led to the acceleration of payment of the
Companys indebtedness with the likely consequence that the
holders of the IDSs would receive substantially less cash
consideration, if any, than in the Merger; (ii) the results
of a Board of Directors-directed process to evaluate a broad
range of capital structure and other alternatives which included
the sale of the Company, a variety of methods to raise new
capital to refinance the Companys indebtedness, and
continuing under the current capital structure and significantly
reducing operating costs and capital expenditures to attempt to
comply with applicable monthly financial maintenance covenants
under the credit agreement; (iii) alternatives to the
Merger being unlikely, if not impossible and (iv) the
opinion of its financial advisor Evercore Group L.L.C.
(Evercore) that on September 18, 2008 the
Aggregate Consideration (as defined in the Evercore Opinion) was
within the range of the Companys Net Enterprise Values (as
defined in the Evercore Opinion) that Evercore estimated for the
Company. The Board of Directors believes that prior to entering
into the Merger Agreement it had used all reasonable efforts to
identify, pursue and evaluate other strategic alternatives.
Opinion
of Evercore Group L.L.C. (Page 34)
In deciding to approve the Merger and recommend that security
holders adopt the Merger Agreement, the Board of Directors
considered the opinion of its financial advisor, Evercore,
provided to the Board of Directors on September 18, 2008,
that as of that date and based upon and subject to the
considerations and limitations set forth in its written opinion,
its work described in the written opinion and other factors it
deemed relevant, the Aggregate Consideration (as defined in
Evercores opinion) was within the range of Net Enterprise
Values (as defined in Evercores opinion) that Evercore
estimated for the Company. A copy of the opinion of Evercore is
attached to this document as Annex B. Security holders
should read the opinion completely and carefully to understand,
among other things, the assumptions made, procedures followed,
matters considered and limits on the review undertaken by
Evercore in providing its opinion. The Evercore Opinion is not a
2
recommendation as to how any security holder should vote with
respect to the proposal to adopt the Merger Agreement or any
other matter.
Interests
of Certain Persons in the Merger (Page 41)
Our executive officers and the members of the Board of Directors
may have interests in the Merger that are different from, or in
addition to, the interests of security holders generally.
These interests include the right of executive officers to
receive severance payments and benefits under the terms of
existing employment agreements and the potential receipt of
change in control benefits under our Long-Term Performance Plan
(LTPP) as a result of the Merger. On September 18,
2008, the Company entered into indemnity agreements with the
directors and executive officers. In addition, Parent has agreed
to continue certain indemnification arrangements for our
directors and executive officers. As of the record date, our
directors owned 6,660 shares of common stock of the
Company, or less than 1% of the outstanding common stock.
The Board of Directors was aware of these interests and
considered them, among other matters, in approving and
recommending that security holders adopt the Merger Agreement.
Financing
(Page 43)
Parent has obtained a debt financing commitment from National
City Bank (National City) pursuant to a debt
commitment letter (the Debt Commitment Letter) for
the transactions contemplated by the Merger Agreement. The Debt
Commitment Letter provides for a commitment by National City to
provide $175 million in senior secured credit facilities,
which will be comprised of (i) a $90 million term loan
facility, (ii) a $60 million revolving credit facility
and (iii) a $25 million letter of credit facility. The
Debt Commitment Letter contains customary conditions to funding
as well as a condition that there has not occurred any adverse
change or disruption in the financial, banking or capital market
conditions that could reasonably be expected to have an adverse
impact on the successful syndication of the proposed senior
credit facilities.
Additionally, subject to the funding of the debt financing and
the satisfaction of the conditions in the Merger Agreement,
Sponsor has committed to invest up to $125 million in the
equity of Parent. Together, the net proceeds of the debt and
equity financing will be used to pay the Merger Consideration
and the Tender Consideration, refinance the Companys other
existing indebtedness and pay fees and expenses related to the
transaction.
The Merger Agreement does not contain a condition that the
financing shall have been obtained. If the financing commitment
is terminated or National City is unable to fund the financing
and, in either case, Parent does not close the Merger within
30 days, the Company may terminate the Merger Agreement and
Parent will be required to pay us a termination fee of
$2,500,000. If Parent refuses to close the transaction, the
Company cannot seek court action to force Parent to close but
Parent will be required to pay us a reverse termination fee of
$2,500,000 if the conditions to its obligation to close have
been satisfied.
Conditions
to the Merger (Page 66)
Each partys obligation to complete the Merger is subject
to the satisfaction or waiver of the following conditions:
|
|
|
|
|
the receipt of the required approval of security holders to
adopt the Merger Agreement; and
|
|
|
|
the absence of orders, injunctions or other legal restraints or
prohibitions preventing completion of the Merger.
|
The obligations of Parent and Merger Sub to complete the Merger
are subject to the satisfaction or waiver of the following
additional conditions:
|
|
|
|
|
the accuracy of the Companys representations and
warranties set forth in the Merger Agreement;
|
|
|
|
the performance by the Company of its obligations under the
Merger Agreement;
|
3
|
|
|
|
|
the absence of a Company material adverse effect;
|
|
|
|
the valid tender of at least 50.1% of the outstanding Notes
pursuant to the Debt Tender and the receipt of the requisite
consents pursuant to the Consent Solicitation; and
|
|
|
|
the receipt of certain required third party consents.
|
The obligation of the Company to complete the Merger is subject
to the satisfaction or waiver of the following additional
conditions:
|
|
|
|
|
the accuracy of Parents and Merger Subs
representations and warranties set forth in the Merger
Agreement; and
|
|
|
|
the performance by Parent and Merger Sub of their obligations
under the Merger Agreement.
|
Restrictions
Regarding Other Offers (Page 63)
The Merger Agreement restricts the Company from soliciting and
engaging in discussions and negotiations with respect to any
proposal or offer (i) for an alternative transaction
involving the Company or any of our subsidiaries or (ii) to
acquire in any manner, directly or indirectly,
33
1
/
3
%
or more of (A) the equity securities, debt securities or
IDSs of the Company or any of our subsidiaries or (B) the
assets of the Company or any of our subsidiaries (a
Company Proposal), and our Board of Directors is
prohibited from:
|
|
|
|
|
withdrawing its approval of the Merger Agreement;
|
|
|
|
failing to recommend that the security holders adopt the Merger
Agreement at the special meeting or recommending any other
Company Proposal (any such action, an Adverse
Recommendation Change); or
|
|
|
|
entering into any letter of understanding or other agreement
with respect to a Company Proposal.
|
Notwithstanding the foregoing, if our Board of Directors
determines after considering the advice of outside counsel that
it should take such action to comply with its fiduciary duties,
the Board of Directors may:
|
|
|
|
|
enter into discussions and negotiations with respect to a bona
fide, written Company Proposal for at least the majority of the
outstanding Company common stock or all or substantially all of
the assets of the Company and our subsidiaries determined to
constitute or reasonably likely to result in, a transaction more
favorable to the Companys security holders (a
Superior Proposal), or
|
|
|
|
effect an Adverse Recommendation Change.
|
Termination
of the Merger Agreement (Page 66)
The Merger Agreement may be terminated at any time before
completion of the Merger by written mutual consent of Parent,
Merger Sub and the Company. The Merger Agreement may also be
terminated in certain other circumstances, including:
|
|
|
|
|
by either Parent or the Company if:
|
|
|
|
|
|
the Merger has not been consummated on or before
February 28, 2009;
|
|
|
|
any injunction, judgment or order is in effect preventing the
consummation of the Merger;
|
|
|
|
our security holders fail to approve the Merger at the special
meeting; or
|
|
|
|
either party breaches its obligations under the Merger Agreement
and the breach is not cured within 30 calendar days.
|
|
|
|
|
|
prior to the security holder approval, the Board of Directors
makes an Adverse Recommendation Change or approves or recommends
a Company Proposal;
|
4
|
|
|
|
|
prior to the security holder approval, the Board of Directors
makes an Adverse Recommendation Change or determines to enter
into an Acquisition Agreement (as defined in the Merger
Agreement) concerning a transaction that constitutes a Superior
Proposal;
|
|
|
|
Parent fails to consummate the Merger upon satisfaction of all
conditions precedent to Parents obligations to close the
Merger; or
|
|
|
|
Parents financing commitment is terminated or National
City denies the obligation to fund or otherwise becomes unable
to or prohibited from funding the financing and, within thirty
days after the Company has delivered written notice to Parent
thereof, the Merger has not been consummated.
|
Termination
Fees and Expenses (Page 67)
If Parent terminates the Merger Agreement (i) due to the
failure to obtain the necessary security holder approval or
(ii) in the event of a breach by the Company that has not
been cured within 30 calendar days, then we will be required to
pay Parent and Merger Sub their expenses, up to a maximum of
$2,500,000, and if, in connection with the failure to obtain
security holder approval, there was another Company Proposal at
the time of the security holder meeting and the Company
consummates a transaction with a higher consideration within
6 months after termination of the Merger Agreement, then we
will be required to pay Parent and Merger Sub a termination fee
in the amount of $2,500,000 (the Termination Fee)
less the amount of any expenses previously paid to Parent and
Merger Sub. In addition, if either Parent or the Company
terminates the Merger Agreement because the Board of Directors
approves or recommends any other Company Proposal or because the
Board of Directors makes an Adverse Recommendation Change, then
we will be required to pay Parent and Merger Sub the Termination
Fee.
If the Company terminates the Merger Agreement in the event of a
breach by Parent or Merger Sub that has not been cured within 30
calendar days, then Parent will be required to pay the Company
its expenses, up to a maximum of $2,500,000. If the Company
terminates the Merger Agreement because (i) Parent and
Merger Sub have refused to close despite the satisfaction of the
conditions to their obligation to close or (ii) the Debt
Commitment Letter is terminated or National City has denied its
obligations under the commitment letter or becomes unable to, or
prohibited from, funding and the Merger has not been consummated
within 30 days thereafter, then Parent will be required to
pay the Company a reverse termination fee in the amount of
$2,500,000 (the Reverse Termination Fee), less the
amount of any expenses previously paid to the Company. Sponsor
has guaranteed any such required payments by Parent to the
Company.
If any party fails to pay amounts due in respect of the
Termination Fee or the Reverse Termination Fee, interest will
accrue on such unpaid amount at a rate of 8% per annum.
The Merger Agreement also contemplates that if the Company,
despite satisfaction of all conditions precedent to the Company
consummating the Merger, fails to consummate the Merger, Parent
may specifically enforce the terms of the Merger Agreement in
the United States District Court of Delaware or in any state
courts in the State of Delaware. The Company has no specific
enforcement rights against Parent (or Sponsor).
Material
U.S. and Certain Canadian Federal Income Tax Consequences (See
page 46)
The receipt of the Merger Consideration, or cash pursuant to the
exercise of dissenters rights, by security holders in
exchange for our common stock and the receipt of the Tender
Consideration in exchange for the Notes will be taxable
transactions for U.S. and Canadian federal income tax
purposes. You should read Adoption of the Merger Agreement
(Proposal 1) The Merger Material
U.S. Federal Income Tax Consequences and
Certain Canadian Federal Income Tax Consequences for
a more complete description of the U.S. and Canadian
federal income tax consequences of the Merger. In addition, you
should read the Debt Tender Documents for a complete description
of the U.S. and Canadian federal income tax consequences of
the Debt Tender.
5
Tax matters are very complicated, and the tax consequences to
you of the Merger and the Debt Tender will depend on your own
situation. You should consult your own tax advisor to determine
the effect of the Merger and the Debt Tender on you under
U.S. federal, state, local, Canadian and other foreign tax
laws.
Appraisal
Rights (Page 51)
Under Delaware law, if the Merger is completed, security holders
of record who demand an appraisal of their shares, do not vote
in favor of the Merger and properly perfect their appraisal
rights pursuant to, and in accordance with, Section 262 of
the DGCL (and do not subsequently lose or withdraw such rights)
will be entitled to receive payment in cash for the judicially
determined fair value of their shares of common stock and,
unless the court determines otherwise, interest at an annual
rate of 5% over the Federal Discount Rate on the amount
determined to be the fair value of the shares. The relevant
provisions of the DGCL relating to the rights of security
holders to such appraisal are included as Annex C to this
proxy statement.
The
Special Meeting (Page 17)
The special meeting will be held at
[ ],
on [ ],
[ ], 2008, at
[ ] a.m., Eastern Time, for
the following purposes:
|
|
|
|
|
to consider and vote upon a proposal to adopt the Merger
Agreement and the transactions contemplated thereby;
|
|
|
|
to consider and vote upon a proposal to adjourn the special
meeting, if necessary, to solicit additional proxies; and
|
|
|
|
to consider and vote on such other matters as may properly be
brought before the special meeting and any adjournments or
postponements thereof.
|
Only record holders of our common stock at the close of business
on
[ ],
2008 will be entitled to vote at the special meeting. Each share
of common stock is entitled to one vote for each matter
presented at the meeting. As of the record date of
[ ],
2008, there were
[ ] shares
of common stock entitled to vote at the special meeting.
The proposal to adopt the Merger Agreement and the transactions
contemplated thereby requires an affirmative vote of the holders
of a majority of the outstanding shares of our common stock
entitled to vote at the special meeting. A security
holders failure to vote or an abstention will have the
same effect as a vote AGAINST the proposal to adopt
the Merger Agreement and the transactions contemplated thereby.
The adoption of the proposal to adjourn the special meeting, if
necessary, to solicit additional proxies requires the
affirmative vote of a majority of shares of our common stock
represented in person or by proxy at the special meeting and
entitled to vote thereon. Accordingly, abstentions will count as
a vote AGAINST these proposed matters, and the
failure to attend the meeting and vote in person, to submit a
proxy, or to instruct your bank, brokerage firm or nominee on
how to vote your shares will not affect the outcome of the
proposal.
As of the record date, our directors had the right to vote
6,660 shares of common stock, or less than 1% of the
outstanding common stock entitled to be voted at the special
meeting.
6
QUESTIONS
AND ANSWERS ABOUT VOTING PROCEDURES
FOR THE SPECIAL MEETING
The questions and answers below highlight only selected
procedural information from this document. They do not contain
all of the information that may be important to you. You should
read carefully the entire document because it contains important
information.
|
|
|
Q:
|
|
What is the proposed transaction?
|
|
A:
|
|
The proposed transaction is the acquisition of the Company by
Parent, an affiliate of Kohlberg, pursuant to the Merger
Agreement, dated as of September 18, 2008, by and among the
Company, Parent and Merger Sub, a wholly owned subsidiary of
Parent. Once the Merger Agreement has been adopted by the
Companys security holders at the special meeting and the
other closing conditions under the Merger Agreement have been
satisfied or waived, Merger Sub will be merged with and into the
Company, with the Company continuing as the surviving wholly
owned subsidiary of Parent. As part of the transaction, the
Company is also commencing a Debt Tender and Consent
Solicitation to purchase up to 70% of the Companys
outstanding Notes.
|
|
Q:
|
|
What will I be entitled to receive upon consummation of the
Merger in consideration for my IDSs?
|
|
A:
|
|
Each IDS includes one share of our common stock and $5.70
principal amount of the Companys Notes. The consideration
for each component underlying an IDS will be paid separately.
The Merger Consideration will be paid pursuant to the Merger for
the shares of common stock underlying your IDSs. The Tender
Consideration will be paid pursuant to the Debt Tender for the
Notes underlying your IDSs that are purchased in the Debt
Tender. To be eligible to receive the Total Consideration for
your IDSs, you must submit a valid and timely Letter of
Transmittal and Consent in the Debt Tender.
|
|
Q:
|
|
What will I be entitled to receive upon consummation of the
Merger in consideration for the common stock underlying my
IDSs?
|
|
A:
|
|
Upon completion of the Merger, each share of common stock of the
Company, other than those held by holders who choose to exercise
and perfect their appraisal rights under Delaware law, will
represent the right to receive the Merger Consideration of $0.01
in cash, without interest. For example, if you own 100 IDSs, the
common stock component of your IDSs will represent the right to
receive $1.00 in cash, without interest. You will not own any
shares in the Surviving Corporation. As a holder of our IDSs you
will also be entitled to receive consideration for the Notes
underlying your IDSs pursuant to the Debt Tender. To be eligible
to receive the Total Consideration for your IDSs, you must
submit a valid and timely Letter of Transmittal and Consent in
the Debt Tender.
|
|
Q:
|
|
What will I be entitled to receive upon consummation of the
Debt Tender in consideration for the Notes underlying my
IDSs?
|
|
A:
|
|
As a holder of our IDSs you are being sent in a separate mailing
the Debt Tender Documents regarding the Debt Tender. Under the
terms of the Debt Tender, the Company will be obligated to
purchase up to 70% of the Notes, for the Tender Consideration of
$3.99 in cash plus accrued and unpaid interest and deferred
interest for each Note so purchased. In order to be eligible to
receive the Tender Consideration, you must submit a valid and
timely Letter of Transmittal and Consent in the Debt Tender.
|
|
Q:
|
|
Will I receive $4.00 for each IDS that I own upon
consummation of the Merger?
|
|
A:
|
|
It depends on the total amount of Notes properly tendered and
accepted for payment pursuant to the Debt Tender and the
approval of the Merger Agreement. If IDS holders representing
less than 70% of the Notes elect to participate in the Debt
Tender (and the Merger is approved), you will receive $4.00 per
IDS if you participate in the Debt Tender. If IDS holders
representing more than 70% of the Notes elect to participate in
the Debt Tender (and the Merger is approved), the amount of
Notes purchased will be prorated among such participating
holders. Any Notes not purchased in the Debt Tender will remain
outstanding. For example, if you own 100 IDSs, and you elect to
tender all the Notes represented by your IDSs and only 70% of
such Notes are accepted for payment pursuant to the terms of the
Debt Tender,
|
7
|
|
|
|
|
you will be entitled to receive $279.30 in cash (plus the $1.00
of aggregate Merger Consideration). In addition, you will
continue to own Notes with an aggregate principal amount of
$171.00 (equal to the face amount of $5.70 per Note underlying
30 IDSs) and such Notes will have the rights specified in the
Indenture as amended by the Proposed Amendments. To be eligible
to receive the Total Consideration, you must submit a valid and
timely Letter of Transmittal and Consent in the Debt Tender.
|
|
Q:
|
|
How does the Companys Board of Directors recommend that
I vote?
|
|
A:
|
|
Our Board of Directors unanimously recommends that you vote
FOR the proposal to adopt the Merger Agreement and
the transactions contemplated thereby and FOR the
proposal to adjourn the special meeting, if necessary, to
solicit additional proxies. Before voting, you should read
Adoption of the Merger Agreement
(Proposal 1) The Merger Reasons for
the Merger; Recommendation of the Board of Directors
beginning on page 31 for a discussion of the factors
that our Board of Directors considered in deciding to recommend
the adoption of the Merger Agreement.
|
|
Q:
|
|
When and where is the special meeting?
|
|
A:
|
|
The special meeting of security holders of the Company will be
held on
[ ]
at
[ ].
|
|
Q:
|
|
What vote is required for adoption of the Merger
Agreement?
|
|
A:
|
|
Adoption of the Merger Agreement and the transactions
contemplated thereby, including the Merger, requires the
affirmative vote of the holders of a majority of the outstanding
shares of our common stock entitled to vote. Therefore, if you
abstain or fail to vote, it will have the same effect as voting
AGAINST the Merger Agreement.
|
|
Q:
|
|
What vote is required for adoption of the proposal to adjourn
the special meeting, if necessary, to solicit additional
proxies?
|
|
A:
|
|
Adoption of the proposal to adjourn the special meeting, if
necessary, to solicit additional proxies requires the
affirmative vote of a majority of shares of our common stock
represented in person or by proxy at the special meeting and
entitled to vote thereon. Accordingly, abstentions will count as
a vote AGAINST these proposed matters, and the
failure to attend the meeting and vote in person, to submit a
proxy, or to instruct your bank, brokerage firm or nominee on
how to vote your shares will not affect the outcome of the
proposal.
|
|
Q:
|
|
Who may vote at the special meeting?
|
|
A:
|
|
You are entitled to vote on the proposals to adopt the Merger
Agreement and to adjourn the meeting if necessary to solicit
additional proxies if you held our common stock at the close of
business on the record date, which is
[ ], 2008. Each holder
of our common stock, as of the record date, is entitled to one
vote for each share owned on that date. Each IDS includes one
share of common stock and $5.70 principal amount of the
Companys Notes. As of the record date,
[ ] shares
of common stock were outstanding and entitled to vote.
|
|
Q:
|
|
How do I vote?
|
|
A:
|
|
You can vote in either of two ways:
|
|
|
|
You can vote by mail by signing and dating your
proxy card or voting instruction card from your broker or other
nominee and mailing it in the enclosed prepaid envelope. If you
mark your voting instructions on the proxy card or voting
instruction card, your shares will be voted per your
instructions.
|
|
|
|
You can vote in person at the special meeting by
delivering your completed proxy card in person at the special
meeting or by completing a ballot available upon request at the
meeting if you are a security holder of record. However, if you
hold your shares at a bank, broker or other holder of record
rather than in your own name, you must obtain a legal proxy from
your broker, trustee or other nominee in order to vote at the
meeting.
|
8
|
|
|
|
|
In addition, even if you mail in a proxy card and decide to
attend the special meeting, you may keep your proxy vote or vote
in person at the meeting.
|
|
Q:
|
|
If my shares are held in street name by a bank,
brokerage firm or nominee, will they vote my shares for me?
|
|
A:
|
|
You should instruct your bank, brokerage firm or nominee to vote
your shares, following the directions they provide. If you do
not instruct your bank, brokerage firm or nominee, they will not
have the discretion to vote your shares. Because the adoption of
the Merger Agreement requires an affirmative vote of the holders
of a majority of the outstanding shares of our common stock for
approval, the failure to vote your shares (or to direct your
bank, brokerage firm or nominee to vote your shares) will have
the same effect as votes cast AGAINST adoption of
the Merger Agreement. Additionally, because approval of the
proposal to adjourn the meeting, if necessary, to solicit
additional proxies, and approval of any other such matters as
may be properly presented incident to the conduct of the special
meeting requires the affirmative vote FOR the
approval of any such matters by a majority of the shares present
in person or by proxy at the meeting and entitled to vote on the
matter, abstentions will count as a vote AGAINST the
proposed matters, but the failure to attend the meeting and vote
in person, to submit a proxy, or to instruct your bank,
brokerage firm or nominee on how to vote your shares will not
affect the outcome of the proposal.
|
|
Q:
|
|
How many shares must be present so that the meeting can take
place?
|
|
A:
|
|
The presence in person or by proxy at the special meeting of the
holders of one-third of the votes entitled to be cast at the
special meeting shall constitute a quorum.
|
|
Q:
|
|
Who will count the votes?
|
|
A:
|
|
Representatives of The Bank of New York, to be known as BNY
Mellon Shareowner Services (BNY Mellon), our
transfer agent, will count the votes. A representative from BNY
Mellon will act as inspector of elections.
|
|
Q:
|
|
How are votes counted?
|
|
A:
|
|
You may vote FOR, AGAINST or
ABSTAIN on the proposal to adopt the Merger
Agreement and the proposal to adjourn the special meeting, if
necessary, to solicit proxies. Abstentions will count for the
purpose of determining whether a quorum is present. If you
ABSTAIN with respect to the proposal to adopt the
Merger Agreement, it will have the same effect as if you vote
AGAINST the approval of the Merger Agreement.
Additionally, if you abstain with respect to the proposal to
adjourn the meeting, if necessary, to solicit additional
proxies, it will have the same effect as a vote
AGAINST the proposal.
|
|
|
|
A broker non-vote generally occurs when a broker, bank or other
nominee holding shares on your behalf does not vote on a
proposal because it has not received your voting instructions
and lacks discretionary power to vote the shares. Broker
non-votes will count for the purpose of determining whether a
quorum is present and will have the same effect as a vote
AGAINST the adoption of the Merger Agreement. A
broker non-vote will not affect the outcome of the vote on the
proposal to adjourn the meeting, if necessary, to solicit
additional proxies.
|
|
|
|
A properly executed proxy card received by the Secretary of the
Company before the meeting, and not revoked, will be voted as
directed by you. If you properly execute and deliver your proxy
card without indicating your vote, your shares will be voted
FOR the adoption of the Merger Agreement,
FOR the proposal to adjourn the special meeting, if
necessary, to solicit additional proxies and in accordance with
the discretion of the persons appointed as proxies on any other
matters properly brought before the meeting for a vote.
|
|
Q:
|
|
What shares are covered by my proxy card?
|
|
A:
|
|
You should have been provided a proxy card or voting instruction
card for each account in which you own shares of our common
stock, as represented by IDSs, either:
|
9
|
|
|
|
|
directly in your name as the holder of record; or
|
|
|
|
indirectly through a broker, bank or other holder of
record.
|
|
Q:
|
|
What does it mean if I receive more than one proxy card?
|
|
A:
|
|
It means that you have multiple accounts in which you own shares
of our common stock. Please vote all proxy cards or voting
instruction cards you receive to ensure that all your shares are
voted. However, for your convenience we recommend that you
contact your broker, bank or our transfer agent to consolidate
as many accounts as possible under a single name and address.
Our transfer agent is BNY Mellon and our proxy solicitor and
information agent is MacKenzie Partners, Inc. (MacKenzie
Partners). All communications concerning shares you hold
in your name, including address changes, name changes, requests
to transfer shares and similar issues, can be handled by making
a toll-free call to BNY Mellon at
1-877-296-3711
or by contacting BNY Mellon on the internet at www.stockbny.com
or by email at shrrelations@bnymellon.com or by contacting
MacKenzie Partners at
1-800-322-2885.
|
|
Q:
|
|
What do I need to do now?
|
|
A:
|
|
After carefully reading and considering the information
contained in this proxy statement, please fill out and sign the
proxy card, and then mail your signed proxy card in the enclosed
prepaid envelope as soon as possible so that your shares may be
voted at the special meeting. Your signed proxy card will
instruct the persons named on the card to vote your shares at
the special meeting as you direct on the card. If you sign and
send in your proxy card and do not indicate how you want your
shares to be voted, your proxy will be voted FOR the
adoption of the Merger Agreement and the transactions
contemplated thereby and FOR the proposal to adjourn
the special meeting, if necessary, to solicit additional
proxies. If you hold shares through a bank, brokerage firm or
nominee, you should follow the instructions of your bank,
brokerage firm or nominee regarding voting your shares. YOUR
VOTE IS VERY IMPORTANT.
|
|
Q:
|
|
May I change my vote after I have mailed my signed proxy
card?
|
|
A:
|
|
You may change your vote at any time before your proxy is voted
at the special meeting. You can do this in one of the following
ways. First, you can send a written notice stating that you want
to revoke your proxy to:
|
MacKenzie Partners, Inc.
105 Madison Avenue,
New York, New York 10016
Telephone: (800) 322-2885
|
|
|
|
|
Second, you can complete and submit a new, later-dated proxy
card. Third, you can attend the special meeting and vote in
person. Simply attending the meeting, however, will not revoke
your proxy; you must vote at the meeting.
|
|
|
|
If you have instructed a broker, bank or other nominee to vote
your shares, you must follow directions received from your
broker, bank or other nominee to change your vote.
|
|
Q:
|
|
What will happen to any IDSs that I own prior to the record
date if the Merger is consummated?
|
|
A:
|
|
If the Merger Agreement is adopted by our security holders at
the special meeting and the Merger is consummated, all of our
outstanding shares of common stock will be cancelled and
converted into the right to receive the Merger Consideration.
Each IDS, unless the holder thereof exercises and perfects
appraisal rights under Delaware law, will thereafter represent a
Note (or, if accepted in the Debt Tender, the Tender
Consideration) and the right to receive the Merger Consideration
for one share of common stock. Following the Merger, our common
stock will no longer be outstanding, we will delist our IDSs
from the American Stock Exchange (AMEX) and Toronto
Stock Exchange (TSX), we will make an application to
cease to be a reporting issuer in Canada and we will no longer
file periodic and other reports with the Securities and Exchange
Commission (the SEC) or Canadian securities
regulatory authorities. See Adoption of the Merger
Agreement (Proposal 1) The Merger
Delisting and Deregistration of Income Deposit Securities
beginning on page 54.
|
10
|
|
|
Q:
|
|
What will happen to my IDSs submitted for separation in
connection with the Debt Tender?
|
|
A:
|
|
As of the consummation of the Merger, each IDS submitted for
separation in connection with the tender of notes pursuant to
the Debt Tender will entitle the holder thereof to receive
(i) for the underlying shares of common stock, the Merger
Consideration, (ii) for the underlying Notes (or portion
thereof) accepted for payment in the Debt Tender, the Tender
Consideration and (iii) for each underlying Note (or
portion thereof) not accepted for payment in the Debt Tender, a
Note of the Surviving Corporation representing the amount that
will remain outstanding. Each Note that will remain outstanding
will be represented by the global note certificate and have the
rights set forth in the Indenture as amended by the Proposed
Amendments. See Adoption of the Merger Agreement
(Proposal 1) The Merger Agreement
Effect on IDSs beginning on page 56.
|
|
Q:
|
|
Do I need to take any action now with respect to any IDSs
that I own in order to vote at the meeting?
|
|
A:
|
|
In order to vote at the meeting the shares of our common stock
underlying your IDSs, you must follow the voting procedures set
forth in this proxy statement and the accompanying proxy
materials that are applicable to all shares of our common stock.
In order to tender into the Debt Tender any Notes underlying
your IDSs, you must follow the procedures and satisfy the
conditions set forth in the Debt Tender Documents.
|
|
Q:
|
|
Are appraisal rights available?
|
|
A:
|
|
Yes. As a holder of our common stock, you are entitled to
appraisal rights for the common stock underlying your IDSs under
Delaware law in connection with the Merger if you meet certain
conditions. See Adoption of the Merger Agreement
(Proposal 1) The Merger Appraisal
Rights beginning on page 51.
|
|
Q:
|
|
When do you expect the Merger to be completed?
|
|
A:
|
|
We expect to complete the Merger after (i) the security holders
adopt the Merger Agreement and the transactions contemplated
thereby at the special meeting, (ii) we receive tenders from
holders in excess of 50.1% of the Notes and (iii) we
receive all other necessary consents and approvals. We currently
anticipate completing the Merger in the first quarter of 2009.
|
|
Q:
|
|
Who can help answer my questions?
|
|
A:
|
|
If you have any questions about the special meeting or if you
need additional copies of this proxy statement or the enclosed
proxy card, please contact:
|
MacKenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016
Telephone:
(800) 322-2885
11
THE
PARTIES TO THE MERGER
The
Company
The Company is a leading provider of food and related services,
including concessions, catering and merchandise services, in
sports facilities, convention centers and other entertainment
facilities throughout the United States and in Canada. Based on
the number of facilities served, we are one of the largest
providers of food and beverage services to a variety of
recreational facilities in the United States.
The Company, including our subsidiaries and their predecessors,
has been in operation for over 35 years. We were organized
as a Delaware corporation on November 21, 1995 under the
name VSI Acquisition II Corporation. In August 1998,
through our wholly owned subsidiary, Volume Services America,
Inc., the parent company of Volume Services Inc., then one of
the leading suppliers of food and beverage services to sports
facilities in the United States, we acquired Service America
Corporation, then one of the leading suppliers of food and
beverage services to convention centers in the United States.
This acquisition allowed us to enter the convention center
market with a significant presence in major convention centers
and resulted in our having a substantially more diversified
client base and revenue stream. As a result of this acquisition,
in October 1998 we changed our corporate name to Volume Services
America Holdings, Inc. In October 2004, we changed our corporate
name to our current name, Centerplate, Inc.
Additional information about the Company is contained in our
Annual Report on
Form 10-K
for the fiscal year ended January 1, 2008 and our Quarterly
Reports on
Form 10-Q
for the fiscal quarters ended April 1, 2008 and
July 1, 2008 which are incorporated herein by reference.
See Where You Can Find More Information on
page 72.
The address and telephone number of our principal executive
office are:
2187 Atlantic Street, 6th Floor
Stamford, Connecticut 06902
(203) 975-5900
Parent
and Merger Sub
Parent and Merger Sub are entities directly and indirectly owned
by Sponsor, an affiliate of Kohlberg. Kohlberg is a leading
U.S. private equity firm with offices in Mt. Kisco, New
York and Menlo Park, California. Since its inception in 1987,
Kohlberg has completed more than 90 platform and add-on
acquisitions as the control investor in a variety of industries
including manufacturing, healthcare, consumer products and
service industries. Kohlberg has invested a total of
$2 billion in equity across six private equity funds with
an aggregate transaction value of approximately $7 billion.
12
RISK
FACTORS
In addition to general investment risks and the other
information included herein, you should carefully consider the
risk factors described below in evaluating whether to adopt the
Merger Agreement and the transactions contemplated thereby,
including the Debt Tender. Described below are the risks
associated with the Merger and the transactions contemplated
thereby. In addition, the Companys business is and will
continue to be subject to the risks described in Part I,
Item 1A of our Annual Report on
Form 10-K
for the fiscal year ended January 1, 2008, and our
Quarterly Reports on
Form 10-Q
for the fiscal quarters ended April 1, 2008 and
July 1, 2008, which are incorporated herein by reference.
See Where You Can Find More Information on
page 72.
Failure to complete the Merger will result in a default
under our indebtedness and would likely result in the Company
resorting to bankruptcy protection, which would negatively
affect our IDS price and could result in our security holders
receiving less value than in the Merger.
If the Merger is not completed for any reason, we would likely
be subject to a number of material risks, including the
following:
|
|
|
|
|
The amendment to our existing credit agreement is conditioned on
our consummation of the Merger; therefore if the Merger is not
consummated we will be in default under our credit agreement.
Without a committed source of capital or a binding arrangement
for an alternative business combination, we do not expect our
existing lenders will waive these defaults or further amend the
credit agreement;
|
|
|
|
If we are unable to timely secure additional capital or to enter
into an alternative business combination transaction and our
lenders accelerate our indebtedness, we would likely have to
resort to bankruptcy protection since we would be unable to pay
all of our liabilities and obligations when due, including our
liabilities under our outstanding Notes;
|
|
|
|
We would still be required to pay expenses incurred in
connection with the consummation of the Merger, including legal
and accounting fees, which we estimate to be approximately
$[ ] million;
|
|
|
|
We may be required to pay Parent a termination fee of
$2.5 million and reimburse Parent for its expenses up to
$2.5 million;
|
|
|
|
Our employees may, faced with an uncertain future in light of
the Companys weakened financial condition, seek
alternative employment, which could have a negative impact on
our business; and
|
|
|
|
Our clients may, faced with the uncertainty presented by a
default under our indebtedness and/or a bankruptcy proceeding,
terminate their contracts with us or fail to renew and we may be
unable to enter into new contracts with new clients, causing
substantial harm to our business and our security holders.
|
The occurrence of any of the above would likely impair our
ability to conduct our operations and business. Any of these
outcomes would likely cause the price of our IDSs to decline
further. In addition, the price of our IDSs may decline further
if the current market price of our IDSs reflects an assumption
that the Merger will be completed.
Even if our security holders approve the Merger, the
Merger may not be completed.
The completion of the Merger is subject to several closing
conditions, some of which are out of our control, and there can
be no guarantee that we will be able to satisfy all of the
closing conditions set forth in the Merger Agreement. Conditions
to closing under the Merger Agreement include, for example, no
material adverse change having occurred with respect to the
Company during the period prior to the closing of the Merger. As
a result, even if the Merger is approved by the required vote of
our security holders at the special meeting and the 50.1% Debt
Tender condition is satisfied, we cannot guarantee that the
Merger will be completed. In addition, if Parent and Merger Sub
were to breach the Merger Agreement or fail to consummate the
Merger as a result of a failure of National City to finance the
Merger, we would not be entitled to seek court action to force
Parent to close. If the Merger is not completed, we would be in
default under our credit agreement and would not have sufficient
capital to repay our outstanding indebtedness when due, and this
would likely force the Company to resort to bankruptcy
protection.
13
The Merger Agreement limits our ability to pursue
alternatives to the Merger.
The Merger Agreement contains no shop provisions
that, subject to limited exceptions, limit our ability to
discuss, facilitate or commit to competing third party proposals
to acquire all or a significant part of the Company, as well as
a termination fee that is payable by us under certain
circumstances.
These provisions could discourage a third party that might have
an interest in acquiring all of or a significant part of the
Company from considering or proposing that acquisition, even if
that party were prepared to pay consideration with a higher
value than the consideration to be paid by Parent.
Furthermore, the termination fee may result in a potential
competing acquiror offering to pay a lower per share price to
acquire the Company than it might otherwise have offered to pay.
The payment of the termination fee could also have an adverse
effect on our financial condition.
Some of our directors and executive officers have
interests in the Merger that may differ from the interests of
our security holders.
When considering the Board of Directors unanimous
recommendation that the security holders vote FOR
the proposal to adopt the Merger Agreement and the transactions
contemplated thereby, you should be aware that certain of our
directors and executive officers have interests in the Merger
Agreement and the Merger that are different from, and may
conflict with, your interests. These directors and executive
officers will receive certain benefits in connection with the
Merger. Additionally, certain executive officers may be entitled
to receive severance payments in connection with the Merger.
Parent has agreed to continue certain indemnification
arrangements for our directors and executive officers. The Board
of Directors was aware of these interests and considered them,
among other matters, in authorizing and advising security holder
approval of the Merger Agreement. See Adoption of the
Merger Agreement (Proposal 1) The
Merger Interests of Certain Persons in the
Merger.
Holders of the Notes that remain outstanding after the
closing of the Merger will no longer have many of the benefits
currently contained in the Indenture governing the Notes.
If the Debt Tender is consummated and the Proposed Amendments
become operative, holders of Notes that are not purchased
pursuant to the Debt Tender will no longer have the benefit of
substantially all of the covenants, certain events of default
and the change of control offer provided in the Indenture. While
the Proposed Amendments will not relieve the Company from its
obligation to make scheduled payments of principal and accrued
interest on the remaining Notes, the elimination of the
foregoing provisions would permit the Company to take actions
that could increase the credit risks faced by the holders of the
remaining Notes, adversely affect any market price of such Notes
or otherwise be adverse to the interests of the holders of the
remaining Notes.
After the Merger there will be no active trading market
for the Notes.
The Companys IDSs currently trade on the AMEX and the TSX.
Effective as of the consummation of the Merger, the IDSs will be
separated into their components with the underlying common stock
being converted into the right to receive the Merger
Consideration and up to 70% of the Notes being purchased in the
Debt Tender. The remaining Notes will not be listed on a stock
exchange and we do not intend to create or sustain a market for
any Notes that remain outstanding following consummation of the
Merger. Thus, the extent of any market for the remaining Notes
will depend upon, among other things, the principal amount of
the Notes that remain outstanding after the Merger, the number
of holders remaining at such time and the interest in
maintaining a market in the Notes on the part of securities
firms. Holders may need to hold their Notes until maturity or an
earlier redemption, if any, by the Company.
The Company and Sponsor may make subsequent repurchases of
Notes or a redemption at different prices.
From time to time after the consummation of the Merger, Sponsor
or the Company may acquire Notes that remain outstanding through
open market purchases, privately negotiated transactions or
otherwise, upon terms and at prices as they may determine, which
may be more or less than the price to be paid for the Notes
14
pursuant to the Debt Tender. The Company also may discharge or
redeem the remaining Notes not tendered pursuant to the terms of
the Indenture. If the Company does not purchase, redeem or
discharge the Notes prior to maturity, you may not be able to
transfer or otherwise realize value on your Notes until maturity.
Subordination of the remaining Notes.
At the effective time of the Merger the Company and certain of
its affiliates will enter into the senior credit facilities
which will constitute senior indebtedness under the
Indenture. The senior credit facilities will be secured by
substantially all of the Companys assets. Pursuant to the
Indenture, the Notes are subordinated to the prior payment in
full of all existing and future senior indebtedness of the
Company and, as such, holders of senior indebtedness have the
right to receive payment in full in cash prior to any payments
being made on the Notes. In addition, in the event of a
bankruptcy, liquidation or reorganization or similar proceeding,
holders of Notes will participate with all other holders of
unsecured indebtedness of the Company who are similarly
subordinated in the assets remaining after the Company has paid
all such senior indebtedness. In any of these cases, the Company
may not have sufficient funds to pay all of its creditors, and
holders of the remaining Notes may receive less, ratably, than
the holders of senior indebtedness. See Adoption of the
Merger Agreement (Proposal 1) The Merger
Agreement Financing.
After the Merger you will no longer be entitled to receive
information.
The Indenture currently requires that the Company file annual,
quarterly and other reports with the SEC even if the Company is
not required to do so under the Exchange Act. Following the
Merger, the Company will no longer be obligated to file reports
under the Exchange Act and if the Proposed Amendments become
operative, the Company will no longer be obligated by the
Indenture to make such filings. Therefore, public information
related to capitalization, cash flows, net income and results of
operations of the Company and its subsidiaries will not be
available to holders of the Notes and other investors, which
will affect liquidity and prices for the remaining Notes.
15
SPECIAL
NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Some of the statements contained or incorporated by reference
into this proxy statement, including those relating to the
Companys strategies and other statements that are
predictive in nature, that depend upon or refer to future events
or conditions, or that include words such as will,
should, may, expects,
anticipates, intends, plans,
believes, estimates and similar
expressions, are forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as
amended (the Exchange Act). Forward-looking
statements include the information concerning possible or
assumed future results of the Company as set forth under
Adoption of the Merger Agreement
(Proposal 1) The Merger Reasons for
the Merger; Recommendation of the Board of Directors and
Adoption of the Merger Agreement
(Proposal 1) The Merger Opinion of
Evercore Group L.L.C. These statements are not historical
facts but instead represent only the Companys
expectations, estimates and projections regarding future events.
These statements are not guarantees of future performance and
involve certain risks and uncertainties that are difficult to
predict, which may include the risk factors set forth above and
other market, business, legal and operational uncertainties
discussed elsewhere in this document and the documents that are
incorporated herein by reference. Those uncertainties include,
but are not limited to:
|
|
|
|
|
the failure of the security holders to adopt the Merger
Agreement and the transactions contemplated thereby;
|
|
|
|
disruption from the Merger and the transactions contemplated
thereby, including lost business opportunities and difficulty
maintaining relationships with employees, clients and suppliers;
|
|
|
|
legal risks, including litigation, whether or not related to the
Merger and the transactions contemplated thereby, and
legislative and regulatory developments; and
|
|
|
|
changes in general economic and market conditions.
|
The Companys actual results and financial conditions may
differ, perhaps materially, from the anticipated results and
financial conditions in any forward-looking statements, and,
accordingly, readers are cautioned not to place undue reliance
on such statements.
For more information concerning factors that could affect the
Companys future results and financial condition, see, in
addition to the factors discussed under Risk Factors
of this proxy statement, Managements Discussion and
Analysis in our annual report on
Form 10-K
for the year ended January 1, 2008, and Quarterly Reports
on
Form 10-Q
for the fiscal quarters ended April 1, 2008 and
July 1, 2008, which are incorporated herein by reference.
Parent and the Company undertake no obligation to update any
forward-looking statements, whether as a result of new
information, future events or otherwise.
16
THE
SPECIAL MEETING
Date,
Time and Place
This proxy statement is being furnished to security holders as
part of the solicitation of proxies by the Board of Directors
for use at the special meeting to be held on
[ ],
2008, at
[ ] a.m.,
Eastern Time, at
[ ].
Purpose
of the Special Meeting
At the special meeting, security holders will be asked:
|
|
|
|
1.
|
to consider and vote upon a proposal to adopt the Merger
Agreement, by and among the Company, Parent and Merger Sub, and
the transactions contemplated thereby, pursuant to which Merger
Sub will be merged with and into the Company and each
outstanding share of our common stock will be converted into the
right to receive $0.01 in cash, without interest and less any
applicable withholding tax;
|
|
|
2.
|
to consider and vote upon a proposal to adjourn the special
meeting, if necessary, to solicit additional proxies; and
|
|
|
3.
|
to consider and vote on such other matters as may properly come
before the special meeting or any adjournment thereof.
|
The
Boards Recommendation
The Board of Directors has unanimously determined that the
Merger is advisable and in the best interests of the Company and
our security holders and has approved the Merger Agreement and
the Merger.
Accordingly, the Board of Directors unanimously
recommends that security holders vote FOR the
proposal to adopt the Merger Agreement and the transactions
contemplated thereby. Additionally, the Board of Directors
unanimously recommends that the security holders vote
FOR the proposal to adjourn the special meeting, if
necessary, to solicit additional proxies.
See Adoption
of the Merger Agreement (Proposal 1) The
Merger Reasons for the Merger; Recommendation of the
Board of Directors and Approval of the Adjournment
or Postponement of the Special Meeting (Proposal 2).
Record
Date
The record holders of shares of common stock as of the close of
business on
[ ],
2008, the record date for the special meeting, are entitled to
receive notice of, and to vote at, the special meeting. On the
record date, there were
[ ]
outstanding shares of common stock.
Required
Vote; How to Vote
Each IDS includes one share of common stock. Each outstanding
share of common stock on
[ ],
2008 entitles the holder to one vote at the special meeting.
Adoption of the Merger Agreement and the transactions
contemplated thereby requires the affirmative vote
FOR the proposal to adopt the Merger Agreement by
the holders of a majority of the shares of our common stock
outstanding on the record date and entitled to vote on the
matter. Adoption of the proposal to adjourn the special meeting,
if necessary, to solicit additional proxies requires the
affirmative vote FOR the proposal by the holders of
a majority of shares of our common stock represented in person
or by proxy at the special meeting and entitled to vote thereon.
In the absence of a quorum, holders of a majority of the shares
present in person or represented by proxy may adjourn the
meeting until a quorum shall be attained. The approval of any
other such other matters as may be properly presented incident
to the conduct of the special meeting requires the affirmative
vote FOR the approval of any such proposed matter by
a majority of the shares present in person or by proxy at the
meeting and entitled to vote on the matter. In order for your
shares of common stock to be included in the vote, you must
submit a proxy to have your shares voted by completing, signing,
dating and returning the enclosed proxy or you must vote in
person at the special meeting.
17
If your shares of common stock are held in street name by your
bank, brokerage firm or nominee, you should instruct them how to
vote your shares of common stock using the instructions provided
by them. If you have not received such voting instructions or
require further information regarding such voting instructions,
you may contact your bank, brokerage firm or nominee to request
directions on how to vote your shares. If your shares are held
in street name and you do not provide your bank, brokerage firm
or nominee with instructions as to how such shares are to be
voted, your shares will not be voted at with the special
meeting. Because adoption of the Merger Agreement and the
transactions contemplated thereby requires the affirmative vote
FOR the approval of the proposal to adopt the Merger
Agreement by the holders of a majority of the shares of our
common stock outstanding on the record date and entitled to vote
on the matter, abstentions and your failure to vote or to
instruct your bank, brokerage firm or nominee how to vote will
have the same effect as a vote AGAINST the proposal.
Because approval of the proposal to adjourn the meeting, if
necessary, to solicit additional proxies, and approval of any
other such matters as may be properly presented incident to the
conduct of the special meeting requires the affirmative vote
FOR the approval of any such matters by holders of a
majority of the shares present in person or by proxy at the
meeting and entitled to vote on the matter, abstentions will
count as a vote AGAINST the proposed matters, and
the failure to attend the meeting and vote in person, to submit
a proxy, or to instruct your bank, brokerage firm or nominee on
how to vote your shares will not affect the outcome of the
proposal.
Quorum
A quorum is necessary to hold the special meeting. The holders
of one-third of the outstanding shares of common stock on
[ ],
2008, represented in person or by proxy and entitled to vote at
the special meeting, will constitute a quorum for purposes of
the special meeting. For purposes of determining the presence of
a quorum, abstentions will be included in determining the number
of shares present and entitled to vote at the meeting; however,
because brokers are not entitled to vote on the proposal to
adopt the Merger Agreement absent specific instructions from the
beneficial owner, shares held by brokers with respect to which
instructions have not been provided will not be included in the
number of shares present and entitled to vote at the meeting for
purposes of establishing a quorum. Any shares of common stock
held in treasury by the Company or by any of our subsidiaries
are not considered to be outstanding for purposes of determining
a quorum. In the absence of a quorum, holders of a majority of
the shares present or represented by proxy at the special
meeting may adjourn the meeting until a quorum is present. Once
a share is represented at the special meeting, it will be
counted for the purpose of determining a quorum at the special
meeting and any adjournment or postponement of the special
meeting. If a new record date is set for the adjourned special
meeting, however, then a new quorum will have to be established.
Proxies;
Revocation
Each copy of this proxy statement mailed to security holders is
accompanied by a form of proxy or voting instruction card and a
self-addressed postage prepaid envelope. You should complete and
return the proxy card accompanying this proxy statement to
ensure that your vote is counted at the special meeting, or at
any adjournment thereof, regardless of whether you plan to
attend the special meeting.
If you vote your shares of common stock by properly completing,
signing and dating the enclosed proxy card, your shares will be
voted at the special meeting as you indicate on your proxy card.
If no instructions are indicated on your signed and dated proxy
card, your shares of common stock will be voted FOR
the adoption of the Merger Agreement and transactions
contemplated thereby, FOR the proposal to adjourn
the special meeting, if necessary, to solicit additional proxies
and will be counted in accordance with the recommendations of
the Board of Directors on any other matters properly brought
before the special meeting for a vote.
You may revoke your proxy at any time before the vote is taken
at the special meeting. To revoke your proxy, you must either
properly advise the Companys Secretary in writing, deliver
a proxy dated after the date of the proxy you wish to revoke or
attend the special meeting and vote your shares in person.
Attendance at the special meeting will not by itself constitute
revocation of a proxy. If you have instructed your bank,
18
brokerage firm or nominee to vote your shares, the
above-described options for revoking your proxy do not apply and
instead you must follow the directions provided by them to
revoke your proxy.
To submit a written notice of revocation or other communications
about revoking your proxy with respect to your shares of common
stock, or to request a new proxy card, you should contact:
MacKenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016
Telephone: (800)
322-2885
The Company does not expect that any matter other than the
proposal to adopt the Merger Agreement and the transactions
contemplated thereby and the proposal to adjourn the special
meeting, if necessary, to solicit additional proxies will be
brought before the special meeting. If, however, such a matter
is properly presented at the special meeting or any adjournment
thereof, the persons appointed as proxies will have
discretionary authority to vote the shares represented by duly
executed proxies in accordance with their discretion and
judgment.
Solicitation
of Proxies
The Company will pay the cost of this proxy solicitation. In
addition to soliciting proxies by mail, directors, officers and
employees of the Company may solicit proxies personally and by
telephone, facsimile or other electronic means of communication.
These persons will not receive additional or special
compensation for such solicitation services. Arrangements may
also be made with brokerage firms and other custodians, nominees
and fiduciaries to forward solicitation materials to the
beneficial owners of shares held of record by those persons, and
we will reimburse those brokerage firms, custodians, nominees
and fiduciaries for reasonable out-of-pocket expenses incurred
by them in connection with those actions. In addition, MacKenzie
Partners has been retained by us to assist in the solicitation
of proxies. MacKenzie Partners may contact holders of shares of
common stock by mail, telephone, facsimile, telegraph or
personal interviews and may request brokers, dealers and other
nominee security holders to forward materials to beneficial
owners of shares of our common stock. MacKenzie Partners will
receive reasonable and customary compensation for its services
(estimated at $[ ]) and will be
reimbursed for certain reasonable out-of-pocket expenses and
other customary costs.
Adjournments
Although it is not expected, the special meeting may be
adjourned or postponed for the purpose of soliciting additional
proxies or for any other reason. Any adjournment may be made
without notice, other than by an announcement made at the
special meeting, by approval of the holders of a majority of the
shares of our common stock present in person or represented by
proxy at the special meeting. Any signed proxies received by the
Company which are otherwise silent on the matter will be voted
in favor of the proposal to adjourn the special meeting, if
necessary, to solicit additional proxies. Any adjournment of the
special meeting for the purpose of soliciting additional proxies
will allow security holders who have already sent in their
proxies to revoke them at any time prior to their use.
Share
Ownership of Directors and Executive Officers
At the close of business on the record date, our directors
owned, through ownership of our IDSs, in the aggregate,
6,600 shares of common stock, or less than 1% of the
outstanding shares of common stock entitled to vote. The
executive officers of the Company do not own any of our IDSs or
common stock. The directors have informed us that they intend to
vote all of their shares of common stock FOR the
proposal to adopt the Merger Agreement and the transactions
contemplated thereby and FOR the proposal to adjourn
the special meeting, if necessary, to solicit additional
proxies. See Share Ownership of Certain Beneficial Owners
and Management.
19
ADOPTION
OF THE MERGER AGREEMENT (PROPOSAL 1)
THE MERGER
General
On September 18, 2008, the Company entered into the Merger
Agreement with Parent and Merger Sub. Parent and Merger Sub are
entities directly and indirectly owned by Sponsor. The Merger
Agreement contemplates that the Merger will be effected through
(i) a proxy solicitation to approve the Merger and
(ii) a Debt Tender and a Consent Solicitation to purchase
up to 70% of the Companys Notes, with noteholders
receiving $3.99 in cash, plus accrued and unpaid interest and
deferred interest as the Tender Consideration for each Note
accepted for payment. Following receipt of a vote of holders of
a majority of our common stock to approve the Merger (and
satisfaction of the other conditions thereto, which includes a
minimum of 50.1% of the Notes being tendered pursuant to the
Debt Tender), at the closing, Merger Sub will be merged with and
into the Company with the Company being the Surviving
Corporation and a wholly owned subsidiary of Parent, and each
share of our common stock will be converted into the right to
receive $0.01 as the Merger Consideration.
Background
of the Transaction
The Boards decision to approve the Merger Agreement was
the outcome of an approximately six-month Board of
Directors-directed process to assess the Companys capital
structure and to identify, pursue and evaluate capital structure
and other alternatives that would allow the Company to operate
under the business conditions it was facing in light of rapidly
deteriorating financial and credit markets.
Set forth below is a chronology of the events leading up to the
Board of Directors decision to approve the Merger Agreement.
On March 10, 2008, the Company disclosed that beginning in
January 2008, it faced declining cash flows from operations
caused by lower revenues from its clients convention
centers primarily due to the weakening economy. Those declines,
as well as more stringent monthly financial covenants required
to be satisfied for the payment of dividends on the common stock
underlying the IDSs, which became effective under the credit
agreement as of January 2008, led the Company to seek and obtain
from its lenders a waiver of such covenants and an amendment to
the credit agreement that allowed the Company to pay the monthly
dividends through March 2008. The Company paid the lenders
approximately $250,000 in fees as part of the waiver and
amendment. At this time, the Company disclosed that it was
seeking a permanent amendment to the credit agreement to enable
it to meet the monthly financial covenants for the payment of
dividends and to give it the flexibility necessary to address
business needs that arise from time to time with respect to cash
flow and capital expenditures, such as variations in event
scheduling or the timing of when accounts come online. The
Company also disclosed on March 17, 2008, that if it was
not able to obtain a permanent amendment it would need to
suspend payment of dividends beginning in April 2008. On
March 21, 2008 the Board of Directors met and approved the
retention of UBS Securities LLC (UBS) to assist the
Company in reviewing its capital structure and obtaining the
permanent amendment to its credit agreement.
As disclosed, on April 1, 2008, the Company sought and
obtained another amendment to the credit agreement which allowed
it to invest in a potential new service contract, increased the
amount of capital expenditures it could make in 2008 and relaxed
the monthly financial covenants it was required to meet in order
to continue to pay monthly dividends on its common stock and
monthly interest payments on the Notes through May 2008. The
amendment increased the interest rate on the Companys term
loan to 1.75% (from 1.25%) over the alternate base rate and to
3.75% (from 3.25%) over the Eurodollar rate. The Company paid
the lenders approximately $750,000 in fees as part of the
amendment. The Company disclosed that without a further
amendment to the credit agreement it would be required to
suspend monthly dividend payments beginning in June and, if it
could no longer meet the monthly financial covenants under the
credit agreement, the Company could be required to defer
interest payments on the Notes. The Company stated that the
deteriorating credit markets may make it difficult to obtain
such an amendment on favorable terms, if at all, and also
disclosed that, in light of the Companys growth strategy
and current business requirements, the
20
Board of Directors could determine that it was more prudent to
change the dividend policy. The IDS price dropped over 50% from
$8.99 to $4.43 per IDS with over 4 million units trading on
the day following this announcement.
On April 2, 2008, the Company disclosed that it had been
informed by the New York Yankees that the Company would not be a
concessionaire at the teams new stadium scheduled to open
in 2009. The Company also disclosed that if it did not obtain
new business to offset the resulting loss in revenues from not
having the contract at the new stadium, there would be a
material adverse effect on its Adjusted EBITDA (as defined in
the credit agreement) beginning in 2009.
On April 3, 2008, Janet Steinmayer, the Companys
President and Chief Executive Officer, received a telephone call
from the President and Chief Operating Officer of Company A,
during which the executive raised the prospect of Company A
acquiring the Company.
On April 4, 2008, the Board of Directors held a telephonic
meeting during which Ms. Steinmayer briefed the Board of
Directors on Company As expression of interest. There was
a full discussion, and the Board of Directors requested that
Cahill Gordon & Reindel LLP (Cahill) be
engaged to advise the Company and the directors as to their
duties and responsibilities in this situation.
On April 7, 2008, the Board of Directors held a telephonic
meeting, which representatives of Cahill attended. Cahill
representatives led a full discussion regarding the
directors duties and responsibilities in connection with
the unsolicited offer from Company A. Following the discussion,
the consensus of the Board of Directors was not to pursue
Company As expression of interest at that time. The Board
of Directors also decided that the Company would continue to
pursue the reduction of costs and a permanent amendment to the
credit agreement to provide more operating flexibility and
permit the continued payment of dividends and interest on its
Notes. Thereafter, Ms. Steinmayer advised Company A that
the Company would not pursue Company As expression of
interest at that time.
On April 18, 2008, David M. Williams, Chairman of the
Board, received a letter from the President and Chief Operating
Officer of Company A, expressing Company As interest in
acquiring all of the Companys IDSs for $8.25 per IDS in
cash and estimated it could complete its diligence process in
approximately two weeks. The offer was conditioned on obtaining
financing, satisfactory completion of Company As due
diligence, the negotiation and execution of mutually acceptable
transaction agreements and customary conditions set forth in
those agreements.
On April 21, 2008, the Board of Directors held a telephonic
meeting attended by representatives of Cahill and UBS.
Ms. Steinmayer updated the Board of Directors on the status
of discussions with the Companys lenders to amend the
credit agreement and the challenges regarding the Companys
capital structure. Representatives of UBS and Cahill discussed
various capital structure and other alternatives and UBS
representatives proposed a process to explore such alternatives.
Following a full discussion of the expression of interest
received from Company A, the Board of Directors again determined
not to pursue Company As expression of interest at that
time.
On April 28, 2008, Ms. Steinmayer responded to Company
As expression of interest by sending the President and
Chief Operating Officer of Company A a letter conveying the
Board of Directors determination not to pursue Company
As expression of interest at that time.
On April 30, 2008, Mr. Williams received a second
letter from Company A, reiterating its interest in acquiring the
Company on the same terms as in the first letter and setting a
May 9, 2008 deadline for the Company to agree to begin
negotiating a definitive merger agreement and to permit Company
A to begin a diligence process.
On April 30, 2008, the Board of Directors met.
Ms. Steinmayer first reviewed the Companys business
and prospects, the history of the Companys capital
structure and the limitations it imposed, the increased capital
expenditures required to secure new client contracts and renew
existing ones, the status of managements discussions with
the lenders to amend the credit agreement, the Companys
ability to continue to pay dividends, efforts to reduce
operating costs and the contents of Company As second
letter.
21
Representatives of UBS then reviewed for the Board of Directors
the Companys dividend policy and capital structure, the
history of amendments to the credit agreement and potential
capital structure alternatives. Representatives of UBS next
outlined the specifics of a process by which the Company could
undertake a thorough review of capital structure and other
alternatives. The Board of Directors then discussed the credit
agreement amendment process and status and whether it would be
in the best interest of the Companys security holders to
eliminate the payment of dividends. The Board of Directors then
determined to begin the process outlined by representatives of
UBS to identify, pursue and evaluate capital structure and other
alternatives.
On May 2, 2008, the Board of Directors held a telephonic
meeting to review again the content of Company As second
letter, the process for identifying, pursuing and evaluating
various capital structure and other alternatives, and the
Companys business and prospects. The Board of Directors
discussed the status of the credit agreement amendment and how
timing of the amendment could delay completion of the financial
statements for the first quarter and the filing with the SEC of
the Companys quarterly report on
Form 10-Q.
The Board of Directors requested that management continue to
seek a permanent amendment to the credit agreement.
In early May, 2008, representatives of UBS began exploring
several alternatives on the Companys behalf, including
raising new secured debt to refinance the indebtedness under the
credit agreement, raising new equity and using the proceeds to
tender for a portion of the IDSs or Notes, exchanging the Notes
for equity and cash proceeds from new mezzanine debt or
preferred stock, and a sale the Company.
On May 7, 2008, the Company executed an amended and
restated letter agreement confirming its engagement of UBS to
act as the Companys financial advisor in connection with
the evaluation of capital structure and other alternatives,
including a sale of the Company. The amended and restated letter
agreement provided that the Company would pay UBS an advisory
fee of $2 million and a transaction fee of 1.25% of the
value of any capital transaction entered into by the Company,
subject to a minimum transaction fee of $2.5 million, which
transaction fee would be offset by credits to the advisory fee
of up to $1 million. Also on May 7, 2008, the Company
announced that the Board of Directors had determined to commence
a process to explore a range of capital structure and other
alternatives which was expected to take up to six months to
complete, and that the Company had engaged UBS as the
Companys financial advisor to assist in that process. The
Company stated that the IDS structure may limit its ability to
invest in strengthening and growing its business. The Company
also stated that it was pursuing a permanent amendment to the
credit agreement to allow for increased flexibility on capital
expenditures and acquisitions and, as a result, the filing with
the SEC of the Companys first quarter report on
Form 10-Q
would be delayed, but would contain details of the amendment
once filed. In addition, the Company said that it was likely to
determine it was in the best interest of the Company to
eliminate monthly dividend payments beginning in June 2008.
On May 8, 2008, representatives of UBS telephonically
responded to Company A regarding its second letter, advising
Company A that the Board of Directors had determined to commence
a process to explore capital structure and other alternatives,
including a possible sale of the Company, and invited Company A
to participate in that process.
In early May 2008, UBS commenced a process to pursue a sale of
the Company to a third party. Representatives of UBS contacted
54 parties, including 7 strategic companies and 47 private
equity investors, including Kohlberg.
On May 19, 2008, the Company obtained the sixth amendment
to the credit agreement which adjusted certain monthly financial
covenants to levels that, based on the Companys projected
financial performance at the time, were expected to permit the
Company to pay interest on the Notes through October 2008.
Thereafter, those monthly financial covenant levels were to be
reset to the more stringent levels that would have been in
effect absent the prior amendments obtained by the Company. In
order to obtain the amendment, the Company agreed to eliminate
the monthly dividend after the May 2008 payment, reduce the size
of the revolving credit facility to $77.5 million from
$107.5 million, increase the interest rate on the term loan
and revolving credit facility to 3.50% (from 1.75%) over the
alternate base rate and 4.50% (from 3.25%) over the Eurodollar
rate, and prepay $8 million on the term loan. The Company
paid the lenders approximately $2.3 million in fees as
22
part of the amendment. The amendment provided relief under
monthly financial covenants to permit payment of interest on the
Notes and monthly financial maintenance covenants in the credit
agreement only through October 2008. The Company disclosed that
if it was not able to comply with the monthly financial
covenants for the payment of interest on the Notes as set forth
in the May 2008 amendment or as set forth in the credit
agreement after the expiration of the May 2008 amendment, it
would have to defer payment of interest on the Notes. The
Company also disclosed that its ability to comply with the
monthly financial maintenance covenants may be affected by
prevailing economic, financial and industry conditions that are
beyond its control, and that a breach of such covenants would
result in an event of default under the credit agreement and in
turn a cross default under the Indenture. Such an event of
default could lead to acceleration of the payment of the
principal and accrued interest under the credit agreement and
Notes, and if the Company were unable to repay those amounts,
its assets may not be sufficient to repay the Companys
full amount of indebtedness.
On May 23, 2008, the Board of Directors held a telephonic
meeting for an update on the exploration process. During the
meeting the Board of Directors directed the Companys
management not to discuss the terms or conditions of potential
post-acquisition employment with any of the potential bidders
until after a merger agreement is signed.
On May 27, 2008, the Board of Directors held a telephonic
meeting in which Cahill summarized the open issues in draft
non-disclosure agreements with potential strategic buyers.
Representatives of UBS also attended the meeting and summarized
the importance of the involvement of interested strategic buyers
in the exploration process. The Board of Directors authorized
Cahill to continue negotiations with these strategic buyers as
discussed at the meeting. Ms. Steinmayer abstained from
voting on the issues to avoid the possible appearance of
conflict.
During May and early June, the Company entered into
non-disclosure agreements with 36 potential bidders, including 3
strategic companies and 33 private equity investors,
including Kohlberg. Representatives of UBS distributed to each
of those bidders a confidential information memorandum
containing information about the Companys business and
operations.
By June 12, 2008, UBS had received non-binding indications
of interest from 11 potential bidders, including 3
strategic companies and 8 private equity investors, with a range
of prices from $5.01 to $16.08 per IDS. Kohlberg was one of
those potential bidders with an initial indication of interest
between $8.50 and $9.00 per IDS. Company A was also among the
initial potential bidders with an indication of interest between
$8.25 and $9.25 per IDS.
On June 13, 2008, the Board of Directors held a telephonic
meeting to discuss developments in the exploration process.
Representatives of UBS first updated the Board of Directors on
the status of the solicitations of interests to purchase the
Company. Representatives of UBS reported to the Board of
Directors that it had received 11 first-round indications of
interest and that UBS recommended that the Board of Directors
move forward with each of them. Representatives of UBS then
reviewed with the Board of Directors three different capital
structure alternatives being explored, each of which had
significant obstacles to execution. Alternatives discussed
included refinancing the credit agreement with the proceeds of a
new secured note offering, exchanging the Notes for new equity
and cash proceeds from new mezzanine debt, and issuing new
equity and using the proceeds to tender for a portion of the
Notes. Representatives of UBS advised the Board of Directors
that each of these options posed substantial challenges due to
the Companys need to make capital expenditures, the market
price of the IDSs and the state of the financial markets.
Management then reviewed the option of continuing with the
current capital structure and significantly reducing operating
costs and capital expenditures as much as possible to try to
maintain compliance with the reinstated levels of the monthly
financial covenants to permit the payment of interest on the
Notes and the monthly financial maintenance covenants in the
credit agreement. Ms. Steinmayer reported that management
was in discussions with the Companys lenders regarding the
possibility of further amending the credit agreement and that
the Companys lenders were working on possible alternatives
for the Company. The Board of Directors determined to proceed
with the auction process with all 11 potential bidders and to
continue to explore the viability of the other capital structure
alternatives.
23
On June 17, 2008, all of the 11 potential bidders were
given access to a data room which contained detailed
confidential information about the Companys business and
operations.
From mid-June to mid-July 2008, Ms. Steinmayer and the
other executive officers, with representatives of UBS in
attendance, gave management presentations to each of the 11
potential bidders and responded to their diligence inquiries.
Also during this time, representatives of UBS sent second round
process letters to all of the remaining bidders setting
July 17, 2008, as the deadline for final bids and other
terms to be addressed. Representatives of UBS also sent two
forms of a merger agreement which reflected either a cash-out
merger with a tender offer for the Notes, or a tender for the
IDSs, with instructions that each bidder, as part of its bid,
provide a detailed
mark-up
of
one of the forms. From mid-June to mid-July, representatives of
UBS also pursued other capital structure alternatives, including
approaching potential debt investors to gauge their interest in
participating in the issuance of new senior secured notes to
refinance the indebtedness under the credit agreement. In
addition, representatives of UBS and management engaged in
discussions with the administrative agent under the credit
agreement regarding a further amendment to the credit agreement.
On June 23, 2008, the Board of Directors held a telephonic
meeting during which Ms. Steinmayer updated the Board of
Directors on a new expression of interest that had been received
from Company B with a price indication of 8.5x to 9.5x EBIT.
Ms. Steinmayer advised that representatives of UBS had
evaluated the bid to imply a range from $5.10 to $6.38 per IDS
based on the most recent balance sheet data. Based on the fact
that the Company had 11 active bids, the higher end of Company
Bs bid was lower than the lowest of all of the other 11
bids but one, and that the process would be slowed down
significantly to get Company B to the same diligence level as
the 11 other bidders, the Board of Directors determined not to
include Company B in the process unless circumstances changed.
Representatives of UBS subsequently communicated the
Boards decision to Company B.
By July 18, 2008, the Company had received 3 second-round
bids (including revised drafts of the proposed merger agreement)
and one alternate proposal. Kohlbergs bid was for $7.50
per IDS and was structured as a merger with a tender for the
Notes. Kohlberg had conditioned its bid on obtaining financing,
for which they had initiated negotiations with Lender A and
National City, but did not yet have a firm commitment, and on
obtaining consents of certain of the Companys clients.
Company Cs bid was for $5.00 to $6.00 per IDS and was also
structured as a merger with a tender for the Notes. Company
Cs bid was conditioned on obtaining financing, for which
it did not yet have a firm commitment, and was subject to the
consummation of another acquisition. In addition, Company C
required more due diligence.
Company Ds bid was for an enterprise value of
$225.0 million, which representatives of UBS estimated
(based on the most recent balance sheet and adjusting for
transaction costs) implied a value of $4.62 to $5.34 per IDS,
but which would vary depending on the Companys aggregate
indebtedness. The bid was structured as a tender offer for the
IDSs. Company Ds proposal was conditioned on receipt of
tenders from 90% of the security holders, receipt of Company
client consents and other conditions and included substantial
revisions to the proposed merger agreement that created
additional closing risk, but was not conditioned on obtaining
financing.
Company E submitted an alternative proposal that involved no
cash payments to security holders, an offer to exchange Company
equity for each outstanding IDS and an infusion of
$15 million of cash in exchange for the payment by the
Company of a management fee to Company E to manage the business.
Alternatively, Company E offered to purchase select portions of
the Companys business.
On July 19, 2008, the Board of Directors held a telephonic
meeting to discuss the outcome of the second round of the
bidding process during which representatives of UBS presented
the Board of Directors with the four proposals received. The
Kohlberg bid was the highest at $7.50 per IDS, Company Cs
bid was $5.00 to $6.00 per IDS and Company Ds bid had an
enterprise value of $225 million, which representatives of
UBS estimated (based on the most recent balance sheet and
adjusting for transaction costs) an implied value of $4.62 to
$5.34 per IDS, but which would vary depending on the
Companys aggregate indebtedness. The bidders were at
different stages of completion of their diligence and could
proceed to a signing on different
24
timetables. Kohlberg had substantially completed its due
diligence review and requested a
30-day
exclusivity period. Company C, which had only conducted
preliminary diligence at this point, requested a
45-day
exclusivity period to move forward. Representatives of UBS
reviewed the terms and conditions of each proposal and
recommended the Company proceed with the bids from Kohlberg,
Company C and Company D. Representatives of Cahill explained the
main issues raised by the
mark-ups
of
the form merger agreement. Representatives of UBS also reviewed
Company Es alternative proposal. Representatives of UBS
then reviewed other capital structure alternatives being
explored, focusing on a plan to refinance the Companys
indebtedness under the credit agreement with the sale of new
senior secured notes. Representatives of UBS explained that the
financing markets had deteriorated significantly since early
June due to volatility in equities, high oil prices, and
economic concerns. Representatives of UBS also indicated that 3
of the 7 investors approached by UBS had expressed interest in
evaluating an investment in the new senior secured notes, but
that their interest had waned since initially being approached
by UBS in June due to the deteriorating economic conditions and
the poor performance of Companys IDS market price. As a
result of the deteriorating financial markets and the
preliminary feedback from the potential investors,
representatives of UBS indicated that successfully executing on
this alternative would be extremely challenging. Management then
updated the Board of Directors regarding the alternative to
reduce significantly operating costs and capital expenditures.
Representatives of UBS explained that under this alternative
they would recommend seeking a refinancing with the existing
lenders under the credit agreement that would involve a
three-year extension to the credit agreement and further
suspending interest payments on the Notes. Problems noted with
this approach included the likelihood that if such an amendment
could be obtained, it would probably require the Company to
incur higher interest rates and higher amortization. The Board
of Directors determined not to pursue the proposal from Company
E as it presented an alternative that, if achievable, could be
effected by the Company on its own without incurring a
management fee. The Board of Directors decided to move forward
with the proposals from Kohlberg, Company C and Company D
simultaneously and to refuse any requests for exclusivity in
order to keep all options open.
On July 19, 2008, UBS representatives reported to Kohlberg,
Company C and Company D that each of them was selected to
continue to the final round. Kohlberg and Company C agreed to
proceed. Company D said it would not continue its efforts
without a period to negotiate exclusively with the Company. UBS
also advised Company E that its proposal would not be pursued at
that time.
On July 22, 2008, representatives of Cahill sent a revised
draft of the Merger Agreement to Kohlbergs counsel
Ropes & Gray reflecting the Companys responses
to Kohlbergs comments and a revised draft of the Merger
Agreement to Company C reflecting the Companys responses
to Company Cs comments.
On July 24, 2008, management of the Company, with
representatives of UBS in attendance, met with each of Kohlberg
and Company C, separately, to provide additional information
about the Companys business.
The draft Merger Agreement Cahill sent in response to
Ropes & Grays
mark-up
had
fewer representations and warranties and conditions precedent
than the Ropes & Gray draft in order to reduce the
risk of the Company not being able to close the Merger. The
changes made in the Cahill draft included the deletion of
conditions that there be no material adverse change in the
Company, that financing be available at the time of the Merger
and that the Companys clients consent to the transaction.
On July 31, 2008, Ropes & Gray responded to the
Company by sending a new draft of the Merger Agreement to Cahill
which included the conditions that Cahill had deleted. Kohlberg
also revised the no-shop provision to require the Company to
keep Parent informed of any Company proposal.
On August 5, 2008, the Board of Directors held a telephonic
meeting during which representatives of UBS provided an update
on the exploration process. Representatives of UBS updated the
Board of Directors on the sale process. The Board of Directors
was informed that one of Kohlbergs potential lenders
(Lender A) was willing to provide
$130 million of financing to Kohlberg and that Kohlberg was
now considering a structure that involved a tender offer and
consent solicitation for a minimum of 50.1% and a maximum of 70%
of the Notes, leaving at least 30% of the Notes outstanding.
Representatives of Cahill summarized Kohlbergs position
regarding conditions to the Merger, including receipt of
financing, no material adverse
25
change in the Company, obtaining consents from a specified group
of the Companys clients and that Kohlberg was requiring
the Company to drop its request for specific performance.
Representatives of UBS also updated the Board of Directors on
the bids from Company C and Company D. Company Cs bid had
been subject to the simultaneous consummation of another
transaction. That other transaction was encountering issues so
Company C had informed representatives of UBS that it was now
analyzing the Company as a stand-alone enterprise.
Representatives of UBS also relayed that Company C was also
experiencing difficulty in obtaining committed financing.
Representatives of UBS also reported that Company D was not
prepared to move forward with the merger process unless it was
granted exclusivity. The Board of Directors decided that
granting exclusivity to Company D, the lowest bidder, was not in
the best interest of the Company at that time. Representatives
of UBS then reviewed in detail the other capital structure
alternatives being explored. Representatives of UBS reported
that the financing markets had deteriorated even further and
that a successful offering of new senior secured notes would be
extremely challenging to achieve given market conditions. In
light of the Companys expectation that it would be unable
to comply with the monthly financial maintenance covenants in
the credit agreement as early as the fourth quarter of 2008 and
the Companys inability to obtain an amendment to the
credit agreement without restructuring the IDSs, representatives
of Cahill reviewed with the Board of Directors the
considerations relevant to seeking to effect a permanent
solution to the capital structure issues in bankruptcy.
Representatives of each of UBS and Cahill noted that in a
bankruptcy the IDSs and Notes could potentially lose all of
their value.
On August 9, 2008, the Board of Directors held a telephonic
meeting without any executive officers where it determined to
designate independent director Glenn Zander as the sole member
of a special committee to work directly with the Companys
advisors and management to evaluate the alternatives.
On August 12, 2008, in the report on Form
10-Q
filed
with the SEC for the fiscal quarter ended July 1, 2008, the
Company disclosed that if the process it initiated to evaluate
its capital structure and other alternatives was not completed
by October 2008, and it was not otherwise able to obtain a
further amendment to the credit agreement by such time, it
intended to implement a restructuring plan designed to
significantly reduce costs and future capital expenditures,
which would limit the Companys ability to make capital
investments to obtain new contracts at levels consistent with
recent years. These actions would be required to attempt to
satisfy monthly financial maintenance covenants in the credit
agreement that would be reinstated unless the existing amendment
was extended. If the Company were unable to significantly reduce
costs and capital expenditures, it expected (i) it would be
required to defer interest payments on the Notes beginning in
November 2008, and (ii) eventually it would be unable to
comply with the reinstated monthly financial maintenance
covenants, which would result in an event of default under the
credit agreement. Upon occurrence of an event of default the
Company would no longer be able borrow under the revolving
credit facility and the lenders could elect to accelerate all
principal and accrued interest. If the lenders were to
accelerate all payments due, this would result in a default
under the indenture governing the Notes. The Company cautioned
that its assets may be insufficient to repay the Companys
indebtedness in full.
On August 15, 2008, the Board of Directors engaged
Abrams & Laster LLP as special Delaware counsel to the
Board of Directors.
On August 19, 2008, representatives of Ropes &
Gray sent further comments on the draft Merger Agreement to
representatives of Cahill.
On August 21, 2008, the Board of Directors held a meeting
in New York City. Representatives of UBS presented an update on
the various capital structure and other alternatives being
explored. Representatives of UBS reviewed the status of the sale
process. Representatives of UBS informed the Board of Directors
that, in light of the worsening financing markets, the decrease
in the market price for the IDSs, and further diligence on the
Companys cash flow and capital expenditure needs, each of
Company C and Kohlberg had lowered their bids. Kohlbergs
bid was lowered to $6.00 per IDS and Company Cs bid was
lowered to a range of $4.50 to $5.00 per IDS. Representatives of
UBS reported that there was significant uncertainty around
Company Cs bid due to its remaining diligence and lack of
progress on obtaining committed financing. Representatives of
UBS also noted that Kohlberg had progressed much further in its
diligence and in its efforts to secure financing. Therefore, the
Board of Directors determined it was in the best interest of the
Companys
26
security holders not to agree to Company Cs request, but
to continue to negotiate with Kohlberg. Representatives of each
of UBS and Cahill then reviewed the terms of the latest Kohlberg
offer, which included certain closing risks such as a financing
condition, the absence of a material adverse effect on the
business, the condition that the Company obtain specified client
consents and Kohlbergs position that the Company not have
any specific enforcement rights. The Board of Directors
discussed requesting Kohlberg to pay a reverse termination fee
if the financing was not available in lieu of specific
enforcement rights. Representatives of UBS then reviewed with
the Board of Directors the status of the exploration of other
capital structure alternatives. Representatives of UBS reported
that their latest round of calls to potential investors had
yielded only one possible interested party with whom they would
continue to try to move forward. Representatives of UBS advised
that it was difficult to generate investor interest because of,
among other reasons, the deterioration in the financial markets,
but that it would continue to pursue a financing with investors
if the opportunity was there. Mr. Zander then reviewed for
the Board of Directors the alternative being considered that
would maintain the current capital structure and require
substantial reductions in operating costs and capital
expenditures in order to meet reinstated monthly financial
maintenance covenants in the credit agreement. He reported that
in addition to reducing costs, the Company would need to sell
assets to pay down debt and increase cash through reduction of
receivables. He reported that this alternative had substantial
uncertainty and that it could jeopardize the business, reduce
the Companys value and would also require the consent of
the lenders under the credit agreement. Mr. Zander
emphasized that this alternative should only be considered as a
last resort if no other more attractive alternative was
achievable. The Board of Directors also explored with Cahill
representatives what could happen in the event there were no
sale of the Company, including the possibility of a bankruptcy
proceeding. The Board of Directors then discussed the financial
advisor opinion.
On August 22, 2008, a representative from
Abrams & Laster, special Delaware counsel to the Board
of Directors, contacted the investment bank Evercore to discuss
its potential engagement to provide an opinion as to the
consideration being offered in the Merger.
In August, as the financing markets further deteriorated,
Kohlberg found it increasingly difficult to secure committed
financing. On August 22, 2008, Kohlberg advised
representatives of UBS that they were having problems securing
debt financing and that they would provide an update the
following week. On August 27, 2008, Kohlberg indicated to
representatives of UBS that Lender A would not provide a debt
financing commitment, but that they had received a commitment
letter from National City which provided for $90 million of
senior debt financing and that, after performing further
diligence, it had lowered its price to $4.00 per IDS.
On September 2, 2008, the Board of Directors held a meeting
in New York City. Representatives of UBS provided an update on
the exploration process and informed the Board of Directors that
Kohlberg had lowered its price to $4.00 per IDS, but that they
believed that Kohlberg might increase its offer, particularly if
the Company committed to negotiating exclusively with Kohlberg.
Representatives of UBS stated that Company C still had not
finished its diligence or secured financing and would need at
least 30 days to complete a deal. UBS representatives
reminded the Board of Directors that although Company D had no
financing contingency, it had significant outstanding diligence
to complete, it had submitted a substantial
mark-up
to
the proposed merger agreement, which increased the uncertainty
of reaching a deal, and required a
30-day
exclusivity period during which negotiations with Kohlberg would
need to be deferred. Representatives of UBS further noted that
Company Ds price would vary depending on the
Companys aggregate indebtedness, the per IDS price was
calculated after transaction costs and Company D was likely to
reduce its price after conducting further due diligence (as
other bidders had). The Board of Directors determined it was in
the best interest of the Companys security holders to
continue to pursue a transaction with Kohlberg.
Ms. Steinmayer summarized the alternative being explored by
management and Mr. Zander that would maintain the current
capital structure but would require substantial reductions in
operating costs and capital expenditures to comply with the
reinstated monthly financial maintenance covenants under the
credit agreement. This alternative would involve recording
restructuring charges and therefore would also require obtaining
waivers to certain monthly financial maintenance covenants from
lenders under the credit agreement. Representatives of each of
UBS and Cahill then led an in-depth discussion of each of the
capital structure and other alternatives being considered,
27
including (i) selling the Company to a third party,
(ii) refinancing the Companys indebtedness under the
credit agreement with the proceeds of an issuance of new senior
secured notes, (iii) exchanging the Notes for new equity
and cash proceeds from new preferred stock ,
(iv) exchanging the Notes for new common equity,
(v) refinancing the IDSs with cash raised from a new equity
offering, (vi) operating under the current capital
structure by significantly reducing operating costs and capital
expenditures, deferring interest payments on the Notes and
either securing a new credit facility with the existing lenders
or seeking a permanent amendment of the monthly financial
maintenance covenants under the credit agreement,
(vii) restructuring the balance sheet in bankruptcy, either
through a pre-arranged restructuring agreed to with the lenders
or otherwise, (viii) conducting a process to sell the
Company under the protections and procedures of the bankruptcy
laws and (ix) liquidating the Company in bankruptcy. The
discussion included consideration of the risks to the business
posed by each of the alternatives. At the conclusion of this
in-depth review, representatives of each of UBS and Cahill
recommended to the Board of Directors that in light of all the
alternatives, the Company should proceed with Kohlberg. The
Board of Directors determined to proceed with the Kohlberg offer
and instructed the representatives of UBS to pursue a higher
price if possible. The Board of Directors then met in executive
session, with only independent directors and a representative of
Abrams & Laster present, and determined that the sole
member of the special committee would be paid a fee of $100,000
for his work in evaluating the alternatives.
On September 4, 2008, representatives of each of UBS and
Cahill and Mr. Zander met with representatives from
Kohlberg and Ropes & Gray at Kohlbergs office in
Mount Kisco, New York. Representatives of UBS proposed to
representatives of Kohlberg a price of $5.00 per IDS, reducing
conditionality to increase the certainty of the closing and
lowering the tender offer minimum condition to a majority. After
further discussion and negotiation, Kohlberg responded that it
would raise its offer price to $4.50 per IDS if the Company
agreed to a termination fee of $10 million, a reverse
termination fee of $2.5 million in exchange for dropping
the Companys request for specific performance, a closing
condition that the Company shall have obtained the consent of
certain clients, and the tender offer for the Notes having a
minimum condition of 70%. The Company countered with a request
for $4.75 per IDS, a termination fee of $3.0 million and a
reverse termination fee of $4.0 million, a much narrower
condition regarding client consents and that the minimum tender
be only 50.1% of the Notes. The parties discussed the proposals
further. Mr. Zander advised Kohlberg that he was prepared
to recommend to the Board of Directors a deal at $4.75 per IDS
with equivalent termination fees, narrower consent conditions
and a brief exclusivity period. Kohlberg agreed to reduce the
minimum tender condition for the Notes to 50.1%, but only if
there was a maximum of 70% debt tenders in order to enable the
remaining 30% of the Notes to serve as the mezzanine debt
financing, and the removal of the condition in the debt
commitment letter that Kohlberg obtain mezzanine financing.
Kohlberg also agreed to seek to negotiate further changes to its
debt commitment letter to reduce as many of the conditions as
possible. Kohlberg also required the Company to obtain a waiver
or amendment from lenders under the credit agreement to extend
the terms of the May 2008 amendment that relaxed certain monthly
financial maintenance covenants until the closing of the Merger
and that the Company obtain a financial advisor opinion
regarding the Merger. The parties adjourned to consider the open
issues.
Later in the day on September 4, 2008, after discussion
with Mr. Zander, representatives of UBS proposed to
Kohlberg a two-tiered pricing structure in which Kohlberg would
pay $4.75 per IDS if 70% or more of the IDS units were tendered
and $4.50 per IDS if less than 70% but at least 50.1% were
tendered.
On September 5, 2008, the Board of Directors held a
telephonic meeting, during which representatives of each of UBS
and Cahill provided a summary of the September 4 meeting with
Kohlberg and an update on the sale process. Mr. Zander
informed the Board of Directors that he had met with the
Administrative Agent under the credit agreement, and relayed
that he had asked GE for the ability to pay interest on the
Notes through the end of the year. Management noted that they
would reach out to GE when more progress had been made on the
merger agreement. Management then updated the Board of Directors
on the Companys compliance with the monthly financial
maintenance covenants under the credit agreement and informed
the Board of Directors that due to unexpected additional
expenses associated with the sale of the Company, the Company
could be in default much earlier than January 2009 without a
further amendment. A representative of Abrams & Laster
then provided the Board of Directors with an update on
Kohlbergs request for the Company to obtain an
28
opinion of its financial advisor. The Board of Directors agreed
to offer Kohlberg a brief period of exclusivity. The Board of
Directors then approved the retention of Evercore to serve as
the Boards financial advisor to provide an opinion
regarding the consideration offered in the Merger. Kohlberg was
informed by representatives of UBS immediately subsequent to the
meeting that it was granted exclusivity and on
September 12, 2008 a formal agreement was signed by the
Company and Kohlberg granting Kohlberg exclusivity until
September 16, 2008.
On September 6, 2008, representatives of Cahill sent a
revised draft Merger Agreement to representatives of
Ropes & Gray reflecting the Companys responses
to the August 19, 2008
mark-up
from
Ropes & Gray and the agreements reached on
September 4. The Company also added provisions which under
certain circumstances would broaden the Companys right to
terminate the Merger Agreement, require the Company to reimburse
Parent for its expenses rather than pay a termination fee and
require Parent to pay the Company a reverse termination fee.
On September 9, 2008, the Companys management and
representatives of UBS met with additional members of Kohlberg
in New York for a brief presentation of the Companys
business plan.
On September 9, 2008, representatives of Ropes &
Gray sent further comments to the draft Merger Agreement to
representatives of Cahill. The new Ropes & Gray draft
Merger Agreement included revisions to the representations and
warranties and other conditions to the Merger, as well as
revisions which broadened the scope as to when the Company would
have to pay a termination fee to Parent, reduced the
circumstances under which Parent would have to pay the Company a
reverse termination fee and eliminated a reverse termination fee
under certain circumstances.
On September 10, 2008, Kohlberg advised representatives of
UBS that it was prepared to agree on two alternative price
structures: a two-tiered price structure in which Kohlberg paid
$4.50 per IDS if less than 70% (but more than 50.1%) of the
Notes were tendered and $4.75 per IDS if greater than 70% of the
Notes were tendered; or a single price structure in which
Kohlberg paid $4.65 for each IDS tendered. Under either
structure, however, a maximum of 70% of the Notes would be
purchased. Kohlberg also requested a $2.5 million
termination fee and reverse termination fee and that the Company
obtain consents from 15 clients. Kohlberg also advised
representatives of UBS on the progress of financing discussions
with National City, and advised UBS that it was expecting a
revised commitment letter shortly.
On September 11, 2008, the Board of Directors held a
telephonic meeting during which representatives of UBS and
Cahill summarized their September 10 discussions with Kohlberg
and provided an update on Kohlbergs negotiations with its
lender. A representative of Cahill reported that, in view of the
then current financing market conditions, it was unlikely that
National City would eliminate all financing conditions in the
commitment letters, including a condition that there has been no
material adverse change in the financial markets that would
affect syndication. Management informed the Board of Directors
that it was negotiating to amend the credit agreement to allow
for the continuation of the existing amendment (which contained
relaxed monthly financial maintenance covenants) until the
closing of the Merger, and hoped to sign an amendment in the
next week. Management reported that the lenders were requiring
the deferral of interest on the Notes after year-end. Management
also said it would begin contacting key clients that week so
that calls to them which Kohlberg required prior to signing the
Merger Agreement could be made. There was a discussion as to the
advantages and disadvantages of the two pricing structures
offered by Kohlberg, including the relative simplicity of the
single price structure and the potential for investors to
receive greater value under the two-tiered structure. The Board
of Directors determined to obtain the advice of its advisors on
the alternative pricing structure in order to make a decision at
a subsequent meeting. The Board of Directors confirmed that
Ms. Steinmayer would inform the lenders with which
management was negotiating the credit agreement amendment that
the Company would agree to defer interest on the Notes after
November.
On September 12, 2008, Cahill representatives responded to
Kohlberg by sending a new draft Merger Agreement to
Ropes & Gray which included an expansion of the
ability of the Board of Directors to effect an adverse
recommendation change, an expansion of the rights of the Company
to terminate the Merger Agreement, the circumstances in which
Parent would have to pay a reverse termination fee, the amount
of the
29
termination and reverse termination fees and reflecting other
issues discussed during the September 10, 2008 meeting.
On September 15, 2008, the Board of Directors held a
telephonic meeting to discuss the proposed alternative price
structures of the Kohlberg offer and to update the Board of
Directors generally. Representatives from UBS informed the Board
of Directors that approximately 70% of the security holders are
retail investors who generally have smaller holdings and are
typically disinclined to sell or participate in debt tender
offers. UBS representatives said that they believed that retail
investors would view the two price offer as an offer for $4.50
per IDS since it could not be certain of the higher price and
therefore would find the guaranteed offer of $4.65 more
appealing. They then summarized the pros and cons of each, and
advised the Board of Directors to pursue the single price
structure of $4.65 per IDS. The representatives of UBS focused
their analysis on how best to ensure that the simple majority of
consents and tenders of the Notes be obtained. They expressed
that there would be a greater risk of not attracting a majority
under the two-price structure alternative because it is more
complex and therefore may be more difficult for the
Companys largely retail investor base to appreciate.
Representatives of UBS also confirmed to the Board of Directors
that if the Company pushed for a higher price from Kohlberg at
this point it risked losing Kohlbergs current offer.
Following the discussion, the Board of Directors approved moving
forward with the single price structure of $4.65 per IDS,
assuming all final terms were agreed to. Ms. Steinmayer
abstained.
On September 16, 2008, Ropes & Gray responded to
the Company by sending a new draft Merger Agreement to Cahill
which included a $2.5 million cap on expenses that would
have to be reimbursed by either party to the other, narrower
conditions under which Parent would have to pay a reverse
termination fee and restrictions on the Companys right to
terminate the Merger Agreement.
On September 17, 2008, the Company secured a six-month
amendment to the credit agreement which allows for payment of
interest on the IDSs through November 2008, and requires that
the interest be deferred thereafter until the closing with
Kohlberg. This amendment to the credit agreement was contingent
upon the execution of the Merger Agreement with Kohlberg and
would automatically expire if the deal with Kohlberg does not
close. If the amendment expires, the Company would be in
immediate default of the monthly financial maintenance covenants
under the credit agreement.
On September 17, 2008, Kohlberg advised UBS that it reduced
its offer price from $4.65 per IDS to $4.00 per IDS based on
managements latest cash flow forecast, a revision to the
financing terms by National City (including an increase in fees
payable) and the further deteriorating financing market
conditions. Kohlberg stated that their proposal was subject to a
call with management to walk through the revised cash flow
forecast and Kohlbergs satisfaction that the forecast was
achievable.
Also on September 17, 2008, representatives of Cahill
responded to Kohlberg by sending a new draft Merger Agreement
which included a $1.5 million expense reimbursement cap and
narrowed the circumstances of the termination fee such that it
would not be payable to Parent where the Board of Directors
makes an adverse recommendation change as the result of a
material adverse change relating to Parent, Merger Sub, the
Sponsor or the lender. On the same date, Kohlberg counsel
Ropes & Gray responded to the Company by sending a new
draft Merger Agreement to Cahill which included a
$2.5 million expense reimbursement cap, a clarification
that such expenses would include all fees and expenses payable
to the Company pursuant to the Merger Agreement and expanded the
circumstances of the termination fee that would be payable in
connection with any adverse recommendation change by the Board
of Directors.
Later on September 17, 2008, the Board of Directors held a
telephonic meeting during which representatives of UBS briefed
the Board of Directors on Kohlbergs revised offer and
representatives of Cahill summarized the outstanding issues with
the Merger Agreement. Ms. Steinmayer reviewed the latest
cash flow forecast and explained that the Company could be
required to reduce substantially its capital expenditures
earlier than expected or be in default under the credit
agreement. Representatives of UBS said that the capital markets
had deteriorated rapidly given the recent developments,
including the bankruptcy of investment bank Lehman Brothers and
the bailout of insurance company AIG by the government.
Mr. Zander said that absent execution of the Merger
Agreement and the credit agreement amendment, the Company would
be in default under the monthly financial maintenance covenants
under the credit agreement upon the release in November
30
of the Companys September financial statements. A
representative of Abrams & Laster informed the Board
of Directors that Evercores engagement letter had been
executed. A motion to move forward with the Kohlberg merger
process was approved by all members of the Board of Directors
present, with Ms. Steinmayer abstaining from the vote.
On September 18, 2008, representatives of UBS proposed to
Kohlberg a counter-offer price of $4.35 per IDS. Kohlberg
maintained its offer of $4.00 per IDS, citing again as reasons
the Companys revised cash flow forecast, the revised terms
of its debt commitment and the deteriorating market conditions.
Later on September 18, 2008, the Board of Directors held a
meeting in Stamford, Connecticut during which representatives of
UBS informed the Board of Directors that Kohlberg was prepared
to sign the Merger Agreement at a price of $4.00 per IDS.
Representatives of UBS told the Board of Directors that, after
having reviewed various strategic alternatives and given the
rapid deterioration of the financing markets, they recommended
that the Company pursue Kohlbergs offer. They also told
the Board of Directors that National City was expected to be
prepared to execute commitment letters by that evening.
Representatives of UBS then summarized certain risks that the
Company faces prior to closing, including the requirement to
obtain consents from certain clients, that no Company Material
Adverse Effect (as defined in the Merger Agreement) will have
occurred prior to the closing, and that the tender and votes of
holders of a majority of the shares of Company common stock and
Notes underlying the IDSs must be obtained. Representatives of
Cahill then informed the Board of Directors that there were no
major issues left to negotiate on the Merger Agreement and that
Ropes & Gray had signed off on the agreement.
Representatives of Cahill summarized the terms and conditions of
the Merger Agreement, including that the Company is not
permitted to solicit other offers, although it can pursue an
unsolicited offer which constitutes or is reasonably likely to
result in a Superior Proposal (as defined in the Merger
Agreement). Representatives of Evercore then orally presented
its opinion. They explained that consideration received by debt
holders is not typically evaluated as fair because,
among other reasons, debt holders ability to benefit from
a companys future prospects is capped, and therefore
Evercore was opining as to whether the consideration was within
the range of the Companys Net Enterprise Values (defined
by Evercore as enterprise value minus the amount of the
Companys indebtedness under the credit agreement, plus the
amount by which the Companys cash balances exceeded
$23.3 million, with the amounts of such indebtedness and
cash balances as estimated by management as of
September 30, 2008). Representatives of Evercore then
described the analysis it performed, including the conditions
and assumptions it relied upon, its review of the sales process,
its review of the Companys financial statements and debt
obligations, its review of sensitivity cases, and the
performance of public market trading and precedent transaction
analyses. Representatives of Evercore concluded to the Board of
Directors that the Aggregate Consideration offered by the Merger
(which Evercore defined as the $4.00 per IDSs for 70% of the
outstanding IDS plus an assumed value of $3.99 per IDS for the
30% of the IDS that will remain outstanding) is within the range
of the Companys Net Enterprise Values as estimated by
Evercore. A representative of Abrams & Laster then
reviewed the Boards fiduciary duties in connection with
evaluating the Merger. Mr. Zander, the member of the
special committee, then recommended to the Board of Directors
that the Company move forward with the Merger with Kohlberg. The
Board of Directors after careful consideration determined, by
the vote of all independent directors and a unanimous vote of
all directors, that the Merger Agreement and the transactions
contemplated thereby are advisable and in the best interests of
the Company and the security holders, and approved the Merger
Agreement, the Merger and the other transactions contemplated
thereby.
On the evening of September 18, 2008, Parent, Merger Sub
and the Company executed the Merger Agreement and announced the
deal.
Reasons
for the Merger; Recommendation of the Board of
Directors
In determining to enter into and approve the Merger Agreement,
the Merger and the transactions contemplated thereby and
recommend that the Companys security holders vote in favor
of the Merger
31
Agreement, the Board of Directors consulted with its legal and
financial advisors, the special committee and senior management
and considered the following factors:
|
|
|
|
|
the Board of Directors belief, based on the Companys
IDS capital structure, the extreme volatility of, and the
deterioration in, international and national economic
conditions, and the equity and credit markets and discussions
with the Companys lenders, that (1) in the absence of
a sale transaction or other restructuring of the Companys
debt, its lenders would not agree to further amendments or
waivers to the credit agreement, (2) the Company would not
be able to comply with the monthly financial maintenance
covenants after expiration of the amendment in September 2008,
which would result in a default under the credit agreement and
(3) such default could likely have led to the acceleration
of payment of the Companys indebtedness with the likely
consequence that the holders of the IDSs would receive
substantially less, if anything, than in the Merger;
|
|
|
|
the Board of Directors, with the assistance of UBS, used all
reasonable efforts to identify, pursue and evaluate a broad
range of capital structures and other alternatives, including
(i) selling the Company to a third party,
(ii) refinancing the Companys indebtedness under the
credit agreement with the proceeds of an issuance of new senior
secured notes, (iii) exchanging the Notes for new common
equity and cash proceeds from new preferred stock,
(iv) exchanging the Notes for new common equity,
(v) refinancing the IDSs with cash raised from a new equity
offering, (vi) operating under the current capital
structure by significantly reducing operating costs and capital
expenditures, deferring interest payments on the Notes and
either securing a new credit facility with the Companys
existing lenders or seeking a permanent amendment of the monthly
financial maintenance covenants under the credit agreement,
(vii) restructuring the balance sheet in bankruptcy, either
through a pre-arranged restructuring agreed to with the lenders
or otherwise, (viii) conducting a process to sell the
Company under the protections and procedures of the bankruptcy
laws, or (ix) liquidating the Company in bankruptcy;
|
|
|
|
Advice of UBS representatives to the Board of Directors that
each of the possible alternatives to the Merger that had been
evaluated would be less favorable to security holders for
reasons that included (i) refinancing the Notes or the
indebtedness under the credit agreement at a reasonable cost of
capital or with the proceeds of a note or equity offering was
unlikely, if not impossible, to accomplish given the
deterioration of the capital markets and the Companys
current financial condition; (ii) continuing with the
current capital structure while attempting to significantly
reduce operating costs and capital expenditures would not
resolve the Companys inability to meet the monthly
financial maintenance covenants in the credit agreement without
obtaining a permanent amendment (which was unlikely, if not
impossible, to achieve) and could result in an overall loss of
value to the business and, therefore, less value being received
by the Companys security holders; and (iii) a
liquidation or restructuring in bankruptcy could damage the
Companys business and result in the security holders
receiving substantially less value, if any, than in the Merger;
|
|
|
|
the Merger Agreement was a result of a Board of
Directors-directed process to pursue the alternative to sell the
Company to a third party, which lasted more than four months and
included contacting 54 parties (7 of which were strategic
companies, 47 of which were private equity investors) entering
into non-disclosure agreements with 36 of the parties (3 of
which were strategic companies, 33 of which were private equity
investors) and evaluating indications of interest from 11 of the
parties (3 of which were strategic companies, 8 of which were
private equity investors) and engaging with 3 final stage
bidders (one strategic company and 2 private equity bidders);
|
|
|
|
the financial presentation to the Board of Directors by Evercore
representatives on September 18, 2008, including
Evercores opinion on that date that the Aggregate
Consideration (as defined by Evercore in its opinion) was within
the range of the Companys Net Enterprise Values (as
defined by Evercore in its opinion) estimated by Evercore for
the Company and the Board of Directors belief that the
analysis of Evercore was reasonable (see Adoption of the
Merger Agreement (Proposal 1) The
Merger Opinion of Evercore Group L.L.C. on
page 34);
|
|
|
|
the fact that the Total Consideration will be paid in cash to
the Companys IDS holders for up to 70% of the outstanding
IDSs, at a price in excess of the market price on the last
trading day before the
|
32
|
|
|
|
|
entering into of the Merger Agreement, and that security holders
would continue to own in the aggregate 30% of the Notes and
therefore continue to earn interest and have the right to be
repaid principal on the Notes they continue to hold;
|
|
|
|
|
|
the terms of the Merger Agreement and the ability of the Board
of Directors, in exercising its fiduciary duties, to
(i) enter into discussions and negotiations with respect to
a proposal that constitutes or is reasonably likely to result in
a Superior Proposal (as defined in the Merger Agreement) or
(ii) change its recommendation in favor of the Merger;
|
|
|
|
that in light of realistic strategic alternatives available to
the Company, the Merger would maximize the value of the business
by injecting much needed capital and refinancing the
Companys indebtedness without a bankruptcy proceeding;
|
|
|
|
the likelihood that the sale to Kohlberg would be received
positively by the Companys employees and clients, thereby
preserving value for security holders; and
|
|
|
|
recognizing there can be no assurance that the Merger will be
consummated even if all of the conditions to Parent and Merger
Subs obligation to close the Merger are satisfied, the
failure of Parent or Merger Sub under such circumstances will
result in payment to the Company of a $2,500,000 reverse
termination fee.
|
The Board of Directors also considered a variety of risks and
other potentially negative factors concerning the Merger
Agreement, the Merger and the transactions contemplated thereby.
The material risks and negative factors considered by the Board
of Directors were as follows:
|
|
|
|
|
the $3.99 in cash plus accrued and unpaid interest and deferred
interest tender consideration for the Notes represented by each
IDS, or the Tender Consideration, is less than the $5.70
principal amount of the Notes, and the $0.01 in cash for the
common stock represented by each IDS, or the Merger
Consideration, only represents nominal consideration for the
common stock;
|
|
|
|
the Company will cease to be a public company and will no longer
file public reports with the SEC and, as a result, remaining
security holders will have less access to information about the
Companys business and results of operations than such
holders had in the past;
|
|
|
|
at least thirty percent of all of the Notes will remain
outstanding after the Merger and there likely will no longer be
a public or other active market for trading the Notes and the
Notes will no longer have the benefit of substantially all of
the covenants, certain events of default and the change of
control offer provided in the Indenture;
|
|
|
|
while there is no financing condition in the Merger Agreement,
the debt financing commitment is subject to conditions which
include the nonoccurrence of any adverse change or disruption in
the financial, banking, or capital market conditions that could,
in the reasonable judgment of National City, in its role as
agent for the contemplated new senior credit facility,
reasonably be expected to have an adverse impact in any material
respect on the successful syndication of the proposed senior
credit facilities; National City would have the ability to
refuse to fund its commitment if it determines this condition
has not been satisfied;
|
|
|
|
the ability of National City to fund its debt commitments to
Kohlberg as a result of the impact of the deteriorating credit
markets and the financial position of National City;
|
|
|
|
while there is no financing condition in the Merger Agreement,
the Companys only remedy in the event that the financing
for the Merger becomes unavailable for any reason and Parent or
Merger Sub breach their obligations to close is a payment of a
$2,500,000 reverse termination fee to the Company by Parent;
|
|
|
|
if the Company (i) decides to withdraw, or modify in a
manner that is adverse to Parent, its recommendation to approve
the Merger or (ii) determines to enter into an agreement
concerning a transaction that constitutes or is reasonably
likely to result in a Superior Proposal, it will be required to
pay Parent a termination fee of $2,500,000;
|
33
|
|
|
|
|
the risk that the Merger may not receive the requisite approval
of, or the requisite tenders from, the Companys security
holders and therefore may not be consummated;
|
|
|
|
the acquisition of the Notes pursuant to the Debt Tender at less
than their principal amount will result in cancellation of
indebtedness income for tax purposes, which might exceed the
amount of the Companys net operating losses that could be
used to offset that income; and
|
|
|
|
the Merger Agreement imposes restrictions on the conduct of the
Companys business prior to the completion of the Merger by
requiring the Company to conduct business only in the ordinary
course, subject to specific limitations, which may delay or
prevent the Company from undertaking business opportunities that
may arise pending completion of the Merger.
|
The Board of Directors concluded, however, that overall, the
negative factors associated with the Merger were outweighed by
the benefits of the Merger to the holders of the Companys
IDSs. The foregoing discussion summarizes the material factors
considered by the Board of Directors in its consideration of the
Merger. In view of the wide variety of factors considered by the
Board of Directors, and the complexity of these matters, the
Board of Directors did not find it practicable to quantify or
otherwise assign relative weights to the foregoing factors. In
addition, individual members of the Board of Directors may have
assigned different weights to various factors. The Board of
Directors unanimously approved the Merger and recommended the
adoption of the Merger Agreement based upon the totality of the
information presented to and considered by the Board of
Directors.
Opinion
of Evercore Group L.L.C.
The Company engaged Evercore to provide financial advisory
services in connection with evaluating the Merger and the Debt
Tender (together, the Transactions). At a meeting of
the Board of Directors of the Company on September 18,
2008, Evercore presented to the Board of Directors
Evercores financial analyses with respect to whether the
aggregate consideration (the aggregate amount of the cash
received in the Transaction and the remaining Notes outstanding,
the Aggregate Consideration) to be received by the
holders of the Companys IDSs was within the range of net
enterprise values (defined as enterprise values minus the amount
of the Companys indebtedness under its term loan and
revolving credit facility and plus the amount by which the
Companys cash balance exceeds $23.3 million, with the
amounts of such indebtedness and cash balance as estimated by
the Company as of September 30, 2008, Net Enterprise
Values) that Evercore estimated for the Company. In the
course of this presentation, the members of the Board were
reminded or informed of the material assumptions that Evercore
made in carrying out its analyses, the matters considered by
Evercore and the limits of Evercores review. At that
meeting Evercore orally rendered its opinion to the Board, which
oral opinion was subsequently confirmed in a written opinion
dated September 18, 2008, that, as of such date, based upon
and subject to the assumptions made, matters considered and
limits of the review undertaken by Evercore, the aggregate
consideration was within the range of Net Enterprise Values that
Evercore estimated for the Company.
The full text of Evercores written opinion, dated
September 18, 2008, is attached as Exhibit B to this
proxy statement. You are encouraged to read Evercores
opinion carefully in its entirety, as it sets forth, among other
things, the assumptions made, procedures followed, factors
considered and limitations upon the review undertaken by
Evercore in rendering its opinion. The following is a summary of
Evercores opinion and the methodology that Evercore used
to render its opinion. This summary is qualified in its entirety
by reference to the full text of the opinion.
Evercores opinion addresses only whether the Aggregate
Consideration was within the range of Net Enterprise Values that
Evercore estimated for the Company, and Evercore was not asked
to express, nor has it expressed, any opinion with respect to
any other aspect of the Transactions. Evercore does not express
any view on, and its opinion does not address, (i) the
relationship between the Aggregate Consideration and any other
consideration received in connection with the Transactions by
the creditors or other constituencies of the Company,
(ii) the allocation of consideration between the Merger
Consideration or the Tender Consideration, or (iii) the
fairness of the amount or nature of any compensation to be paid
or payable to any of the officers, directors or employees of the
Company, or any class of such persons, whether relative to the
Merger
34
Consideration, the Tender Consideration, the Aggregate
Consideration or otherwise. Evercore assumed that the structure
of the Transaction will not be modified in any respect material
to its analysis.
Evercore was advised that the Company faces serious liquidity
and capital constraints, and absent some restructuring
transaction, the Company expects to default under its credit
facility and the Notes. In arriving at its opinion, Evercore
took into account the view of the Companys management,
given the Companys current financial condition and the
state of the capital markets, that the Company is unlikely to be
able to obtain, in the near term, the additional capital
required to execute its business plan, and the likelihood that,
in the absence of obtaining such additional capital, the Company
will need to undertake a restructuring, either in bankruptcy or
out of bankruptcy, that will diminish the Companys value.
Evercore understands that the management of the Company
considered the feasibility of refinancing its credit facility
and determined that under current market conditions, a
refinancing was not feasible. Evercore further understands that
management of the Company believes, in the absence of a sale
transaction, obtaining additional amendments or waivers from its
lenders likely would require additional payments and
restructuring steps, which management expects would diminish the
value of the Company.
Evercores opinion does not address the relative merits of
the Transaction as compared to other business or financial
strategies that might be available to the Company, whether in
bankruptcy or out of bankruptcy, nor does it address the
underlying business decision of the Company to engage in the
Transactions.
In arriving at its opinion, Evercore assumed that the Notes not
acquired in the Tender Offer should be deemed part of the
Aggregate Consideration with a value following consummation of
the Transaction equal to at least $3.99 per Note.
In arriving at its opinion, Evercore was not authorized to
solicit, and did not solicit, interest from any third party with
respect to the acquisition of any or all of the Company Common
Stock or any business combination or other extraordinary
transaction involving the Company. Evercore understands that the
Company has considered all refinancing , restructuring, sale
(including conducting a broad sale process) and other strategic
options and that the Board has concluded that the Transaction is
the superior strategic alternative available to the Company.
This letter, and the opinion, does not constitute a
recommendation to the Board or to any other persons in respect
of the Transaction, including as to how any holder of IDSs or
any other securities of the Company should vote or act in
respect of the Transaction. Evercore is not a legal, regulatory,
accounting or tax expert and has assumed the accuracy and
completeness of assessments by the Company and its advisors with
respect to legal, regulatory, accounting and tax matters.
Evercores opinion was addressed to, and for the
information and benefit of, the Board in connection with its
evaluation of the Transactions. Evercore expresses no opinion as
to the price at which any securities of the Company will trade
at any future time.
In connection with rendering its opinion, Evercore, among other
things:
|
|
|
|
|
reviewed certain publicly available business and financial
information relating to the Company that Evercore deemed to be
relevant;
|
|
|
|
reviewed certain non-public historical financial statements and
other historical non-public financial data relating to the
Company prepared and furnished to Evercore by management of the
Company;
|
|
|
|
reviewed certain non-public projected financial data relating to
the Company prepared and furnished to Evercore by management of
the Company;
|
|
|
|
reviewed certain non-public historical and projected operating
data relating to the Company prepared and furnished to Evercore
by management of the Company;
|
|
|
|
discussed the past and current operations, financial projections
and current financial condition of the Company with management
of the Company (including their views on the risks and
uncertainties of achieving such projections);
|
|
|
|
reviewed the sale process with UBS, financial advisor to the
Company; and reviewed certain presentations to the Board by UBS;
|
35
|
|
|
|
|
reviewed the reported prices and the historical trading activity
of the IDSs;
|
|
|
|
reviewed a draft of the Merger Agreement dated
September 17, 2008, which Evercore assumed was in
substantially final form and from which Evercore assumed the
final form will not vary in any respect material for its
analysis; and
|
|
|
|
performed such other analyses and examinations and considered
such other factors that Evercore deemed appropriate.
|
In arriving at its opinion, Evercore assumed and relied upon,
without undertaking any independent verification of, the
accuracy and completeness of all of the information publicly
available, and all of the information supplied or otherwise made
available to, discussed with, or reviewed by Evercore, and
Evercore assumes no liability therefor. For purposes of
rendering its opinion, members of the management of the Company
provided Evercore with certain financial projections, which it
refers to as the management projections. With respect to the
management projections, Evercore assumed that they were
reasonably prepared on bases reflecting the best available
estimates and good faith judgments of the Companys
management as to the future matters covered by the management
projections. Evercore also prepared a sensitivity case to the
management projections that utilized different assumptions
relating to cost savings (including related restructuring
charges) and improvements in working capital management.
Management confirmed that these sensitivity assumptions
represented a reasonable set of assumptions for a sensitivity
case.
In arriving at its opinion, Evercore assumed, in all respects
material to its analysis, that the representations and
warranties of each party contained in the Merger Agreement are
true and correct, that each party will perform all of the
covenants and agreements required to be performed by it under
the Merger Agreement and that all conditions to the consummation
of the Transactions will be satisfied without material waiver or
modification thereof.
Evercore further assumed that all governmental, regulatory or
other consents, approvals or releases necessary for the
consummation of the Transactions will be obtained without any
material delay, limitation, restriction or condition that would
have an adverse effect on the Company or the consummation of the
Transactions or materially reduce the benefits of the
Transactions to the holders of the IDSs.
Evercore does not make or assume any responsibility for making
any independent valuation or appraisal of the assets or
liabilities of the Company, nor has Evercore been furnished with
any such appraisals, nor has Evercore evaluated the solvency or
fair value of the Company under any state or federal laws
relating to bankruptcy, insolvency or similar matters. Evercore
has not evaluated, and expresses no opinion as to, the recovery
that might be available to the holders of any securities of the
Company in a bankruptcy proceeding or other restructuring,
relative to the Tender Consideration, the Merger Consideration,
the Aggregate Consideration or otherwise. Evercores
opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available
to Evercore as of, September 18, 2008. Subsequent
developments may affect its opinion and Evercore does not have
any obligation to update, revise or reaffirm its opinion.
In receiving Evercores opinion on September 18, 2008
and reviewing with Evercore the written materials prepared by
Evercore in support of its opinion, the Board was aware of and
consented to the assumptions and other matters discussed above.
The opinion was approved by the Opinion Committee of Evercore.
Evercores opinion was only one of many factors considered
by the Board in its evaluation of the Transactions and should
not be viewed as determinative of the views of the Board or
management of the Company with respect to the Transactions or
the Aggregate Consideration to be received in accordance with
the Merger Agreement.
Summary
of Analyses
The following is a summary of the material analyses performed
by Evercore and presented to the Board in connection with
rendering its opinion.
36
Some of the financial analyses summarized below include summary
data and information presented in tabular format. In order to
understand fully the financial analyses, the summary data and
tables must be read together with the full text of the analyses.
The summary data and tables alone are not a complete description
of the financial analyses. Considering the summary data and
tables alone could create a misleading or incomplete view of
Evercores financial analyses. Except as otherwise noted,
the following quantitative information, to the extent that it is
based on market data, is based on market data as it existed on
or before September 18, 2008, and is not necessarily
indicative of current market conditions.
Public
Market Trading Analysis
Evercore reviewed the historical high and low closing prices of
the Companys IDSs since its initial public offering
(IPO).
|
|
|
|
|
|
|
Historical
|
|
|
|
Closing IDS
|
|
|
|
Price
|
|
|
September 17, 2008
|
|
$
|
3.03
|
|
High Closing Price since IPO
|
|
$
|
19.88
|
|
Low Closing Price since IPO
|
|
$
|
2.10
|
|
Using publicly available information, Evercore reviewed the
market values and implied trading multiples of selected publicly
traded caterers and concession operators. Evercore noted,
however, that none of the selected publicly traded companies was
directly comparable to the Company due to differences in
business, financial, trading and geographic characteristics.
|
Caterers & Concession Operators
|
|
Compass Group
|
Sodexho
|
Autogrill
|
Evercore calculated and analyzed the ratio of total enterprise
value, which we refer to as TEV, to estimated 2008 calendar year
earnings before interest, taxes, depreciation and amortization,
or EBITDA, less normalized capital expenditures (estimated as
average capital expenditures as a percentage of sales from 2005
to 2007, multiplied by estimated 2008 revenue) for the above
selected publicly-traded companies, as well as the ratio of TEV
to estimated 2009 calendar year EBITDA less normalized capital
expenditures (estimated as average capital expenditures as a
percentage of sales from 2005 to 2007, multiplied by estimated
2009 revenue). Evercore also calculated and analyzed the ratio
of price to estimated 2008 and 2009 earnings per share for the
above selected publicly-traded companies. Evercore also
calculated and analyzed the ratio of price to book value per
share per the latest publicly available balance sheet. Evercore
calculated all multiples for the selected companies based on
each respective companys closing share prices as of
September 17, 2008. These calculations were based on
publicly available financial data including estimates from
equity research analysts. The range of implied multiples that
Evercore calculated is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public Market
|
|
|
|
Transaction
|
|
|
Trading Multiples
|
|
|
|
Multiples
|
|
|
Caterers & Concession Operators
|
|
Metric
|
|
CVP
|
|
|
Mean
|
|
|
Median
|
|
|
TEV/2008E EBITDA CapEx
|
|
|
8.8
|
x
|
|
|
13.3x
|
|
|
|
13.2x
|
|
TEV/2009E EBITDA CapEx
|
|
|
11.0
|
x
|
|
|
11.8x
|
|
|
|
11.9x
|
|
Price/2008E Earnings
|
|
|
Deficit
|
|
|
|
16.2x
|
|
|
|
15.5x
|
|
Price/2009E Earnings
|
|
|
Deficit
|
|
|
|
14.1x
|
|
|
|
13.5x
|
|
Price/Book Value
|
|
|
Deficit
|
|
|
|
3.6x
|
|
|
|
3.4x
|
|
37
Precedent
Transaction Analysis
Evercore performed an analysis of selected merger and
acquisition transactions. Evercore identified and analyzed a
group of three acquisitions of caterer and concession operators
that were announced between 2006 and 2007. Evercore noted that
the target companies identified were not directly comparable to
the Company due to differences in business, financial, trading
and geographic characteristics. Evercore also noted that these
transactions occurred at a time when the availability of
financing for transactions was greater and terms were
substantially more favorable than at the time of the
Transactions. Evercore calculated the TEV as a multiple of
EBITDA during the last 12 months prior to the acquisition,
or LTM, less normalized capital expenditures (defined as the
average of the last three fiscal year capital expenditures as a
percentage of sales multiplied by the revenue for the last
12 months) implied by these transactions. Evercore also
calculated the ratio of the offer price to LTM earnings per
share. Multiples for the selected transactions were based on
publicly available financial information.
|
|
|
|
|
Date Announced
|
|
Target
|
|
Acquiror
|
|
5/12/07
|
|
Selecta Group
|
|
Allianz Capital Partners
|
5/1/06
|
|
Aramark Corporation
|
|
CCMP Capital Advisors, Goldman Sachs Group Merchant Banking
Division, JPMorgan Partners, Thomas H. Lee Partners, Warburg
Pincus
|
1/13/06
|
|
Levy Restaurants
|
|
Compass Group
|
The range of implied multiples that Evercore calculated is
summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
|
Precedent Transaction
|
|
|
|
Multiples
|
|
|
Multiples
|
|
|
|
CVP
|
|
|
Mean
|
|
|
Median
|
|
|
TEV/LTM EBITDA CapEx
|
|
|
9.1
|
x
|
|
|
14.7
|
x
|
|
|
14.7x
|
|
Offer Price/LTM EPS
|
|
|
Deficit
|
|
|
|
20.5
|
x
|
|
|
20.5x
|
|
Discounted
Cash Flow Analysis
Evercore performed a discounted cash flow, or DCF, analysis,
which calculates the present value of a companys future
unlevered, after-tax free cash flow based upon assumptions with
respect to such cash flow and assumed discount rates. The
financial forecast used in Evercores DCF analysis was
based upon the management projections.
Evercore calculated ranges of estimated terminal values by using
a range of perpetuity growth rates from 2.0% to 6.0%. The
estimated interim after-tax free cash flows and terminal values
were then discounted to present value at September 30, 2008
using discount rates of 12.0% to 20.0%. This analysis indicated
the following implied net enterprise value ranges for the
Company:
|
|
|
|
|
|
|
Implied Net Enterprise Value Range
|
|
Low
|
|
$
|
(21) million
|
|
High
|
|
$
|
178 million
|
|
Evercore also prepared a sensitivity case to the management
projections that utilized different assumptions relating to cost
savings and improvements in working capital management.
Management confirmed that these sensitivity assumptions
represented a reasonable set of assumptions for a sensitivity
case. The analysis indicated the following implied net
enterprise value ranges for the Company:
|
|
|
|
|
|
|
Implied Net Enterprise Value Range
|
|
Low
|
|
$
|
(44) million
|
|
High
|
|
$
|
130 million
|
|
These Implied Net Enterprise Value Ranges compared to Aggregate
Consideration of $83.9 million to be received by holders of
the Companys IDSs. While discounted cash flow analysis is
a widely used valuation methodology, it necessarily relies on
numerous assumptions, including assets and earnings growth
rates,
38
terminal values and discount rates. As a result, it is not
necessarily indicative of actual, present or future value or
results, which may be significantly more or less favorable than
suggested by such analysis.
General
The preparation of an opinion is a complex process involving
various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those
methods to the particular circumstances. As a result, an opinion
is not readily susceptible to partial analysis or summary
description. In arriving at its opinion, Evercore made
qualitative judgments as to the significance and relevance of
each analysis and factor that it considered. Accordingly,
Evercore believes that its analyses must be considered as a
whole and that selecting portions of its analyses and factors,
without considering all analyses and factors, could create a
misleading or incomplete view of the processes underlying its
analyses and opinion. In addition, Evercore may have given
various analyses and factors more or less weight than other
analyses and factors and may have deemed various assumptions
more or less probable than other assumptions, so that the ranges
of valuations resulting from any of the foregoing analyses
should not be taken to be Evercores view of the actual
value of the Company. The foregoing summary does not purport to
be a complete description of all analyses performed by Evercore.
Evercore made numerous assumptions with respect to risks
associated with industry performance, general business and
economic conditions and other matters, many of which are beyond
the control of the Company. Any estimates contained in
Evercores analyses are not necessarily indicative of
future results or actual values, which may be significantly more
or less favorable than those suggested by such estimates. The
analyses performed were prepared solely as part of
Evercores analysis of the Aggregate Consideration to be
received by the holders of IDSs of the Company pursuant to the
Merger Agreement, from a financial point of view, and were
prepared in connection with the delivery by Evercore of its
opinion to the Board.
The Merger Consideration and the Tender Consideration were
determined through arms length negotiations between the
Company and Sponsor and were approved by the Board. Evercore did
not provide any advice to the Company during these negotiations.
Evercore is an internationally recognized investment banking and
advisory firm. Evercore, as part of its investment banking
business, is continuously engaged in the valuation of businesses
and their securities in connection with mergers and
acquisitions, competitive biddings and valuations for corporate,
estate and other purposes. The Board selected Evercore because
its investment banking professionals have had substantial
experience in merger and acquisition transactions. In the
ordinary course of its business, Evercore and its affiliates may
from time to time trade in the securities or the indebtedness of
the Company, or affiliates of Sponsor or any currencies or
commodities (or derivatives thereof) (i) for its own
account, (ii) for the accounts of investment funds and
other clients under the management of Evercore and
(iii) for the accounts of its customers and, accordingly,
may at any time hold a long or short position in such
securities, indebtedness, currencies or commodities (or
derivatives thereof) for any such account.
Pursuant to the terms of an engagement letter, the Company has
agreed to pay Evercore an advisory fee of $800,000,
(i) $200,000 of which was paid to Evercore upon signing the
engagement letter, (ii) $200,000 of which was paid to
Evercore when it delivered its written opinion and
(iii) the remainder of which is contingent upon, and
payable upon, consummation of the Merger. The Company has also
agreed to reimburse Evercore for reasonable out of pocket
expenses (including legal fees) incurred in performing its
services not to exceed $100,000. In addition, the Company has
agreed to indemnify Evercore and certain related parties for
certain liabilities that may arise out of Evercores
engagement by the Company.
Company
Projected Financial Information
The Company does not as a matter of course make public
projections as to future sales, earnings, or other results.
However, our senior management prepared certain sets of
financial forecasts for internal use and for the use of Evercore
and Parent and its advisors in connection with the transaction
described in this proxy statement. The accompanying financial
forecasts were not prepared with a view toward public disclosure
or with a view toward complying with the guidelines established
by the American Institute of Certified Public
39
Accountants with respect to prospective financial information,
but, in the view of our management, were prepared on a
reasonable basis, and reflect our best available estimates and
judgments and the expected future financial performance of the
Company at the time the projections were prepared. However, this
information is not factual and should not be relied upon as
being indicative of future results, and readers of this proxy
statement are cautioned not to place undue reliance on the
prospective financial information. Furthermore, neither set of
financial projections take into account any circumstances or
events occurring after the respective dates the projections were
prepared and, in particular, do not take into account or give
effect to the Merger or the proposed financing of the Merger.
Neither the Companys independent auditors, nor any other
independent accountants, have compiled, examined, or performed
any procedures with respect to the prospective financial
information contained herein, nor have they expressed any
opinion or any other form of assurance on such information or
its achievability, and assume no responsibility for, and
disclaim any association with, the prospective financial
information.
The accompanying financial projections were, in one case, made
available to the 11 potential bidders, including Parent,
who participated in the second phase of the process in
connection with a potential sale of the Company and, in the
other case, to our financial advisor Evercore. We have included
subsets of these projections in this proxy statement to give
security holders access to certain nonpublic information that
served as the basis for Parents offer and Evercores
evaluation. The inclusion of this information should not be
regarded as an indication that we, Evercore, Parent or any other
person considered, or now considers, it to be predictive of
actual future results. The Company does not intend to update or
otherwise revise either set of financial projections or the
specific portions presented to reflect circumstances existing
after the date when made or to reflect the occurrence of future
events, even in the event that any or all of the assumptions
underlying the projections are shown to be in error.
Third-Party
Buyer Projections
These projections, dated June 16, 2008, were provided to
the 11 potential bidders who participated in the second
phase of the process in connection with a potential sale of the
Company. These projections reflect the Net Sales and Adjusted
EBITDA that the Company might achieve if it were able to enter
into an agreement whereby a third party would purchase the
Company and, in connection with such purchase, invest equity in
the Company. These projections reflect strong sales and Adjusted
EBITDA growth driven by significant capital investments in 2008
and 2009 to maintain existing business, obtain new business and
make several acquisitions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008E
|
|
|
2009E
|
|
|
2010E
|
|
|
2011E
|
|
|
2012E
|
|
|
|
|
|
Net Sales
|
|
$
|
879.1
|
|
|
$
|
1,095.6
|
|
|
$
|
1,251.0
|
|
|
$
|
1,340.1
|
|
|
$
|
1,444.4
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
61.9
|
|
|
|
72.7
|
|
|
|
86.7
|
|
|
|
96.2
|
|
|
|
106.1
|
|
|
|
|
|
Net Income/(Loss)
|
|
$
|
(3.5
|
)
|
|
$
|
(0.6
|
)
|
|
$
|
10.7
|
|
|
$
|
17.6
|
|
|
$
|
23.3
|
|
|
|
|
|
Capital Expenditures
|
|
$
|
113.4
|
|
|
$
|
154.1
|
|
|
$
|
29.8
|
|
|
$
|
28.0
|
|
|
$
|
28.6
|
|
|
|
|
|
Management
Projections Provided to Evercore
These projections, dated September 9, 2008, were provided
to Evercore in connection with its evaluation of the Merger.
These projections reflect the Net Sales and Adjusted EBITDA that
the Company might achieve as a stand-alone entity if it had to
continue under its existing IDS capital structure and liquidity
constraints. These projections reflect a large drop in sales in
2009 and essentially flat sales thereafter primarily due to the
termination of the Yankees contract at the end of 2008, the sale
of several business segments to third parties (with 100% of the
proceeds going to pay down the term loan as required under our
credit agreement) and minimal new business due to the
Companys inability to access new capital. In addition, the
loss of business would be higher than historical levels in the
next two years due to the weak economy and business environment
and competitive pressures. These projections also reflect
significant cuts in overhead expenses and working capital which
would be necessary to satisfy the monthly financial maintenance
covenants under
40
the credit agreement. To implement this scenario the Company
would need the cooperation of the lenders and an amendment to
the credit agreement to be able to execute several of these
initiatives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008E
|
|
|
2009E
|
|
|
2010E
|
|
|
2011E
|
|
|
2012E
|
|
|
Net Sales
|
|
$
|
830.0
|
|
|
$
|
669.6
|
|
|
$
|
682.2
|
|
|
$
|
680.1
|
|
|
$
|
709.5
|
|
Adjusted EBITDA
|
|
|
53.5
|
|
|
|
47.4
|
|
|
|
49.0
|
|
|
|
50.5
|
|
|
|
52.4
|
|
Net Income/(Loss)
|
|
$
|
(10.8
|
)
|
|
$
|
(3.1
|
)
|
|
$
|
(1.5
|
)
|
|
$
|
0.9
|
|
|
$
|
2.9
|
|
Capital Expenditures
|
|
$
|
47.9
|
|
|
$
|
17.3
|
|
|
$
|
22.2
|
|
|
$
|
15.0
|
|
|
$
|
15.0
|
|
The projections reflect numerous estimates and assumptions with
respect to industry performance, general business, economic,
regulatory, market and financial conditions, as well as matters
specific to our business, all of which are difficult to predict
and beyond our control. As a result, there can be no assurance
that the projected results will be realized or that actual
results will not be significantly higher or lower than
projected. Since the projections cover multiple years, such
information by its nature becomes less reliable with each
successive year.
We have made publicly available our actual results of operations
for fiscal year 2007 and for the subsequent fiscal quarters
ending April 1, 2008 and July 1, 2008. You should
review our Annual Report on
Form 10-K
for the fiscal year ended January 1, 2008, and our
Quarterly Reports on
Form 10-Q
for the fiscal quarters ended April 1, 2008 and
July 1, 2008 to obtain this information. See Where
You Can Find More Information. Readers of this proxy
statement are cautioned not to place undue reliance on the
projections set forth above. No one has made or makes any
representation to any security holder regarding the information
included in these projections.
Interests
of Certain Persons in the Merger
In considering the recommendations of the Board of Directors,
you should be aware that the directors and executive officers of
the Company may have interests in the Merger Agreement and the
Merger that are different from, or in addition to, your
interests as a security holder. These interests may present them
with actual or potential conflicts of interest, and, to the
extent material, are described below. The Board of Directors was
aware of these potential conflicts of interest and considered
them, among other matters, in reaching its decision to
unanimously authorize and declare the advisability of the Merger
Agreement and the transactions contemplated by the Merger
Agreement.
LTPP
Payments following a Change in Control
Our Long-Term Performance Plan (LTPP) permits the
Compensation Committee of our Board of Directors to grant change
in control benefits to participants under the LTPP. In the event
of a
Change-in-Control
(as defined below), a designated participants performance
goals and performance objectives in respect of all outstanding
LTPP awards will be deemed to have been achieved and the
designated participant will be entitled to receive the greater
of (i) the applicable target award with respect to each
outstanding award and (ii) the initial amount of the
participants award that would be payable at the conclusion
of the applicable performance period, after applying the
criteria established for the applicable class award program.
Such amount will be paid in a lump sum at the earlier of
(i) the time of the termination of the designated
participants employment with the Company or (ii) the
time that the award would otherwise be paid where there is no
termination of employment. If a designated participants
employment is terminated by the Company within two years of a
Change-in-Control,
or if a designated participant resigns for Good
Reason (as defined below) within two years from the date
of a
Change-in-Control,
the designated participant will receive the
Change-in-Control
benefits described above, to the extent not already paid, plus
an additional amount equal to such previously described
Change-in-Control
benefits. Such amount will be paid in a lump sum at the time of
termination of employment. Janet L. Steinmayer, our President
and Chief Executive Officer, Kevin F. McNamara, our Chief
Financial Officer, and William H. Peterson, our Executive Vice
President of Operations, will have the right to receive
Change-in-Control
benefits for their 2006 and 2007 class awards under the LTPP.
41
For purposes of the plan, a
Change-in-Control
means (i) an event by which any person (as such
term is used in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 51% or
more of the combined voting power of the then outstanding
securities of the Company; (ii) a change in the composition
of a majority of the Board of Directors within 12 months
after any person is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 25% of the
combined voting power of the then outstanding securities of the
Company; or (iii) the sale of substantially all the assets
of the Company
and/or
our
operating subsidiaries. A resignation for
Good
Reason
means a voluntary termination by a designated
participant that otherwise entitles the designated participant
to severance benefits pursuant to the terms of an employment
agreement between the designated participant and the Company.
Ms. Steinmayers employment agreement entitles her to
severance for voluntary termination of employment for good
reason, including a voluntary termination of employment within
6 months of a change in control (as defined in her
employment agreement) of the Company. The employment agreements
of Messrs. McNamara and Peterson do not contain provisions
for severance in the event of voluntary termination.
Completion of the Merger will constitute a
Change-in-Control
under the LTPP. Following the consummation of the Merger, if it
occurs in fiscal 2008, our executive officers would be entitled
to the following payments in respect of their 2006 and 2007
class awards under the LTPP: $2,040,000 for Ms. Steinmayer,
$1,098,000 for Mr. McNamara and $1,130,000 for
Mr. Peterson. If the employment of these officers were
terminated immediately after the Merger by the Company or by
Ms. Steinmayer for Good Reason, the total amounts payable
for the 2006 and 2007 class awards would be increased to:
$4,080,000 for Ms. Steinmayer, $2,196,000 for
Mr. McNamara and $2,260,000 for Mr. Peterson.
Severance
under Employment Agreements
Janet L. Steinmayer Employment Agreement.
Our
employment agreement with Ms. Steinmayer provides that if
her employment is terminated by us without cause or by her for
good reason as defined in the employment agreement, including a
voluntary termination within 6 months of a change in
control of the Company, she will receive a one-time payment
equal to twice her annual base salary then in effect, plus a
continuation for a period of up to 18 months of certain
employee benefits available to her as an employee.
Kevin F. McNamara Employment Agreement.
Under
the terms of Mr. McNamaras employment agreement, upon
a termination of his employment by us without cause (as defined
in his employment agreement), he is entitled to one years
base salary as severance, payable over the one-year period
following termination, in accordance with the Companys
normal payroll practice.
William H. Peterson Employment
Agreement.
Under the terms of
Mr. Petersons employment agreement, upon a
termination of his employment by us without cause (as defined in
his employment agreement), he is entitled to one years
base salary as severance, payable over the one-year period
following termination, in accordance with the Companys
normal payroll practice.
Assuming that the employment of each of our current executive
officers was terminated by the Company without cause
(as defined in the applicable employment agreement) or by
Ms. Steinmayers resignation for good
reason (as defined in her employment agreement)
immediately following the Merger, the approximate amounts of
cash severance benefits that would be payable under the
employment agreements are as follows: $1,400,000 for
Ms. Steinmayer, $365,750 for Mr. McNamara and $376,200
for Mr. Peterson.
Continued
Benefits for Employees under the Merger Agreement
For a period of one year following the closing of the Merger,
the Surviving Corporation will provide current employees,
including executive officers, of the Company and our
subsidiaries (other than those employees covered by a collective
bargaining agreement) as of the Effective Time who continue
employment with the Surviving Corporation with base salary, the
opportunity for cash bonus compensation, and benefits that are
no less favorable in the aggregate than those provided under the
Companys compensation and benefit plans, programs,
policies, practices and arrangements (excluding equity-based
programs) in effect at the Effective Time. However, such
obligations of the Surviving Corporation would not prevent the
Surviving
42
Corporation from amending or terminating any specific plan,
program or arrangement or terminating the employment of an
employee for any reason for which the Company could have
terminated such employee prior to the Merger.
Subject to certain exceptions, the Surviving Corporation will
(i) give continuing Company employees full credit for
purposes of eligibility to participate, vesting and benefit
accrual (other than with respect to any defined benefit plan)
under the employee benefit plans or arrangements maintained by
the Surviving Corporation to the same extent recognized by the
Company or our subsidiaries under the corresponding Company
benefit plans immediately prior to the Effective Time; and
(ii) with respect to certain welfare benefit plans
maintained for the benefit of continuing Company employees
following the Effective Time, (x) waive eligibility
requirements or preexisting condition limitations, to the same
extent waived under comparable Company plans immediately prior
to the Effective Time, and (y) recognize deductible amounts
paid by such continuing Company employees under the
corresponding Company benefit plans immediately prior to the
Effective Time.
Indemnification
Arrangements and Directors and Officers Liability
Insurance Policy
On September 18, 2008, the Board of Directors authorized
the Company to enter into Indemnity Agreements with each of its
directors, including Janet L. Steinmayer, and also with Kevin F.
McNamara and William H. Peterson.
The Companys Certificate of Incorporation and Bylaws each
require that the Company indemnify and advance expenses to its
directors and officers to the full extent permitted by law. Each
Indemnity Agreement requires the Company to indemnify, hold
harmless and exonerate the individual director or executive
officer against all expenses, judgments, liabilities, fines,
penalties and amounts paid in settlement incurred by such person
for or as a result of action taken or not taken while such
person was acting in his or her capacity as a director or
executive officer of the Company. Each Indemnity Agreement
requires the Company, subject to specific terms and conditions,
to advance expenses to the indemnitee and also sets forth
certain other procedures with respect to indemnification and
advancement of expenses. The Company is also obligated, upon
written request, to establish and fund a trust for the benefit
of the indemnitee in the event of a Potential Change in Control
(as defined in the form of Indemnity Agreement). Recovery under
an Indemnity Agreement is not exclusive of other rights to
indemnification that the indemnitee may have.
Parent has agreed to maintain in effect after completion of the
Merger, for the benefit of current and former Company directors
and officers, the existing rights to indemnification and
limitations on liability for acts or omissions occurring prior
to the closing of the Merger under the Companys
Certificate of Incorporation, Bylaws, Indemnity Agreements and
other agreements of the Company. In addition, the Merger
Agreement provides that Parent will maintain, at its expense,
directors and officers liability insurance policies
with a claims period of at least six years from the Effective
Time of the Merger. For further details on these indemnification
and insurance arrangements, please see Adoption of the
Merger Agreement (Proposal 1) The Merger
Agreement Covenants and Agreements
Indemnification; Exculpation and Insurance; and Employees;
Certain Benefit Plans.
Financing
Parent estimates that the total amount of funds necessary to
consummate the Merger and related transactions, if 70% of the
Notes are accepted in the Debt Tender, is approximately
$209 million, consisting of (i) approximately
$59 million to pay the Tender Consideration not including
accrued and unpaid or deferred interest, (ii) approximately
$200,000 to pay the Merger Consideration, assuming that no
security holder validly exercises its appraisal rights,
(iii) approximately $115 million to refinance the
Companys other existing indebtedness and
(iv) approximately $35 million to pay fees and
expenses in connection with the Merger and related transactions.
In addition, if 70% of the Notes are accepted in the Debt
Tender, the outstanding Notes following the transaction will
total $36 million. The Merger and related transactions may
be consummated with as low as 50.1% of the Notes tendered. In
the event that 50.1% of the Notes are tendered the Parent
estimates that the funds necessary to pay the Tender
Consideration, not including accrued and unpaid or
43
deferred interest is approximately $42.9 million with
approximately $58.6 million in outstanding Notes following
the transaction.
These funds are anticipated to come from the following sources
(i) a cash investment made by Sponsor and any of its
affiliated investment funds in Parent of up to $125 million
(the Equity Financing) and (ii) borrowings by
the Surviving Corporation under a $175 million senior
secured credit facility (the Debt Financing).
Certain terms of the Equity Financing and Debt Financing are
described below.
Equity
Financing
Parent has received a fully executed commitment letter, dated
September 18, 2008 (the Equity Commitment
Letter), from Sponsor, pursuant to which Sponsor has
committed to provide to Parent up to $125 million in cash,
subject to the satisfaction of all conditions to Parents
obligations to consummate the Merger in the Merger Agreement and
the contemporaneous funding of the Debt Financing.
Debt
Financing
Parent has obtained a debt financing commitment from National
City pursuant to the Debt Commitment Letter for the transactions
contemplated by the Merger Agreement. The Debt Commitment Letter
provides for a commitment by National City to provide
$175 million in senior secured credit facilities, which
will be comprised of (i) a $90 million term loan
facility, (ii) a $60 million revolving credit facility
and (iii) a $25 million letter of credit facility.
Conditions
to the Debt Financing
The commitment of National City will expire if not drawn on or
prior to February 28, 2009. The senior credit facilities
contemplated by the Debt Commitment Letter are subject to
customary closing conditions, including, among others:
|
|
|
|
|
a Company material adverse effect not having occurred (for a
definition of Company material adverse effect see
Adoption of the Merger Agreement
(Proposal 1) The Merger Agreement
Representations and Warranties;
|
|
|
|
National City not becoming aware of any information affecting
the Company or the Merger that it believes to be inconsistent in
a material and adverse manner with any such information or other
matter previously disclosed to National City (which shall not
include information or matters made available to National City
prior to the date of the Debt Commitment Letter);
|
|
|
|
there not having occurred any adverse change or disruption in
the financial, banking or capital market conditions that could
reasonably be expected to have an adverse impact on the
successful syndication of the proposed senior credit facilities;
|
|
|
|
the negotiation, execution and delivery of customary definitive
documentation with respect to the senior credit facilities;
|
|
|
|
the accuracy of certain representations;
|
|
|
|
receipt of requisite security holder approval;
|
|
|
|
the consummation of the Merger in accordance with the terms of
the Merger Agreement and in compliance with applicable law and
regulatory approvals;
|
|
|
|
successful completion of the Debt Tender and Consent
Solicitation;
|
|
|
|
National Citys satisfaction with the Companys pro
forma capital structure;
|
|
|
|
the Company having a specified level of pro forma adjusted
EBITDA for the twelve month period ending June 30, 2008;
|
44
|
|
|
|
|
the Company having a minimum of $50 million in borrowing
availability under its revolving credit facility;
|
|
|
|
the lack of any injunctions seeking to restrain the Merger;
|
|
|
|
the lack of any litigation that would reasonably be expected to
have a Company material adverse effect;
|
|
|
|
the receipt of customary closing documents and
deliverables; and
|
|
|
|
the payment of certain specified fees.
|
The Merger Agreement does not contain a condition that the
financing shall have been obtained. If the financing commitment
is terminated or lender is unable to fund the financing and, in
either case, Parent does not close the Merger within
30 days, the Company may terminate the Merger Agreement and
Parent will be required to pay us a termination fee of
$2,500,000. If Parent refuses to close the transaction, the
Company, under the terms of the Merger Agreement, is not
entitled to seek court action to force Parent to close, but
Parent will be required to pay us a reverse termination fee of
$2,500,000 if the conditions to its obligation to close have
been satisfied.
As of the date of this proxy statement, no alternative financing
arrangements or alternative financing plans have been made in
the event the debt financing described herein is not available
as anticipated.
Governmental,
Regulatory and Third Party Consents and Approvals
Liquor Licensing and Permit Approvals.
In
certain jurisdictions it is necessary to obtain the prior
approval of the state regulatory authority or commission in
charge of granting liquor licenses and/or health permits to
effect a change in control of a licensee or permit holder.
Third Party Consents.
Certain of our contracts
contain provisions that may require the consent of the other
party to effect the Merger.
Other Approvals.
The Company is required to
file a Certificate of Merger with the Secretary of State of the
State of Delaware and comply with any requirements of applicable
securities laws and the rules and regulations of AMEX and TSX.
Other than the consents and approvals described above, neither
Parent nor the Company is aware of any regulatory or other
notifications that must be filed, approvals that must be
obtained, or waiting periods that must be observed, in order to
complete the Merger. If the parties discover that other
notifications, approvals or waiting periods are necessary, they
will seek to observe or obtain them. If any such approval or
action is needed, however, Parent and the Company may not be
able to obtain it or any of the other necessary approvals.
General.
It is possible that any of the
governmental entities with which filings have been made or
notices sent may seek additional information or seek to impose
additional conditions on the Merger or such governmental
entities or private parties may commence litigation to prevent
the completion of the Merger. There can be no assurance that:
|
|
|
|
|
Parent or the Company will be able to satisfy or comply with any
such conditions imposed; or
|
|
|
|
litigation, if any, will be resolved favorably by Parent and the
Company.
|
Even if the parties obtain all necessary approvals and the
Merger Agreement is adopted by our security holders, conditions
may be placed on the Merger, or the Merger could be delayed in a
manner, that could cause Parent to abandon it. See
Adoption of the Merger Agreement
(Proposal 1) The Merger Agreement
Covenants and Agreements, beginning on page 59, and
Adoption of the Merger Agreement
(Proposal 1) The Merger Agreement
Termination.
Merger
Expenses, Fees and Costs
Generally, all fees and expenses incurred in connection with the
Merger Agreement and the transactions contemplated thereby will
be paid by the party incurring those expenses, subject to the
specific exceptions discussed in this document. Upon termination
of the Merger Agreement under specified circumstances, Parent
45
or the Company may be required to pay the other party a
termination fee and reimburse expenses, each in respective
amounts of up to $2.5 million. See Adoption of the
Merger Agreement (Proposal 1) The Merger
Agreement Termination Fees and Expenses for a
discussion of the circumstances under which termination fees
will be paid and expenses will be reimbursed.
Structure
of the Transaction
Approval of the transaction will be effected through (i) a
proxy solicitation to approve the Merger and (ii) the Debt
Tender and Consent Solicitation to buy up to 70% of the Notes
and amend the Indenture. Following receipt of a vote of holders
of a majority of our common stock to approve the Merger, and
satisfaction of the other conditions thereto, which include a
minimum of 50.1% of the Notes being tendered, at the closing,
Merger Sub will be merged with and into the Company with the
Company being the Surviving Corporation and a wholly owned
subsidiary of Parent.
Material
U.S. Federal Income Tax Consequences
The following is a summary of the material U.S. federal
income tax consequences of the Merger to the Company and certain
U.S. holders and
non-U.S. holders
of our IDSs. For purposes of this discussion, a
U.S. holder means a beneficial owner of our
IDSs that is:
|
|
|
|
|
a citizen or individual resident of the U.S. for
U.S. federal income tax purposes;
|
|
|
|
a corporation or other entity taxable as a corporation for
U.S. federal income tax purposes created or organized in or
under the laws of the U.S. or any state or the District of
Columbia;
|
|
|
|
a trust if it (1) is subject to the primary supervision of
a court within the U.S. and one or more U.S. persons
have the authority to control all substantial decisions of the
trust, or (2) has a valid election in effect under
applicable Treasury regulations to be treated as a
U.S. person; or
|
|
|
|
an estate the income of which is subject to U.S. federal
income taxation regardless of its source.
|
A
non-U.S. holder
means a beneficial owner of our IDSs that is not a
U.S. holder or an entity treated as a partnership for
U.S. federal income tax purposes.
This discussion is based on the Internal Revenue Code of 1986,
as amended (the Code), existing and proposed
Treasury regulations thereunder, judicial authority, and
administrative rulings and practice as of the date of this proxy
statement, all of which are subject to change, possibly on a
retroactive basis.
The following discussion is addressed to a U.S. holder that
holds our IDSs as a capital asset within the meaning of
Section 1221 of the Code. This discussion does not address
all aspects of U.S. federal income taxation that might be
relevant to a holder in light of its particular circumstances,
or that might apply to a holder that is subject to special
treatment under the U.S. federal income tax laws,
including, without limitation, financial institutions, insurance
companies, broker dealers, tax-exempt organizations, persons
holding our IDSs as part of a straddle, hedge, synthetic
security transaction, or other integrated investment, including
a conversion transaction, partners of a partnership
or other beneficial owners of pass-through entities holding our
IDSs, persons that have a functional currency other than the
U.S. dollar, persons subject to the alternative minimum
tax, or persons who acquired our IDSs through the exercise of an
employee stock option or other compensation arrangement.
If any entity that is treated as a partnership for
U.S. federal income tax purposes holds our IDSs, the tax
treatment of its partners or members generally will depend upon
the status of the partner or member and the activities of the
entity. If you are a partner of a partnership or a member of a
limited liability company or other entity classified as a
partnership for U.S. federal tax purposes and that entity
is holding our IDSs, you should consult your tax advisor
regarding the consequences of the Merger to you.
No statutory, administrative or judicial authority directly
addresses the treatment of the IDSs or instruments similar to
the IDSs for U.S. federal income tax purposes. As a result,
the U.S. federal income tax consequences of the
acquisition, ownership and disposition of the common stock and
Notes (or any interest
46
therein) underlying the IDSs are uncertain. We believe, however,
and the remainder of this discussion assumes that, for
U.S. federal income tax purposes, (i) a holder of an
IDS should be treated as having acquired and owned the share of
common stock and Note underlying the IDS, and (ii) the
Notes should be treated as debt.
The
Company
Cancellation
of Indebtedness Income
The Company will realize cancellation of indebtedness income
(COD income) on the acquisition of its Notes
pursuant to the Debt Tender in connection with the Merger. The
amount of COD income realized will be equal to the excess of the
adjusted issue price of the Notes acquired by the Company over
the aggregate consideration paid for the Notes. The adjusted
issue price of the Notes acquired will be equal to their issue
price increased by accrued original issue discount
(OID), if any, and reduced by any payments on the
notes other than payments of qualified stated interest.
Qualified stated interest is interest that is unconditionally
payable in cash or in property (other than debt instruments of
the issuer) at least annually at a single fixed rate.
The Company will not recognize COD income to the extent that it
is considered insolvent from a U.S. federal tax perspective
immediately prior to the Effective Time of the Merger. If and to
the extent that COD income is excluded from the Companys
taxable income as a result of insolvency, we will be required to
reduce certain of our tax attributes, including our net
operating loss carryforwards. Consequently, a significant amount
of the Companys tax attributes may be eliminated.
To the extent that the COD income exceeds the amount by which
the Company is considered insolvent immediately prior to the
Effective Time of the Merger, we will recognize that excess
amount of COD income. That income may be offset by available net
operating losses for regular income tax purposes. For purposes
of the alternative minimum tax, however, only 90% of alternative
minimum taxable income for a taxable year may be offset by net
operating loss carryforwards to that year. As a result, the COD
income may result in an alternative minimum tax liability even
if that income is fully offset by available net operating losses
for regular income tax purposes. COD income recognized in excess
of available losses will result in a tax liability.
Limitation
on Use of Tax Attributes
The Merger will result in an ownership change of the
Company within the meaning of Section 382 of the Code.
Consequently, the Companys ability to use certain of its
tax attributes that remain after taking into account COD income
will be significantly limited after the Merger.
U.S.
Holders
Disposition
of Common Stock
The receipt of the Merger Consideration, or cash pursuant to the
exercise of dissenters rights of appraisal, by a
U.S. holder in exchange for our common stock will be a
taxable transaction for U.S. federal income tax purposes.
In general, a U.S. holder will recognize capital gain or
loss for U.S. federal income tax purposes equal to the
difference, if any, between the cash received (other than any
cash received by dissenters that is treated as actual or imputed
interest, which will be taxable as ordinary income) and the
U.S. holders adjusted tax basis in the share of our
common stock exchanged therefor. Any such gain or loss will be
long-term capital gain or loss if the holding period for those
shares exceeds one year as of the Effective Time of the Merger.
Long term capital gains of non- corporate U.S. holders
generally are eligible for reduced rates of taxation. The
deductibility of capital losses is subject to limitations.
Debt
Tender
The receipt of the Tender Consideration in exchange for Notes
will be a taxable transaction for U.S. federal income tax
purposes. In general, a U.S. holder will recognize capital
gain or loss for U.S. federal income tax purposes equal to
the difference, if any, between the cash received (other than
any cash attributable to accrued but unpaid interest or OID, if
any, which will be taxable as ordinary income to the extent not
47
previously included in income) and the U.S. holders
adjusted tax basis in the Notes (or portions thereof) exchanged
therefor. Any such gain or loss will be long-term capital gain
or loss if the holding period for the Notes exceeds one year at
the time of the repurchase. Long-term capital gains of
non-corporate U.S. holders generally are eligible for
reduced rates of taxation. The deductibility of capital losses
is subject to limitations.
The U.S. federal income tax consequences of the Debt Tender
to U.S. holders, including the tax treatment of accrued and
unpaid interest or OID and Notes that remain outstanding after
the Debt Tender, are described in greater detail in the Debt
Tender Documents, which are being sent simultaneously with this
proxy statement to holders of our IDSs in a separate mailing.
Information
Reporting and Backup Withholding
The payment of cash to a U.S. holder in exchange for shares
of our common stock pursuant to the Merger Agreement or the
exercise of appraisal rights, or as Tender Consideration, will
be subject to information reporting and may be subject to backup
withholding at the current rate of 28% unless the holder
(1) is a corporation or other exempt recipient and, when
required, demonstrates that fact, or (2) provides a
taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with
the applicable requirements of the backup withholding rules.
To prevent the possibility of backup withholding on payments to
certain U.S. holders in exchange for shares of our common
stock or as Tender Consideration, each U.S. holder must
provide the paying agent with a properly executed
Form W-9
or Substitute
Form W-9.
A U.S. holder that does not furnish a properly executed
form may be subject to penalties imposed by the Internal Revenue
Service (the IRS) and to backup withholding. Any
amount withheld under these rules will be refundable or
creditable against the U.S. holders U.S. federal
income tax liability if the required information is timely
furnished to the IRS.
Non-U.S.
Holders
Disposition
of Common Stock
A
non-U.S. holder
generally will not be subject to U.S. federal income tax on
any gain recognized on the Merger unless:
|
|
|
|
|
The gain is effectively connected with the
non-U.S. holders
conduct of a trade or business in the U.S. and, if required
by an applicable tax treaty, is attributable to a
U.S. permanent establishment. In that case, the
non-U.S. holder
will generally be subject to tax on its net gain derived from
the Merger at regular graduated U.S. federal income tax
rates. In addition, if the
non-U.S. holder
is a foreign corporation, that gain may be subject to a branch
profits tax at a 30% rate or a lower rate under an applicable
tax treaty; or
|
|
|
|
The
non-U.S. holder
is an individual who is present in the U.S. for
183 days or more in the taxable year of the Merger, and
certain other conditions are met. In that case, the
non-U.S. holder
will be subject to a flat 30% tax on the gain, which may be
offset by certain U.S. source capital losses.
|
Debt
Tender
A
non-U.S. holder
generally will not be subject to U.S. federal income tax on
any gain recognized on the receipt of the Tender Consideration
unless (1) the gain is effectively connected with the
conduct of a trade or business by the
non-U.S. holder
in the U.S. and, if required by an applicable tax treaty,
is attributable to a U.S. permanent establishment, or
(2) the
non-U.S. holder
is an individual who is present in the U.S. for
183 days or more in the taxable year of the Merger, and
certain other conditions are met.
The U.S. federal income tax consequences of the Debt Tender
to
non-U.S. holders,
including the tax treatment of accrued and unpaid interest or
OID and Notes that remain outstanding after the Debt Tender, are
described in greater detail in the Debt Tender Documents, which
are being sent simultaneously with this proxy statement to
holders of our IDSs in a separate mailing.
48
Information
Reporting and Backup Withholding
The payment of cash to a
non-U.S. holder
in exchange for shares of our common stock pursuant to the
Merger Agreement or the exercise of appraisal rights, or as
Tender Consideration, will generally be subject to information
reporting and backup withholding at the current rate of 28%
unless the holder (1) is a corporation or other exempt
recipient and, when required, demonstrates that fact, or
(2) otherwise establishes an exemption from information
reporting and backup withholding.
To prevent the possibility of backup withholding on payments to
certain
non-U.S. holders,
each
non-U.S. holder
must provide the paying agent with a properly executed
Form W-8BEN
or Substitute
Form W-8BEN,
or other applicable
Form W-8
or substitute form. A
non-U.S. holder
that does not furnish a properly executed form may be subject to
penalties imposed by the IRS and to backup withholding. Any
amount withheld under these rules will be refundable or
creditable against the
non-U.S. holders
U.S. federal income tax liability if the required
information is furnished to the IRS.
The discussion of U.S. federal income tax consequences
of the Merger in this proxy statement is for general information
only. The tax consequences to a particular holder will depend
upon the facts and circumstances applicable to that holder.
Accordingly, each holder is urged to consult a tax advisor to
determine the tax consequences of the Merger to the holder in
light of the holders particular circumstances, including
the applicability and effect of state, local, foreign and other
tax laws, and any possible changes in those laws.
Certain
Canadian Federal Income Tax Consequences
The following is a summary of the principal Canadian federal
income tax consequences of the Merger to certain Canadian
holders of our IDSs. For purposes of this discussion, a
Canadian holder means a beneficial owner of our IDSs who, for
purposes of the
Income Tax Act
(Canada) as amended (the
Canadian Tax Act) and any applicable income tax
treaty or convention:
|
|
|
|
|
is at all relevant times is a resident of Canada;
|
|
|
|
deals at arms length with and is not affiliated with the
Company, Parent or Merger Sub;
|
|
|
|
holds Company common stock and Notes underlying our IDSs as
capital property;
|
|
|
|
is not a financial institution as defined in the
Canadian Tax Act for purposes of the mark-to-market
rules; and
|
|
|
|
for whom the Company is not a foreign affiliate
within the meaning of the Canadian Tax Act or a foreign
investment entity within the meaning of certain Proposed
Regulatory Amendments (as defined below) to the Canadian Tax Act.
|
Generally, shares of Company common stock and Notes will be
capital property to a Canadian holder unless the shares or Notes
are held or were acquired in the course of carrying on a
business or as part of an adventure or concern in the nature of
trade. Canadian resident security holders who are
financial institutions or for whom the Company is a
foreign affiliate or a foreign investment
entity should consult their own tax advisors.
This summary is based upon the current provisions of the
Canadian Tax Act, the regulations thereunder (the
Regulations) and counsels understanding of the
current administrative policies and assessing practices of the
Canada Revenue Agency (CRA) made publicly available
in writing prior to the date hereof. This summary also takes
into account all specific proposals to amend the Canadian Tax
Act and the Regulations publicly announced by or on behalf of
the Minister of Finance (Canada) prior to the date hereof (the
Proposed Tax Amendments) and assumes that all
Proposed Tax Amendments will be enacted in the form proposed. No
assurances can be given that the Proposed Tax Amendments will be
enacted as proposed, or at all. This summary is not exhaustive
of all possible Canadian federal income tax consequences and
except for the Proposed Tax Amendments does not take into
account or anticipate any changes in law or administrative
policies or assessing practices whether by legislative,
regulatory, administrative or judicial action or decision
49
nor does it take into account provincial, territorial or foreign
tax legislation or considerations, which may be different from
those discussed in this summary.
For purposes of the Canadian Tax Act, all amounts relating to
the acquisition, holding or disposition of the Notes and shares
of Centerplate common stock, including any proceeds of
disposition, must be determined in Canadian dollars at the
prevailing exchange rates at the relevant time. The amount of
interest and any capital gain or capital loss may be affected by
fluctuations in Canadian dollar exchange rates.
Canadian
Holders
Disposition
of Common Stock
The receipt by a Canadian holder of the Merger Consideration (or
cash pursuant to the exercise of dissenters rights of
appraisal) in exchange for shares of Company common stock will
be a taxable transaction for Canadian federal income tax
purposes.
In general, a Canadian holder (other than a person who has
exercised dissenters rights of appraisal) will realize a
capital gain (or capital loss) equal to the difference, if any,
between the cash received (net of reasonable costs of
disposition) and the Canadian holders adjusted cost base
of the shares of Company common stock to the Canadian holder.
The tax treatment of any such capital gain (or capital loss) is
the same as described below under Taxation of Capital
Gains and Capital Losses.
The appropriate income tax treatment of an amount received by a
Canadian holder who exercises dissenters rights of
appraisal, is not clear. However, it is the CRAs
administrative position that the entire amount received on a
redemption or purchase for cancellation of shares of a
non-resident corporation (other than interest awarded by a
court, which is taxable as ordinary income) is proceeds of
disposition. On this basis, and assuming that the Company is not
resident in Canada for purposes of the Canadian Tax Act at such
time as it purchases the shares held by a dissenting Canadian
holder, such dissenting Canadian holder will realize a capital
gain (or capital loss) equal to the difference, if any, between
the cash received (net of reasonable costs of disposition) and
the dissenting Canadian holders adjusted cost base of the
shares of Company common stock to the dissenting Canadian holder.
Debt
Tender
A Canadian holder will be considered to have disposed of the
Notes upon the receipt of the Tender Consideration in exchange
for such Notes. A Canadian holder that is a corporation,
partnership, unit trust or any trust of which a corporation or
partnership is a beneficiary will generally be required to
include in income the amount of interest accrued or deemed to
have accrued on the Notes or that became receivable or was
received on or before the closing of the Merger. Any other
Canadian holder, including an individual, will be required to
include in income for a taxation year any interest on the Notes
received or receivable by such Canadian holder in the year
(depending upon the method regularly followed by the Canadian
holder in computing income) except to the extent that such
amount was otherwise included in the Canadian holders
income for the year or a preceding year.
In general, a Canadian holder will realize a capital gain (or
capital loss) on the disposition of the Notes equal to the
amount by which the amount of cash received (other than cash
attributable to accrued but unpaid interest) exceeds (or is
exceeded by) the adjusted cost base of the Notes, plus any
reasonable costs of disposition. The tax treatment of any such
capital gain (or capital loss) is the same as described below
under Taxation of Capital Gains and Capital Losses.
Taxation
of Capital Gains and Capital Losses
In general, one-half of the amount of any capital gain (a
taxable capital gain) realized by a Canadian holder
in a taxation year will be included in the Canadian
holders income. One-half of the amount of any capital loss
realized by a Canadian holder in a taxation year may be deducted
from net taxable capital gains realized by the Canadian holder
in the year and any of the three preceding taxation years, to
the extent and under the circumstances described in the Canadian
Tax Act. The amount of any capital loss realized by a
50
corporation on the disposition of a share may be reduced by the
amount of dividends received or deemed to be received by it on
such share (or on a share for which the share has been
substituted). Similar rules may apply where a corporation is a
member of a partnership or a beneficiary of a trust that owns
shares, directly or indirectly, through a partnership or a
trust. Capital gains realized by an individual or a trust, other
than certain trusts, may give rise to alternative minimum tax
under the Canadian Tax Act.
A Canadian holder that is throughout the year a
Canadian-controlled private corporation (as defined
in the Canadian Tax Act) may be liable to pay an additional
refundable tax of
6
2
/
3
%
on certain investment income, including amounts in respect of
interest and taxable capital gains.
The foregoing discussion of Canadian federal income tax
consequences of the Merger in this proxy statement is for
general information only. The tax consequences to a particular
Canadian holder will depend upon the facts and circumstances
applicable to that holder. Accordingly, each Canadian holder is
urged to consult a Canadian tax advisor to determine the
Canadian tax consequences of the Merger to the Canadian holder
in light of the holders particular circumstances.
Appraisal
Rights
In connection with the Merger, security holders of record of our
common stock who comply with the procedures summarized below
will be entitled to appraisal rights for our common stock if the
Merger is completed. Under Section 262 of the DGCL
(Section 262), as a result of completion of the
Merger, holders of shares of our common stock with respect to
which appraisal rights are properly demanded and perfected and
not withdrawn or lost are entitled, in lieu of receiving the
Merger Consideration, to have the fair value of
their shares at the Effective Time of the Merger (exclusive of
any element of value arising from the accomplishment or
expectation of the Merger), together with a fair rate of
interest, if any, to be paid on the amount determined to be the
fair value, judicially determined and paid to them in cash by
complying with the provisions of Section 262. Unless the
Delaware Court of Chancery in its discretion determines
otherwise for good cause shown, interest from the Effective Date
of the Merger through the date of payment of the judgment shall
be compounded quarterly and shall accrue at an annual rate of 5%
over the Federal Reserve discount rate (including any surcharge)
as established from time to time during the period between the
Effective Time of the Merger and the date of payment of the
judgment. The Company is required to send a notice to that
effect to each security holder not less than twenty days prior
to the special meeting. This proxy statement constitutes such
notice to security holders.
The following is a brief summary of Section 262 that sets
forth the procedures for demanding statutory appraisal rights.
This summary is qualified in its entirety by reference to
Section 262, a copy of the text of which is attached to
this proxy statement as Annex C.
Security holders of record of the Company who desire to
exercise their appraisal rights must satisfy all of the
following conditions.
A security holder who desires to exercise appraisal rights must
(i) not vote in favor of adoption of the Merger Agreement
and (ii) deliver in the manner set forth below a written
demand for appraisal of the security holders shares to the
Company before the vote on the Merger at the special meeting.
A demand for appraisal must be executed by or for the security
holder of record, fully and correctly, as the security
holders name appears on the certificates representing
shares. If shares are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, such demand must be
executed by the fiduciary. If shares are owned of record by more
than one person, as in a joint tenancy or tenancy in common, the
demand must be executed by all joint owners. An authorized
agent, including an agent of two or more joint owners, may
execute the demand for appraisal for a security holder of
record; however, the agent must identify the record owner and
expressly disclose that, in exercising the demand, the agent is
acting as agent for the record owner. In addition, the security
holder must continuously hold the shares of record from the date
of making the demand through the Effective Time of the Merger.
A record owner, such as a broker, who holds shares as a nominee
for others may exercise appraisal rights with respect to the
shares held for all or less than all beneficial owners of shares
as to which the holder is the
51
record owner. In that case, the written demand must set forth
the number of shares covered by the demand. Where the number of
shares is not expressly stated, the demand will be presumed to
cover all shares outstanding in the name of the record owner.
Beneficial owners who are not record owners and who intend to
exercise appraisal rights should instruct the record owner to
comply strictly with the statutory requirements with respect to
the exercise of appraisal rights before the vote on the adoption
of the Merger Agreement at the special meeting. A beneficial
owner of shares held in street name who desires to assert
appraisal rights with respect to those shares must take such
actions as may be necessary to ensure that a timely and proper
demand for appraisal is made by the record owner of the shares.
Shares held through banks, brokerage firms and other financial
institutions are frequently deposited with and held of record in
the name of a nominee of a central security depositary, such as
Cede & Co., The Depository Trust Companys
nominee. Any holder of shares desiring to assert appraisal
rights with respect to such shares who held such shares through
a brokerage firm, bank or other financial institution is
responsible for ensuring that the demand for appraisal is made
by the record holder. The security holder should instruct such
firm, bank or institution that the demand for appraisal must be
made by the record holder of the shares, which might be the
nominee of a central security depositary if the shares have been
so deposited.
As required by Section 262, a demand for appraisal must be
in writing and must reasonably inform the Company of the
identity of the security holder of record (which might be a
nominee as described above) and of such holders intention
to seek appraisal of such shares.
Security holders of record who elect to demand appraisal of
their shares must mail or deliver their written demand to:
Centerplate, Inc., 2187 Atlantic Street, 6th Floor,
Stamford, Connecticut 06902, Attention: Corporate Secretary. The
written demand for appraisal should specify the security
holders name and mailing address, the number of shares
owned, and that the security holder is demanding appraisal of
his or her shares. The written demand must be received by the
Company prior to the taking of the vote on the proposal to adopt
the Merger Agreement at the special meeting. Neither voting (in
person or by proxy) against, abstaining from voting on or
failing to vote on the proposal to adopt the Merger Agreement
will alone suffice to constitute a written demand for appraisal
within the meaning of Section 262.
In addition, the security holder must not vote its shares of
common stock in favor of adoption of the Merger Agreement. A
proxy that is signed and does not contain voting instructions
will, unless revoked, be voted in favor of the adoption of the
Merger Agreement, will constitute a waiver of that security
holders right of appraisal and will nullify any previously
written demand for appraisal. Therefore, a security holder who
submits a proxy and who wishes to exercise appraisal rights must
indicate that such security holders shares are to be voted
against the proposal to adopt the Merger Agreement or to abstain
from voting on that proposal.
Within 120 days after the Effective Time of the Merger,
either the Company, as the Surviving Corporation in the Merger,
or any security holder who has timely and properly demanded
appraisal of such security holders shares and who has
complied with the required conditions of Section 262 and is
otherwise entitled to appraisal rights may file a petition in
the Delaware Court of Chancery demanding a determination of the
fair value of the shares of all security holders who have
properly demanded appraisal. The Company, as the Surviving
Corporation, has no obligation, and no present intention, to
file such a petition. Accordingly, the failure of a security
holder to file a petition within the specified period could
nullify the security holders previously written demand for
appraisal. A person who is the beneficial owner of shares of
common stock held either in a voting trust or by a nominee on
behalf of such person may, in such persons own name, file
such a petition.
Within 120 days after the Effective Time of the Merger, any
security holder who has complied with the provisions of
Section 262 of the DGCL to that point in time may receive
from the Surviving Company, upon written request, a statement
setting forth the aggregate number of shares not voted in favor
of the Merger and with respect to which the Company has received
demands for appraisal, and the aggregate number of holders of
those shares. The Surviving Company must mail this statement to
the security holder within the later of 10 days of receipt
of the request or 10 days after expiration of the period
for delivery of demands for appraisal.
52
If a petition for an appraisal is timely filed, after a hearing
on such petition, the Delaware Court of Chancery will determine
which security holders are entitled to appraisal rights and may
require the security holders demanding appraisal who hold
certificated shares to submit their stock certificates to the
court for notation of the pendency of the appraisal proceedings,
and any security holder who fails to comply with such direction
may be dismissed from such proceedings. The Delaware Court of
Chancery thereafter will appraise the shares owned by those
security holders, determining the fair value of the shares
exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a
fair rate of interest to be paid, if any, upon the amount
determined to be the fair value. Unless the Delaware Court of
Chancery in its discretion determines otherwise for good cause
shown, interest from the Effective Date of the Merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at an annual rate of 5% over the
Federal Reserve discount rate (including any surcharge) as
established from time to time during the period between the
Effective Time of the Merger and the date of payment of the
judgment.
In determining fair value, the Delaware Court of Chancery is to
take into account all relevant factors. In
Weinberger v.
UOP, Inc., et al.
, the Delaware Supreme Court discussed the
considerations that could be considered in determining fair
value in an appraisal proceeding, stating that proof of
value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise
admissible in court should be considered and that
[f]air price obviously requires consideration of all
relevant factors involving the value of a company. The
Delaware Supreme Court stated that in making this determination
of fair value the court must consider market value, asset
value, dividends, earnings prospects, the nature of the
enterprise and any other facts which were known or which could
be ascertained as of the date of merger and which throw any
light on future prospects of the merged corporation . . .
. The Delaware Supreme Court construed Section 262 to
mean that elements of future value, including the nature
of the enterprise, which are known or susceptible of proof as of
the date of the merger and not the product of speculation, may
be considered. The Delaware Supreme Court noted, however,
that Section 262 provides that fair value is to be
determined exclusive of any element of value arising from
the accomplishment or expectation of the merger.
Security holders considering seeking appraisal should bear in
mind that the fair value of their shares determined under
Section 262 could be more than, the same as, or less than
the Merger Consideration they are entitled to receive pursuant
to the Merger Agreement if they do not seek appraisal of their
shares, and that opinions of investment banking firms are not
necessarily opinions as to fair value under Section 262.
The cost of the appraisal proceeding may be determined by the
Delaware Court of Chancery and taxed upon the parties as the
Delaware Court of Chancery deems equitable in the circumstances.
Upon application of a security holder seeking appraisal rights,
the Delaware Court of Chancery may order that all or a portion
of the expenses incurred by such security holder in connection
with the appraisal proceeding, including, without limitation,
reasonable attorneys fees and the fees and expenses of
experts, be charged pro rata against the value of all shares
entitled to appraisal. In the absence of such a determination of
assessment, each party bears its own expenses.
From and after the Effective Time of the Merger, no security
holder who has demanded appraisal rights shall be entitled to
vote any shares subject thereto for any purpose or to receive
payment of dividends or other distributions thereon (except
dividends or other distributions payable to the security holders
of record at a date prior to the Effective Time of the Merger).
At any time within 60 days after the date of completion of
the Merger, any former security holder of the Company who has
not commenced an appraisal proceeding or joined that proceeding
as a named party shall have the right to withdraw such security
holders demand for appraisal and to accept the Merger
Consideration as provided in the Merger Agreement. After this
period, the security holder may withdraw such security
holders demand for appraisal and receive the Merger
Consideration as provided in the Merger Agreement only with the
written consent of the Surviving Corporation in the Merger. If
no petition for appraisal is filed with the Delaware Court of
Chancery within 120 days after the Effective Time of the
Merger, security holders rights to appraisal shall cease
and all security holders shall be entitled only to receive the
Merger Consideration as provided in the Merger Agreement.
Inasmuch as the parties to the Merger Agreement have no
obligation to file such a petition, and have no present
intention to do so, any security holder who desires
53
that such petition be filed is advised to file it on a timely
basis. No appraisal proceeding in the Delaware Court of Chancery
may be dismissed as to any security holder without the approval
of the Delaware Court of Chancery, which may be conditioned upon
such terms as the Delaware Court of Chancery deems just.
The foregoing is a brief summary of Section 262 that sets
forth the procedures for demanding statutory appraisal rights.
This summary is qualified in its entirety by reference to
Section 262, a copy of the text of which is attached hereto
as Annex C.
Delisting
and Deregistration of Income Deposit Securities
If you are a holder of our IDSs, following consummation of the
Merger and the transactions contemplated thereby, (i) the
shares of common stock underlying your IDSs will be cancelled
and, subject to your exercise and perfection of appraisal rights
under Delaware law, converted into the right to receive the
Merger Consideration, and (ii) the Notes underlying your
IDS will either be purchased in the Debt Tender for the Tender
Consideration or remain outstanding. If the Merger is completed,
our IDSs will be delisted from the AMEX and the TSX and
deregistered under the Exchange Act, we will make an application
to cease to be a reporting issuer in Canada and we will no
longer file periodic and other reports with the SEC or Canadian
securities regulatory authorities on account of our IDSs.
54
THE
MERGER AGREEMENT
The following is a summary of the material provisions of the
Merger Agreement. This summary is qualified in its entirety by
reference to the Merger Agreement, which is incorporated by
reference in its entirety and attached to this proxy statement
as Annex A. We encourage you to read the Merger Agreement
in its entirety because it is the legal document that governs
the Merger. This summary is not intended to provide you with any
other factual information about Parent or the Company. Such
information can be found elsewhere in this proxy statement and
in our public filings with the SEC, as described in the section
entitled Where You Can Find More Information.
Structure
Under the Merger Agreement, Merger Sub, a wholly owned
subsidiary of Parent, will be merged with and into the Company
at the Effective Time (defined below). The Company will continue
as the Surviving Corporation and the separate corporate
existence of Merger Sub will cease. The Company will become a
wholly owned subsidiary of Parent. Upon the consummation of the
Merger, our IDS units will be delisted from the AMEX and TSX and
deregistered under the Exchange Act, we will make an application
to cease to be a reporting issuer in Canada and we will no
longer file periodic and other reports with the SEC or Canadian
securities regulatory authorities.
We expect the closing date for the Merger to be no later than
the second business day after the satisfaction or waiver of the
conditions set forth in the Merger Agreement (which are
described below under The Merger Agreement
Conditions to the Merger beginning on page 66). We
will seek to complete the Merger prior to February 28,
2009, the date set forth in the Merger Agreement by which time
if the Merger is not consummated Parent and the Company may
exercise their termination rights under the Merger Agreement
(see The Merger Agreement Termination
beginning on page 66). However, we cannot assure you when,
or if, all of the conditions to completion of the Merger will be
satisfied or waived. Completion of the Merger could be delayed
if there is a delay satisfying any of the conditions to the
Merger.
The Merger will become effective at such time when we file a
Certificate of Merger with the Secretary of State of the State
of Delaware, or at such later time as we and Parent specify in
the Certificate of Merger (the time the Merger becomes effective
being the Effective Time). We expect to make the
filing of such Certificate of Merger on or shortly after the
closing date of the Merger.
Merger
Consideration; Payment
At the Effective Time, each share of our common stock
outstanding as of the Effective Time of the Merger, including
the shares of our common stock represented by the IDSs, will
automatically be cancelled and converted into the right to
receive $0.01 in cash, other than shares of our common stock:
|
|
|
|
|
owned by Parent or any of its subsidiaries;
|
|
|
|
held by the Company as treasury stock; and
|
|
|
|
held by a security holder who is entitled to demand and has
properly made a demand to exercise appraisal rights with respect
to such shares in accordance with the DGCL and has not voted in
favor of adopting the Merger Agreement, until such time as such
holder withdraws, fails to perfect or otherwise loses such
holders appraisal rights under the DGCL.
|
Prior to the Effective Time, the Company will appoint, subject
to Parents approval, an exchange agent that will pay the
Merger Consideration to our security holders in exchange for
stock certificates representing shares of our common stock or
for non-certificated shares represented by book-entry (to which
we refer as Book-Entry Shares). At the Effective
Time, Parent will, or will cause the Surviving Corporation to,
deposit with the exchange agent an amount in immediately
available funds equal to the aggregate Merger Consideration and
promptly after the Effective Time, the exchange agent will mail
each security holder a Letter of Transmittal and instructions
for surrendering stock certificates and Book-Entry Shares. The
exchange agent will pay the Merger Consideration, less any
applicable withholding taxes, to our security holders promptly
55
following the exchange agents receipt of the stock
certificates (or Book-Entry Shares). No interest will be paid or
accrued on the cash payable upon the surrender of any stock
certificate (or Book-Entry Shares). Until so surrendered, each
such certificate (or Book-Entry Share) will represent after the
Effective Time for all purposes only the right to receive such
Merger Consideration. Any funds that have not been distributed
within six months after the Effective Time will be returned upon
demand to Parent, and security holders who have not complied
with the instructions to exchange their stock certificates (or
Book-Entry Shares) will be entitled to look only to Parent and
the Surviving Corporation for payment of the applicable per
share Merger Consideration, without interest.
Parent and the Surviving Corporation generally will each be
entitled to deduct and withhold from the Merger Consideration
otherwise payable to any holder of shares of our common stock
any applicable withholding taxes that it is required to deduct
and withhold under the Code, the rules and regulations
promulgated thereunder, or any other applicable state, local or
foreign tax law. Our security holders are entitled to assert
appraisal rights instead of receiving the Merger Consideration.
For a description of these appraisal rights, see The
Merger Agreement Dissenters Rights below
beginning on page 56.
Effect on
IDSs
As of the Effective Time, each IDS separated in connection with
the tender of Notes pursuant to the Debt Tender will entitle the
IDS holder to receive (i) for the underlying share of our
common stock, the Merger Consideration, (ii) for the
underlying Note (or portion thereof) accepted for payment in the
Debt Tender, the Tender Consideration and (iii) for the
underlying Note (or portion thereof) not accepted for payment in
the Debt Tender, a Note of the Surviving Corporation
representing the amount thereof that will remain outstanding.
Each Note that will remain outstanding will be represented by
the global note certificate and have the rights set forth in the
Indenture as amended by the Proposed Amendments.
As of the Effective Time, each issued and outstanding IDS,
pursuant to the Proposed Amendments to the Indenture, will
automatically be separated into the right to receive the Merger
Consideration and either the Tender Consideration or one
subordinated note of the Surviving Corporation. After the
Effective Time, all IDSs having been separated will be delisted
from the AMEX and TSX and deregistered under the Exchange Act,
we will make an application to cease to be a reporting issuer in
Canada and we will no longer file periodic and other reports
with the SEC or Canadian securities regulatory authorities.
Lost
Certificates
In the event any certificates shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
person claiming such certificates to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the
posting by such person of a bond in such sum as the Surviving
Corporation may reasonably direct as indemnity against any claim
that may be made against it with respect to such certificates,
the exchange agent will pay the Merger Consideration payable in
respect of the shares of our common stock represented by such
lost, stolen or destroyed certificates.
Dissenters
Rights
Shares of our common stock that are outstanding immediately
prior to the Effective Time and that are held by any person who
properly demands appraisal of such shares pursuant to
Section 262 of the DGCL, who did not vote in favor of
adopting the Merger Agreement or consent thereto in writing, and
who complies in all other respects with Section 262 of the
DGCL, shall not be converted into the right to receive the
Merger Consideration as provided in the Merger Agreement, but
shall instead be entitled to receive payment of the fair value
of such shares in accordance with Section 262 of the DGCL.
The appraisal rights of and procedures applicable to such
dissenting security holders are described further under
Adoption of the Merger Agreement
(Proposal 1) The Merger Appraisal
Rights.
56
Certificate
of Incorporation and Bylaws
The Companys Certificate of Incorporation, as in effect
immediately prior to the Effective Time will be the Certificate
of Incorporation of the Surviving Corporation until changed or
amended as provided in the Certificate of Incorporation or by
applicable law.
The Companys Bylaws, as in effect immediately prior to the
Effective Time, will be the Bylaws of the Surviving Corporation
until such time as they are changed or amended as provided by
the Bylaws or by applicable law.
Directors
and Officers
The directors of Merger Sub immediately prior to the Effective
Time will be the directors of the Surviving Corporation until
their successors are duly elected or appointed and qualified or
until the earlier of their resignation or removal.
The officers of the Company immediately prior to the Effective
Time will be the officers of the Surviving Corporation until
their successors are duly elected or appointed and qualified or
until the earlier of their resignation or removal.
Representations
and Warranties
The Merger Agreement contains representations and warranties
that the parties have made to each other as of specific dates.
Except for its status as a contractual document that establishes
and governs the legal relations among the parties with respect
to the Merger described therein, the Merger Agreement is not
intended to be a source of factual, business or operational
information about the parties. The representations and
warranties contained in certain reports, forms, statements and
other documents filed with the SEC and the Merger Agreement were
made only for purposes of that agreement and as of specific
dates, were solely for the benefit of the parties to that
agreement, and may be subject to limitations agreed among those
parties, including being qualified by disclosures among those
parties. Those representations and warranties may have been made
to allocate risks among the parties to the Merger Agreement,
including where the parties do not have complete knowledge of
all facts, instead of establishing matters as facts.
Furthermore, those representations and warranties may be subject
to standards of materiality applicable to the contracting
parties that differ from those applicable to investors. The
assertions embodied in such representations and warranties are
qualified by information contained in disclosure schedules that
the parties exchanged in connection with signing the Merger
Agreement. Accordingly, investors and security holders should
not rely on such representations and warranties as
characterizations of the actual state of facts or circumstances,
since they were only made as of the date of the Merger Agreement
and are modified in important part by the underlying disclosure
schedules. Moreover, information concerning the subject matter
of such representations and warranties may change after the date
of the Merger Agreement.
The Merger Agreement contains customary representations and
warranties of the Company, Parent and Merger Sub relating to
their respective businesses. The representations and warranties
in the Merger Agreement do not survive the Effective Time of the
Merger.
Each of Parent, Merger Sub and the Company has made
representations and warranties to the other regarding, among
other things:
|
|
|
|
|
corporate matters, including due organization and qualification;
|
|
|
|
authority to execute and deliver the Merger Agreement, the
enforceability thereof and the absence of conflicts with, or
violations of, organizational documents or other obligations as
a result of the Merger;
|
|
|
|
fees to brokers and other advisors payable in connection with
the Merger; and
|
|
|
|
necessary governmental approvals and consent.
|
57
In addition, the Company has made other representations and
warranties about itself to Parent as to:
|
|
|
|
|
capital structure and subsidiaries
|
|
|
|
material contracts;
|
|
|
|
the absence of certain changes;
|
|
|
|
SEC reports and financial statements;
|
|
|
|
compliance with applicable laws;
|
|
|
|
legal proceedings;
|
|
|
|
intellectual property;
|
|
|
|
environmental matters;
|
|
|
|
employee benefit plans;
|
|
|
|
labor matters;
|
|
|
|
tax matters;
|
|
|
|
matters relating to significant customers and suppliers;
|
|
|
|
disclosure controls and procedures; and
|
|
|
|
the receipt of a financial advisors opinion.
|
Also, Parent and Merger Sub have made other representations and
warranties to the Company regarding:
|
|
|
|
|
solvency;
|
|
|
|
matters relating to the availability of financing to consummate
the Merger and to fund working capital needs following the
merger; and
|
|
|
|
status of Merger Sub as a shell company and lack of existing
agreements with the Company.
|
Some of our representations and warranties are qualified by a
materiality or material adverse effect standard. Subject to
certain exclusions, a Company material adverse
effect means any change, state of facts, event, occurrence
or effect that, individually or in the aggregate with all such
other changes, states of facts, events, occurrences or effects,
would have a material adverse effect on (i) the ability of
the Company to consummate the Merger or (ii) the business,
assets, financial condition, operations or results of operations
of the Company and our subsidiaries, taken as a whole; provided
that none of the following shall constitute a Company material
adverse effect or (with the exception of the third and fourth
bullet points below) be taken into account in determining
whether there has been or is reasonably expected to be a Company
material adverse effect:
|
|
|
|
|
to the extent that they do not have a materially
disproportionate effect on the Company and our subsidiaries
taken as a whole: (i) any change in conditions in the
United States, foreign or global economy or capital or financial
markets generally, including any change in interest or exchange
rates; or (ii) any change in conditions (including any
change in general legal, regulatory, political, economic or
business conditions) in the industry in which the Company and
our subsidiaries conduct business.
|
|
|
|
the announcement of the execution of the Merger Agreement or
pendency (but not the closing) of the transactions contemplated
thereby;
|
|
|
|
any change in the market price or trading volume of the our
common stock, the IDSs or the Notes (provided that the
underlying cause of such change may constitute a Company
material adverse effect);
|
|
|
|
any failure to meet any revenue or earnings targets or
projections of the Company (provided that the underlying cause
of such failure may constitute a Company material adverse
effect);
|
|
|
|
any change in GAAP; or
|
58
|
|
|
|
|
to the extent they do not have a materially disproportionate
effect on the Company and our subsidiaries taken as a whole, any
natural disaster or calamity, or act of terrorism, sabotage,
military action or war or any escalation or worsening thereof
(in each case, threatened, pending or declared).
|
Covenants
and Agreements
Conduct
of Business by the Company
The Company has agreed that, subject to certain exceptions and
the prior written consent of Parent, between September 18,
2008 and the Effective Time, we and our subsidiaries will carry
on our business in the ordinary course. We have also agreed that
during that same period, subject to certain exceptions and the
prior written consent of Parent, the Company and our
subsidiaries will not:
|
|
|
|
|
declare, set aside or pay any dividend or distribution in
respect of our capital stock or split, combine, reclassify or
issue other securities in respect of our capital stock;
|
|
|
|
issue, sell, grant, pledge or otherwise encumber any shares of
our capital stock, any voting securities or any securities
convertible into any such shares;
|
|
|
|
amend our organizational documents;
|
|
|
|
acquire any assets of a third party, except in the ordinary
course of business consistent with past practice;
|
|
|
|
sell, transfer, pledge, lease, mortgage, sell and lease back or
otherwise encumber or subject to any lien or otherwise dispose
of any of our properties or other assets to a third party,
except for sales of properties or other assets in the ordinary
course of business consistent with past practice;
|
|
|
|
incur, assume or modify any indebtedness for money borrowed or
guarantee thereof, including any capitalized lease obligations
but excluding (i) any capitalized lease obligations with an
aggregate capitalized amount less than $500,000, intercompany
debt, and letters of credit entered into or performance bonds
posted in the ordinary course of business consistent with past
practice or (ii) drawdowns or borrowings under the credit
facilities of the Company in effect on the date of the Merger
Agreement;
|
|
|
|
acquire directly or indirectly, by repurchase or otherwise any
shares of the capital stock of the Company or any subsidiary;
|
|
|
|
grant to any director, officer or employee of the Company or any
of our subsidiaries (i) any increase in compensation, bonus
or other benefits or (ii) any increase in severance, change
of control or termination pay, other than, with respect to
employees who are not executive officers or directors, increases
in compensation, bonus or other benefits in the ordinary course
of business consistent with past practice or as required by a
written agreement in effect on the date of the Merger Agreement;
|
|
|
|
enter into, amend or terminate any material contract, other than
in the ordinary course of business consistent with past
practice, or make capital expenditures in connection with any
material contract, other than as required under any material
contract;
|
|
|
|
pay, discharge, waive, release, assign, settle, satisfy or
forgive any action, other than actions grounded in tort law and
other commercial claims that arise or have arisen in the
ordinary course of business and only to the extent that the
aggregate payments related to the settlement of all such actions
do not exceed $300,000 in the aggregate plus certain other
amounts;
|
|
|
|
(i) make or change any material tax election;
(ii) change annual tax accounting period or material method
of tax accounting; (iii) except as required by applicable
law, file any amended tax return; (iv) enter into any
closing agreement with respect to taxes; (v) settle any tax
claim or assessment; or (vi) consent to any extension or
waiver of the limitations period for the assessment of any tax;
|
|
|
|
make any payments, incur any liabilities or grant contractual or
other concessions to counterparties in order to secure any
consents necessary in connection with the transactions
contemplated by the Merger
|
59
|
|
|
|
|
Agreement under any contracts or permits, other than, with
respect to any permits, payments of filing, application and
similar fees; or
|
|
|
|
|
|
authorize, commit or agree to any of the foregoing.
|
Security
Holder Meeting; Proxy Material
The Company has agreed that, as promptly as reasonably
practicable after the execution of the Merger Agreement, we will
prepare and file with the SEC and the Canadian Securities
Commissions (CSC) a preliminary proxy statement,
together with a form of proxy. We further agreed that promptly
after the proxy statement and form of proxy were cleared with
the SEC and CSC we would mail the definitive proxy statement and
form of proxy to our security holders.
Parent and Merger Sub have agreed to cooperate with us in
connection with the preparation of the proxy statement including
furnishing to us any and all information regarding Parent,
Merger Sub and their respective affiliates as may be required to
be disclosed in the proxy statement.
We will take all action necessary in accordance with the DGCL
and our Certificate of Incorporation and Bylaws to call, give
notice of, convene and hold a meeting of our security holders to
consider the adoption of the Merger Agreement, including the
Merger, as promptly as reasonably practicable after the mailing
of the proxy. The Companys obligation to call, hold and
convene the security holder meeting will not be affected by
(i) the commencement, proposal, disclosure or announcement
of any Company Proposal or (ii) any Adverse Recommendation
Change, unless in either case the Merger Agreement is terminated
(see Merger Agreement Termination
beginning on page 66). The Merger Agreement requires the
Board of Directors, subject to complying with its fiduciary
duties, to (i) recommend that the security holders vote in
favor of the adoption of the Merger Agreement and (ii) use
its reasonable best efforts to solicit from security holders of
the Company proxies in favor of the adoption of the Merger
Agreement and the Merger. The Merger Agreement also requires
that the proxy statement include a statement to the effect that
the Board of Directors has recommended that the security holders
vote in favor of adoption of the Merger Agreement at the
security holder meeting.
Employees;
Benefit Plans
For a period of one year following the closing of the Merger,
the Surviving Corporation will provide current employees of the
Company and our subsidiaries (other than those employees covered
by a collective bargaining agreement) as of the Effective Time
who continue employment with the Surviving Corporation with base
salary, the opportunity for cash bonus compensation, and
benefits that are no less favorable in the aggregate than those
provided under the Companys compensation and benefit
plans, programs, policies, practices and arrangements (excluding
equity-based programs) in effect at the Effective Time. However,
such obligations of the Surviving Corporation would not prevent
the Surviving Corporation from amending or terminating any
specific plan, program or arrangement or terminating the
employment of an employee for any reason for which the Company
could have terminated such employee prior to the Merger.
The Surviving Corporation and its affiliates will honor all
employee benefit plans and employment agreements (including any
severance, retention, change of control and similar plans,
agreements and written arrangements) in accordance with their
terms as in effect immediately prior to the Effective Time. For
all purposes under the employee benefits plans of the Surviving
Corporation and its subsidiaries providing benefits to any
employees after the Effective Time (the New Plans),
each employee will be credited with his or her years of service
with the Company and its affiliates prior to the Effective Time,
to the same extent as such employee was entitled, before the
Effective Time, to credit for such service under the
corresponding employee benefit plan, except for benefit accrual
purposes under defined benefit plans. In addition, and without
limiting the foregoing, (i) each employee immediately will
be eligible to participate, without any waiting time, in any and
all New Plans to the extent coverage under such New Plan
replaces coverage under a similar or comparable employee benefit
plan in which such employee participated immediately before the
Effective Time (such plans, the Old Plans) and
(ii) for the purposes of each New Plan providing medical,
dental, pharmaceutical
and/or
vision benefits to any employee and his or her covered
dependents, to the extent
60
any such exclusions or requirements were waived or inapplicable
under any Old Plan, and the Surviving Corporation will cause any
eligible expenses incurred by such employee and his or her
covered dependents during the portion of the plan year of the
Old Plans ending on the date such employees participation
in the corresponding New Plan begins to be taken into account
under such New Plan for purposes of satisfying all deductible,
coinsurance and maximum out-of-pocket requirements applicable to
such employee and his or her covered dependents for the
applicable plan year as if such amounts had been paid in
accordance with such New Plan.
Reasonable
Best Efforts
Upon the terms and subject to the conditions set forth in the
Merger Agreement, each of the Company, Parent and Merger Sub has
agreed to use its reasonable best efforts to assist and
cooperate with the other parties in doing all things necessary,
proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other
transactions contemplated by the Merger Agreement, including
using reasonable best efforts to accomplish the following:
|
|
|
|
|
taking all acts necessary to cause the conditions to closing to
be satisfied as promptly as practicable;
|
|
|
|
obtaining all necessary actions, waivers, consents and approvals
from governmental authorities and the making of all necessary
registrations and filings;
|
|
|
|
obtaining all consents, approvals or waivers from third parties;
|
|
|
|
defending any lawsuits or other legal proceedings, whether
judicial or administrative, challenging the Merger Agreement or
the consummation of the Merger;
|
|
|
|
executing and delivering any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry
out the purposes of, the Merger Agreement.
|
The Company and Parent have each agreed to use its reasonable
best efforts to take promptly any and all steps necessary to
avoid or eliminate each and every impediment under any antitrust
or competition laws as expeditiously as possible, including
committing to or effecting, by consent decree, hold separate
orders, trust or otherwise, the sale or disposition of such of
their assets or businesses as are required to be divested in
order to avoid the entry of, or to effect the dissolution of,
any decree, order, judgment, injunction, temporary restraining
order or other order in any suit or proceeding, that would
otherwise have the effect of preventing or materially delaying
the consummation of the Merger and the other transactions
contemplated by the Merger Agreement.
In addition, each of the Company and Parent has agreed to use
its reasonable best efforts to take promptly any and all steps
necessary to vacate or lift any order relating to antitrust or
competition that would have the effect of making any of the
transactions contemplated by the Merger Agreement illegal or
otherwise prohibiting or materially delaying their consummation.
Reasonable best efforts will impose on the Company
and our subsidiaries the obligation to pay filing, application
and similar fees but will not require the Company or our
subsidiaries to make payments, incur liabilities or grant
contractual or other concessions to counterparties in order to
secure any consents, waivers, approvals or authorizations.
Indemnification;
Exculpation and Insurance.
From and after the Effective Time, Parent will cause the
Surviving Corporation to, and the Surviving Corporation will,
indemnify and hold harmless, to the same extent provided under
the Companys Certificate of Incorporation and Bylaws in
effect on the date of the Merger Agreement, the individuals who
on or prior to the Effective Time were directors, officers or
employees of the Company or any of our subsidiaries
(collectively, the Indemnitees) with respect to all
acts or omissions by them in their capacities as such or taken
at the request of the Company or any of our subsidiaries at any
time prior to the Effective Time. All obligations with respect
to all rights of the Indemnitees to indemnification and
exculpation from liabilities for acts or omissions occurring at
or prior to the Effective Time as provided in the respective
Certificates of Incorporation or Bylaws (or comparable
organizational documents) of the Company or any of our
subsidiaries
61
as now in effect, and any indemnification agreements or
arrangements of the Company or any of our subsidiaries, will
survive the Merger and continue in full force and effect in
accordance with their terms. For a period of not less than six
(6) years from the Effective Time, such rights shall not be
amended, or otherwise modified in any manner that would
adversely affect the rights of the Indemnitees with respect to
indemnification and exculpation from liabilities for acts or
omissions occurring prior to the Effective Time, unless such
modification is required by law.
As of the Effective Time, the Company will have obtained, and
the Surviving Corporation has agreed to maintain in effect for a
six-year period thereafter, a so-called tail policy
for such six-year period covering acts or omissions occurring
prior to the Effective Time with respect to those persons who
are currently covered by the Companys directors and
officers liability insurance policy on terms with respect
to such coverage and amount no less favorable to our directors
and officers currently covered by such insurance than those of
such policy in effect on the date of the Merger Agreement.
Fees
and Expenses
Except as described in Merger Agreement
Termination Fees and Expenses beginning on page 67,
all expenses incurred in connection with the Merger Agreement,
the Merger and the other transactions contemplated thereby will
be paid by the party incurring such expenses, whether or not the
Merger is consummated, except that the Company or, if the Merger
is consummated, the Surviving Corporation will bear and pay the
costs and expenses incurred in connection with the filing fees
for any applicable foreign or supranational antitrust laws and
all separation fees. Except as otherwise provided in the Merger
Agreement, all transfer, documentary, sales, use, real property
transfer, stock transfer, stamp, registration and other similar
taxes and fees (including any penalties and interest) incurred
in connection with the transaction contemplated by this
Agreement will be borne equally by the Company and Parent.
Public
Announcements
Parent and the Company have agreed to consult with each other
before issuing, and give each other the opportunity to review
and comment upon, any press release or other public statements
with respect to the transactions contemplated by the Merger
Agreement, including the Merger, and will not issue any such
press release or make any such public statement prior to such
consultation, except as may be required by applicable law or
court process.
Notification
of Certain Matters
Each of the Company and Parent has agreed to give prompt notice
to the other of:
|
|
|
|
|
any material notice or other communication received or sent by
such party to any governmental authority in connection with the
Merger or the transactions contemplated thereby or from any
person alleging that the consent of such person is or may be
required in connection with the Merger or the transactions
contemplated thereby; and
|
|
|
|
any actions, suits, claims, investigations or proceedings
commenced or, to such partys knowledge, threatened
against, relating to or involving or otherwise affecting such
party or any of its subsidiaries which relate to the Merger or
the transactions contemplated thereby.
|
Access
to Information
The Company has agreed that from the date of the Merger
Agreement until the Effective Time, to the extent consistent
with applicable antitrust and other laws, to provide Parent and
Merger Sub and their representatives reasonable access upon
notice, to the officers, directors, employees, accountants,
properties,
62
offices and other facilities and to the books and records of the
Company and our subsidiaries and will cause the our
representatives and subsidiaries to:
|
|
|
|
|
furnish Parent, Merger Sub and Parents representatives
with financial and operating data and other information with
respect to the business and operations of the Company and our
subsidiaries as Parent and Merger Sub may from time to time
reasonably request; and
|
|
|
|
notify Parent of the filing by the Company of any form, report,
schedule, statement, registration statement and other documents
filed by the Company or our subsidiaries during such period
pursuant to the requirements of the United States federal or
state securities laws.
|
Non-Solicitation
The Merger Agreement restricts the Company from soliciting and
engaging in discussions and negotiations with respect to a
Company Proposal, and the Board of Directors of the Company is
prohibited from:
|
|
|
|
|
withdrawing its approval of the Merger Agreement;
|
|
|
|
effecting an Adverse Recommendation Change; or
|
|
|
|
entering into any letter of understanding or other agreement
with respect to a Company Proposal.
|
Notwithstanding the foregoing, if our Board of Directors
determines after considering the advice of outside counsel that
it should take such action to comply with its fiduciary duties,
the Board of Directors may:
|
|
|
|
|
enter into discussions and negotiations with respect to a
Company Proposal determined to constitute or reasonably likely
to result in a Superior Proposal; or
|
|
|
|
effect an Adverse Recommendation Change.
|
Financing
Matters
Obligations
of Parent and Merger Sub
Parent and Merger Sub have agreed to use their reasonable best
efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to
arrange the debt and equity financing pursuant to the terms of
the Debt Commitment Letter and the Equity Commitment Letter,
including using their reasonable best efforts to:
|
|
|
|
|
satisfy all conditions within their control to obtaining the
debt and equity financing;
|
|
|
|
comply with all obligations applicable to Parent and Merger Sub;
|
|
|
|
negotiate and enter into definitive financing agreements as
contemplated in the commitment letters;
|
|
|
|
consummate the debt and equity financing prior to
closing; and
|
|
|
|
seek to enforce their rights under the debt and equity financing
commitment letters.
|
In the event that the debt financing becomes unavailable, or a
financing source notifies Parent that it no longer intends to
provide financing on the terms and conditions contemplated by
the debt financing commitment letter, Parent will promptly
notify the Company and use its reasonable best efforts to
arrange to obtain alternative financing from alternative
financing sources, which is not materially less favorable to and
not more onerous on Parent and Merger Sub, as promptly as
practicable following the occurrence of such event and prior to
closing.
Parent and Merger Sub are obligated not to take any action that
would impede the consummation of the debt or equity financing as
contemplated. Parent is obligated to keep us informed of all
material activity
63
concerning the status of the financing arrangements, and to give
prompt notice of any material adverse change with respect to the
financing, which includes notice that:
|
|
|
|
|
the Debt Commitment Letter or Equity Commitment Letter has
expired or been terminated for any reason;
|
|
|
|
a financing source has notified Parent that it no longer intends
to provide financing; or
|
|
|
|
Parent no longer believes in good faith that it will be able to
obtain all or a part of the financing contemplated in the debt
and equity financing commitment letters.
|
Cooperation
of the Company
Prior to the closing, we are required to provide Parent and
Merger Sub, and must use our reasonable best efforts to cause
our officers, directors, employees, lenders and legal, financial
and accounting advisors to provide, at Parents expense,
Parent and Merger Sub with all cooperation reasonably requested
by Parent in connection with the debt financing, including:
|
|
|
|
|
assisting in the preparation for, and participating in,
meetings, presentations, road shows, due diligence sessions and
similar presentations to and with prospective lenders, investors
and rating agencies;
|
|
|
|
assisting with the preparation of materials for rating agency
presentations, offering documents, private placement memoranda,
bank information memoranda, prospectuses and similar documents
to the extent of information related to the Company;
|
|
|
|
executing and delivering any pledge and security documents,
other definitive financing documents, or other certificates,
opinions or documents required by the debt financing commitment
letters or as otherwise reasonably requested by Parent and
otherwise reasonably facilitate the pledging of collateral at
closing;
|
|
|
|
furnishing Parent and its financing sources with the financial
statements of the Company, pro forma financial information,
financial data, audit reports and other information relating to
the Company of the type required by
Regulation S-X
and
Regulation S-K
under the Securities Act and the other accounting rules and
regulations of the SEC required by the Debt Commitment Letter or
as may be otherwise reasonably requested by Parent;
|
|
|
|
using reasonable best efforts to obtain accountants
comfort letters, legal opinions, surveys, appraisals,
environmental reports and title insurance as reasonably
requested by Parent;
|
|
|
|
obtaining any necessary rating agencies confirmation or
approvals for the debt financing; and
|
|
|
|
taking all corporate actions reasonably necessary to permit the
consummation of the debt financing;
|
provided that the Company will not be required to pay any
commitment or other similar fee or incur any other liability in
connection with the debt or equity financing prior to the
closing date of the Merger except for any liabilities that are
conditioned on the closing date having occurred.
In evaluating the proposed Merger, the Board of Directors
considered, among other things, the ability of National City to
fund its commitments to Kohlberg as a result of the impact of
the deteriorating credit markets and the financial position of
National City. While National City has signed the Debt
Commitment Letter, there can be no assurance that it will, or
will have the ability to, fund the senior secured credit
facilities on the closing date.
If the Merger Agreement is terminated prior to the closing date,
Parent and Merger Sub will, on a joint and several basis,
indemnify and hold harmless the Company, our subsidiaries and
our officers, directors, employees, lenders and legal, financial
and accounting advisors for and against any and all losses
suffered or incurred by them in connection with the debt and
equity financing, and information utilized in connection with
the debt and equity financing (other than information provided
by the Company and our subsidiaries for use in connection
therewith).
64
Debt
Tender Offer
Simultaneously with the mailing of the Proxy Statement, the
Company will commence:
|
|
|
|
|
the Debt Tender for 70% of the Notes, for an amount, in cash,
equal to $3.99 per Note, plus accrued and unpaid interest and
deferred interest; and
|
|
|
|
the Consent Solicitation of the holders of a majority of the
Notes to an amendment to the Indenture in the form set forth in
Exhibit A to the Merger Agreement which is attached hereto
as Annex A.
|
Any amounts payable to holders of the Notes in the Consent
Solicitation or Debt Tender will be funded by Parent and Merger
Sub or by the Surviving Corporation at the direction of Parent
at the Effective Time by deposit with a designated agent of
immediately available funds equal to the amount to be paid. The
Consent Solicitation and Debt Tender will not require any
payment by the Company prior to the Effective Time for the Notes
and/or
the
consents or waiver or amendment under the Consent Solicitations.
In connection with the Consent Solicitation and Debt Tender, the
Company will prepare all reasonably necessary and appropriate
offer documents including;
|
|
|
|
|
the offer to purchase;
|
|
|
|
the terms of the consent;
|
|
|
|
related letters of transmittal; and
|
|
|
|
other related documents and any other filing that may be
required by the SEC or the CSC.
|
All mailings to the holders of the Notes in connection with the
Consent Solicitation and Debt Tender and related filings with
the SEC and CSC are subject to the prior review and comment of
the Company and Merger Sub. Merger Sub, the Company and our
subsidiaries and each of Merger Subs and the
Companys respective representatives are required to
reasonably cooperate with each other in connection with the
Consent Solicitation and Debt Tender (including the preparation
of the offer documents) and use reasonable best efforts to cause
any payment for the Consent Solicitation and the initial
settlement of the Debt Tender to occur simultaneously with the
Effective Time.
We are required to use our reasonable best efforts to obtain the
requisite consents in connection with the Consent Solicitation.
Promptly upon receipt of the requisite consents permitting an
amendment of the Indenture, we will enter into a supplemental
indenture reflecting the amendments to the Indenture approved by
such consents. We are required to use our reasonable best
efforts to cause the Indenture trustee to promptly enter into
such supplemental indenture. The amendments contained in such
supplemental indenture will become effective upon signing, but
not operative until the closing of the Merger and the acceptance
of the Notes tendered in the Debt Tender.
The closing of the Consent Solicitation and Debt Tender will be
conditioned solely on:
|
|
|
|
|
the receipt of the requisite consents;
|
|
|
|
the simultaneous occurrence of the closing of the
Merger; and
|
|
|
|
there being no restraint that prohibits the closing of the
Merger.
|
Simultaneously with the closing of the Merger and in accordance
with the terms of the Consent Solicitation and Debt Tender, the
Surviving Corporation will be provided by Merger Sub with the
funds reasonably necessary to consummate the Debt Tender and
Consent Solicitation and the Surviving Corporation is required
to accept for purchase, and use such funds to purchase, the
Notes tendered in the Debt Tender (and pay all accrued and
unpaid interest, deferred interest, applicable premiums, consent
fees and all related fees and expenses in connection with the
Debt Tender and Consent Solicitation).
If requested by Merger Sub, the Company is required to enter
into one or more customary dealer manager agreements with such
persons as mutually agreed upon by Merger Sub and the Company.
Parent and Merger Sub or, if the Merger is consummated, the
Surviving Corporation will pay the fees and expenses of any
dealer
65
manager, information agent, depositary or other agent retained
in connection with the Consent Solicitation and Debt Tender.
Conditions
to the Merger
Conditions
to Each Partys Obligations
Each partys obligation to complete the Merger is subject
to the satisfaction or waiver of the following conditions:
|
|
|
|
|
the receipt of the required approval of security holders to
adopt the Merger Agreement; and
|
|
|
|
the absence of orders, injunctions or other legal restraints or
prohibitions preventing completion of the Merger.
|
Conditions
to Parents and Merger Subs Obligations
The obligations of Parent and Merger Sub to complete the Merger
are subject to the satisfaction or waiver of the following
additional conditions:
|
|
|
|
|
the accuracy of the Companys representations and
warranties set forth in the Merger Agreement;
|
|
|
|
the performance by the Company of its obligations under the
Merger Agreement;
|
|
|
|
the absence of a Company material adverse effect;
|
|
|
|
the valid tender of at least 50.1% of the outstanding Notes
pursuant to the Debt Tender and the receipt of the requisite
consents pursuant to the Consent Solicitation; and
|
|
|
|
the receipt of certain specified third-party consents.
|
Conditions
to the Companys Obligations
The obligation of the Company to complete the Merger is subject
to the satisfaction or waiver of the following additional
conditions:
|
|
|
|
|
the accuracy of Parents and Merger Subs
representations and warranties set forth in the Merger
Agreement; and
|
|
|
|
the performance by Parent and Merger Sub of their obligations
under the Merger Agreement;
|
Termination
The Merger Agreement may be terminated at any time before
completion of the Merger by written mutual consent of Parent,
Merger Sub and the Company. The Merger Agreement may also be
terminated in certain other circumstances, including:
|
|
|
|
|
by either Parent or the Company if:
|
|
|
|
|
|
the Merger is not consummated on or before February 28,
2009;
|
|
|
|
any injunction, judgment or order is in effect preventing the
consummation of the Merger; or
|
|
|
|
our security holders fail to approve the Merger at the special
meeting.
|
|
|
|
|
|
prior to the security holder approval, the Board of Directors
makes an Adverse Recommendation Change or approves or recommends
a Company Proposal; or
|
|
|
|
if the Company breaches or fails to perform any of its
representations, warranties, covenants or agreements under the
Merger Agreement and the breach is not cured within 30 calendar
days.
|
66
|
|
|
|
|
prior to the security holder approval, the Board of Directors
makes an Adverse Recommendation Change or determines to enter
into an Acquisition Agreement (as defined in the Merger
Agreement) concerning a transaction that constitutes a Superior
Proposal;
|
|
|
|
Parent or Merger Sub breaches or fails to perform any of its
representations, warranties, covenants or agreements under the
Merger Agreement and the breach is not cured within 30 calendar
days;
|
|
|
|
Parent fails to consummate the Merger upon satisfaction of all
conditions precedent to Parents obligations to close the
Merger; or
|
|
|
|
the Debt Commitment Letter is terminated or National City denies
the obligation to fund or otherwise becomes unable to or
prohibited from funding the financing and, within thirty days
after the Company has delivered written notice to Parent
thereof, the Merger has not been consummated.
|
Termination
Fees and Expenses
If Parent terminates the Merger Agreement (i) due to the
failure to obtain the necessary security holder approval or
(ii) in the event of a breach by the Company that has not
been cured within 30 calendar days, then we will be required to
pay Parent and Merger Sub their expenses, up to a maximum of
$2,500,000 and if, in connection with the failure to obtain
security holder approval, there was another Company Proposal at
the time of the security holder meeting and the Company
consummates a transaction with a higher consideration within
6 months after termination of the Merger Agreement, then we
will be required to pay Parent and Merger Sub the Termination
Fee, less the amount of any expenses previously paid by the
Company to Parent or Merger Sub. In addition, if either Parent
or the Company terminates the Merger Agreement because the Board
of Directors approves or recommends any other Company Proposal
or because the Board of Directors makes an Adverse
Recommendation Change then we will also be required to pay
Parent and Merger Sub the Termination Fee.
If the Company terminates the Merger Agreement in the event of a
breach by Parent or Merger Sub that has not been cured within 30
calendar days, then Parent will be required to pay the Company
its expenses, up to a maximum of $2,500,000. If the Company
terminates the Merger Agreement because (i) Parent and
Merger Sub have refused to close despite the satisfaction of the
conditions to their obligation to close or (ii) the Debt
Commitment Letter is terminated or National City has denied its
obligations under the commitment letter or becomes unable to, or
prohibited from, funding and the Merger has not been consummated
within 30 days thereafter, then Parent will be required to
pay the Company the Reverse Termination Fee, less the amount of
any expenses previously paid by the Parent or Merger Sub to the
Company. Sponsor has guaranteed any such required payments by
Parent to the Company.
If any party fails to pay amounts due in respect of the
Termination Fee or the Reverse Termination Fee, interest will
accrue on such unpaid amount at a rate of 8% per annum.
Amendment;
Extension; Waiver
The parties to the Merger Agreement may amend the Merger
Agreement at any time prior to the Effective Time, except that
no such amendment may be made that by law would require that
such amendment be approved by either our security holders or the
Parents shareholders without such approval having been
obtained. To be effective, the amendment must be in writing and
signed by the Company, Parent and Merger Sub.
At any time prior to the consummation of the Merger, each of the
Company, Parent or Merger Sub may, by written instrument:
|
|
|
|
|
extend the time for the performance of any of the obligations or
other acts of the other parties;
|
|
|
|
waive any inaccuracies in the representations and warranties of
the other parties contained in the Merger Agreement or in any
document delivered pursuant to the Merger Agreement; or
|
67
|
|
|
|
|
waive compliance with any of the agreements or conditions
contained in the Merger Agreement.
|
Specific
Enforcement
The Merger Agreement contemplates that if the Company, despite
satisfaction of all conditions precedent to the Company
consummating the Merger, fails to consummate the Merger, Parent
may specifically enforce the terms of the Merger Agreement in
the United States District Court of the District of Delaware or
in any state courts in the State of Delaware. Accordingly,
Parent and Merger Sub will be entitled to an injunction to
prevent breaches or threatened breaches of the Merger Agreement
by us and to enforce specifically the terms and provisions of
the Merger Agreement. The Merger Agreement provides that the
Company will not be entitled to an injunction to prevent
breaches or threatened breaches of the Merger Agreement by
Parent or Merger Sub or to enforce specifically the terms and
provisions of the Merger Agreement.
MARKET
PRICE AND DIVIDEND INFORMATION
The Companys IDSs trade on the AMEX under the symbol
CVP and on the TSX under the symbol
CVP.un.
The following table shows the range of the high and low sale
prices of our IDSs, as reported on the AMEX for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMEX
|
|
|
|
Company IDS
|
|
|
|
High
|
|
|
Low
|
|
|
Dividends
|
|
|
Calendar Quarters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
13.25
|
|
|
$
|
12.42
|
|
|
|
$0.20
|
|
|
Second Quarter
|
|
$
|
14.45
|
|
|
$
|
12.78
|
|
|
|
$0.20
|
|
|
Third Quarter
|
|
$
|
16.50
|
|
|
$
|
13.25
|
|
|
|
$0.20
|
|
|
Fourth Quarter
|
|
$
|
19.06
|
|
|
$
|
14.94
|
|
|
|
$0.20
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
19.88
|
|
|
$
|
13.52
|
|
|
|
$0.20
|
|
|
Second Quarter
|
|
$
|
18.85
|
|
|
$
|
15.34
|
|
|
|
$0.20
|
|
|
Third Quarter
|
|
$
|
24.22
|
|
|
$
|
10.87
|
|
|
|
$0.20
|
|
|
Fourth Quarter
|
|
$
|
17.92
|
|
|
$
|
8.66
|
|
|
|
$0.20
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
12.99
|
|
|
$
|
9.49
|
|
|
|
$0.20
|
|
|
Second Quarter
|
|
$
|
9.92
|
|
|
$
|
3.50
|
|
|
|
$0.07
|
|
|
Third Quarter
|
|
$
|
4.98
|
|
|
$
|
1.92
|
|
|
$
|
n/a
|
|
|
68
The following table shows the range of the high and low sale
prices of our IDSs, as reported on the TSX for each of the
periods indicated. All prices are in Canadian Dollars except for
dividends which are paid to all IDS holders in U.S. Dollars:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSX
|
|
|
|
Company IDS
|
|
|
|
High
|
|
|
Low
|
|
|
Dividends
|
|
|
Calendar Quarters
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
C$
|
15.50
|
|
|
C$
|
12.75
|
|
|
$
|
0.20
|
|
Second Quarter
|
|
C$
|
17.00
|
|
|
C$
|
14.00
|
|
|
$
|
0.20
|
|
Third Quarter
|
|
C$
|
19.00
|
|
|
C$
|
14.00
|
|
|
$
|
0.20
|
|
Fourth Quarter
|
|
C$
|
22.00
|
|
|
C$
|
15.00
|
|
|
$
|
0.20
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
C$
|
25.00
|
|
|
C$
|
15.00
|
|
|
$
|
0.20
|
|
Second Quarter
|
|
C$
|
24.00
|
|
|
C$
|
15.00
|
|
|
$
|
0.20
|
|
Third Quarter
|
|
C$
|
22.00
|
|
|
C$
|
13.13
|
|
|
$
|
0.20
|
|
Fourth Quarter
|
|
C$
|
20.00
|
|
|
C$
|
8.00
|
|
|
$
|
0.20
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
C$
|
15.00
|
|
|
C$
|
8.04
|
|
|
$
|
0.20
|
|
Second Quarter
|
|
C$
|
9.98
|
|
|
C$
|
2.37
|
|
|
$
|
0.07
|
|
Third Quarter
|
|
C$
|
6.00
|
|
|
C$
|
0.75
|
|
|
$
|
n/a
|
|
On
[ ],
2008, there were
[ ] shares
of common stock outstanding. As of the record date, there were
approximately
[ ] security
holders of record.
The closing sale prices of our IDSs on the AMEX and TSX on
September 18, 2008, the last full trading day before the
public announcement of approval of the Merger Agreement by the
Company, were US$3.00 and C$3.75 per unit respectively. On
[ ],
2008, the last trading day prior to the date of the first
mailing of this proxy statement, the closing sale price of our
IDSs on the AMEX and TSX was
US$[ ]
and
C$[ ]
per unit respectively. Security holders should obtain a current
market quotation for our IDSs before making any decision with
respect to the Merger.
In connection with the May 2008 amendment to our credit
agreement, we agreed to eliminate the monthly dividend payments
on our common stock.
69
SHARE
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal
Holders of Common Stock and IDSs
The following table and the accompanying notes show information
as of
[ ],
2008 (unless otherwise indicated), based on public filings with
the SEC, regarding the beneficial ownership of shares of our
common stock and IDSs, and show the number of and percentage
owned by:
|
|
|
|
|
Each person who is known by us to own beneficially more than 5%
of our capital stock or IDSs;
|
|
|
|
Each member of our Board of Directors;
|
|
|
|
Each of our named executive officers; and
|
|
|
|
All current members of our Board of Directors and executive
officers as a group.
|
Except as indicated in the footnotes to this table, each person
has sole voting and investment power with respect to all shares
attributable to such person. All shares of common stock are
owned as part of IDS units.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Percent of
|
|
|
|
of Common Stock
|
|
|
Common Stock and
|
|
Name of Beneficial Owner
|
|
and IDS Units
|
|
|
Percent of IDSs
|
|
|
The Baupost Group. L.L.C.(1)
|
|
|
2,255,318
|
|
|
|
10.75
|
%
|
HBK(2)
|
|
|
1,883,618
|
|
|
|
9.0
|
%
|
FMR LLC(3)
|
|
|
1,722,760
|
|
|
|
7.1
|
%
|
Janet L. Steinmayer(4)
|
|
|
0
|
|
|
|
0
|
|
Kevin F. McNamara(4)
|
|
|
0
|
|
|
|
0
|
|
William H. Peterson(4)
|
|
|
0
|
|
|
|
0
|
|
Felix P. Chee
|
|
|
1,150
|
|
|
|
*
|
|
Sue Ling Gin
|
|
|
2,092
|
|
|
|
*
|
|
Alfred Poe
|
|
|
1,142
|
|
|
|
*
|
|
David M. Williams
|
|
|
1,135
|
|
|
|
*
|
|
Glenn R. Zander
|
|
|
1,141
|
|
|
|
*
|
|
All current directors and executive officers as a group (eight
persons)(4)
|
|
|
6,660
|
|
|
|
*
|
%
|
|
|
|
*
|
|
Less than 1%.
|
|
(1)
|
|
The Baupost Group, L.L.C. (Baupost) owns 2,255,318
of our IDS units. Baupost is a registered investment adviser.
SAK Corporation is the Manager of Baupost. Seth A. Klarman, as
the sole Director of SAK Corporation and a controlling person of
Baupost, may be deemed to have beneficial ownership of the
securities beneficially owned by Baupost. Baupost has sole
investment and voting power over the 2,255,318 IDS units as
reported in a Schedule 13G filed by Baupost with the SEC on
August 8, 2008. The address of each of these entities is
10 St. James Avenue, Suite 1700, Boston,
Massachusetts 02166.
|
|
(2)
|
|
HBK Investments L.P., HBK Services LLC, HBK Partners II
L.P., HBK Management LLC and HBK Master Fund L.P. have
shared voting and investment power over 1,883,618 IDS units, as
reported in a Schedule 13G/A filed with the SEC on
February 5, 2008. The address of each of these entities is
300 Crescent Court, Suite 700, Dallas, Texas 85201.
|
|
(3)
|
|
FMR LLC owns 1,722,760 of our IDS units through its wholly owned
subsidiary, Fidelity Management & Research Company
(Fidelity), as a result of Fidelitys acting as
an investment adviser to various investment companies. Edward C.
Johnson III, as Chairman of FMR Corp., may be deemed to
beneficially own the units owned by FMR LLC. Mr. Johnson
and FMR LLC each have sole investment power over the 1,722,760
IDS units owned by Fidelity. Voting power over the
1,722,760 units rests with the Fidelity Funds Boards
of Trustees. This information is as of December 31, 2007,
as set forth in a Schedule 13G/A filed by FMR LLC with the
SEC on February 14, 2008. The address of Fidelity and FMR
LLC is 82 Devonshire Street, Boston, Massachusetts 02109.
|
|
(4)
|
|
Our executive officers do not receive stock options or other
forms of equity compensation due to certain restrictions on, and
difficulties relating to, the issuance of additional IDSs.
Through the annual bonus program and the LTPP, their interests
are tied to increases in Adjusted EBITDA, which is the
companys principal financial metric.
|
70
CURRENCY
AND EXCHANGE RATES
Unless otherwise indicated, all references to dollar amounts,
and all references to $ or dollar in
this proxy statement are to U.S. dollars. References to
C$ in this proxy statement are to Canadian dollars.
The following table sets out: (1) the high noon rate of
exchange for one U.S. dollar in Canadian dollars during the
periods set out below; (2) the low noon rate of exchange
for one U.S. dollar in Canadian dollars during the periods
set out below; (3) the simple average rate of exchange for
one U.S. dollar in Canadian dollars during the periods set
out below; and (4) the rate of exchange in effect at the
end of each period, all based on daily noon buying rates
published by the Bank of Canada:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
(C$)
|
|
|
(C$)
|
|
|
Average (C$)
|
|
|
End of Period (C$)
|
|
|
Nine Month Period Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
1.0796
|
|
|
|
0.9719
|
|
|
|
1.0184
|
|
|
|
1.0599
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
1.1853
|
|
|
|
0.9170
|
|
|
|
1.0748
|
|
|
|
0.9881
|
|
2006
|
|
|
1.1726
|
|
|
|
1.0990
|
|
|
|
1.1342
|
|
|
|
1.1653
|
|
2005
|
|
|
1.2704
|
|
|
|
1.1507
|
|
|
|
1.2116
|
|
|
|
1.1659
|
|
2004
|
|
|
1.3968
|
|
|
|
1.1774
|
|
|
|
1.3015
|
|
|
|
1.2036
|
|
On
[ ] ,
2008 the noon buying rate for one U.S. dollar in Canadian
dollars published by the Bank of Canada was
C$[ ].
71
APPROVAL
OF THE ADJOURNMENT OF THE SPECIAL MEETING
(PROPOSAL 2)
Security holders are being asked to consider and vote on a
proposal to adjourn the special meeting, if necessary, to
solicit additional proxies. The adoption of the proposal to
adjourn the special meeting, if necessary, to solicit additional
proxies requires the affirmative vote of the holders of a
majority of the shares of common stock present or represented at
the special meeting and entitled to vote thereon. Accordingly,
an abstention on the proposal to adjourn the special meeting, if
necessary, to solicit additional proxies will have the same
effect as a vote AGAINST that proposal, but the
failure to attend the meeting and vote in person, to submit a
proxy, or to provide voting instructions to your bank, brokerage
firm or nominee will have no effect on the outcome of the
proposal. The Board of Directors unanimously recommends that you
vote FOR the proposal to adjourn the special
meeting, if necessary, to solicit additional proxies.
INDEPENDENT
ACCOUNTANTS
The financial statements as of January 1, 2008 have been
audited by Deloitte & Touche LLP as stated in their
report included in our Annual Report on
Form 10-K
for the fiscal year ended January 1, 2008, which is
incorporated herein by reference.
SECURITY
HOLDER PROPOSALS
If the Merger is not consummated, the Company currently
anticipates holding our annual meeting of security holders in
2009. If the Merger is consummated, we will not have public
equity security holders and there will be no public
participation in any future meeting of equity security holders
after the consummation of the Merger.
Under the rules of the SEC, if a security holder would like us
to include a proposal in our proxy statement and form of proxy
for our 2009 annual meeting of security holders (if it takes
place), the proposal must be received by us at our offices at
2187 Atlantic Street, 6th Floor, Stamford, CT 06902 by
December 26, 2008, and must otherwise comply with SEC
Rule 14a-8.
Proposals should be sent to the attention of our Corporate
Secretary.
All security holders who wish to bring business before the 2009
annual meeting (if it is to take place) that will not be
included in our proxy statement for such meeting, including the
nomination of candidates for election as directors, must provide
notice to our Corporate Secretary by certified mail, return
receipt requested, to Corporate Secretary, Centerplate, Inc.,
2187 Atlantic Street, 6th Floor, Stamford, CT 06902, no
later than February 23, 2009 and no earlier than
January 24, 2009. However, if the 2009 annual meeting does
not occur between May 2, 2009 and July 31, 2009, the
notice must be received not earlier than 120 days before
the 2009 annual meeting and not later than the close of business
on the later of 90 days before the 2009 annual meeting or
10 days following the day on which public announcement of
the 2009 annual meeting is first made. The notice must set forth
the security holders name and address as they appear on
our books and the class and number of shares of common stock
beneficially owned by such security holder. Additionally, the
notice must set forth, as to each person whom the security
holder proposes to nominate for election as a director, all
information relating to such person required to be disclosed
pursuant to Regulation 14A under the Exchange Act
(including such persons written consent to being named as
a nominee and to serving as a director if elected).
You may contact the Corporate Secretary at the address above for
a copy of the relevant bylaw provisions regarding the
requirements for making security holder proposals and nominating
director candidates.
WHERE YOU
CAN FIND MORE INFORMATION
The Company files annual, quarterly and current reports, proxy
statements and other documents with the SEC under the Exchange
Act. Our SEC filings made electronically through the SEC EDGAR
system are available to the public at the SEC website at
http://www.sec.gov
.
You may also read and copy any document we file with the SEC at
the SEC public reference room located at 100 F Street,
N.E., Room 1580, Washington, D.C. 20549. Please call
the SEC at (800) SEC-0330 for further information on the
operation of the public reference room.
72
As allowed by SEC rules, this proxy statement does not contain
all the information you can find in the proxy statement on
Schedule 14A filed by the Company to vote on the proposal
to adopt the Merger Agreement. The SEC allows us to
incorporate by reference information into this proxy
statement, which means that we can disclose important
information to you by referring you to other documents filed
separately with the SEC. The information incorporated by
reference is deemed to be part of this proxy statement, except
for any information superseded by information in this proxy
statement. This proxy statement incorporates by reference the
documents set forth below that we (SEC file number
001-31904)
have previously filed with the SEC. These documents contain
important information about the Company and our financial
condition.
|
|
|
COMPANY FILINGS WITH THE SEC
|
|
PERIOD AND/OR FILING DATE
|
Annual Report on
Form 10-K
|
|
Year ended January 1, 2008, as filed March 17, 2008
|
Quarterly Reports on
Form 10-Q
|
|
Quarter ended July 1, 2008, as filed August 12,
2008 and Quarter ended April 1, 2008, as filed May 19, 2008
|
Definitive Proxy Statement on Schedule 14A
|
|
Filed April 25, 2008
|
Current Reports on
Form 8-K
|
|
Filed April 7, 2008, September 19, 2008 and
September 22, 2008
|
You may obtain additional copies of the documents incorporated
in this proxy statement, without charge, by requesting them in
writing or by telephone from:
|
|
|
|
|
MacKenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016
Telephone:
(800) 322-2885
|
|
or
|
|
Centerplate, Inc.
Corporate Secretary
2187 Atlantic Street, 6th Floor
Stamford, Connecticut 06902
(203) 975-5906
|
Any request for copies of documents should be made by
[ ],
2008 in order to ensure receipt of the documents before the
special meeting.
This proxy statement does not constitute an offer to sell, or
a solicitation of an offer to buy, any securities, or the
solicitation of a proxy, in any jurisdiction to or from any
person to whom it is not lawful to make any offer or
solicitation in that jurisdiction. The delivery of this proxy
statement should not create an implication that there has been
no change in the affairs of the Company since the date of this
proxy statement or that the information herein is correct as of
any later date.
The Company has not authorized anyone to give any information or
make any representation about the Merger that is different from,
or in addition to, that contained in this proxy statement or in
any of the materials that are incorporated by reference into
this proxy statement. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are
in a jurisdiction where offers to exchange or sell, or
solicitations of offers to exchange or purchase, the securities
offered by this proxy statement are unlawful, or if you are a
person to whom it is unlawful to direct these types of
activities, then the offer presented in this proxy statement
does not extend to you. The information contained in this proxy
statement speaks only as of the date of this document unless the
information specifically indicates that another date applies.
73
ANNEX
A
EXECUTION
VERSION
AGREEMENT
AND PLAN OF MERGER
by and among
KPLT HOLDINGS, INC.,
KPLT MERGERCO, INC.
and
CENTERPLATE, INC.
Dated as of September 18, 2008
TABLE
OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE I
The Merger
|
Section 1.01
|
|
The Merger
|
|
|
A-1
|
|
Section 1.02
|
|
Closing
|
|
|
A-1
|
|
Section 1.03
|
|
Effective Time
|
|
|
A-1
|
|
Section 1.04
|
|
Effects of the Merger
|
|
|
A-1
|
|
Section 1.05
|
|
Certificate of Incorporation and Bylaws
|
|
|
A-1
|
|
Section 1.06
|
|
Directors
|
|
|
A-1
|
|
Section 1.07
|
|
Officers
|
|
|
A-2
|
|
|
ARTICLE II
Effect of the Merger on the Securities of the Constituent
Corporations
|
Section 2.01
|
|
Effect on Capital Stock
|
|
|
A-2
|
|
Section 2.02
|
|
Payment for Company Common Shares
|
|
|
A-2
|
|
Section 2.03
|
|
Adjustments
|
|
|
A-4
|
|
Section 2.04
|
|
Lost Certificates
|
|
|
A-4
|
|
Section 2.05
|
|
Effect on Units
|
|
|
A-4
|
|
|
ARTICLE III
Representations and Warranties of the Company
|
Section 3.01
|
|
Organization, Standing and Corporate Power
|
|
|
A-5
|
|
Section 3.02
|
|
Subsidiaries
|
|
|
A-5
|
|
Section 3.03
|
|
Capital Structure
|
|
|
A-6
|
|
Section 3.04
|
|
Authority; Noncontravention
|
|
|
A-6
|
|
Section 3.05
|
|
Brokers and Other Advisors
|
|
|
A-7
|
|
Section 3.06
|
|
Governmental Approvals and Consents
|
|
|
A-7
|
|
Section 3.07
|
|
Company SEC Documents; Financial Reports
|
|
|
A-7
|
|
Section 3.08
|
|
Absence of Certain Changes or Events
|
|
|
A-8
|
|
Section 3.09
|
|
Litigation
|
|
|
A-8
|
|
Section 3.10
|
|
Contracts
|
|
|
A-8
|
|
Section 3.11
|
|
Compliance with Laws
|
|
|
A-9
|
|
Section 3.12
|
|
ERISA
|
|
|
A-10
|
|
Section 3.13
|
|
Labor
|
|
|
A-11
|
|
Section 3.14
|
|
Intellectual Property
|
|
|
A-12
|
|
Section 3.15
|
|
Environmental Matters
|
|
|
A-13
|
|
Section 3.16
|
|
Taxes
|
|
|
A-14
|
|
Section 3.17
|
|
Commercial Relationships
|
|
|
A-15
|
|
Section 3.18
|
|
Internal Controls
|
|
|
A-15
|
|
Section 3.19
|
|
Opinion
|
|
|
A-15
|
|
|
ARTICLE IV
Representations and Warranties of Parent and Merger Sub
|
Section 4.01
|
|
Organization, Standing and Corporate Power
|
|
|
A-16
|
|
Section 4.02
|
|
Authority; Noncontravention
|
|
|
A-16
|
|
Section 4.03
|
|
Governmental Approvals
|
|
|
A-16
|
|
Section 4.04
|
|
Brokers and Other Advisors
|
|
|
A-16
|
|
Section 4.05
|
|
Financing
|
|
|
A-17
|
|
Section 4.06
|
|
Solvency; Surviving Corporation After the Merger
|
|
|
A-17
|
|
Section 4.07
|
|
Business Conduct
|
|
|
A-17
|
|
A-i
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE V
Covenants Relating to Conduct of Business
|
Section 5.01
|
|
Conduct of Business
|
|
|
A-18
|
|
Section 5.02
|
|
Stockholder Meeting; Proxy Material
|
|
|
A-19
|
|
Section 5.03
|
|
No Solicitation; Other Offers
|
|
|
A-20
|
|
Section 5.04
|
|
Employees; Benefit Plans
|
|
|
A-21
|
|
|
ARTICLE VI
Additional Agreements
|
Section 6.01
|
|
Reasonable Best Efforts
|
|
|
A-22
|
|
Section 6.02
|
|
Indemnification, Exculpation and Insurance
|
|
|
A-23
|
|
Section 6.03
|
|
Fees and Expenses
|
|
|
A-24
|
|
Section 6.04
|
|
Public Announcements
|
|
|
A-24
|
|
Section 6.05
|
|
Notification of Certain Matters
|
|
|
A-24
|
|
Section 6.06
|
|
Access to Information
|
|
|
A-24
|
|
Section 6.07
|
|
Company Representations and Warranties
|
|
|
A-25
|
|
Section 6.08
|
|
Financing for Parent and Merger Sub
|
|
|
A-25
|
|
Section 6.09
|
|
Debt Tender Offer and Consent Solicitation
|
|
|
A-27
|
|
|
ARTICLE VII
Conditions Precedent
|
Section 7.01
|
|
Conditions to Each Partys Obligation to Effect the Merger
|
|
|
A-28
|
|
Section 7.02
|
|
Conditions to Obligations of Parent and Merger Sub
|
|
|
A-28
|
|
Section 7.03
|
|
Conditions to Obligation of the Company
|
|
|
A-29
|
|
Section 7.04
|
|
Frustration of Closing Conditions
|
|
|
A-29
|
|
|
ARTICLE VIII
Termination, Amendment and Waiver
|
Section 8.01
|
|
Termination
|
|
|
A-30
|
|
Section 8.02
|
|
Effect of Termination
|
|
|
A-31
|
|
Section 8.03
|
|
Amendment
|
|
|
A-32
|
|
Section 8.04
|
|
Extension; Waiver
|
|
|
A-32
|
|
|
ARTICLE IX
General Provisions
|
Section 9.01
|
|
Nonsurvival of Representations and Warranties
|
|
|
A-32
|
|
Section 9.02
|
|
Notices
|
|
|
A-32
|
|
Section 9.03
|
|
Definitions
|
|
|
A-33
|
|
Section 9.04
|
|
Interpretation
|
|
|
A-36
|
|
Section 9.05
|
|
Counterparts
|
|
|
A-37
|
|
Section 9.06
|
|
Entire Agreement; No Third-Party Beneficiaries
|
|
|
A-37
|
|
Section 9.07
|
|
Governing Law; Consent to Jurisdiction
|
|
|
A-38
|
|
Section 9.08
|
|
Assignment
|
|
|
A-38
|
|
Section 9.09
|
|
Specific Enforcement
|
|
|
A-38
|
|
Section 9.10
|
|
Severability
|
|
|
A-39
|
|
Section 9.11
|
|
Joint Liability
|
|
|
A-39
|
|
Exhibit A Form of Amendment to Indenture
|
|
|
A-41
|
|
A-ii
AGREEMENT
AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this
Agreement
), dated as of September 18,
2008, is made by and among KPLT HOLDINGS, INC., a Delaware
corporation (
Parent
), KPLT MERGERCO, INC., a
Delaware corporation, and a wholly owned Subsidiary of Parent
(
Merger Sub
), and CENTERPLATE, INC., a
Delaware corporation (the
Company
).
WHEREAS, the respective Boards of Directors of Parent, Merger
Sub and the Company have approved and declared advisable this
Agreement and the merger of Merger Sub with and into the Company
(the
Merger
), upon the terms and subject to
the conditions set forth in this Agreement;
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe various
conditions to the Merger.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement
and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
The
Merger
Section
1.01
The
Merger
.
Upon the terms and subject to the
conditions set forth in this Agreement and in accordance with
the Delaware General Corporation Law (the
DGCL
), Merger Sub shall be merged with and
into the Company at the Effective Time (as defined hereafter).
Following the Effective Time, the separate corporate existence
of Merger Sub shall cease, and the Company shall continue as the
surviving corporation in the Merger (the
Surviving
Corporation
).
Section
1.02
Closing
.
The
closing of the Merger (the
Closing
) will take
place at 10:00 a.m. on a date to be specified by the
parties (the
Closing Date
), which shall be no
later than the second Business Day after satisfaction or waiver
of the conditions set forth in Article VII, at the offices
of Ropes & Gray LLP, Boston, MA, unless another date
or place is agreed to in writing by the parties hereto.
Section
1.03
Effective
Time
.
Subject to the provisions of this
Agreement, at the Closing, the parties shall file a certificate
of merger (the
Certificate of Merger
)
executed in accordance with the relevant provisions of the DGCL
and shall make all other filings or recordings required under
the DGCL to effect the Merger. The Merger shall become effective
at such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware, or at such other
time as Parent and the Company shall agree and shall specify in
the Certificate of Merger (the time the Merger becomes effective
being the
Effective Time
).
Section
1.04
Effects
of the Merger
.
The Merger shall have the
effects set forth in this Agreement and the applicable
provisions of the DGCL.
Section
1.05
Certificate
of Incorporation and Bylaws
.
(a) The Certificate of Incorporation of the Company shall
be the Certificate of Incorporation of the Surviving Corporation
until thereafter changed or amended as provided therein or by
applicable Law.
(b) The Bylaws of the Company, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter changed or amended as
provided therein or by applicable Law.
Section
1.06
Directors
.
The
directors of Merger Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation, each of
such directors to hold office, subject to the applicable
provisions of the Certificate of Incorporation and Bylaws of the
Surviving Corporation, until the earlier of their resignation or
removal or until their respective successors are duly elected
and qualified, as the case may be.
A-1
Section
1.07
Officers
.
The
officers of the Company immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, such
officers to hold office, subject to the applicable provisions of
the Certificate of Incorporation and Bylaws of the Surviving
Corporation, until the earlier of their resignation or removal
or until their respective successors are duly elected and
qualified, as the case may be.
ARTICLE II
Effect of
the Merger on the Securities of the Constituent
Corporations
Section
2.01
Effect
on Capital Stock
.
As of the Effective Time,
by virtue of the Merger and without any action on the part of
the holder of any shares of Company Common Stock or any shares
of Capital Stock of Merger Sub:
(a)
Common Stock of Merger
Sub
.
Each issued and outstanding share of
common stock of Merger Sub shall be converted into and become
one validly issued, fully paid and nonassessable share of
common stock, par value $0.01 per share, of the Surviving
Corporation with the same rights, powers and privileges as the
shares so converted and shall constitute the only outstanding
shares of Capital Stock of the Surviving Corporation.
(b)
Cancellation of Treasury
Stock
.
Each share of common stock, par value
$0.01 per share, of the Company (each a
Company Common
Share
and collectively, the
Company Common
Stock
) and each share of Company Preferred Stock (as
defined in Section 3.03) held by the Company as treasury
stock or owned by Parent or any of its Subsidiaries (including
as part of an IDS unit) immediately prior to the Effective Time
shall automatically be cancelled and retired and shall cease to
exist and no payment shall be made with respect thereto.
(c)
Company Capital Stock; Determination of Merger
Consideration
.
Each Company Common Share,
including the Company Common Shares represented by the IDSs (as
defined hereafter), outstanding as of the Effective Time (other
than the Dissent Shares, as defined hereafter, and shares
cancelled pursuant to Section 2.01(b)), by virtue of the
Merger, shall be converted into a right to receive $0.01 in
cash, without interest (the
Merger
Consideration
).
(d)
Dissenters
Rights
.
Notwithstanding anything in this
Agreement to the contrary, Company Common Shares that are
outstanding immediately prior to the Effective Time and that are
held by any person who is entitled to dissent from the Merger
pursuant to Section 262 of the DGCL (the
Dissenters Rights Statute
), who did not
vote in favor of the Merger or consent thereto in writing and
who complies in all other respects with the Dissenters
Rights Statute shall not be converted into a right to receive
the Merger Consideration as provided in Section 2.01(c)
(
Dissent Shares
), but rather the holders of
Dissent Shares shall be entitled to the right to receive payment
of the fair value of such Dissent Shares in accordance with the
Dissenters Rights Statute;
provided
,
however
, that if any such holder shall fail to perfect or
otherwise shall waive, withdraw or lose the right to receive
payment of the fair value under the Dissenters Rights
Statute, then the right of such holder to be paid the fair value
of such holders Dissent Shares shall cease and such
Dissent Shares shall be deemed to have been converted as of the
Effective Time into the right to receive the Merger
Consideration, without interest, as provided in
Section 2.01(c). The Company shall give prompt notice to
Parent of any objections, notices of intent to dissent or
demands received by the Company pursuant to the Dissenters
Rights Statute and Parent shall have the right to participate in
all negotiations and proceedings with respect to such demands.
Except with the prior written consent of Parent, the Company
shall not make any payment with respect to, or offer to settle
or settle, any such demands. Each holder of Dissent Shares who
becomes entitled to payment for such shares pursuant to the
Dissenters Rights Statute shall receive payment therefor
from the Surviving Corporation in accordance with the
Dissenters Rights Statute.
Section
2.02
Payment
for Company Common Shares
.
(a) Prior to the Effective Time, the Company shall appoint
an agent, subject to Parents approval of the terms and
conditions of such appointment (such approval not to be
unreasonably withheld), which shall be the
A-2
Companys agent (the
Exchange Agent
) for
the purpose of paying the Merger Consideration in exchange for
all of the Company Common Shares outstanding immediately prior
to the Effective Time (other than shares cancelled pursuant to
Section 2.01(b)). At the Effective Time, Parent shall
deposit, or cause the Surviving Corporation to deposit, with the
Exchange Agent an amount in immediately available funds equal to
the aggregate Merger Consideration required to be paid in
accordance with Section 2.01. Promptly after the Effective
Time, Parent shall send, or shall cause the Exchange Agent to
send, to each holder of record of Company Common Shares at the
Effective Time who has not already surrendered their Company
Common Shares and delivered a letter of transmittal prior to the
Effective Time (i) a letter of transmittal specifying that
delivery shall be effected, and risk of loss and title to each
certificate previously representing a Company Common Share
(directly or indirectly as part of an IDS) (a
Certificate
) shall pass, only upon delivery
of the Certificates (or affidavits of loss in lieu thereof as
provided in Section 2.04) or in the case of Company Common
Shares represented by book-entry (
Book-Entry
Shares
), upon the adherence to the procedures set
forth in the letter of transmittal to the Exchange Agent, such
letter of transmittal to be in the form and have such other
provisions as Parent and the Company may agree, and
(ii) instructions for use in effecting the surrender of the
Certificates (or affidavits of loss in lieu thereof as provided
in Section 2.04) or, in the case of Book-Entry Shares, the
surrender of such Company Common Shares in exchange for the
Merger Consideration.
(b) Upon the surrender of a Certificate or of Book-Entry
Shares (or affidavit of loss in lieu thereof as provided in
Section 2.04) to the Exchange Agent in accordance with the
terms of such letter of transmittal or the letter of transmittal
distributed in connection with the Debt Tender Offer, duly
executed, the holder of such Certificate or Book-Entry Shares
shall be entitled to receive in exchange therefor a cash amount
in immediately available funds (before giving effect to any
required Tax withholdings as provided in Section 2.02(g))
equal to (x) the number of Company Common Shares
represented by such Certificate or book-entry (or affidavit of
loss in lieu thereof as provided in Section 2.04)
multiplied by (y) the Merger Consideration, and the
Certificate or Book-Entry Shares so surrendered shall forthwith
be cancelled. No interest will be paid or accrued on any amount
payable upon due surrender of the Certificates or Book-Entry
Shares. Until so surrendered or transferred, as the case may be,
each such Certificate or Book-Entry Share shall represent after
the Effective Time for all purposes only the right to receive
such Merger Consideration.
(c) If any portion of the Merger Consideration is to be
paid to a Person other than the Person in whose name the
transferred Certificate or Book-Entry Share is registered, it
shall be a condition to such payment that the Person requesting
such payment shall pay to the Exchange Agent any transfer or
other fees or Taxes required as a result of such payment to a
Person other than the registered holder of such Certificate or
Book-Entry
Share or establish to the satisfaction of the Exchange Agent
that such fee or Tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further
registration of transfers of Company Common Shares. If, after
the Effective Time, any Certificate or Book-Entry Shares is
presented to the Surviving Corporation, it shall be cancelled
and exchanged for the Merger Consideration provided for, and in
accordance with the procedures set forth, in this
Article II.
(e) Any portion of the Merger Consideration deposited with
the Exchange Agent pursuant to Section 2.02(a) (and any
interest or other income earned thereon) that remains unclaimed
by the holders of Company Common Shares six (6) months
after the Effective Time shall be returned to Parent, upon
demand, and any such holder who has not exchanged such Company
Common Shares for the Merger Consideration in accordance with
this Section 2.02 prior to that time shall thereafter look
only to Parent and the Surviving Corporation for payment of the
Merger Consideration in respect of such Company Common Shares,
in any case without any interest thereon. Notwithstanding the
foregoing, Parent, the Surviving Corporation and the Exchange
Agent shall not be liable to any holder of Company Common Shares
for any amount paid to a public official pursuant to applicable
abandoned property, escheat or similar Law. Any amounts
remaining unclaimed by holders of Company Common Shares two
(2) years after the Effective Time (or such earlier date
immediately prior to such time when the amounts would otherwise
escheat to or become property of any Governmental Authority)
shall become, to the extent permitted by applicable Law, the
property of Parent free and clear of any claims or interest of
any Person previously entitled thereto.
A-3
(f) Any portion of the Merger Consideration deposited with
the Exchange Agent pursuant to Section 2.02(a) to pay for
Company Common Shares, for which appraisal rights have been
perfected and have not been withdrawn or lost 30 days after
the Effective Time, shall be returned to Parent, upon demand.
(g) Parent, the Surviving Corporation and the Exchange
Agent shall be entitled to deduct and withhold from the
consideration otherwise payable to any holder of shares of
Company Common Stock pursuant to this Agreement such amounts as
may be required to be deducted and withheld with respect to the
making of such payment under the Internal Revenue Code of 1986,
as amended (the
Code
) and the rules and
regulations promulgated thereunder, or under any provision of
state or foreign Tax Law. To the extent that amounts are so
withheld and paid over to the appropriate taxing authority by
Parent, the Surviving Corporation or Exchange Agent, such
withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of Company Common
Stock in respect of which such deduction and withholding was
made.
Section
2.03
Adjustments
.
If,
during the period between the date of this Agreement and the
Effective Time, any change in the outstanding Company Common
Shares shall occur, including by reason of any reclassification,
recapitalization, stock split or combination or exchange of
Company Common Shares, or stock dividend thereon with a record
date during such period or issuer tender or exchange offer or
similar transaction (excluding any such change as a result of
any exercise of options outstanding as of the date hereof to
purchase Company Common Shares granted under the Companys
stock option or compensation plans or arrangements), the Merger
Consideration and any other amounts payable pursuant to this
Agreement shall be appropriately adjusted.
Section
2.04
Lost
Certificates
.
If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Surviving
Corporation, the posting by such Person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as
indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent shall pay, in
exchange for such lost, stolen or destroyed Certificate, the
Merger Consideration to be paid in respect of Company Common
Shares, as contemplated by this Article II.
Section
2.05
Effect
on Units
.
(a) As of the Effective Time, each IDS separated in
connection with the tender of Notes pursuant to the Debt Tender
Offer shall entitle the holder thereof to receive (i) for
the underlying Company Common Share, the Merger Consideration as
provided in Section 2.01(c), (ii) for the underlying
Note (or portion thereof) accepted for payment in the Debt
Tender Offer, the Debt Tender Consideration and (iii) for
the underlying Note (or portion thereof) not accepted for
payment in the Debt Tender Offer, a new Subordinated Note of the
Surviving Corporation representing the amount thereof which will
remain outstanding.
(b) As of the Effective Time, by virtue of the Merger and
without any action on the part of the holder of any IDS, each
issued and outstanding IDS that has not been separated in
connection with the tender of Notes pursuant to the Debt Tender
Offer shall be converted into an IDS of the Surviving
Corporation consisting of the right to receive the Merger
Consideration (in accordance with Section 2.01(c)) and one
Subordinated Note of the Surviving Corporation. After the
Effective Time, in order to receive the Merger Consideration for
each Company Common Share underlying an IDS that has not be
separated in connection with the tender of Notes pursuant to the
Debt Tender, the holder must surrender such IDS for separation
and the underlying Common Shares as described in
Section 2.02.
ARTICLE III
Representations
and Warranties of the Company
Except (i) as set forth in the disclosure schedule of the
Company dated the date hereof (the
Company Disclosure
Schedule
) (it being understood that any matter
disclosed in any section or subsection of the Company Disclosure
Schedule is deemed to be disclosed in any other section or
subsection of the Company Disclosure Schedule only to the extent
that it is reasonably apparent from such disclosure that such
disclosure
A-4
is applicable to such other section or subsection) or
(ii) as set forth in the Company SEC Documents (as defined
hereafter) filed since January 1, 2008 and prior to the
date hereof (excluding any disclosures set forth in any risk
factor section, in any section relating to forward-looking
statements and any other disclosures included therein to the
extent that they are cautionary, predictive or forward-looking
in nature), the Company represents and warrants to Parent and
Merger Sub that:
Section
3.01
Organization,
Standing and Corporate Power
.
(a) Each of the Company and its Subsidiaries (as defined
hereafter) is duly organized, validly existing and in good
standing, if available, under the Laws (as defined hereafter) of
the jurisdiction in which it is incorporated or organized and
has all requisite corporate power and authority to own, operate
and lease its properties and to carry on its business as now
being conducted. The Company has made available to Parent
complete and correct copies of its Certificate of Incorporation
and Bylaws, each as amended and restated to the date hereof, and
the Certificate of Incorporation and Bylaws or other similar
documents of each Subsidiary of the Company, each as amended and
restated to the date hereof.
(b) Each of the Company and its Subsidiaries is duly
qualified or licensed to do business and is in good standing, if
available, in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so
qualified or licensed, individually or in the aggregate, would
not reasonably be expected to have a Company Material Adverse
Effect. For purposes of this Agreement,
Company
Material Adverse Effect
shall mean any change, state
of facts, event, occurrence or effect that, individually or in
the aggregate with all such other changes, states of facts,
events, occurrences or effects, would have a material adverse
effect on (i) the ability of the Company to consummate the
Merger or (ii) the business, assets, financial condition,
operations or results of operations of the Company and its
Subsidiaries, taken as a whole,
provided
, that none of
the following shall constitute a Company Material Adverse Effect
or, with the exception of (C) or (D), be taken into account
when determining whether there has been or is reasonably
expected to be a Company Material Adverse Effect: any effect on
the Company resulting from or arising out of (A) to the
extent that they do not have a materially disproportionate
effect on the Company and its Subsidiaries taken as a whole,
(i) any change in conditions in the United States, foreign
or global economy or capital or financial markets generally,
including any change in interest or exchange rates, or
(ii) any change in conditions (including any change in
general legal, regulatory, political, economic or business
conditions) in the industry in which the Company and its
Subsidiaries conduct business, (B) the announcement of the
execution of this Agreement or pendency (but not the Closing) of
the transactions contemplated hereby, (C) any change in the
market price or trading volume of the Company Common Stock, the
IDSs or the Subordinated Notes (
provided
that the
underlying cause of such change may constitute a Company
Material Adverse Effect), (D) any failure to meet any
revenue or earnings targets or projections of the Company
(
provided
that the underlying cause of such failure may
constitute a Company Material Adverse Effect), (E) any
change in GAAP or (F) to the extent they do not have a
materially disproportionate effect on the Company and its
Subsidiaries taken as a whole, any natural disaster or calamity,
or act of terrorism, sabotage, military action or war or any
escalation or worsening thereof (in each case, threatened,
pending or declared).
Section
3.02
Subsidiaries
.
Section 3.02
of the Company Disclosure Schedule lists all the Subsidiaries of
the Company and, for each such Subsidiary, the jurisdiction of
incorporation or formation, as applicable. All the outstanding
shares of Capital Stock of, or other equity interests in, each
such Subsidiary (i) have been duly authorized, validly
issued and are fully paid and nonassessable, (ii) are owned
directly or indirectly by the Company, (iii) are free and
clear of all pledges, claims, liens, charges, encumbrances or
security interests of any kind or nature whatsoever
(collectively,
Liens
) and (iv) are free
of any restriction on the right to vote, sell or otherwise
dispose of such Capital Stock or other equity interests. Neither
the Company nor any of its Subsidiaries directly or indirectly
owns Capital Stock of, or any other equity interest in, any
entity other than the Subsidiaries listed in Section 3.02
of the Company Disclosure Schedule. There are no stock
appreciation rights, stock options, phantom stock, profit
participation or similar rights outstanding with respect to the
Capital Stock of any direct or indirect Subsidiary of the
Company.
A-5
Section
3.03
Capital
Structure
.
(a) The authorized Capital Stock of the Company consists of
100,000,000 shares of Company Common Stock and
10,000,000 shares of preferred stock, par value $0.01 per
share (the
Company Preferred Stock
). As of
the date of this Agreement (i) 20,981,813 shares of
Company Common Stock were issued and outstanding, all of which
shares of Company Common Stock are represented by the IDSs,
(ii) 19,013,332 shares of Company Preferred Stock are
held by the Company in its treasury, and (iii) no shares of
Company Preferred Stock are issued and outstanding. All
outstanding shares of Capital Stock of the Company are duly
authorized, validly issued, fully paid and nonassessable and not
subject to or issued in violation of any preemptive rights.
(b) (i) There are no issued, reserved for issuance or
outstanding (A) securities of the Company or any of its
Subsidiaries convertible into or exchangeable or exercisable for
shares of Capital Stock or voting securities of the Company or
any of its Subsidiaries or (B) warrants, calls, options,
subscriptions or other rights, agreements or commitments to
acquire from the Company or any of its Subsidiaries, or any
obligation of the Company or any of its Subsidiaries to issue,
any Capital Stock, voting securities or securities convertible
into or exchangeable or exercisable for Capital Stock or voting
securities of the Company or any of its Subsidiaries and
(ii) there are no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise
acquire any such securities or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities.
Neither the Company nor any of its Subsidiaries is a party to
any voting agreement or proxy with respect to the voting of any
such securities.
(c) As of the date hereof, the only outstanding capital
lease obligations requiring annual payments in excess of
$100,000 individually or $1,000,000 in the aggregate, or
indebtedness for borrowed money and indebtedness secured by
mortgages or Liens, or guarantees of the foregoing of the
Company or its Subsidiaries requiring annual payments in excess
of $50,000 individually, are set forth on Section 3.03(c)
of the Company Disclosure Schedule (including the respective
amounts outstanding as of the date set forth therein of each of
the foregoing).
Section
3.04
Authority;
Noncontravention
.
(a) The Company has all requisite corporate power and
authority to execute and deliver this Agreement, perform its
obligations hereunder and to consummate the transactions
contemplated by this Agreement. The execution and delivery of
this Agreement by the Company and the consummation by the
Company of the transactions contemplated by this Agreement have
been duly authorized by all necessary corporate action, other
than Shareholder Approval (as defined hereafter), on the part of
the Company, and no other corporate proceedings, other than
Shareholder Approval, on the part of the Company are necessary
to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization,
execution and delivery by each of the other parties hereto,
constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms (subject to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other Laws affecting
creditors rights generally, and to general equity
principles, in each case from time to time in effect). The Board
of Directors of the Company, at a meeting duly called and held,
duly adopted resolutions (i) approving and declaring
advisable this Agreement, the Merger and the other transactions
contemplated by this Agreement, (ii) resolving that the
adoption of this Agreement be submitted to the shareholders of
the Company for a vote and (iii) recommending that the
shareholders of the Company adopt this Agreement (the
Company Board Recommendation
). The
affirmative vote of the holders of a majority of the outstanding
Company Common Shares (the
Shareholder
Approval
) is the only vote of the holders of any of
the Companys Capital Stock necessary in connection with
the consummation of the Merger.
(b) The execution and delivery of this Agreement do not,
and the consummation of the Merger and the other transactions
contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, require
the consent, waiver, approval or authorization from any party
to, or result in any violation or breach of, or default (with or
without notice or lapse of time or both) under, or give rise to
a right of termination, cancellation or acceleration of any
obligation, or result in the creation of any Lien in or upon any
of the properties or other assets of the Company or any of its
Subsidiaries under, (i) the Certificate of
A-6
Incorporation or the Bylaws of the Company or the comparable
organizational documents of any of its Subsidiaries,
(ii) any Contract or Permit of the Company or any of its
Subsidiaries or (iii) subject to the Shareholder Approval
and the governmental filings and other matters referred to in
Section 3.06, any Law applicable to the Company or any of
its Subsidiaries or their respective properties or other assets,
other than, in the case of clause (ii), any such conflicts,
consents, waivers, approvals, authorizations, violations,
breaches, defaults, rights or Liens that individually or in the
aggregate would not reasonably be expected to have a Company
Material Adverse Effect.
Section
3.05
Brokers
and Other Advisors
.
No broker, investment
banker, financial advisor or other person, other than UBS
Securities LLC and Evercore Group L.L.C. (the fees and expenses
of which will be paid by the Company), is entitled to any
brokers, finders, financial advisors or other
similar fee or com mission in connection with the transactions
contemplated by this Agreement based upon arrangements made by
or on behalf of the Company.
Section
3.06
Governmental
Approvals and Consents
.
(a) No consent, waiver, approval, order, license or permit
of, or authorization of, action by or in respect of, or
registration, declaration or filing with or notification to, any
Federal, state, county, local or foreign government, any court,
administrative, regulatory or other governmental agency,
commission or authority, non-governmental self-regulatory
agency, commission or authority, or any arbitrator, whether
Federal, state, county, local or foreign (each, a
Governmental Authority
), is required by or
with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the Merger or
the other transactions contemplated by this Agreement, except
for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware,
(ii) compliance with any requirements of the applicable
securities Laws or the rules or regulations of any stock
exchanges on which any securities of the Company or any of its
Affiliates are listed, (iii) any consent, waiver, approval,
order, license or permit of, or authorization of, action by or
in respect of, or registration, declaration or filing with or
notification to, any Governmental Authority with respect to any
liquor Laws or public health Laws, and (iv) any other
consent, waiver, approval, order, license or permit of, or
authorization of, action by or in respect of, or registration,
declaration or filing with or notification to, any Governmental
Authority with respect to which the failure to obtain or make,
as applicable, individually or in the aggregate, has not had, or
would not reasonably be expected to have, a Company Material
Adverse Effect;
provided
,
however
, that the term
Governmental Authority shall not include any
Governmental Authority in its capacity as a party to a customer
contract with the Company.
(b) The Company has taken all actions necessary such that
no restrictive provision of any fair price,
moratorium, control share acquisition,
interested stockholder, business
combination, stockholder protection or other
similar antitakeover statute or regulation enacted under state
or Federal Laws (including Section 203 of the DGCL) is, or
at the Effective Time, will be, applicable to this Agreement or
to the transactions contemplated hereby.
Section
3.07
Company
SEC Documents; Financial Reports
.
(a) Since January 2, 2006, the Company has filed all
required reports, schedules, forms, statements and other
documents (including exhibits and other information incorporated
therein) with the Securities and Exchange Commission (the
SEC
) and the securities regulatory authority
in each of the provinces of Canada (the
Canadian
Securities Commissions
or the
CSC
)
(collectively, the
Company SEC Documents
). As
of their respective dates, the Company SEC Documents complied in
all material respects with the requirements (except as and to
the extent modified or superseded in any subsequent Company SEC
Document filed prior to the date of this Agreement) of the
Securities Act of 1933, as amended (the
Securities
Act
), or the Securities Exchange Act of 1934, as
amended (the
Exchange Act
), as the case may
be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Company SEC Documents. As of their
respective dates (except as and to the extent modified or
superseded in any subsequent Company SEC Document filed prior to
the date of this Agreement), none of the Company SEC Documents
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,
provided
that, if
A-7
the Company amends any of the Company SEC Documents, the fact of
the filing of such amendment shall not, in and of itself, be
deemed to mean or imply that any representation or warranty in
this Agreement was not true when made or became untrue
thereafter.
(b) The financial statements of the Company included in the
Company SEC Documents were prepared in accordance with generally
accepted accounting principles in the United States
(
GAAP
) applied on a consistent basis during
the periods involved (except as may be indicated in the notes
thereto) and fairly presented in all material respects the
financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(c) Neither the Company nor any of its Subsidiaries has any
indebtedness, obligations or other liabilities (whether
absolute, accrued, fixed, contingent or otherwise)
(
Liabilities
) which would be required to be
reflected or reserved against on a consolidated balance sheet of
the Company prepared in accordance with GAAP or the notes
thereto, except Liabilities (i) reflected or reserved
against on the audited balance sheet of the Company as of
January 2, 2008 (the
Audited Balance Sheet
Date
) (including the notes thereto) included in the
Company SEC Documents, (ii) incurred since the Audited
Balance Sheet Date and reflected in any unaudited balance sheet
of the Company included in the SEC Documents,
(iii) incurred in connection with the transactions
contemplated by this Agreement or (iv) incurred in the
ordinary course of business consistent with past practice since
such date which would not reasonably be expected to have a
Company Material Adverse Effect.
Section
3.08
Absence
of Certain Changes or Events
.
Except for
actions undertaken in connection with this Agreement and the
transactions contemplated hereby, since January 2, 2008
(a) the Company and its Subsidiaries have conducted their
respective businesses in all material respects in the ordinary
course consistent with past practice, (b) neither the
Company nor any of its Subsidiaries has engaged in any material
transaction or entered into any material agreement outside the
ordinary course of business, (c) other than in the ordinary
course of business consistent with past practice, neither the
Company nor any of its Subsidiaries has increased the
compensation of any officer or granted any general salary or
benefits increase to their respective employees, (d) other
than in the ordinary course of business consistent with past
practice, there has been no declaration, setting aside or
payment of any dividend or other distribution with respect to
the Company Common Stock, or any repurchase, redemption or other
acquisition by the Company or any of its Subsidiaries of any
stock or other securities of the Company or any of its
Subsidiaries, (e) there has been no material change by the
Company in accounting principles, practices or methods and
(f) since the Audited Balance Sheet Date there has not
occurred any circumstance or event that has had, or would be
reasonably expected to have, a Company Material Adverse Effect.
Section
3.09
Litigation
.
There
is no Action pending, and since January 1, 2006 there has
been no Action pending, or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries or any
of their respective properties or assets that individually or in
the aggregate has had, or would reasonably be expected to have,
a Company Material Adverse Effect, nor is there, or since
January 1, 2006 has there been, any judgment, decree,
injunction, rule or order of any Governmental Authority or
arbitrator outstanding against, or, to the Knowledge of the
Company, investigation by any Governmental Authority involving,
the Company or any of its Subsidiaries except for those that
individually or in the aggregate have not had, or would not
reasonably be expected to have, a Company Material Adverse
Effect.
Section
3.10
Contracts
.
(a) Section 3.10(a) of the Company Disclosure Schedule
lists any loan or credit agreement, bond, debenture, note,
mortgage, indenture, lease or other contract, agreement,
obligation, commitment, instrument, permit or license (each, a
Contract
) to which the Company or any of its
Subsidiaries is a party or any of
A-8
their respective properties or other assets is subject as of the
date hereof and which falls within any of the following
categories:
(i) any Contract with a customer of the Company or any of
its Subsidiaries that has produced revenue for the Company or
any of its Subsidiaries in excess of $5,000,000 during the
twelve month period ended January 2, 2008 (each such
customer, a
Significant Customer
);
(ii) any material Contract pursuant to which Intellectual
Property is licensed to or from the Company or any of its
Subsidiaries, other than Contracts licensing the right to use
off-the-shelf or other readily commercially available third
party software, which is not licensed pursuant to a written
agreement, but is executed by the licensee, such as by
click-wrap or shrink-wrap license;
(iii) any Contract to which the Company or any of its
Subsidiaries is party concerning a partnership or joint venture
with one or more Persons;
(iv) any Contract containing terms purporting to materially
limit the ability of the Company or any of its Subsidiaries to
compete in any line of business in any geographic area;
(v) any Contract that contains any outstanding commitments
for capital expenditures in excess of $1,000,000;
(vi) any Contract relating to indebtedness for borrowed
money that has been incurred in amounts in excess of $500,000;
(vii) any Contract with or for the benefit of any Affiliate
of the Company or any of its Subsidiaries that would be required
to be disclosed under Item 404 of
Regulation S-K
under the Securities Act;
(viii) any Contract with a supplier of the Company that has
provided for payments by the Company or any of its Subsidiaries
in excess of $2,750,000 during the twelve month period ended
January 2, 2008 (each such supplier a
Significant
Supplier
);
(ix) any Contract with any individual (including a
director, officer or employee of the Company or any of its
Subsidiaries) who provides services to the Company or any of its
Subsidiaries, that contains obligations of the Company or any of
its Subsidiaries to pay annual compensation in excess of
$100,000, or that contains obligations of the Company or any of
its Subsidiaries to make severance payments, or any payments
that will become due and payable as a consequence of the Merger;
(x) all Collective Bargaining Agreements; and
(xi) any Contract listed on Section 3.10(a)(xi) of the
Company Disclosure Schedule.
All of the Contracts required to be disclosed by this
Section 3.10(a) are referred to herein as
Company
Contracts
.
(b) True and complete copies of each Company Contract,
including all amendments and supplements thereto, have been made
available to Parent. No breach or default, alleged breach or
default, or event which would (with the passage of time, notice
or both) constitute a breach or default thereunder by the
Company or any of its Subsidiaries or, to the Knowledge of the
Company, any other party or obligor with respect thereto, has
occurred and is continuing except for those breaches and
defaults that, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect.
(c) Section 3.10(c) of the Company Disclosure Schedule
lists any contract that is listed on Sections 3.10(a)(i)
through 3.10(a)(iii) of the Company Disclosure Schedule which
contains (A) an express change of control
provision that would require the consent of the counterparty in
connection with the Merger or (B) a provision that allows
the counterparty to terminate for convenience or at will.
Section
3.11
Compliance
with Laws
.
The business of the Company and
each of its Subsidiaries is being conducted, and since
January 1, 2006 has been conducted, in compliance in all
material respects with all statutes, laws, ordinances, rules,
regulations, judgments, orders and decrees of any Governmental
Authority (collectively,
Laws
) applicable to
the Company, its Subsidiaries, its properties or other assets or
its business
A-9
or operations, except for instances of noncompliance that
individually or in the aggregate have not had, and would not
reasonably be expected to have, a Company Material Adverse
Effect. Each of the Company and its Subsidiaries has obtained
all Federal, state, local and foreign governmental approvals,
authorizations, certificates, filings, franchises, licenses,
notices, permits and rights (collectively,
Permits
) necessary for it to own, lease or
operate its properties and assets and to carry on its business
as presently conducted, except for any Permits with respect to
which the failure to obtain would not reasonably be expected to
have a Company Material Adverse Effect. All such Permits are
valid and in full force and effect and there has not occurred
any default under any such Permit except for any invalidity or
defaults that, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect.
Section
3.12
ERISA
.
(a)
List of Plans
.
All employee
benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended
(
ERISA
)), equity plans, or any deferred
compensation, retirement, welfare benefit, bonus, incentive or
fringe-benefit plan, program or arrangement, whether covering an
individual or group, that are sponsored, maintained or
contributed to by the Company or its Subsidiaries or under which
the Company or its Subsidiaries has or may have any Liabilities,
other than multi-employer plans (
Employee Benefit
Plans
) are listed on Section 3.12(a) of the
Company Disclosure Schedule. For each Employee Benefit Plan, the
Company has provided or made available to Parent accurate and
complete copies of each of the following: (a) if the
Employee Benefit Plan has been reduced to writing, the plan
document together with all amendments thereto, (b) if the
Employee Benefit Plan has not been reduced to writing, a written
summary of all material plan terms, (c) if applicable,
copies of any trust agreements, custodial agreements, insurance
policies, administrative agreements and similar agreements, and
investment management or investment advisory agreements,
(d) copies of any summary plan descriptions, employee
handbooks or similar Employee Benefit Plan descriptions,
(e) in the case of any Employee Benefit Plan that is
intended to be qualified under Code Section 401(a), a copy
of the most recent determination letter from the Internal
Revenue Service and any related correspondence, and a copy of
any pending request for such determination, (f) in the case
of any funding arrangement intended to qualify as a VEBA under
Code Section 501(c)(9), a copy of the IRS letter
determining that it so qualifies and (g) in the case of any
plan for which Forms 5500 are required to be filed, a
copy of the two most recently filed Forms 5500, with
schedules attached.
(b)
Material Compliance
.
To the
Companys Knowledge, each Employee Benefit Plan that is
intended to be qualified under Code Section 401(a) is so
qualified. All Employee Benefit Plans are materially in
compliance with their terms and with the presently applicable
provisions of ERISA and the Code. Nothing has occurred with
respect to any Employee Benefit Plan that has subjected or would
reasonably be expected to subject the Company to a penalty under
Section 502 of ERISA or to an excise tax under the Code, or
that has subjected or would reasonably be expected to subject
any participant in, or beneficiary of, a Company Plan, to a tax
under Code Section 4973. All required contributions to, and
premium payments on account of, each Employee Benefit Plan have
been made on a timely basis and have been properly accrued in
accordance with GAAP.
(c)
Pension Plans
.
Neither the
Company nor any of its ERISA Affiliates maintains or contributes
to, or in the past six (6) years has maintained or
contributed to, any plan subject to Title IV of ERISA or
Code Section 412 other than a Multiemployer Plan.
(d)
Multiemployer Plans
.
All
Multiemployer Plans are listed on Section 3.12(d) of the
Company Disclosure Schedule. Neither the Company nor any of its
ERISA Affiliates has incurred, or reasonably expects to incur,
any liability under Sections 4201 et seq. or 4243 of ERISA
with respect to any Multiemployer Plan. The Company and its
ERISA Affiliates have complied with the minimum funding
requirements of the Code and ERISA with respect to any
Multiemployer Plan.
(e)
Investigations; Prohibited
Transactions
.
Except where failure to comply
would not reasonably be expected to have a Company Material
Adverse Effect, with respect to all Employee Benefit Plans,
(i) there are no pending nor, to the Companys
Knowledge, threatened investigations or claims (other than
routine claims for benefits) and (ii) there have been no
prohibited transactions under the Code or ERISA.
A-10
(f)
Post-Termination
Benefits
.
Except as required under
Section 601 et seq. of ERISA, no Employee Benefit Plan
provides or has any obligation to provide benefits or coverage
in the nature of health, life or disability insurance following
retirement or other termination of employment.
(g)
409A
.
Except where failure to
comply would not reasonably be expected to have a Company
Material Adverse Effect, each Employee Benefit Plan that is
subject to the requirements of Code Section 409A has been
adopted and administered in good faith compliance with such
Section and the regulations issued thereunder.
(h)
280G
.
The consummation of the
transactions contemplated by this Agreement will not (either
alone or together with any other event) (i) entitle any
current or former officer, employee, director or independent
contractor to any bonus, severance, retirement, or other benefit
or accelerate the time of payment or vesting or trigger any
payment or funding of compensation under, increase the amount
payable or trigger any other obligation pursuant to Employee
Benefit Plan or (ii) cause any compensation or benefit
payable to any employee of the Company or its Subsidiaries not
to be deductible under Code Section 280G or to be subject
to any excise tax under Code Section 4999.
Section
3.13
Labor
.
(a) Section 3.13 of the Company Disclosure Schedule
sets forth a list of all collective bargaining agreements with
any labor union or other representative of a group of employees
to which the Company or any of its Subsidiaries is a party
(
Collective Bargaining Agreements
) as of the
date hereof. True and complete copies of each such Collective
Bargaining Agreement, including all amendments and supplements
thereto, have been made available to Parent.
(b) There is not any work stoppage, slowdown, lockout,
picketing or employee strike involving the Company or any of its
Subsidiaries and, to the Knowledge of the Company, none of the
foregoing that would reasonably be expected to have a Company
Material Adverse Effect has been threatened. There are no unfair
labor practice complaints pending against the Company or any of
its Subsidiaries before the National Labor Relations Board or
any other labor relations tribunal or authority. No petition has
been filed or proceedings instituted by an employee or group of
employees of the Company or any of its Subsidiaries with any
labor relations board seeking recognition of a bargaining
representative that is not already the bargaining representative
of such employee or group of employees. There is no
organizational effort currently being made or threatened by, or
on behalf of, any labor union to organize any employees of the
Company or any of its Subsidiaries and there is no pending
demand for recognition of any employees of the Company or any of
its Subsidiaries by or on behalf of, any labor union.
(c) As of the date hereof, to the Knowledge of the Company,
no current executive, key employee or group of employees has
given notice of termination of employment or otherwise disclosed
plans to terminate employment with the Company or any of its
Subsidiaries.
(d) The Company and its Subsidiaries are in compliance with
all applicable Laws respecting employment and employment
practices, terms and conditions of employment, including but not
limited to wages and hours and the classification of employees
and independent contractors, and have not been and are not
engaged in any unfair labor practice as defined by any
applicable Laws, the violation of which could, individually or
in the aggregate, have a Company Material Adverse Effect. There
is no investigation, audit or review pending (or, to the
knowledge of the Company, threatened) by any Governmental
Authority with respect to the Company or any of its Subsidiaries
concerning employment and employment practices, terms and
conditions of employment, or unfair labor practices as defined
by any applicable Laws, an adverse finding in which could,
individually or in the aggregate, have a Company Material
Adverse Effect.
(e) The Company and its Subsidiaries have provided to
Parent copies of all written employment agreements, and are in
material compliance with all employment agreements, consulting
and other service contracts, written employee or human resources
personnel policies (to the extent they contain enforceable
obligations), handbooks or manuals, and severance or separation
agreements, except as would not reasonably be expected to have a
Company Material Adverse Effect.
A-11
(f) Neither the Company nor any of its Subsidiaries has,
during the ninety (90) day period prior to the date hereof,
taken any action that would constitute a Mass Layoff
or Plant Closing within the meaning of the Worker
Adjustment Retraining and Notification (
WARN
)
Act or would otherwise trigger notice requirements or liability
under any other Laws respecting plant closing notice. No
arbitration, court decision or governmental order to which the
Company or any of its Subsidiaries is a party or is subject in
any way limits or restricts the Company or any of its
Subsidiaries from relocating or closing any of the operations of
the Company or any of its Subsidiaries.
Section
3.14
Intellectual
Property
.
(a) Section 3.14 of the Company Disclosure Schedule
sets forth a true and complete list of registered Intellectual
Property and material unregistered Intellectual Property owned
by or exclusively licensed to the Company or any of its
Subsidiaries as of the date hereof, identifying for each whether
it is owned by or exclusively licensed to the Company or the
relevant Subsidiary. Section 3.14 of the Company Disclosure
Schedule lists the record owner of each such item of
Intellectual Property and the jurisdiction in which each such
item of Intellectual Property has been issued or registered or
in which each such application for the issuance or registration
of such item of Intellectual Property has been filed.
(b) No registered Trademark or service mark (each, a
Mark
) identified on Section 3.14 of the
Company Disclosure Schedule has been or is now involved in any
opposition or cancellation proceeding and, to the Knowledge of
the Company, no such proceeding is or has been threatened in
writing with respect to any of such Marks.
(c) (i) All registered Marks identified on
Section 3.14 of the Company Disclosure Schedules
(
Company Registered IP
) are valid and
subsisting and, to the Knowledge of the Company, enforceable and
(ii) neither the Company nor any of its Subsidiaries has
received any notice from any third party challenging the
validity or enforceability of any Company Registered IP or
alleging any misuse of such Company Registered IP. Neither the
Company nor any of its Subsidiaries has taken any action or
failed to take any action that would reasonably be expected to
result in the abandonment, cancellation, forfeiture,
relinquishment, invalidation or unenforceability of any of the
Company Registered IP which is necessary to operate the
business. All necessary registration, maintenance, renewal and
other relevant filing fees in connection with any of the Company
Registered IP which is necessary to operate the business have
been paid and all necessary documents, certificates and other
relevant filing in connection with such Company Registered IP
have been timely filed with the relevant patent, trademark,
copyright or other relevant authorities in the United States, or
other jurisdictions, for the purpose of maintaining such Company
Registered IP.
(d) The Company and its Subsidiaries own, license or
otherwise have the right to use, free and clear of any and all
encumbrances, liens, license (royalty bearing or royalty-free)
or obligations to others requiring payment to any person or any
obligation to grant any right to any person, all Intellectual
Property that is necessary for the conduct of the business of
the Company and its Subsidiaries, taken as a whole, except as
would not be reasonably expected to have a Company Material
Adverse Effect.
(e) To the Knowledge of the Company, the business of the
Company and its Subsidiaries as currently conducted (including
the use of the Intellectual Property) does not infringe or
otherwise violate any Third Party Intellectual Property and
there is no such claim pending or, to the Knowledge of the
Company, threatened against any of the Company or its
Subsidiaries. To the Knowledge of the Company, there is no
reasonable basis for any claim that the Company does not so own
any of the Intellectual Property which is necessary to operate
the business. No material Company Registered IP is subject to
any outstanding order, judgment, decree, stipulation or
agreement restricting the use or licensing thereof by the
Company or its Subsidiaries.
(f) To the Knowledge of the Company, and except as has not
had or would not reasonably be expected to have a Company
Material Adverse Effect, (i) no Third Party is infringing
or otherwise violating any material Intellectual Property owned
by the Company or its Subsidiaries, and (ii) no such claims
are pending or threatened against any Third Party by any of the
Company or its Subsidiaries.
(g) The Company and each of its Subsidiaries has taken all
commercially reasonable steps in accordance with standard
industry practices to protect its rights in its Intellectual
Property and to protect the secrecy,
A-12
confidentiality and value of all information that constitutes or
constituted a trade secret of the Company or any of its
Subsidiaries. During the two (2) years prior to the date of
this Agreement, to the Knowledge of the Company, there have been
no material unauthorized disclosures of the Companys trade
secrets or non-public proprietary information to a third party.
(h) The Company and each of its Subsidiaries maintains
policies and procedures regarding data security and privacy that
are in material compliance with all applicable laws. The Company
has installed or operates a Payment Card Industry compliant
version of a point of sale system at approximately 50 of its
venues and operates credit card processing devices in a manner
consistent with Payment Card Industry Standards at its other
venues. To the Knowledge of the Company, there have been no
security breaches relating to violations or any security policy
or any unauthorized access of any data or information of the
Companys software or technology systems in the last two
(2) years. The use and dissemination by the Company of any
and all personal and confidential data or information concerning
individuals is in material compliance with all such privacy
policies and laws.
(i) The Company owns, leases, licenses or otherwise has the
rights to use all material software systems, computer hardware,
databases, computer equipment and other information technology
assets that are necessary for the operations of the
Companys business, and, to the Knowledge of the Company,
in the last twelve (12) months, there have been no material
failures, breakdowns, breaches, outages or unavailability of any
of the foregoing.
Section
3.15
Environmental
Matters
.
Except as would not reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect:
(a) To the Companys Knowledge: (i) the Company
and its Subsidiaries are and have been in compliance with all
Environmental Laws and Permits, and have obtained all Permits
required under applicable Environmental Law for the operation of
the business of the Company and its Subsidiaries; and
(ii) there are no liabilities of the Company or any of its
Subsidiaries arising under or relating to any Environmental Law
(whether directly as a result of the operations and activities
of the Company or its Subsidiaries, or indirectly as a result of
the Companys or any Subsidiarys relationship with
any predecessor in interest), and there is no condition,
occurrence, activity or circumstance that would reasonably be
expected to result in or be the basis for any such liabilities;
(b) To the Companys Knowledge, no notice,
notification, demand, request for information, citation, summons
or order has been received, no penalty has been assessed, no
investigation, action, claim, suit or proceeding is pending, or,
to the Knowledge of the Company, is threatened, by any
Governmental Authority or other person relating to the Company
or any of its Subsidiaries that alleges a violation by the
Company or any of its Subsidiaries of any Environmental Law, or
that seeks to impose liability on or recover damages from the
Company or any of its Subsidiaries pursuant to any Environmental
Law;
(c) To the Companys Knowledge, no Releases of
Hazardous Materials have occurred at, on or from any real
property owned, leased or operated by the Company or any of its
Subsidiaries, for which Releases the Company or any of its
Subsidiaries would reasonably be expected to have any liability
under Environmental Law. Neither the Company nor any of its
Subsidiaries is conducting or paying, in whole or in part, for
any investigation, response, or other corrective action under
any Environmental Law at any location or facility; and
(d) Neither the Company nor any of its Subsidiaries has
retained or assumed, either contractually or by operation of
Law, any liabilities or obligations under any Environmental Law.
For purposes of this Agreement,
Environmental
Law
means the common law and all federal, state and
local laws, statutes, rules, regulations, codes, ordinances,
orders, judgments and decrees relating to pollution or to the
protection of the Environment and of human health (to the extent
relating to exposure to Hazardous Materials), or to the use,
handling, distribution, generation, transportation, storage,
treatment, Release or exposure to Hazardous Materials;
Environment
means surface or ground water,
soil, surface and subsurface strata, ambient air, indoor air,
and natural resources such as wetlands, flora and fauna;
Hazardous Materials
means any chemical,
substance, waste, pollutant, contaminant, compound, mixture or
constituent in any form,
A-13
including petroleum, asbestos and asbestos-containing materials,
regulated or which can give rise to liability under any
Environmental Law; and
Release
means any
release, spill, emission, leaking, pumping, pouring, dumping,
emptying, injection, deposit, disposal, discharge, leaching,
dispersal or migration on, into or through the Environment or
into or out of any property, facility or equipment.
Section
3.16
Taxes
.
(a) Each of the Company and its Subsidiaries has timely and
properly filed or caused to be filed, taking into account any
extensions, all U.S. federal income and other Tax Returns
and reports required to be filed, and have paid or caused to be
paid or adequately reserved for in accordance with GAAP, all
material Taxes due and payable by it (whether or not shown on
any Tax Return) on or prior to the date hereof. All such Tax
Returns were true, correct and complete in all material respects.
(b) With respect to any period for which Tax Returns have
not yet been filed, or for which Taxes are not yet due or owing,
the Company and each Subsidiary has, in accordance with GAAP,
made due and sufficient accruals for such Taxes in the books and
records of the Company or such Subsidiary (as appropriate).
Section 3.16(b) of the Company Disclosure Schedule
identifies each tax position and the measurement
thereof as required by FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes. Parent has been
provided with all work and other papers of the Company, each
Subsidiary and its advisors related to the foregoing.
(c) To the Knowledge of the Company, no claim has been made
in writing by any taxing jurisdiction where the Company or any
of its Subsidiaries does not file Tax Returns that the Company
or such Subsidiary is or may be subject to taxation by that
jurisdiction.
(d) Neither the Company nor any of its Subsidiaries has
received written notice of any proceeding or audit against, or
with respect to any Taxes of, the Company or any of its
Subsidiaries (and, to the Knowledge of the Company, no such
audit or proceeding is currently pending against either the
Company or any of its Subsidiaries). No material deficiencies
for any Taxes have been assessed against the Company or any of
its Subsidiaries.
(e) The federal, state and foreign net operating
losses, tax credit carryforwards and other tax attributes
(collectively, the
Tax Attributes
) of the
Company and its consolidated subsidiaries through the date of
the most recently filed applicable Tax Return are set forth in
Section 3.16(e) of the Company Disclosure Schedule.
Section 3.16(e) of the Company Disclosure Schedule
describes the amount or other limitation (if any) on the use of
Tax Attributes pursuant to Section 382 or 383 of the Code
(including the amount of net unrealized built-in gain or loss at
the date of any ownership change, all within the meaning of
Section 382 of the Code) or the separate return limitation
year rules under the applicable consolidated return provisions
of the regulations of the U.S. Department of the Treasury
or comparable provisions of state, local or foreign Law.
(f) Neither the Company nor any of its Subsidiaries has
been either a distributing corporation or a
controlled corporation (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of
stock, occurring within the past two years, that was intended to
qualify for tax-free treatment under Section 355 of the
Code.
(g) There are no liens for a material amount of Taxes,
other than Taxes that are not yet due, on the assets of the
Company or any of its Subsidiaries.
(h) Neither the Company nor any of its Subsidiaries has
been included in any consolidated, unitary or combined Tax
Return provided for under the Law of the United States, any
foreign jurisdiction, or any state or locality with respect to
Taxes for any taxable period for which the statute of
limitations has not expired, other than the consolidated,
unitary or combined group of which the Company and its
Subsidiaries are the sole members.
(i) The Company and its Subsidiaries have timely withheld
and paid to the appropriate Governmental Authorities all
material Taxes required to have been withheld by them in
connection with amounts paid or owing to any employee, creditor
or other person. The Company and its Subsidiaries have complied
in all
A-14
material respects with all recordkeeping and reporting
requirements in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other person.
(j) There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to the
assessment or collection of Taxes against the Company or any of
its Subsidiaries.
(k) Neither the Company nor any of its Subsidiaries is a
party to any indemnification, allocation or sharing agreement
with respect to Taxes (other than agreements among the Company
and its Subsidiaries).
(l) Neither the Company nor any Subsidiary will be required
to include any material item of income in, or exclude any
material item of deduction from, taxable income for any taxable
period (or portion thereof) beginning after the Closing Date as
a result of any: (i) adjustment under Section 481 of
the Code (or any corresponding or similar provisions of state,
local or foreign Tax law) made prior to the Closing Date,
(ii) closing agreement as described in Code
Section 7121 (or any corresponding or similar provisions of
state, local or foreign Tax law) executed during the six
(6) year period ending on the Closing Date, (iii) any
installment sale or other transaction disposition made on or
prior to the Closing Date, or (iv) any prepaid amount
received on or prior to the Closing Date.
(m) Neither the Company nor any Subsidiary has participated
in any listed transaction within the meaning of
Treas. Reg.
Section 1.6011-4(b).
Section
3.17
Commercial
Relationships
.
Since January 2, 2008
through the date hereof, none of the Companys Significant
Customers or Significant Suppliers has cancelled or terminated
its relationship with the Company or any Subsidiary. As of the
date hereof, the Company does not have any Knowledge of any plan
or intention of any such Significant Customer or Significant
Supplier to cancel or terminate its relationship with the
Company or any Subsidiary, and the senior management of the
Company has not received any written threat or notice from any
such Significant Customer or Significant Supplier, to cancel or
terminate its relationship with the Company or any Subsidiary.
Section
3.18
Internal
Controls
.
The Company has established and
maintains disclosure controls and procedures and internal
control over financial reporting (as such terms are defined in
paragraphs (e) and (f), respectively, of
Rule 13a-15
under the Exchange Act) as required by
Rule 13a-15
under the Exchange Act. The Company has disclosed, based on its
most recent evaluation prior to the date of this Agreement, to
the Companys auditors and the audit committee of the Board
of Directors and Parent (A) any significant deficiencies
and material weaknesses in the design or operation of internal
controls over financial reporting which are reasonably likely to
adversely affect in any material respect the Companys
ability to record, process, summarize and report financial
information and (B) any fraud, whether or not material,
that involves executive officers or employees who have a
significant role in the Companys internal controls over
financial reporting. As of the date of this Agreement, the
Company has not identified any material weaknesses in the design
or operation of internal controls over financial reporting other
than as described in the Company SEC Documents.
Section
3.19
Opinion
.
The
Board of Directors of the Company has received the written
opinion of Evercore Group L.L.C., dated the date of this
Agreement, to the effect that, as of such date and subject to
the assumptions and qualifications contained therein, the
Aggregate Consideration (as defined therein) is within the range
of Net Enterprise Values (as defined therein) that Evercore
Group L.L.C. estimates for the Company.
A-15
ARTICLE IV
Representations
and Warranties of Parent and Merger Sub
Except as set forth in the disclosure schedule of Parent and
Merger Sub dated the date hereof (the
Acquiror
Disclosure Schedule
) (it being understood that any
matter disclosed in any section or subsection of the Acquiror
Disclosure Schedule is deemed to be disclosed in any other
section or subsection of the Acquiror Disclosure Schedule only
to the extent that it is reasonably apparent from such
disclosure that such disclosure is applicable to such other
section or subsection), Parent and Merger Sub represent and
warrant to the Company that as of the date hereof (unless such
statement expressly relates to an earlier date):
Section
4.01
Organization,
Standing and Corporate Power
.
Each of Parent
and Merger Sub is a corporation duly organized, validly existing
and in good standing under the Laws of the jurisdiction in which
it is incorporated and has all requisite corporate power and
authority to own, operate and lease its properties and to carry
on its business as now being conducted. Each of Parent and
Merger Sub is duly qualified or licensed to do business and is
in good standing in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary.
Section
4.02
Authority;
Noncontravention
.
(a) Each of Parent and Merger Sub has all requisite
corporate power and authority to execute and deliver this
Agreement, perform its obligations hereunder and, consummate the
transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of
Parent and Merger Sub and no other corporate proceedings,
including any vote of security holders of Parent, on the part of
Parent or Merger Sub are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Parent and
Merger Sub and, assuming the due authorization, execution and
delivery by the other party hereto, constitutes a legal, valid
and binding obligation of Parent and Merger Sub enforceable
against Parent and Merger Sub in accordance with its terms
(subject to applicable bankruptcy, solvency, fraudulent
transfer, reorganization, moratorium and other Laws affecting
creditors rights generally, any to general equity
principles, in each case from time to time in effect). The
respective Board of Directors of Parent and Merger Sub, at a
meeting duly called and held, duly adopted resolutions approving
and declaring advisable this Agreement and have been adopted by
Parent as the sole stockholder of Merger Sub.
(b) The execution and delivery of this Agreement do not,
and the consummation of the Merger and the other transactions
contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, require
the consent, waiver, approval or authorization from any party
to, or result in any violation or breach of, or default (with or
without notice or lapse of time or both) under (i) the
Certificate of Incorporation or Bylaws of Parent and Merger Sub,
(ii) any Contract to which Parent or Merger Sub is a party
or any of their respective properties or other assets is subject
or (iii) subject to the governmental filings and other
matters referred to in Section 4.03, any Law applicable to
Parent or Merger Sub or their respective properties or other
assets.
Section
4.03
Governmental
Approvals
.
No consent, waiver, approval,
order, license or permit of, or authorization of, action by or
in respect of, or registration, declaration or filing with or
notification to, any Governmental Authority is required by or
with respect to Parent or Merger Sub in connection with the
execution and delivery of this Agreement by Parent and Merger
Sub or the consummation by Parent and Merger Sub of the Merger
or the other transactions contemplated by this Agreement, except
for (a) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (b) compliance
with any requirements of the applicable securities Laws or the
stock exchanges on which any securities of Parent or any of its
Affiliates are subject and (c) compliance with any
requirements of any Governmental Authority with respect to any
liquor Law or public health Law.
Section
4.04
Brokers
and Other Advisors
.
No broker, investment
banker, financial advisor or other person (other than those, the
fees and expenses of which will be paid by Parent or the
Surviving Corporation) is entitled to any brokers,
finders, financial advisors or other similar fee or
commission in connection with
A-16
the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Merger Sub.
Section
4.05
Financing
.
Parent
has delivered to the Company true and complete copies of
(i) the equity commitment letter, dated as of the date
hereof (the
Equity Commitment Letter
), by and
between Parent and Kohlberg Investors VI, L.P.
(
Sponsor
), pursuant to which Sponsor has
committed to provide the cash equity financing to Parent in
connection with the transactions contemplated hereby, and
(ii) the executed debt commitment letter, dated as of the
date hereof (the
Debt Commitment Letter
),
among Parent and National City Bank (the
Lender
), pursuant to which the Lender has
committed to provide the debt financing (the
Debt
Financing
) described therein in connection with the
transactions contemplated hereby. The Equity Commitment Letter,
together with the Debt Commitment Letter, are sometimes referred
to collectively herein as the
Commitment
Letters
, and the amounts committed pursuant to the
Commitment Letters being the
Financing
. As of
the date of this Agreement, the commitments contained in the
Commitment Letters have not been withdrawn or rescinded in any
respect and the Commitment Letters have not been amended or
modified. As of the date of this Agreement, the Commitment
Letters are in full force and effect in the form delivered to
the Company and the Commitment Letters constitute the valid and
binding obligations of the Parent and, to the Knowledge of the
Parent, the other parties thereto. There are no conditions
precedent or other contingencies or agreements related to the
funding of the full amount of the Financing, other than as set
forth in the Commitment Letters and the Fee Letter, dated as of
the date hereof, among Parent, the Sponsor and the Lender (the
Disclosed Conditions
) and, to the Knowledge
of Parent or Merger Sub, except as set forth in the Debt
Commitment Letter and the Fee Letter, no Person has any right to
impose, and neither the Lenders nor Parent has any obligation to
accept, (A) any condition precedent to such funding other
than the Disclosed Conditions nor (B) any reduction to the
aggregate amount available under the Debt Commitment Letter on
the Closing Date (nor any term or condition which would have the
effect of reducing the aggregate amount under the Debt
Commitment Letter on the Closing Date). Parent has fully paid
all commitment fees required to be paid in connection with the
Debt Commitment Letter. Assuming the accuracy of the
representations and warranties in Article III and
compliance by the Company with its cove- nants set forth herein,
the Financing, together with any cash or cash equivalents
available to the Company, would provide Parent and Merger Sub
with acquisition financing at the Effective Time sufficient for
Parent and the Surviving Corporation to pay the aggregate Merger
Consideration and Debt Tender Consideration and any other
payments contemplated in this Agreement (including the
refinancing of any outstanding indebtedness of the Company) and
to pay all fees and expenses related to the Financing, the
Merger, the Debt Tender Offer or any other transactions
contemplated by this Agreement. As of the date of this
Agreement, assuming the accuracy of the representations and
warranties in Article III and compliance by the Company
with its covenants set forth herein, Parent does not have any
reason to believe that any of the conditions to the Financing
will not be satisfied or that the Financing will not be
available to Merger Sub on the Closing Date.
Section
4.06
Solvency;
Surviving Corporation After the
Merger
.
Neither Parent nor Merger Sub is
entering into the transactions contemplated by this Agreement
with the actual intent to hinder, delay or defraud either
present or future creditors. Assuming that the representations
and warranties of the Company contained in Article III are
true and correct in all material respects, at and immediately
after the Effective Time, and after giving effect to the Merger
and the other transactions contemplated hereby, (a) the
aggregate value of the Surviving Corporations assets will
exceed its total liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities) at a fair
valuation and at fair saleable value; (b) the Surviving
Corporation will have the ability to pay its total debts and
liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) as they become due in the usual course
of its business; and (c) the Surviving Corporation will not
have an unreasonably small amount of capital with which to
conduct its business.
Section
4.07
Business
Conduct
.
(a) Merger Sub was incorporated on September 18, 2008.
Since its inception, Merger Sub has not engaged in any activity,
other than such actions in connection with (i) its
organization and (ii) the preparation, negotiation and
execution of this Agreement, the Merger and the Financing.
Merger Sub has no operations, has not generated any revenues and
has no liabilities other than those incurred in connection with
the foregoing and in association with the Merger as provided in
this Agreement.
A-17
(b) There are no contracts, agreements, arrangements or
transactions between Parent, Merger Sub or any of their
respective Affiliates, on the one hand, and any member of the
Companys current officers or directors, on the other hand,
as of the date hereof that relate in any way to the Company or
the Merger.
ARTICLE V
Covenants
Relating to Conduct of Business
Section
5.01
Conduct
of Business
.
During the period from the date
of this Agreement to the Effective Time, the Company shall, and
shall cause each of its Subsidiaries to, carry on its business
in the ordinary course. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to
the Effective Time, except as provided in Section 5.01 of
the Company Disclosure Schedule or as expressly contemplated by
this Agreement, the Company shall not, and shall not permit any
of its Subsidiaries to, without Parents prior written
consent:
(a) (i) declare, set aside or pay any dividends on, or
make any other distributions (whether in cash, stock or
property) in respect of, any of its Capital Stock, other than
dividends or distributions by a direct or indirect Subsidiary of
the Company (A) to its parent or (B) to a third party
as required by the terms of any agreement listed on
Section 5.01(a) of the Company Disclosure Schedule or
(ii) split, combine or reclassify any of its Capital Stock
or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its
Capital Stock;
(b) issue, sell, grant, pledge or otherwise encumber any
shares of its Capital Stock, any other voting securities or any
securities convertible into, or any rights, warrants or options
to acquire, any such shares, voting securities or convertible
securities, or any phantom stock,
phantom stock rights, stock appreciation rights or
stock based performance units;
(c) amend the Certificate of Incorporation or Bylaws of the
Company or the comparable charter or organizational documents of
any of its Subsidiaries;
(d) acquire in any manner assets of any Third Party, except
for acquisitions of assets in the ordinary course of business
consistent with past practice or that would not be material to
the Company and its Subsidiaries taken as a whole;
(e) sell, transfer, pledge, lease, mortgage, sell and
leaseback or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or other assets to a
Third Party, except for sales of properties or other assets in
the ordinary course of business consistent with past practice or
that would not be material to the Company and its Subsidiaries
taken as a whole or for pledges of collateral in accordance with
the Companys credit facilities;
(f) incur, assume or modify any indebtedness for money
borrowed or guarantee thereof, including any capitalized lease
obligations but excluding (i) any capitalized lease
obligations with an aggregate capitalized amount less than
$500,000, intercompany debt, letters of credit entered into or
performance bonds posted in the ordinary course of business
consistent with past practice or (ii) drawdowns or
borrowings under the credit facilities of the Company in effect
on the date hereof;
(g) acquire directly or indirectly, by repurchase or
otherwise any shares of the Capital Stock of the Company or any
Subsidiary except as contemplated by this Agreement;
(h) grant to any director, officer or employee of the
Company or any of its Subsidiaries (i) any increase in
compensation, bonus or other benefits or (ii) any increase
in severance, change of control or termination pay, other than,
with respect to employees who are not executive officers or
directors, increases in compensation, bonus or other benefits in
the ordinary course of business consistent with past practice or
as required by a written agreement in effect on the date hereof;
(i) enter into, amend or terminate any Company Contract (or
Contract which, if in existence on the date hereof would be
required to be listed on Section 3.10(a) of the Company
Disclosure Schedule), other
A-18
than in the ordinary course of business consistent with past
practice, or make capital expenditures in connection therewith,
other than as required thereunder;
(j) pay, discharge, waive, release, assign, settle, satisfy
or forgive any Action, other than Actions grounded in tort law
and other commercial claims that arise or have arisen in the
ordinary course of business (but specifically excluding any
Action relating to the transactions contemplated hereby) and
only to the extent that the aggregate payments related to the
settlement of all such Actions do not exceed $300,000 in the
aggregate plus the amount set forth on Section 5.01(j) of
the Company Disclosure Schedule with respect to the matter
identified therein and subject to the conditions set forth
therein;
(k) (i) make or change any material Tax election;
(ii) change annual Tax accounting period or material method
of Tax accounting; (iii) except as required by applicable
Law, file any amended Tax Return; (iv) enter into any
closing agreement with respect to Taxes; (v) settle any Tax
claim or assessment; or (vi) consent to any extension or
waiver of the limitations period for the assessment of any Tax;
(l) make any payments, incur any liabilities or grant
contractual or other concessions to counterparties in order to
secure any consents necessary in connection with the
transactions contemplated hereby under any Contracts or Permits,
other than, with respect to any Permits, payments of filing,
application and similar fees; or
(m) authorize any of, or commit or agree to take any of,
the foregoing actions.
Section
5.02
Stockholder
Meeting; Proxy Material
.
(a) Each of the Company and Parent shall cooperate with
each other in the preparation of the proxy statement
(including the letter to shareholders, notice of meeting and
form of proxy, the
Proxy Statement
)
(including the preliminary Proxy Statement) and any amendment or
supplement to the preliminary Proxy Statement. As promptly as
practicable the Company shall prepare and file with the SEC and
CSC a preliminary Proxy Statement;
provided
,
however
, that the Company shall furnish such preliminary
Proxy Statement to Parent and give Parent and its legal
counsel a reasonable opportunity to review such preliminary
Proxy Statement prior to filing with the SEC and shall accept
all reasonable additions, deletions or changes suggested by
Parent in connection therewith. The Company shall notify Parent
of the receipt of any comments of the SEC staff with respect to
the preliminary Proxy Statement and of any requests by the
SEC for any amendment or supplement thereto or for
additional information and shall provide to Parent, as promptly
as reasonably practicable, copies of all written correspondence
between the Company or any representative of the Company and the
SEC with respect to the Proxy Statement. If comments are
received from the SEC staff with respect to the preliminary
Proxy Statement, the Company shall respond as promptly as
reasonably practicable to the comments of the SEC. The Company
shall provide Parent and its legal counsel with a reasonable
opportunity to review any amendment or supplement to each of the
preliminary and the definitive Proxy Statement prior to
filing with the SEC and shall accept all reasonable additions,
deletions or changes suggested by Parent in connection
therewith. Parent shall promptly provide the Company with such
information as may be required to be included in the Proxy
Statement or as may be reasonably required to respond to any
comment of the SEC staff. After all the comments received from
the SEC have been cleared by the SEC staff and all
information required to be contained in the Proxy Statement has
been included therein by the Company, the Company shall file the
definitive Proxy Statement with the SEC and CSC and cause the
Proxy Statement to be mailed (including by electronic
delivery if permitted) as promptly as reasonably practicable, to
its holders of record, as of the record date established by the
Board of Directors of the Company.
(b) The Company shall take all action necessary in
accordance with the DGCL and its Certificate of Incorporation
and By-laws to duly call, give notice of, convene and hold a
meeting of its shareholders as promptly as reasonably
practicable following the mailing of the Proxy Statement for the
purpose of voting on the adoption of the Agreement and the
Merger (such meeting or any adjournment or postponement thereof,
(the
Company Meeting
) and the Companys
obligation to call, hold, and convene the Company Meeting shall
not be affected by (i) the commencement, proposal,
disclosure, or announcement of any Company
A-19
Proposal (as defined hereafter) or (ii) any Adverse
Recommendation Change (as defined in Section 5.03(b)),
unless in either case the Agreement is terminated pursuant to
Article VIII. Subject to complying with its fiduciary
duties under applicable Law, (A) the Board of Directors of
the Company shall recommend that the shareholders of the Company
vote in favor of the adoption of this Agreement and the Merger
at the Companys shareholders meeting and the Board
of Directors of the Company shall use its reasonable best
efforts to solicit from holders of the Company proxies in favor
of the adoption of this Agreement and the Merger and
(B) the Proxy Statement shall include a statement to the
effect that the Board of Directors of the Company has
recommended that the Companys shareholders vote in favor
of adoption of this Agreement at the Company Meeting.
Notwithstanding anything to the contrary contained in this
Agreement, the Company shall adjourn or postpone the Company
Meeting to the extent necessary to ensure that any required
supplement or amendment to the Proxy Statement is provided to
the Companys shareholders or, if as of the time for which
the Company Meeting is originally scheduled (as set forth in the
Proxy Statement) there are insufficient shares of Company Common
Stock represented (either in person or by proxy) to constitute a
quorum necessary to conduct business at such meeting;
provided
, that no adjournment may be to a date on or
after three Business Days prior to the date set forth in
Section 8.01(b)(i).
Section
5.03
No
Solicitation; Other Offers
.
(a) Subject to Section 5.03(c), from and after the
date hereof, neither the Company nor any of its Subsidiaries
shall, nor shall the Company or any of its Subsidiaries
authorize any of its or their officers, directors, employees,
investment bankers, attorneys, accountants, consultants or other
agents or advisors to, directly or indirectly, (i) solicit,
initiate, or take any action to facilitate or encourage the
submission of any Company Proposal or (ii) enter into or
participate in any discussions or negotiations with, furnish any
information relating to the Company or any of its Subsidiaries
or afford access to the business, properties, assets, books or
records of the Company or any of its Subsidiaries to, otherwise
cooperate in any way with, or knowingly assist, participate in,
facilitate or encourage any effort by, any Third Party that is
seeking to make, or has made, a Company Proposal. The Company
shall, and shall cause its Subsidiaries and the advisors,
employees and other agents of the Company and any of its
Subsidiaries to, cease immediately and cause to be terminated
any and all existing activities, discussions and negotiations,
if any, with any Third Party conducted prior to the date hereof
with respect to any Company Proposal and shall use its
reasonable best efforts to cause any such Third Party (or its
agents or advisors) in possession of confidential information
about the Company that was furnished by or on behalf of the
Company to return or destroy all such information. For purposes
of this Agreement
Company Proposal
shall mean
(i) any proposal or offer for a merger, consolidation,
dissolution, recapitalization or other business combination
involving the Company or any of its Subsidiaries or
(ii) any proposal or offer to acquire in any manner,
directly or indirectly,
33
1
/
3
%
or more of (A) the equity securities, debt securities or
IDSs of the Company or any of its Subsidiaries or (B) the
assets of the Company or any of its Subsidiaries outside the
ordinary course of business, in each case other than the
transactions contemplated by this Agreement and the agreements
to be executed in connection herewith.
(b) The Board of Directors of the Company shall not (and
shall not permit any committee thereof to) (i) (A) withdraw
(or amend, qualify or modify in a manner adverse to Parent or
Merger Sub), or publicly propose to withdraw (or amend, qualify
or modify in a manner adverse to Parent or Merger Sub), the
approval, adoption or recommendation by such Board of Directors
of this Agreement and the Merger or fail to recommend to the
shareholders in the Proxy Statement that they approve the Merger
or (B) endorse, approve, adopt, submit to Company
shareholders (including by seeking to obtain an action by
written consent of some or all of the Companys
shareholders) or recommend, or propose publicly to endorse,
approve, adopt, submit to shareholders of the Company or
recommend, any Company Proposal (any action described in this
clause (i) being referred to as an
Adverse
Recommendation Change
) or (ii) enter into, adopt
or recommend, or publicly propose to enter into, adopt or
recommend, or allow the Company to execute or enter into, any
letter of intent, memorandum of understanding or other agreement
constituting or related to, or that is intended to or would
reasonably be expected to lead to, any Company Proposal (other
than a confidentiality agreement referred to in
Section 5.03(c)) (any such document, an
Acquisition Agreement
). For the avoidance of
doubt, for purposes of this Agreement, a Notice of Superior
Proposal, a notice of any Company Proposal (whether or not the
Board of Directors of the Company determines that it is a
Superior Proposal or reasonably expects that
A-20
it would result in a Superior Proposal), any other notice
required by this Section 5.03 or any disclosure thereof
shall not constitute an Adverse Recommendation Change.
(c) Notwithstanding the foregoing, (A) the Board of
Directors may effect an Adverse Recommendation Change for any
reason other than in response to a Company Proposal and
(B) subject to the provisions of Section 5.03(e), the
Board of Directors, directly or indirectly through advisors,
agents or other intermediaries, at any time prior to the
adoption and approval of the Merger by the Companys
shareholders, may, subject to the Companys compliance with
Section 5.03(a), in response to a Third Partys bona
fide written Company Proposal that the Board of Directors
determines constitutes, or is reasonably expected to result in,
a Superior Proposal, (i) enter into or participate in any
discussions or negotiations with, and furnish any information
relating to the Company or any of its Subsidiaries to or afford
such Third Party access to, the business, properties, assets,
books or records of, the Company or any of its Subsidiaries to,
otherwise cooperate in any way with, or knowingly assist,
participate in, facilitate or encourage any effort by, such
Third Party and its auditors, advisors and lenders (subject to a
confidentiality agreement (including a customary standstill)
with terms no less favorable to the Company than those contained
in the Confidentiality Agreement (as defined hereafter)),
(ii) effect an Adverse Recommendation Change and
(iii) take any action that any court of competent
jurisdiction orders the Company to take but, in the case of the
foregoing clauses (A) and (B)(i) and (B)(ii), only if the
Board of Directors, after considering the advice from outside
legal counsel to the Company, determines in good faith that it
should take such action to comply with its fiduciary duties
under applicable Law.
(d) Nothing contained herein shall prevent the Board of
Directors from complying with
Rule 14e-2(a)
under the Exchange Act with regard to a Company Proposal. For
the avoidance of doubt, for all purposes under this Agreement,
including Article VIII, any disclosure by the Board of
Directors of the status of any Company Proposal (without comment
on the merits thereof) shall not be considered a failure to
make, withdrawal or modification adverse to Parent or Merger Sub
of its Company Board Recommendation.
(e) The Board of Directors shall not take any of the
actions referred to in clauses (B)(i) and (B)(ii) of
Section 5.03(c) unless the Company shall have delivered to
Parent a prior written notice advising Parent that it intends to
take such action. In addition, the Company shall notify Parent
promptly (but in any event within 48 hours) in writing of
any Company Proposal, which notice shall state the material
terms and conditions of any such Company Proposal and the
identity of the Person making any such Company Proposal as well
as the Companys intention to furnish information to, or
enter into discussions or negotiations with, such Person or
group. The Company shall keep Parent and Merger Sub informed in
all material respects of the status and details (including any
material change to the terms thereof) of any Company Proposal.
The Company shall provide to Parent any information provided to
such Third Party that has not been previously provided to
Parent. For purposes of this Agreement,
Superior
Proposal
means any bona fide, written Company Proposal
made in compliance with the terms of this Agreement for at least
a majority of the outstanding Company Common Shares or all or
substantially all of the assets of the Company and its
Subsidiaries, taken as a whole, which is reasonably capable of
being consummated on the terms proposed, and which the Board of
Directors, after consultation with outside legal counsel and a
financial advisor of nationally recognized reputation and taking
into account all the terms and conditions of the Company
Proposal, determines in good faith is more favorable to all the
Companys shareholders than as provided hereunder.
Section
5.04
Employees;
Benefit Plans
.
(a) For a period of one year following the Closing Date,
the Surviving Corporation will provide current employees of the
Company and its Subsidiaries (other than those employees covered
by a collective bargaining agreement) as of the Effective Time
who continue employment with the Surviving Corporation
(
Employees
) with base salary, the opportunity
for cash bonus compensation, and benefits that are no less
favorable in the aggregate than those provided under the
Companys compensation and benefit plans, programs,
policies, practices and arrangements (excluding equity-based
programs) in effect at the Effective Time (it being understood
that discretionary incentive programs will remain
discretionary);
provided
,
however
, that nothing
herein will prevent the amendment or termination of any specific
plan, program or ar- rangement, require that the Surviving
Corporation provide or permit investment in the securities of
the Surviving Corporation or
A-21
interfere with the Surviving Corporations right or
obligation to make such changes as are necessary to comply with
applicable Law. Notwithstanding anything to the contrary set
forth herein, nothing herein shall preclude the Surviving
Corporation from terminating the employment of any Employee for
any reason for which the Company could have terminated such
Employee prior to the Effective Time.
(b) The Surviving Corporation and its Affiliates will honor
all Employee Benefit Plans and employment agreements (including
any severance, retention, change of control and similar plans,
agreements and written arrangements) in accordance with their
terms as in effect immediately prior to the Effective Time,
subject to any amendment or termination thereof that may be
permitted by such plans, agreements or written arrangements.
(c) For all purposes under the employee benefits plans of
the Surviving Corporation and its Subsidiaries providing
benefits to any employees after the Effective Time (the
New Plans
), each employee will be credited
with his or her years of service with the Company and its
Affiliates prior to the Effective Time (including predecessor or
other entities for which the Company and its Affiliates have
given credit for prior service), to the same extent as such
employee was entitled, before the Effective Time, to credit for
such service under the corresponding Employee Benefit Plan,
except for purposes of benefit accrual under defined benefit
plans, for any purpose where service credit for the applicable
period is not provided to participants generally, and to the
extent that such credit would result in a duplication of accrual
of benefits. In addition, and without limiting the foregoing,
(i) each Employee immediately will be eligible to
participate, without any waiting time, in any and all New Plans
to the extent coverage under such New Plan replaces coverage
under a similar or comparable Employee Benefit Plan in which
such employee participated immediately before the Effective Time
(such plans, the
Old Plans
) and (ii) for
the purposes of each New Plan providing medical, dental,
pharmaceutical
and/or
vision benefits to any employee and his or her covered
dependents, to the extent any such exclusions or requirements
were waived or inapplicable under any Old Plan, and the
Surviving Corporation will cause any eligible expenses incurred
by such employee and his or her covered dependents during the
portion of the plan year of the Old Plans ending on the date
such employees participation in the corresponding New Plan
begins to be taken into account under such New Plan for purposes
of satisfying all deductible, coinsurance and maximum
out-of-pocket requirements applicable to such employee and his
or her covered dependents for the applicable plan year as if
such amounts had been paid in accordance with such New Plan.
(d) The terms and provisions of this Section 5.04 are
intended solely for the benefit of each party hereto and their
respective or permitted assigns and it is not the intention of
the parties to confer Third Party beneficiary rights upon any
other Person. Nothing in this Agreement is intended to and shall
not establish or create or amend any employee benefit plan,
practice or program of the Company or any of its Subsidiaries or
the Parent or the Surviving Corporation or any of their
respective successors or assigns and shall not create any
contract of employment.
ARTICLE VI
Additional
Agreements
Section
6.01
Reasonable
Best Efforts
.
Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties
agrees to use its reasonable best efforts to assist and
cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including using
reasonable best efforts to accomplish the following:
(a) the taking of all acts necessary to cause the
conditions to Closing to be satisfied as promptly as
practicable, (b) the obtaining of all necessary actions,
waivers, consents and approvals from Governmental Authorities
and the making of all necessary registrations and filings
promptly (including filings with Governmental Authorities, if
any) and the taking of all steps as may be necessary to obtain
an approval or waiver from, or to avoid an action or proceeding
by any Governmental Authority with respect to the transactions
contemplated hereunder, (c) the obtaining of all consents,
approvals or waivers from Third Parties set forth on
Sections 3.04 and 3.10(c) of the Company Disclosure
Schedule (the costs and expenses of which, if any, shall be
borne solely by the Company or, if the
A-22
Merger is consummated, the Surviving Corporation);
provided
that the failure to obtain any such consents,
approvals or waivers shall not constitute a breach by the
Company of any covenants or representations or, except with
respect to the consents, approvals and waivers required by
Section 7.02(f), the failure of any condition contained in
this Agreement, (d) the defending of any lawsuits or other
legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the
transactions contemplated hereby or questioning the validity or
legality of the Merger, including seeking to have any stay or
temporary restraining order entered by any court or other
Governmental Authority vacated or reversed and (e) the
execution and delivery of any additional instruments necessary
to consummate the transactions contemplated by, and to fully
carry out the purposes of, this Agreement. In connection with
and without limiting the foregoing, the Company and Parent each
agree to use its reasonable best efforts to take promptly any
and all steps necessary to avoid or eliminate each and every
impediment under any antitrust or competition Laws that may be
asserted by any Federal, state and local and
non-United
States antitrust or competition authority, so as to enable the
parties to close the transactions contemplated by this Agreement
as expeditiously as possible, including committing to or
effecting, by consent decree, hold separate orders, trust or
otherwise the sale or disposition of such of its assets or
businesses as are required to be divested in order to avoid the
entry of, or to effect the dissolution of, any decree, order,
judgment, injunction, temporary restraining order or other order
in any suit or preceding, that would otherwise have the effect
of preventing or materially delaying the consummation of the
Merger and the other transactions contemplated by this
Agreement. In addition, each of the Company and Parent agrees to
use its reasonable best efforts to take promptly any and all
steps necessary to vacate or lift any order relating to
antitrust or competition that would have the effect of making
any of the transactions contemplated by this Agreement illegal
or otherwise prohibiting or materially delaying their
consummation. For the avoidance of doubt, notwithstanding
anything herein to the contrary, reasonable best
efforts shall impose on the Company and its Subsidiaries
the obligation to pay filing, application and similar fees but
shall not impose on the Company or its Subsidiaries any
obligation to make payments, incur liabilities or grant
contractual or other concessions to counterparties in order to
secure any consents, waivers, approvals or authorizations.
Section
6.02
Indemnification,
Exculpation and Insurance
.
(a) From and after the Effective Time, Parent shall cause
the Surviving Corporation to, and the Surviving Corporation
shall, indemnify and hold harmless, to the same extent provided
under the Companys Certificate of Incorporation and Bylaws
in effect on the date hereof, the individuals who on or prior to
the Effective Time were directors, officers or employees of the
Company or any of its Subsidiaries (collectively, the
Indemnitees
) with respect to all acts or
omissions by them in their capacities as such or taken at the
request of the Company or any of its Subsidiaries at any time
prior to the Effective Time. All obligations with respect to all
rights of the Indemnitees to indemnification and exculpation
from liabilities for acts or omissions occurring at or prior to
the Effective Time as provided in the respective Certificates of
Incorporation or Bylaws (or comparable organizational documents)
of the Company or any of its Subsidiaries as now in effect, and
any indemnification agreements or arrangements of the Company or
any of its Subsidiaries set forth in Section 6.02 of the
Company Disclosure Schedule shall survive the Merger and shall
continue in full force and effect in accordance with their
terms. For a period of not less than six (6) years from the
Effective Time, such rights shall not be amended, or otherwise
modified in any manner that would adversely affect the rights of
the Indemnitees with respect to indemnification and exculpation
from liabilities for acts or omissions occurring prior to the
Effective Time, unless such modification is required by Law.
(b) As of the Effective Time, the Company shall have
obtained, and for a six-year period thereafter, the Surviving
Corporation shall maintain in effect, a so-called
tail policy for such six-year period covering acts
or omissions occurring prior to the Effective Time with respect
to those persons who are currently covered by the Companys
directors and officers liability insurance policy on
terms with respect to such coverage and amount no less favorable
to the Companys directors and officers currently covered
by such insurance than those of such policy in effect on the
date hereof.
(c) The provisions of this Section 6.02 are intended
to be for the benefit of, and shall be enforceable by, each
Indemnitee, his or her heirs and his or her representatives and
are in addition to, and not in substitution for, any other
rights to indemnification or contribution that any such person
may have pursuant to any
A-23
indemnification agreements or arrangement of the Company or any
of its Subsidiaries set forth in Section 6.02 of the
Company Disclosure Schedule.
(d) In the event that the Surviving Corporation or any of
its successors or assigns (i) consolidates with or merges
into any other Person and is not the continuing or surviving
corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such
case, proper provision shall be made so that the successors and
assigns of the Surviving Corporation shall assume all of the
obligations thereof set forth in this Section 6.02.
(e) The obligations of Parent and the Surviving Corporation
under this Section 6.02 shall not be terminated or modified
in such a manner as to adversely affect any Indemnitee to whom
this Section 6.02 applies without the consent of the
affected Indemnitee (it being expressly agreed that the
Indemnitees to whom this Section 6.02 applies shall be
Third Party beneficiaries of this Section 6.02).
Section
6.03
Fees
and Expenses
.
Except as otherwise provided in
this Agreement, all Expenses incurred in connection with this
Agreement, the Merger and the other transactions contemplated by
this Agreement shall be paid by the party incurring such
Expenses, whether or not the Merger is consummated, except that
the Company or, if the Merger is consummated, the Surviving
Corporation shall bear and pay the costs and expenses incurred
in connection with the filing fees for any applicable foreign or
supranational antitrust Laws and all Separation Fees. Except to
the extent provided in Section 2.02(c), all transfer,
documentary, sales, use, real property transfer, stock transfer,
stamp, registration and other similar Taxes and fees (including
any penalties and interest) incurred in connection with the
transaction contemplated by this Agreement shall be borne
equally by the Company and Parent.
Expenses
,
as used in this Agreement, shall include all reasonable
out-of-pocket expenses (including all fees and expenses of
counsel, accountants, investment bankers, financing sources,
hedging counterparties, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf
in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the
preparation, printing and filing of the Proxy Statement and the
mailing of the Proxy Statement, the solicitation of stockholder
approvals, the preparation, printing and mailing of the Offer
Documents and all other matters related to the closing of the
Merger and the other Transactions.
Section
6.04
Public
Announcements
.
Parent and the Company shall
consult with each other before issuing, and give each other the
opportunity to review and comment upon, any press release or
other public statements with respect to the transactions
contemplated by this Agreement, including the Merger, and shall
not issue any such press release or make any such public
statement prior to such consultation, except as may be required
by applicable Law or court process. The parties agree that the
initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form
heretofore reasonably agreed to by the parties.
Section
6.05
Notification
of Certain Matters
.
The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to
the Company, of (a) any notice or other communication
received by such party from or sent by such party to any
Governmental Authority in connection with the Merger or the
transactions contemplated thereby or from any Person alleging
that the consent of such Person is or may be required in
connection with the Merger or the transactions contemplated
thereby, if the subject matter of such communication or the
failure of such party to obtain such consent would be material
to the Company, the Surviving Corporation or Parent and
(b) any actions, suits, claims, investigations or
proceedings commenced or, to such partys Knowledge,
threatened against, relating to or involving or otherwise
affecting such party or any of its subsidiaries which relate to
the Merger or the transactions contemplated thereby. The
Company, Parent and Merger Sub shall promptly cooperate and
consult with one another with respect to the preparation and
submission of any filings, communications or correspondence with
any Governmental Authority to the extent practicable and subject
to the terms of the Confidentiality Agreement and any
restrictions under antitrust Law.
Section
6.06
Access
to Information
.
(a) From the date hereof until the Effective Time, to the
extent consistent with applicable antitrust and other Laws, the
Company shall, and shall cause its Subsidiaries, and each of
their respective officers, directors
A-24
and employees, counsel, advisors, accountants, financial
advisors, lenders and representatives (collectively, the
Company Representatives
) to, provide Parent
and Merger Sub and their respective officers, employees,
counsel, advisors, accountants, financial advisors, financial
sources, Affiliates and representatives (collectively, the
Parent Representatives
) reasonable access
during normal business hours and upon reasonable notice, to the
officers, directors, employees, accountants, properties, offices
and other facilities and to the books and records of the Company
and its Subsidiaries, as will permit Parent and Merger Sub to
make inspections of such as either of them may reasonably
require, and will cause the Company Representatives and the
Companys Subsidiaries to (i) furnish Parent, Merger
Sub and the Parent Representatives to the extent available with
such financial and operating data and other information with
respect to the business and operations of the Company and its
Subsidiaries as Parent and Merger Sub may from time to time
reasonably request and (ii) notify Parent of the filing by
the Company of any form, report, schedule, statement,
registration statement and other documents filed by the Company
or its Subsidiaries during such period pursuant to the
requirements of the United States federal or state securities
Laws. All legal, accounting and business due diligence shall
have been completed prior to the date of this Agreement.
(b) Parent and Merger Sub confirm that (i) the Company
has provided Parent, Merger Sub and the Parent Representatives
with access to such documents, books, records, facilities,
contracts and other assets of the Company as any of them has
requested to review, (ii) each of them has had the
opportunity to ask questions of the officers and management of
the Company, to acquire such additional information about the
Company as Parent and Merger Sub and the Parent Representatives
have requested and (iii) each of them has had the
opportunity to conduct a complete due diligence process; all
such information that has been provided to Parent, Merger Sub or
the Parent Representatives is subject to the Confidentiality
Agreement (as hereinafter defined). In connection with such
investigation, Parent, Merger Sub and the Parent Representatives
have received from the Company or the Company Representatives
certain other estimates, projections and other forecasts for the
Company and its Subsidiaries and certain estimates, plans and
budget information.
Section
6.07
Company
Representations and Warranties
.
Each of
Parent and Merger Sub agrees that, except for the
representations and warranties made by the Company that are
expressly set forth in Article III of this Agreement (as
modified by the Company Disclosure Schedule), neither the
Company nor any other Person has made, nor shall the Company or
any other Person be deemed to have made, any representation or
warranty of any kind. Without limiting the generality of the
foregoing, each of Parent and Merger Sub agrees that, except to
the extent and as expressly covered by a representation and
warranty made by the Company and contained in Article III
of this Agreement, neither the Company, any holder of the
Companys securities nor any of their respective Affiliates
or representatives makes or has made any representation or
warranty to Parent, Merger Sub or any of their representatives
or Affiliates with respect to:
(i) any projections, forecasts or other estimates, plans or
budgets of future revenues, expenses or expenditures, future
results of operations (or any component thereof), future cash
flows (or any component thereof) or future financial condition
(or any component thereof) of the Company or any of its
Subsidiaries or the future business, operations or affairs of
the Company or any of its Subsidiaries heretofore or hereafter
de- livered to or made available to Parent, Merger Sub or their
respective representatives or Affiliates; or
(ii) any other information, statement or documents
heretofore or hereafter delivered to or made available to
Parent, Merger Sub or their respective representatives or
Affiliates.
Section
6.08
Financing
for Parent and Merger Sub
.
(a) Parent and Merger Sub shall use their reasonable best
efforts to take, or cause to be taken, all actions and do, or
cause to be done, all things necessary, proper or advisable to
arrange the Financing on the terms and conditions described in
the Commitment Letter, including using their reasonable best
efforts to: (i) satisfy, on a timely basis, all conditions
within their control applicable to Parent and Merger Sub to
obtaining the Financing, (ii) comply with all obligations
applicable to Parent and Merger Sub, (iii) negotiate and
enter into definitive agreements with respect thereto on the
terms and conditions contemplated by the Commitment Letters
(including any terms and conditions contained in the flex
provisions related to the Debt Financing),
(iv) consummate the Financing at or prior to Closing and
(v) seek to enforce their rights under the
A-25
Commitment Letters. Parent and Merger Sub shall be permitted,
upon prior written notice to the Company, to amend, supplement,
modify or waive any provision or remedy under the Commitment
Letters or the definitive agreements relating to the Financing;
provided that (x) no such amendment, supplement,
modification or waiver shall add or make more onerous any
conditions to the funding of the Financing on the Closing Date
and (y) any amendment, supplement, modification or waiver
that could reasonably be expected to materially impede, delay or
prevent the consummation of the Merger shall require the prior
written consent of the Company. In the event all or any portion
of the Debt Financing becomes unavailable or any financing
source notifies Parent that it no longer intends to provide
Financing on the terms and conditions contemplated in the Debt
Commitment Letter, Parent shall promptly notify the Company and
shall use its reasonable best efforts to arrange to obtain all
or such portion of the Debt Financing from alternative sources
(such portion from alternative sources, the
Alternative
Financing
) or replace such Debt Financing with equity
financing in an amount sufficient, when combined with the funds
under the Equity Commitment Letter and the Debt Commitment
Letter (if any), to consummate the transactions contemplated by
this Agreement on (A) terms and conditions (other than
those relating to conditions to the funding thereof), not
materially less favorable to Parent or Merger Sub (as determined
in the reasonable judgment of Parent and Merger Sub) and
(B) terms and conditions relating to conditions to the
funding thereof, not more onerous to Parent or Merger Sub (as
determined in the reasonable judgment of the Company), in each
case, in the aggregate than the Debt Financing (taking into
account the flex provisions related to the Debt
Financing) as promptly as practicable following the occurrence
of such event but in all cases at or prior to Closing. Parent
shall provide to the Company executed copies of the definitive
documents related to the Debt Financing and any commitment
letter related to any alternate financing. Parent shall keep the
Company informed with respect to all material activity
concerning the status of the Financing contemplated by the
Commitment Letters and any alternate financing and shall give
the Company prompt notice of any material adverse change with
respect thereto. Without limiting the foregoing, Parent agrees
to notify the Company promptly, and in any event within two
Business Days, if at any time (i) the Commitment Letters
shall expire or be terminated for any reason, (ii) any
financing source that is a party to the Commitment Letters or
any alternate financing notifies Parent that such source no
longer intends to provide financing to Parent on the terms set
forth therein, or (iii) for any reason Parent no longer
believes in good faith that it will be able to obtain all or any
portion of the Financing contemplated by the Commitment Letters
or any alternate financing on the terms described therein.
Parent shall not, and shall not permit Merger Sub to, without
the prior written consent of the Company, take (or fail to take)
any action or enter into any transaction, including any merger,
acquisition, joint venture, disposition, lease, contract or debt
or equity financing, which taking (or failure to take) could
reasonably be expected to materially impede, delay or prevent
consummation of the Financing contemplated by the Commitment
Letters or any alternate financing.
(b) Prior to the Effective Time, the Company shall provide,
and shall cause the Company Subsidiaries to, and shall use its
reasonable best efforts to cause their Company Representatives
to provide, all cooperation reasonably requested by Parent in
connection with the Debt Financing, at Parents sole cost
and expense, including (i) assisting in the preparation
for, and participating in, meetings, presentations, road shows,
due diligence sessions and similar presentations to and with,
among others, prospective lenders, investors and rating agencies
on a customary basis with reasonable advance notice,
(ii) assisting with the preparation of materials for rating
agency presentations, offering documents, private placement
memoranda, bank information memoranda, prospectuses and similar
documents required in connection with the Debt Financing to the
extent of information related to the Company,
(iii) executing and delivering any pledge and security
documents, other definitive financing documents, or other
certificates, opinions or documents required by the Debt
Commitment Letters or as may be otherwise reasonably requested
by Parent and otherwise reasonably facilitating the pledging of
collateral at the Effective Time, (iv) furnishing Parent
and its Financing sources with the financial statements and
financial data of the Company financial statements, pro forma
financial information, financial data, audit reports and other
information relating to the Company of the type required by
Regulation S-X
and
Regulation S-K
under the Securities Act and the other accounting rules and
regulations of the SEC required by the Debt Commitment Letters
or as may be otherwise reasonably requested by Parent,
(v) using reasonable best efforts to obtain
accountants comfort letters, legal opinions, surveys,
appraisals, environmental reports and title insurance as
reasonably requested by Parent, (vi) obtaining any
necessary rating agencies
A-26
confirmation or approvals for the Debt Financing, and
(vii) taking all corporate actions reasonably necessary to
permit the consummation of the Debt Financing;
provided
that none of the Company or any Company Subsidiary shall be
required to pay any commitment or other similar fee or incur any
other liability in connection with the Financing prior to the
Effective Time except for any liabilities that are conditioned
on the Effective Time having occurred. If this Agreement is
terminated prior to the Effective Time, Parent shall, promptly
upon request by the Company, reimburse the Company for all
reasonable out-of-pocket costs incurred by the Company or the
Company Subsidiaries in connection with its cooperation with the
Debt Financing. If this Agreement is terminated prior to the
Effective Time, Parent and Merger Sub shall, on a joint and
several basis, indemnify and hold harmless the Company, the
Company Subsidiaries and the Company Representatives for and
against any and all losses suffered or incurred by them in
connection with the Financing or any Alternative Financing and
any information utilized in connection therewith (other than
information provided by the Company or the Company Subsidiaries
expressly for use in connection therewith). For purposes of this
Section 6.08(b), the term Debt Financing shall
also be deemed to include any Alternative Financing and the term
Debt Commitment Letter shall also be deemed to
include any commitment letter (or similar agreement) with
respect to such Alternative Financing.
Section 6.09
Debt
Tender Offer and Consent Solicitation
.
(a) Simultaneously with the mailing of the Proxy Statement,
the Company shall commence a tender offer for 70% of the
outstanding Subordinated Notes (a
Debt Tender
Offer
), for an amount, in cash, equal to $3.99 per
Note, plus accrued and unpaid interest and deferred interest
(the
Debt Tender Consideration
), and on such
other terms and conditions as may be agreed between the Company
and Merger Sub, and a solicitation of the consents of holders of
a majority in principal amount of the Subordinated Notes (a
Consent Solicitation
) to an amendment to the
indenture governing the terms of the Subordinated Notes (the
Indenture
) in the form set forth in
Exhibit A hereto, with such other changes as Parent and the
Company may mutually agree (the
Requisite
Consents
). Any amounts payable to holders of the
Subordinated Notes in the Consent Solicitation or Debt Tender
Offer shall be funded by Parent and Merger Sub or by the
Surviving Corporation at the direction of Parent at the
Effective Time by deposit with a designated agent of immediately
available funds equal to the amount to be paid. Notwithstanding
anything herein to the contrary, the Consent Solicitation and
Debt Tender Offer shall not require any payment for the
Subordinated Notes
and/or
the
consents or waiver or amendment under the Consent Solicitations
to be made by the Company prior to the Effective Time.
(b) In connection with the Consent Solicitation and Debt
Tender Offer, the Company shall prepare all reasonably necessary
and appropriate documentation, including the offer to purchase,
the terms of the consent, related letters of transmittal and
other related documents and any other filing that may be
required by the SEC or the CSC (collectively, the
Offer
Documents
). All mailings to the holders of the
Subordinated Notes in connection with the Consent Solicitation
and Debt Tender Offer and related filings with the SEC and CSC
shall be subject to the prior review and comment of the Company
and Merger Sub and shall be reasonably acceptable to each of
them. Merger Sub and the Company shall reasonably cooperate, and
the Company shall cause its Subsidiaries to reasonably
cooperate, and Merger Sub and the Company shall each use its
respective reasonable best efforts, to cause its respective
representatives to reasonably cooperate with each other in
connection with the Consent Solicitation and Debt Tender Offer
(including the preparation of the Offer Documents) and use
reasonable best efforts to cause any payment for the Consent
Solicitation and the initial settlement of the Debt Tender Offer
to occur simultaneously with the Effective Time.
(c) The Company shall use its reasonable best efforts to
obtain the Requisite Consents in connection with the Consent
Solicitation. Promptly upon receipt of the Requisite Consents
permitting an amendment of the Indenture, the Company shall
enter into a supplemental indenture reflecting the amendments to
the Indenture approved by such Requisite Consents and shall use
its reasonable best efforts to cause the Indenture trustee to
promptly enter into such supplemental indenture;
provided
, that the amendments contained in such
supplemental indenture shall become effective upon signing, but
not operative until the Closing and the acceptance of the
Subordinated Notes tendered in the Debt Tender Offer. The
closing of the Consent Solicitation and Debt Tender Offer shall
be conditioned solely on (i) the receipt of the Requisite
Consents, (ii) the simultaneous occurrence of the Closing
and (ii) there being no Restraint that prohibits the
Closing. Simultaneously with the
A-27
Closing and in accordance with the terms of the Consent
Solicitation and Debt Tender Offer, the Surviving Company (as
successor in interest to Merger Sub) shall be provided by Merger
Sub with the funds reasonably necessary to consummate such Debt
Tender Offer and Consent Solicitation (including the payment of
all accrued and unpaid interest, deferred interest, applicable
premiums, consent fees and all related fees and expenses) and
the Company shall accept for purchase, and use such funds to
purchase, the Subordinated Notes tendered in such Debt Tender
Offer (and pay all accrued and unpaid interest, deferred
interest, applicable premiums, consent fees and all related fees
and expenses in connection with the Debt Tender Offer and
Consent Solicitation).
(d) If requested by Merger Sub, the Company shall enter
into one or more customary dealer manager agreements with such
Persons as Merger Sub and the Company shall mutually agree.
Parent and Merger Sub or, if the Merger is consummated, the
Surviving Corporation shall pay the fees and expenses of any
dealer manager, information agent, depositary or other agent
retained in connection with the Consent Solicitation and Debt
Tender Offer.
(e) Notwithstanding anything to the contrary herein,
nothing in this Section 6.09 (x) shall require the
Company or any of its Subsidiaries to make any monetary payments
or concessions or incur any other liability prior to the
Effective Time or (y) shall unreasonably interfere with the
ongoing operations of the Company and its Subsidiaries.
ARTICLE VII
Conditions
Precedent
Section
7.01
Conditions
to Each Partys Obligation to Effect the
Merger
.
The respective obligations of each
party to effect the Merger are subject to the satisfaction or
waiver on or prior to the Closing Date of the following
conditions:
(a)
Shareholder Approval
.
This
Agreement shall have been approved and adopted by the
shareholders of the Company in accordance with the DGCL.
(b)
No Injunctions or
Restraints
.
No temporary restraining order,
preliminary or permanent injunction or other judgment or order
shall have been issued by any court of competent jurisdiction
and no other statute, Law, rule, legal restraint or prohibition
(collectively,
Restraints
) shall be in effect
preventing or restraining the consummation of the Merger.
Section
7.02
Conditions
to Obligations of Parent and Merger Sub
.
The
obligations of Parent and Merger Sub to effect the Merger are
further subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a)
Representations and
Warranties
.
Except in the case of the
representations and warranties of the Company contained in
Sections 3.03(a), (b), and (c) the representations and
warranties of the Company set forth in Article III of this
Agreement (as modified by the Company Disclosure Schedule) shall
be (i) true and correct in all material respects, in the
case of representations not qualified by materiality or Company
Material Adverse Effect and (ii) true and correct in all
respects, in the case of representations that are so qualified,
on the date hereof and as of the Effective Time as if made on
and as of the Effective Time, except that any such
representations and warranties that expressly relate to a
specified date shall be true and correct only as of such date.
The representations and warranties of the Company contained in
Sections 3.03(a) and (b) shall be true and correct on
the date hereof and as of the Effective Time as though made on
and as of the Effective Time (except to the extent expressly
made as of an earlier date, in which case as of such earlier
date), except where the failure of such representations and
warranties to be so true and correct would not, individually or
in the aggregate, give rise to damages, losses, costs and
expenses in excess of $1,000,000 in the aggregate. The
representations and warranties of the Company contained in
Section 3.03(c) shall be true and correct on the date
hereof and as of the Effective Time (except to the extent
expressly made as of an earlier date, in which case as of such
earlier date), except where the failure of such representations
and warranties to be so true and correct would not, individually
A-28
or in the aggregate, give rise to damages, losses, costs and
expenses in excess of $1,000,000. Parent shall have received a
certificate signed on behalf of the Company by an executive
officer of the Company to such effect.
(b)
Performance of Obligations of the
Company
.
The Company shall have performed in
all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date and
Parent shall have received a certificate signed on behalf of the
Company by an executive officer of the Company to such effect.
(c)
No Company Material Adverse
Effect
.
Since the date of this Agreement no
event, circumstance, change or effect shall have occurred or
come to exist which has had a Company Material Adverse Effect
that is continuing, or which would be reasonably expected to
have a Company Material Adverse Effect. Parent shall have
received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect.
(d)
Debt Tender Offer and Consent
Solicitation
.
Pursuant to the Debt Tender
Offer and Consent Solicitation, (i) at least 50.1% of the
outstanding Subordinated Notes shall have been validly tendered
and not withdrawn and (ii) the Requisite Consents shall
have been received.
(e)
Required Third-Party
Consents
.
All consents, approvals and waivers
as set forth on Section 7.02(e) of the Company Disclosure
Schedule shall have been obtained, and no such consent, approval
or waiver shall have been revoked.
Section
7.03
Conditions
to Obligation of the Company
.
The obligation
of the Company to effect the Merger is further subject to the
satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a)
Representations and
Warranties
.
The representations and
warranties of Parent and Merger Sub in Article IV of this
Agreement (as modified by the Acquiror Disclosure Schedule)
shall be (i) true and correct in all material respects, in
the case of representations not qualified by materiality and
(ii) true and correct in all respects, in the case of
representations that are so qualified, on the date hereof and as
of the Effective Time as if made on and as of the Effective
Time, except that any such representations and warranties that
expressly relate to a specified date shall be true and correct
only as of such date. The Company shall have received a
certificate signed on behalf of Parent by an executive officer
of Parent to such effect.
(b)
Performance of Obligations of Parent and Merger
Sub
.
Parent and Merger Sub shall have
performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the
Closing Date, and the Company shall have received a certificate
signed on behalf of Parent by an executive officer of Parent to
such effect.
Section
7.04
Frustration
of Closing Conditions
.
None of the Company,
Parent or Merger Sub may rely on the failure of any condition
set forth in Section 7.01, 7.02 or 7.03, as the case may
be, to be satisfied if such failure was caused by such
partys failure to use its reasonable best efforts to
consummate the Merger and the other transactions contemplated by
this Agreement.
ARTICLE VIII
Termination,
Amendment and Waiver
Section
8.01
Termination
.
This
Agreement may be terminated at any time prior to the Effective
Time (the date of any such termination, the
Termination
Date
):
(a) by mutual written consent of Parent and Merger Sub on
the one hand and the Company on the other hand;
A-29
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated on or
before February 28, 2009;
provided
,
however
,
that the right to terminate this Agreement under this
Section 8.01(b)(i) shall not be available to any party
whose breach has been a proximate cause of or resulted in the
failure of the Merger to be consummated on or before such date;
(ii) if any Restraint having the effect set forth in
Section 7.01(c) shall be in effect and shall have become
final and nonappealable; or
(iii) if the Companys shareholders voting at the
Company Meeting (or any adjournment thereof) shall not have
adopted this Agreement in accordance with the DGCL;
(c) by Parent: (i) if at any time prior to the
adoption and approval of this Agreement by the Companys
shareholders, the Board of Directors (A) shall have made an
Adverse Recommendation Change or (B) shall have approved or
recommended any Company Proposal (it being understood that, for
the avoidance of doubt, for all purposes under this Agreement,
including this Article VIII, any disclosure by the Board of
Directors of the status of any Company Proposal (without comment
on the merits thereof) shall not be considered a withdrawal or
modification adverse to Parent of its Company Board
Recommendation or approval or recommendation of another Company
Proposal); or (ii) if the Company shall have breached or
failed to perform any of its representations, warranties,
covenants or agreements set forth in this Agreement, which
breach or failure to perform (A) would give rise to the
failure of a condition set forth in Section 7.02 and
(B) is not cured by the Company within 30 calendar days
following receipt of written notice of such breach or failure to
perform from Parent; or
(d) by the Company: (i) if, at any time prior to the
adoption of this Agreement by the Companys shareholders,
the Board of Directors (A) shall have made an Adverse
Recommendation Change or (B) determines to enter into an
Acquisition Agreement concerning a transaction that constitutes
a Superior Proposal;
provided
that the Company has not
willfully and materially breached its obligations under
Section 5.03;
provided
,
further
, that the
Company shall not be entitled to terminate this Agreement
pursuant to this Section 8.01(d)(i)(A) other than with
respect to a Company Proposal, until one Business Day following
receipt by Parent and Merger Sub of written notice thereof or,
otherwise pursuant to this Section 8.01(d)(i), until after
the third Business Day following receipt by Parent and Merger
Sub of written notice (a
Notice of Superior
Proposal
) from the Company advising Parent and Merger
Sub that the Board of Directors of the Company intends to take
such action and specifying the reasons therefor, including the
material terms and conditions of any Superior Proposal that is
the basis of the proposed action by the Board of Directors of
the Company (including a copy thereof with all accompanying
documentation and the identity of Person making such Superior
Proposal), during which three Business Day period, Parent and
Merger Sub shall have the right (in their sole discretion) to
offer the Company adjustments to the terms and conditions of
this Agreement that may permit the Board of Directors of the
Company to determine that, with such adjustments, the Merger is
at least as favorable to the shareholders as such Superior
Proposal, (ii) if Parent or Merger Sub shall have breached
or failed to perform any of its representations, warranties,
covenants or agreements set forth in this Agreement, which
breach or failure to perform (A) would give rise to the
failure of a condition set forth in Section 7.03 and
(B) is not cured by Parent or Merger Sub within 30 calendar
days following receipt of written notice of such breach or
failure to perform from the Company, (iii) if no event has
occurred and no condition exists that would cause any of the
conditions set forth in Sections 7.01 and 7.02 to fail to
be satisfied assuming the Closing were to occur on the date of
termination and, within five Business Days after the Company has
delivered written notice to Parent thereof, the Merger has not
been consummated or (iv) the Debt Commitment Letter is
terminated, the Lender denies the obligation to fund the Debt
Financing or the Lender is placed into receivership,
conservatorship, has its bank charter suspended or revoked or
otherwise becomes unable to or prohibited from funding the Debt
Financing and, within thirty days after the Company has
delivered written notice to Parent thereof, the Merger has not
been consummated.
A-30
Section
8.02
Effect
of Termination
.
(a) In the event of termination of this Agreement by either
the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Parent,
Merger Sub or the Company, other than the provisions of
Section 6.03 (and any other provision of this Agreement
related to the payment of expenses), this Section 8.02 and
Article IX, which provisions shall survive such termination.
(b) If this Agreement is terminated pursuant to
Section 8.01(b)(iii) or Section 8.01(c)(ii), then
(A) the Company shall reimburse Parent and Merger Sub for
their Expenses up to a maximum amount of $2,500,000, within two
Business Days of the Companys receipt of reasonable
documentation of such Expenses from Parent, and (B) with
respect to a termination pursuant to Section 8.01(b)(iii),
if at or prior to the date of the Company Meeting a Company
Proposal shall have been publicly announced and not publicly
withdrawn and within six months of the Termination Date the
Company enters into an Acquisition Agreement for a transaction
involving an aggregate consideration greater than the Merger
Consideration and the Debt Tender Consideration, which
transaction subsequently closes, then, upon the closing of such
transaction, the Company shall pay, or cause to be paid to
Parent and Merger Sub an amount equal to $2,500,000 (the
Termination Fee
), reduced by any amounts
previously paid to Parent and Merger Sub as Expenses pursuant to
clause (A). If this Agreement is terminated pursuant to
Section 8.01(c)(i) or Section 8.01(d)(i), then the
Company shall pay or cause to be paid to Parent and Merger Sub
an amount equal to the Termination Fee on the Termination Date
(in the case of a termination by the Company) or within two
Business Days of the Termination Date (in the case of a
termination by Parent or Merger Sub). Any payments to Parent and
Merger Sub under this Section 8.02(b) will be paid to an
account or accounts designated by Parent and will be made by
wire transfer of immediately available funds.
(c) If this Agreement is terminated pursuant to
Section 8.01(d)(ii), then Parent shall reimburse the
Company for its Expenses (which shall be deemed for purposes of
this Section 8.02(c) to include the amount of any fees or
expenses incurred by Parent or Merger Sub pursuant to
Section 6.09(d)) up to a maximum amount of $2,500,000
within two Business Days of Parents receipt of reasonable
documentation of such Expenses from the Company. If this
Agreement is terminated by the Company pursuant to
Section 8.01(d)(iii) or Section 8.01(d)(iv) then
Parent shall pay the Company, within three Business Days of such
termination, a fee of $2,500,000 (the
Reverse
Termination Fee
) by wire transfer of immediately
available funds to an account designated by the Company.
(d) If a party fails to promptly pay the amount due by it
pursuant to Section 8.02(b) or 8.02(c), as applicable,
interest shall accrue on such amount from the date such payment
was required to be paid pursuant to the terms of this Agreement
until the date of payment at the rate of 8% per annum. If, in
order to obtain such payment, the other party commences a suit
that results in judgment for such party for such amount, the
defaulting party shall pay the other party its reasonable costs
and expenses (including attorneys fees and expenses)
incurred in connection with such suit. For the avoidance of
doubt, in no event shall Parent or the Company be entitled to
receive more than one payment of the Termination Fee or Reverse
Termination Fee, as applicable.
(e) The parties acknowledge and agree that the agreements
contained in this Section 8.02 are an integral part of the
transactions contemplated by this Agreement, and that, without
these agreements, the parties would not enter into this
Agreement. Each of the parties hereto further acknowledges that
neither the payment of the amounts by the Company specified in
Section 8.02(b) nor the payment of the amounts by Parent
specified in Section 8.02(c) is a penalty, but in each case
is liquidated damages in a reasonable amount that will
compensate Parent and Merger Sub or the Company, as the case may
be, in the circumstances in which such fees are payable for the
efforts and resources expended and the opportunities foregone
while negotiating this Agreement and in reliance on this
Agreement and on the expectation of the consummation of the
transactions contemplated hereby, which amount would otherwise
be impossible to calculate with precision.
(f) Notwithstanding anything to the contrary in this
Agreement, the parties agree that the monetary remedies set
forth in this Section 8.02 and the specific performance
remedies set forth in Section 9.09 shall be the sole and
exclusive remedies of (A) the Company and its Subsidiaries
against Parent and Merger Sub and any of their respective
former, current or future general or limited partners,
stockholders, managers, employees, representatives, members,
directors, officers, Affiliates or agents for any loss suffered
as a result of the failure of the Merger to be consummated,
except in the case of fraud, and upon payment thereof, none of
Parent or
A-31
Merger Sub or any of their respective former, current or future
general or limited partners, stockholders, managers, employees,
representatives, members, directors, officers, Affiliates or
agents shall have any further liability or obligation relating
to or arising out of this Agreement or the transactions
contemplated hereby except in the case of fraud; and
(B) Parent and Merger Sub against the Company and its
Subsidiaries and any of their respective former, current or
future stockholders, managers, employees, representatives,
members, directors, officers, Affiliates or agents for any loss
suffered as a result of the failure of the Merger to be
consummated, except in the case of fraud, and upon payment
thereof, none of the Company and its Subsidiaries or any of
their respective former, current or future stockholders,
managers, employees, representatives, members, directors,
officers, Affiliates or agents shall have any further liability
or obligation relating to or arising out of this Agreement or
the transactions contemplated hereby except in the case of fraud.
Section
8.03
Amendment
.
At
any time prior to the Effective Time, this Agreement may be
amended by the parties hereto;
provided
,
however
,
that there shall be made no amendment that by Law requires
further approval by the Company Shareholders or the approval of
the shareholders of Parent without such approval having been
obtained. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto.
Section
8.04
Extension;
Waiver
.
At any time prior to the Effective
Time, the parties may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the
agreements of any other party or conditions to its obligations
contained herein. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The
failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
ARTICLE IX
General
Provisions
Section
9.01
Nonsurvival
of Representations and Warranties
.
None of
the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive
the Effective Time. This Section 9.01 shall not limit any
covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
Section
9.02
Notices
.
Except
for notices that are specifically required by the terms of this
Agreement to be delivered orally, all notices, requests, claims,
demands and other communications hereunder shall be in writing
and shall be deemed given if delivered personally, facsimiled
(which is confirmed) or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or
at such other address for a party as shall be specified by like
notice):
if to Parent or Merger Sub, to:
KPLT Holdings, Inc.
c/o Kohlberg &
Company LLC
111 Radio Circle
Mt. Kisco, NY 10549
Facsimile No.:
914-241-7476
|
|
|
|
Attention:
|
Gordon Woodward
|
Seth Hollander
with a copy to:
Ropes & Gray LLP
1 International Place
Boston, MA 02110
Facsimile No.:
617-951-7050
Attention: William M. Shields, Esq.
A-32
if to the Company, to:
Centerplate, Inc.
2187 Atlantic Street, 6th Floor
Stamford, CT 06902
Facsimile No.:
203-975-5949
Attention: General Counsel
with copies to:
Cahill Gordon & Reindel
llp
80 Pine Street
New York, NY 10005
Facsimile No.:
212-269-5420
Attention: Kenneth W. Orce, Esq.
Section
9.03
Definitions
.
For
purposes of this Agreement:
(a)
Action
means any claim,
action, cause of action or suit (whether in contract or tort or
otherwise), litigation (whether at law or in equity, whether
civil or criminal), arbitration, hearing or proceeding from, by
or before any Governmental Authority.
(b)
Affiliate
of any person means
another person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, such first person.
(c)
Business Day
means any day,
other than a Saturday, Sunday or a day on which the banks or
national securities exchanges located in New York, New York
shall be authorized or required by Law to close.
(d)
Capital Stock
means:
(i) in the case of a corporation, corporate stock,
including corporate stock represented by IDSs and corporate
stock outstanding upon the separation of IDSs into the
securities represented thereby; and (ii) in the case of a
partnership or limited liability company, partnership or
membership interests (whether general or limited).
(e)
Copyrights
means all rights
in a work of authorship and all copyrights (including all
registrations and applications to register the same).
(f)
ERISA Affiliate
means any
trade or business (whether or not incorporated) that is under
common control with the Company and is treated as a single
employer with the Company within the meaning of Section 414
of the Code or Section 4001 of ERISA.
(g)
IDSs
means income deposit
securities issued by the Company representing (i) one
(1) share of Company Common Share and (ii) a Note.
(h)
Intellectual Property
means
all Trademarks, Patents, Copyrights, service marks, service mark
rights, computer programs, moral rights and the benefits of any
waivers of moral rights and any other proprietary intellectual
property rights.
(i)
Knowledge
of (i) any
person that is an individual means such individuals actual
knowledge and (ii) any person that is not an individual
means, with respect to any matter in question, the knowledge of
such persons Chief Executive Officer, Chief Financial
Officer and other officers having primary responsibility for
such matter.
(j)
Multiemployer Plan
means any
employee benefit plan of the type described in
Section 4001(a)(3) of ERISA and subject to Title IV of
ERISA to which the Company or any ERISA Affiliate makes or is
obligated to make contributions, or in the past six
(6) years has made or been obligated to make contributions
or has or may have liabilities.
(k)
Note
means the $5.70
principal amount of Subordinated Notes represented by each IDS.
A-33
(l)
Patents
means all patents,
patent rights and patent applications, including divisions,
continuations,
continuations-in-part,
reissues, re-examinations, and all extensions thereof.
(m)
Person
or
person
means an individual,
corporation, partnership, limited liability company, joint
venture, association, trust, unincorporated organization or
other entity.
(n)
Separation Fees
means any
costs, fees and expenses imposed by the Exchange Agent,
Depositary Trust Company, brokers or other financial
intermediaries in connection with the exchange of Company Common
Shares for the Merger Consideration (including to separate one
or more IDSs into its individual underlying components) in
connection with the Merger and the transactions contemplated
hereby.
(o)
Subsidiary
of any person
means another person, an amount of the voting securities, other
voting rights or voting partnership interests of which is
sufficient to elect at least a majority of its board of
directors or other governing body or is otherwise sufficient to
constitute a majority of the voting power of such board of
directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of which)
is owned directly or indirectly by such first person.
(p)
Subordinated Notes
means the
Companys 13.5% Subordinated Notes due 2013.
(q)
Tax
or
Taxes
means (i) any and all
federal, state, local and foreign income, gross receipts,
payroll, employment, excise, stamp, customs duties, capital
stock, franchise, profits, withholding, payroll, social security
(or similar), employment, unemployment, workers
compensation, escheat obligation, excise, net worth, real
property, personal property, sales, use, transfer, ad valorem,
occupation, value added, alternative or add-on minimum,
estimated or any other taxes, charges, duties, impositions or
assessments imposed by any Governmental Authority, together with
interest, penalties and additions thereto, including any
liability for taxes of another Person or a predecessor entity,
as a transferee or otherwise, and (ii) any obligations
under any agreements or arrangements with respect to any Taxes
described in clause (i) above.
(r)
Tax Returns
means all
original and amended returns, declarations, reports, forms, tax
shelter disclosure statements, estimates, information returns,
refund and other claims, and other documents or statements
relating to Taxes filed or required to be filed with any
Governmental Authority with respect to the Company or its
Subsidiaries (and any supplements, attachments and supporting
documentation thereto).
(s)
Third Party
means any Person
as defined in this Agreement or in Section 13(d) of the
Exchange Act, other than Parent or any of its Affiliates.
(t)
Trademarks
means all
trademarks, trademark rights, trade names, trade name rights,
brands, logos, trade dress, business names and Internet domain
names, together with the goodwill associated with any of the
foregoing, and all registrations and applications for
registration of the foregoing.
A-34
(u) Each of the following terms is defined in the Section
set forth opposite such term:
|
|
|
Term
|
|
Section
|
|
Acquiror Disclosure Schedule
|
|
Article IV
|
Acquisition Agreement
|
|
5.03(b)
|
Adverse Recommendation Change
|
|
5.03(b)
|
Agreement
|
|
Preamble
|
Audited Balance Sheet Date
|
|
3.07(c)
|
Book-Entry Shares
|
|
2.02(a)
|
Canadian Securities Commissions
|
|
3.07(a)
|
Certificate
|
|
2.02(a)
|
Certificate of Merger
|
|
1.03
|
Closing
|
|
1.02
|
Closing Date
|
|
1.02
|
Code
|
|
2.02(g)
|
Collective Bargaining Agreement
|
|
3.13(a)
|
Commitment Letter
|
|
4.05
|
Company
|
|
Preamble
|
Company Board Recommendation
|
|
3.04(a)
|
Company Common Share
|
|
2.01(b)
|
Company Common Stock
|
|
2.01(b)
|
Company Contracts
|
|
3.10(a)
|
Company Disclosure Schedule
|
|
Article III
|
Company Material Adverse Effect
|
|
3.01(b)
|
Company Meeting
|
|
5.02(b)
|
Company Preferred Stock
|
|
3.03(a)
|
Company Proposal
|
|
5.03(a)
|
Company Representatives
|
|
6.06(a)
|
Company SEC Documents
|
|
3.07(a)
|
Confidentiality Agreement
|
|
9.06
|
Consent Solicitation
|
|
6.09(a)
|
Contract
|
|
3.10(a)
|
CSC
|
|
3.07(a)
|
Debt Commitment Letter
|
|
4.05
|
Debt Financing
|
|
4.05
|
Debt Tender Consideration
|
|
6.09(a)
|
Debt Tender Offer
|
|
6.09(a)
|
DGCL
|
|
1.01
|
Disclosed Conditions
|
|
4.05
|
Dissent Shares
|
|
2.01(d)
|
Dissenters Rights Statute
|
|
2.01(d)
|
Effective Time
|
|
1.03
|
Employee Benefit Plans
|
|
3.12(a)
|
Employees
|
|
5.04(a)
|
Environment
|
|
3.15
|
Environmental Law
|
|
3.15
|
A-35
|
|
|
Term
|
|
Section
|
|
Equity Commitment Letter
|
|
4.05
|
ERISA
|
|
3.12(a)
|
Exchange Act
|
|
3.07(a)
|
Exchange Agent
|
|
2.02(a)
|
Expenses
|
|
6.03
|
Financing
|
|
4.05
|
GAAP
|
|
3.07(b)
|
Governmental Authority
|
|
3.06(a)
|
Hazardous Materials
|
|
3.15
|
Indemnitees
|
|
6.02(a)
|
Indenture
|
|
6.09(a)
|
Laws
|
|
3.11
|
Lender
|
|
4.05
|
Liabilities
|
|
3.07(c)
|
Liens
|
|
3.02
|
Merger
|
|
Preamble
|
Merger Consideration
|
|
2.01(c)
|
Merger Sub
|
|
Preamble
|
New Plans
|
|
5.04(c)
|
Notice of Superior Proposal
|
|
8.01(d)
|
Offer Documents
|
|
6.09(b)
|
Old Plans
|
|
5.04(c)
|
Parent
|
|
Preamble
|
Parent Representatives
|
|
6.06(a)
|
Permits
|
|
3.11
|
Proxy Statement
|
|
5.02(a)
|
Release
|
|
3.15
|
Requisite Consents
|
|
6.09(a)
|
Restraints
|
|
7.01(b)
|
SEC
|
|
3.07(a)
|
Securities Act
|
|
3.07(a)
|
Shareholder Approval
|
|
3.04(a)
|
Significant Customer
|
|
3.10(a)(i)
|
Significant Supplier
|
|
3.10(a)(viii)
|
Sponsor
|
|
4.05
|
Superior Proposal
|
|
5.03(e)
|
Surviving Corporation
|
|
1.01
|
Termination Date
|
|
8.01
|
Section
9.04
Interpretation
.
(a) When a reference is made in this Agreement to an
Article, a Section, Exhibit or Schedule, such reference shall be
to an Article of, a Section of, or an Exhibit or Schedule to,
this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words
include, includes or
including are used in this Agreement, they shall be
deemed to be followed by the words
A-36
without limitation. The words hereof,
herein and hereunder and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement shall have the
defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument
that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver
or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments
thereto and instruments incorporated therein. References to a
person are also to its permitted successors and assigns.
(b) The inclusion of any information in the Company
Disclosure Schedule shall not be deemed to be an admission or
acknowledgment, in and of itself, that such information is
required by the terms of this Agreement to be disclosed, is
material, has resulted in or would result in a Company Material
Adverse Effect or is outside the ordinary course of business.
Nor shall the inclusion of any information in the Company
Disclosure Schedule constitute an admission of fault,
culpability or liability with respect to any claim, action,
lawsuit or proceeding or an admission that any breach,
violation, default or event of default exists with respect to
any contract or agreement. All capitalized terms shall have the
meanings set forth in this Agreement, unless the context
otherwise requires. Any descriptions of agreements therein are
summaries only and are qualified in their entirety by the
specific terms of such agreements, copies of which have been
made available to Parent. The table of contents and all headings
contained in the Company Disclosure Schedule are inserted for
convenience only and shall not be considered in interpreting or
construing any of the provisions contained in either this
Agreement or the Company Disclosure Schedule. Certain
information in the Company Disclosure Schedule may not be
required to be disclosed pursuant to this Agreement. Any such
information is included solely for informational purposes, and
nothing in the Company Disclosure Schedule is intended to
broaden the scope of any representation, warranty or covenant of
the Company contained in this Agreement. It is expressly
understood and acknowledged that any exceptions set forth
therein shall not constitute a basis for a claim of a breach of
any of the representations and warranties or covenants made in
this Agreement. The provision of monetary or other quantitative
thresholds for disclosure does not and shall not be deemed to
create or imply a standard of materiality thereunder.
(c) The specification of any dollar amount in the
representations and warranties or otherwise in this Agreement or
in the Company Disclosure Schedule is not intended and shall not
be deemed to be an admission or acknowledgment of the
materiality of such amounts or items, nor shall the same be used
in any dispute or controversy between the parties to determine
whether any obligation, item or matter (whether or not described
herein or included in any schedule) is or is not material for
purposes of this Agreement.
(d) The parties hereto agree that this Agreement is the
product of negotiations between sophisticated parties and
individuals, all of whom were represented by counsel, and each
of whom had an opportunity to participate in and did participate
in, the drafting of each provision hereof. Accordingly,
ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather
shall be given a fair and reasonable construction without regard
to the rule of contra proferentem.
Section
9.05
Counterparts
.
This
Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall
become effective when one or more counterparts have been signed
by each of the parties and delivered to the other parties.
Section
9.06
Entire
Agreement; No Third-Party Beneficiaries
.
This
Agreement, including the Company Disclosure Schedule, and the
confidentiality agreement, dated as of May 15, 2008,
between Kohlberg Management VI, LLC and the Company (the
Confidentiality Agreement
),
(a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this
Agreement and the Merger and (b) except for the provisions
of Article II and Section 6.02 (which from and after
the Effective Time are intended for the benefit of, and shall be
enforceable by, the Persons referred to therein and by their
respective heirs and representatives), are not intended to
confer
A-37
upon any person other than the parties any rights or remedies.
The parties hereto further agree that the rights of the third
party beneficiaries under Section 6.02 shall not arise
unless and until the Effective Time occurs. The representations
and warranties in this Agreement are the product of negotiations
among the parties hereto and are for the sole benefit of the
parties hereto. Any inaccuracies in such representations and
warranties are subject to waiver by the parties hereto in
accordance with Section 8.05 without notice or liability to
any other Person. In some instances, the representations and
warranties in this Agreement may represent an allocation among
the parties hereto of risks associated with particular matters
regardless of the knowledge of any of the parties hereto.
Consequently, Persons other than the parties hereto may not rely
upon the representations and warranties in this Agreement as
characterizations of actual facts or circumstances as of the
date of this Agreement or as of any other date.
Section 9.07
Governing
Law; Consent to Jurisdiction
.
(a) This Agreement is made pursuant to, and shall be
construed, governed by and enforced in accordance with, the Laws
of State of Delaware (and the United States federal Law, to the
extent applicable), irrespective of the principal place of
business, residence or domicile of the parties hereto, and
without giving effect to otherwise applicable principles of
conflicts of Laws thereof.
(b) Each of the parties hereto (i) consents to submit
itself to the exclusive jurisdiction of the state courts of
Delaware, the United States District Court for Delaware and the
Court of Chancery of the State of Delaware in and for New Castle
County, Delaware (or if the Court of Chancery of the State of
Delaware or the Delaware Supreme Court determines that,
notwithstanding Section 111 of the DGCL, the Court of
Chancery does not have or should not exercise subject matter
jurisdiction over such matter, the Superior Court of the State
of Delaware), (ii) agrees that it will not attempt to deny
or defeat such personal jurisdiction by motion or other request
for leave from any such court and (iii) agrees that it will
not bring any action relating to this Agreement or the
transactions contemplated by this Agreement in any other court.
(c) Each party acknowledges and agrees that any controversy
which may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore each such party
hereby irrevocably and unconditionally waives any right such
party may have to a trial by jury in respect of any litigation
directly or indirectly arising out of or relating to this
Agreement or the transactions contemplated by this Agreement.
Each party certifies and acknowledges that (i) no
representative, agent or attorney of any other party has
represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce the foregoing
waiver; (ii) such party understands and has considered the
implications of the foregoing waiver; (iii) such party
makes the foregoing waiver voluntarily; and (iv) such party
has been induced to enter into this Agreement by, among other
things, the mutual waiver and certifications in this
Section 9.07.
Section
9.08
Assignment
.
Neither
this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned prior to the Closing, in whole or in
part, by operation of Law or otherwise by any of the parties
without the prior written consent of the other parties, except
that Merger Sub may assign any of or all its rights, interests
and obligations under this Agreement to Parent or to any direct,
wholly owned Subsidiary of Parent incorporated in Delaware if
such assignment would not cause a delay in the consummation of
the Merger or have an adverse effect on the ability of Parent or
Merger Sub (or such designee) to consummate the Merger, but no
such assignment shall relieve Merger Sub of any of its
obligations hereunder. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and
assigns.
Section
9.09
Specific
Enforcement
.
The parties agree that
irreparable damage would be incurred by Parent and Merger Sub,
and that Parent and Merger Sub would not have any adequate
remedy at Law, in the event that the Company failed to perform
its agreements and covenants hereunder in accordance with their
specific terms. It is accordingly agreed that Parent and Merger
Sub shall be entitled to an injunction or injunctions to prevent
breaches or threatened breaches of this Agreement by the Company
and to enforce specifically the terms and provisions of this
Agreement in the United States District Court for Delaware or in
any state court in the State of Delaware, this being in addition
to any other remedy to which Parent and Merger Sub are entitled
at Law or in equity. Each party further agrees that neither
Parent nor Merger Sub nor any other Person shall be required to
obtain, furnish or post any bond or similar instrument in
connection with
A-38
or as a condition to obtaining any remedy referred to in this
Section 9.09, and the Company irrevocably waives any right
it may have to require the obtaining, furnishing or posting of
any such bond or similar instrument. Notwithstanding anything
else in this Agreement or otherwise, the Company shall not be
entitled to an injunction or injunctions to prevent breaches of
this Agreement by Parent or Merger Sub or to enforce
specifically the terms and provisions of this Agreement or to
obtain other equitable remedies.
Section
9.10
Severability
.
If
any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of Law or
public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect.
Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable Law in an
acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
Section
9.11
Joint
Liability
.
Each representation, warranty,
covenant and agreement made by Parent or Merger Sub in this
Agreement shall be deemed a representation, warranty, covenant
and agreement made by Parent and Merger Sub jointly and all
liability and obligations relating thereto shall be deemed a
joint liability and obligation of Parent and Merger Sub.
[Remainder
of Page Intentionally Left Blank]
A-39
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have
caused this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first written
above.
KPLT HOLDINGS, INC.
|
|
|
|
By:
|
/s/ Seth
H. Hollander
|
Name: Seth H. Hollander
|
|
|
|
Title:
|
Secretary and Treasurer
|
KPLT MERGERCO, INC.
|
|
|
|
By:
|
/s/ Seth
H. Hollander
|
Name: Seth H. Hollander
|
|
|
|
Title:
|
Secretary and Treasurer
|
CENTERPLATE, INC.
|
|
|
|
By:
|
/s/ Janet
L. Steinmayer
|
Name: Janet L. Steinmayer
|
|
|
|
Title:
|
President and Chief Executive Officer
|
A-40
EXHIBIT A
FORM OF AMENDMENT TO INDENTURE
FORM OF FIRST SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this
Supplemental
Indenture
), dated as of September
2008, among Centerplate, Inc. (the
Company
),
a Delaware corporation formerly known as Volume Services America
Holdings, Inc., the subsidiaries of the Company listed on the
signature pages hereto (the
Guarantors
) and
The Bank of New York, a New York banking corporation, as trustee
(the
Trustee
).
RECITALS
WHEREAS, the Company, the Guarantors and the Trustee are parties
to an Indenture dated December 10, 2003 (as amended,
supplemented, waived or otherwise modified, the
Indenture
) providing for the issuance of an
aggregate original principal amount of $95,677,065 of
13.5% Subordinated Notes due 2013 (the
Notes
);
WHEREAS, the Company and the Guarantors propose to amend the
Indenture and the Notes (the
Proposed
Amendments
) as contemplated hereby;
WHEREAS, the Company has obtained the consent of the Holders of
the Notes pursuant to the
[ ]
dated ,
as amended, supplemented or modified (the
Consent
Solicitation Statement
) to the Proposed Amendments
upon the terms and subject to the conditions set forth therein;
WHEREAS, the Company has received and delivered to the Trustee
the consent of the Holders of at least a majority in aggregate
principal amount of the Notes to the Proposed Amendments;
WHEREAS, all other acts and proceedings required by law, by the
Indenture, and by the organizational documents of the Company
and the Guarantors to make this Supplemental Indenture a valid
and binding agreement for the purposes expressed herein, in
accordance with its terms, have been duly done and performed;
WHEREAS, while this Supplemental Indenture will become effective
when executed, the terms hereof will not become operative until
the Notes are accepted for purchase by the Company pursuant to
the tender offer contemplated by the Consent Solicitation
Statement (such acceptance date, the
Operative
Date
); and
WHEREAS, pursuant to Section 9.02 of the Indenture, the
Company and the Guarantors may amend or supplement the Indenture
and the Notes as contemplated hereby provided that the Holders
of at least a majority in aggregate principal amount of the
Notes then outstanding have consented.
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby
acknowledged, in order to effect the Proposed Amendments
pursuant to Section 9.02 of the Indenture, the Company and
the Guarantors agree with the Trustee as follows:
ARTICLE 1
Amendment
of Indenture and Notes
1.01. Effective as of the Operative Date, pursuant to
Section 9.02 of the Indenture, this Supplemental Indenture
amends the Indenture and Notes as provided for herein.
1.02.
Amendment of
Section 1.01.
Section 1.01 of the
Indenture is hereby amended by deleting in their entirety the
definitions listed in Schedule 1.01 hereto;
1.03.
Amendment of
Section 1.02.
Section 1.02 of the
Indenture is hereby amended by deleting in their entirety the
references listed in Schedule 1.02 hereto;
A-41
1.04.
Amendment of
Section 2.15.
Section 2.15 of the
Indenture is hereby amended and restated as follows:
Section
2.15.
Extension
of Maturity
.
The Company may irrevocably
extend the maturity date of the Securities for two additional
successive five-year terms to December 10, 2018 and
December 10, 2023, respectively, if the following
conditions are satisfied as of the date the Company delivers to
the Trustee the Officers Certificate described below:
(1) during the twelve month period ending on the last day
of the fiscal quarter ending at least 45 days prior to the
date such Officers Certificate is furnished to the
Trustee, the ratio of Net Debt to Adjusted EBITDA is less than
5.00 to 1.00;
(2) no Event of Default (including certain events of
bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary) has occurred and is continuing with
respect to the Securities;
(3) no Event of Default has occurred and is continuing with
respect to any other Indebtedness of the Company, or could occur
as a result of such extension, including under any Designated
Senior Indebtedness; and
(4) there is no interest due but unpaid on the Securities
or any other Indebtedness of the Company, other than trade
payables in an immaterial amount.
If the Company determines to extend the maturity of the
Securities, the Company, or the Trustee at the Companys
direction, shall mail a notice of such extension, which notice
shall include the new maturity date, by first-class mail to each
Holder at such Holders registered address, at least 30 and
not more than 200 days prior to the previous maturity date;
provided that in each such case, the Company shall deliver to
the Trustee, at least 10 and not more than 15 days prior to
the proposed date for giving such notice, an Officers
Certificate requesting that the Trustee give such notice (or
informing the Trustee that the Company is giving such notice, as
applicable) and setting forth the information required above.
The extension of the maturity date of the Securities shall
become effective automatically upon delivery of such
Officers Certificate to the Trustee and, once effective,
may not be revoked.
1.05.
Amendment of
Section 4.02.
Section 4.02 is hereby
amended and restated as follows:
SECTION 4.02. [INTENTIONALLY OMITTED]
1.06.
Amendment of
Section 4.03.
Section 4.03 is hereby
amended and restated as follows:
SECTION 4.03. [INTENTIONALLY OMITTED]
1.07.
Amendment of
Section 4.04.
Section 4.04 is hereby
amended and restated as follows:
SECTION 4.04. [INTENTIONALLY OMITTED]
1.08.
Amendment of
Section 4.05.
Section 4.05 is hereby
amended and restated as follows:
SECTION 4.05. [INTENTIONALLY OMITTED]
1.09.
Amendment of
Section 4.06.
Section 4.06 is hereby
amended and restated as follows:
SECTION 4.06. [INTENTIONALLY OMITTED]
1.10.
Amendment of
Section 4.07.
Section 4.07 is hereby
amended and restated as follows:
SECTION 4.07. [INTENTIONALLY OMITTED]
1.11.
Amendment of
Section 4.08.
Section 4.08 is hereby
amended and restated as follows:
SECTION 4.08. [INTENTIONALLY OMITTED]
1.12.
Amendment of
Section 4.09.
Section 4.09 is hereby
amended and restated as follows:
SECTION 4.09. [INTENTIONALLY OMITTED]
A-42
1.13.
Amendment of
Section 4.10.
Section 4.10 is hereby
amended and restated as follows:
SECTION 4.10. [INTENTIONALLY OMITTED]
1.14.
Amendment of
Section 4.11.
Section 4.11 is hereby
amended and restated as follows:
SECTION 4.11. [INTENTIONALLY OMITTED]
1.15.
Amendment of
Section 4.12.
Section 4.12 is hereby
amended and restated as follows:
SECTION 4.12. [INTENTIONALLY OMITTED]
1.16.
Amendment of
Section 4.13.
Section 4.13 is hereby
amended and restated as follows:
SECTION 4.13. [INTENTIONALLY OMITTED]
1.17.
Amendment of
Section 4.14.
Section 4.14 is hereby
amended and restated as follows:
SECTION 4.14. [INTENTIONALLY OMITTED]
1.18.
Amendment of
Section 4.15.
Section 4.15 is hereby
amended and restated as follows:
SECTION 4.15. [INTENTIONALLY OMITTED]
1.19.
Amendment of
Section 5.01.
Section 5.01 is hereby
amended and restated as follows:
SECTION 5.01. [INTENTIONALLY OMITTED]
1.20.
Amendment of
Section 6.01.
Section 6.01 is hereby
amended by replacing the text in clauses (3), (4), (6),
(9) and (10), in each case, with the text
[INTENTIONALLY OMITTED].
1.21.
Amendment of
Section 8.02.
Section 8.02 is hereby
amended and restated as follows:
Section
8.02.
Conditions
to Defeasance
.
The Company may exercise its
legal defeasance option or its covenant defeasance option only
if:
(1) the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations for the
payment of principal, premium (if any) and interest on the
Securities to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from
a nationally recognized firm of independent accountants
expressing their opinion that the payments of principal and
interest when due and without reinvestment on the deposited
U.S. Government Obligations plus any deposited money
without investment will provide cash at such times and in such
amounts as will be sufficient to pay principal and interest when
due on all the Securities to maturity or redemption, as the case
may be; and
(3) the Company delivers to the Trustee an Officers
Certificate and an Opinion of Counsel (which Opinion of Counsel
may be subject to customary assumptions and exclusions), each
stating that all conditions precedent to the defeasance and
discharge of the Securities as contemplated by this
Article 8 have been complied with.
1.22.
Amendment of Notes.
(a) The final paragraph of Section 1 of the Notes is
hereby amended and restated as follows:
As provided in Section 2.15 of the Indenture, the Company
may irrevocably extend the maturity date of any Securities for
two additional successive five-year terms, to December 10,
2018 and December 10, 2023, respectively, if the following
conditions are satisfied as of the date the Company delivers the
Officers Certificate required by such Section 2.15:
(1) during the twelve month period ending on the last day
of the fiscal quarter ending at least 45 days prior to the
date such Officers Certificate is furnished to the
Trustee, the ratio of Net Debt to Adjusted EBITDA is less than
5.00 to 1.00;
A-43
(2) no Event of Default (including certain events of
bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary) has occurred and is continuing with
respect to the Securities;
(3) no Event of Default has occurred and is continuing with
respect to any other Indebtedness of the Company, or could occur
as a result of such extension, including under any Designated
Senior Indebtedness; and
(4) there is no interest due but unpaid on the Securities
or any other Indebtedness of the Company, other than trade
payables in an immaterial amount.
(b) The final two sentences in the second paragraph of
Section 4 of the Notes are hereby deleted.
(c) Section 8 of the Notes is hereby amended and
restated as follows:
8. [INTENTIONALLY OMITTED]
(d) the first paragraph of Section 15 of the Notes is
hereby deleted.
ARTICLE 2
The
Trustee
2.01.
Privileges and Immunities of
Trustee.
The Trustee accepts the amendment of the
Indenture and the Notes effected by this Supplemental Indenture
but only upon the terms and conditions set forth in the
Indenture, including the terms and provisions defining and
limiting the liabilities and responsibilities of the Trustee,
which terms and provisions shall in like manner define and limit
its liabilities and responsibilities in the performance of the
trust created by the Indenture as hereby amended. The Trustee
shall not be responsible for the adequacy or sufficiency of this
Supplemental Indenture, for the due execution thereof by the
Company and the Guarantors or for the recitals contained herein,
which are the Companys and the Guarantors
responsibilities.
ARTICLE 3
Miscellaneous
Provisions
3.01.
Defined Terms.
As used in
this Supplemental Indenture, terms defined in the Indenture or
in the preamble or recital hereto are used herein as therein
defined. The words herein, hereof and
hereby and other words of similar import used in
this Supplemental Indenture refer to this Supplemental Indenture
as a whole and not to any particular section hereof.
3.02.
Governing Law.
THIS
SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THE TRUSTEE,
THE COMPANY, EACH SUBSIDIARY GUARANTOR, ANY OTHER OBLIGOR IN
RESPECT OF THE NOTES AND (BY THEIR ACCEPTANCE OF THE NOTES)
THE HOLDERS, AGREE TO SUBMIT TO THE JURISDICTION OF ANY UNITED
STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF
MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE OR THE
NOTES.
3.03.
Ratification of Indenture; Supplemental
Indentures Part of Indenture.
Except as expressly
amended hereby, the Indenture is in all respects ratified and
confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental
Indenture will take effect immediately upon execution by the
parties hereto, however, the terms hereof will not become
operative until the Operative Date. On the Operative Date this
Supplemental Indenture shall form a part of the Indenture for
all purposes, and every Holder of Notes heretofore or hereafter
authenticated and delivered shall be bound hereby. The Trustee
makes no representation or warranty as to the validity or
sufficiency of this Supplemental Indenture.
A-44
3.04.
Counterparts.
The parties
hereto may sign one or more copies of this Supplemental
Indenture in counterparts, all of which together shall
constitute one and the same agreement.
3.05.
Headings.
The section
headings herein are for convenience of reference only and shall
not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[The
remainder of this page is intentionally blank.]
A-45
ANNEX B
Evercore
Group L.L.C.
September 18,
2008
The Board of Directors of
Centerplate, Inc.
2187 Atlantic Street, 6th Floor
Stamford, Connecticut 06902
Members of the Board of Directors:
We understand that Centerplate, Inc., a Delaware corporation
(the Company), proposes to enter into an Agreement
and Plan of Merger, dated as of the date hereof (the
Agreement), with KPLT MergerCo, Inc.
(MergerCo), a wholly owned subsidiary of KPLT
Holdings, Inc. (Parent), an affiliate of
Kohlberg & Company LLC (Kohlberg &
Co.). Pursuant to the Agreement, Parent will agree
(i) to acquire the Company through a merger of MergerCo
with and into the Company (the
Merger
) and
(ii) to make a tender offer (the
Tender
Offer
and, together with the Merger, the
Transaction
) to acquire up to 70% of the
13.5% subordinated notes of the Company (the
Notes
) for $3.99 per Note (the
Offer
Consideration
). All of the outstanding equity of the
Company is held in the form of income deposit securities
(
IDSs
), each consisting of $5.70 face amount
of the Notes and one share of common stock, par value $0.01 per
share, of the Company (the
Company Common
Stock
). As a result of the Merger, each share of
Company Common Stock, other than shares owned by Parent,
MergerCo or the Company and Dissent Shares (as defined in the
Merger Agreement), will be converted into the right to receive
$0.01 per share in cash, without interest (the
Merger
Consideration
). Accordingly, assuming that all of the
Notes are tendered in the Tender Offer, the result of the
Transaction would be that immediately following the closing,
each holder of 100 IDSs will hold in respect of such IDSs
$280.30 plus 30 Notes (the aggregate of the amount of cash
received in the Transaction and the remaining Notes outstanding
is hereinafter referred to as the
Aggregate
Consideration
). The terms and conditions of the
Transaction are more fully set forth in the Agreement and terms
used herein and not defined shall have the meanings ascribed
thereto in the Agreement.
The Board of Directors has asked us whether, in our opinion, the
Aggregate Consideration is within the range of net enterprise
values (defined as enterprise values minus the amount of the
Companys indebtedness under its term loan and revolving
credit facility and plus the amount by which the Companys
cash balance exceeds $23.3 million, with the amounts of
such indebtedness and cash balance as estimated by the Company
as of September 30, 2008,
Net Enterprise
Values
) that we estimate for the Company.
In connection with rendering our opinion, we have, among other
things:
(i) reviewed certain publicly available business and
financial information relating to the Company that we deemed to
be relevant;
(ii) reviewed certain non-public historical financial
statements and other historical non-public financial data
relating to the Company prepared and furnished to us by
management of the Company;
(iii) reviewed certain non-public projected financial data
relating to the Company prepared and furnished to us by
management of the Company (the
Management
Projections
);
(iv) reviewed certain non-public historical and projected
operating data relating to the Company prepared and furnished to
us by management of the Company;
(v) discussed the past and current operations, financial
projections and current financial condition of the Company with
management of the Company (including their views on the risks
and uncertainties of achieving such projections);
|
|
|
|
|
Evercore
Group L.L.C.
|
55 East 52nd Street
|
New York, NY 10055
|
Tel: 212.857.3100
|
Fax: 212.857.3101
|
B-1
The Board of Directors of Centerplate, Inc.
September 18, 2008
Page 1 of 4
(vi) reviewed the sale process with UBS Securities LLC
(
UBS
), financial advisor to the Company; and
reviewed certain presentations to the Board of Directors of the
Company by UBS;
(vii) reviewed the reported prices and the historical
trading activity of the
IDSs
;
(viii) reviewed a draft of the Agreement dated
September 17, 2008, which we assume is in substantially
final form and from which we assume the final form will not vary
in any respect material for our analysis; and
(ix) performed such other analyses and examinations and
considered such other factors that we deemed appropriate.
For purposes of our analysis and opinion, we have assumed and
relied upon, without undertaking any independent verification
of, the accuracy and completeness of all of the information
publicly available, and all of the information supplied or
otherwise made available to, discussed with, or reviewed by us,
and we assume no liability therefor. With respect to the
Management Projections, we have assumed that they have been
reasonably prepared on bases reflecting the best currently
available estimates and good faith judgments of management of
the Company as to the future matters covered by the Management
Projections. We also prepared a sensitivity case to the
Management Projections in which we utilized different
assumptions relating to cost savings (including related
restructuring charges) and improvements in working capital
management. Management confirmed that these sensitivity
assumptions represented a reasonable set of assumptions for a
sensitivity case.
For purposes of rendering our opinion, we have assumed, in all
respects material to our analysis, that the representations and
warranties of each party contained in the Agreement are true and
correct, that each party will perform all of the covenants and
agreements required to be performed by it under the Agreement
and that all conditions to the consummation of the Transaction
will be satisfied without material waiver or modification
thereof. We have further assumed that all governmental,
regulatory or other consents, approvals or releases necessary
for the consummation of the Transaction will be obtained without
any material delay, limitation, restriction or condition that
would have an adverse effect on the Company or the consummation
of the Transaction or materially reduce the benefits of the
Transaction to the holders of the IDSs.
We have not made nor assumed any responsibility for making any
independent valuation or appraisal of the assets or liabilities
of the Company, nor have we been furnished with any such
appraisals, nor have we evaluated the solvency or fair value of
the Company under any state or federal laws relating to
bankruptcy, insolvency or similar matters. We have not
evaluated, and express no opinion as to, the recovery that might
be available to the holders of any securities of the Company in
a bankruptcy proceeding or other restructuring, relative to the
Offer Consideration, the Merger Consideration or otherwise. Our
opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available
to us as of, the date hereof. It is understood that subsequent
developments may affect this opinion and that we do not have any
obligation to update, revise or reaffirm this opinion.
We have not been asked to pass upon, and express no opinion with
respect to, any matter other than whether the Aggregate
Consideration is within the range of Net Enterprise Values that
we estimate for the Company. We do not express any view on, and
our opinion does not address, (i) the relationship between
the Aggregate Consideration and any other consideration received
in connection with the Transaction by the creditors or other
constituencies of the Company, (ii) the allocation of
consideration between the Merger Consideration and the Offer
Consideration, or (iii) the fairness of the amount or
nature of any compensation to be paid or payable to any of the
officers, directors or employees of the Company, or any class of
such persons, whether relative to the Merger Consideration, the
Offer Consideration or otherwise. We have assumed that any
modification to the structure of the Transaction will not vary
in any respect material to our analysis. You have advised us
that the Company faces serious liquidity and capital
constraints, and, absent some restructuring transaction, the
Company expects to default under its credit facility and the
Notes. In arriving at our opinion,
B-2
The Board of Directors of Centerplate, Inc.
September 18, 2008
Page 2 of 4
we have taken into account the view of the Companys
management, given the Companys current financial condition
and the state of the capital markets, that the Company is
unlikely to be able to obtain, in the near term, the additional
capital required to execute its business plan, and the
likelihood that, in the absence of obtaining such additional
capital, the Company will need to undertake a restructuring,
either in bankruptcy or out of bankruptcy, that will diminish
the Companys value. We understand the Management of the
Company considered the feasibility of refinancing its credit
facility and determined that under current market conditions, a
refinancing was not feasible. We further understand that
Management of the Company believes, in the absence of a sale
transaction, obtaining additional amendments or waivers from the
lenders likely would require additional payments and
restructuring steps, which Management expects would diminish the
value of the Company. Our opinion does not address the relative
merits of the Transaction as compared to other business or
financial strategies that might be available to the Company,
whether in bankruptcy or out of bankruptcy, nor does it address
the underlying business decision of the Company to engage in the
Transaction.
In arriving at our opinion, we have assumed, with the
Companys consent, that the Notes not acquired in the
Tender Offer should be deemed part of the Aggregate
Consideration with a value following consummation of the
Transaction equal to at least $3.99 per Note.
In arriving at our opinion, we were not authorized to solicit,
and did not solicit, interest from any third party with respect
to the acquisition of any or all of the Company Common Stock or
any business combination or other extraordinary transaction
involving the Company. We understand that the Company has
considered all refinancing , restructuring, sale (including
conducting a broad sale process) and other strategic options and
that the Board of Directors of the Company has concluded that
the Transaction is the superior strategic alternative available
to the Company. This letter, and our opinion, does not
constitute a recommendation to the Board of Directors or to any
other persons in respect of the Transaction, including as to how
any holder of IDSs or any other securities of the Company should
vote or act in respect of the Transaction. We are not legal,
regulatory, accounting or tax experts and have assumed the
accuracy and completeness of assessments by the Company and its
advisors with respect to legal, regulatory, accounting and tax
matters.
We will receive a fee for our services upon the rendering of
this opinion, a substantial portion of which is contingent upon
consummation of the Transaction. The Company has also agreed to
reimburse our expenses and to indemnify us against certain
liabilities arising out of our engagement. We may provide
financial or other services to Kohlberg & Co. and its
affiliates in the future and in connection with any such
services we may receive compensation.
In the ordinary course of business, Evercore Group L.L.C. or its
affiliates may actively trade the securities, or related
derivative securities, or financial instruments of the Company,
or affiliates of Kohlberg & Co., for its own account
and for the accounts of its customers and, accordingly, may at
any time hold a long or short position in such securities or
instruments.
This letter, and the opinion expressed herein is addressed to,
and for the information and benefit of, the Board of Directors
in connection with their evaluation of the proposed Transaction.
We are expressing no opinion as to the price at which any
securities of the Company will trade at any future time.
This opinion may not be disclosed, quoted, referred to or
communicated (in whole or in part) to any third party for any
purpose whatsoever except with our prior written approval,
except the Company may reproduce this opinion in full in any
document that is required to be filed with the
U.S. Securities and Exchange Commission and required to be
mailed by the Company to its stockholders relating to the
Transaction; provided, however, that all references to us or our
opinion in any such document and the description or inclusion of
our opinion therein shall be subject to our prior consent with
respect to form and substance, which consent shall not be
unreasonably withheld or delayed. This opinion has been approved
by the Opinion Committee of Evercore Group L.L.C.
B-3
The Board of Directors of Centerplate, Inc.
September 18, 2008
Page 3 of 4
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Aggregate Consideration is within the
range of Net Enterprise Values that we estimate for the Company.
Very truly yours,
EVERCORE GROUP L.L.C.
Senior Managing Director
B-4
ANNEX C
Section 262
of the General Corporation Law of the State of
Delaware
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words stock and share
mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock
corporation; and the words depository receipt mean a
receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national
securities exchange or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights
shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for
its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of
§ 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a
C-1
provision, the procedures of this section, including those set
forth in subsections (d) and (e) of this section,
shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
C-2
consolidation, any stockholder who has not commenced an
appraisal proceeding or joined that proceeding as a named party
shall have the right to withdraw such stockholders demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) of
this section hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholders certificates of stock to the Register in
Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder
is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such
C-3
stockholder, in the case of holders of uncertificated stock
forthwith, and the case of holders of shares represented by
certificates upon the surrender to the corporation of the
certificates representing such stock. The Courts decree
may be enforced as other decrees in the Court of Chancery may be
enforced, whether such surviving or resulting corporation be a
corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation. (8 Del. C. 1953,
§ 262; 56 Del. Laws, c. 50; 56 Del. Laws, c. 186,
§ 24; 57 Del. Laws, c. 148,
§§ 27-29;
59 Del. Laws, c. 106, § 12; 60 Del. Laws, c. 371,
§§ 3-12; 63 Del. Laws, c. 25, § 14; 63
Del. Laws, c. 152, §§ 1, 2; 64 Del. Laws, c. 112,
§§ 46-54;
66 Del. Laws, c. 136,
§§ 30-32;
66 Del. Laws, c. 352, § 9; 67 Del. Laws, c. 376,
§§ 19, 20; 68 Del. Laws, c. 337,
§§ 3, 4; 69 Del. Laws, c. 61, § 10; 69
Del. Laws, c. 262, §§ 1-9; 70 Del. Laws, c. 79,
§ 16; 70 Del. Laws, c. 186, § 1; 70
Del. Laws, c. 299, §§ 2, 3; 70 Del. Laws, c. 349,
§ 22; 71 Del. Laws, c. 120, § 15; 71 Del.
Laws, c. 339,
§§ 49-52;
73 Del. Laws, c. 82, § 21; 76 Del. Laws, c. 145,
§§ 11-16.)
C-4
SPECIAL MEETING OF SECURITY HOLDERS OF
CENTERPLATE, INC.
[ ], 2008
PLEASE MARK, DATE, SIGN AND RETURN
THIS PROXY CARD IN THE ENCLOSED
ENVELOPE PROVIDED AS SOON
AS POSSIBLE.
Please detach along perforated line and mail in the envelope provided.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
x
|
|
|
|
|
|
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Proposal to adopt the Agreement and Plan of
Merger, dated September 18, 2008, as it may be
amended from time to time, by and among the Company,
Parent and Merger Sub, and the transactions
contemplated thereby, pursuant to which Merger Sub
will be merged with and into the Company, with the
Company as the surviving corporation.
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
|
|
(THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
Proposal to adjourn the Special Meeting, if
necessary, to solicit additional proxies.
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
|
|
(THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In their discretion, the Proxies are authorized to vote and otherwise represent the
undersigned on such other matters as may properly come before the Special Meeting or any
adjournment thereof.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To change the address on your account, please mark the box at right and
indicate your new address in the space below. Please note that changes to the
registered name(s) on the account may not be submitted via this method.
|
|
o
|
|
|
|
|
|
|
|
|
|
If you plan to attend the Special Meeting, please mark the box at right.
|
|
o
|
|
|
|
|
|
|
|
Signature of Stockholder
|
|
|
|
Date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature of Stockholder
|
|
|
|
Date:
|
|
|
|
|
|
|
|
|
|
NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly,
each holder should sign. When signing as executor, administrator, attorney, trustee or guardian,
please give full title as such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
CENTERPLATE, INC.
PROXY FOR THE SPECIAL
MEETING OF SECURITY HOLDERS [ ], 2008
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The
undersigned hereby appoints Janet L. Steinmayer and Kevin F. McNamara, and each of them, with
full power of substitution, for and in the name of the undersigned, to vote all shares of common
stock of Centerplate, Inc., a Delaware corporation (the Company), that the undersigned would be
entitled to vote if personally present at the Special Meeting of security holders of
the Company,
to be held in
[
],
at [
] a.m.,
Eastern Time on [ ] 2008
and at any adjournment
thereof, upon the matters described in the Notice of Special Meeting and Proxy Statement dated
[ ],
2008, receipt of which is hereby acknowledged, subject to any direction indicated on the reverse
side of this card and upon any other matters that may properly come before the Special Meeting or
any adjournment thereof, hereby revoking any proxy heretofore executed by the undersigned to vote
at said meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANYS BOARD OF DIRECTORS. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2. THE SHARES REPRESENTED BY THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE,
THE PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2, SAID PROPOSALS BEING MORE FULLY DESCRIBED IN THE
NOTICE OF SPECIAL MEETING AND THE PROXY STATEMENT, AND IN THE DISCRETION OF THE PROXIES ON ANY
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENT THEREOF. THE
UNDERSIGNED RATIFIES AND CONFIRMS ALL THAT SAID PROXIES OR THEIR SUBSTITUTES MAY LAWFULLY DO BY
VIRTUE HEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(TO BE SIGNED ON REVERSE SIDE)
Centerplate (AMEX:CVP)
Historical Stock Chart
From Aug 2024 to Sep 2024
Centerplate (AMEX:CVP)
Historical Stock Chart
From Sep 2023 to Sep 2024