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ACQUISITION AGREEMENT
AMONG
ALLOY, INC.,
DODGER ACQUISITION CORP.
AND
XXXXX*S CORP.
DATED AS OF JULY 30, 2003
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER..........................................................1
SECTION 1.01. THE MERGER............................................2
SECTION 1.02. CLOSING...............................................2
SECTION 1.03. EFFECTIVE TIME........................................2
SECTION 1.04. EFFECTS OF THE MERGER.................................2
SECTION 1.05. CERTIFICATE OF INCORPORATION AND BY-LAWS..............3
SECTION 1.06. DIRECTORS.............................................3
SECTION 1.07. OFFICERS..............................................3
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES.................4
SECTION 2.01. MERGER CONSIDERATION; CONVERSION AND
ANCELLATION OF SECURITIES.............................4
SECTION 2.02. STOCK SPLITS, ETC.....................................6
SECTION 2.03 EXCHANGE OF CERTIFICATES..............................6
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................8
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........8
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.....26
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS.........................28
SECTION 4.01. CONDUCT OF BUSINESS..................................28
SECTION 4.02. CONDUCT OF BUSINESS BY PARENT........................33
SECTION 4.03. NO SOLICITATION......................................34
ARTICLE V ADDITIONAL AGREEMENTS..............................................37
SECTION 5.01. PREPARATION OF THE FORM S-4 AND THE PROXY
STATEMENT/PROSPECTUS; STOCKHOLDERS MEETING...........37
SECTION 5.03. LETTERS OF PARENT'S ACCOUNTANTS......................38
SECTION 5.04. ACCESS TO INFORMATION; CONFIDENTIALITY...............38
SECTION 5.05. COMMERCIALLY REASONABLE EFFORTS; NOTIFICATION........41
SECTION 5.06. COMPANY STOCK OPTIONS................................42
SECTION 5.07. INDEMNIFICATION, EXCULPATION AND INSURANCE...........43
SECTION 5.08. FEES AND EXPENSES....................................45
SECTION 5.09. INFORMATION SUPPLIED.................................46
SECTION 5.10. EMPLOYEE BENEFIT MATTERS.............................46
SECTION 5.11. PUBLIC ANNOUNCEMENTS.................................47
SECTION 5.13. NASDAQ LISTING.......................................47
SECTION 5.14. REGULATORY FILINGS; REASONABLE EFFORTS...............47
SECTION 5.15. RIGHTS AGREEMENT.....................................47
SECTION 5.16. TRANSFER TAXES.......................................47
SECTION 5.17. VOTING AGREEMENT.....................................48
SECTION 5.18. VOTING AGREEMENT.....................................48
ARTICLE VI CONDITIONS PRECEDENT..............................................48
SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO
EFFECT THE MERGER....................................48
SECTION 6.02. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB..........49
SECTION 6.03. CONDITIONS TO OBLIGATION OF THE COMPANY..............51
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER................................52
SECTION 7.01. TERMINATION..........................................52
SECTION 7.02. EFFECT OF TERMINATION................................53
SECTION 7.03. AMENDMENT............................................53
SECTION 7.04. EXTENSION; WAIVER....................................53
ARTICLE VIII GENERAL PROVISIONS..............................................54
SECTION 8.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES........54
SECTION 8.02. NOTICES..............................................54
SECTION 8.03. DEFINITIONS..........................................55
SECTION 8.04. INTERPRETATION.......................................56
SECTION 8.05. COUNTERPARTS.........................................56
SECTION 8.06. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.......56
SECTION 8.07. GOVERNING LAW........................................56
SECTION 8.08. ASSIGNMENT...........................................56
SECTION 8.09. CONSENT TO JURISDICTION..............................57
SECTION 8.10. WAIVER OF JURY TRIAL.................................57
SECTION 8.11. ENFORCEMENT..........................................57
SECTION 8.12. FEES AND EXPENSES....................................57
Annex A - Form of Support Agreement
Annex B - Conditions to Offer
Annex C - Forms of Termination Agreement
Annex D - Forms of Consulting/Employment Agreement
Annex E - [Omitted]
Annex F - Form of Restated Bylaws
Annex G - Form of Restated Certificate of Incorporation of the Surviving
Corporation
Annex H - Forms of Confidentiality Agreement
Annex I - Forms of Mutual Release
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT dated as of July 30, 2003, by and among ALLOY,
INC., a Delaware corporation ("PARENT"), DODGER ACQUISITION CORP., a Delaware
corporation and an indirect wholly owned subsidiary of Parent ("SUB"), and
XXXXX*S CORP., a Delaware corporation (the "COMPANY").
WHEREAS the Board of Directors of each of the Company and Sub has
approved and declared advisable, and the Board of Directors of Parent has
approved, this Agreement and the merger of Sub with and into the Company, upon
the terms and subject to the conditions set forth in this Agreement (such
transactions being referred to hereinafter as the "MERGER");
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to the willingness of Parent and Sub to enter
into this Agreement, certain holders of Class A Common Stock, par value $0.01
per share (the "COMPANY COMMON STOCK"), of the Company have each entered into a
Tender and Stockholder Support Agreement in the form attached hereto as Annex A
(the "SUPPORT AGREEMENT") dated as of the date hereof pursuant to which such
holders have agreed to vote their shares of Company Common Stock in the manner
set forth therein; and
WHEREAS Parent, Sub and the Company wish 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 foregoing and the
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
SECTION 1.01. THE OFFER. As promptly as practicable, but in no event
later than August 6, 2003, Sub shall commence an offer to purchase for cash (the
"OFFER") all of the Company's issued and outstanding shares of Company Common
Stock, at a price of $0.928 per share, net to the seller in cash, subject to the
tender of not less than a majority of the Outstanding Shares (as defined
below)(the "MINIMUM CONDITION"). The obligation of Sub to commence the Offer and
to accept for payment and to pay for any shares tendered shall be subject to the
additional conditions set forth in Annex B hereto. Sub shall not decrease the
offer price or number of shares tendered for or increase the Minimum Condition
without the prior written consent of the Company.
SECTION 1.02. COMPANY ACTIONS. The Company consents to the Offer and
represents that (a) its Board of Directors (at a meeting duly called and held)
consents to the Offer and has resolved to recommend acceptance of the Offer and
approval and adoption of this Agreement by its Stockholders (as defined in
Section 8.03 below) and (b) Xxxxx X. Xxxxxxx Company, L.P. has delivered to the
Board of Directors of the Company its opinion that the consideration to be paid
in the Offer and the Merger is fair to the holders of Company Common Stock. The
Company agrees to file contemporaneously with the commencement of the Offer with
the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE
14D-9"), containing such recommendations. In connection with the Offer, the
Company will promptly furnish Sub with mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of Company Common Stock as of a recent date and
shall furnish Sub with such information and assistance as Sub or its agents may
reasonably request in communicating the Offer to the Stockholders of the
Company.
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SECTION 1.03. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in reliance upon the representations,
warranties, covenants and agreements set forth herein, and in accordance with
the General Corporation Law of the State of Delaware (the "DGCL"), Sub shall be
merged with and into the Company at the Effective Time (as defined in Section
1.05). At the Effective Time, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation (the
"SURVIVING CORPORATION") in the Merger and as a wholly-owned subsidiary of
Parent and shall succeed to and assume all the rights and obligations of Sub in
accordance with the DGCL.
SECTION 1.04. CLOSING. Upon the terms and subject to the conditions set
forth in this Agreement, the closing of the Merger (the "CLOSING") will take
place at 11:00 a.m., New York time, on the second business day after the
satisfaction or (to the extent permitted by Applicable Laws (as defined below))
waiver of the conditions set forth in Article VI (other than those that by their
terms cannot be satisfied until the time of the Closing), at the offices of
Xxxxxx Xxxxxx Xxxxx Xxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000, or at such
other time, date or place agreed to in writing by Parent and the Company;
provided, however, that if all the conditions set forth in Article VI shall not
have been satisfied or (to the extent permitted by Applicable Laws) waived on
such second business day, then the Closing will take place on the first business
day on which all such conditions shall have been satisfied or (to the extent
permitted by Applicable Laws) waived. The date on which the Closing occurs is
referred to in this Agreement as the "CLOSING DATE".
SECTION 1.05. EFFECTIVE TIME. Upon the terms and subject to the
conditions set forth in this Agreement, as soon as practicable after the Closing
and on the Closing Date, a certificate of merger (in any such case, the
"CERTIFICATE OF MERGER") shall be duly prepared, executed and acknowledged by
the parties in accordance with the relevant provisions of the DGCL and filed
with the Secretary of State of the State of Delaware. The Merger shall become
effective upon the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware or at such subsequent time or date as Parent and
the Company shall specify in the Certificate of Merger. The time at which the
Merger becomes effective in accordance with the foregoing is referred to in this
Agreement as the "EFFECTIVE TIME".
SECTION 1.06. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in Section 259 of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Sub shall be vested in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
Sub shall become the debts, liabilities and duties of the Surviving Corporation.
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SECTION 1.07. CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) The Certificate of Incorporation of the Company as in effect
immediately prior to the Effective Time shall be amended in its entirety as
provided in Annex G attached hereto and incorporated herein by reference, and,
as so amended, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
Applicable Laws.
(b) The By-laws of the Company as in effect immediately prior to the
Effective Time shall be amended as provided in Annex H attached hereto and
incorporated herein by reference, and, as so amended, shall be the By-laws of
the Surviving Corporation until thereafter changed or amended as provided
therein or by Applicable Laws.
SECTION 1.08. DIRECTORS. The directors of Sub immediately prior to the
Effective Time shall be the directors 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.
SECTION 1.09. OFFICERS. The officers of Sub immediately prior to the
Effective Time shall be the officers 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.
SECTION 1.10. ADDITIONAL ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that consistent
with the terms of this Agreement any further assignments or assurances in law or
any other acts are necessary or desirable (a) to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation, title to and possession of
any property or right of either constituent corporation acquired or to be
acquired by reason of, or as a result of, the Merger, or (b) otherwise to carry
out the purposes of this Agreement, then, subject to the terms and conditions of
this Agreement, each such constituent corporation and its officers and directors
shall be deemed to have granted to the Surviving Corporation an irrevocable
power of attorney to execute and deliver all such deeds, assignments and
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such property or rights in the Surviving
Corporation and otherwise to carry out the purposes of this Agreement; and the
officers and directors of the Surviving Corporation are fully authorized in the
name of either constituent corporation to take any and all such action.
SECTION 1.11. BOARD OF DIRECTORS AND COMMITTEES; SECTION 14(F).
(a) Promptly upon the purchase by Sub of Company Common Stock pursuant
to the Offer and from time to time thereafter, Parent shall be entitled to
designate up to such number of directors, rounded up to the next whole number on
the board of directors of the Company (the "COMPANY BOARD") that equals the
product of (i) the total number of directors on the Company Board (giving effect
to the election of any additional directors pursuant to this Section 1.11) and
(ii) the percentage that the number of shares of Company Common Stock owned by
Parent, Sub and their affiliates (including shares of Company Common Stock
purchased pursuant to the Offer) bears to the total number of Outstanding
Shares, and the Company shall upon request by Parent, subject to the provisions
of Section 1.11(b), promptly either increase the size of the Company Board (and
shall, if necessary, amend the Company's bylaws to permit such an increase) or
use its best efforts to secure the resignation of such number of directors as is
necessary to enable Parent's designees to be elected to the Company Board and
shall cause Parent's designees to be so elected; provided, however, that at all
times prior to the Effective Time, the Company Board shall include at least two
members who are not designees of Parent. Promptly upon request by Parent, the
Company will, subject to the provisions of Section 1.11(b), use its best efforts
to cause persons designated by Parent to constitute the same percentage as the
number of Parent's designees to the Company Board bears to the total number of
directors on the Company Board on (i) each committee of the Company Board, (ii)
each board of directors or similar governing body or bodies of each subsidiary
of the Company designated by Parent, and (iii) each committee of each such board
or body.
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(b) The Company's obligations to appoint Parent's designees to the
Company Board shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. The Company shall promptly take all actions
required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its
obligations under this Section 1.11 and shall include in the Schedule 14D-9 or a
separate Rule 14f-1 Statement provided to shareholders such information with
respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-1. Parent or Sub will supply to the Company in
writing and be solely responsible for any information with respect to either of
them and their nominees, officers, directors and affiliates required by Section
14(f) and Rule 14f-1.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. MERGER CONSIDERATION; CONVERSION AND CANCELLATION OF
SECURITIES.
(a) The per share consideration payable by Parent with respect to all
outstanding shares of capital stock of the Company immediately prior to the
Effective Time, including those shares deemed to be outstanding pursuant to the
exercise of Company Stock Options (as defined below) as set forth in Section
5.06(a)(i) and those shares deemed to be outstanding pursuant to the exercise of
the warrants as set forth in Section 2.01(b)(iv) (collectively, the "OUTSTANDING
SHARES") shall be equal to $0.928 per share (the "PER SHARE AMOUNT").
(b) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder of any securities of the Company, Parent or
Sub:
(i) CAPITAL STOCK OF SUB. Each issued and outstanding share of
common stock of Sub immediately prior to the Effective Time shall be
automatically converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(ii) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK.
Each share of Company Common Stock that is directly owned by the
Company (as treasury stock), Parent or Sub immediately prior to the
Effective Time, and each share of Class B common stock, par value $0.01
per share, of the Company (the "CLASS B COMMON"), outstanding
immediately prior to the Effective Time, shall automatically be
canceled and shall cease to exist and no consideration shall be
delivered in exchange therefor.
(iii) CONVERSION OF COMPANY COMMON STOCK. Each share of
Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares canceled pursuant to Section
2.01(b)(ii) and Appraisal Shares), including all accrued and unpaid
dividends thereon, shall be automatically converted into and become the
right to receive the Per Share Amount. At the Effective Time, all such
shares of Company Common Stock shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of
a certificate that immediately prior to the Effective Time represented
any such shares of Company Common Stock shall cease to have any rights
with respect thereto, except the right to only the Per Share Amount,
without interest.
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(iv) TREATMENT OF CONVERTIBLE SECURITIES. Other than the
Company Stock Options, which shall be treated in accordance with
Section 5.06, and the outstanding warrants to purchase up to 650,000
shares of Company Common Stock, each of which shall be amended to (i)
permit the net-exercise thereof and (ii) provide that if not exercised
prior to the Effective Time shall be cancelled (all of which shares
shall be deemed outstanding for purposes of calculating the number of
Outstanding Shares), all outstanding options (whether vested or
unvested), warrants, rights, calls, commitments or agreements of any
character to which the Company or any subsidiary is a party or by which
it is bound, calling for the issuance of shares of capital stock of the
Company, and all securities convertible into or exercisable or
exchangeable for, or representing the right to purchase or otherwise
receive, directly or indirectly, any such capital stock, or other
arrangement to acquire, at any time or under any circumstance, capital
stock of the Company or any such other securities (the "CONVERTIBLE
SECURITIES") that, as of the Effective Time have not been exercised or
converted, as applicable, shall be cancelled and shall no longer be
exercisable, exchangeable or convertible, as applicable.
(c) APPRAISAL RIGHTS. Notwithstanding anything in this Agreement to the
contrary, shares (the "APPRAISAL SHARES") of Company Common Stock issued and
outstanding immediately prior to the Effective Time that are held by any holder
who is entitled to demand and properly demands appraisal of such shares pursuant
to, and who otherwise complies in all respects with, the provisions of Section
262 of the DGCL ("SECTION 262") shall not be converted into the right to receive
the Per Share Amount as provided in Section 2.01(b)(iii), but instead such
holder shall be entitled to payment of the fair value of such shares in
accordance with the provisions of Section 262. Such holders of Appraisal Shares
shall be entitled only to those rights granted under Section 262. At the
Effective Time, all Appraisal Shares shall automatically be canceled and shall
cease to exist or be outstanding, and each holder of certificates representing
Appraisal Shares shall cease to have any rights with respect thereto, except the
right to receive the fair value of such shares in accordance with the provisions
of Section 262. Notwithstanding the foregoing, if any such holder shall fail to
perfect or otherwise shall waive, withdraw or lose the right to appraisal under
Section 262 or a court of competent jurisdiction shall determine that such
holder is not entitled to the relief provided by Section 262, then the right of
such holder to be paid the fair value of such holder's Appraisal Shares under
Section 262 shall cease to exist and such Appraisal Shares shall be treated as
if they had been converted at the Effective Time into, and shall have become,
the right to receive only the Per Share Amount as provided in Section
2.01(b)(iii). The Company shall serve prompt notice to Parent of any demands for
appraisal of any shares of Company Common Stock, and Parent shall have the right
to participate in and, subject to Applicable Laws, direct all negotiations and
proceedings with respect to such demands. The Company shall not, without the
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, any such demands, or agree to do any of the foregoing.
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SECTION 2.02. INTENTIONALLY OMITTED.
SECTION 2.03. EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Prior to the Effective Time, Parent shall designate a
bank or trust company reasonably acceptable to the Company and having at least
$50,000,000.00 in capital, surplus and undivided profits, to act as paying agent
(the "PAYING AGENT") for the payment of the Merger Consideration (as defined
below) and shall deposit, or cause the Surviving Corporation to deposit, in
trust with the Paying Agent, on a timely basis, as and when needed after the
Effective Time, cash necessary to pay the Per Share Amount for the Outstanding
Shares (such cash being hereinafter referred to as the "EXCHANGE FUND").
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of an
outstanding certificate or outstanding certificates ("Certificates") which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive the
Per Share Amount or any higher price paid for any share of Company Common Stock
pursuant to the Offer (the "MERGER CONSIDERATION") with respect thereto pursuant
to Section 2.01, (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates held
by such person shall pass, only upon proper delivery of the Certificates to the
Paying Agent and shall be in customary form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration with
respect thereto. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly completed and validly executed, and such
other documents as may reasonably be required by the Paying Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the amount of
cash, and the Certificate so surrendered shall forthwith be canceled. Upon a
transfer of ownership of Company Common Stock that is not registered in the
transfer records of the Company, the proper amount of cash may be issued and
paid as described in the previous sentence in exchange therefor to a person
other than the person in whose name the Certificate so surrendered is registered
if such Certificate shall be properly endorsed or otherwise be in proper form
for transfer and the person requesting such issuance shall pay any transfer or
other taxes required by reason of the payment of cash to a person other than the
registered holder of such Certificate or establish to the satisfaction of Parent
that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.03(b), each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration that the holder thereof has the right to
receive pursuant to the provisions of this Article II. No interest shall be paid
or shall accrue on any cash payable upon surrender of any Certificate.
(c) INTENTIONALLY OMITTED.
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(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All cash paid
upon the surrender for exchange of Certificates in accordance with the terms of
this Article II shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to the shares of Company Common Stock
formerly represented by such Certificates. At the close of business on the day
on which the Effective Time occurs the stock transfer books of the Company shall
be closed, and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Paying Agent for transfer or any other reason, they shall be canceled and
exchanged as provided in this Article II, except as otherwise provided by
Applicable Law.
(e) INTENTIONALLY OMITTED.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund that
remains undistributed to the holders of the Certificates for twelve months after
the Effective Time shall be delivered to Parent, upon demand, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent for, and, subject to Section 2.03(g), Parent
shall remain liable for, payment of their claim for Merger Consideration.
(g) NO LIABILITY. None of Parent, Sub, the Company or the Paying Agent
shall be liable to any person in respect cash from the Exchange Fund in each
case delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Certificates shall not have been
surrendered prior to two years after the Effective Time (or immediately prior to
such earlier date on which any Merger Consideration would otherwise escheat to
or became the property of any Governmental Entity (as defined in Section
3.01(d)), any such Merger Consideration in respect thereof shall, to the extent
permitted by Applicable Laws, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.
(h) INVESTMENT OF EXCHANGE FUND. The Paying Agent shall invest any cash
included in the Exchange Fund, as directed by Parent, on a daily basis;
provided, however, that such investments shall be solely in (i) obligations of
or guaranteed by the United States of America and backed by the full faith and
credit of the Unites States of America or (ii) commercial paper obligations
rated A-1 or P-1 or better by Xxxxx'x Investors Service, Inc. or Standard &
Poor's Corporation, respectively. All interest or other income resulting from
such investments shall be paid to Parent.
(i) 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 together with an
indemnity reasonably acceptable to Parent and, if required by the Parent, the
posting by such person of a bond in such reasonable amount as the Parent may
direct as indemnity against any claim that may be made against it on account of
the alleged loss, theft or destruction of any such Certificate, the Paying Agent
will issue in exchange for such lost, stolen or destroyed Certificate, the
Merger Consideration.
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(j) WITHHOLDING RIGHTS. Parent, Sub or the Paying Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Certificates such amounts as Parent,
Sub or the Paying Agent is required to deduct and withhold with respect to the
making of such payment under the Code (as defined below), or any other provision
of domestic or foreign (whether national, federal, state, provincial, local or
otherwise) tax law. To the extent that amounts are so withheld and paid over to
the appropriate taxing authority by Parent, Sub or the Paying Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Certificates in respect of which such deduction
and withholding was made by Parent, Sub or the Paying Agent.
(k) TERMINATION PRIOR TO EFFECTIVE TIME. In the event this Agreement is
terminated without the occurrence of the Effective Time, Parent shall, or shall
cause the Paying Agent to, return promptly any Certificates theretofore
submitted or delivered to the Paying Agent, without charge to the person who
submitted such Certificates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
set forth on the disclosure schedule (with specific reference to the Section or
Subsection of this Agreement to which the information stated in such disclosure
relates, provided that any fact, item, contract, agreement, document or
instrument listed or described, and any information disclosed, in any section
thereof shall be deemed listed, described and disclosed in all other applicable
sections even though not expressly set forth in such other section(s), provided
that the Company shall use its reasonable best efforts to number all exceptions
noted in the attached sections to correspond to the applicable section of this
Agreement to which such exception refers) delivered by the Company to Parent
prior to the execution of this Agreement (the "COMPANY DISCLOSURE SCHEDULE"),
the Company represents and warrants to Parent and Sub as follows:
(a) ORGANIZATION, STANDING AND POWER. Each of the Company and its
subsidiaries (as defined in Section 8.03) (i) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (ii) has all requisite corporate, company or partnership power and
authority to carry on its business as now being conducted and (iii) 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,
other than (except in the case of clause (i) above with respect to the Company)
where the failure to be so organized, existing, qualified or licensed or in good
standing individually or in the aggregate could not reasonably be expected to
have a material adverse effect (as defined in Section 8.03) on the Company. The
Company has made available to Parent true and complete copies of its Second
Restated Certificate of Incorporation (as amended, the "CERTIFICATE OF
INCORPORATION") and Amended and Restated By-laws (the "BY-LAWS") and the
certificate of incorporation and by-laws (or similar organizational documents)
of each of its subsidiaries, in each case as amended to the date of this
Agreement. The Company has made available to Parent and its representatives true
and complete copies of the minutes of all meetings of the stockholders, the
Board of Directors and each committee of the Board of Directors of the Company
held since incorporation of the Company. Neither the Company nor any subsidiary
has maintained minutes of any meetings of the stockholders or boards of
directors or other governing body of any subsidiary of the Company.
(b) SUBSIDIARIES. Section 3.01(b) of the Company Disclosure Schedule
lists each subsidiary of the Company. All the outstanding shares of capital
stock or other equity or voting interests of each such subsidiary are owned by
the Company, by another wholly owned subsidiary of the Company or by the Company
and another wholly owned subsidiary of the Company, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever (collectively, "LIENS"), and are duly authorized, validly
issued, fully paid and nonassessable. Except for the capital stock of, or other
equity or voting interests in, its subsidiaries, the Company does not own,
directly or indirectly, any capital stock of, or other equity or voting
interests in, any person.
8
(c) CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 100,000,000 shares of Company Common Stock, 12,500,000 shares of
Class B Common and 1,000,000 shares of preferred stock, par value $0.01 per
share (the "COMPANY PREFERRED STOCK"). As of the close of business on July 25,
2003, (i) 53,308,710 shares of Company Common Stock (excluding treasury shares)
were issued and outstanding, none of which were held by any subsidiary of the
Company, (ii) 1,685,580 shares of Company Common Stock and 11,425,000 shares of
Class B Common Stock were held by the Company in its treasury, (iii) 415,925
shares of Company Common Stock were subject to outstanding Company Stock Options
(as defined below) under the Amended and Restated 1996 Stock Incentive Plan of
Daisy, Inc. (the "1996 PLAN"), 301,429 shares of Company Common Stock were
subject to outstanding Company Stock Options under the 1998 Stock Incentive Plan
of Daisy, Inc. (the "1998 PLAN"), and 4,500,000 shares of Company Common Stock
were reserved for issuance pursuant to the iTurf Inc. (renamed Daisy Corp.) 1999
Amended and Restated Stock Incentive Plan (the "1999 PLAN") (of which 2,595,818
shares were subject to outstanding Company Stock Options issued under the 1999
Plan) (such plans, collectively, the "COMPANY STOCK PLANS"); (iv) 3,313,172
shares were subject to outstanding Company Stock Options (as defined below); (v)
no shares of Company Common Stock and 750,000 shares of Company Preferred Stock
were reserved for issuance upon the exercise of the rights (the "RIGHTS")
distributed to the holders of Company Common Stock and Class B Common pursuant
to the Rights Agreement dated as of January 12, 2001, between the Company and
The Bank of New York, as rights agent (the "RIGHTS AGREEMENT"), (vi) no shares
of Company Preferred Stock were issued and outstanding or were held by the
Company in its treasury, and (vii) 650,000 shares of Company Common Stock were
reserved for issuance upon the exercise of presently outstanding warrants.
Section 3.01(c) of the Company Disclosure Schedule sets forth a true and
complete list, as of the close of business on July 25, 2003, of (i) all
outstanding options to purchase Company Common Stock (collectively, the "COMPANY
STOCK OPTIONS") granted under the Company Stock Plans, (ii) all restricted stock
awards granted under the Company Stock Plans (the "RESTRICTED STOCK AWARDS") and
(iii) all other rights, if any, to purchase or receive Company Common Stock
granted under the Company Stock Plans, together, in each case, with the number
of shares of Company Common Stock subject to each such Company Stock Option,
Restricted Stock Award or other purchase right, the grant dates and exercise
prices and vesting schedule of each such Company Stock Option, Restricted Stock
Award or other purchase right and the names of the holder thereof and the
particular Company Stock Plan pursuant to which such Company Stock Option,
Restricted Stock Award or other purchase right was granted or issued. Other than
the Company Stock Options issued pursuant to the Company Stock Plans, the
Restricted Stock Awards issued pursuant to the Company Stock Plans and the
outstanding warrants to purchase 650,000 shares of Company Common Stock, there
are no outstanding rights of any person to receive Company Common Stock, whether
on a deferred basis or otherwise. There are no outstanding stock appreciation
rights or other rights that are in any way linked to the price of Company Common
Stock that were not granted in tandem with a related Company Stock Option. As of
the close of business on July 25, 2003, there were outstanding Company Stock
Options to purchase 882,728 shares of Company Common Stock with exercise prices
on a per share basis lower than the Per Share Amount. Except as set forth above,
as of the close of business on July 25, 2003, no shares of capital stock of, or
other equity or voting interests in, the Company, or options, warrants or other
rights to acquire any such stock or securities were issued, reserved for
issuance or outstanding. Except as set forth in Section 3.01(c) of the Company
Disclosure Schedule, there are no commitments or agreements of any character to
which the Company is bound obligating the Company to accelerate the vesting of
any Company Stock Option as a result of the Merger. All outstanding shares of
Company Common Stock and all outstanding Company Stock Options have been issued
and granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements (as defined below) and (ii) all requirements set
forth in applicable Contracts (as defined in Section 3.01(d)). For the purposes
of this Agreement, "LEGAL REQUIREMENTS" means any federal, state, local,
municipal, foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity (as defined in
Section 3.01(d)).
9
During the period from July 25, 2003, to the date of this Agreement,
(x) there have been no issuances by the Company of shares of capital stock of,
or other equity or voting interests in, the Company other than issuances of
shares of Company Common Stock pursuant to the exercise of Company Stock Options
or rights under the Company Stock Plans outstanding on such date as required by
their terms as in effect on the date of this Agreement and (y) there have been
no issuances by the Company or any of its subsidiaries of options, warrants or
other rights to acquire shares of capital stock of, or other equity or voting
interests in, the Company, other than for rights that may have arisen under the
Company Stock Plans. All outstanding shares of capital stock of the Company are,
and all shares that may be issued pursuant to the Company Stock Plans and the
Company Stock Plans will be, when issued in accordance with the terms thereof,
duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other indebtedness
of the Company or any of its subsidiaries, and no securities or other
instruments or obligations of the Company or any of its subsidiaries, the value
of which is in any way based upon or derived from any capital or voting stock of
the Company or having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which stockholders
of the Company may vote. Except as set forth on Section 3.01(d) of the Company
Disclosure Schedule, there are no Contracts of any kind to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound obligating the Company or any of its subsidiaries to
issue, grant, deliver or sell, or cause to be issued, granted, delivered or
sold, additional shares of capital stock of, or securities convertible into, or
exchangeable or exercisable for, shares of capital stock of, or other equity or
voting interests in, the Company or any of its subsidiaries or obligating the
Company or any of its subsidiaries to issue, grant, deliver, sell or enter into
any such shares, securities, equity or voting interests or Contracts. There are
not any outstanding contractual obligations of the Company or any of its
subsidiaries to (i) repurchase, redeem or otherwise acquire any shares of
capital stock of, or other equity or voting interests in, the Company or any of
its subsidiaries or (ii) vote or dispose of any shares of the capital stock of,
or other equity or voting interests in, any of its subsidiaries. To the
knowledge of the Company as of the date of this Agreement, except as set forth
in Section 3.01(c) of the Company Disclosure Schedule, there are no irrevocable
proxies and no voting agreements with respect to any shares of the capital stock
or other voting securities of the Company or any of its subsidiaries.
As of July 25, 2003, (i) the only outstanding indebtedness for borrowed
money of the Company and its subsidiaries in each case in excess of $50,000 is
set forth on Section 3.01(c) of the Company Disclosure Schedule and (ii) except
as set forth on Schedule 3.01(c) of the Company Disclosure Schedule, there are
no guarantees by the Company or any of its subsidiaries of indebtedness of third
parties for borrowed money. The amounts shown as outstanding on Section 3.01(c)
of the Company Disclosure Schedule for each borrowing facility has not increased
or decreased, other than in the ordinary course of business, and the Company has
not entered into any new borrowing facilities since July 25, 2003. All such
indebtedness is prepayable in full in accordance with their terms and without
any penalty or premium in connection therewith.
10
(d) AUTHORITY; NONCONTRAVENTION. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement, subject, in the case
of the consummation of the Merger, to obtaining the Stockholder Approval (as
defined in Section 3.01(r)). 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 on
the part of the Company and no other corporate proceedings on the part of the
Company are necessary to approve this Agreement or to consummate the
transactions contemplated by this Agreement, subject, in the case of the
consummation of the Merger, to obtaining the Stockholder Approval and to the
filing and recordation of the Certificate of Merger as required by the DGCL.
This Agreement has been duly executed and delivered by the Company, and assuming
the due authorization, execution and delivery by the other parties hereto,
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms subject to (i) applicable bankruptcy,
insolvency, fraudulent transfer and conveyance, moratorium, reorganization,
receivership and similar laws relating to or affecting the enforcement of the
rights and remedies of creditors generally, (ii) principles of equity which may
limit the availability of remedies (regardless of whether considered and applied
in a proceeding in equity or at law) and (iii) an implied covenant of good faith
and fair dealing. The Board of Directors of the Company, at a meeting duly
called and held at which all directors of the Company were present, duly adopted
resolutions (i) approving and declaring advisable this Agreement, the Merger,
the Support Agreement and the other transactions contemplated hereby and
thereby, (ii) declaring that it is in the best interests of the Company's
stockholders that the Company enter into this Agreement and consummate the
Merger on the terms and subject to the conditions set forth in this Agreement,
and (iii) declaring that this Agreement is fair to the Company's stockholders.
Except as set forth on Schedule 3.01(d) of the Company Disclosure Schedule, the
execution and delivery of this Agreement by the Company and the consummation of
the transactions contemplated hereby and compliance by the Company with the
provisions hereof do not and will not conflict with, 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, or result in, termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any Lien in or upon any of the properties or assets of the
Company or any of its subsidiaries under, or give rise to any increased,
additional, accelerated or guaranteed rights or entitlements under, any
provision of (i) the Certificate of Incorporation or By-laws of the Company or
the certificate of incorporation or by-laws (or similar organizational
documents) of any of its subsidiaries, (ii) any loan or credit agreement, bond,
debenture, note, mortgage, indenture, guarantee, lease or other contract,
commitment, agreement, instrument, obligation, binding arrangement, binding
understanding, binding undertaking, permit, franchise or license, whether oral
or written (each, including all amendments thereto, a "CONTRACT"), to which the
Company or any of its subsidiaries is a party or any of their respective
properties or assets is subject or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any (A) statute, law,
ordinance, rule or regulation or (B) judgment, order or decree, in each case,
applicable to the Company or any of its subsidiaries or their respective
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, violations, breaches, defaults, rights, results, losses, Liens
or entitlements that individually or in the aggregate could not reasonably be
expected to have a material adverse effect on the Company. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
domestic or foreign (whether national, federal, state, provincial, local or
otherwise) government or any court, administrative agency or commission or other
governmental or regulatory authority or agency, domestic, foreign or
supranational (each, a "GOVERNMENTAL ENTITY"), 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 transactions contemplated hereby or compliance with the provisions hereof,
except for (1) the filing of a premerger notification and report form by the
Company under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR ACT") or any other applicable competition, merger control,
antitrust or similar law or regulation, (2) the filing with the Securities and
Exchange Commission (the "SEC") of all documents related to the Offer and the
Merger required to be filed pursuant to the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), (3) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware and appropriate documents with
the relevant authorities of other states in which the Company or any of its
subsidiaries is qualified to do business, (4) any filings required under the
rules and regulations of The Nasdaq Stock Market Inc. ("NASDAQ"), or (5) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings the failure of which to be obtained or made individually or in the
aggregate could not reasonably be expected to have a material adverse effect on
the Company.
11
(e) SEC DOCUMENTS. The Company (including its predecessors) has filed
with the SEC, and has heretofore made available to Parent true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed with the SEC by the Company since February 1, 2001
(together with all information incorporated therein by reference, the "COMPANY
SEC DOCUMENTS"). No subsidiary of the Company is required to file any form,
report, schedule, statement or other document with the SEC. As of their
respective dates, the Company SEC Documents complied as to form in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Company SEC
Documents, and none of the Company SEC Documents at the time they were filed
contained any untrue statement of a material-fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements (including the related notes) included in
the Company SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles ("GAAP") (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects the consolidated financial position
of the Company and its consolidated subsidiaries as of the dates thereof and
their respective consolidated results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal and
recurring year-end audit adjustments). Except as set forth in the Company SEC
Documents filed and publicly available prior to the date of this Agreement (the
"COMPANY FILED SEC DOCUMENTS") (including the financial statements included
therein) or in the Company Disclosure Schedule and except as arising hereunder,
the Company and its subsidiaries have no liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise), other than
liabilities and obligations that individually or in the aggregate could not
reasonably be expected to have a material adverse effect on the Company.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since February 2, 2003,
except (i) as set forth in the Company Filed SEC Documents, (ii) as otherwise
publicly disclosed in press releases issued by the Company, (iii) as set forth
in Section 3.01(f) of the Company Disclosure Schedule, or (iv) in the ordinary
course of business consistent with past practice, there has not been, with
respect to the Company or any of its subsidiaries (A) any material adverse
change respecting the Company, (B) prior to the date of this Agreement, any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of the Company's or any
of its subsidiaries' capital stock [except for dividends by a wholly owned
subsidiary of the Company to its parent,] (C) prior to the date of this
Agreement, any purchase, redemption or other acquisition of any shares of
capital stock or any other securities of the Company or any of its subsidiaries
or any options, warrants, calls or rights to acquire such shares or other
securities, (D) prior to the date of this Agreement, any split, combination or
reclassification of any of the Company's or any of its subsidiaries' capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of capital
stock or other securities of the Company or any of its subsidiaries, (E) (1) any
granting by the Company or any of its subsidiaries to any current or former
director, officer, employee or consultant of any increase in salary or bonus in
an amount greater than or equal to $1,000.00, or any such granting of any type
of salary or bonus in an amount greater than or equal to $1,000.00 to any
current or former director, officer, employee or consultant not previously
receiving or entitled to receive such type of compensation or benefit in effect
as of February 2, 2003; provided, however, that no such increase in salary or
bonus or any such granting of any type of salary or bonus shall have been in an
amount less than $1,000.00 in order to avoid its disclosure on the Company
Disclosure Schedules, or (2) any granting by the Company or any of its
subsidiaries to any current or former director, officer, employee or consultant
of the right to receive any severance or termination pay, or increases therein,
(F) any damage, destruction or loss, whether or not covered by insurance, that
individually or in the aggregate could reasonably be expected to have a material
adverse effect on the Company, (G) any material change in financial or tax
accounting methods, principles or practices by the Company or any of its
subsidiaries, except insofar as may have been required by a change in GAAP or
Applicable Laws, (H) any material election with respect to taxes by the Company
or any of its subsidiaries or any settlement or compromise of any material tax
liability or refund or (I) any revaluation by the Company or any of its
subsidiaries of any of the material assets of the Company or any of its
subsidiaries.
12
(g) LITIGATION. The Company Filed SEC Documents together with Section
3.01(g) of the Company Disclosure Schedule contain a true and complete list of
all known claims, actions, investigations or proceedings in which the Company or
any of its subsidiaries or affiliates is a party. Except as set forth in the
Company Filed SEC Documents or the Company Disclosure Schedules, there is no
suit, claim, action, investigation or proceeding pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
subsidiaries or any of their respective assets before or by any Governmental
Entity that, if adversely determined to the Company or its subsidiaries, could,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the Company, nor is there any judgment, order or decree of any
Governmental Entity or arbitrator outstanding against the Company or any of its
subsidiaries that individually or in the aggregate could reasonably be expected
to have a material adverse effect on the Company.
(h) CONTRACTS.
(i) Except for Contracts filed as exhibits to the Company
Filed SEC Documents, there are no Contracts that are required to be
filed as an exhibit to any Company SEC Document under the Exchange Act
and the rules and regulations promulgated thereunder. Except for
Contracts filed in unredacted form as exhibits to the Company Filed SEC
Documents and purchase orders entered into in the ordinary course of
business, Section 3.01(h) of the Company Disclosure Schedule sets forth
a true and complete list as of the date of this Agreement, and the
Company has made available to Parent true and correct copies, of:
(A) all Contracts of the Company or any of its
subsidiaries made in the ordinary course of business having an
aggregate value, or involving payments by or to the Company, of
more than $100,000;
(B) all Contracts of the Company or any of its
subsidiaries made outside the ordinary course of business;
(C) all Contracts to which the Company or any of its
subsidiaries is a party, or that purport to be binding upon the
Company, any of its subsidiaries or any of its affiliates, that
contain a covenant restricting the ability of the Company or any
of its subsidiaries (or which, following the consummation of the
Merger, could restrict the ability of Parent or any of its
subsidiaries, including the Company and its subsidiaries) to
compete in any business or with any person or in any geographic
area;
(D) all Contracts of the Company or any of its
subsidiaries with any affiliate of the Company (other than any of
its subsidiaries);
(E) all Contracts to which the Company or any of its
subsidiaries is party granting any license to any material
property, asset or right;
13
(F) all confidentiality, standstill or similar agreements
to which the Company or any of its subsidiaries is a party;
(G) all joint venture, partnership or other similar
agreements (including all amendments thereto); and
(H) except as set forth in Section 3.01(c), all loan
agreements, credit agreements, notes, debentures, bonds,
mortgages, indentures and other Contracts (collectively, "DEBT
OBLIGATIONS") pursuant to which any indebtedness of the Company or
any of its subsidiaries is outstanding or may be incurred and all
guarantees of or by the Company or any of its subsidiaries of any
debt obligations of any other person (other than the Company or
any of its subsidiaries) (except for such indebtedness or
guarantees the aggregate principal amount of which does not exceed
$100,000), including the respective aggregate principal amounts
outstanding as of the date of this Agreement.
None of the Company or any of its subsidiaries is in violation or
breach of or default (with or without notice or lapse of time or
both) under, or has waived or failed to enforce any rights or
benefits under, any Contract to which it is a party or any of its
properties or assets is subject, and, to the knowledge of the
Company or such subsidiary, no other party to any of its Contracts
is in violation or breach of or default (with or without notice or
lapse of time or both) under, or has waived or failed to enforce
any rights or benefits under, and there has occurred no event
giving to others any right of termination, amendment or
cancellation of, with or without notice or lapse of time or both,
any such Contract except, in each case, for violations, breaches,
defaults, waivers or failures to enforce material rights or
benefits that individually or in the aggregate could not
reasonably be expected to have a material adverse effect on the
Company.
(ii) Each of the Contracts between the Company or any of its
subsidiaries, on the one hand, and any affiliate of the Company (other
than any of its subsidiaries), on the other hand, was entered into on
an arm's length basis.
(i) COMPLIANCE WITH LAWS.
(i) Except with respect to Environmental Laws (as defined in
Section 3.01(1)(v)) and taxes (as defined in Section 3.01(n)(iv)),
which are the subject of Sections 3.01(1) and 3.01(n), respectively,
the Company and its subsidiaries and their relevant personnel and
operations are and, since February 1, 2001, have been, in compliance
with all statutes, laws, ordinances, rules, regulations, judgments,
orders and decrees of any Governmental Entity ("APPLICABLE LAWS")
applicable to their businesses or operations except for failures to be
in compliance that individually or in the aggregate could not
reasonably be expected to have a material adverse effect on the
Company. None of the Company or any of its subsidiaries has received,
since February 1, 2001, a notice or other written communication
alleging or relating to a possible material violation of any statute,
law, ordinance, rule, regulation, judgment, order or decree of any
Governmental Entity applicable to its businesses or operations. The
Company and its subsidiaries have in effect all material permits,
licenses, variances, exemptions, authorizations, operating
certificates, franchises, orders and approvals of all Governmental
Entities (collectively, "PERMITS") necessary or advisable for them to
own, lease or operate their properties and assets and to carry on their
businesses as now conducted, and there has occurred no violation of,
default (with or without notice or lapse of time or both) under, or
event giving to others any right of termination, amendment or
cancellation of, with or without notice or lapse of time or both, any
Permit except for violations, defaults or events that individually or
in the aggregate could not reasonably be expected to have a material
adverse effect on the Company. There is no event which has occurred
that, to the knowledge of the Company, could reasonably be expected to
result in the revocation, cancellation, non-renewal or adverse
modification of any material Permit.
14
(ii) Except as set forth in Section 3.01(i) of the Company
Disclosure Schedule, the Company and each of its officers and directors
have complied in all material respects with (i) the applicable
provisions of the Xxxxxxxx-Xxxxx Act of 2002 and the related rules and
regulations promulgated under such Act or the Exchange Act
("XXXXXXXX-XXXXX") and (ii) the applicable listing and corporate
governance rules and regulations of the Nasdaq. The Company has
previously disclosed to Parent all of the information disclosed by the
Company and certain of its officers to the Company's Board of Directors
or any committee thereof pursuant to the certification requirements
contained in Form 10-K and Form 10-Q under the Exchange Act. Except as
set forth on Schedule 3.01 (i) of the Company Disclosure Schedule, from
the period beginning January 1, 2000 through the enactment of
Xxxxxxxx-Xxxxx, neither the Company nor any of its Affiliates made, or
forgave, any loans to any executive officer or director of the Company
other than pursuant to terms and conditions relating thereto that were
in effect prior to the enactment of Xxxxxxxx-Xxxxx. Since the enactment
of Xxxxxxxx-Xxxxx, neither the Company nor any of its Affiliates has
made any loans to any executive officer or director of the Company.
(iii) Each executive officer and director of the Company has
complied with all Applicable Laws in connection with or relating to
actions within the scope of the Company's business, except where the
failure to comply would not have a material adverse effect on the
Company. No executive officer or director of the Company is a party to
or the subject of any pending or threatened suit, action, proceeding or
investigation by any Governmental Entity that could reasonably be
expected to have a material adverse effect on the Company, except as
disclosed in the Company Filed SEC Documents.
(j) ABSENCE OF CHANGES IN BENEFIT PLANS; EMPLOYMENT AGREEMENTS. Except
as disclosed in the Company Filed SEC Documents or on the applicable section(s)
of the Company Disclosure Schedule, and except in the ordinary course consistent
with past practice or as required by Applicable Laws, since February 2, 2003,
none of the Company or any of its subsidiaries has terminated, adopted, amended
in any material respect or agreed to amend in any material respect any cash
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock appreciation, restricted stock, stock
option, phantom stock, performance, retirement, thrift, savings, stock bonus,
cafeteria, paid time off, vacation, severance, disability, death benefit,
hospitalization, medical, welfare benefit or other material perquisite, material
fringe benefit, or other material plan, program, policy, or arrangement
maintained, contributed to, or required to be maintained or contributed to by
the Company or any other person or entity that, together with the Company, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
(each, a "COMMONLY CONTROLLED ENTITY"), in each case providing benefits to any
current or former directors, officers, employees or consultants of the Company
or any of its subsidiaries (collectively, "COMPANY BENEFIT PLANS") or has made
any material change in any actuarial or other assumption used to calculate
funding obligations with respect to any Company Pension Plan (as defined in
Section 3.01(m)) or any material change in the manner in which contributions to
any Company Pension Plans are made or the basis on which such contributions are
determined. Except as disclosed in the Company Filed SEC Documents, on the
applicable section(s) of the Company Disclosure Schedule or as required by
Applicable Laws, there exist no (i) employment (except employment at will),
consulting, deferred compensation, severance, termination or indemnification
agreements or arrangements providing for annual salary in excess of $100,000
between the Company or any of its subsidiaries, on the one hand, and any current
or former director, officer, employee or consultant of the Company or any of its
subsidiaries, on the other hand or (ii) agreements or arrangements between the
Company or any of its subsidiaries, on the one hand, and any current or former
director, officer, employee or consultant of the Company or any of its
subsidiaries, on the other hand, that provide material benefits which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company of the nature contemplated by this Agreement
(all such agreements and arrangements described in clauses (i) and (ii),
collectively, "COMPANY BENEFIT AGREEMENTS").
15
(k) LABOR MATTERS. There are no collective bargaining agreements or
other labor union contracts applicable to any employees of the Company or any of
its subsidiaries. There is no labor dispute, strike, work stoppage or lockout,
or, to the knowledge of the Company, threat thereof, by or with respect to any
employee of the Company or any of its subsidiaries, except where such dispute,
strike, work stoppage or lockout individually or in the aggregate could not
reasonably be expected to have a material adverse effect on the Company.
(l) ENVIRONMENTAL MATTERS.
(i) PERMITS AND AUTHORIZATIONS. Each of the Company and its
subsidiaries possesses all material Environmental Permits (as defined
below) necessary to conduct its businesses and operations as now being
conducted.
(ii) COMPLIANCE. Each of the Company and its subsidiaries is
in compliance with all applicable Environmental Laws (as defined below)
and all Environmental Permits except for failures to be in compliance
that individually or in the aggregate could not reasonably be expected
to have a material adverse effect on the Company. None of the Company
or its subsidiaries has received any written communication from any
Governmental Entity or other person that alleges that the Company or
any of its subsidiaries has violated or is, or may be, liable under any
Environmental Law.
(iii) ENVIRONMENTAL CLAIMS. There are no Environmental Claims
(as defined below) pending or, to the knowledge of the Company,
threatened (A) against the Company or any of its subsidiaries or (B)
against any person whose liability for any Environmental Claim the
Company or any of its subsidiaries has retained or assumed, either
contractually or by operation of law, and none of the Company or its
subsidiaries has contractually retained or assumed any liabilities or
obligations that could reasonably be expected to provide the basis for
any material Environmental Claim.
(iv) RELEASES. There have been no Releases (as defined below)
of any Hazardous Materials (as defined below) that could reasonably be
expected to form the basis of any Environmental Claim against the
Company or any of its subsidiaries.
(v) DEFINITIONS.
(A) "Environmental Claims" means any and all actions,
orders, decrees, suits, demands, directives, claims, liens,
investigations, proceedings or notices of violation by any
Governmental Entity or other person alleging potential
responsibility or liability arising out of, based on or related to
(x) the presence, Release or threatened Release of, or exposure
to, any Hazardous Materials at any location or (y) circumstances
forming the basis of any violation or alleged violation of any
Environmental Law.
16
(B) "Environmental Laws" means all laws, rules,
regulations, orders, decrees, common law, judgments or binding
agreements issued, promulgated or entered into by or with any
Governmental Entity relating to pollution or protection of the
environment or human health.
(C) "Environmental Permits" means all permits, licenses,
registrations and other authorizations required under applicable
Environmental Laws.
(D) "Hazardous Materials" means all hazardous, toxic,
explosive or radioactive substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos,
polychlorinated biphenyls, radon gas and all other substances or
wastes of any nature regulated pursuant to any Environmental Law.
(E) "Release" means any release, spill, emission, leaking,
dumping, injection, pouring, deposit, disposal, discharge,
dispersal, leaching or migration into the environment or within
any building, structure, facility or fixture.
(m) ERISA COMPLIANCE; EXCESS PARACHUTE PAYMENTS.
(i) Section 3.01(m) of the Company Disclosure Schedule
contains a true, complete and correct list of all Company Benefit Plans,
including each "employee pension benefit plan" (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as a "Company Pension Plan"), and "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA), and all material
Company Benefit Agreements. The Company has made available or provided to Parent
true, complete and correct copies of (A) each Company Benefit Plan and Company
Benefit Agreement, (B) the three (3) most recent annual reports on Form 5500
filed with the Internal Revenue Service with respect to each Company Benefit
Plan (if any such report was required pursuant to Applicable Laws), (C) the most
recent summary plan description of each Company Benefit Plan for which such
summary plan description is required, (D) each trust agreement and group annuity
contract relating to any Company Pension Plan and (E) the most recent Internal
Revenue Service determination letter for each Company Pension Plan intended to
be tax-qualified under Section 401(a) of the Code.
(ii) Each Company Benefit Plan has been administered in all
material respects in accordance with its terms. The Company, its subsidiaries
and each Company Benefit Plan are in compliance in all material respects with
the applicable provisions of ERISA and the Code, and all other domestic or
foreign (whether national, federal, state, provincial, local or otherwise) laws.
There is no pending or, to the knowledge of the Company, threatened, suit, claim
(other than claims for benefits in the ordinary course of business), action,
investigation or proceeding relating to Company Benefit Plans.
17
(iii) All Company Pension Plans intended to be qualified have
received favorable determination letters from the Internal Revenue Service with
respect to tax law changes prior to the Economic Growth and Tax Relief
Reconciliation Act of 2001, to the effect that such Company Pension Plans are
qualified under Section 401(a) of the Code or has been established under
prototype plan for which a determination letter from the Internal Revenue
Services has been obtained by the plan sponsor and no such determination letter
has been revoked nor, to the knowledge of the Company, has any such revocation
been threatened, nor has any such Company Pension Plan been amended, nor, to the
extent required, has there been a failure to amend, in each case since the date
of its most recent determination letter or application therefor in any respect
that would adversely affect its qualification or require security under Section
307 of ERISA.
(iv) No Company Benefit Plan is, or during the five (5) year
period ending on the date hereof, has been, subject to Title IV or Section 302
of ERISA or Section 412 of the Code. To the knowledge of the Company, none of
the Company, any of its subsidiaries, any officer of the Company or any of its
subsidiaries, any of the Company Benefit Plans which are subject to ERISA,
including the Company Pension Plans, or any trusts created thereunder or any
trustee or administrator thereof has engaged in a "prohibited transaction" (as
such term is defined in Section 406 ERISA or Section 4975 of the Code) that
could reasonably be expected to subject the Company, any of its subsidiaries or
any officer of the Company or any of its subsidiaries to any material tax or
penalty on prohibited transactions imposed by such Section 4975.
(v) With respect to each Company Benefit Plan that is an
employee welfare benefit plan, (A) such Company Benefit Plan is not funded
through a "welfare benefit fund" (as such term is defined in Section 419(e) of
the Code) and (B) such Company Benefit Plan that is a "group health plan" (as
such term is defined in Section 5000(b)(1) of the Code) complies in all material
respects with applicable requirements of Section 4980B(f) of the Code and Part 6
of Title I of ERISA. Neither the Company nor any of its subsidiaries has any
material obligation for retiree health or life benefits under any Company
Benefit Plan or Company Benefit Agreement.
(vi) Except as disclosed on Section 3.01(m)(vi) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement by the
Company nor the obtaining of the Stockholder Approval nor the consummation of
the merger will (A) entitle any current or former director, officer, employee or
consultant of the Company or any of its subsidiaries to severance pay, (B)
except pursuant to the Company Stock Plans which provide for Company Stock
Options, accelerate the time of payment or vesting or trigger any payment or
funding (through a grantor trust or otherwise) of compensation or benefits
under, or increase the amount payable or trigger any other material obligation
pursuant to, any Company Benefit Plan or Company Benefit Agreement or (C) result
in any material breach or violation of, or a default under, any Company Benefit
Plan or Company Benefit Agreement.
(vii) Other than payments that may be made to the persons
listed in Section 3.01(m)(vii) of the Company Disclosure Schedule, any amount or
economic benefit that could reasonably be expected to be received (whether in
cash or property or the vesting of property) as a result of the execution and
delivery of this Agreement by the Company, the obtaining of the Stockholder
Approval or the consummation of the Merger (including as a result of termination
of employment on or following the Effective Time) by any current or former
director, officer, employee or consultant of the Company or any of its
affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any Company Benefit Plan or
Company Benefit Agreement or otherwise would not be characterized as an "excess
parachute payment" (as defined in Section 280G(b)(1) of the Code).
(viii) The Company does not have material joint and several
liability (actual or potential) under either ERISA or the Code with respect to
any "employee benefit plan" (as defined in Section 3(3) of ERISA) solely by
reason of being treated as a single employer under Section 414 of the Code or
Section 4001(b) of ERISA, with any trade, business or entity other than the
Company
(n) TAXES.
(i) TAXES GENERALLY. Except as set forth on Schedule 3.01(n)
of the Company Disclosure Schedule:
18
(A) Each of the Company and its subsidiaries has
timely filed all material tax returns (as defined below in clause
(iv)) required to be filed by it. Each of the Company and each of
its subsidiaries has timely paid or caused to be timely paid all
taxes shown as due on such tax returns and any other material
amount of taxes with respect to the taxable periods covered by
such tax returns and all material other taxes as are due, and the
most recent financial statements contained in the Company Filed
SEC Documents reflect a reserve that is adequate in the reasonable
judgment of the Company, (in addition to any reserve for deferred
taxes established to reflect timing differences between book and
tax income) for all taxes payable by the Company and its
subsidiaries for all taxable periods and portions thereof through
the date of such financial statements.
(B) No material tax return of the Company or any of its
subsidiaries is under audit or examination by any taxing
authority, and no notice of such an audit or examination has been
received by the Company or any of its subsidiaries. There is no
deficiency, refund litigation, proposed adjustment or matter in
controversy with respect to any material amount of taxes due and
owing by the Company or any of its subsidiaries. Each deficiency
resulting from any completed audit or examination relating to any
material amount of taxes by any taxing authority has been timely
paid. The United States federal income tax returns of the Company
and its subsidiaries have either been examined and settled with
the Internal Revenue Service or closed by virtue of the expiration
of the applicable statute of limitations for all years through
January 29, 2000.
(C) With respect to the Company or any subsidiaries, there
is no currently effective agreement or other document extending,
or having the effect of extending, the period of assessment or
collection of any taxes and no power of attorney with respect to
any taxes has been executed or filed with any taxing authority.
(D) No Liens for taxes exist with respect to any assets or
properties of the Company or any of its subsidiaries, except for
statutory Liens for taxes not yet due and Liens that individually
or in the aggregate could not reasonably be expected to have a
material adverse effect on the Company.
(E) Neither the Company nor any of its subsidiaries will
be required to include in a taxable period ending after the
Effective Time any material taxable income attributable to income
that accrued (for purposes of the financial statements of the
Company included in the Company Filed SEC Documents) in a prior
taxable period but was not recognized for tax purposes in any
prior taxable period as a result of the installment method of
accounting, the completed contract method of accounting, the
long-term contract method of accounting, the cash method of
accounting or Section 481 of the Code or comparable provisions of
any other, domestic or foreign (whether national, federal, state,
provincial, local or otherwise) tax laws, or for any other reason.
19
(F) The Company and its subsidiaries have complied with
all applicable statutes, laws, ordinances, rules and regulations
relating to the payment and withholding of taxes (including
withholding of taxes pursuant to Sections 1441, 1442, 3121 and
3402 of the Code and similar provisions under any other domestic
or foreign (whether national, federal, state, provincial, local or
otherwise) tax laws), except for such statutes, laws, ordinances,
rules and regulations, the violation of which individually or in
the aggregate could not reasonably be expected to have a material
adverse effect on the Company. The Company and its subsidiaries
have, within the time and the manner prescribed by law, withheld
from and paid over to the proper Governmental Entities all amounts
required to be so withheld and paid over under Applicable Laws,
except for such amounts which individually or in the aggregate
could not reasonably be expected to have a material adverse effect
on the Company.
(G) Neither the Company nor any subsidiary has entered
into a Listed Transaction or a transaction that is the same as, or
substantially similar to, a "Listed Transactions" for purposes of
ss. 1.6011-4(b)(2) of the Income Tax Regulations and xx.xx.
301.6111-2(b)(2) and 301.6112-1(b)(2) of the Procedure and
Administration Regulations.
(ii) None of the Company or any of its subsidiaries has
constituted either a "distributing corporation" or a "controlled
corporation" (in each case, within the meaning of Section 355(a)(1)(A)
of the Code) in a distribution of stock qualifying for tax-free
treatment under Section 355(e) of the Code (A) in the two years prior
to the date of this Agreement or (B) in a distribution that could
otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(iii) The Company was not, at any time during the period
specified in Section 897(c)(1)(A)(ii) of the Code, a United States real
property holding corporation within the meaning of Section 897(c)(2) of
the Code.
(iv) As used in this Agreement, (A) "taxes" shall include (1)
all forms of taxation, whenever created or imposed, and whether
domestic or foreign, and whether imposed by a national, federal, state,
provincial, local or other Governmental Entity, including all interest,
penalties and additions imposed with respect to such amounts, (2)
liability for the payment of any amounts of the type described in
clause (1) as a result of being a member of an affiliated,
consolidated, combined or unitary group and (3) liability for the
payment of any amounts as a result of being party to any tax sharing
agreement or as a result of any express or implied obligation to
indemnify any other person with respect to the payment of any amount
described in clause (1) or (2) and (B) "tax returns" shall mean all
domestic or foreign (whether national, federal, state, provincial,
local or otherwise) returns, declarations, statements, reports,
schedules, forms and information returns relating to taxes and any
amended tax return.
(o) TITLE TO PROPERTIES.
(i) The Company Disclosure Schedule contains (1) a true and
complete listing and (2) a description that is true and complete in all
material respects of all real property owned or leased by the Company
and its subsidiaries. Each of the Company and its subsidiaries has good
and marketable title to, or valid leasehold interests in, all of its
properties and assets except for such as are no longer used or useful
in the conduct of its businesses or as have been disposed of in the
ordinary course of business and except for defects in title, easements,
restrictive covenants and similar encumbrances that individually or in
the aggregate could not reasonably be expected to have a material
adverse effect on the Company. Except as set forth on Schedule 3.01 (o)
of the Company Disclosure Schedule, all such properties and assets,
other than properties and assets in which the Company or any of its
subsidiaries has a leasehold interest, are free and clear of all Liens,
except for Liens that individually or in the aggregate could not
reasonably be expected to have a material adverse effect on the
Company.
20
(ii) Each of the Company and its subsidiaries has complied
with the terms of all leases to which it is a party and under which it
is in occupancy, and all such leases are in full force and effect,
except for such noncompliances or failures to be in full force and
effect that individually or in the aggregate could not reasonably be
expected to have a material adverse effect on the Company. The Company
and its subsidiaries enjoy peaceful and undisturbed possession under
all such leases, except for failures to so enjoy possession that
individually or in the aggregate could not reasonably be expected to
have a material adverse effect on the Company.
(p) INTELLECTUAL PROPERTY.
(i) Section 3.01(p) of the Company Disclosure Schedule lists
all material registered trademarks, tradenames, service marks,
registered copyrights and applications therefor, patents and patent
applications, if any, owned by or licensed to the Company or any of its
subsidiaries as of the date of this Agreement. Each of the Company and
its subsidiaries owns, or is validly licensed or otherwise has the
right to use, in each case free and clear of any Liens, all
Intellectual Property (as defined below in clause (iv)) used or
necessary to carry on its business as now being conducted except for
Intellectual Property the failure of which to own or have the right to
use could not reasonably be expected to have a material adverse effect
on the Company. The Company has made available to Parent true, complete
and correct copies of all material license agreements relating to
Intellectual Property to which the Company or any of its subsidiaries
is a party as of the date of this Agreement.
(ii) To the Company's knowledge, none of the Company or any of
its subsidiaries has infringed upon, misappropriated or otherwise come
into conflict with any Intellectual Property or other proprietary
information of any other person, except for any such infringement,
misappropriation or other conflict that individually or in the
aggregate could not reasonably be expected to have a material adverse
effect on the Company. None of the Company or any of its subsidiaries
has received any written material charge, complaint, claim, demand or
notice alleging any such infringement, misappropriation or other
conflict (including any claim that the Company or any of its
subsidiaries must license or refrain from using any Intellectual
Property or other proprietary information of any other person), or is
party to or the subject of any pending or, to the knowledge of the
Company, threatened, material suit, claim, action, investigation or
proceeding before or by any Governmental Entity with respect to any
such infringement, misappropriation or conflict, that has not been
settled or otherwise fully resolved. To the Company's knowledge, no
other person has infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property owned by, licensed to or
otherwise used by the Company or any of its subsidiaries, except for
any such infringement, misappropriation or other conflict that
individually or in the aggregate could not reasonably be expected to
have a material adverse effect on the Company.
(iii) Each of the Company and its subsidiaries has taken all
reasonable and necessary steps to protect the Intellectual Property
listed on Section 3.01(p) of the Company Disclosure Schedule and rights
thereunder, and to the knowledge of the Company no such rights to any
Intellectual Property listed on Section 3.01(p) of the Company
Disclosure Schedule have been lost or are in jeopardy of being lost as
a result of any act or omission by the Company or any of its
subsidiaries.
(iv) As used in this Agreement, "Intellectual Property" shall
mean trademarks (registered or unregistered), service marks, brand
names, certification marks, trade dress, assumed names, trade names and
other indications of origin, the goodwill associated with the foregoing
and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing, including any extension,
modification or renewal of any such registration or application; trade
secrets and confidential information and rights in any jurisdiction to
limit the use or disclosure thereof by any person; registration or
applications for registration of copyrights in any jurisdiction, and
any renewals or extensions thereof; any similar intellectual property
or proprietary rights similar to any of the foregoing; licenses,
immunities, covenants not to xxx and the like relating to any of the
foregoing; and any claims or causes of action arising out of or related
to any infringement, misuse or misappropriation of any of the
foregoing.
21
(q) STATE TAKEOVER STATUTES. Assuming the accuracy of the
representations and warranties of Parent and Sub set forth in Section 3.02(j),
the approval of this Agreement, the Merger and the Support Agreement by the
Board of Directors of the Company referred to in Section 3.01(d) and the
Recitals constitutes approval of the Merger for purposes of Section 203 of the
DGCL and represents all of the action necessary to ensure that the restrictions
on business combinations (as such term is defined therein) set forth in Section
203 of the DGCL do not and will not apply to the execution or delivery of this
Agreement (including any amendments to this Agreement) or the Support Agreement
or the consummation of the Merger and the other transactions contemplated hereby
and by the Support Agreement. To the knowledge of the Company, no state takeover
or other similar statute or regulation is applicable to this Agreement, the
Merger or the other transactions contemplated hereby or by the Support
Agreement.
(r) VOTING REQUIREMENTS. Assuming the accuracy of the representations
and warranties of Parent and Sub set forth in Section 3.02(j), the affirmative
vote at the Stockholders Meeting (as defined in Section 5.01(a)) or any
adjournment or postponement thereof of the holders of a majority of the votes
represented by all the outstanding shares of Company Common Stock in favor of
adopting this Agreement (the "STOCKHOLDER APPROVAL") is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve or adopt this Agreement or the Merger.
(s) BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker, investment
banker, financial advisor or other person, other than Xxxxx X. Xxxxxxx Company,
L.P., the fees and expenses of which will be paid by the Company, is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The Company has delivered to
Parent true and complete copies of all agreements under which any such fees or
expenses are payable and all indemnification and other agreements related to the
engagement of the persons to whom such fees are payable.
(t) OPINION OF FINANCIAL ADVISOR. The Company has received the opinion
of Xxxxx X. Xxxxxxx Company, L.P., in customary form, to the effect that, as of
the date of this Agreement, the consideration to be received in the Offer and
the Merger by the holders of the Company Common Stock is fair to the holders of
the Company Common Stock from a financial point of view, a copy of which opinion
will be delivered to Parent by the Company promptly after receipt by the
Company.
(u) RIGHTS AGREEMENT. The Company has taken all action such that (i)
(A) no "Distribution Date" (as defined in the Rights Agreement) shall occur and
neither Parent, Sub nor any of their Affiliates, individually or taken together,
shall become an "Acquiring Person" (as defined in the Rights Agreement) and (B)
the Rights Agreement and the Rights shall not apply to Parent, Sub or any of
their Affiliates, individually or taken together, in the case of (A) or (B),
solely as a result of the approval, execution and delivery of this Agreement and
the Support Agreement, the announcement or consummation of the Merger, or the
transactions contemplated hereby and thereby, or the announcement or
consummation of the Merger, and (ii) all Rights issued under the Rights
Agreement shall, immediately prior to the Effective Time, be cancelled, void and
of no further force or effect.
22
(v) CERTAIN BUSINESS PRACTICES. Neither the Company nor any of its
Subsidiaries nor any director, officer, employee or agent of the Company or any
of its Subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful payments relating to political activity, (ii)
made any unlawful payment to any foreign or domestic government official or
employee or to any foreign or domestic political party or campaign or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, (iii)
consummated any transaction, made any payment, entered into any agreement or
arrangement or taken any other action in violation of Section 1128B(b) of the
Social Security Act, as amended, or (iv) made any other unlawful payment except
for the foregoing matters that are not material in any respect to the Company.
(w) COMPANY DATABASE. As soon as practicable following the date of this
Agreement, the Company will deliver to Parent a letter representing and
warranting (i) the number of unique (i.e., individuals not duplicated in the
listing) customers of the Company and its subsidiaries who have purchased goods
from the Company and its subsidiaries in the twelve (12) month period ended June
30, 2003, and (ii) the number of unique individuals who have requested catalogs
or other information from the Company and its subsidiaries in the twelve (12)
month period ended June 30, 2003, together in each instance with such customer's
or individual's e-mail address and postal address, contained in the Company's
customer databases used in the operation of the business of the Company and its
subsidiaries (the "DATABASES"). The Company will also represent and warrant to
Parent that the Databases contain the names of current, former and potential
customers of the Company and its subsidiaries and Personally Identifiable
Information related thereto. The letter will also state that except as set forth
therein, neither the Company nor any of its subsidiaries has, since January 1,
2002, sold, assigned, leased, transferred, permitted the use of or otherwise
disclosed to any other Person any information contained in any of the Databases,
including any Personally Identifiable Information, and all information contained
in the Databases has been collected, used and maintained in accordance with all
applicable privacy laws, including, without limitation, the provisions of the
Children's Online Privacy Protection Act of 1998, as amended, and any similar
federal, state or local online privacy laws. For purposes hereof and of the
letter, the term "PERSONALLY IDENTIFIABLE INFORMATION" means information that
can be used to identify or contact consumers, including, by way of illustration,
their first and last name, physical address, e-mail address, Social Security
number or telephone number.
(x) DISCLOSURE. True and complete copies of all documents listed in the
Company Disclosure Schedule have been made available or provided to Parent. The
books of account, stock record books and other financial and corporate records
of the Company and its subsidiaries, including the minute books of the Company's
Stockholders and Board of Directors, all of which have been made available to
Parent, are complete and correct in all material respects, including the
maintenance of a system of internal accounting controls sufficient to provide
reasonable assurance that transactions are executed with its management's
authorizations and such books and records are accurately reflected in all
material respects in the Company Filed SEC Documents.
23
(y) SUPPLIERS. As of the date hereof, to the Company's knowledge, no
current supplier whose products or services are material to the Company's
business, has terminated or materially reduced or threatened to terminate or
materially reduce its provision of products or services to the Company.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Except
as set forth on the disclosure schedule (with specific reference to the Section
or Subsection of this Agreement to which the information stated in such
disclosure relates, with such disclosure to be applicable to other Sections or
Subsections of this Agreement to the extent a matter is disclosed in such a way
as to make its relevance to the information called for by such other Section or
Subsection readily apparent) delivered by Parent to the Company prior to the
execution of this Agreement (the "PARENT DISCLOSURE SCHEDULE"), Parent and Sub
represent and warrant to the Company as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of Parent and Sub
(i) is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is incorporated, (ii) has all requisite
corporate power and authority to carry on its business as now being conducted
and (iii) 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, other than where the failure to be so organized, existing, qualified
or licensed or in good standing individually or in the aggregate could not
reasonably be expected to have a material adverse effect on Parent. Parent has
made available to the Company true and complete copies of its Restated Articles
of Incorporation and By-laws and the Certificate of Incorporation and By-laws of
Sub, in each case as amended to the date of this Agreement.
(b) INTENTIONALLY OMITTED.
(c) AUTHORITY; NONCONTRAVENTION. Parent and Sub have the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Parent and Sub and the consummation by Parent and
Sub of the transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action on the part of Parent and Sub and no other
corporate proceedings on the part of Parent or Sub are necessary to approve this
Agreement or to consummate the transactions contemplated by this Agreement. This
Agreement has been duly executed and delivered by Parent and Sub, as applicable,
and constitutes a valid and binding obligation of Parent and Sub, as applicable,
enforceable against Parent and Sub, as applicable, in accordance with its terms
subject to (i) applicable bankruptcy, insolvency, fraudulent transfer and
conveyance, moratorium, reorganization, receivership and similar laws relating
to or affecting the enforcement of the rights and remedies of creditors
generally, (ii) principles of equity (regardless of whether considered and
applied in a proceeding in equity or at law) and (iii) an implied covenant of
good faith and fair dealing. The execution and delivery of this Agreement by
Parent and Sub and the consummation of the transactions contemplated hereby and
the compliance by Parent and Sub with the provisions of this Agreement do not
and will not conflict with, 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, or result in, termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the creation of
any Lien upon any of the properties or assets of Parent under, or give rise to
any increased, additional, accelerated or guaranteed rights or entitlements
under, any provision of (i) the certificate of incorporation or by-laws of
Parent or the certificate of incorporation or by-laws of Sub, (ii) any Contract
to which Parent or Sub is a party or any of their respective properties or
assets is subject or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any (A) statute, law, ordinance, rule or
regulation or (B) judgment, order or decree, in each case, applicable to Parent
or Sub or their respective properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, violations, defaults, rights,
results, losses, Liens or entitlements that individually or in the aggregate
could not reasonably be expected to prevent or materially impede or delay the
consummation of the Merger or the other transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Parent or Sub in connection with the execution and delivery of this
Agreement by Parent and Sub or the consummation by Parent and Sub of the
transactions contemplated hereby or the compliance with the provisions of this
Agreement, except for (1) the filing of a premerger notification and report form
under the HSR Act or any other applicable competition, merger control, antitrust
or similar law or regulation, (2) the filing with the SEC of all documents
related to the Offer and the Merger required to be filed pursuant to the
Exchange Act, (3) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
(4) filings with the Nasdaq and (5) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made individually or in the aggregate could not reasonably be
expected to prevent or materially impede or delay the consummation of the Merger
or the other transactions contemplated by this Agreement.
(d) INTENTIONALLY OMITTED.
(e) INTENTIONALLY OMITTED.
(f) VOTING REQUIREMENTS. No vote of the holders of shares of Parent
Common Stock or any other class or series of capital stock of Parent is
necessary to approve or adopt this Agreement, the Merger or the other
transactions contemplated hereby.
24
(g) LITIGATION. As of the date of this Agreement, except as disclosed
on all forms, reports, schedules, statements and other documents required to be
filed with the SEC by Parent since February 1, 2001 (together with all
information incorporated therein by reference, the "PARENT SEC DOCUMENTS"),
there is no suit, claim, action, investigation or proceeding pending against or
affecting Parent or any of its subsidiaries or any of their respective assets
before or by any Governmental Entity that individually or in the aggregate could
reasonably be expected to have a material adverse effect on Parent or Sub or
prevent or materially impede or delay the consummation of the Merger and the
other transaction contemplated by this Agreement nor is there any judgment,
order or decree of any Governmental Entity or arbitrator outstanding against
Parent or any of its subsidiaries that individually or in the aggregate could
reasonably be expected to prevent or materially impede or delay the consummation
of the Merger and the other transactions contemplated by this Agreement.
(h) BROKERS. No broker, investment banker, financial advisor or other
person, other than Xxxxxx Brothers, the fees and expenses of which will be paid
by Parent, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or Sub.
(i) INTERIM OPERATIONS OF SUB. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby and has engaged in no business
other than in connection with the transactions contemplated by this Agreement.
(j) COMPANY CAPITAL STOCK. As of the time immediately prior to the
execution of this Agreement, each of Parent and Sub is not, nor at any time
during the last three years has either been, an "interested stockholder" of the
Company as defined in Section 203 of the DGCL. As of the time immediately prior
to the execution of this Agreement, each of Parent and Sub does not own
(directly or indirectly, beneficially or of record) and is not a party to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, any shares of capital stock of the Company (other than
as contemplated by this Agreement).
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. CONDUCT OF BUSINESS.
(a) CONDUCT OF BUSINESS. During the period from the date of this
Agreement to the Effective Time, except as consented to in writing by Parent or
as specifically required or permitted by this Agreement, the Company shall, and
shall cause its subsidiaries to, in all material respects, carry on their
respective businesses, and continue all pricing, sales, receivables and payables
practices, in the ordinary course consistent with past practice and comply with
all Applicable Laws, rules and regulations in all material respects and use all
commercially reasonable efforts to preserve their assets, brands, licenses and
technology and their relationships with customers, suppliers, licensors,
licensees, distributors and others having material business dealings with them
as they exist on the date hereof. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, except as consented to in writing by Parent, which consent shall not be
unreasonably withheld or delayed, as set forth in Section 4.01(a) of the Company
Disclosure Schedule, or as specifically required or permitted by this Agreement,
the Company shall not, and shall not permit any of its subsidiaries to take any
of the following actions, provided, however, the Company shall not be required
to obtain the consent of Parent to (i) the refinancing, sale-leaseback,
modification, amendment or termination of that certain Construction Loan
Agreement, dated August 6, 1999, by and between the Company and Allfirst Bank,
or the related mortgage Note, dated August 6, 1999, from the Company to Allfirst
Bank, respecting the Company's warehouse facility in Hanover, Pennsylvania
25
(collectively, the "ALLFIRST MORTGAGE"), provided that any such refinancing,
sale-leaseback, modification, amendment or termination shall be consummated on
terms substantially similar to those previously disclosed to Parent, and in the
case of a sale-leaseback transaction, would not result in an annual rental in
excess of $650,000 in the first five years following the sale-leaseback
transaction, or (ii) the Company's reverse stock split to be effected to
maintain the Company's listing on the Nasdaq National Market and any actions or
transactions customarily associated therewith; provided that the Company shall
use its commercially reasonable efforts to defer the date currently scheduled
for such shareholders meeting until a date after the Closing Date, or (iii) the
settlement of the class action lawsuits pending against the Company and
identified in the Company Filed SEC Documents so long as the aggregate amount to
be paid under any settlement does not exceed the Company's available insurance
coverage applicable to such lawsuits:
(i) (A) 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, except for dividends by a direct or
indirect wholly owned subsidiary of the Company to its parent, (B)
purchase, redeem or otherwise acquire any shares of capital stock or
any other securities of the Company or its subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other
securities or (C) 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 or
any of its other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other equity or voting interests or
any Convertible Securities or any stock appreciation rights or other
rights that are linked in any way to the price of Company Common Stock
(other than the issuance of shares of Company Common Stock pursuant to
the exercise of warrants or options outstanding as of the date of this
Agreement and other than the issuance in the ordinary course of
business consistent with past practice of up to an additional 75,000
shares of Company Common Stock, in the aggregate, and not more than
10,000 shares of Company Common Stock to any one employee, under the
Company's Stock Plans pursuant to new grants of options or share
purchase rights and such options or purchase rights will not vest or
become exercisable sooner than the six month anniversary of the date of
this Agreement);
(iii) amend or propose to amend its Certificate of
Incorporation or By-laws (or similar organizational documents) other
than any amendments necessary to effectuate the reverse stock split
referred to above;
(iv) directly or indirectly acquire or agree to acquire (A) by
merging or consolidating with, or by purchasing all or a substantial
portion of the assets of, or by any other manner, any assets
constituting a business or any corporation, partnership, limited
liability company, joint venture or association or other entity or
division thereof, or any direct or indirect interest in any of the
foregoing, or (B) any assets other than inventory or other immaterial
assets in each case in the ordinary course of business consistent with
past practice;
26
(v) directly or indirectly sell, lease, license, sell and
leaseback, mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets or any interest
therein, except sales of Inventory, factoring of its accounts
receivable and sales of immaterial assets, in each case in the ordinary
course of business consistent with past practice;
(vi) (x) repurchase, prepay or incur any indebtedness for
borrowed money or guarantee any indebtedness of another person or issue
or sell any debt securities or options, warrants, calls or other rights
to acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of another person, enter
into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, except for
short-term borrowings incurred and letters of credit opened, in each
case in the ordinary course of business consistent with past practice
or (y) make any loans, advances (other than in respect of employee
credit cards or travel expenses advanced to employees, in each case in
the ordinary course of business) or capital contributions to, or
investments in, any other person, other than the Company, or any direct
or indirect wholly owned subsidiary of the Company;
(vii) incur or commit to incur any capital expenditures, or
any obligations or liabilities in connection therewith, in any manner
inconsistent in any material respect with the Company's capital budget
for 2003, a true and complete copy of which (including all back-up
materials) has been provided to Parent prior to the date of this
Agreement;
(viii) pay, discharge, settle or satisfy any material claims
(including claims of stockholders), liabilities or obligations (whether
absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice or as required by
their terms as in effect on the date of this Agreement of claims,
liabilities or obligations reflected or reserved against in the most
recent audited financial statements (or the notes thereto) of the
Company included in the Company Filed SEC Documents (for amounts not in
excess of such reserves) or incurred since the date of such financial
statements in the ordinary course of business consistent with past
practice, or waive, release, grant or transfer any right of material
value, other than in the ordinary course of business consistent with
past practice, or waive any material benefits of, or agree to modify in
any materially adverse respect, or, subject to the terms hereof, fail
to enforce, or consent to any matter with respect to which its consent
is required under, any confidentiality, standstill or similar agreement
to which the Company or any of its subsidiaries is a party;
(ix) (A) enter into, modify, amend or terminate any Contract
to which the Company or any subsidiary thereof is a party which if so
entered into, modified, amended or terminated could be reasonably
likely to (x) have a material adverse effect on the Company, (y) impair
in any material respect the ability of the Company to perform its
obligations under this Agreement or (z) prevent or materially delay the
consummation of the transactions contemplated by this Agreement, or (B)
modify or amend that certain Loan and Security Agreement between the
Company, as lead borrower, and Xxxxx Fargo Retail Finance, LLC, dated
as of September 24, 2001, as amended (the "SENIOR CREDIT FACILITY"),
provided that the act of the Company obtaining a consent or waiver
respecting any provision of the Senior Credit Facility shall not be
deemed to be an amendment or modification of the Senior Credit
Facility;
(x) enter into any Contract to the extent consummation of the
transactions contemplated by this Agreement or compliance by the
Company with the provisions of this Agreement could reasonably be
expected to conflict with, or result in a violation or breach of, or
default (with or without notice or lapse of time, or both) under, or
give rise to a right of, or result in, termination, cancellation or
acceleration of any obligation or to a loss of a benefit under, or
result in the creation of any Lien in or upon any of the properties or
assets of the Company or any of its subsidiaries under, or give rise to
any increased, additional, accelerated, or guaranteed right or
entitlements of any third party under, or result in any material
alteration of, any provision of such Contract;
27
(xi) enter into any Contract containing any restriction on the
ability of the Company or any of its subsidiaries to assign its rights,
interests or obligations thereunder, unless such restriction expressly
excludes any assignment to Parent or any of its subsidiaries in
connection with or following the consummation of the Merger and the
other transactions contemplated by this Agreement;
(xii) (A) except as otherwise contemplated by this Agreement
or as required to comply with Applicable Laws or any Contract, Company
Benefit Plan or Company Benefit Agreement existing on the date of this
Agreement, pay any material benefit not provided for as of the date of
this Agreement under any Contract, Company Benefit Agreement or Company
Benefit Plan, (B) adopt or enter into any collective bargaining
agreement or other labor union contract applicable to the employees of
the Company or any subsidiary thereof, (C) except as set forth in
Section 4.01(a)(xii)(C) of the Company Disclosure Schedule, effect any
increase in or modification of compensation payable to, any (i) officer
or director of the Company or any subsidiary or (ii) any employee of
the Company or any subsidiary except, with respect to such employees,
in the ordinary course of business consistent with past practice, or
(D) enter into any employment contract or arrangement with any officer
or employee of the Company or any subsidiary other than at will
arrangements that may be terminated without cost or charge upon not
more than 30 days prior notice; provided, however, that no provision of
this Section 4.01 shall prevent the Company, between the date of this
Agreement and the Effective Time, with the consent of Parent (which
consent shall not be unreasonably withheld) and in consultation with
Parent, from implementing a program or programs having an aggregate
value of up to $5,000 per employee or up to $250,000 in the aggregate
for the purpose of retaining employees of the Company or its
subsidiaries;
(xiii) except in the ordinary course consistent with past
practice and except as required to comply with Applicable Laws or any
provision of any Company Benefit Plan, Company Benefit Agreement or
other Contract as in effect on the date of this Agreement or as
otherwise contemplated by this Agreement, (A) take any action to fund
or in any other way secure the payment of compensation or benefits
under any Company Benefit Plan, Company Benefit Agreement or other
Contract or (B) take any action to accelerate the vesting or payment of
any compensation or benefit under any Company Benefit Plan or Company
Benefit Agreement or other Contract;
(xiv) maintain insurance at levels materially less than
current levels or otherwise in a manner inconsistent with past
practice;
(xv) take any action (or omit to take any action) if such
action (or omission) would or could reasonably be expected to result in
(A) any representation and warranty of the Company set forth in this
Agreement that is qualified as to materiality becoming untrue, (B) any
such representation and warranty that is not so qualified becoming
untrue in any material respect or (C) any condition to the Merger set
forth in Article VI not being satisfied;
(xvi) commence any suit, action or proceeding not in the
ordinary course of business (excluding, without limitation, a suit,
claim, action or proceeding in connection with the collection of
accounts receivable, to enforce the terms of this Agreement or as a
result of a suit, action or proceeding commenced against the Company or
any of its subsidiaries);
28
(xvii) change its fiscal year, revalue any of its material
assets or, except as required by generally accepted accounting
principles, make any changes in accounting methods, principles or
practices;
(xviii) engage in (A) any trade loading practices or any other
promotional sales or discount activity with any customers or
distributors with the effect of accelerating to pre-Closing periods
sales to the trade or otherwise that would otherwise be expected (based
on past practice) to occur in post-Closing periods, (B) any practice
which would have the effect of accelerating to pre-Closing periods
collections of receivables that would otherwise be expected (based on
past practice) to be made in post-Closing periods, (C) any practice
which would have the effect of postponing to post-Closing periods
payments by the Company or any of its subsidiaries that would otherwise
be expected (based on past practice) to be made in pre-Closing periods
or (D) any other promotional sales, discount activity or inventory
overstocking or understocking, in each case in this clause (D) in a
manner outside the ordinary course of business;
(xix) except as set forth in the Company's 2003 capital
budget, enter into any lease for real property or open any new retail
stores; or
(xx) authorize any of, or commit, resolve or agree to take any
of the foregoing actions.
(b) CERTAIN TAX MATTERS. During the period from the date of this
Agreement to the Effective Time, the Company shall, and shall cause each of its
subsidiaries to, (i) prepare in accordance with Applicable Laws and, to the
extent not inconsistent with Applicable Laws, the Company's past practice in
preparing its tax returns, and timely file, all material tax returns ("COMPANY
POST-SIGNING RETURNS") required to be filed by it, (ii) timely pay all taxes due
and payable in respect of such Company Post-Signing Returns that are so filed
and any other material amount of taxes that accrue before the Effective Time,
(iii) accrue a reserve in its books and records and financial statements in
accordance with GAAP and the Company's past practice for all taxes payable by it
for which no Company Post-Signing Return is due prior to the Effective Time,
(iv) promptly notify Parent of any suit, claim, action, investigation,
proceeding or audit (collectively, "ACTIONS") pending against or with respect to
the Company or any of its subsidiaries in respect of any tax and not settle or
compromise any such Action without Parent's prior written consent, which consent
shall not be unreasonably withheld or delayed, (v) not make any material tax
election without Parent's consent, and (vi) cause any and all existing tax
sharing agreements, tax indemnity obligations and similar agreements,
arrangements and practices with respect to taxes to which the Company or any of
its subsidiaries is a party or by which the Company or any of its subsidiaries
is otherwise bound to be terminated as of the Closing Date so that after such
date neither the Company nor any of its subsidiaries shall have any further
rights or liabilities thereunder.
(c) ADVICE OF CHANGES; FILINGS. The Company shall (i) at the reasonable
request of Parent, confer with Parent on a regular and frequent basis to report
on operational matters and other matters reasonably requested by Parent and (ii)
promptly advise Parent orally and in writing of any change or event that could
reasonably be expected to have a material adverse effect on the Company. Upon
obtaining knowledge thereof, the Company shall give prompt notice to Parent of
any representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate such that the condition set forth in Section 6.02(a) would
not be satisfied; provided, however, that no such notification shall affect the
conditions to the obligations of the parties under this Agreement or be deemed
to constitute a modification or any representation or warranty of the Company
made herein. The Company and Parent shall each promptly provide the other copies
of all filings made by such party with any Governmental Entity in connection
with this Agreement and the transactions contemplated hereby, other than the
portions of such filings that include confidential information not directly
related to the transactions contemplated by this Agreement.
29
(d) LITIGATION. The Company shall provide to Parent immediate written
notice and copies of all pleadings and correspondence in connection with any
suit, claim, action, investigation or proceeding before or by a Governmental
Entity against the Company and/or its directors relating to the transactions
contemplated by this Agreement.
(e) TERMINATION OF AUTO LEASES. The Company shall use its best efforts
to either (i) terminate all outstanding automobile leases for cars driven by
officers of the Company, or (ii) assign all such leases to the applicable
officer, in each case such that it has no further liability thereunder.
SECTION 4.02. CONDUCT OF BUSINESS BY PARENT. During the period from the
date of this Agreement to the Effective Time, Parent agrees that, except as
consented to in writing by the Company or as specifically required or permitted
by this Agreement:
(a) CONDUCT OF BUSINESS. Parent shall use its commercially reasonable
efforts to preserve intact its business in all material respects and preserve
its relationships with customers, suppliers, licensors, licensees, distributors
and others having material business dealings with it; provided, however, that
nothing herein shall prevent Parent from selling, in a transaction or series of
transactions, any assets that its Board of Directors determines is not
strategically valuable to Parent and its business as then conducted or
contemplated to be conducted following the Merger so long as no such transaction
or series of transactions results in the sale or all or substantially all of
Parent's assets.
(b) DIVIDENDS. Except for dividends or distributions in connection with
its rights plan, Parent shall not, and shall not permit any of its subsidiaries
to declare or pay any dividends on or make other distributions in respect of any
of its capital stock, except dividends by a direct or indirect wholly owned
subsidiary of Parent to its parent.
(c) LIQUIDATION. Parent shall not adopt a plan of complete or partial
liquidation with respect to Parent or resolutions providing for or authorizing
such a liquidation or a dissolution.
30
(d) INTENTIONALLY OMITTED.
(e) NO GENERAL AUTHORIZATION. Parent shall not, nor shall it permit any
of its subsidiaries to, authorize any of, or commit, resolve or agree to take
any of, the actions prohibited by paragraphs (a) through (d) of this Section
4.02.
(f) ADVICE OF CHANGES. Parent shall promptly advise the Company orally
and in writing of any change or event known to Parent that could reasonably be
expected to have a material adverse effect on Parent.
(g) INTENTIONALLY OMITTED.
(h) CERTAIN TAX MATTERS. CERTAIN TAX MATTERS. During the period from
the date of this Agreement to the Effective Time, the Parent shall, and shall
cause each of its subsidiaries to, (i) prepare in accordance with Applicable
Laws and, to the extent not inconsistent with Applicable Laws, the Parent's past
practice in preparing its tax returns, and timely file, all material tax returns
("PARENT POST-SIGNING RETURNS") required to be filed by it, (ii) timely pay all
taxes due and payable in respect of such Parent Post-Signing Returns that are so
filed and any other material amount of taxes that accrue before the Effective
Time, (iii) accrue a reserve in its books and records and financial statements
in accordance with GAAP and the Parent's past practice for all taxes payable by
it for which no Parent Post-Signing Return is due prior to the Effective Time,
in each case only where such failure to prepare, file, pay or accrue would cause
a material adverse effect on Parent's ability to consummate the transactions
contemplated hereby.
SECTION 4.03. NO SOLICITATION.
(a) From the date hereof until this Agreement has been terminated as
provided herein, the Company shall not, nor shall it permit any of its
subsidiaries to, or authorize or permit any director, officer or employee of the
Company or any of its subsidiaries or any investment banker, attorney,
accountant or other advisor or representative of the Company or any of its
subsidiaries (the "COMPANY REPRESENTATIVES") to, directly or indirectly, (i)
solicit, initiate or knowingly encourage, or take any other action knowingly to
facilitate, any Takeover Proposal (as defined below) or any inquiries or the
making of any proposal that constitutes or could reasonably be expected to lead
to a Takeover Proposal or (ii) enter into, continue or otherwise participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, or otherwise cooperate in any way with respect to,
any Takeover Proposal; provided, however, that at any time prior to obtaining
the Stockholder Approval, the Board of Directors of the Company or the Company
Representatives may, in response to a bona fide written Takeover Proposal that
such Board of Directors determines in good faith constitutes or is reasonably
likely to lead to a Superior Proposal (as defined below), and which Takeover
Proposal was unsolicited and did not otherwise result from a breach of this
Section 4.03, and subject to compliance with Section 4.03(c) and (d), (x)
furnish information with respect to the Company and its subsidiaries to the
person making such Takeover Proposal (and its representatives) pursuant to a
customary confidentiality agreement, provided that all such information is
provided to Parent or has been previously provided to Parent, and (y)
participate in discussions or negotiations with the person making such Takeover
Proposal (and its representatives) regarding such Takeover Proposal. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in the preceding sentence by any director, officer or employee of the
Company or any of its subsidiaries or any investment banker, attorney,
accountant or other advisor or representative of the Company or any of its
subsidiaries shall be deemed to be a breach of this Section 4.03(a) by the
Company.
31
The term "Takeover Proposal" means any inquiry, proposal or offer from
any person relating to, or that is reasonably likely to lead to, any direct or
indirect acquisition, in one transaction or a series of transactions, including
any merger, consolidation, tender offer, exchange offer, stock acquisition,
asset acquisition, share exchange, business combination, recapitalization,
liquidation, dissolution, joint venture or similar transaction, of (A) assets or
businesses that constitute or represent 10% or more of the total revenue,
operating income, EBITDA or assets of the Company and its subsidiaries, taken as
a whole, or (B) 10% or more of the outstanding shares of Company Common Stock or
capital stock of, or other equity or voting interests in, any of the Company's
subsidiaries directly or indirectly holding, individually or taken together, the
assets or businesses referred to in clause (A) above, in each case other than
the transactions contemplated by this Agreement.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall, unless the Board of Directors or a committee thereof determines
in good faith, after consulting with legal counsel, that the failure to take any
such action set forth in this Section 4.03(b) would be reasonably likely to
result in a breach of its fiduciary duties under Applicable Laws (i) (A)
withdraw (or modify in a manner adverse to Parent or Sub) the recommendation by
such Board of Directors or any such committee of this Agreement or the Merger,
(B) determine that this Agreement or the Merger is no longer advisable, (C)
recommend that the stockholders of the Company reject this Agreement or the
Merger, (D) recommend the approval or adoption of any Takeover Proposal or (E)
resolve, agree or propose publicly to take any such actions (each such action
set forth in this Section 4.03(b)(i) being referred to herein as an "ADVERSE
RECOMMENDATION CHANGE"), (ii) adopt or approve any Takeover Proposal, or
withdraw its approval of this Agreement, or resolve or agree to take any such
actions, (iii) without limiting Section 4.03(b)(i), propose publicly to adopt or
approve any Takeover Proposal or propose publicly to withdraw its approval of
this Agreement, or resolve or agree to take any such actions, or (iv) cause or
permit the Company to enter into any letter of intent, memorandum of
understanding, agreement in principle, acquisition agreement, merger agreement,
option agreement, joint venture agreement, partnership agreement or other
agreement (each, an "ACQUISITION AGREEMENT") constituting or related to, or
which is intended to or is reasonably likely to lead to, any Takeover Proposal
(other than a confidentiality agreement referred to in Section 4.03(a)), or
resolve or agree to take any such actions. Notwithstanding anything in this
Section 4.03 to the contrary, at any time prior to obtaining the Stockholder
Approval, the Board of Directors of the Company may, in response to a Superior
Proposal and that did not result from a breach of Section 4.03(a), cause the
Company to terminate this Agreement pursuant to Section 7.01(f) and concurrently
enter into a binding Acquisition Agreement containing the terms of a Superior
Proposal; provided, however, that the Company shall not terminate this Agreement
pursuant to Section 7.01(f), and any purported termination pursuant to Section
7.01(f) shall be void and of no force or effect, unless the Company shall have
complied with all provisions of this Section 4.03, including the notification
provisions in this Section 4.03, and with all applicable requirements of
Sections 5.08(b) (including the payment of the Termination Fee (as defined in
Section 5.08(b)) prior to or simultaneously with such termination); and provided
further, however, that the Company shall not exercise its right to terminate
this Agreement pursuant to Section 7.01(f) until after the third business day
following Parent's receipt of written notice (a "NOTICE OF SUPERIOR PROPOSAL")
from the Company advising Parent that the Board of Directors of the Company has
received a Superior Proposal and that such Board of Directors will, subject to
any action taken by Parent pursuant to this sentence, cause the Company to
accept such Superior Proposal, specifying the terms and conditions of the
Superior Proposal and identifying the person making such Superior Proposal (it
being understood and agreed that any amendment to the price or any other
material term of a Superior Proposal shall require a new Notice of Superior
Proposal and a new three business day period).
32
The term "Superior Proposal" means any bona fide binding written offer
not solicited by or on behalf of the Company and, subject to the Company's
compliance with the provision of Section 4.03(e), received subsequent to the
date hereof made by a third party that if consummated would result in such third
party (or in the case of a direct merger between such third party and the
Company, the stockholders of such third party) acquiring, directly or
indirectly, more than 50% of the voting power of the Company or all or
substantially all the assets of the Company and its subsidiaries, taken as a
whole, that the Board of Directors of the Company determines in its good faith
judgment (after consultation with its financial advisor or other financial
advisor of nationally recognized reputation) is reasonably likely to result in
terms which are more favorable from a financial point of view to the Company's
stockholders than the Merger, taking into account, among other things, any
changes to the terms of this Agreement offered by Parent in response to such
Superior Proposal or otherwise.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.03, the Company promptly shall, but in
any case within 48 hours, advise Parent in writing of any request for
information that the Company reasonably believes could lead to or contemplates a
Takeover Proposal or of any Takeover Proposal, or any inquiry the Company
reasonably believes could lead to any Takeover Proposal, the terms and
conditions of such request, Takeover Proposal or inquiry (including any
subsequent material amendment or modification to such terms and conditions) and
the identity of the person making any such request, Takeover Proposal or
inquiry. The Company shall keep Parent informed in all material respects on a
timely basis of the status and details (including material amendments or
proposed amendments) of any such request, Takeover Proposal or inquiry.
(d) Nothing contained in this Section 4.03 or elsewhere in this
Agreement shall prohibit the Company from (i) taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) and Rule 14d-9 promulgated
under the Exchange Act or (ii) making any disclosure to the Company's
stockholders if, in the good faith judgment of the Board of Directors of the
Company, after consultation with outside counsel, failure so to disclose would
be reasonably likely to be inconsistent with Applicable Laws; provided, however,
that in no event shall the Company or its Board of Directors or any committee
thereof take, agree or resolve to take any action prohibited by Section
4.03(b)(i) or 4.03(b)(ii).
(e) The Company shall immediately cease existing discussions or
negotiations with any persons conducted heretofore with respect to a Takeover
Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. PREPARATION OF THE PROXY STATEMENT; STOCKHOLDERS MEETING.
(a) INTENTIONALLY OMITTED.
33
(b) If a meeting of its Stockholders (the "STOCKHOLDERS MEETING") is
required to effect the Merger, the Company shall prepare and file with the SEC a
proxy statement relating to the meeting of the Company's Stockholders to be held
in connection with the Merger (together with any amendments thereof or
supplements thereto, the "PROXY STATEMENT"). As promptly as practicable after
comments are received from the SEC on the preliminary proxy materials and after
the furnishing by the Company of all information required to be contained
therein, the Company shall mail the Proxy Statement to its Stockholders.
(c) If a Stockholders Meeting is required to effect the Merger, Parent
shall supply the Company with the information pertaining to Parent required by
the Exchange Act for inclusion or incorporation by reference in the Proxy
Statement, which information will not, at the date mailed to Stockholders and at
the time of the Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. If before the Effective Time, any
event or circumstance relating to Parent or any of its Subsidiaries, or their
respective officers or directors, should be discovered by Parent that should be
set forth in an amendment or a supplement to the Proxy Statement, Parent shall
promptly inform the Company.
(d) Parent shall vote (or consent with respect to) any shares of common
stock of Sub beneficially owned by it, or with respect to which it has the power
(by agreement, proxy, or otherwise) to cause to be voted (or to provide a
consent), in favor of the adoption of this Agreement at any meeting of the
stockholders of Sub at which this Agreement shall be submitted for adoption and
at all adjournments or postponements thereof (or, if applicable, by any action
of the stockholders of Sub by consent in lieu of a meeting).
SECTION 5.02. ADDITIONAL COMPANY REPORTS. The Company shall furnish to
Parent copies of any Company SEC Documents which it files with the SEC on or
after the date hereof, and the Company represents and warrants that as of the
respective dates thereof, such reports will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statement therein, in light of the circumstances under
which they were made, not misleading. Any unaudited consolidated interim
financial statements included in such reports (including any related notes and
schedules) will fairly present, in all respects, the financial position of the
Company as of the dates thereof and the results of operations and changes in
financial position or other information included therein for the periods or as
of the dates then ended, in each case in accordance with past practice and GAAP
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto and subject, where appropriate, to normal year-end
adjustments).
SECTION 5.03. ADDITIONAL PARENT REPORTS. Parent shall furnish to the
Company copies of any Parent SEC Documents which it files with the SEC on or
after the date hereof, and Parent represents and warrants that as of the
respective dates thereof, such reports will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statement therein, in light of the circumstances under
which they were made, not misleading. Any unaudited consolidated interim
financial statements included in such reports (including any related notes and
schedules) will fairly present, in all respects, the financial position of the
Company as of the dates thereof and the results of operations and changes in
financial position or other information included therein for the periods or as
of the dates then ended, in each case in accordance with past practice and GAAP
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto and subject, where appropriate, to normal year-end
adjustments).
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SECTION 5.04. ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) The Company shall, and shall cause each of its subsidiaries to,
afford to Parent and to Parent's officers, employees, investment bankers,
attorneys, accountants and other advisors and representatives reasonable and
prompt access during normal business hours during the period prior to the
Effective Time or the termination of this Agreement to all their respective
properties, assets, books, contracts, commitments, directors, officers,
employees, attorneys, accountants, auditors, other advisors and representatives
and records and, during such period, the Company shall, and shall cause each of
its subsidiaries to, make available to Parent on a prompt basis (i) a copy of
each report, schedule, form, statement and other document filed or received by
it during such period pursuant to the requirements of domestic or foreign
(whether national, federal, state, provincial, local or otherwise) laws and (ii)
all other information concerning its business, properties and personnel as
Parent may reasonably request (including the financial and tax work papers of
Ernst & Young, LLP and Minken & Associates, PC), provided that Parent shall not
unreasonably interfere with the Company's business operations and the Company
may, in its discretion, limit Parent's access to the Company's merchandise
buyers or designers or other employees whose work product the Company reasonably
wishes to keep confidential.
(b) Parent shall afford to the Company and to the Company's officers
and employees access to its offices, banks and records during normal business
hours during the period prior to the Effective Time or the termination of this
Agreement at a level consistent with such access provided for due diligence
purposes prior to the date of this Agreement.
(c) Each of Parent and the Company (individually a "PARTY" and
together, the "PARTIES") has learned and will learn from the other Party, its
subsidiaries or affiliates (collectively, the "DISCLOSING PARTY"), from or
through the Disclosing Party's employees, officers, directors, independent
contractors, agents or representatives, confidential and/or proprietary
information, both orally and in writing, concerning the intellectual property
and/or business of the Disclosing Party and/or current or potential business
operations and customers of the Disclosing Party, including, without limitation,
trade secrets, discoveries, ideas, concepts, know-how, techniques, designs,
specifications, drawings, blueprints, tracings, diagrams, models, samples, flow
charts, data, computer programs, source code, software, disks, diskettes, tapes,
customer lists, customer addresses, products and services provided to specific
customers, sales volumes, customer pricing, equipment specifications, locations
and use, network configurations, capacities and capabilities, current or
prospective relationship with vendors and independent contractors (including,
without limitation, information regarding the types of products and services
contracted for and the cost of such products and services to the Disclosing
Party), implementation of technology, data and programs, finance, sales,
marketing, and development of internet, telecommunication and related technology
and services. Such information, in whole or in part and whether or not
specifically marked as "confidential" by the Disclosing Party, together with all
analyses, compilations, programs, reports, proposals, studies, or any other
documentation prepared by the other Party (the "RECEIVING PARTY") which contain
or otherwise reflect or make reference to any of such information, are
hereinafter referred to as "CONFIDENTIAL INFORMATION."
(d) All Confidential Information is deemed proprietary to the
Disclosing Party. Accordingly, each Receiving Party hereby agrees, as set forth
below, to hold all Confidential Information of the Disclosing Party, whether
furnished before, on or after the date of this Agreement, in the strictest
confidence and not to disclose such information to anyone except as expressly
permitted pursuant to this Agreement.
(e) Each Party hereby agrees that Confidential Information will also
include information that is not specifically encompassed in the definition
thereof above, but that would reasonably be expected to be considered
confidential by the Disclosing Party. Any issue as to the confidentiality
expectations of the Disclosing Party regarding particular information shall be
submitted to the Disclosing Party for determination. In addition, the Parties
hereby agree that although Confidential Information is not required to be marked
as such under this Agreement, some Confidential Information which is delivered
to the Receiving Party hereunder may indeed be so marked.
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(f) Each Party acknowledges that each Disclosing Party claims its
Confidential Information as its sole and exclusive property (or that such
Disclosing Party is a valid licensee of such information) and that such
Receiving Party shall not have any right, title, or interest in or to such
Confidential Information except as expressly provided in this Agreement.
(g) Each Receiving Party agrees to hold in the strictest confidence and
not to disclose to anyone for any reason Confidential Information of the
Disclosing Party; provided, however, that:
(i) such Confidential Information may be disclosed to the
officers, directors, employees, agents, or representatives
(collectively, "REPRESENTATIVES") of the Receiving Party on a "need to
know" basis for the purpose of consummating the transactions
contemplated hereby, on the condition that (i) each such Representative
will be informed of the confidential nature of such Confidential
Information and will agree to be bound by the terms of this Agreement
and not to disclose such Confidential Information to any other person
and (ii) each Party agrees to accept full responsibility for any breach
of this agreement by that Party's Representatives; and
(ii) Confidential Information of the Disclosing Party may be
disclosed by the Receiving Party upon the prior written consent of the
Disclosing Party.
Notwithstanding anything herein to the contrary, any party to this Agreement
(and any employee, representative, or other agent of any party to this
Agreement) may disclose to any and all persons, without limitation of any kind,
the tax treatment and tax structure of the Merger and all materials of any kind
(including opinions or other tax analyses) that are provided to it relating to
such tax treatment and structure.
Each Receiving Party agrees, upon the request of the Disclosing Party given
after any termination of this Agreement pursuant to the provisions of this
Section 5.04, to promptly deliver to the Disclosing Party (or, with the
Disclosing Party's consent, destroy) the originals and all copies of the
Disclosing Party's Confidential Information then in the Receiving Party's
possession or control, including, without limitation, the portion of the
Confidential Information that consists of analyses, compilations, programs,
reports, proposals, studies, or other documentation prepared by a Receiving
Party or its Representatives. Notwithstanding the foregoing, each Party's
in-house counsel shall be entitled to maintain for litigation purposes one set
of all Confidential Information for a period of three (3) years after the
request referenced above.
(h) The term "CONFIDENTIAL INFORMATION" does not include any
information which:
(i) is or becomes generally available to or known by the
public (other than as a result of a disclosure directly or
indirectly by the Receiving Party);
(ii) is independently developed by the Receiving Party without
breach of this agreement;
(iii) is lawfully received by the Receiving Party without
restriction from a third party who obtained such information
other than as a result of a breach of any confidentiality
obligation to the Disclosing Party; or
36
(iv) is disclosed by the Receiving Party pursuant to judicial
action or governmental regulations, provided that the
Receiving Party uses its reasonable efforts to notify the
Disclosing Party prior to such disclosure and the Receiving
Party cooperates with the Disclosing Party, at the Disclosing
Party's cost and expense, if the Disclosing Party elects
legally to contest and avoid such disclosure.
(i) The Parties acknowledge and agree that the rights being protected
by the terms of this Section 5.04 are of a special, unique, unusual and
extraordinary character, which gives them a particular value, and that the
breach of any provision of this agreement may cause irreparable injury and
damage to the nonbreaching Party. In the event of such irreparable injury, the
nonbreaching Party shall be entitled to require specific performance of all of
the acts and the undertakings required of the breaching Party hereunder and to
obtain injunctive and other equitable relief in any court of competent
jurisdiction to prevent the violation or threatened violation of any of the
provisions of this Agreement which gave rise to, or may give rise to, such
irreparable injury. Neither this Section 5.04 nor any exercise by the
nonbreaching Party of its right to equitable relief or specific performance
herein granted shall constitute a waiver by the nonbreaching Party of any other
rights which it may have to damages or other relief.
SECTION 5.05. COMMERCIALLY REASONABLE EFFORTS; NOTIFICATION.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all commercially reasonable efforts
to take, or cause to be taken, all actions, that are necessary, proper or
advisable to consummate and make effective the Merger and the other transactions
contemplated by this Agreement, including using all commercially reasonable
efforts to accomplish the following: (i) the taking of all reasonable acts
necessary to cause the conditions precedent set forth in Article VI to be
satisfied, (ii) the obtaining of all necessary actions or nonactions, waivers,
consents, approvals, orders and authorizations from Governmental Entities and
the making of all necessary registrations, declarations and filings and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental Entity and
(iii) the obtaining of all necessary consents, approvals or waivers from third
parties. In connection with and without limiting the foregoing, the Company and
its Board of Directors shall, if any state takeover statute or similar statute
or regulation is or becomes applicable to this Agreement, the Merger or any of
the other transactions contemplated hereby, use all commercially reasonable
efforts to ensure that the Merger and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on this Agreement, the Merger and the other transactions
contemplated hereby. Notwithstanding the foregoing or any other provision of
this Agreement to the contrary, in no event shall any party hereto be required
to agree or proffer to divest or hold separate, or take any other action with
respect to, any of the material assets (whether tangible or intangible) or
businesses of Parent and its subsidiaries, taken as a whole, or the Company and
subsidiaries, taken as a whole, and the Company shall not, and shall not permit
any of its subsidiaries to, take any such action with respect to any such assets
or businesses without the express written consent of Parent. The Company and
Parent shall provide such assistance, information and cooperation to each other
as is reasonably requested in connection with the foregoing and, in connection
therewith, shall notify the other person promptly following the receipt of any
comments from any Governmental Entity and of any request by any Governmental
Entity for amendments, supplements or additional information in respect of any
registration, declaration or filing with such Governmental Entity and shall
supply the other person with copies of all correspondence between such person or
any of its representatives, on the one hand, and any Governmental Entity, on the
other hand.
37
(b) The Company agrees to provide, and will cause its subsidiaries and
its and their respective officers, employees and advisors to provide, all
cooperation reasonably necessary in connection with (i) the arrangement of any
financing to be consummated contemporaneous with or at or after the Closing in
respect of the transactions contemplated by this Agreement and (ii) the matters
set forth in Section 5.05(b) of the Company Disclosure Schedule. In addition, in
conjunction with the obtaining of any such financing or otherwise, the Company
agrees, at the request of Parent, (i) to call for prepayment or redemption, or
to prepay, repurchase, redeem and/or seek to renegotiate, as the case may be,
any then existing indebtedness for borrowed money of the Company; provided,
however, that (x) no such prepayment, repurchase or redemption shall be required
to be effective prior to the Effective Time and (y) Parent and its subsidiaries
(other than the Company and its subsidiaries) shall provide to the Company on a
timely basis all the consideration used in connection with such prepayment,
repurchase or redemption
SECTION 5.06. COMPANY STOCK OPTIONS.
(a) As soon as practicable following the date of this Agreement, the
Board of Directors of the Company (or, if appropriate, any committee
administering the Company Stock Plans) and the Board of Directors of Parent
shall adopt such resolutions or take such other actions (if any), including,
without limitation, the approval of the Stockholders pursuant to the Proxy
Statement, as may be required to effect the following:
(i) Each Company Stock Option outstanding immediately prior to
the Effective Time that is (a) vested and (b) exercisable for a share
of Company Common Stock at an exercise price less than the Per Share
Amount shall be, automatically and without further action of the holder
thereof, deemed exercised on a net exercise basis (i.e., based on the
difference between the Per Share Amount and the exercise price per
share) and each share of Company Common Stock resulting from such net
exercise shall be deemed outstanding for purposes of calculating the
number of Outstanding Shares entitled to receive the Merger
Consideration pursuant to the provisions of Section 2.01;
(ii) Each share of Company Common Stock subject to a
Restricted Stock Award outstanding immediately prior to the Effective
Time shall, be deemed outstanding for purposes of calculating the
number of Outstanding Shares entitled to receive the Merger
Consideration pursuant to the provisions of Section 2.01;
(iii) Each Company Stock Option outstanding immediately prior
to the Effective Time that has not vested, but is exercisable for
shares of Company Common Stock at an exercise price less than the Per
Share Amount shall be amended and converted into an option to acquire,
on the same terms and conditions (including vesting, limitations or
transfer and exercisability) as were applicable under such Company
Stock Option, a number of shares of Parent Common Stock equal to the
product of (A) the number of shares of Company Common Stock underlying
such Company Stock Option and (B) the Option Exchange Ratio (as defined
below), at an exercise price for each share of Parent Company Stock
(rounded to the nearest whole cent) determined by dividing (X) the per
share exercise price for each share of Company Common Stock subject to
such Company Stock Option, by (Y) the Option Exchange Ratio (as defined
below) (each an, "ADJUSTED OPTION"); provided, however, that all
Adjusted Options that result from the conversion (on a share-by-share
basis as described above) of a single Company Stock Option to acquire
two or more shares of Company Common Stock held by a single holder
shall be aggregated and treated as a single Adjusted Option to purchase
the aggregate number of shares (including fractional shares) of Parent
Common Stock subject to all such Adjusted Options (with such result
rounded to the nearest whole share). The term "OPTION EXCHANGE RATIO"
means the quotient obtained by dividing (A) the Per Share Amount, by
(B) $6.99.
38
(iv) Each holder of a Company Stock Option in respect of a
share of Company Common Stock outstanding immediately prior to the
Effective Time, whether vested or unvested, which has an exercise price
per share of Company Common Stock that is greater than or equal to the
Per Share Amount shall receive a notice from the Company at least
twenty (20) days prior to the Closing Date indicating that all such
options shall terminate at the Closing Date; provided, however, that
during the period from the date on which such notice of termination is
delivered to the Closing Date, each such holder shall have the right to
exercise any such Company Stock Option, contingent upon the
consummation of the Merger; and
(v) make such other changes to the Company Stock Plans as
Parent and the Company may agree are appropriate to give effect to the
Merger and the provisions of this Section 5.06.
(b) The adjustments provided herein with respect to any Company Stock
Options that are "incentive stock options" as defined in Section 422 of the Code
shall be and are intended to be effected in a manner which is consistent with
Sections 422 and 424(a) of the Code and all regulations promulgated thereunder.
(c) At the Effective Time, Parent shall assume the Company Stock Plans,
with the result that all obligations of the Company under the Company Stock
Plans with respect to the Adjusted Options shall be obligations of Parent
following the Effective Time.
(d) At or prior to the Effective Time, Parent shall prepare and file
with the SEC a registration statement on Form S-8 (or another appropriate form)
registering a number of shares of Parent Common Stock equal to at least the
number of shares subject to the Adjusted Options. Such registration statement
shall be kept effective (and the current status of the prospectus or
prospectuses required thereby shall be maintained) as long as any Adjusted
Options may remain outstanding.
(e) Except as otherwise specifically provided by this Section 5.06 and
except to the extent required under the respective terms of the Company Stock
Options as in effect on the date of this Agreement, all restrictions or
limitations on transfer with respect to Company Stock Options awarded under the
Company Stock Plans or any other plan, program or arrangement of the Company or
any of its subsidiaries, to the extent that such restrictions or limitations
shall not have already lapsed, and all other terms thereof, shall remain in full
force and effect with respect to such options after giving effect to the Merger
and the assumption by Parent as set forth above.
(f) In addition to any method of exercise permitted under the
applicable Company Stock Option, a holder of an Adjusted Option may exercise
such Adjusted Option in whole or in part in accordance with its terms by
delivering a properly executed notice of exercise to Parent, together with the
consideration therefor and the federal withholding tax information, if any,
required in accordance with the related Company Stock Plan.
39
SECTION 5.07. INDEMNIFICATION, EXCULPATION AND INSURANCE.
(a) Parent and Sub agree that all rights to indemnification,
advancement of expenses and exculpation from liabilities for acts or omissions
arising or occurring at or prior to the Effective Time now existing in favor of
the current or former directors, officers, employees and agents of the Company
and its subsidiaries as provided in their respective certificates of
incorporation or by-laws (or similar organizational documents) shall be assumed
and performed by the Surviving Corporation, without further action, at the
Effective Time and shall survive the Merger and shall continue in full force and
effect in accordance with their terms. Parent and Sub agree that any existing
indemnification agreements between the Company and any current or former
director, officer, employee or agent of the Company or any of its subsidiaries
shall be assumed and performed by the Surviving Corporation, without any further
action, at the Effective Time and shall survive the Merger and continue in full
force and effect in accordance with their terms.
In the event of any threatened or actual claim, action, suit, demand,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, demand, proceeding
or investigation in which any person who is now, or has been at any time prior
to the date hereof, or who becomes prior to the Effective Time, a director,
officer, employee, fiduciary or agent of the Company or any subsidiary of the
Company (the "Indemnified Parties") is, or is threatened to be, made a party
based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director, officer, employee,
fiduciary or agent of the Company or any subsidiary of the Company, or is or was
serving at the request of the Company or any subsidiary of the Company as a
director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust or other enterprise or (ii) with respect to
the directors and officers of the Company, the negotiation, execution or
performance of this Agreement or any of the transactions contemplated hereby,
whether in any case asserted or arising before or after the Effective Time, the
parties hereto agree to cooperate and use their commercially reasonable efforts
to defend against and respond thereto. It is understood and agreed that the
Company shall indemnify and hold harmless, and after the Effective Time, Parent
shall cause the Surviving Corporation to, and the Surviving Corporation shall,
indemnify and hold harmless, as and to the full extent permitted by applicable
law, each Indemnified Party (or, with respect to the obligation in clause (ii)
above, the directors and officers of the Company) against any losses, claims,
damages, liabilities, costs, expenses (including reasonable attorneys' fees and
expenses), judgments, fines and amounts paid in settlement (collectively,
"DAMAGES") in connection with any such threatened or actual claim, action, suit,
demand, proceeding or investigation, and in the event of any such threatened or
actual claim, action, suit, demand, proceeding or investigation (whether
asserted or arising before or after the Effective Time), the Company, and after
the Effective Time, Parent shall cause the Surviving Corporation to, and the
Surviving Corporation shall, promptly pay expenses in advance of the final
disposition of any claim, suit, proceeding or investigation to each Indemnified
Party (or, with respect to the obligation in clause (ii) above, the directors
and officers of the Company), to the fullest extent permitted by applicable law.
Notwithstanding the foregoing, indemnification and/or payment of expenses
hereunder shall only be required to the extent that the Damages are not
ultimately covered by insurance and actually paid to the Indemnified Party
pursuant to such insurance coverage. For the avoidance of doubt, the advancement
of expenses shall occur, if required hereunder, whether or not a determination
has been made as to the availability of insurance coverage, and then, if a
subsequent payment is made by the insurance carrier, those advanced expenses
will be remitted back to Parent or Surviving Corporation, as the case may be, to
the extent of such insurance payment.
(b) If Parent, 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,
(ii) transfers or conveys all or substantially all its properties and assets to
any person or (iii) transfers, by means of a distribution, sale, assignment or
other transaction, all of the stock of the Surviving Corporation or all or
substantially all of its assets, to any person, then, and in each such case,
Parent shall cause proper provision to be made so that the successor and assign
of Parent or the Surviving Corporation assumes the obligations set forth in this
Section 5.07, and in such event all references to the Surviving Corporation in
this Section 5.07 shall be deemed a reference to such successor and assign.
40
(c) For six years after the Effective Time, the Surviving Corporation
shall, and Parent shall cause the Surviving Corporation to, cause to be
maintained in effect the existing directors' and officers' liability insurance
and fiduciary insurance policies with an amount of coverage not less than one
hundred percent (100%) of the amount of existing coverage and with at least the
same scope of the existing coverage, or policies that are no less favorable to
the Indemnified Parties, and with an amount of coverage not less than one
hundred percent (100%) of the amount of existing coverage, than the policies
which are currently maintained by the Company, with respect to claims arising
from facts or events which occurred at or before the Effective Time, so long as
such policies are available for an annual premium which is no more than one
hundred and fifty percent (150%) of the current annual premium for the existing
policies; provided, that if such policies are not available for an annual
premium of no more than one hundred and fifty percent (150%) of the current
annual premium, then policies in an amount and scope as great as can be obtained
for an annual premium of one hundred and fifty percent (150%) of the current
annual premium shall be obtained.
(d) The provisions of this Section 5.07 shall survive consummation of
the Merger and are intended to be for the benefit of, and will be enforceable
by, each indemnified party, his or her heirs and his or her representatives.
Parent shall cause the Surviving Corporation to comply with its obligations set
forth in this Section 5.07.
SECTION 5.08. FEES AND EXPENSES.
(a) Subject to the provisions of Section 8.12(a), all fees and expenses
incurred in connection with this Agreement, the Merger and the other
transactions contemplated hereby shall be paid by the party incurring such fees
or expenses, whether or not the Merger is consummated; provided that the payment
of any such fees and expenses shall not be deemed to constitute a breach of any
representation, warranty or covenant of the party making such payment contained
herein.
(b) If (i) (A) a Takeover Proposal has been made to the Company or its
stockholders or any person has announced an intention (whether or not
conditional and whether or not withdrawn) to make a Takeover Proposal, (B)
thereafter this Agreement is terminated by either Parent or the Company pursuant
to Section 7.01(b)(i) or 7.01(b)(iii) and (C) within 12 months after such
termination, the Company or any of its subsidiaries enters into any Acquisition
Agreement with respect to, or consummates, any Takeover Proposal (solely for
purposes of this Section 5.08(b)(i)(C), the term "Takeover Proposal" shall have
the meaning set forth in the definition of Takeover Proposal contained in
Section 4.03(a) except that all references in such definition to 10% shall be
deemed references to 35%), (ii) this Agreement is terminated by the Company
pursuant to Section 7.01(f) or (iii) this Agreement is terminated by Parent
pursuant to Section 7.01(c), then the Company shall pay Parent a fee equal to
$1,740,000 (the "TERMINATION FEE") by wire transfer of same day funds to an
account designated by Parent (x) in the case of a termination by the Company
pursuant to Section 7.01(f), prior to or simultaneously with such termination,
(y) in the case of a termination by Parent pursuant to Section 7.01(c), within
two business days after such termination and (z) in the case of a payment as a
result of any event referred to in Section 5.08(b)(i), upon the first to occur
of such events. The Company acknowledges that the agreements contained in this
Section 5.08(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if the Company fails promptly to pay the amounts due
pursuant to this Section 5.08(b), and, in order to obtain such payment, Parent
commences a suit that results in a judgment against the Company for the amounts
set forth in this Section 5.08(b), the Company shall pay to Parent interest on
the amounts set forth in this Section 5.06 at a rate per annum equal to
three-month LIBOR (as reported in The Wall Street Journal (Northeast edition)
or, if not reported therein, in another authoritative source selected by Parent)
on the date such payment was required to be made (or if no quotation for
three-month LIBOR is available for such date, on the next preceding date for
which such a quotation is available) plus 200 basis points (the "INTEREST
RATE").
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SECTION 5.09. INFORMATION SUPPLIED. The Company covenants that none of
the information included or incorporated by reference in the Proxy Statement
will (except to the extent revised or superseded by amendments or supplements
contemplated hereby), at the date mailed to the Company's stockholders or at the
time of the Stockholders Meeting, or at the time of any amendment or supplement
thereof, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, except that no covenant is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by Parent or Sub specifically for inclusion or incorporation by
reference therein. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
SECTION 5.10. EMPLOYEE BENEFIT MATTERS. Parent will, or will cause the
Surviving Corporation to provide to each employee of the Company prior to the
Merger that remains an employee of the Company after the Effective Time
("CONTINUING EMPLOYEES") with employee benefits that are substantially similar
in the aggregate to the benefits provided to similarly situated employees of
Parent. Parent may or may cause the Surviving Corporation to comply with the
prior sentence by either (i) retaining the Company's Benefit Plans in their form
or, in Parent's discretion, amending such plans as provided therein, or (ii)
terminating such plans and enabling the Company's employees to participate in
its employee benefit plans. To the extent permitted pursuant to Parent's plans,
Parent will, or will cause the Surviving Corporation to: (1) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Continuing
Employees under any welfare plan that the Continuing Employees may be eligible
to participate in after the Effective Time to the extent waived or satisfied
under the applicable corresponding Company Benefit Plan immediately prior to the
Effective Time; (2) provide each Continued Employee with credit for purposes of
satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such Continued Employee is eligible to participate in after
the Effective Time for any co-payments and deductibles paid under a
corresponding Company Benefit Plan for the year in which the Effective Time
occurs; and (3) provide each Continued Employee with credit for all purposes for
all service with the Company and its affiliates under each employee benefit
plan, program, or arrangement of the Parent or its affiliates in which such
Continued Employee is eligible to participate to the extent such service was
credited for similar purposes under similar Company Benefit Plans; provided,
however, that in no event shall the Continuing Employees be entitled to any
credit (A) under any defined benefit pension plan of Parent or its subsidiaries
(other than the Surviving Corporation and its subsidiaries) or (B) to the extent
that it would result in a duplication of benefits with respect to the same
period of service.
SECTION 5.11. PUBLIC ANNOUNCEMENTS. Unless otherwise required by
Applicable Laws, Parent and Sub, on the one hand, and the Company, on the other
hand, shall, to the extent reasonably practicable, consult with each other
before issuing, and give each other a reasonable opportunity to review and
comment upon, any press release or other public statements with respect to this
Agreement, the Merger and the other transactions contemplated hereby. 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
agreed to by the parties.
SECTION 5.12. INTENTIONALLY OMITTED.
SECTION 5.13. INTENTIONALLY OMITTED.
42
SECTION 5.14. REGULATORY FILINGS; REASONABLE EFFORTS. As soon as may be
reasonably practicable, Company and Parent each will file with the United States
Federal Trade Commission (the "FTC") and the Antitrust Division of the United
States Department of Justice ("DOJ") Notification and Report Forms relating to
the transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties. Company and Parent each will promptly (a) supply the other with any
information which may be required in order to effectuate such filings and (b)
supply any additional information which reasonably may be required by the FTC,
the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties may reasonably deem appropriate; provided,
however, that Parent will not be required to agree to any divestiture by Parent
or the Company or any of Parent's subsidiaries or affiliates of shares of
capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or of the Company, its affiliates, or the imposition
of any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and stock.
SECTION 5.15. RIGHTS AGREEMENT. The Board of Directors of the Company
shall take all further action (in addition to that referred to in Section
3.01(u)) necessary or desirable (including redeeming the Rights immediately
prior to the Effective Time or amending the Rights Agreement if reasonably
requested by Parent), if any, in order to render the Rights inapplicable to the
Merger and the other transactions contemplated by this Agreement. If any
"Distribution Date" or "Stock Acquisition Date" occurs under the Rights
Agreement at any time during the period from the date of this Agreement to the
Effective Time, the Company and Parent shall make such adjustment to the Merger
Consideration as the Company and Parent shall mutually agree so as to preserve
the economic benefits that the Company and Parent each reasonably expected on
the date of this Agreement to receive as a result of the consummation of the
Merger and the other transactions contemplated hereby. Except in connection with
a Takeover Proposal approved by the Company in accordance with Section 4.03, and
after the termination of this Agreement under Section 7.01, and except as
provided in this Section 5.15, the Company shall not (i) amend, modify or waive
any provision of the Rights Agreement or (ii) take any action to redeem the
Rights or render the Rights inapplicable to any transaction or than the Merger.
SECTION 5.16. TRANSFER TAXES. All stock transfer, real estate transfer,
documentary, stamp, recording and other similar taxes (including interest,
penalties and additions to any such taxes) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the Company
out of its own funds.
SECTION 5.17. SUPPORT AGREEMENT. The Company shall use its best
efforts, on behalf of Parent and pursuant to the request of Parent, to cause
each Company stockholder named on the signature pages to the Support Agreement
to execute and deliver to Parent the Support Agreement concurrently with the
execution of this Agreement.
SECTION 5.18. INTENTIONALLY OMITTED.
SECTION 5.19. SHAREHOLDER LITIGATION. The parties to this agreement
shall cooperate and consult with one another, to the fullest extent possible, in
connection with any stockholder litigation against any of them or any of their
respective directors or officers with respect to the transactions contemplated
by this Agreement. In furtherance of and without in any way limiting the
foregoing, each of the parties shall use its respective reasonable best efforts
to prevail in such litigation so as to permit the consummation of the
transactions contemplated by this Agreement in the manner contemplated by this
Agreement. Notwithstanding the foregoing, the Company shall not compromise or
settle any litigation commenced against it or its directors or officers relating
to this Agreement or the transactions contemplated hereby (including the Merger)
without Parent's prior written consent, which consent shall not be unreasonably
withheld.
43
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The obligation of each party to effect the Merger is subject to the
satisfaction, or to the waiver by such party, on or prior to the Closing Date of
the following conditions:
(a) STOCKHOLDER APPROVAL. The Stockholder Approval shall have been
obtained.
(b) PROXY STATEMENT. If a Proxy Statement is to be utilized, no stop
order or similar proceeding in respect of the Proxy Statement shall have been
initiated or threatened in writing by the SEC; and all requests for additional
information on the part of the SEC shall have been complied with to the
reasonable satisfaction of the parties hereto.
(c) ANTITRUST. Any waiting period (and any extension thereof)
applicable to the Merger under the HSR Act or any other applicable competition,
merger control, antitrust or similar law or regulation shall have been
terminated or shall have expired.
(d) NO INJUNCTIONS OR LEGAL RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order or decree issued by any court
of competent jurisdiction or other legal restraint or prohibition (collectively,
"LEGAL RESTRAINTS") that has the effect of preventing the consummation of the
Merger shall be in effect.
(e) INTENTIONALLY OMITTED.
SECTION 6.02. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The
obligation of Parent and Sub to effect the Merger are further subject to the
satisfaction or waiver on or prior to the Closing Date of the following
additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained herein that are qualified as to materiality or material
adverse effect shall be true and correct, and the representations and warranties
of the Company contained herein that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this Agreement
and as of the Closing Date with the same effect as though made as of the Closing
Date, except that the accuracy of representations and warranties that by their
terms speak as of a specified date will be determined as of such date. Parent
shall have received a certificate signed on behalf of the Company by the chief
executive officer or chief financial officer of the Company to such effect, with
such exceptions as specifically identified and described in reasonable detail in
such certificate.
(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 the chief executive
officer or the chief financial officer of the Company to such effect.
(c) INTENTIONALLY OMITTED.
(d) NO LITIGATION.
(i) There shall not be pending any suit, action or proceeding
brought by any Governmental Entity seeking (A) to restrain or prohibit
the consummation of the Merger, (B) to prohibit or limit in any
material respect the ownership or operation by the Company, Parent or
any of their respective affiliates of a material portion of the
business or assets of the Company and its subsidiaries, taken as a
whole, or Parent and its subsidiaries, taken as a whole, or to require
any such person to dispose of or hold separate any material portion of
the business or assets of the Company and its subsidiaries, taken as a
whole, or Parent and its subsidiaries, taken as a whole, as a result of
the Merger, (C) to prohibit Parent or any of its affiliates from
effectively controlling in any material respect a material portion of
the business or operations of the Company or its subsidiaries, or (D)
to impose material limitations on the ability of Parent or any of its
affiliates to acquire or hold, or exercise full rights of ownership of,
any shares of Company Common Stock, including the right to vote the
Company Common Stock on all matters properly presented to the
stockholders of the Company.
(ii) There shall not be pending any suit, action or proceeding
brought by any third party (other than a Governmental Entity) against
the Company or any of its subsidiaries that could reasonably be
expected to succeed except for suits, actions or proceedings that
individually or in the aggregate could not reasonably be expected to
have a material adverse effect on the Company.
44
(e) LEGAL RESTRAINT. No Legal Restraint that has the effect of granting
or implementing any relief referred to in clauses (B), (C) or (D) of paragraph
(d)(i) of this Section 6.02 shall be in effect.
(f) CONSENTS. Parent shall have received evidence, in form and
substance reasonably satisfactory to it, that Parent or the Company shall have
obtained all consents, approvals, authorizations, qualifications and orders of
Governmental Entities required in connection with this Agreement and the
transactions contemplated by this Agreement (including consents to assignments
of material contracts and material Intellectual Property) except for those the
failure of which to be obtained individually or in the aggregate could not
reasonably be expected to (A) restrain or prohibit the consummation of the
Merger or (B) prohibit or limit in any material respect the ownership or
operation or effective control by Parent of a material portion of the business,
operations or assets of the Company and its subsidiaries, taken as a whole as in
existence on the date of this Agreement (other than with respect to assets
disposed of in the ordinary course of business).
(g) DEMANDS FOR PAYMENT. Demands for payment of cash in respect to
Appraisal Shares shall not have been received with respect to more than 5% of
the outstanding shares of Company Common Stock.
(h) RIGHTS PLAN. The provisions of the Company Rights Agreement and the
Rights shall not apply to Parent, Sub or any of their Affiliates, individually
or taken together, as a result of this Agreement, the Support Agreement or the
transactions contemplated hereby or thereby, or to the Merger, and all Company
Rights issued thereunder shall, immediately prior to the Effective Time, be
canceled, void and of no further force or effect.
(i) ALTERNATIVE OPTIONS. The Board of Directors of the Company or the
committee(s) thereof appointed to administer the Company Stock Plans, as
applicable, shall have made a determination with respect to each of the Company
Stock Plans that the Adjusted Options to be issued in replacement of certain of
the outstanding Company Stock Options are "Alternative Options" as defined in
the Company Stock Plans; provided, however that, such determination shall not
affect the acceleration of vesting of Company Stock Options to the extent that
accelerated vesting is provided for under an option agreement, employment
agreement or similar agreement in effect on the date of this Agreement.
(j) NO DEFAULT UNDER SENIOR CREDIT FACILITY. The Senior Credit Facility
shall not have been terminated or the indebtedness thereunder accelerated
without the Company having entered into a replacement credit facility on
substantially similar terms and conditions.
(k) NON-EXERCISE OF PUT OPTION AGREEMENT. The put granted to certain
security holders of the Company pursuant to that certain Put Option Agreement
dated May 12, 2003 shall not have been exercised.
(l) OPINION OF COUNSEL. Parent shall have received an opinion from the
law firm of Proskauer Rose LLP, counsel to the Company, effective as of the
Closing Date, reasonably satisfactory to Parent as to such matters as are
customarily the subject of an opinion to the acquiring company by counsel for
the acquired company in similar transactions.
(m) EMPLOYMENT RELATED AGREEMENTS. The individuals specified in Section
6.02(m) of the Company Disclosure Schedule shall have entered into (i)
termination agreements and releases substantially in the form of Annexes C-1,
C-2 and C-3, as applicable, to this Agreement, (ii) employment or consulting
agreements substantially in the form of Annexes X-0, X-0 or D-3, as applicable,
to this Agreement, (iii) confidentiality and non-competition agreements
substantially in the form of Annexes H-1, H-2 and H-3, and (iv) mutual and
general releases substantially in the form of Annexes I-1, I-2 and I-3.
45
SECTION 6.03. 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 Sub contained herein that are qualified as to materiality or
material adverse effect shall be true and correct, and the representations and
warranties of the Company contained herein that are not so qualified shall be
true and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date with the same effect as though made as of
the Closing Date, except that the accuracy of representations and warranties
that by their terms speak as of a specified date will be determined as of such
date. The Company shall have received a certificate signed on behalf of Parent
by the chief executive officer or chief financial officer of Parent to such
effect, with such exceptions as specifically identified and described in
reasonable detail in such certificate.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Parent and 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 the chief
executive officer or chief financial officer of Parent to such effect.
(c) OPINION OF COUNSEL. The Company shall have received an opinion from
the law firm of KMZ Rosenman, counsel to Parent, dated the Closing Date,
reasonably satisfactory to the Company, as to such matters as are customarily
the subject of an opinion to the acquired company by counsel for the acquiring
company in similar transactions.
(d) OPINION OF FINANCIAL ADVISOR. The Company shall have received from
The Xxxxx X. Xxxxxxx Company, LLC an opinion reasonably acceptable to the
Company, dated as of the date of this Agreement, to the effect that the
consideration to be received by the holders of the Company Common Stock in the
Merger is fair, from a financial point of view; and
(e) EMPLOYMENT/CONSULTING ARRANGEMENTS. The individuals specified in
Schedule 6.03(e) shall have entered into employment or consulting agreements
substantially in the form of Annexes X-0, X-0 or D-3, as applicable, to this
Agreement.
(f) NO LITIGATION.
(i) There shall not be pending any suit, action or proceeding
brought by any Governmental Entity seeking (A) to restrain or prohibit
the consummation of the Merger, (B) to prohibit or limit in any
material respect the ownership or operation by the Company, Parent or
any of their respective affiliates of a material portion of the
business or assets of the Company and its subsidiaries, taken as a
whole, or Parent and its subsidiaries, taken as a whole, or to require
any such person to dispose of or hold separate any material portion of
the business or assets of the Company and its subsidiaries, taken as a
whole, or Parent and its subsidiaries, taken as a whole, as a result of
the Merger, (C) to prohibit Parent or any of its affiliates from
effectively controlling in any material respect a material portion of
the business or operations of the Company or its subsidiaries, or (D)
to impose material limitations on the ability of Parent or any of its
affiliates to acquire or hold, or exercise full rights of ownership of,
any shares of Company Common Stock, including the right to vote the
Company Common Stock on all matters properly presented to the
stockholders of the Company.
(ii) There shall not be pending any suit, action or proceeding
brought by any third party (other than a Governmental Entity) against
the Parent or any of its subsidiaries that could reasonably be expected
to succeed except for suits, actions or proceedings that individually
or in the aggregate could not reasonably be expected to have a material
adverse effect on the Parent.
46
(g) LEGAL RESTRAINT. No Legal Restraint that has the effect of granting
or implementing any relief referred to in clauses (B), (C) or (D) of paragraph
(f)(i) of this Section 6.03 shall be in effect.
(h) CONSENTS. Company shall have received evidence, in form and
substance reasonably satisfactory to it, that Parent or the Company shall have
obtained all consents, approvals, authorizations, qualifications and orders of
Governmental Entities required in connection with this Agreement and the
transactions contemplated by this Agreement (including consents to assignments
of material contracts and material Intellectual Property) except for those the
failure of which to be obtained individually or in the aggregate could not
reasonably be expected to (A) restrain or prohibit the consummation of the
Merger or (B) prohibit or limit in any material respect the ownership or
operation or effective control by Parent of a material portion of the business,
operations or assets of the Company and its subsidiaries, taken as a whole as in
existence on the date of this Agreement (other than with respect to assets
disposed of in the ordinary course of business).
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. TERMINATION. This Agreement may be terminated, and the
Merger contemplated hereby may be abandoned, at any time prior to the Effective
Time, whether before or after the Stockholder Approval has been obtained and
whether before or after adoption of this Agreement by the stockholder of Sub:
(a) by mutual written consent duly authorized by the boards of
directors of each of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Offer shall not have been consummated by January
31, 2003;
(ii) if any Legal Restraint set forth in Section 6.01(d) shall
be in effect and shall have become final and nonappealable; or
(iii) if the Stockholder Approval shall not have been obtained
at the Stockholders Meeting duly convened therefor;
(c) by Parent in the event (i) an Adverse Recommendation Change has
occurred in accordance with Section 4.03(b)(i) or (ii) the Board of Directors of
the Company or any committee thereof shall have failed to confirm its
recommendation and declaration of advisability of this Agreement and the Merger
within 15 business days after a written request by Parent that it do so if such
request is made following the making of a Takeover Proposal;
47
(d) by Parent if the Company shall have breached any of its
representations, warranties or covenants contained in this Agreement, which
breach would give rise to the failure of a condition set forth in Section
6.02(a) or 6.02(b), and has not been or is incapable of being cured by the
Company within ten business days after its receipt of written notice thereof
from Parent;
(e) by the Company if Parent shall have breached any of its
representations, warranties or covenants contained in this Agreement, which
breach would give rise to the failure of a condition set forth in Section
6.03(a) or 6.03(b), and has not been or is incapable of being cured by Parent
within ten business days after its receipt of written notice thereof from the
Company;
(f) by the Company in accordance with, and subject to the terms and
conditions of, Section 4.03(b); or
(g) INTENTIONALLY OMITTED.
SECTION 7.02. EFFECT OF TERMINATION. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of Section 3.01(s), Section 3.02(h), Section 5.04, Section 5.08, this
Section 7.02 and Article VIII, which provisions shall survive any termination of
this Agreement; provided, however, that no such termination shall relieve any
party hereto from any liability or damages resulting from a material and
intentional breach by a party of any of its representations, warranties or
covenants set forth in this Agreement.
SECTION 7.03. AMENDMENT. This Agreement may be amended by the parties
hereto at any time, whether before or after the Stockholder Approval has been
obtained and whether before or after adoption of this Agreement by the
stockholder of Sub; provided, however, that after such approval or adoption has
been obtained, there shall be made no amendment that by law requires further
approval or adoption by stockholders without such further approval or adoption.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
SECTION 7.04. 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 or conditions
contained herein; provided, however, that after the Stockholder Approval has
been obtained or after adoption of this Agreement by the stockholder of Sub,
there shall be made no waiver that by law requires further approval or adoption
by stockholders without such further approval or adoption. 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 or delay
by any party to this Agreement to assert any of its rights under this Agreement
or otherwise shall not constitute a waiver of such rights nor shall any single
or partial exercise by any party to this Agreement of any of its rights under
this Agreement preclude any other or further exercise of such rights or any
other rights under this Agreement.
48
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations and warranties in this Agreement or in any certificate or
instrument delivered pursuant to this Agreement, including any rights arising
out of any breach of such representations or warranties, shall survive the
Effective Time. This Section 8.01 shall not limit this Article VIII or any
covenant or agreement of the parties which by its terms applies, or is to be
performed in whole or in part, after the Effective Time.
SECTION 8.02. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally 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 Sub, to:
Alloy, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Chief Executive Officer
with copies to:
Alloy, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
and
Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
1025 Xxxxxx Xxxxxxxxx Street, NW
Suite 700 East Lobby
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
if to the Company, to:
xXXxX*s Corp.
000 Xxxxxx Xx.
Xxx Xxxx, XX 00000
Attention: General Counsel
with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
SECTION 8.03. DEFINITIONS. For purposes of this Agreement:
(a) an "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;
(b) "material adverse effect" or "material adverse change" means, when
used in connection with the Company or Parent, as the case may be, any state of
facts, change, development, effect, condition or occurrence that could
reasonably be expected to be material and adverse to the business, assets,
properties, condition (financial or otherwise) or results of operations of such
party and its subsidiaries, taken as a whole, or to prevent or materially impede
or delay the consummation of the Merger or the other transactions contemplated
by this Agreement, other than, in any case, any state of facts, change,
development, event, effect, condition or occurrence (i) resulting from changes
in the United States economy or the United States securities markets in general;
or (ii) resulting from changes in the industries in which the Company or Parent,
as the case may be, operates and not specifically relating to the Company or
Parent, as the case may be; (iii) resulting from any litigation or loss of
current or prospective customers, employee or revenues that the party against
which the material adverse effect or material adverse change is sought to be
enforced successfully bears the burden of proving arose from the entering into
of this Agreement; provided, however, that in no event shall a decrease in the
trading price of Company Common Stock or Parent Common Stock, or litigation
relating thereto, be considered a material adverse effect or material adverse
change; or (iv) resulting from any lack of liquidity that the Company
experiences by reason of Parent's unreasonable refusal to consent to any action
relating to alternative sources of liquidity that the Company proposes to enter
into pursuant to Section 4.01.
49
(c) "person" means an individual, corporation, partnership, joint
venture, association, trust, limited liability company, Governmental Entity,
unincorporated organization or other entity; and
(d) a "subsidiary" of any person means another person, an amount of the
voting securities or other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, more than 50%
of the equity interests of which) is owned directly or indirectly by such first
person.
(e) "Stockholders" means all persons owning any shares of Company
Common Stock.
SECTION 8.04. INTERPRETATION. When a reference is made in this
Agreement to a Section, Subsection, Exhibit, Annex or Schedule, such reference
shall be to a Section or Subsection of, or an Exhibit, Annex 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 "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. The words "date hereof" shall refer to the date of this
Agreement. The term "or" is not exclusive. The word "extent" in the phrase "to
the extent" shall mean the degree to which a subject or other thing extends, and
such phrase shall not mean simply "if". The definitions contained in this
Agreement are applicable to the singular as well as the plural forms of such
terms. Any agreement or instrument defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement or
instrument as from time to time amended, modified or supplemented. References to
a person are also to its permitted successors and assigns.
SECTION 8.05. COUNTERPARTS. This Agreement may be executed in one or
more counterparts (including telecopy), 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 8.06. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement and the Confidentiality Agreement (a) constitute the entire agreement,
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this Agreement and the
Confidentiality Agreement and (b) except for the provisions of Sections 5.06 and
5.07 of this Agreement, are not intended to confer upon any person other than
the parties hereto and thereto (and their respective successors and assigns) any
rights or remedies. In furtherance of the foregoing, the provisions of Section
5.04 are specifically intended to modify, amend, supersede and replace in their
entirety the terms and provisions the Confidentiality Agreements between Parent
and the Company dated as of November 27, 2002, and June 5, 2003 (the
"CONFIDENTIALITY AGREEMENTS") and the Confidentiality Agreements are hereby
terminated effective as of the date of this Agreement.
SECTION 8.07. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
50
SECTION 8.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part
(except by operation of law), by any of the parties hereto without the prior
written consent of the other parties hereto, except that Sub may assign, in its
sole discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct wholly owned subsidiary of Parent, but no
such assignment shall relieve Sub of any of its obligations hereunder. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by, the parties hereto and their respective
successors and assigns.
SECTION 8.09. CONSENT TO JURISDICTION. Each of the parties hereto
irrevocably and unconditionally submits to the exclusive jurisdiction of (a) any
Delaware State court and (b) any Federal court of the United States of America
sitting in the State of Delaware, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby
(and each agrees that no such action, suit or proceeding relating to this
Agreement shall be brought by it or any of its affiliates except in such
courts). Each of the parties hereto further agrees that, to the fullest extent
permitted by Applicable Laws, service of any process, summons, notice or
document by U.S. registered mail to such person's respective address set forth
above shall be effective service of process for any action, suit or proceeding
in Delaware with respect to any matters to which it has submitted to
jurisdiction as set forth above in the immediately preceding sentence. Each of
the parties hereto irrevocably and unconditionally waives (and agrees not to
plead or claim) any objection to the laying of venue of any action, suit or
proceeding arising out of this Agreement or the transactions contemplated hereby
in (a) any Delaware Court of Chancery or (b) any Federal court of the United
State of America sitting in the State of Delaware, or that any such action, suit
or proceeding brought in any such court has been brought in an inconvenient
forum.
SECTION 8.10. WAIVER OF JURY TRIAL. Each party hereto hereby waives, to
the fullest extent permitted by Applicable Laws, any right it may have to a
trial by jury in respect of any suit, action or other proceeding directly or
indirectly arising out of, under or in connection with this Agreement. Each
party hereto (a) certifies that no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such party would not,
in the event of any action, suit or proceeding, seek to enforce the foregoing
waiver and (b) acknowledges that it and the other parties hereto have been
induced to enter into this Agreement, by, among other things, the mutual waiver
and certifications in this Section 8.10.
SECTION 8.11. ENFORCEMENT. The parties agree that irreparable damage
would occur if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Delaware Court of Chancery or
any Federal court of the United States of America sitting in the State of
Delaware, this being in addition to any other remedy to which they are entitled
at law or in equity.
SECTION 8.12. FEES AND EXPENSES.
(a) Except as set forth in this Section 8.12, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses whether or not the
Merger is consummated; provided, however, that Parent and Company shall share
equally all fees and expenses, other than attorneys' and accountants fees and
expenses, incurred (i) in relation to the printing and mailing of the Proxy
Statement (including any preliminary materials related thereto) and any
amendments or supplements thereto or (ii) for the premerger notification and
report forms under the HSR Act.
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(b) TERMINATION. If Parent shall terminate this Agreement pursuant to
Section 7.01(d), then Company shall promptly reimburse Parent for Parent's
documented out-of-pocket costs and expenses in connection with this Agreement
and the transactions contemplated hereby.
(c) FAILURE TO PAY....Each of the parties acknowledges that the
agreements contained in this Section are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, the other
party would not enter into this Agreement; accordingly, if either of the parties
fails to pay in a timely manner the amounts due pursuant to this Section and, in
order to obtain such payment, the other party makes a claim that results in a
judgment against the first party for the amounts set forth in this Section, the
first party shall pay to the other party its costs and expenses (including
attorneys' fees and expenses) in connection with such suit, together with
interest on the applicable amounts at the Interest Rate in effect on the date
such payment was required to be made. Payment of the fees or the reimbursement
of expenses described in this Section shall not be in lieu of damages incurred
in the event of intentional breach of this Agreement.
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IN WITNESS WHEREOF, Parent, 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.
ALLOY, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
DODGER ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Treasurer
XXXXX*S CORP.
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------
Name:
Title:
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ANNEX B
CONDITIONS TO OFFER
Notwithstanding any other provisions of the Offer, the Purchaser which
will be Sub or another direct or indirect wholly owned subsidiary of Parent
shall not be required to accept for payment or pay for, or may delay the
acceptance for payment of or payment for, tendered shares, or may terminate or
amend the Offer if fewer than a majority of the shares are validly tendered and
not withdrawn prior to the Expiration Date or if on or after the commencement
date of the Offer, and at or before the time of payment for shares (whether or
not any shares have theretofore been accepted for payment or paid for pursuant
to the Offer), any of the following events shall occur:
(a) there shall have occurred any (1) general suspension of,
or limitation on prices for, trading in securities on the New York
Stock Exchange, Inc. or the Nasdaq for any five trading days out of any
twenty consecutive trading days; (2) declaration of a banking
moratorium or suspension of payments in respect of banks in the United
States or any general limitation by United States federal or state
authorities (whether or not mandatory) on the extension of credit by
lending institutions, which limitation materially affects the
Purchaser's ability to pay for the shares; or (3) commencement of a
war, armed hostilities or other national calamity involving the United
States which, in Parent's judgment, is reasonably likely to have a
material adverse effect on the Company and its subsidiaries taken as a
whole or Purchaser's ability to consummate the Offer;
(b) there shall have occurred (1) any breach by the Company of
any of its representations, warranties or covenants contained in the
Acquisition Agreement which would have a material adverse effect on the
value of the Company and its subsidiaries taken as a whole or the
Company's shares or (2) any breach by the Company of any of its
covenants in the Acquisition Agreement.
(c) any order shall have been entered in any action or
proceeding before any federal or state court or governmental agency or
other regulatory or administrative agency or commission, or a
preliminary or permanent injunction by any federal or state court of
competent jurisdiction by any federal or state court of competent
jurisdiction in the United States shall have been issued and remain in
effect which would have the effect of (1) making the purchase of, or
payment for, some or all of the shares pursuant to the Offer or the
Merger illegal, (2) otherwise preventing consummation of the Offer or
the Merger, (3) imposing limitations on the ability of the Purchaser or
Parent effectively (A) to acquire, hold or operate the business of the
Company and its subsidiaries taken as a whole or (B) to exercise full
rights of ownership of the shares acquired by it, including, but not
limited to, the right to vote the shares purchased by it on all matters
properly presented to the Stockholders of the Company, which, in either
case, would effect a material diminution in the value of the Company
and its subsidiaries taken as a whole or the Company's shares, or (4)
imposing material financial burdens on Parent as a result of the
Purchaser's acquisition of shares over and above (A) the purchase price
for said shares, and (B) the actions contemplated by the Acquisition
Agreement; provided, that prior to terminating as a result of the entry
of any such order, Purchaser shall use its commercially reasonable
efforts to have such order lifted or overturned;
(d) there shall have been any federal or state statute, rule
or regulation enacted or promulgated on or after the date of the Offer
that could reasonably, directly or indirectly, result in any of the
material adverse consequences referred to in clauses (1), (2), (3) or
(4) of paragraph (c);
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(e) a tender or exchange offer for any shares shall have been
made or publicly proposed to be made by another person, or it shall
have been publicly disclosed or the Purchaser shall have learned that
(1) any person, entity or "group" (as the term is used in Section
13(d)(3) of the Exchange Act) shall have acquired, or proposed to
acquire, more than 20% of any class or series of capital stock of the
Company, or shall have been granted any option or right, conditional or
otherwise, to acquire more than 20% of any class or series of capital
stock of the Company, (2) any new group shall have been formed which
beneficially owns more than 20% of any class or series of capital stock
of the Company, (3) any person, entity or group shall have entered into
a definitive agreement or an agreement in principle or made a proposal
with respect to a tender offer or exchange offer for any shares or a
merger, consolidation or other business combination with or involving
the Company or (4) any person shall have filed a Notification and
Report Form under the HSR Act reflecting an intent to acquire the
Company or assets or securities of the Company; provided, that if
Purchaser terminates the Offer in such event, it shall reimburse the
Company for the expenses reasonably and actually incurred in connection
with the negotiation and consummation of the transactions contemplated
by the Acquisition Agreement;
(f) any change shall have occurred in the assets, financial
condition or business of the Company and its subsidiaries taken as a
whole, which is materially adverse to the Company; or
(g) Parent or Purchaser shall have reached an agreement or
understanding in writing with the Company providing for termination of
the Offer.
The foregoing conditions are for the sole benefit of the Purchaser and may be
asserted by the Purchaser regardless of the circumstances giving rise to such
condition or may be waived by the Purchaser in whole or in part at any time and
from time to time in its sole discretion. Any determination by the Purchaser
concerning any event described above shall be final and binding upon all
parties.
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