EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE SPORTS AUTHORITY, INC.,
SLAP SHOT HOLDINGS CORP.
AND
SAS ACQUISITION CORP.
JANUARY 22, 2006
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS..........................................................1
SECTION 1.1 DEFINITIONS...................................................1
SECTION 1.2 TERMS GENERALLY...............................................8
ARTICLE II THE MERGER..........................................................9
SECTION 2.1 THE MERGER....................................................9
SECTION 2.2 CONVERSION OF SECURITIES......................................9
SECTION 2.3 PAYMENT OF CASH FOR MERGER SHARES............................11
SECTION 2.4 TREATMENT OF OPTIONS.........................................13
ARTICLE III THE SURVIVING CORPORATION.........................................13
SECTION 3.1 ARTICLES OF INCORPORATION....................................13
SECTION 3.2 BYLAWS.......................................................13
SECTION 3.3 DIRECTORS AND OFFICERS.......................................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................14
SECTION 4.1 CORPORATE EXISTENCE AND POWER................................14
SECTION 4.2 CORPORATE AUTHORIZATION; COMPANY FAIRNESS OPINION............15
SECTION 4.3 GOVERNMENTAL AUTHORIZATION...................................15
SECTION 4.4 NON-CONTRAVENTION............................................16
SECTION 4.5 CAPITALIZATION...............................................16
SECTION 4.6 COMPANY SUBSIDIARIES AND JOINT VENTURES......................17
SECTION 4.7 REPORTS AND FINANCIAL STATEMENTS.............................17
SECTION 4.8 DISCLOSURE DOCUMENTS.........................................18
SECTION 4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS.........................19
SECTION 4.10 LITIGATION..................................................20
SECTION 4.11 TAXES ......................................................21
SECTION 4.12 ERISA ......................................................23
SECTION 4.13 LABOR MATTERS...............................................24
SECTION 4.14 COMPLIANCE WITH LAWS........................................24
SECTION 4.15 FINDERS' FEES...............................................25
SECTION 4.16 ENVIRONMENTAL MATTERS.......................................25
SECTION 4.17 SUPPLIERS AND RELATIONSHIPS.................................26
SECTION 4.18 CONTRACTS...................................................26
SECTION 4.19 INTELLECTUAL PROPERTY.......................................27
SECTION 4.20 ASSETS AND PROPERTY.........................................27
SECTION 4.21 INSURANCE...................................................29
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.............29
SECTION 5.1. CORPORATE EXISTENCE AND POWER...............................29
SECTION 5.2 CORPORATE AUTHORIZATION......................................29
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SECTION 5.3 GOVERNMENTAL AUTHORIZATION...................................29
SECTION 5.4 NON-CONTRAVENTION............................................30
SECTION 5.5 DISCLOSURE DOCUMENTS.........................................30
SECTION 5.6 FINDERS' FEES................................................30
SECTION 5.7 FINANCING....................................................30
SECTION 5.8 NO OTHER INFORMATION.........................................31
SECTION 5.9 INTEREST IN COMPETITORS......................................31
SECTION 5.10 OWNERSHIP OF COMMON SHARES..................................31
SECTION 5.11 SOLVENCY OF THE COMPANY FOLLOWING COMPLETION OF THE MERGER..31
SECTION 5.12 MANAGEMENT AGREEMENTS.......................................31
ARTICLE VI COVENANTS OF THE COMPANY...........................................32
SECTION 6.1 CONDUCT OF THE COMPANY AND SUBSIDIARIES......................32
SECTION 6.2 STOCKHOLDER MEETING; PROXY MATERIAL..........................34
SECTION 6.3 ACCESS TO INFORMATION; COOPERATION IN FINANCING..............35
SECTION 6.4 SOLICITATION.................................................36
ARTICLE VII COVENANTS OF PARENT AND MERGER SUB................................39
SECTION 7.1 VOTING OF SHARES.............................................39
SECTION 7.2 DIRECTOR AND OFFICER LIABILITY...............................39
SECTION 7.3 FINANCING EFFORTS............................................41
SECTION 7.4 SOLVENCY OPINION.............................................41
ARTICLE VIII COVENANTS OF THE PARTIES.........................................41
SECTION 8.1 REASONABLE BEST EFFORTS......................................41
SECTION 8.2 CERTAIN FILINGS..............................................42
SECTION 8.3 PUBLIC ANNOUNCEMENTS.........................................43
SECTION 8.4 FURTHER ASSURANCES...........................................43
SECTION 8.5 NOTICES OF CERTAIN EVENTS....................................43
SECTION 8.6 DISPOSITION OF LITIGATION....................................44
SECTION 8.7 EMPLOYEE MATTERS.............................................44
SECTION 8.8 CONFIDENTIALITY AGREEMENT....................................44
ARTICLE IX CONDITIONS TO THE MERGER...........................................45
SECTION 9.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY..................45
SECTION 9.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB.......45
SECTION 9.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY.................46
ARTICLE X TERMINATION.........................................................46
SECTION 10.1 TERMINATION.................................................46
SECTION 10.2 TERMINATION FEE.............................................48
SECTION 10.3 EFFECT OF TERMINATION.......................................48
ARTICLE XI MISCELLANEOUS......................................................49
SECTION 11.1 NOTICES.....................................................49
SECTION 11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES..................50
SECTION 11.3 AMENDMENTS NO WAIVERS.......................................50
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SECTION 11.4 EXPENSES....................................................50
SECTION 11.5 SUCCESSORS AND ASSIGNS......................................50
SECTION 11.6 GOVERNING LAW...............................................51
SECTION 11.7 COUNTERPARTS; EFFECTIVENESS; THIRD PARTY BENEFICIARIES......51
SECTION 11.8 SEVERABILITY................................................51
SECTION 11.9 SPECIFIC PERFORMANCE........................................51
SECTION 11.10 ENTIRE AGREEMENT...........................................51
SECTION 11.11 JURISDICTION...............................................51
SECTION 11.12 AUTHORSHIP.................................................52
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EXHIBITS
A. Form of Contribution and Exchange Agreement
B. Certificate of Incorporation of the Surviving Corporation
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made
and entered into as of this 22nd day of January, 2006 by and among The Sports
Authority, Inc., a Delaware corporation (the "COMPANY"), Slap Shot Holdings
Corp., a Delaware corporation ("PARENT"), and SAS Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Parent("MERGER SUB").
RECITALS
A. The parties intend that Merger Sub be merged with and into the
Company (the "MERGER"), with the Company surviving the Merger as a wholly-owned
subsidiary of Parent (the "SURVIVING CORPORATION").
B. The Special Committee and the Board of Directors of the Company
(except for directors affiliated with Parent or Merger Sub and members of
Company management who recused themselves) have, acting in joint session,
unanimously (i) determined that the Merger and this Agreement are fair to and in
the best interests of the Company, (ii) adopted this Agreement and (iii)
resolved to recommend that the Company shareholders approve this Agreement.
C. The Board of Directors of Merger Sub has unanimously adopted this
Agreement. The Board of Directors of Parent, and Parent, as the sole shareholder
of Merger Sub, in each case, has approved this Agreement and has approved the
Merger and the transactions contemplated hereby.
D. The Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger, as set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein,
intending to be legally bound, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. For purposes of this Agreement, the
following terms have the respective meanings set forth below:
"ACCEPTABLE CONFIDENTIALITY AGREEMENT" has the meaning set forth in
SECTION 6.4(F)(I).
"ADVERSE RECOMMENDATION CHANGE" has the meaning set forth in SECTION
6.4(D).
"AFFILIATE" means, with respect to any Person, any other Person,
directly or indirectly, controlling, controlled by, or under common control
with, such Person. For purposes of this definition, the term "control"
(including the correlative terms "CONTROLLING", "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"AGREEMENT" has the meaning set forth in the Preamble.
"AMENDED OPTION" has the meaning set forth in SECTION 2.4(A).
"BALANCE SHEET" means the consolidated balance sheet of the Company as
of October 29, 2005 (and the notes thereto) set forth in the Company's quarterly
report on Form 10-Q for the quarterly period ended October 29, 2005.
"BALANCE SHEET DATE" means October 29, 2005.
"BUSINESS DAY" means any day other than the days on which banks in the
City of New York generally are closed.
"CERTIFICATE OF MERGER" has the meaning set forth in SECTION 2.1(B).
"CLOSING" has the meaning set forth in SECTION 2.1(D).
"CLOSING DATE" has the meaning set forth in SECTION 2.1(D)
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON SHARES" means shares of Common Stock.
"COMMON STOCK" means the common stock of the Company, par value $0.01
per share.
"COMPANY" has the meaning set forth in the Preamble.
"COMPANY ACQUISITION AGREEMENT" has the meaning set forth in SECTION
6.4(D).
"COMPANY ACQUISITION PROPOSAL" has the meaning set forth in SECTION
6.4(F)(II).
"COMPANY EMPLOYEES" has the meaning set forth in SECTION 8.7(A).
"COMPANY FAIRNESS OPINION" has the meaning set forth in SECTION
4.2(D).
"COMPANY FINANCIAL ADVISOR" has the meaning set forth in SECTION
4.2(D).
"COMPANY JOINT VENTURE" means, with respect to the Company, any
corporation or other entity (including partnerships, limited liability companies
and other business associations and joint ventures) in which the Company,
directly or indirectly, owns an equity interest that does not have voting power
under ordinary circumstances to elect a majority of the board of
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directors or other person performing similar functions but in which the Company
has rights with respect to the management of such Person.
"COMPANY OPTIONS" means Employee Options and Director Options, as the
context requires.
"COMPANY PROXY STATEMENT" has the meaning set forth in SECTION 4.8.
"COMPANY REPRESENTATIVES" has the meaning set forth in SECTION 6.4(A).
"COMPANY RESTRICTED SHARES " has the meaning set forth in SECTION
2.2(F).
"COMPANY SEC REPORTS" has the meaning set forth in SECTION 4.7(A).
"COMPANY SECURITIES" has the meaning set forth in SECTION 4.5(B).
"COMPANY SHAREHOLDER MEETING" has the meaning set forth in SECTION
6.2(A).
"CONFIDENTIALITY AGREEMENT" means, collectively, the Confidentiality
Agreement dated December 22, 2005 between the Company and LGP.
"CONTRACTS" has the meaning set forth in SECTION 4.18(A).
"CONTRIBUTING HOLDERS" means Xxxx Xxxxxxx Xxxxxx, Xxxxxx X.
Xxxxxxxxxxx, Xxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxx and Xxxx X. Xxxxxxxxx and any
other holder of Common Shares or Company Options who enters into a Contribution
and Exchange Agreement or other agreement providing for such holder to (i)
acquire shares of capital stock of Parent immediately prior to the Effective
Time and/or (ii) agree to amend the terms of a portion of their Company Options
effective concurrently with the consummation of the Merger.
"CONTRIBUTION AND EXCHANGE AGREEMENT" means each agreement by and
between Parent and the Contributing Holders, in the form of EXHIBIT A attached,
pursuant to which (i) such Contributing Holders will exchange a portion of their
respective Common Shares for shares of capital stock of Parent immediately prior
to the Effective Time and/or (ii) a portion of such Contributing Holders'
respective Company Options will be assumed by Parent and amended concurrently
with the consummation of the Merger.
"CONTROLLED GROUP LIABILITY" means any and all liabilities (i) under
Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections 412 and
4971 of the Code, or (iv) as a result of a failure to comply with the
continuation coverage requirements of Section 601 et seq. of ERISA and Section
4980B of the Code, other than such liabilities that arise out of, or relate to,
the Employee Plans.
"CURRENT COMPANY SEC REPORTS" means the Company's annual report on
Form 10-K for the fiscal year ended January 29, 2005, the Company's Definitive
Proxy for the 2005 Annual Meeting of Company shareholders and the Company's
quarterly reports on Form 10-Q for the fiscal quarters ended April 30, 2005,
July 30, 2005 and October 29, 2005.
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"CURRENT POLICIES" has the meaning set forth in SECTION 7.2(A).
"DAMAGES" has the meaning set forth in SECTION 7.2(A).
"DELAWARE CORPORATE LAW" means the Delaware General Corporation Law,
as amended.
"DIRECTOR OPTIONS" means the outstanding options to acquire Common
Shares granted to directors of the Company.
"DISBURSING AGENT" has the meaning set forth in SECTION 2.3(A).
"DISCLOSURE LETTER" has the meaning set forth in the preamble to
ARTICLE IV.
"DISSENTING COMMON SHARES" has the meaning set forth in SECTION
2.2(D).
"EFFECTIVE TIME" has the meaning set forth in SECTION 2.1(B).
"EMPLOYEE BENEFIT PLAN" has the meaning set forth in Section 3(3) of
ERISA.
"EMPLOYEE OPTIONS" means the outstanding options to acquire Common
Shares granted to employees of the Company and/or its Subsidiaries.
"EMPLOYEE PLAN" has the meaning set forth in SECTION 4.12(A).
"EMPLOYMENT AGREEMENT" means a contract, offer letter or agreement of
the Company or any of its Subsidiaries with or addressed to any individual who
is rendering or has rendered services thereto as an employee, officer, director,
independent contractor or consultant pursuant to which the Company or any of its
Subsidiaries has any liability or obligation to provide compensation and/or
benefits in consideration for past, present or future services.
"END DATE" means 180 days following the date of this Agreement.
"ENVIRONMENTAL LAWS" means any and all applicable federal, state,
local, municipal and foreign Laws relating to the environment or to Releases of
Hazardous Substances or to public health as it relates thereto or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances or the notification,
clean up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any entity, trade or business (whether or not
incorporated) that is a member of a controlled group including the Company or
that is under common control with the Company within the meaning of Section 414
of the Code.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXCLUDED PARTY" has the meaning set forth in SECTION 6.4(B).
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"EXCLUSIVITY PERIOD START DATE" has the meaning set forth in SECTION
6.4(A).
"FINANCING" has the meaning set forth in SECTION 5.7.
"FINANCING LETTERS" has the meaning set forth in SECTION 5.7.
"GAAP" means United States generally accepted accounting principles.
"GEI IV LETTER" has the meaning set forth in SECTION 5.7.
"GOVERNMENTAL AUTHORITY" means any agency, public or regulatory
authority, instrumentality, department, commission, court, arbitrator, ministry,
tribunal or board of any nation or government or political subdivision thereof,
whether foreign or domestic and whether national, supranational, federal,
tribal, provincial, state, regional, local or municipal.
"HAZARDOUS SUBSTANCES" means any wastes, substances, radiation, matter
or materials (i) which are hazardous, toxic, infectious, explosive, dangerous,
flammable, radioactive, carcinogenic, or mutagenic; (ii) which are defined as
"hazardous materials," "hazardous wastes," "hazardous substances," "wastes" or
other similar designations in any Environmental Laws; or (iii) without
limitation, which contain asbestos and asbestos-containing materials,
polychlorinated biphenyls, lead-based paints, mold or other multicellular fungi,
urea-formaldehyde foam insulation, and petroleum or petroleum products
(including, without limitation, crude oil or any fraction thereof and all other
substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in
the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R.
Section 300.5).
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"INSURANCE POLICIES" has the meaning set forth in SECTION 4.21.
"INTELLECTUAL PROPERTY" means all United States and foreign
trademarks, trademark rights, trade names, trade names rights, service marks and
service xxxx rights, service names and service names rights, copyrights and
copyright rights, trade secrets, Internet domain names and other proprietary
intellectual property rights and all pending applications for and registrations
of any of the foregoing.
"KNOWLEDGE" of any Person that is not an individual means, with
respect to any specific matter, the actual knowledge of such Person's executive
officers after due inquiry of individuals who are aware of the proposed Merger
as of the date hereof.
"LAW" means applicable, statutes, common laws, rules, ordinances,
regulations, codes, licensing requirements, orders, judgments, injunctions,
writs, decrees, licenses, governmental guidelines or interpretations having the
force of law, permits, rules and bylaws, in each case, of a Governmental
Authority.
"LEASED REAL PROPERTY" has the meaning set forth in SECTION 4.20(C).
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"LEASES" has the meaning set forth in SECTION 4.20(C).
"LGP" means Xxxxxxx Xxxxx & Partners L.P.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
"MATERIAL ADVERSE EFFECT ON THE COMPANY" has the meaning set forth in
SECTION 4.9(A).
"MATERIAL CONTRACTS" has the meaning set forth in SECTION 4.18(A).
"MATERIAL EMPLOYMENT AGREEMENT" means an Employment Agreement pursuant
to which the Company or any of its Subsidiaries has or would reasonably be
expected to have any obligation to provide compensation and/or benefits
(including without limitation severance pay or benefits or payments related to
change in control of the Company) in an amount or having a value in excess of
$150,000 per year or $250,000 in the aggregate.
"MERGER" has the meaning set forth in the Recitals.
"MERGER CONSIDERATION" has the meaning set forth in SECTION 2.2(C).
"MERGER SHARES" has the meaning set forth in SECTION 2.2(C).
"MERGER SUB" has the meaning set forth in the Preamble.
"MERGER SUB COMMON SHARES" means the common stock of Merger Sub, par
value $0.01 per share.
"NEW FINANCING LETTERS" has the meaning set forth in SECTION 5.7.
"NEW PLANS" has the meaning set forth in SECTION 8.7(A).
"OLD PLANS" has the meaning set forth in SECTION 8.7(A).
"OTHER ANTITRUST LAWS" means any Law enacted by any Governmental
Authority relating to antitrust matters or regulating competition.
"OWNED REAL PROPERTY" has the meaning set forth in SECTION 4.20(B).
"PARENT" has the meaning set forth in the Preamble.
"PARENT EXPENSES" has the meaning set forth in SECTION 10.2.
"PERMITS" means any licenses, franchises, permits, certificates,
consents, approvals or other similar authorizations of, from or by a
Governmental Authority possessed by or granted to or necessary for the ownership
of the material assets or conduct of the business of, the Company or its
Significant Subsidiaries.
"PERMITTED ALTERNATIVE AGREEMENT" has the meaning set forth in SECTION
10.1(E).
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"PERMITTED LIENS" means (i) liens for taxes not yet due and payable or
that are being contested in good faith and by appropriate proceedings; (ii)
mechanics', materialmen's or other liens or security interests that secure a
liquidated amount that are being contested in good faith and by appropriate
proceedings; or (iii) any other liens, encumbrances, security interests,
easements, rights-of-way, encroachments, restrictions, conditions and other
encumbrances that do not secure a liquidated amount, that have been incurred or
suffered in the ordinary course of business and that would not, individually or
in the aggregate, have a material effect on the Company.
"PERSON" means any individual, corporation, limited liability company,
partnership, association, trust or any other entity or organization, including
any government or political subdivision or any agency or instrumentality
thereof.
"PROCEEDING" has the meaning set forth in SECTION 4.10.
"REAL PROPERTY" has the meaning set forth in SECTION 4.20(D).
"RECOMMENDATION" has the meaning set forth in SECTION 6.2(B).
"RELEASE" means any emission, spill, seepage, leak, escape, leaching,
discharge, injection, ejection, pumping, pouring, emptying, dumping, disposal,
or release of Hazardous Substances into or upon the environment, including the
air, soil, surface water, groundwater, the sewer, septic system, storm drain,
publicly owned treatment works, or waste treatment, storage, or disposal
systems.
"REPLACEMENT POLICIES" has the meaning set forth in SECTION 7.2(A).
"REQUIRED CONTRACTUAL CONSENTS" has the meaning set forth in SECTION
4.4.
"REQUIRED GOVERNMENTAL APPROVALS" has the meaning set forth in SECTION
4.3.
"REQUISITE SHAREHOLDER VOTE" has the meaning set forth in SECTION
4.2(A).
"SCHEDULE 13E-3" has the meaning set forth in SECTION 4.8.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SIGNIFICANT SUBSIDIARIES" has the meaning set forth in SECTION
4.1(B).
"SPECIAL COMMITTEE" means a committee comprised of all of the members
of the Company's Board of Directors (other than those who are affiliated with
Parent or Merger Sub or are members of the Company's management) formed for the
purpose of evaluating, and making a recommendation to the full Board of
Directors of the Company with respect to, this Agreement and the Merger.
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"SUBSIDIARY" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by such Person.
"SUPERIOR PROPOSAL" has the meaning set forth in SECTION 6.4(F)(III).
"SURVIVING CORPORATION" has the meaning set forth in the Recitals.
"TAX" (including "TAXES") means (i) all federal, state, local, foreign
and other taxes (including withholding taxes), fees and other governmental
charges of any kind or nature whatsoever, together with any interest and any
penalties, additions or additional amounts with respect thereto, (ii) any
liability for payment of amounts described in CLAUSE (I) whether as a result of
transferee liability, joint and several liability for being a member of an
affiliated, consolidated, combined, unitary or other group for any period, or
otherwise by operation of law, and (iii) any liability for the payment of
amounts described in CLAUSE (I) or (II) as a result of any tax sharing, tax
indemnity or tax allocation agreement or any other express or implied agreement
to pay or indemnify any other Person.
"TAX RETURN" means any return, declaration, report, statement,
information statement or other document filed or required to be filed with
respect to Taxes, including any claims for refunds of Taxes and any amendments
or supplements of any of the foregoing.
"TERMINATION FEE" has the meaning set forth in SECTION 10.2.
"THIRD PARTY" means any Person (which includes a "person" as such term
is defined in Section 13(d)(3) of the Exchange Act) other than Parent, Merger
Sub or any of their respective Affiliates.
"TRADE SECRETS" means non-public know-how, inventions, discoveries,
improvements, concepts, ideas, methods, processes, designs, plans, schematics,
drawings, formulae, technical data, specifications, research and development
information, technology and product roadmaps, data bases and other proprietary
or confidential information, including customer lists, but excluding any
Copyrights or Patents that may cover or protect any of the foregoing.
Section 1.2 TERMS GENERALLY. The definitions in SECTION 1.1 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation,"
unless the context expressly provides otherwise. All references herein to
Sections, paragraphs, subparagraphs, clauses, Exhibits or Schedules shall be
deemed references to Sections, paragraphs, subparagraphs or clauses of, or
Exhibits or Schedules to this Agreement, unless the context requires otherwise.
Unless otherwise expressly defined, terms defined in this Agreement have the
same meanings when used in any Exhibit or Schedule hereto, including the
Disclosure Letter. Unless otherwise specified, the words "herein," "hereof,"
"hereto" and "hereunder" and other words of similar import refer to this
Agreement as a whole (including the Schedules and Exhibits) and not to any
particular provision of this Agreement.
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ARTICLE II
THE MERGER
Section 2.1 THE MERGER.
(a) At the Effective Time, in accordance with the Delaware
Corporate Law, and upon the terms and subject to the conditions set forth in
this Agreement, Merger Sub shall be merged with and into the Company, at which
time the separate existence of Merger Sub shall cease and the Company shall
survive the Merger as a wholly-owned subsidiary of Parent.
(b) As soon as reasonably practicable after the satisfaction or
valid waiver of all conditions to the Merger, the Company and Merger Sub will
file a certificate of merger (the "CERTIFICATE OF MERGER") meeting the
requirements of the Delaware Corporate Law with the Secretary of State of the
State of Delaware. The Merger shall become effective at such time as the
Certificate of Merger is endorsed by the Secretary of State of the State of
Delaware, or at such later time as the Company and Merger Sub may agree and
specify in the Certificate of Merger (such time as the Merger becomes effective,
the "EFFECTIVE TIME").
(c) The Merger shall have the effects set forth in the applicable
provisions of the Delaware Corporate Law. Without limiting the generality of the
foregoing, and subject thereto, from and after the Effective Time, all property,
rights, privileges, immunities, powers, franchises, licenses and authority of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions and duties of each of the Company
and Merger Sub shall become the debts, liabilities, obligations, restrictions
and duties of the Surviving Corporation.
(d) The closing of the Merger (the "CLOSING") shall take place (i) at
the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP located in Los Angeles, California,
as soon as reasonably practicable (but in any event, no later than the second
Business Day) after the day on which the last condition to the Merger set forth
in ARTICLE IX is satisfied or validly waived (other than those conditions that
by their nature cannot be satisfied until the Closing Date, but subject to the
satisfaction or valid waiver of such conditions) or (ii) at such other place and
time or on such other date as the Company and Merger Sub may agree in writing
(the actual date of the Closing, the "CLOSING DATE").
Section 2.2 CONVERSION OF SECURITIES. At the Effective Time,
pursuant to this Agreement and by virtue of the Merger and without any action on
the part of the Company, Parent, Merger Sub or the holders of the Common Stock:
(a) Each share of Common Stock held by the Company as treasury stock
or otherwise owned by Parent, Merger Sub or any Company Subsidiary immediately
prior to the Effective Time (including shares of Common Stock acquired by Parent
immediately prior to the Effective Time pursuant to the Contribution and
Exchange Agreements), if any, shall be canceled and retired and shall cease to
exist, and no payment or distribution shall be made or delivered with respect
thereto.
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(b) Each Merger Sub Common Share issued and outstanding immediately
prior to the Effective Time shall be converted into and become one newly issued,
fully paid and non-assessable share of common stock of the Surviving
Corporation.
(c) Each Common Share issued and outstanding immediately prior to the
Effective Time (other than Common Shares to be canceled pursuant to SECTION
2.2(A) and Dissenting Common Shares (as hereinafter defined)), automatically
shall be canceled and converted into the right to receive $37.25 in cash,
without interest (the "MERGER CONSIDERATION"), payable to the holder thereof
upon surrender of the stock certificate formerly representing such Common Share
in the manner provided in SECTION 2.3. Such Common Shares, other than those
canceled pursuant to SECTION 2.2(A), sometimes are referred to herein as the
"MERGER SHARES."
(d) Notwithstanding any provision of this Agreement to the contrary,
if required by the Delaware Corporate Law but only to the extent required
thereby, Common Shares that are issued and outstanding immediately prior to the
Effective Time (other than Common Shares to be canceled pursuant to SECTION
2.2(A)) and that are held by holders of such Common Shares who have not voted in
favor of the adoption of this Agreement or consented thereto in writing and who
have properly exercised appraisal rights with respect thereto in accordance
with, and who have complied with, Section 262 of the Delaware Corporate Law (the
"DISSENTING COMMON SHARES") will not be convertible into the right to receive
the Merger Consideration, and holders of such Dissenting Common Shares will be
entitled to receive payment of the appraised value of such Dissenting Common
Shares in accordance with the provisions of such Section 262 unless and until
any such holder fails to perfect or effectively withdraws or loses its rights to
appraisal and payment under the Delaware Corporate Law. If, after the Effective
Time, any such holder fails to perfect or effectively withdraws or loses such
right, such Dissenting Common Shares will thereupon be treated as if they had
been converted into and have become exchangeable for, at the Effective Time, the
right to receive the Merger Consideration, without any interest thereon. At the
Effective Time, any holder of Dissenting Common Shares shall cease to have any
rights with respect thereto, except the rights provided in Section 262 of the
Delaware Corporate Law and as provided in the previous sentence. The Company
will give Parent (i) notice of any demands received by the Company for
appraisals of shares of Common Stock and (ii) the opportunity to participate in
and direct all negotiations and proceedings with respect to such notices and
demands. The Company shall not, except with the prior written consent of Parent,
make any payment with respect to any demands for appraisal or settle any such
demands.
(e) If between the date of this Agreement and the Effective Time the
number of outstanding Common Shares is changed into a different number of shares
or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split-up, combination, exchange of shares or
the like, other than pursuant to the Merger, the amount of Merger Consideration
payable per Common Share shall be correspondingly adjusted.
(f) All vested or unvested restricted shares of Common Stock
outstanding immediately prior to the Effective Time and all vested and unvested
restricted share units outstanding immediately prior to the Effective Time
(collectively, the "COMPANY RESTRICTED SHARES") shall, by virtue of this
Agreement and, without further action of the Company, Parent,
10
Merger Sub or the holder of such Company Restricted Shares, vest and
become free of all restrictions immediately prior to the Effective Time and
shall be canceled, retired and shall cease to exist and shall be converted into
the right to receive the Merger Consideration.
(g) The Company Options shall be treated as provided in SECTION 2.4.
(h) For the avoidance of doubt, the parties acknowledge and agree that
the contribution of Common Shares by the Contributing Holders to Parent pursuant
to the Contribution and Exchange Agreements shall be deemed to occur immediately
prior to the Effective Time and prior to any other above-described event.
Section 2.3 PAYMENT OF CASH FOR MERGER SHARES.
(a) Prior to the Closing Date, Parent shall designate a bank or
trust company that is reasonably satisfactory to the Company, that is organized
and doing business under the laws of the United States or any state thereof and
that has a combined capital and surplus of at least $500,000,000 to serve as the
disbursing agent for the Merger Consideration and payments in respect of the
Company Options, unless another agent is designated as provided in SECTION
2.4(A) (the "DISBURSING AGENT"). At or prior to the Closing, Parent will cause
to be deposited with the Disbursing Agent cash in the aggregate amount
sufficient to pay the Merger Consideration in respect of all Merger Shares
outstanding immediately prior to the Effective Time plus any cash necessary to
pay for Company Options pursuant to SECTION 2.4. Pending distribution of the
cash deposited with the Disbursing Agent, such cash shall be held in trust for
the benefit of the holders of Merger Shares and such Company Options and shall
not be used for any other purposes; PROVIDED, HOWEVER, that Parent may direct
the Disbursing Agent to invest such cash in obligations of or guaranteed by the
United States of America, as long as no such investments have maturities that
could prevent or delay payments to be made pursuant to SECTION 2.3(B).
(b) As promptly as practicable after the Effective Time (but no
later than five Business Days after the Effective Time), the Surviving
Corporation shall send, or cause the Disbursing Agent to send, to each record
holder of Merger Shares as of immediately prior to the Effective Time (other
than Common Shares to be canceled pursuant to SECTION 2.2(A)) a letter of
transmittal and instructions for exchanging their Merger Shares for the Merger
Consideration payable therefor. The letter of transmittal will be in customary
form and will specify that delivery of Merger Shares will be effected, and risk
of loss and title will pass, only upon delivery of the stock certificates
representing the Merger Shares to the Disbursing Agent. Upon surrender of such
stock certificate or certificates to the Disbursing Agent together with a
properly completed and duly executed letter of transmittal and any other
documentation that the Disbursing Agent may reasonably require, the record
holder thereof shall be entitled to receive the Merger Consideration payable
in exchange therefor, less any amounts required to be withheld for Tax. Until so
surrendered and exchanged, each such certificate shall, after the Effective
Time, be deemed to represent only the right to receive the Merger Consideration,
and until such surrender and exchange, no cash shall be paid to the holder of
such outstanding certificate in respect thereof.
11
(c) If payment is to be made to a Person other than the registered
holder of the Merger Shares represented by the certificate or certificates
surrendered in exchange therefor, it shall be a condition to such payment that
the certificate or certificates so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting such
payment shall pay to the Disbursing Agent any applicable stock transfer taxes
required as a result of such payment to a Person other than the registered
holder of such Merger Shares or establish to the satisfaction of the Disbursing
Agent that such stock transfer taxes have been paid or are not payable.
(d) After the Effective Time, there shall be no further transfers on
the stock transfer books of the Surviving Corporation of the Common Shares that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing Merger Shares are presented to the
Surviving Corporation, such shares shall be canceled and exchanged for the
consideration provided for, and in accordance with the procedures set forth, in
this ARTICLE II.
(e) If any cash deposited with the Disbursing Agent remains
unclaimed twelve months after the Effective Time, such cash shall be returned to
the Surviving Corporation upon demand, and any holder who has not surrendered
his Merger Shares certificates for the Merger Consideration prior to that time
shall thereafter look only to the Surviving Corporation for payment of the
Merger Consideration. Notwithstanding the foregoing, the Surviving Corporation
shall not be liable to any holder of Merger Shares for an amount paid to a
public official pursuant to any applicable unclaimed property laws. Any amounts
remaining unclaimed by holders of Merger Shares as of a date immediately prior
to such time that such amounts would otherwise escheat to or become property of
any Governmental Authority shall, to the extent permitted by applicable Law,
become the property of the Surviving Corporation on such date, free and clear of
any claims or interest of any Person previously entitled thereto.
(f) No dividends or other distributions with respect to capital
stock of the Surviving Corporation with a record date after the Effective Time
shall be paid to the holder of any unsurrendered certificate for Common Shares.
(g) From and after the Effective Time, the holders of Common Shares
(other than Dissenting Common Shares) outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Common
Shares, other than the right to receive the Merger Consideration as provided in
this Agreement.
(h) In the event that any Merger Share certificate has been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Merger Share certificate to be lost, stolen or destroyed, in
addition to the posting by such holder of any bond in such reasonable amount as
the Surviving Corporation may direct as indemnity against any claim that may be
made against the Surviving Corporation with respect to such Merger Share
certificate, the Disbursing Agent will issue in exchange for such lost, stolen
or destroyed Merger Share certificate the proper amount of the Merger
Consideration.
(i) Parent, Surviving Corporation and the Disbursing Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise payable
hereunder any amounts
12
required to be deducted and withheld under any applicable Tax Law. To the extent
any amounts are so withheld, such withheld amounts shall be treated for all
purposes as having been paid to the holder from whose Merger Consideration the
amounts were so deducted and withheld.
Section 2.4 TREATMENT OF OPTIONS.
(a) As of the Effective Time, each Company Option (other than
Amended Options) will be cancelled and extinguished, and the holder thereof will
be entitled to receive an amount in cash equal to the excess (if any) of (A) the
product of (i) the number of Common Shares subject to such Company Option and
(ii) the Merger Consideration over (B) the aggregate exercise price of such
Company Option, without interest and less any amounts required to be deducted
and withheld under any applicable Law. All payments with respect to canceled
Company Options shall be made by the Disbursing Agent (or such other agent
reasonably acceptable to the Company as Parent shall designate prior to the
Effective Time) as promptly as reasonably practicable after the Effective Time
from funds deposited by or at the direction of Parent to pay such amounts in
accordance with SECTION 2.3(A). Notwithstanding the foregoing, with respect to
Company Options that are identified in a Contribution and Exchange Agreement
between a Contributing Holder and Parent, such Company Options will be assumed
by Parent and amended concurrently with the consummation of the Merger pursuant
to the terms of such Contribution and Exchange Agreement (any Company Option so
to be amended, an "AMENDED OPTION").
(b) Prior to the Effective Time, the Company and Parent will adopt
such resolutions as may be reasonably required to effectuate the actions
contemplated by this SECTION 2.4, without paying any consideration or incurring
any debts or obligations on behalf of the Company or the Surviving Corporation.
(c) Parent and the Surviving Corporation shall be entitled to deduct
and withhold from any amounts to be paid hereunder in respect of Company Options
or Company Restricted Shares any amounts required to be deducted and withheld
under any applicable Tax Law. To the extent any amounts are so withheld, such
withheld amounts shall be treated for all purposes as having been paid to the
Company Option or Company Restricted Share holder from whose payments in respect
of Company Options or Company Restricted Shares the amounts were so deducted and
withheld.
ARTICLE III
THE SURVIVING CORPORATION
Section 3.1 ARTICLES OF INCORPORATION. The certificate of
incorporation of the Company as in effect immediately prior to the Effective
Time shall be amended as set forth on EXHIBIT B, and, as so amended, shall be
the certificate of incorporation of the Surviving Corporation until thereafter
amended in accordance with the terms thereof and as provided by applicable Law.
Section 3.2 BYLAWS. The bylaws of the Company in effect at the
Effective Time shall be amended to read the same as the bylaws of the Merger Sub
in effect immediately prior to the Effective Time, and shall be the bylaws of
the Surviving Corporation until thereafter amended in accordance with the terms
thereof and as provided by applicable Law.
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Section 3.3 DIRECTORS AND OFFICERS. From and after the Effective
Time, (i) the directors of Merger Sub at the Effective Time shall be the
directors of the Surviving Corporation and (ii) the officers of the Company at
the Effective Time shall be the officers of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified in accordance with applicable Law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding sections or subsections of
the Disclosure Letter delivered to Parent and Merger Sub by the Company
concurrently with entering into this Agreement (the "DISCLOSURE LETTER") or as
may be disclosed in reasonable detail in any Current Company SEC Report filed
prior to the date hereof (it being understood that any information set forth in
a particular section or subsection of the Disclosure Letter shall be deemed to
be disclosed in each other section or subsection thereof to which the relevance
of such information is reasonably apparent), the Company hereby represents and
warrants to Parent and Merger Sub that:
Section 4.1 CORPORATE EXISTENCE AND POWER.
(a) Each of the Company and its Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of the Company and its Subsidiaries has all
corporate powers and authority required to own, lease and operate its respective
properties and to carry on its business as now conducted. The Company has all
corporate powers and authority to execute and deliver this Agreement, and to
consummate the Merger and the other transactions contemplated hereby and to
perform each of its obligations hereunder. Each of the Company Joint Ventures
has all powers and authority required to own, lease and operate its respective
properties and to carry on its business as now conducted, except where the
failure to have such power and authority would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company.
(b) Each of the Company and its Subsidiaries listed on Exhibit 21.1
to the Company's Annual Report on Form 10-K for the fiscal year ended January
29, 2005 (the "SIGNIFICANT SUBSIDIARIES") is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
or be in good standing would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Company. None of the
Company Subsidiaries (other than the Significant Subsidiaries) has any material
assets or liabilities, conducts any operations or has any employees.
(c) The Company has made available to Parent and Merger Sub true and
complete copies of the currently effective articles of incorporation and bylaws
or similar organizational and governing documents of the Company and its
Subsidiaries and the Company Joint Ventures. Neither the Company nor any
Subsidiary nor, to the Company's knowledge, any Company Joint Venture, is in
violation of its organizational or governing documents.
14
Section 4.2 CORPORATE AUTHORIZATION; COMPANY FAIRNESS OPINION.
(a) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the Merger and the other
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company. The only Company shareholder approval or
authorization required to approve this Agreement and effect the Merger is the
affirmative vote of the holders of Common Shares as required by the Delaware
Corporate Law (the "REQUISITE SHAREHOLDER VOTE").
(b) This Agreement has been duly and validly executed and delivered
by the Company and, assuming the due and valid execution and delivery by Parent
and Merger Sub, constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except (i) as
rights to indemnity hereunder may be limited by federal or state securities laws
or the public policies embodied therein, (ii) as such enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the enforcement of creditors' rights generally, and (iii) as the
remedy of specific performance and other forms of injunctive relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(c) On or prior to the date hereof, the Board of Directors of
the Company, based on the unanimous recommendation of the Special Committee, has
(except for directors who are affiliated with Parent or Merger Sub and members
of Company management who have recused themselves) unanimously adopted
resolutions (i) adopting this Agreement and declaring the Merger and the other
transactions contemplated by this Agreement advisable and (ii) resolving to
recommend that the Company shareholders approve this Agreement. As of the date
hereof, all such resolutions are in full force and effect and none have been
amended or superseded.
(d) Xxxxxxx Xxxxx & Co. (the "COMPANY FINANCIAL ADVISOR") has
delivered to the Board of the Directors of the Company its opinion to the effect
that, as of the date such opinion was delivered, the consideration to be
received in the Merger is fair, from a financial point of view, to the holders
of Common Shares other than Merger Sub and its Affiliates (the "COMPANY FAIRNESS
OPINION"). The Company has been authorized by the Company Financial Advisor to
permit the inclusion in full of the Company Fairness Opinion in the Company
Proxy Statement. As of the date hereof, the Company Fairness Opinion has not
been withdrawn, revoked or modified.
Section 4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Company of this Agreement and the consummation of the Merger
by the Company require no action by, or by the Company or any Subsidiary in
respect of, or filing by the Company or any Subsidiary with, any Governmental
Authority other than (i) the filing of the Certificate of Merger; (ii)
compliance with any applicable requirements of the HSR Act or any other
applicable Other Antitrust Laws or any other Laws specified in Section 4.3 of
the Disclosure Letter (the "REQUIRED GOVERNMENTAL APPROVALS"); (iii) compliance
with the applicable requirements of the Exchange Act; (iv) compliance with the
applicable requirements of the Securities Act; (v) compliance with any
applicable foreign or state securities or Blue Sky laws; and (vi) such other
items or filings, which if not taken or made, (A) would not, individually
15
or in the aggregate, be reasonably expected to be material to the Company or the
applicable Subsidiary and (B) would not reasonably be expected to adversely
effect in any material respect, or materially hinder or delay, the consummation
of the Merger or the Company's ability to observe and perform its obligations
hereunder.
Section 4.4 NON-CONTRAVENTION. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby do not and will not (i) contravene or
conflict with the organizational or governing documents of the Company or any of
its Significant Subsidiaries or Company Joint Ventures; (ii) assuming compliance
with the matters referenced in SECTION 4.3 and the receipt of the Requisite
Shareholder Vote, contravene or conflict with or constitute a violation of any
provision of any Law binding upon or applicable to the Company or any of its
Significant Subsidiaries or Company Joint Ventures or any of their respective
properties or assets; (iii) constitute a default under or give rise to a right
of termination, cancellation or acceleration of any right or obligation that is
material to the Company and its Significant Subsidiaries taken as a whole or to
a loss of any benefit that is material to the Company and its Significant
Subsidiaries taken as a whole to which any such Person is entitled under any
agreement, contract or other instrument applicable to or binding upon the
Company or any of its Subsidiaries or Company Joint Ventures, except those
consents set forth in Section 4.4 of the Disclosure Letter (the "REQUIRED
CONTRACTUAL CONSENTS"); or (iv) result in the creation or imposition of any Lien
on any assets that are material to the Company and its Subsidiaries taken as a
whole (other than any such Lien as may be created or imposed in connection with
the Financing or as otherwise may arise from any actions taken by Parent or
Merger Sub), except in the case of (ii) - (iv) above, which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company or materially hinder or delay the consummation of
the Merger or the Company's ability to observe and perform its obligations
hereunder.
Section 4.5 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of (i)
75,000,000 Common Shares, of which as of January 18, 2006 there were 26,436,542
Common Shares issued and outstanding (excluding 1,572,738 Common Shares held in
treasury) and (ii) 10,000,000 shares of Preferred Stock, par value $0.01 per
share, of which no shares are issued and outstanding. As of January 18, 2006
there were outstanding (A) Company Options to purchase an aggregate of 1,635,862
Common Shares and (B) 855,084 unvested restricted stock units. All outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable. Section 4.5(a) of the Disclosure
Letter sets forth a complete and accurate list of all outstanding Company
Options and other stock-related awards, including grants of Company Restricted
Shares, which list sets forth the name of the holders thereof and, to the extent
applicable thereto, the exercise price or purchase price thereof, the governing
stock option plan with respect thereto and the expiration date thereof.
(b) Except as set forth in SECTION 4.5(A), and except for changes
since January 18, 2006 resulting from the exercise of Company Options
outstanding on such date, there are no outstanding, and there have not been
reserved for issuance, any (i) shares of capital stock or other voting
securities of the Company; (ii) securities of the Company or any Subsidiary
convertible into or exchangeable for shares of capital stock or voting
securities of the Company
16
or its Subsidiaries; (iii) Company Options or other rights or options to acquire
from the Company or its Subsidiaries, or obligations of the Company or its
Subsidiaries to issue, any shares of capital stock, voting securities or
securities convertible into or exchangeable for shares of capital stock or
voting securities of the Company or such Subsidiary, as the case may be; or
(iv) equity equivalent interests in the ownership or earnings of the Company of
its Subsidiaries or other similar rights (the items in CLAUSES (I) through (IV)
collectively, "COMPANY SECURITIES"). There are no outstanding obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any Company
Securities. There are no shareholder agreements, voting trusts or other
agreements or understandings to which the Company or any of its Subsidiaries is
a party or by which it is bound relating to the voting or registration of any
shares of capital stock of the Company or any of its Subsidiaries or preemptive
rights with respect thereto.
(c) Other than the issuance of Common Shares upon exercise of
Company Options, since the Balance Sheet Date, the Company has not declared or
paid any dividend or distribution in respect of any Company Securities, and
neither the Company nor any Subsidiary has issued, sold, repurchased, redeemed
or otherwise acquired any Company Securities, and their respective Boards of
Directors have not authorized any of the foregoing.
(d) Neither the Company nor any of its Subsidiaries has entered into
any commitment or agreement, or are otherwise obligated, to contribute capital,
loan money or otherwise provide funds or make additional investments in any
Company Joint Venture or any other Person.
Section 4.6 COMPANY SUBSIDIARIES AND JOINT VENTURES.
(a) Section 4.6(a) of the Disclosure Letter sets forth all
Subsidiaries of the Company and Company Joint Ventures, as well as the
respective jurisdictions of incorporation and all jurisdictions in which the
Company and such Subsidiaries and Company Joint Ventures are qualified to do
business. Each of the Company Subsidiaries is wholly owned (directly or
indirectly) by the Company and, except for such Company Subsidiaries and Company
Joint Ventures, the Company does not directly or indirectly own any equity
interest in any other Person.
(b) All equity interests of the Company Subsidiaries and the Company
Joint Ventures held by the Company or any other Company Subsidiary are fully
paid and non-assessable and were not issued in violation of any preemptive or
similar rights. All such equity interests are free and clear of any Liens or any
other limitations or restrictions on such equity interests (including any
limitation or restriction on the right to vote, pledge or sell or otherwise
dispose of such equity interests).
Section 4.7 REPORTS AND FINANCIAL STATEMENTS.
(a) The Company has timely filed with or otherwise furnished to the
SEC all forms, reports, schedules, statements and other documents required to be
filed or furnished by it under the Securities Act or the Exchange Act since
August 4, 2003 (such documents, as supplemented or amended since the time of
filing, the "COMPANY SEC REPORTS"). No Subsidiary of the Company is or at any
time since August 4, 2003 has been required to file with
17
or furnish to the SEC any such forms, reports, schedules or other documents. As
of their respective dates, the Company SEC Reports, including any financial
statements or schedules included or incorporated by reference therein, at the
time filed (and, in the case of registration statements and proxy statements, on
the dates of effectiveness and the dates of mailing, respectively) (i) complied
as to form in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as applicable, and (ii) did 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 statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The audited consolidated financial statements and unaudited
consolidated interim financial statements included or incorporated by reference
in the Company SEC Reports (including any related notes and schedules) fairly
present, in all material respects, the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof, and the
results of their operations and their cash flows for the periods set forth
therein, and in each case were prepared in accordance with GAAP consistently
applied during the periods involved (except as otherwise disclosed in the notes
thereto and subject, where appropriate, to normal year-end adjustments that
would not be material in amount or effect).
(c) There are no liabilities or obligations of the Company or any
Company Subsidiary (whether accrued, contingent, absolute, determined,
determinable or otherwise) which, individually or in the aggregate, would be
material to the Company and its Subsidiaries taken as a whole other than (i)
liabilities or obligations disclosed or provided for in the Balance Sheet or
disclosed in the notes thereto; (ii) liabilities or obligations incurred after
the Balance Sheet Date in the ordinary course of business; (iii) liabilities
under this Agreement or incurred in connection with the transactions
contemplated hereby; and (iv) liabilities disclosed on Section 4.15 of the
Disclosure Letter.
(d) The Company has heretofore made available or promptly will make
available to Parent and Merger Sub a complete and correct copy of any amendments
or modifications to any Company SEC Reports filed prior to the date hereof which
are required to be filed with the SEC but have not yet been filed with the SEC,
and any Company SEC Reports required to be filed by the Company on or after the
date hereof and prior to the Effective Time.
Section 4.8 DISCLOSURE DOCUMENTS. The proxy statement (the "COMPANY
PROXY STATEMENT") and the Rule 13e-3 Transaction Statement on Schedule 13E-3
(the "SCHEDULE 13E-3") relating to the Merger and the other transactions
contemplated hereby, to be filed by the Company with the SEC in connection with
seeking the adoption and approval of this Agreement by the Company shareholders
will not, at the date it is first mailed to shareholders of the Company (in the
case of the Proxy Statement) or at the time of the Company Shareholder Meeting
(other than as to information supplied by Parent and Merger Sub for inclusion
therein), 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. The Company will cause the Company Proxy Statement, the Schedule
13E-3 and all related SEC filings to comply as to form in all material respects
with the requirements of the Exchange Act applicable thereto as of the date of
such filing. No representation is made by the Company with respect to statements
made in the
18
Company Proxy Statement or the Schedule 13E-3 based on information supplied, or
required to be supplied, by Parent and Merger Sub or their Affiliates
specifically for inclusion therein.
Section 4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Since the Balance Sheet Date through the date hereof, the
businesses of the Company and its Subsidiaries and, to the Company's knowledge,
the businesses of the Company Joint Ventures, have been conducted in all
material respects in the ordinary course and neither the Company nor any of its
Subsidiaries, nor to the Company's knowledge any Company Joint Venture, has
engaged in any transaction or series of related transactions outside the
ordinary course material to the Company and its Subsidiaries taken as a whole.
Since the Balance Sheet Date, there has not been a Material Adverse Effect on
the Company. For purposes of this Agreement, "MATERIAL ADVERSE EFFECT ON THE
COMPANY" means any change, circumstance, event or effect that would be
materially adverse to the assets and liabilities, business, financial condition
or results of operations of the Company and its Subsidiaries, taken as a whole,
other than any change, circumstance, event or effect resulting from (i) changes
in general economic conditions, (ii) the announcement or pendency of this
Agreement and the transactions contemplated hereby, (iii) general changes or
developments in the industries in which the Company and its Subsidiaries
operate, (iv) any actions required under this Agreement to obtain any approval
or authorization under the HSR Act or any applicable Other Antitrust Laws for
the consummation of the transactions contemplated by this Agreement or (v)
changes in any Laws or applicable accounting regulations or principles, except,
in the case of the foregoing clauses (i) and (iii), to the extent such changes
or developments referred to therein would reasonably be expected to have a
materially disproportionate impact on the business, financial condition or
results of operations of the Company and its Subsidiaries, taken as a whole,
relative to other industry participants, it being understood that in the event
the Company should fail to meet any expected financial or operating performance
targets, the fact of such failure, alone, would not constitute a Material
Adverse Effect on the Company (although any party can assert the facts
underlying any such failure in any dispute as to whether there has been a
Material Adverse Effect on the Company).
(b) Without limiting the generality of the foregoing SECTION 4.9(A),
since the Balance Sheet Date, there has not been (except, in each case, for
transactions solely among the Company and its wholly-owned Subsidiaries or among
the Company's wholly-owned Subsidiaries):
(i) any declaration, setting aside or payment of any dividend or
distribution or capital return in respect of any shares of the Company's
capital stock or any redemption, purchase or other acquisition by the
Company or any of its Subsidiaries of any shares of the Company's capital
stock or any amendment of any material term of any outstanding capital
stock of the Company or any of its Subsidiaries;
(ii) any (A) incurrence of, or guarantee with respect to, or
provision of credit support for, any indebtedness for borrowed money by the
Company or any of its Subsidiaries, other than pursuant to the Company's or
any Company Subsidiary's existing credit facilities in the ordinary course
of business; (B) event of default or default under the Company's or any
Subsidiary's existing credit facilities or outstanding loans; or
19
(c) creation or assumption by the Company or any of its Subsidiaries
of any material Lien on any material asset, other than Permitted Liens;
(iii) any material change in any method of financial accounting or
financial accounting principle or practice used by the Company or any of
its Subsidiaries, other than such changes required by Law or a change in
GAAP;
(iv) (A) any deferred compensation, severance or similar agreement
entered into or amended by the Company or any of its Subsidiaries and any
employee; (B) any material increase in or acceleration of the compensation
or benefits payable or to become payable by the Company or any of its
Subsidiaries to its directors or officers or generally applicable to all or
any category of the Company's or any such Subsidiary's employees; (C) any
material increase in the coverage or benefits available under any vacation
pay, company awards, salary continuation or disability, sick leave,
deferred compensation, bonus or other incentive compensation, insurance,
pension or other employee benefit plan, payment or arrangement made to, for
or with any of the directors or officers of the Company or any Subsidiary
or generally applicable to all or any category of the Company's or any
Subsidiary's employees; or (D) any Material Employment Agreement or any
amendment to the same, other than increases in compensation in the ordinary
course of business and that in the aggregate have not resulted in a
material increase in the benefits or compensation expense of the Company or
any of its Subsidiaries;
(v) any loan, advance or capital contribution made by the Company or
any of its Subsidiaries to, or investment in, any Person other than loans,
advances or capital contributions made to a Subsidiary;
(vi) any amendment, alteration or modification in any material term
of any currently outstanding Company Options, warrants or other rights to
purchase any capital stock or other equity interests in the Company or any
securities exchangeable or exercisable for or convertible into the same; or
(vii) any agreement to take or permit any actions specified in this
SECTION 4.9(B), except for this Agreement.
Section 4.10 LITIGATION. As of the date hereof, there is no material
action, suit, claim, investigation, arbitration or proceeding pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or their respective assets or properties before any arbitrator,
arbitration provider or Governmental Authority (a "PROCEEDING"). As of the date
hereof, neither the Company, nor any Subsidiary of the Company, nor any officer,
director or employee of the Company or any such Subsidiary has been permanently
or temporarily enjoined by any Law from engaging in or continuing any conduct or
practice in connection with the business or assets of the Company or any
Subsidiary of the Company. To the knowledge of the Company as of the date
hereof, none of the Company, nor any Subsidiary of the Company, nor any officer,
director or employee of the Company or any such Subsidiary is under
investigation by any Governmental Authority related to the conduct of the
Company's or any such Subsidiary's business, the results of which investigation
reasonably could be materially adverse to the business or assets of the Company
and its Subsidiaries taken as a whole.
20
Section 4.11 TAXES.
(a) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company:
(i) Within the times and in the manner prescribed by Law, the
Company and its Subsidiaries (and their predecessors) have properly
prepared and timely filed all Tax Returns required by Law, have timely paid
all Taxes due and payable (whether or not shown on any Tax Return) and have
timely withheld and deposited all Taxes required to be withheld and
deposited. Tax Returns filed by the Company and its Subsidiaries (and their
predecessors) are true, correct and complete, and include all statements
and other information required to avoid penalties or additions to Tax. The
Company and its Subsidiaries (and their predecessors) have complied with
all Law relating to Taxes. The Company has made available to Parent and
Merger Sub all federal and material state, local and foreign Tax Returns
containing material elections of the Company or any of its Subsidiaries
with respect to periods commencing on or after January 31, 2002. Neither
the Company nor any of its Subsidiaries (nor any of their predecessors) has
either (A) been a party to a "reportable transaction" (as such term is
defined in Treasury Regulations issued under the Code) that has not been
properly reported on its Tax Returns, or (B) been a party to a "listed
transaction" (as such term is defined in Treasury Regulations issued under
the Code).
(ii) Neither the Company nor any of its Subsidiaries (nor any
predecessor thereof) (A) is a party to or bound by any closing agreement,
offer in compromise or any other agreement with any Tax authority or any
Tax indemnity agreement, Tax sharing agreement or other agreement whereby
amounts due thereunder are determined with reference to Taxes or items used
to determine the amount of any Taxes, in each case, that is currently in
effect; (B) has requested in writing a ruling or other advice or guidance
from any Governmental Authority with respect to Taxes; (C) has present or
contingent liabilities for Taxes, other than Taxes that either have been
(1) incurred in the ordinary course of business thereof and reflected as a
liability on the most recent balance sheet included in the Financial
Statements or (2) incurred in the ordinary course of business with respect
to taxable periods or portions of taxable periods following the date of the
most recent balance sheet included in the Financial Statements in amounts
consistent with prior years (adjusted for changes in ordinary course
operating results and ordinary course changes in assets) and for which
adequate reserves have been established and separately reflected in the
financial records of the Company; or (D) that is subject to United States
federal income taxation, has engaged in a trade or business, or had a
permanent establishment (within the meaning of an applicable tax treaty),
within a country other than the United States.
(iii) There are no proposed, threatened or actual pending assessments,
audits, examinations, disputes or requests from a Governmental Authority
for filings or information pertaining to Taxes relating to the Company or
any of its Subsidiaries (or their predecessors). There are no (A)
adjustments under Section 481 of the Code or any similar adjustments with
respect to the Company or any Subsidiary (or their predecessors) applicable
to the current or any future taxable year of the Company or such
21
Subsidiary, (B) waivers or extensions of the statute of limitations with
respect to Taxes for which the Company or any Subsidiary could be held
liable, or (C)grants by the Company or any Subsidiary of power of attorney
to any Person with respect to Taxes for which the Company or any Subsidiary
would be liable.
(iv) During any taxable year for which the applicable statute of
limitations on the assessment of Tax against the Company or any of its
Subsidiaries remains open, neither the Company nor any of its Subsidiaries
(nor any predecessor thereof) has been (A) a "distributing corporation," or
a "controlled corporation" in connection with a distribution intended or
purported to be governed by Section 355 of the Code, or (B) a member of an
affiliated group of corporations, within the meaning of Section 1504 of the
Code, or a member of a combined, consolidated or unitary group for state,
local or foreign Tax purposes, other than such a group the common parent of
which is and at all times has been the Company (or TSA Stores, Inc.) or a
group that did not include as members entities other than the Company and
its Subsidiaries (or TSA Stores, Inc. and its Subsidiaries).
(v) No Subsidiary of the Company (or predecessor thereof) that is
not a United States person, as defined in the Code, is a passive foreign
investment company within the meaning of Section 1297 of the Code, and
neither the Company nor any Subsidiary is a shareholder, directly or
indirectly, in a passive foreign investment company, except, in each case,
as is properly reflected in Tax Returns with respect to periods commencing
on or after January 31, 2002. No Subsidiary of the Company (or any
predecessor thereof) that is not a United States person as defined in the
Code (x) is, or at any time has been, engaged in the conduct of a trade or
business within the United States or treated as or considered to be so
engaged and (y) has, or at any time has had, an investment in "United
States property" within the meaning of Section 956(c) of the Code other
than investments in United states property that are properly reflected in
Tax Returns filed by the Company or its Subsidiaries. Neither the Company
nor any Subsidiary is, or at any time has been, impacted by (A) the dual
consolidated loss provisions of the Section 1503(d) of the Code, (B) the
overall foreign loss provisions of Section 904(f) of the Code, or (C) the
recharacterization provisions of Section 952(c)(2) of the Code, except for
any such impacts that are properly reflected in Tax Returns filed by the
Company or its Subsidiaries.
(b) (i) To the knowledge of the Company, the Company is not and has
not been a United States real property holding corporation at any time during
the applicable period specified in Code Section 897(c)(1)(A)(ii), (ii) to the
knowledge of the Company, no interest in the stock in the Company constitutes a
United States real property interest pursuant to Section 897(c) of the Code, and
(iii) prior to Closing the Company will use commercially reasonable efforts to
provide to Parent an affidavit satisfying the requirements of Treasury
Regulation Section 1.1445-2(c)(3) in form and substance reasonably satisfactory
to Parent.
(c) It is understood and agreed that the Company does not provide
any representations or warranties under this Agreement regarding Taxes, except
for those set forth in this SECTION 4.11 or SECTION 4.12.
22
Section 4.12 ERISA.
(a) Section 4.12(a) of the Disclosure Letter sets forth a list
identifying as of the date hereof (i) all Employee Benefit Plans and all bonus,
stock option, stock purchase, incentive, deferred compensation, supplemental
retirement, health, life, or disability insurance, dependent care, severance and
other similar fringe or employee benefit plans or programs maintained or
contributed to by the Company or any of its Subsidiaries for the benefit of or
relating to any employee or former employee (each such plan or program, an
"EMPLOYEE PLAN") and (ii) each Material Employment Agreement; provided, however,
that there shall be no obligation to disclose on Section 4.12(a) of the
Disclosure Letter any Employee Plan that is not material. The most recent copies
of each material Employee Plan and Material Employment Agreement (and, if
applicable, related trust agreements) and all amendments thereto have been made
available to Parent and Merger Sub together with, to the extent applicable, (A)
the two most recent annual reports (Form 5500 including applicable schedules and
financial reports) or ERISA alternative compliance statements prepared in
connection with any such Employee Plan; (B) the most recent actuarial valuation
report prepared in connection with any such Employee Plan; (C) the most recent
summary plan description and any summaries of material modifications for each
such Employee Plan and (D) the most recent favorable IRS determination letter
for each Employee Plan that is intended to be qualified pursuant to Section
401(a) of the Code.
(b) Neither the Company nor any ERISA Affiliate sponsors,
maintains, contributes to or has an obligation to contribute to, has sponsored,
maintained, contributed to or been required to contribute to within the last
five years, or has any liability (contingent or otherwise) with respect to a
pension plan subject to Section 302 of ERISA, Title IV of ERISA or Section 412
of the Code. Neither the Company nor any ERISA Affiliate sponsors, maintains,
contributes to or has an obligation to contribute to, has in the last five years
sponsored, maintained, contributed to, or incurred an obligation to contribute
to, or has any liability (contingent or otherwise) with respect to any
multiemployer plan (as defined in Section 3(37) of ERISA) or any plan sponsored
by more than one employer within the meaning of Sections 4063 or 4064 of ERISA
or Section 413(c) of the Code. There does not now exist, nor do any
circumstances exist that could reasonably be expected to result in, any
Controlled Group Liability that would be a material liability of the Company or
any of its Subsidiaries following the Closing.
(c) Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code has received a determination letter from the Internal
Revenue Service to the effect that such Employee Plan is so qualified, and, to
the knowledge of the Company, nothing has occurred since the date of the most
recent Internal Revenue Service determination letters that could be reasonably
expected to adversely affect the tax-qualified status of any Plan. Each Employee
Plan has been maintained in material compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code, which are applicable to such
Employee Plan. No prohibited transaction (as defined in Section 406 of ERISA and
Section 4975 of the Code) has occurred in respect of any Employee Plan.
(d) There is no contract, agreement, plan or arrangement covering
any employee or former employee of the Company or any of its Affiliates that,
individually or
23
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the Code.
(e) No payment, accrual of additional benefits, acceleration of
payments or vesting in any benefit under any Employee Plan or Material
Employment Agreement will be caused by the Company's entering into this
Agreement or by the consummation of the transactions contemplated by this
Agreement (either alone or in combination with any other event).
(f) No Employee Plan that is a welfare benefit plan (within the
meaning of Section 3(1) of ERISA) provides benefits to former employees of the
Company, other than pursuant to Section 4980B of the Code or any similar state
or local law.
Section 4.13 LABOR MATTERS.
(a) There is no labor strike, dispute, slowdown, stoppage or lockout
actually pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary and since August 4, 2003 there has not
been any such action.
(b) To the knowledge of the Company, no union claims to represent
the employees of the Company or any Subsidiary. Neither the Company nor any
Subsidiary is a party to or bound by any collective bargaining or similar
agreement with any labor organization, or work rules or practices agreed to with
any labor organization or employee association applicable to employees of the
Company or any Subsidiary.
(c) None of the employees of the Company or any Subsidiary are
represented by any labor organization and, to the Company's knowledge, there are
no current union organizing activities among the employees of the Company or any
Subsidiary.
(d) From the Balance Sheet Date, except as has not had, and would
not reasonably be expected to have, a Material Adverse Effect on the Company,
there is no unfair labor practice charge or complaint against the Company or any
Subsidiary pending or, to the knowledge of the Company, threatened before the
National Labor Relations Board or any similar state or foreign agency.
Section 4.14 COMPLIANCE WITH LAWS.
(a) The Company and each of its Subsidiaries is, and at all times
since the Balance Sheet Date has been, in compliance in all material respects
with all material Laws applicable to the Company, its Subsidiaries and their
respective businesses and activities.
(b) The Company and each Company Subsidiary has and maintains in
full force and effect, and is in compliance with, all Permits necessary for the
Company and each Subsidiary to carry on their respective businesses as currently
conducted and currently proposed to be conducted, except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
24
Section 4.15 FINDERS' FEES. There is no investment banker, broker,
finder or other intermediary that has been retained by or is authorized to act
on behalf of the Company or any of its Subsidiaries or Affiliates and that might
be entitled to any fee or commission from the Company or any of its Affiliates
in connection with the transactions contemplated by this Agreement (other than
based on arrangements made by Parent or Merger Sub or any of their respective
Affiliates). The Company has provided true and complete copies of all engagement
letters or other agreements providing for the payment of the fees and
commissions described in Section 4.15 of the Disclosure Letter, and no such
letters or agreements have been amended or superseded.
Section 4.16 ENVIRONMENTAL MATTERS. Except as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company:
(a) the Company is and has at all times been in compliance in all
material respects with all Environmental Laws;
(b) there has been no Release of Hazardous Substances at any real
property that is or was owned or operated by the Company during the period of
such ownership or operation;
(c) no notice, demand, request for information, citation, summons,
complaint, order, consent decree, or settlement has been received or entered
into by, or to the knowledge of the Company is pending or threatened by any
Person against, the Company or any of its Subsidiaries nor has any penalty been
assessed against the Company or any such Subsidiary with respect to any alleged
violation of any Environmental Law;
(d) neither the Company nor any of its Subsidiaries has disposed or
arranged for the disposal of any Hazardous Substances that has resulted in or
reasonably may be expected to result in the Company or any Subsidiary having or
incurring any liability under any Environmental Law;
(e) to the Company's knowledge, no underground tanks or Hazardous
Substances are or have been located on real property that is owned or operated
by the Company or any of its Subsidiaries nor has the Company or any of its
Subsidiaries ever operated an underground tank or used, handled or stored
Hazardous Substances except for products and materials held as inventory (and of
a nature customarily held by sporting goods stores) and for generally accepted
cleaning agents in typical quantities;
(f) there has been no material written report of any environmental
investigation, study, audit, test, review or other analysis conducted of which
the Company or any of its Subsidiaries has knowledge and has in its possession
or control relating to the business of the Company or such Subsidiary or any
real property that is owned or operated by the Company or such Subsidiary that
has not been disclosed and made available to Parent and Merger Sub; and
(g) to the Company's knowledge, neither the Company nor any of its
Subsidiaries has agreed to assume, undertake or provide indemnification for any
liability of any other Person under any Environmental Law, including any
obligation for corrective or remedial action.
25
Section 4.17 SUPPLIERS AND RELATIONSHIPS. Set forth in Section 4.17
of the Disclosure Letter is a list of the twenty largest merchandise vendors of
the Company and its Subsidiaries based on the dollar value of materials or
products purchased by the Company and its Subsidiaries for the fiscal year ended
January 29, 2005. Since the Balance Sheet Date, there has not been, and the
Company has not received any notice of or threatening, any material change in
relations with any of the major suppliers of the Company or its Subsidiaries,
the result of which would be material to the Company and its Subsidiaries taken
as a whole.
Section 4.18 CONTRACTS.
(a) Section 4.18 of the Disclosure Letter contains a complete and
accurate list, as of the date hereof, of all Contracts (as hereinafter defined)
that are material Contracts within the meaning of Item 601 of Regulation S-K
promulgated under the Securities Act or Contracts that the Company's management
considers material to the Company and its Subsidiaries, taken as a whole
("MATERIAL CONTRACTS"). All of the Material Contracts are in full force and
effect, except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company. As used herein,
"CONTRACTS" means contracts, undertakings, commitments or agreements (other than
contracts, undertakings, commitments or agreements for employee benefit matters
set forth in Section 4.12(a) of the Disclosure Letter and real property leases
set forth in Section 4.20(c) of the Disclosure Letter and any vendor contracts
entered into in the ordinary course of business).
(b) True and complete copies of all written Material Contracts have
been either (i) filed as exhibits to the Company's annual report on Form 10-K
for the fiscal year ended January 29, 2005 or (ii) delivered or made available
to Parent and Merger Sub. Each such Material Contract is a valid and binding
obligation of the Company (or the Subsidiaries party thereto) and enforceable
against the Company and its Subsidiaries and, to the Company's knowledge, the
other parties thereto in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, moratorium, reorganization, arrangement or
similar laws affecting creditors' rights generally and by general principles of
equity, except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company.
(c) As of the date hereof, neither the Company nor any of its
Subsidiaries is, nor to the knowledge of the Company is any other party, in
material breach, default or violation (and no event has occurred or not occurred
through the Company's action or inaction or, to the knowledge of the Company,
through the action or inaction of any third parties, which with notice or the
lapse of time or both could constitute a breach, default or violation) of any
term, condition or provision of any Material Contract to which the Company or
any of its Subsidiaries is now a party or by which any of them or any of their
respective properties or assets may be bound, except as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company.
(d) With respect to each of the Company Joint Ventures, all
agreements to which the Company or any of its Subsidiaries is a party that
contain (i) any change of control provisions, put options or call options
related to the interests in such Company Joint Venture, (ii) any rights of first
refusal or other similar provisions or (iii) any provisions that are reasonably
26
likely to alter the Company's rights with respect to such Company Joint Venture
following consummation of the Merger and other transactions contemplated hereby,
in each case, have been disclosed in Section 4.6(a) of the Disclosure Letter and
true, correct and complete copies (or descriptions of oral agreements, if any)
of such agreements have been made available to Parent and Merger Sub. No Company
Joint Venture has any material liability for which the Company or any of its
Subsidiaries may be held liable.
Section 4.19 INTELLECTUAL PROPERTY. Section 4.19 of the Disclosure
Letter sets forth the material Intellectual Property of the Company and its
Subsidiaries that have been registered with any Governmental Authority (or as to
which there are pending applications for registration). With respect to
Intellectual Property that is used in the conduct of the business of the Company
or any of its Significant Subsidiaries, except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company:
(a) the Company and its Subsidiaries own or have a valid right to
use all of their material Intellectual Property free and clear of all material
Liens (other than Permitted Liens), and there are no agreements or arrangements
by which any such Intellectual Property has been licensed to any third parties;
(b) to the Company's knowledge, no third party is materially
infringing the Company's Intellectual Property, the Company and its Subsidiaries
are not materially infringing any Intellectual Property of a third party, and
the Company and its Subsidiaries are not in default (or with the giving of time
or lapse of notice would be in default) on any material license to use their
Intellectual Property; and
(c) no material claim has been asserted against the Company or any
of its Subsidiaries and is pending by any Person challenging the ownership or
use by the Company or any of its Subsidiaries of their Intellectual Property,
and the Company and its Subsidiaries have not asserted any material claims
against any third parties challenging the use by third parties of their
Intellectual Property.
Section 4.20 ASSETS AND PROPERTY.
(a) The Company and its Subsidiaries have good and valid title to or
a valid leasehold estate, free and clear of any Liens (other than Permitted
Liens), in all real property and personal properties and assets reflected on the
Balance Sheet at the Balance Sheet Date or acquired after the Balance Sheet Date
(except for properties or assets subsequently sold, including real property
leases that are subsequently terminated, in the ordinary course of business).
(b) Section 4.20(b) of the Disclosure Letter sets forth a true,
correct and complete list of all real property owned in fee simple by the
Company or any of its Subsidiaries (collectively, the "OWNED REAL PROPERTY").
With respect to each such parcel of Owned Real Property: (i) there are no
leases, subleases, licenses, concessions or other agreements, written or oral,
granting to any person the right of use or occupancy of any portion of such
parcel other than the Leases (as defined below); and (ii) there are no
outstanding rights of first refusal or options to purchase such parcel.
27
(c) Section 4.20(c) of the Disclosure Letter sets forth a true,
correct and complete list of all of the leases and subleases (the "LEASES") and
each leased and subleased parcel of real property in which the Company or any of
its Subsidiaries is a tenant, subtenant, landlord or sublandlord (collectively,
the "LEASED REAL PROPERTY") and for each Lease indicates: (i) its term and any
options to extend the term; and (ii) other than in respect of subleases, closed
stores and non-store properties, the current rent payable (including all
occupancy costs other than utilities). The Company (either directly or through a
Subsidiary) holds a valid and existing leasehold or subleasehold interest or
landlord or sublandlord interest as applicable in the Leased Real Property,
under each of the Leases listed in Section 4.20(c) of the Disclosure Letter. The
Company has delivered or made available to Parent and Merger Sub true, correct
and complete copies of each of the Leases, including, without limitation, all
material amendments, modifications, side agreements, consents, subordination
agreements and guarantees. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company: (A) each Lease is legal, valid, binding, enforceable and in full force
and effect; (B) each Lease will continue to be legal, valid, binding,
enforceable and in full force and effect on the same terms and conditions
following the Effective Time; (C) neither the Company (or its applicable
Subsidiary), nor, to the Company's knowledge, any other party to any Lease, has
received written notice of a material breach or default under any Lease, and to
the Company's knowledge, no event has occurred that, with notice or lapse of
time, would constitute a breach or material default by the Company (or such
Subsidiary) or permit termination, modification or acceleration under any Lease
by any other party thereto; (D) there are no material disputes, oral agreements
or rent forbearance programs in effect as to any Lease; (E) the Company has not
assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest in any Lease; (F) no Lease has been modified in any material respect,
except to the extent that such modifications are set forth in the documents
previously delivered or made available to Parent and Merger Sub; and (G) each
guaranty by the Company or any of its Subsidiaries is in full force and effect
and no default has occurred thereunder.
(d) The Owned Real Property and the Leased Real Property are
referred to collectively herein as the "REAL PROPERTY." To the knowledge of the
Company, each parcel of Real Property is in material compliance with all
existing material Laws applicable to such Real Property. Except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company, (i) the Company has not received written notice
of any proceedings in eminent domain, condemnation or other similar proceedings
that are pending, and, to the Company's knowledge, there are no such proceedings
threatened, affecting any portion of the Real Property and (ii) the Company has
not received written notice of the existence of any outstanding writ,
injunction, decree, order or judgment or of any pending proceeding, and, to the
Company's knowledge, there is no such writ, injunction, decree, order, judgment
or proceeding threatened, relating to the ownership, lease, use, occupancy or
operation by any person of the Real Property.
(e) To the knowledge of the Company, there are no violations of any
covenants, conditions, restrictions, easements, agreements or orders of any
Governmental Authority having jurisdiction over any of the Real Property that
affect such Real Property or the use or occupancy thereof other than those that
do not, individually or in the aggregate, constitute a Material Adverse Effect
on the Company.
28
Section 4.21 INSURANCE. Each of the Company and its Subsidiaries
maintains insurance policies (the "INSURANCE POLICIES") against all risks of a
character and in such amounts as are usually insured against by similarly
situated companies in the same or similar businesses. Except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company, (i) each Insurance Policy is in full force and
effect and all premiums due thereon have been paid in full; (ii) none of the
Insurance Policies will terminate or lapse (or be affected in any other
materially adverse manner) by reason of the transactions contemplated by this
Agreement; (iii) each of the Company and its Subsidiaries has complied in all
material respects with the provisions of each Insurance Policy under which it is
the insured party; and (iv) no insurer under any Insurance Policy has canceled
or generally disclaimed liability under any such policy and all material claims
for which coverage is provided under the Insurance Policies have been filed in a
timely fashion.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company that:
Section 5.1 CORPORATE EXISTENCE AND POWER. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all corporate powers and authority
required to execute and deliver this Agreement and to consummate the Merger and
the other transactions contemplated hereby and to perform each of its
obligations hereunder. Since their respective dates of organization, neither
Parent or Merger Sub has engaged in any activities other than in connection with
or as contemplated by this Agreement or in connection with arranging the
Financing.
Section 5.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by Parent and Merger Sub of this Agreement and the consummation by
Parent and Merger Sub of the transactions contemplated hereby have been duly
authorized by all necessary Parent and Merger Sub corporate and shareholder
action. This Agreement has been duly and validly executed and delivered by
Parent and Merger Sub and, assuming the due and valid execution and delivery of
the Agreement by the Company, constitutes a valid and binding agreement of
Parent and Merger Sub, respectively, enforceable against Parent and Merger Sub
except (i) as rights to indemnity hereunder may be limited by federal or state
securities laws or the public policies embodied therein, (ii) as such
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the enforcement of creditors' rights
generally, and (iii) as the remedy of specific performance and other forms of
injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
Section 5.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Parent and Merger Sub of this Agreement and the consummation by
Parent and Merger Sub of the transactions contemplated by this Agreement will
not require any action by Parent or Merger Sub in respect of, or filing by
Parent or Merger Sub with, any Governmental Authority other than (a) the filing
of the Certificate of Merger as provided in SECTION 2.1(B), (b) compliance with
any
29
applicable requirements of the HSR Act and any applicable Other Antitrust Law
and any other Law specified in Section 4.3 of the Disclosure Letter; (c)
compliance with the applicable requirements of the Exchange Act; (d) compliance
with the applicable requirements of the Securities Act; (e) compliance with any
applicable foreign or state securities or Blue Sky laws; and (f) such other
items the failure of which to do or be obtained would not reasonably be expected
to adversely effect in any material respect, or materially delay, Parent's and
Merger Sub's ability to observe and perform their respective obligations
hereunder.
Section 5.4 NON-CONTRAVENTION. The execution, delivery and
performance by Parent and Merger Sub of this Agreement and the consummation by
Parent and Merger Sub of the transactions contemplated hereby do not and will
not (a) contravene or conflict with the organizational or governing documents of
Parent or Merger Sub, (b) assuming compliance with the items specified in
SECTION 5.3, contravene, conflict with or constitute a violation of any
provision of Law binding upon Parent or Merger Sub, or (c) constitute a default
under or give rise to any right of termination, cancellation or acceleration of
any right or obligation of Parent or Merger Sub or to a loss of any material
benefit to which Parent or Merger Sub is entitled under any agreement, contract
or other instrument.
Section 5.5 DISCLOSURE DOCUMENTS. None of the information supplied
or to be supplied by Parent or Merger Sub specifically for inclusion in the
Company Proxy Statement or Schedule 13E-3 will, (a) at the date it is first
mailed to shareholders of the Company (in the case of the Company Proxy
Statement) or (b) at the time of the Company Shareholder 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; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
information so provided by Parent or Merger Sub that subsequently changes or
becomes incomplete or incorrect to the extent such changes or failure to be
complete or correct are promptly disclosed to the Company and to the further
extent that Parent and Merger Sub reasonably cooperate with the Company in
preparing, filing or disseminating updated information to the extent required by
Law.
Section 5.6 FINDERS' FEES. There is no investment banker, broker,
finder or other intermediary who is entitled to any fee or commission from the
Company in connection with the transactions contemplated by this Agreement based
on any arrangements made by Parent or Merger Sub or any of their respective
Affiliates.
Section 5.7 FINANCING. Parent and Merger Sub have delivered to the
Company financing letters from the following Persons: Green Equity Investors IV,
L.P. (the "GEI IV LETTER"), Banc of America Securities LLC and Bank of America,
N.A. and TCW/Crescent Mezzanine Management III, LLC and TCW/Crescent Mezzanine
Management IV, LLC (collectively, the "FINANCING LETTERS"), which together
reflect commitments from such equity investors and financial institutions, in
each case subject to the conditions set forth in the respective Financing
Letters, sufficient to pay the full Merger Consideration (and all other cash
amounts payable pursuant hereto), and all of the related fees and expenses
payable by Parent or Merger Sub (or, after the Closing, the Surviving
Corporation) in connection with the Merger (the funds necessary to pay the
foregoing amounts, the "FINANCING"). Such Financing Letters are in full force
and effect and the parties thereto have not withdrawn or indicated an intent to
withdraw
30
the commitments made therein. Notwithstanding anything in this Agreement to the
contrary, one or more Financing Letters may be superseded at the option of
Parent and Merger Sub after the date hereof but prior to the Effective Time by
instruments (the "NEW FINANCING LETTERS") which replace existing Financing
Letters and/or contemplate co-investment by or financing from one or more other
or additional parties; PROVIDED, that the terms of the New Financing Letters
shall not (a) expand upon the conditions precedent to the Financing as set forth
in the Financing Letters in any respect that would make such conditions less
likely to be satisfied, (b) reasonably be expected to delay the Closing or (c)
otherwise have an adverse impact on the Company at any time that is prior to the
Closing. In such event, the term "FINANCING LETTERS" as used herein shall be
deemed to include the Financing Letters that are not so superseded at the time
in question and the New Financing Letters to the extent then in effect. There
are no conditions precedent or other contingencies related to the funding of the
Financing other than as set forth or referred to in the Financing Letters.
Section 5.8 NO OTHER INFORMATION. Parent and Merger Sub acknowledge
that the Company makes no representations or warranties as to any matter
whatsoever except as expressly set forth in this Agreement, and specifically
(but without limitation) that the Company makes no representation or warranty
with respect to any projections, estimates or budgets delivered to or made
available to Parent and Merger Sub or to any of their respective Affiliates or
any representatives of future revenues, future results of operations (or any
component thereof), future cash flows or future financial condition (or any
component thereof) of the Company and its Subsidiaries or of the future business
and operations of the Company and its Subsidiaries.
Section 5.9 INTEREST IN COMPETITORS. Neither Parent nor Merger Sub
owns any interest(s) (nor do any of their respective Affiliates insofar as such
Affiliate-owned interests would be attributed to Parent or Merger Sub under the
HSR Act) in any entity or Person that derives a substantial portion of its
revenues from a line of business within the Company's principal lines of
business.
Section 5.10 OWNERSHIP OF COMMON SHARES. On the date hereof, neither
Parent nor Merger Sub owns any shares of Common Stock of the Company.
Section 5.11 SOLVENCY OF THE COMPANY FOLLOWING COMPLETION OF THE
MERGER. As of the date hereof, to the knowledge of Parent and Merger Sub,
immediately following the Effective Time and after giving effect to the Merger
and the other transactions contemplated hereby, the Company and each of its
Subsidiaries will not (i) be insolvent (either because of its financial
condition is such that the sum of its debts is greater than the fair market
value of its assets or because the fair saleable value of its assets is less
than the amount required to pay its probable liability on its existing debts as
they mature), (ii) have unreasonably small capital with which to engage in its
business or (iii) have incurred debts beyond its ability to pay as they become
due.
Section 5.12 MANAGEMENT AGREEMENTS. Other than (i) the Contribution
and Exchange Agreements, (ii) the stockholders agreement among Parent and the
Contributing Holders and (iii) those certain amendments to the Contributing
Holders' respective Employment Agreements entered into by the Contributing
Holders and Merger Sub in connection with the Contribution and Exchange
Agreements, there are no Contracts between Parent and/or Merger Sub, on the one
31
hand, and members of the Company's management on the other hand. None of the
foregoing agreements requires any material performance or forbearance by the
Contributing Holders prior to the Effective Time.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 CONDUCT OF THE COMPANY AND SUBSIDIARIES. Except for
matters set forth in Section 6.1 of the Disclosure Letter or as otherwise
contemplated by or specifically provided in this Agreement, without the prior
written consent of Parent and Merger Sub (which consent shall not be
unreasonably withheld, conditioned or delayed), from the date hereof to the
Effective Time, the Company shall, and shall cause its Subsidiaries to, conduct
their respective businesses in the ordinary and usual course consistent with
past practice, and shall use its reasonable best efforts (with the reasonable
cooperation of Parent and Merger Sub and their Affiliates) to (i) preserve
intact its and its Subsidiaries' present business organization and capital
structure; (ii) maintain in effect all material Permits that are required for
the Company or its Subsidiaries to carry on their respective businesses; (iii)
keep available the services of present officers and key employees (as a group);
and (iv) maintain the current relationships with its lenders, suppliers and
other Persons with which the Company or its Subsidiaries have significant
business relationships. Without limiting the generality of the foregoing, and
except for matters set forth in Section 6.1 of the Disclosure Letter or as
expressly contemplated or permitted by this Agreement, without the prior written
consent of Parent and Merger Sub (which consent shall not be unreasonably
withheld, conditioned or delayed), the Company shall not, and shall not permit
its Subsidiaries to (except, in each case, for transactions solely among the
Company and its wholly-owned Subsidiaries or among the Company's wholly-owned
Subsidiaries):
(a) (i) enter into any new line of business or discontinue any line
of business or (ii) propose or adopt any change in its organizational or
governing documents (other than with respect to Company Subsidiaries that are
not Significant Subsidiaries);
(b) merge or consolidate the Company or any of its Subsidiaries
with any Person;
(c) sell, lease or otherwise dispose of a material amount of assets
(other than the sale of inventory or the closing of stores in the ordinary
course of business) or securities;
(d) (i) other than in connection with intercompany transactions,
incur any third-party indebtedness for borrowed money or guarantee such
indebtedness of another Person, except for borrowings under the Company's and
its Subsidiaries' existing revolving lines of credit incurred in the ordinary
course of business repayable within 180 days without penalty; (ii) make any
loans, advances or capital contributions to, or investments in, any other
Person, except in the ordinary course of business consistent with past practice
or as required by existing contracts set forth in Section 6.1(d) of the
Disclosure Letter; (iii) authorize any capital expenditures in excess of
$5,000,000 in the aggregate in excess of the capital expenditures set forth in
the Company's 2005 and 2006 budget forecasts;
32
(e) pledge or otherwise encumber shares of capital stock or other
voting securities of the Company or any of its Subsidiaries;
(f) mortgage or pledge any of its material assets, tangible or
intangible, or create any material Lien thereupon (other than Permitted Liens);
(g) enter into any Contract other than in the ordinary course of
business that would be material to the Company and its Subsidiaries, taken as a
whole;
(h) amend, modify or waive in any material respect any material
right under any existing Material Contract, except in the ordinary course of
business;
(i) (i) split, combine or reclassify any Company Securities or
amend the terms of any Company Securities, (ii) declare, set aside or pay any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of Company Securities other than a dividend or
distribution by a wholly owned Subsidiary of the Company to its parent
corporation in the ordinary course of business, or (iii) issue or offer to issue
any Company Securities, or redeem, repurchase or otherwise acquire or offer to
redeem, repurchase, or otherwise acquire, any Company Securities, other than in
connection with (x) the exercise of Company Options outstanding on the date
hereof in accordance with their original terms or as set forth on Section
6.1(i)(iii) of the Disclosure Letter or (y) the withholding of Company
Securities to satisfy tax obligations with respect to Company Options or Company
Restricted Shares;
(j) except (x) as required pursuant to existing written agreements
or Employee Plans in effect on the date hereof, in each case, that are set forth
in Section 4.12(a) of the Disclosure Letter, (y) as specifically permitted by
the terms of this Agreement or (z) as otherwise required by Law, (i) enter into
any Material Employment Agreement (except for entry into a Material Employment
Agreement with respect to promotions of current employees or to the extent
necessary to replace a departing employee or to fill an existing vacancy), (ii)
adopt or amend any bonus, profit sharing, compensation, severance, termination,
stock option, pension, retirement, deferred compensation, employment or employee
benefit plan in a manner that materially increases the cost to the Company or
(iii) materially increase in any manner the compensation or fringe benefits of
any director, officer or any class of employee, except in the ordinary course of
business consistent with past practice (it being understood that (1) the normal
salary and bonus review process conducted each year and any resulting increases
and (2) bonus payments for fiscal year 2005 shall, in each case, be permitted
hereunder);
(k) except as required by applicable Law or GAAP or in the ordinary
course of business, revalue in any material respect any of its assets, including
writing down the value of inventory in any material manner or writing-off notes
or accounts receivable in any material manner;
(l) pay, discharge or satisfy any material claims, liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent or
otherwise), except (i) as required by Law or existing Contract or (ii) in the
ordinary course for an amount less than $1,000,000 individually excluding any
amounts which may be paid under existing Insurance Policies;
33
(m) (i) make, change or rescind any express or deemed material
election relating to Taxes (other than in the ordinary course of business, as
required by applicable Law, or as is consistent with past practice), (ii) take
any position or adopt any tax accounting method that is inconsistent with
methods used in preparing or filing Tax Returns for similar Taxes in prior
periods, other than with respect to such items that, in the aggregate, are not
material or such actions that are required by Law, (iii) settle or compromise
any material Tax liability for an amount in excess of the amount currently
reserved in the books and records of the Company for such Tax liability, (iv)
enter into any closing or other agreement with respect to any material Tax
liability with any Tax authority for an amount in excess of the amount currently
reserved in the books and records of the Company for such Tax liability, (v)
file or cause to be filed any material amended Tax Return (except as required by
applicable Law or as is consistent with past practice), (vi) file or cause to be
filed a material claim for refund of Taxes previously paid (except as required
by applicable Law or as is consistent with past practice), (vii) agree to an
extension of a statute of limitations with respect to the assessment or
determination of material Taxes, or (viii) grant any power of attorney with
respect to material Taxes;
(n) make any change in financial accounting methods, principles or
practices materially affecting the reported consolidated assets, liabilities or
results of operations of the Company and its Subsidiaries, except insofar as may
have been required by a change in GAAP or Law (including, without limitation,
Regulation S-X of the Exchange Act) and after consulting with the Company's
outside accountants;
(o) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its Subsidiaries (other than the Merger and other than
in respect of Company Subsidiaries that are not Significant Subsidiaries);
(p) alter the corporate structure of ownership of any Significant
Subsidiary, through merger, liquidation, reorganization, restructuring or any
other fashion;
(q) settle, pay or discharge, any litigation, investigation,
arbitration, proceeding or other claim, liability or obligation except in the
ordinary course for an amount less than $1,000,000 individually excluding any
amounts which may be paid under existing Insurance Policies; or
(r) authorize, agree or commit to do any of the foregoing.
Section 6.2 STOCKHOLDER MEETING; PROXY MATERIAL.
(a) The Company shall duly call and hold a meeting of its
shareholders (the "COMPANY SHAREHOLDER MEETING") for the purpose of obtaining
the approval of this Agreement and the Merger by the Company shareholders in
accordance with applicable Law as promptly as reasonably practicable after the
SEC clears the Company Proxy Statement and the Schedule 13E-3. In connection
with the Company Shareholder Meeting, the Company will (i) as promptly as
reasonably practicable prepare and file with the SEC the Company Proxy Statement
relating to the Merger and the other transactions contemplated hereby, (ii)
respond as promptly as reasonably practicable to any comments received from the
SEC with respect to such filings
34
and will provide copies of such comments to Parent and Merger Sub promptly upon
receipt, (iii) as promptly as reasonably practicable prepare and file (after
Parent and Merger Sub have had a reasonable opportunity to review and comment
on) any amendments or supplements necessary to be filed in response to any SEC
comments or as required by Law, (iv) use its reasonable best efforts to have
cleared by the SEC and will thereafter mail to its shareholders as promptly as
reasonably practicable, the Company Proxy Statement and all other customary
proxy or other materials for meetings such as the Company Shareholder Meeting,
(v) to the extent required by applicable Law, as promptly as reasonably
practicable prepare, file and distribute to the Company shareholders (in the
case of the Company Proxy Statement) any supplement or amendment to the Company
Proxy Statement if any event shall occur which requires such action at any time
prior to the Company Shareholder Meeting, and (vi) otherwise use commercially
reasonable efforts to comply with all requirements of Law applicable to the
Company Shareholder Meeting and the Merger. Parent and Merger Sub shall
cooperate with the Company in connection with the preparation and filing of the
Company Proxy Statement, including furnishing the Company upon request with any
and all information as may be required to be set forth in the Company Proxy
Statement under the Exchange Act. The Company will provide Parent and Merger Sub
a reasonable opportunity to review and comment upon the Company Proxy Statement,
or any amendments or supplements thereto, prior to filing the same with the SEC.
In connection with the filing of the Company Proxy Statement, the Company and
Parent and Merger Sub will cooperate to (i) concurrently with the preparation
and filing of the Company Proxy Statement, jointly prepare and file with the SEC
the Schedule 13E-3 relating to the Merger and the other transactions
contemplated hereby and furnish to each other all information concerning such
party as may be reasonably requested in connection with the preparation of the
Schedule 13E-3, (ii) respond as promptly as reasonably practicable to any
comments received from the SEC with respect to such filings and will consult
with each other prior to providing such response, (iii) as promptly as
reasonable practicable after consulting with each other, prepare and file any
amendments or supplements necessary to be filed in response to any SEC comments
or as required by Law, (iv) to have cleared by the SEC the Schedule 13E-3 and
(v) to the extent required by applicable Law, as promptly as reasonably
practicable prepare, file and distribute to the Company stockholders any
supplement or amendment to the Schedule 13E-3 if any event shall occur which
requires such action at any time prior to the Stockholders Meeting.
(b) Subject to SECTION 6.4, the Company Proxy Statement will
contain the recommendation of the Board of Directors of the Company that the
shareholders of the Company adopt this Agreement and the Merger (the
"RECOMMENDATION") and the Company shall use reasonable best efforts to solicit
the adoption and approval of this Agreement by the Company stockholders.
Section 6.3 ACCESS TO INFORMATION; COOPERATION IN FINANCING.
(a) Subject to applicable Law, the Company will provide and will
cause its Subsidiaries and its and their respective Representatives to provide
Parent and Merger Sub and their respective authorized representatives, during
normal business hours and upon reasonable advance notice (i) such access to the
offices, properties, books and records of the Company and such Subsidiaries (so
long as such access does not unreasonably interfere with the operations of the
Company) as Parent or Merger Sub reasonably may request and (ii) all documents
that Parent
35
or Merger Sub reasonably may request. Notwithstanding the foregoing, Parent,
Merger Sub and their representatives shall not have access to any books, records
and other information the disclosure of which would, in the Company's good faith
opinion after consultation with legal counsel, result in the loss of
attorney-client privilege with respect to such books, records and other
information.
(b) The Company will and will cause its Subsidiaries to and will
request their respective representatives to reasonably cooperate with Parent,
Merger Sub and their authorized representatives in connection with the
arrangement of the Financing, including (i) participation in meetings, (ii)
furnishing information (including any financial statements) required to be
included in the preparation of offering memoranda, private placement memoranda,
prospectuses and similar documents and (iii) cooperation in respect of the
preparation of any underwriting or placement agreements, pledge and security
documents, other definitive financing documents, including a certificate of the
chief financial officer of the Company with respect to solvency matters, comfort
letters of accountants and legal opinions as reasonably may be requested by
Parent or Merger Sub; PROVIDED, that any information provided to Parent or
Merger Sub pursuant to this SECTION 6.3 shall be subject to the Confidentiality
Agreement; and PROVIDED, FURTHER, that the Company shall not be required to
incur any significant expenses or become subject to any significant obligations
relating to such activities prior to the Closing.
Section 6.4 SOLICITATION.
(a) During the period beginning on the date of this Agreement and
continuing until 12:01 a.m. (EST) on the 21st day after the date of this
Agreement (the "EXCLUSIVITY PERIOD START DATE"), the Company and its
Subsidiaries and their respective officers, directors, employees, agents,
advisors, affiliates and other representatives (such Persons, together with the
Subsidiaries of the Company, collectively, the "COMPANY REPRESENTATIVES") shall
have the right (acting under the direction of the Special Committee) to: (i)
initiate, solicit and encourage Company Acquisition Proposals (as hereinafter
defined), including by way of providing access to non-public information
pursuant to (but only pursuant to) one or more Acceptable Confidentiality
Agreements (as hereinafter defined); PROVIDED that the Company shall promptly
provide to Parent and Merger Sub any material non-public information concerning
the Company or its Subsidiaries that is provided to any Person given such access
which was not previously provided to Parent and Merger Sub; and (ii) enter into
and maintain or continue discussions or negotiations with respect to Company
Acquisition Proposals or otherwise cooperate with or assist or participate in,
or facilitate any such inquiries, proposals, discussions or negotiations.
(b) Subject to SECTION 6.4(C), and except as may relate to any
Person or group of related Persons from whom the Company has received, after the
date hereof and prior to the Exclusivity Period Start Date, a written indication
of interest that the Board of Directors of the Company (acting through the
Special Committee if such committee still exists) believes in good faith is bona
fide and could reasonably be expected to result in a Superior Proposal (as
hereinafter defined) (each such Person or group, an "EXCLUDED PARTY"), from the
Exclusivity Period Start Date until the Effective Time or, if earlier, the
termination of this Agreement in accordance with Article X, the Company shall
not, and shall not direct, authorize or permit any of the Company
Representatives, and shall be responsible for noncompliance with the following
provisions by any of the foregoing, to, directly or indirectly, (A) initiate,
solicit or encourage
36
(including by way of providing information) the submission of any inquiries,
proposals or offers or any other efforts or attempts that constitute or may
reasonably be expected to lead to, any Company Acquisition Proposal or engage in
any discussions or negotiations with respect thereto or otherwise cooperate with
or assist or participate in, or facilitate any such inquiries, proposals,
discussions or negotiations or (B) accept a Company Acquisition Proposal or
enter into any agreement or agreement in principle (other than an Acceptable
Confidentiality Agreement) providing for or relating to a Company Acquisition
Proposal or enter into any agreement or agreement in principle requiring the
Company to abandon, terminate or fail to consummate the transactions
contemplated hereby or breach its obligations hereunder. Subject to SECTION
6.4(C) and except as may relate to an Excluded Party, on the Exclusivity Period
Start Date the Company shall immediately cease and cause to be terminated any
existing solicitation, encouragement, discussion or negotiation with any Persons
conducted theretofore by the Company or any Company Representatives with respect
to any Company Acquisition Proposal. Notwithstanding anything to the contrary
contained herein, the Company (A) shall not, and shall not permit any of the
Company Representatives to, provide any non-public information to any Excluded
Party without first entering into an Acceptable Confidentiality Agreement and
(B) will promptly provide to Parent and Merger Sub any material non-public
information concerning the Company or its Subsidiaries provided to any Excluded
Party which was not previously provided to Parent and Merger Sub.
(c) Notwithstanding anything to the contrary contained in SECTION
6.4(B), if at any time prior to obtaining Company Stockholder Approval, (i) the
Company has otherwise complied with its obligations under this SECTION 6.4 and
the Company has received a written Company Acquisition Proposal from a third
party that the Board of Directors of the Company (acting through the Special
Committee if such committee still exists) believes in good faith to be bona
fide, (ii) the Board of Directors of the Company (acting through the Special
Committee if such committee still exists) determines in good faith, after
consultation with its independent financial advisors and outside counsel, that
such Company Acquisition Proposal constitutes or could reasonably be expected to
result in a Superior Proposal and (iii) after consultation with its outside
counsel, the Board of Directors of the Company (acting through the Special
Committee if such committee still exists) determines in good faith that the
failure to take such action would be inconsistent with its fiduciary duties
under applicable Law, then the Company may (x) furnish information with respect
to the Company and its Subsidiaries to the Person making such Company
Acquisition Proposal and (y) participate in discussions or negotiations with the
Person making such Company Acquisition Proposal regarding such Company
Acquisition Proposal; PROVIDED, that the Company (A) will not, and will not
allow Company Representatives to, disclose any non-public information to such
Person without entering into an Acceptable Confidentiality Agreement, (B) will
promptly provide to Parent and Merger Sub any material non-public information
concerning the Company or its Subsidiaries provided to such other Person which
was not previously provided to Parent and Merger Sub and (C) will promptly
notify Parent and Merger Sub in the event it receives such Company Acquisition
Proposal, including the material terms and conditions thereof and the identity
of the party making such proposal or inquiry, and shall keep Parent and Merger
Sub reasonably informed as to the status and any material developments
concerning the same, including furnishing copies of any such written inquiries,
correspondence, draft documentation and written summaries of any material oral
inquiries or discussions. Nothing contained in this SECTION 6.4(C) shall
prohibit the
37
Company or the Board of Directors of the Company (in each case, acting through
the Special Committee if such committee still exists) from taking and disclosing
to the Company's stockholders a position with respect to a tender or exchange
offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act or from making any other disclosure required by applicable Law.
(d) Neither the Board of Directors of the Company nor any committee
thereof shall directly or indirectly (i) (A) withdraw (or modify in a manner
adverse to Parent or Merger Sub), or publicly propose to withdraw (or modify in
a manner adverse to Parent or Merger Sub), the approval, recommendation or
declaration of advisability by such Board of Directors or any such committee
thereof of this Agreement, or the Merger or the other transactions contemplated
by this Agreement or (B) recommend, adopt or approve, or propose publicly to
recommend, adopt or approve, any alternative Company Acquisition Proposal,
including any Permitted Alternative Agreement (as hereinafter defined) (any
action described in this CLAUSE (I) being referred to as an "ADVERSE
RECOMMENDATION CHANGE") or (ii) approve or recommend, or publicly propose to
approve or recommend, or allow the Company or any of its Subsidiaries to execute
or enter into, any letter of intent, memorandum of understanding, agreement in
principle, merger agreement, acquisition agreement, option agreement, joint
venture agreement, partnership agreement or other similar agreement constituting
or related to, or that is intended to or could reasonably be expected to lead
to, any Company Acquisition Proposal (other than an Acceptable Confidentiality
Agreement and, to the extent a Company Acquisition Proposal involves the
issuance of securities to stockholders of the Company, other than an appropriate
confidentiality agreement that allows the Company to receive and review
confidential information with respect to a proposed issuer of any such
securities) (a "COMPANY ACQUISITION AGREEMENT"); PROVIDED, that the Company
shall not be prohibited from terminating this Agreement and entering into a
Permitted Alternative Agreement in accordance with SECTION 10.1(E).
Notwithstanding the foregoing, at any time prior to obtaining Company
Stockholder Approval, the Board of Directors of the Company (acting through the
Special Committee if such committee still exists) may make an Adverse
Recommendation Change if such Board of Directors determines in good faith (after
consultation with its independent financial advisors and outside counsel) that
failure to take such action would be inconsistent with its fiduciary duties to
the stockholders of the Company under applicable Law.
(e) From and after the date hereof, the Company shall provide
notice promptly to Parent and Merger Sub of any resolution to take any of the
actions described in this SECTION 6.4 or to terminate this Agreement pursuant to
SECTION 10.1(E).
(f) As used in this Agreement, the term:
(i) "ACCEPTABLE CONFIDENTIALITY AGREEMENT" means a
confidentiality and standstill agreement that contains provisions that are
no less favorable in the aggregate to the Company than those contained in
the Confidentiality Agreement; PROVIDED, HOWEVER, that an Acceptable
Confidentiality Agreement may include provisions that are less favorable to
the Company than those contained in the Confidentiality Agreement so long
as the Company offers to amend the Confidentiality
38
Agreement, concurrently with execution of such Acceptable Confidentiality
Agreement, to include substantially similar provisions for the benefit of
LGP;
(ii) "COMPANY ACQUISITION PROPOSAL" means any inquiry,
proposal or offer from any Person or group of Persons other than Parent,
Merger Sub or their respective Affiliates relating to any direct or
indirect acquisition or purchase of a business that constitutes 25% or more
of the net revenues, net income or assets of the Company and its
Subsidiaries, taken as a whole, or 25% or more of the outstanding Company
Securities, any tender offer or exchange offer that if consummated would
result in any Person or group of Persons beneficially owning 25% or more of
the outstanding Company Securities, or any merger, reorganization,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company (or
any Subsidiary or Subsidiaries of the Company whose business constitutes
25% or more of the net revenues, net income or assets of the Company and
its Subsidiaries, taken as a whole); (iii) "SUPERIOR PROPOSAL" means a
Company Acquisition Proposal (but changing the references to "25% or more"
in the definition of "Company Acquisition Proposal" to "50% or more") which
the Board of Directors of the Company (acting through the Special Committee
if it still exists) in good faith determines (based on such matters as it
deems relevant, including the advice of its independent financial advisor
and outside counsel), would, if consummated, result in a transaction that
is more favorable from a financial point of view to the stockholders of the
Company, (in their capacities as stockholders) than the transactions
contemplated hereby.
ARTICLE VII
COVENANTS OF PARENT AND MERGER SUB
Section 7.1 VOTING OF SHARES. Each of Parent and Merger Sub agree to
vote all Common Shares beneficially owned by it, and to cause all Common Shares
beneficially owned by any of their respective Affiliates that are (i) controlled
by Parent or Merger Sub or (ii) members of the Company's Board of Directors to
be voted, in favor of adoption of this Agreement at the Company Shareholder
Meeting.
Section 7.2 DIRECTOR AND OFFICER LIABILITY.
(a) The Surviving Corporation shall comply with all of the
Company's and its respective Subsidiaries' obligations to indemnify and hold
harmless (including any obligations to advance funds for expenses) (i) the
present and former officers and directors thereof against any and all costs or
expenses (including reasonable attorneys' fees and expenses), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any actual or threatened claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative
("DAMAGES"), arising out of, relating to or in connection with any acts or
omissions occurring or alleged to occur prior to or at the Effective Time to the
extent provided under the Company's or such Subsidiaries' respective
organizational and governing documents or agreements in effect on the date
hereof, including, without limitation, the adoption and approval of this
Agreement, the Merger or the other transactions contemplated by this
39
Agreement or arising out of or pertaining to the transactions contemplated by
this Agreement; and (ii) such persons and any other present or former employee
of the Company against any and all Damages arising out of acts or omissions in
connection with such persons serving as an officer, director or other fiduciary
in any entity if such service was at the request or for the benefit of the
Company or any of its Subsidiaries. Such obligations shall survive the Merger
and shall continue in full force and effect in accordance with the terms of the
Surviving Corporation's articles of incorporation and bylaws from the Effective
Time until the expiration of the applicable statue of limitations with respect
to any claims against such directors or officers arising out of such acts or
omissions. Any determination required to be made with respect to whether the
conduct of an individual seeking indemnification has complied with the standards
set forth under applicable Law shall be made by independent counsel mutually
acceptable to the Surviving Corporation and such individual. For a period of six
years after the Effective Time, the Surviving Corporation shall cause to be
maintained in effect the current policies of officers' and directors' liability
insurance maintained on the date hereof by the Company and its respective
Subsidiaries (the "CURRENT POLICIES"); PROVIDED, HOWEVER, that the Surviving
Corporation may, and in the event of the cancellation or termination of such
policies shall, substitute therefor policies with reputable and financially
sound carriers providing at least the same coverage and amount and containing
terms and conditions that are no less favorable to the covered persons (the
"REPLACEMENT POLICIES") in respect of claims arising from facts or events that
existed or occurred prior to or at the Effective Time under the Current
Policies; PROVIDED, FURTHER, HOWEVER, that in no event will the Surviving
Corporation be required to expend annually in excess of 300% of the annual
premium currently paid by the Company under the Current Policies; PROVIDED,
FURTHER, HOWEVER, that in lieu of the foregoing insurance coverage, Parent may
direct the Company to purchase "tail" insurance coverage that provides coverage
no less favorable than the coverage described above, PROVIDED that the Company
shall not be required to pay any amounts in respect of such coverage prior to
the Closing.
(b) This SECTION 7.2 shall survive the consummation of the Merger
and is intended to be for the benefit of, and shall be enforceable by, present
or former directors or officers of the Company or its Subsidiaries, their
respective heirs and personal representatives and shall be binding on the
Surviving Corporation and its successors and assigns, and the agreements and
covenants contained herein shall not be deemed to be exclusive of any other
rights to which any such present or former director or officer is entitled,
whether pursuant to Law, contract or otherwise. Nothing in this Agreement is
intended to, shall be construed to or shall release, waive or impair any rights
to directors' and officers' insurance claims under any policy that is or has
been in existence with respect to the Company or any of its Subsidiaries or
their respective officers, directors and employees, it being understood and
agreed that the indemnification provided for in this SECTION 7.2 is not prior to
or in substitution for any such claims under any such policies.
(c) If the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity or (ii) transfers or conveys
substantially all of its properties and assets to any person, then and in each
case to the extent reasonably necessary, proper provision shall be made so that
the successors and assigns of the Surviving Corporation shall assume the
obligations set forth in this SECTION 7.2.
40
Section 7.3 FINANCING EFFORTS. Parent and Merger Sub shall use all
reasonable best efforts to obtain the Financing contemplated by the Financing
Letters. Parent and Merger Sub shall not, without the prior written consent of
the Company (approved by the Special Committee), amend, modify or supplement
(including in the definitive documents) (i) any of the conditions or
contingencies to funding contained in the Financing Letters or (ii) any other
provision of the Financing Letters, in either case to the extent such amendment,
modification or supplement would have the effect of amending, modifying or
supplementing the conditions or contingencies to funding in a manner adverse to
the Company or the holders of Common Shares. In the event that any portion of
the Financing contemplated by the Financing Letters becomes unavailable
otherwise than due to the material breach of representations and warranties or
covenants of the Company or a failure of a condition to be satisfied by the
Company, Parent and Merger Sub will use all reasonable best efforts to arrange
alternative Financing from the same or other sources on terms and conditions not
materially less favorable to Parent and Merger Sub than those contained in the
Financing Letters as of the date hereof. Parent and Merger Sub shall use all
reasonable best efforts to satisfy on or before the Closing all requirements of
the definitive agreements pursuant to which the Financing will be obtained.
Parent and Merger Sub shall keep the Company reasonably apprised of material
developments relating to the Financing.
Section 7.4 SOLVENCY OPINION. The parties shall, at the expense of
the Surviving Corporation, retain a nationally recognized investment banking or
valuation firm to render a solvency opinion of customary scope and substance as
of the Closing to the Boards of Directors of the Company, Parent and Merger Sub.
ARTICLE VIII
COVENANTS OF THE PARTIES
The parties hereto agree that:
Section 8.1 REASONABLE BEST EFFORTS. Subject to the terms and
conditions of this Agreement (including SECTION 6.4), each party will use its
reasonable best efforts to take, or cause to be taken, all actions, to file, or
cause to be filed, all documents and to do, or cause to be done, all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement, including obtaining all necessary consents, waivers, approvals,
authorizations, Permits or orders from all Governmental Authorities or other
Persons; PROVIDED, HOWEVER, that in no event shall the Company or any of its
Subsidiaries be required to pay prior to the Effective Time any fee, penalties
or other consideration to any landlord or other third party to obtain any
consent or approval required for the consummation of the Merger under any real
estate leases or other material contracts (other than de minimis amounts or if
Parent and Merger Sub have provided adequate assurance of repayment). Each party
shall also refrain from taking, directly or indirectly, any action that would be
reasonably likely to result in a failure of any of the conditions to the Merger
in this Agreement being satisfied or restrict such party's ability to consummate
the Merger and the other transactions contemplated hereby. Without limiting the
foregoing, the parties shall use their respective reasonable best efforts to (i)
to take all action necessary so that no takeover, anti-takeover, moratorium,
"fair price," "control share" or other similar Law is or becomes applicable to
the Merger or any of the other transactions contemplated by this Agreement and
(ii) if any such Law is or becomes applicable to any of the foregoing, to take
all action necessary so that the Merger and the other transactions contemplated
by this
41
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 the Merger and the other transactions contemplated by
this Agreement.
Section 8.2 CERTAIN FILINGS.
(a) The parties shall cooperate with one another (i) in determining
whether any action by or in respect of, or filing with, any Governmental
Authority is required, or any actions, consents, approvals or waivers are
required to be obtained from any parties to any Contracts, in connection with
the consummation of the transactions contemplated by this Agreement and (ii) in
seeking and obtaining any such actions, consents, approvals or waivers or making
any such filings, furnishing information required in connection therewith or
with the Company Proxy Statement or the Schedule 13E-3; PROVIDED, HOWEVER, that
the conditions to the parties' respective obligations to consummate the
transactions contemplated hereby shall be limited to those conditions specified
in Article IX. The parties shall have the right to review in advance, and to the
extent reasonably practicable each will consult the other on, all the
information relating to the other and each of their respective Subsidiaries that
appears in any filing made with, or written materials submitted to, any
Governmental Authority in connection with the Merger and the other transactions
contemplated by this Agreement. Each of the Company and Parent shall promptly
notify and provide a copy to the other party of any substantive written
communication received from any Governmental Authority with respect to any
filing or submission or with respect to the Merger and the other transactions
contemplated by this Agreement. Each of the Company and Parent shall give the
other reasonable prior notice of any substantive communication with, and any
proposed understanding, undertaking or agreement with, any Governmental
Authority regarding any such filing or any such transaction. Neither the Company
nor Parent shall, nor shall they permit their respective representatives to,
participate independently in any meeting or engage in any substantive
conversation with any Governmental Authority in respect of any such filing,
investigation or other inquiry without giving the other party prior notice of
such meeting or conversation and without giving, unless prohibited by such
Governmental Authority, the opportunity of the other party to attend or
participate. The parties to this Agreement will consult and cooperate with one
another in connection with any analyses, appearance, presentations, memoranda,
briefs, arguments, opinions, and proposals made or submitted by or on behalf of
any party to this Agreement in connection with proceedings under or related to
the HSR Act or Other Antitrust Laws.
(b) The parties (i) shall use their respective reasonable best
efforts to take or cause to be taken (A) all actions necessary, proper or
advisable by such party with respect to the prompt preparation and filing with
the SEC of the Company Proxy Statement and the Schedule 13E-3, (B) such actions
as may be required to have the Company Proxy Statement and any related materials
cleared by the SEC as promptly as reasonably practicable, and (C) such actions
as may be required to be taken under the Exchange Act and state securities or
applicable Blue Sky Laws in connection with the Merger; and (ii) shall promptly
prepare and file all necessary documentation, effect all necessary applications,
notices, petitions and filings, and use all reasonable efforts to obtain all
material Permits from any Governmental Authorities necessary to consummate the
Merger (including, without limitation, any filing under the HSR Act or any
applicable Other Antitrust Law), including (1) responding as promptly as
practicable to any inquiries from the Federal Trade Commission and the Antitrust
Division of the Department of
42
Justice for additional information or documentation; and (2) complying with the
requirements of, and responding as promptly as reasonably practicable to all
inquiries and requests received from any Governmental Authority in connection
with, the HSR Act or Other Antitrust Laws related to the Merger or the other
transactions contemplated by this Agreement.
Section 8.3 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in
effect, the parties will consult with each other before issuing any press
release or making any public statement with respect to this Agreement or the
transactions contemplated hereby and, except for any press release or public
statement as may be required by applicable Law or any listing agreement with the
New York Stock Exchange, will not issue any such press release or make any such
public statement without the consent of the other parties (not to be
unreasonably delayed, conditioned or withheld).
Section 8.4 FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger Sub, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Company or Merger Sub, any other actions and things to
vest, perfect or confirm of record or otherwise in the Surviving Corporation any
and all right, title and interest in, to and under any of the rights, properties
or assets of the Company.
Section 8.5 NOTICES OF CERTAIN EVENTS. Each of the parties hereto
shall use reasonable best efforts to promptly notify the other party of:
(a) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would reasonably be expected to cause any representation
or warranty of such party contained in this Agreement to be untrue or inaccurate
in any material respect;
(b) any failure of the Company, Parent or Merger Sub, as the case
may be, to comply with or satisfy, or the occurrence or nonoccurrence of any
event, the occurrence or nonoccurrence of which would reasonably be expected to
cause the failure by such party to comply with or satisfy, any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
(c) the receipt by such party of any notice or other communication
from any Person alleging that the consent of such Person, which consent is or
could reasonably be expected to be material to the Company and its Subsidiaries
or the operation of their businesses, is or may be required in connection with
the transactions contemplated by this Agreement;
(d) the receipt by such party of any notice or other communication
from any Governmental Authority in connection with the transactions contemplated
by this Agreement; and
(e) its learning of any actions, suits, claims, investigations or
proceedings commenced against, or affecting such party that, if they were
pending on the date of this Agreement, would have been required to be disclosed
pursuant to this Agreement or which relate to the consummation of the
transactions contemplated by this Agreement.
43
Section 8.6 DISPOSITION OF LITIGATION. The Company will keep Parent
and Merger Sub reasonably apprised of all important developments relating to,
and consult with Parent and Merger Sub with respect to, any action by any third
party to restrain or prohibit or otherwise oppose the Merger or the other
transactions contemplated by this Agreement and, subject to SECTION 6.4, will
use reasonable best efforts to resist any such effort to restrain or prohibit or
otherwise oppose the Merger or the other transactions contemplated by this
Agreement. Parent and Merger Sub may participate in (but not control) the
defense of any stockholder litigation against the Company and its Directors
relating to the transactions contemplated by this Agreement at Parent and Merger
Sub's sole cost and expense (subject to SECTION 10.2). In addition, subject to
SECTION 6.4, the Company will reasonably cooperate with Parent and Merger Sub to
resist any such effort to restrain or prohibit or otherwise oppose the Merger or
the other transactions contemplated by this Agreement.
Section 8.7 EMPLOYEE MATTERS.
(a) For all purposes (other than benefit accrual under final
average pay defined benefit pension plans) under the employee benefit plans of
the Parent and its Subsidiaries providing benefits to each current and former
employee of the Company and its Subsidiaries ("COMPANY EMPLOYEES") after the
Effective Time (the "NEW PLANS"), except as would result in a duplication of
benefits, each Company Employee shall be credited with all years of service for
which such Company Employee was credited before the Effective Time under any
similar Employee Plans. In addition and without limiting the generality of the
foregoing: (i) each Company Employee shall be immediately eligible to
participate, without any waiting time, in any and all New Plans to the extent
coverage under such New Plan replaces coverage under a comparable Employee Plan
in which such Company Employee participated immediately before the Effective
Time (such plans, collectively, the "OLD PLANS"); and (ii) for purposes of each
New Plan providing medical, dental, disability, pharmaceutical and/or vision
benefits to any Company Employee, Parent shall cause all pre-existing condition
exclusions and actively-at-work requirements of such New Plan to be waived for
such employee and his or her covered dependents during the portion of the plan
year of the Old Plan ending on the date such employee's participation in the
corresponding New Plan begins to be taken into account under such New Plan for
purposes of satisfying all deductible, coinsurance and maximum out-of-pocket
requirements applicable to such employee and his or her covered dependents for
the applicable plan year as if such amounts had been paid in accordance with
such New Plan.
(b) For a period of one year from the Effective Time, Parent shall
honor, fulfill and discharge the Company's and its Subsidiaries' obligations
under the severance plans listed on Section 8.7(b) of the Disclosure Letter
without any amendment or change that is adverse to the Company Employees. During
the period specified above, severance benefits offered to Company Employees
shall be determined without taking into account any reduction after the
Effective Time in the compensation paid to Company Employees and used to
determine severance benefits.
Section 8.8 CONFIDENTIALITY AGREEMENT. The parties acknowledge that
the Company, and LGP entered into the Confidentiality Agreement, which agreement
shall be deemed incorporated herein as if it were set forth in its entirety, and
the Confidentiality Agreement shall
44
continue in full force and effect in accordance with its terms until the earlier
of (a) the Effective Time or (b) the expiration of the Confidentiality Agreement
according to its terms.
ARTICLE IX
CONDITIONS TO THE MERGER
Section 9.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
obligations of the Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) This Agreement shall have been approved by the Requisite
Shareholder Vote;
(b) Any applicable waiting period under the HSR Act (and any
extension thereof) relating to the Merger shall have expired or been terminated;
and
(c) No Law shall be in effect which prohibits, restrains or renders
illegal the consummation of the Merger.
Section 9.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to consummate the Merger are subject to
the satisfaction or valid waiver of the following further conditions:
(a) (i) the Company shall have performed in all material respects
all of its obligations hereunder required to be performed by it at or prior to
the Effective Time; (ii) the representations and warranties (A) set forth in
SECTION 4.5 shall be true and correct in all respects (except for inaccuracies
that are de minimis in the aggregate) as of the Effective Time as if made at and
as of such time and (B) set forth in ARTICLE IV, other than those described in
clause (A) above, shall be true and correct as of the date of the Effective Time
as if made at and as of such time (without giving effect to any qualification as
to "materiality" or "Material Adverse Effect" set forth therein), except in the
case of this CLAUSE (B) where the failure to be so true and correct does not
constitute a Material Adverse Effect on the Company, PROVIDED that
representations made as of a specific date shall be required to be so true and
correct (subject to such qualifications) as of such date only; and (iii) Parent
and Merger Sub shall have received a certificate signed by a senior officer of
the Company attesting to (i) and (ii) above;
(b) Parent and Merger Sub have obtained the Financing (other than
the equity financing described in the GEI IV Letter); PROVIDED, that the
condition set forth in this SECTION 9.2(B) shall be deemed waived if the failure
to satisfy such condition arises out of or results from a willful breach by
Parent or Merger Sub of their respective obligations under SECTION 7.3; and
(c) the aggregate number of shares of Common Stock at the Effective
Time, the holders of which have demanded appraisal of their shares from the
Company in accordance with the provisions of Section 262 of the Delaware
Corporate Law, shall not equal 15% or more of the Common Stock outstanding as of
the record date for the Stockholder Meeting.
45
Section 9.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligation of the Company to consummate the Merger is subject to the
satisfaction or valid waiver of the following further conditions:
(a) Parent and Merger Sub shall have performed in all material
respects all of their respective obligations hereunder required to be performed
by them at or prior to the Effective Time;
(b) the representations and warranties of Parent and Merger Sub
contained in this Agreement and in any certificate or other writing delivered by
them pursuant hereto that are qualified as to materiality shall be true and
correct in accordance with their terms as of date of this Agreement and as of
the Effective Time as if made at and as of such time and those which are not so
qualified will be true and correct in all material respects as of date of this
Agreement and as of the Effective Time as if made at and as of such time
(provided that representations made as of a specific date shall be required to
be true as of such date only); and
(c) the Company shall have received a certificate signed by a
senior officer of Parent and Merger Sub attesting to (a) and (b) above.
ARTICLE X
TERMINATION
Section 10.1 TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any prior approval of this Agreement by the shareholders of the Company):
(a) by mutual written consent of the Company, on the one hand, and
Parent and Merger Sub, on the other hand;
(b) by either the Company or Merger Sub, if:
(i) the Merger has not been consummated by the End Date,
provided that the failure of the Merger to be consummated by such date
is not the result of, or caused by, the failure of the party seeking
to exercise such termination right to fulfill any of its obligations
under this Agreement;
(ii) there shall be any final and nonappealable Law that
makes consummation of the Merger illegal or otherwise prohibited;
PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant
to this SECTION 10.1(B)(II) shall not be available to any party whose
breach of any provision of this Agreement results in the application
or imposition of such Law; or
(iii) at the Company Shareholder Meeting or any adjournment
thereof at which this Agreement has been voted upon, the Company
shareholders fail to approve this Agreement by the Requisite
Shareholder Vote;
(c) by the Company, if a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of Parent or Merger
Sub set forth in this Agreement
46
shall have occurred which would cause any of the conditions set forth in
SECTIONS 9.3(A) or (B) not to be satisfied, and such condition is incapable of
being satisfied by the End Date; PROVIDED, HOWEVER, that the Company is not then
in material breach of this Agreement;
(d) by Parent or Merger Sub, if:
(i) a breach of or failure to perform any representation,
warranty, covenant or agreement on the part of the Company set forth
in this Agreement shall have occurred which would cause any of the
conditions set forth in SECTION 9.2(A) not to be satisfied, and such
condition is incapable of being satisfied by the End Date; PROVIDED,
HOWEVER, that neither Parent nor Merger Sub is then in material breach
of this Agreement;
(ii) the Board of Directors of the Company shall make an
Adverse Recommendation Change or approve a resolution or authorize or
agree to do so; or
(iii) the Company shall have entered into a Company Acquisition
Agreement;
(e) by the Company, at any time prior to obtaining the Requisite
Shareholder Vote, upon the Board of Directors of the Company (acting through the
Special Committee but only if such committee still exists) resolving to enter
into, subject to the terms of this Agreement, including SECTION 6.4, a
definitive agreement containing a Company Acquisition Proposal; PROVIDED, that
(i) the Board of Directors of the Company (acting through the Special Committee
but only if such committee still exists) shall not so resolve unless (A) the
Company shall have complied with its obligations under SECTION 6.4, (B) the
Board of Directors of the Company shall have determined in good faith (after
consultation with its independent financial advisors and outside counsel) that
such Company Acquisition Proposal constitutes a Superior Proposal and the
failure to take such action is inconsistent with the fiduciary duties of the
Board of Directors of the Company to the shareholders of the Company under
applicable Law, and (C) the Company shall have substantially negotiated and
documented the terms of such Company Acquisition Proposal; (ii) immediately
following the Board of Directors of the Company (acting through the Special
Committee) so resolving, the Company shall have so notified Parent and provided
to Parent in writing the identity of the Person making, and the final terms and
conditions of, such Company Acquisition Proposal; and (iii) the Company shall
have the right to enter into such a definitive agreement (a "PERMITTED
ALTERNATIVE AGREEMENT") so long as (A) the effectiveness of such agreement is
conditioned upon the Company complying with its obligations under SECTION 10.2,
(B) the effectiveness of such agreement is conditioned upon the termination of
this Agreement pursuant to this SECTION 10.1(E) and (C) immediately following
the execution of such agreement, a copy of such agreement and all related
agreements, exhibits, schedules and other documents are delivered to Parent and
Merger Sub.
The party desiring to terminate this Agreement pursuant to Sections 10.1(B)
through (E) shall give written notice of such termination to the other party in
accordance with SECTION 11.1 of this Agreement; PROVIDED, HOWEVER, that no
termination by the Company shall be effective unless and
47
until the Company shall have paid any amounts required to be paid by the Company
pursuant to SECTION 10.2.
Section 10.2 TERMINATION FEE. Notwithstanding any other provision of
this Agreement, if this Agreement is terminated pursuant to either SECTION
10.1(D)(III) or SECTION 10.1(E), then the Company shall immediately pay to
Parent and Merger Sub, collectively, a break-up fee of $30,000,000 (the
"TERMINATION Fee"). In addition, if this Agreement is terminated pursuant to
SECTION 10.1(B)(III), then the Company shall immediately pay to Parent and
Merger Sub, collectively, all of Parent's and Merger Sub's actual and reasonably
documented out-of-pocket expenses and fees (including reasonable attorneys'
fees) actually incurred by Parent, Merger Sub and their respective Affiliates on
or prior to the termination of this Agreement in connection with the
transactions contemplated by this Agreement, which amount shall not be greater
than $5,000,000 (the "PARENT EXPENSES"); PROVIDED that, if Parent's and Merger
Sub's actual and reasonably incurred and documented out-of-pocket expenses
exceed $5,000,000 as a result of their good faith efforts to satisfy the
conditions set forth in ARTICLE IX and their compliance with the covenants and
agreements set forth in this Agreement, then the Company shall negotiate in good
faith with Parent with respect to increasing the amount of such expenses that
are reimbursed by the Company . Notwithstanding the foregoing, if this Agreement
is terminated pursuant to SECTION 10.1(B)(III) and at the time of the Company
Stockholder Meeting a Company Acquisition Proposal has been made public and not
withdrawn, then in the event that, within twelve months after such termination,
either (A) the acquisition of more than 50% of the voting securities of the
Company occurs or (B) the Company enters into a definitive agreement in respect
of such a transaction, which transaction is subsequently consummated (whether
within the twelve month period described above or thereafter), then in either
case the Company shall immediately pay to Parent and Merger Sub, collectively,
the Termination Fee (less the amount of any Parent Expenses previously paid by
the Company to Parent and Merger Sub). The parties hereto agree that the
Termination Fee is not a penalty, but rather is liquidated Damages in a
reasonable amount that will compensate Parent and Merger Sub for the efforts and
resources expended and opportunities foregone while negotiating this Agreement
and in reliance on this Agreement and on the expectation of the consummation of
the transactions contemplated hereby, which amount would otherwise be impossible
to calculate with precision. The parties further agree that in the event any
payment of the Termination Fee is made by the Company to Parent and Merger Sub
pursuant to this SECTION 10.2, the Termination Fee paid shall be the exclusive
remedy available to Parent and Merger Sub and, upon payment of such amounts by
the Company, the Company shall have no further liability to Parent or Merger Sub
hereunder.
Section 10.3 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to SECTION 10.1, this Agreement shall forthwith become null and void
and there shall be no liability or obligation on the part of the Company,
Parent, Merger Sub or their respective Subsidiaries or Affiliates, except (i)
SECTIONS 10.2, 10.3, 11.1, 11.4, 11.6 and 11.11 will survive the termination
hereof and (ii) with respect to any liabilities for Damages incurred or suffered
by a party as a result of the willful and material breach by any other party of
any of its representations, warranties, covenants or other agreements set forth
in this Agreement.
48
ARTICLE XI
MISCELLANEOUS
Section 11.1 NOTICES. All notices, requests and other communications
to any part hereunder shall be in writing (including facsimile or similar
writing) and shall be given:
if to Parent or Merger Sub, to:
Slap Shot Holdings Corp.
00000 Xxxxx Xxxxxx Xxxx.
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx
Fax: (000) 000-0000
and
SAS Acquisition Corp.
00000 Xxxxx Xxxxxx Xxxx.
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx
Fax: (000) 000-0000
with copies (which shall not constitute notice) to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx Xxxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
if to the Company, to:
The Sports Authority, Inc.
0000 X. Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Fax: (000) 000-0000
with a copy (which shall not constitute notice) to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
49
or such other address or facsimile number as such party may hereafter specify
for by notice to the other parties hereto. Each such notice, request or other
communication shall be effective (i) if given by telecopier, when such telecopy
is transmitted to the facsimile number specified above and electronic
confirmation of transmission is received or (ii) if given by any other means,
when delivered at the address specified in this SECTION 11.1.
Section 11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall survive until (but not beyond) the
Effective Time. None of the representations and warranties herein shall be
considered modified, vitiated or waived in regard to any matter by any due
diligence review or research conducted by or on behalf of Parent or Merger Sub,
unless such matter is contained in the Disclosure Letter or an amendment to such
representation and warranty adopted pursuant to SECTION 11.3(A). This SECTION
11.2 shall not limit any covenant or agreement of the parties that by its terms
contemplates performance in whole or in part after the Effective Time.
Section 11.3 AMENDMENTS NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived prior
to the Effective Time only by amendment or waiver in writing and signed, (i) in
the case of an amendment to this Agreement, by the Company (approved by the
Special Committee), Parent and Merger Sub, or (ii) in the case of a waiver, by
the party against whom the waiver is to be effective; PROVIDED, HOWEVER, that
after the approval of this Agreement by the shareholders of the Company, any
proposed amendment that by Law requires further approval by the shareholders of
the Company shall not be effective without such further shareholder approval.
(b) At any time prior to the Effective Time, the Company, on the
one hand, and Parent and Merger Sub, on the other hand, may but will have no
obligation to, or to consider, with respect to the other parties hereto (i)
extend the time for the performance of any of the obligations or other acts of
such party and (ii) waive any inaccuracies in the representations and warranties
of such party contained herein or in any document delivered pursuant hereto.
(c) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. Except as expressly set
forth in SECTION 10.2, the rights and remedies herein provided shall be
cumulative and not exclusive of any other rights or remedies herein provided or
available at Law or in equity.
Section 11.4 EXPENSES. Except as otherwise expressly provided in
SECTIONS 6.4 and 10.2, all costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such cost or expense.
Section 11.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or
50
obligations under this Agreement without the consent of the other parties
hereto. Any purported assignment in violation of these provisions shall be null
and void AB INITIO.
Section 11.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the law of the State of Delaware, without giving
effect to the conflicts or choice of law principles of such states.
Section 11.7 COUNTERPARTS; EFFECTIVENESS; THIRD PARTY BENEFICIARIES.
This Agreement may be executed by facsimile signatures and in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective only when actually signed by each party hereto and each
such party has received counterparts hereof signed by all of the other parties
hereto. No provision of this Agreement is intended to or shall confer upon any
Person other than the parties hereto any rights or remedies hereunder or with
respect hereto, except with respect to the matters provided in SECTIONS 2.3, 2.4
and 7.2.
Section 11.8 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by virtue of any
Law, or due to any public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner so that the transactions contemplated hereby
are fulfilled to the extent possible.
Section 11.9 SPECIFIC PERFORMANCE. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to consummate the Merger, will cause irreparable injury to the other
parties, for which damages, even if available, will not be an adequate remedy.
Accordingly, each party hereby consents to the issuance of injunctive relief by
any court of competent jurisdiction to compel performance of such party's
obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder, in addition to any other rights or
remedies available hereunder or at law or in equity.
Section 11.10 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties hereto with respect to its subject matter and
supersedes all oral or written prior or contemporaneous agreements and
understandings among the parties with respect to such subject matter.
Section 11.11 JURISDICTION.
(a) Except as otherwise expressly provided in this Agreement, the
parties hereto agree that any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby shall be brought exclusively
in the Court of Chancery of the State of Delaware, County of New Castle or, if
such court does not have jurisdiction over the subject matter of such
51
proceeding or if such jurisdiction is not available, in the United State
District Court for the District of Delaware, and each of the parties hereby
irrevocably consents to the exclusive jurisdiction of those courts (and of the
appropriate appellate courts therefrom) in any suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by Law, any objection which
it may now or hereafter have to the laying of the venue of any suit, action or
proceeding in any of those courts or that any suit, action or proceeding which
is brought in any of those courts has been brought in an inconvenient forum.
Process in any suit, action or proceeding may be served on any party anywhere in
the world, whether within or without the jurisdiction of any of the named
courts.
(b) EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH
PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH
PARTY MAKES THIS WAIVER VOLUNTARILY AND (IV) EACH PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 11.11.
Section 11.12 AUTHORSHIP. The parties agree that the terms and
language of this Agreement were the result of negotiations between the parties
and their respective advisors and, as a result, there shall be no presumption
that any ambiguities in this Agreement shall be resolved against any party. Any
controversy over construction of this Agreement shall be decided without regard
to events of authorship or negotiation.
[signature page follows]
52
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
THE COMPANY
THE SPORTS AUTHORITY, INC.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Director
PARENT
SLAP SHOT HOLDINGS CORP.
By: /s/ Xxxxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: President
MERGER SUB
SAS ACQUISITION CORP.
By: /s/ Xxxxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: President
SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER
EXHIBIT A
THE OPTIONS AND THE SHARES OF COMMON STOCK SUBSCRIBED FOR BY THIS AGREEMENT AND
THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF SUCH OPTIONS WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND MAY NOT BE OFFERED OR SOLD UNLESS REGISTERED THEREUNDER OR UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. TRANSFER OF SUCH OPTIONS AND
SHARES IS ALSO RESTRICTED BY THE TERMS OF THIS AGREEMENT AND BY THE TERMS OF THE
STOCKHOLDERS AGREEMENT WITH SLAP SHOT HOLDINGS CORP.
OPTION ASSUMPTION, CONTRIBUTION AND SUBSCRIPTION AGREEMENT
This OPTION ASSUMPTION, CONTRIBUTION AND SUBSCRIPTION AGREEMENT (this
"AGREEMENT"), dated as of January 22, 2006, is entered into by and between
___________, an individual (the "INVESTOR"), and Slap Shot Holdings Corp., a
Delaware corporation ("PARENT").
Parent and its wholly-owned subsidiary, SAS Acquisition Corp., a Delaware
corporation ("MERGER SUB"), have been formed solely for purposes of effectuating
the Merger (as defined below) and will engage in no activities other than those
incident to the Merger;
Investor currently is (i) a stockholder in The Sports Authority, Inc., a
Delaware corporation (the "COMPANY"), the owner of shares of common stock, par
value $0.01 per share, of the Company ("COMPANY SHARES") and/or (ii) a holder of
options ("COMPANY OPTIONS") to acquire Company Shares;
In connection with that certain Agreement and Plan of Merger, dated as of
January 22, 2006 (the "MERGER AGREEMENT"), by and among the Company, Parent and
Merger Sub, Merger Sub shall merge with and into the Company (the "MERGER"),
with the Company as the surviving corporation (the "SURVIVING CORPORATION");
Subject to the terms and conditions of this Agreement, Investor desires to
(i) make contributions to Parent of Company Shares and/or cash and/or (ii) have
Company Options assumed and amended by Parent, in each case, in such amounts as
are set forth under the captions "Rollover Shares," "Cash Contribution" "and
Rollover Options," respectively, on SCHEDULE 1 to this Agreement (upon
completion of such Schedule pursuant to Section 1.7 below) and with an aggregate
value of not less than the amount set forth under the caption "Aggregate
Investment" on SCHEDULE 1 (as it appears on the date hereof, but subject to
Section 1.7);
Subject to the terms and conditions of this Agreement, the parties desire
that with respect to any Company Shares owned by Investor that are set forth in
the final version of SCHEDULE 1 under the caption "Rollover Shares" (the
"ROLLOVER SHARES"), immediately prior to the Merger, Investor shall contribute
such Rollover Shares to Parent (the "EQUITY CONTRIBUTION") in exchange for (i)
newly issued shares of common stock, par value $0.01 per share, of Parent (the
"COMMON SHARES") and/or (ii) newly issued shares of (a) series A preferred
stock, par value $0.01 per share, of Parent (the "SERIES A PREFERRED SHARES")
and (b) series B preferred stock, par value $0.01 per share, of Parent (the
"SERIES B PREFERRED SHARES" and, together with the
Common Shares and Series A Preferred Shares, the "SHARES"), in each case, in the
amount set forth under the caption "Equity Contribution Shares" in the final
version of SCHEDULE 1 attached hereto (the Shares received in exchange for the
Equity Contribution are referred to herein as the "EQUITY CONTRIBUTION SHARES");
Subject to the terms and conditions of this Agreement, the parties desire
that with respect to any Company Options owned by Investor that are set forth in
the final version of SCHEDULE 1 under the caption "Rollover Options" (the
"ROLLOVER OPTIONS"), immediately following the consummation of the Merger, such
Rollover Options shall be (i) assumed by Parent (and become exercisable for
Common Shares) and (ii) amended, such that, after giving effect to such
amendments, the number of option shares and exercise price per option share of
such options shall be as set forth under the caption "Amended Options" in the
final version of SCHEDULE 1 (such amended options are referred to herein as the
"AMENDED OPTIONS");
Subject to the terms and conditions of this Agreement, the parties desire
that with respect to any cash amount that is set forth in the final version of
SCHEDULE 1 under the caption "Cash Contribution," immediately prior to the
Merger, Investor shall contribute such amount in cash to Parent (the "CASH
CONTRIBUTION") in exchange for (i) newly issued Common Shares and/or (ii) newly
issued Series A Preferred Shares and newly issued Series B Preferred Shares, in
each case, in the amount set forth under the caption "Cash Contribution Shares"
in the final version of SCHEDULE 1 (the Shares received in exchange for the Cash
Contribution are referred to herein as the "CASH CONTRIBUTION SHARES");
For United States federal income tax purposes, it is intended that (a) the
Equity Contribution and the Cash Contribution, as applicable, taken together
with (i) the contribution of securities and/or cash by other investors to
Parent, and (ii) the contribution by affiliates of Parent of cash to Parent,
will qualify as transfers described in Section 351(a) of the Internal Revenue
Code of 1986, as amended (the "CODE"), (b) none of the Shares received in
connection with those transfers will be treated as other property or money
within the meaning of Section 351(b) of the Code, and (c) with respect to the
Rollover Options and Amended Options, (i) the amendment and assumption of such
Rollover Options not be treated as a taxable event, and (ii) the Amended Options
be subject to taxation as options to which Section 421 of the Code does not
apply, in accordance with the Treasury Regulations issued under Section 83 of
the Code; and
In connection with the consummation of the transactions contemplated by
this Agreement and the Merger Agreement, Parent, certain affiliates of Parent,
Investor and certain other holders of Company Shares and Company Options will
enter into a Stockholders Agreement with terms and conditions substantially
similar to those described in EXHIBIT B-1 hereto (the "STOCKHOLDERS AGREEMENT").
NOW, THEREFORE, in order to implement the foregoing and in consideration
of the mutual representations, warranties, covenants and agreements contained
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows.
2
1. OPTION ASSUMPTION, CONTRIBUTION AND SUBSCRIPTION.
1.1 ASSUMPTION, CONTRIBUTION AND SUBSCRIPTION. The parties hereby agree
that the following transactions shall occur and be deemed effective as follows:
(a) As of the Closing, on the terms and conditions set forth herein,
Parent shall issue to Investor, the number and class of Shares (if any) set
forth under the caption "Equity Contribution Shares" in the final version of
SCHEDULE 1 in exchange for the Equity Contribution by the Investor of the
Rollover Shares.
(b) Immediately following the consummation of the Merger, on the terms
and conditions set forth herein, Parent shall assume the Company's obligations
with respect to the Rollover Options (if any) set forth under the caption
"Rollover Options" in the final version of SCHEDULE 1 and the terms of such
Rollover Options shall be amended as follows:
(i) such that, after giving effect to such amendments, the number
of option shares and exercise price per option share of such options shall
be as set forth under the caption "Amended Options" in the final version of
SCHEDULE 1;
(ii) to provide (if not already provided) for the exercise price of
such option to be paid by one or more certificates evidencing Shares of any
class owned by Investor immediately prior to such exercise, together with a
duly executed stock power tendering such Shares with an aggregate fair
market value on the date on which the applicable exercise notice is given
equal to the aggregate exercise price set forth in such exercise notice;
PROVIDED that such Shares have been held by Investor for at least six
months (or such greater or lesser period required by Parent) or have such
other characteristics as are necessary in order to prevent Parent or the
Surviving Corporation from incurring an accounting charge on account of the
use of such Shares to pay the purchase price (such Shares being referred to
hereinafter as "MATURE SHARES"); and
(iii)to provide (if not already provided) that, upon exercise,
Investor may elect to satisfy any required income and employment tax
withholding by having Parent (or any of its affiliates) withhold from the
delivery of Common Shares upon such exercise a number of Common Shares with
a fair market value (determined in the same manner as is used in computing
the amount of gain reported upon such exercise for tax purposes) equal to
the amount of such required withholding;
PROVIDED, HOWEVER, that with respect to the amendments described in clauses
(ii) and (iii) above, if at the time of exercise of any Amended Option (x)
the payment of the exercise price with Mature Shares or (y) the
satisfaction of the applicable tax withholding by Parent (or its
affiliates) withholding Common Shares would violate any provision of any
debt agreement or other material agreement binding on Parent, the Surviving
Corporation or any of their subsidiaries), then the applicable amendment
shall not be effective as to such Amended Option at such time.
The Amended Options shall be fully and immediately exercisable upon
consummation of the transactions described in this Section 1.1(b). An example of
the option assumption and amendment mechanics is set forth on EXHIBIT D hereto.
3
(c) As of the Closing, on the terms and conditions set forth herein,
Parent shall issue to Investor, the Cash Contribution Shares (if any) in the
number and class set forth under the caption "Cash Contribution Shares" in the
final version of SCHEDULE 1 in exchange for the Cash Contribution by the
Investor (if any). The contributions, subscriptions and amendments described in
this Section 1.1 are hereinafter referred to as the "TRANSACTIONS").
1.2 CLOSING. Subject to the satisfaction or waiver of the conditions set
forth in Section 1.4, the closing (the "CLOSING") of the Transactions shall
occur and be deemed effective immediately prior to the closing of the Merger;
provided that the assumption and amendment of the Rollover Options described in
Section 1.1(b) shall occur and be deemed effective immediately following the
consummation of the Merger. The Closing shall take place at the offices Xxxxxx,
Xxxx & Xxxxxxxx LLP located in Los Angeles, California, or such other place
determined by the parties.
1.3 FAILURE TO CONSUMMATE THE MERGER. In the event that, after the
Transactions have occurred, the Merger is not consummated for any reason
whatsoever and the Merger Agreement is terminated, the parties hereto agree that
concurrently with the termination of the Merger Agreement, regardless of the
price at which the Company Shares are quoted at that time on the New York Stock
Exchange or any other national securities exchange on which the common stock of
the Company is listed, (i) Parent shall return to Investor the Rollover Shares
and Cash Contribution, as applicable, (ii) Investor shall return to Parent the
Equity Contribution Shares and Cash Contribution Shares, as applicable, (iii)
the proposed assumption of and amendments to the Rollover Options shall be of no
further force or effect and (iv) subject to compliance with clause (i) and (ii)
above, this Agreement shall be considered null and void and of no further force
or effect and no party shall have any liability to the other with respect to
this Agreement. For the avoidance of doubt, in such event, Investor shall have
no claim against Parent other than the right to receive such Rollover Shares and
Cash Contribution, as applicable, upon return of the Equity Contribution Shares
and/or Cash Contribution Shares.
1.4 CONDITIONS TO CLOSING. The effectiveness of the Transactions shall be
subject to the following conditions unless waived in writing by the party
entitled to the benefit of such conditions:
(a) MERGER AGREEMENT CONDITIONS. The conditions to the Merger Agreement
shall have been satisfied or waived and the parties to the Merger Agreement
shall have represented that they intend to consummate the Merger immediately
following consummation of the Transactions.
(b) REPRESENTATIONS AND WARRANTIES. All representations and warranties
in this Agreement by the Investor and Parent shall be true and correct in all
respects on the date when made and on and as of the Closing date with the same
effect as if made on and as of the Closing date.
(c) COVENANTS AND AGREEMENTS. Investor and Parent shall have performed
or complied in all material respects with all covenants and conditions contained
in this Agreement or in any agreement, certificate or instrument to be executed
pursuant hereto which are required to be performed or complied with at or prior
to the Closing.
4
(d) STOCKHOLDERS AGREEMENT. Investor, Parent and the other parties to
the Stockholders Agreement shall have executed and delivered the Stockholders
Agreement.
(e) EMPLOYMENT AGREEMENT AMENDMENT. Investor and Merger Sub shall have
executed and delivered to Parent an amendment to the Investor's employment
agreement with the Company, in form attached hereto as EXHIBIT C hereto.
1.5 COMPANY DELIVERIES. At the Closing, Parent shall deliver to Investor
stock certificates representing the Shares (if any) to be received by Investor
pursuant to this Agreement.
1.6 INVESTOR DELIVERIES. At the Closing, Investor shall deliver to Parent
the following:
(a) certificate(s) evidencing the Rollover Shares (if any), endorsed in
blank (or together with duly executed stock powers in form and substance
reasonably satisfactory to Parent);
(b) any documents reasonably requested by Parent with respect to the
amendment of the Rollover Options;
(c) a bank or cashier's check made out to Parent for the amount of the
Cash Contribution (if any); and
(d) a certificate of Investor confirming the fulfillment of the
conditions set forth in Sections 1.4(b) and (c).
1.7 COMPLETION OF SCHEDULE 1. The parties acknowledge and agree that
SCHEDULE 1 to this Agreement (other than the amount set forth under the caption
"Aggregate Investment" on SCHEDULE 1 as it appears on the date hereof) shall be
completed and finalized, based on mutual agreement of the parties hereto, prior
to the Closing; provided, however, that Parent acknowledges and agrees that the
amount set forth under "Aggregate Investment" may be reduced if and to the
extent that one or more other members of Company's management enter into option
amendment, contribution and subscription agreements, in substantially the form
hereof, that provide for investments in Parent by such persons that, in the
aggregate, equal the amount of such reduction.
2. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby represents and
warrants to Investor as of the date hereof and as of the Closing Date as
follows.
2.1 ORGANIZATION. Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, having full
corporate power and authority to own its properties and to carry on its business
as conducted.
2.2 AUTHORITY. Parent has the requisite corporate power and authority to
enter into and deliver this Agreement, perform its obligations herein, and
consummate the transactions contemplated hereby. Parent has duly executed and
delivered this Agreement. This Agreement is a valid, legal and binding
obligation of Parent enforceable against Parent in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy,
5
insolvency or similar laws affecting the enforcement of creditors' rights
generally and subject to general principles of equity (regardless of whether
such enforcement is considered in a proceeding at law or at equity).
2.3 SHARES DULY AUTHORIZED. All of the Shares to be issued to Investor
pursuant to this Agreement, when issued and delivered in accordance with the
terms of this Agreement, will be duly authorized, validly issued, fully paid and
non-assessable. All of the Amended Options to be acquired by Investor pursuant
to this Agreement, when issued and delivered in accordance with the terms of
this Agreement, will be duly authorized. All of the Shares issuable upon
exercise of the Amended Options, will upon payment of the exercise price
therefore, be duly authorized, validly issued, fully paid and non-assessable.
2.4 PARENT. Each of Parent and Merger Sub is a newly formed corporation
and, accordingly, has no financial or operating history and, except for
liabilities and activities incident to the acquisition of the Company or as
contemplated by the Merger Agreement. Neither Parent nor Merger Sub has any
liabilities or has engaged in any business activities of any type or kind
whatsoever. Each of Parent and Merger Sub has provided to Investor a true and
correct copy of its certificate of incorporation and by-laws as in effect on the
date hereof, and prior to the Closing, no amendments shall be made to such
certificates of incorporation or by-laws (except for (i) any technical
corrections and/or (ii) any amendments to the certificate of incorporation of
Parent as may be required to designate and describe the Series A Preferred
Shares and Series B Preferred Shares).
2.5 PRIVATE OFFERING. No form of general solicitation or general
advertising was used by Parent or its representatives in connection with the
offer, sale or issuance of the Shares. No registration of the Shares pursuant to
the provisions of the Securities Act of 1933, as amended (the "SECURITIES ACT")
or any state securities or "blue sky" laws, will be required by the offer, sale
or issuance of the Shares.
2.6 SAME SECURITIES. Each of the Common Shares, Series A Preferred Shares
and Series B Preferred Shares received by the Investor pursuant to this
Agreement shall be of the same class and series of stock as each of the Common
Shares, Series A Preferred Shares and Series B Preferred Shares, respectively,
held by Green Equity Investors IV, L.P., a Delaware limited partnership, and its
affiliates and co-investors (collectively, the "OTHER INVESTORS") on the Closing
Date, and the price per share paid by the Investor for each Common Share, Series
A Preferred Share and Series B Preferred Share shall be the same as the price
per share paid by the Other Investors for each Common Share, Series A Preferred
Share and Series B Preferred Share, respectively, on the Closing Date.
2.7 CAPITALIZATION. The capital structure of Parent immediately following
the Merger shall be substantially as described in the Financing Letters and/or
New Financing Letters (each as defined in the Merger Agreement) delivered
pursuant to the Merger Agreement.
2.8 OPTION AMENDMENTS. It is the intention of Parent that the amendments to
each Rollover Option (if any) with respect to the number of shares and exercise
price per share shall be implemented such that (i) (A) the excess of the
aggregate fair market value of the Shares subject to the corresponding Amended
Option immediately after the consummation of the
6
Merger over the aggregate exercise price of such Amended Option will not exceed
(B) the excess of the aggregate fair market value of the Company Shares subject
to such Rollover Option immediately prior to the consummation of the Merger over
the aggregate exercise price of such Rollover Option and (ii) on a share by
share comparison, the ratio of the exercise price to the fair market value of
the Shares subject to the corresponding Amended Option immediately after the
consummation of the Merger will not be greater than the ratio of the exercise
price to the fair market value of the Company Shares subject to such Rollover
Option immediately before the consummation of the Merger.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. Investor hereby
represents and warrants to Parent as of the date hereof and as of the Closing
Date as follows.
3.1 ORGANIZATION. Investor, if an entity, is duly organized, validly
existing and in good standing under the laws of the state of its incorporation
or organization, having full power and authority to own its properties and to
carry on its business as conducted. Investor, if a natural person, is of legal
age, competent to enter into a contractual obligation, and a citizen of the
United States of America. The principal place of business or principal residence
of Investor is as shown on the signature page of this Agreement.
3.2 OWNERSHIP OF THE ROLLOVER SHARES AND ROLLOVER OPTIONS. Investor is the
sole record and beneficial owner of the Rollover Shares and Rollover Options set
forth in SCHEDULE 1 hereto, free and clear of any claim, lien, security
interest, mortgage, deed of trust, pledge, charge, conditional sale or other
title retention agreement, lease, preemptive right, right of first refusal,
option, restriction, tenancy, easement, license or other encumbrance of any
kind. Neither Investor nor any of its affiliates is a party to, or bound by, any
contract, arrangement, agreement, instrument or order (i) relating to the sale,
repurchase, assignment, or other transfer of any capital stock or equity
securities of the Company or (ii) relating to the receipt of dividends, proxy
rights, or voting rights of any capital stock or other equity securities of the
Company.
3.3 AUTHORITY. Investor has the requisite power and authority to deliver
this Agreement, perform Investor's obligations herein, and consummate the
transactions contemplated hereby. Investor has duly executed and delivered this
Agreement and has obtained the necessary authorization to execute and deliver
this Agreement and to perform Investor's obligations herein and to consummate
the transactions contemplated hereby. This Agreement is a valid, legal and
binding obligation of Investor enforceable against Investor in accordance with
its terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally and subject to general principles of equity (regardless of
whether such enforcement is considered in a proceeding at law or at equity)..
3.4 INVESTOR INTENT. Investor is acquiring the Shares and the Amended
Options (and the Shares issuable upon exercise of the Amended Options) for
Investor's own account as principal, for investment purposes only, not for any
other person or entity and not for the purpose of resale or distribution.
Investor is not subscribing for the Shares or Amended Options in a fiduciary
capacity.
7
3.5 FINANCIAL STATUS. (a) Investor is an Accredited Investor (as defined in
Rule 501(a)(3), (4), (5), (6), (7) or (8) of Regulation D promulgated under the
Securities Act) because, (A) Investor's individual net worth or joint net worth
with Investor's spouse at the time of the execution of this Agreement is in
excess of $1,000,000, (B) Investor had an individual income in excess of
$200,000 in each of the two (2) most recent years or joint income with
Investor's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year or
(C) Investor is an executive officer or director of Parent or its Subsidiaries;
or
(b) Investor is able to bear the economic risk of an investment in the
Shares and the Amended Options (and the Shares issuable upon exercise of the
Amended Options) for an indefinite period of time, has adequate means of
providing for his or her current financial needs and personal contingencies, has
no need for liquidity in the investment in the Shares or the Amended Options (or
the Shares issuable upon exercise of the Amended Options), understands that
Investor may not be able to liquidate his or her investment in Parent in an
emergency, if at all, and can afford a complete loss of the investment.
(c) Investor has delivered to Parent an executed Investment
Qualification Questionnaire (including an executed Purchaser Representative
Questionnaire, if applicable) in the form(s) attached hereto as Exhibits A-1 and
A-2. The information contained therein is complete and accurate in all material
respects.
(d) If applicable, Investor has delivered to Parent a copy of a duly
executed Purchaser Representative Agreement, which agreement remains in full
force and effect.
3.6 NO GENERAL SOLICITATION. Investor has received no general solicitation
or general advertisement in connection with the Transactions or an investment in
Parent. Investor has received no other representations or warranties from
Parent, the Company or any other person acting on behalf of Parent or the
Company, other than those contained in this Agreement.
3.7 NO RELIANCE. Investor did not look to, or rely in any manner upon,
Parent, the Company or any of their respective stockholders, affiliates,
directors, officers, employees or representatives for advice about tax,
financial or legal consequences of the acquisition, exercise, ownership or
disposition of (as applicable) the Rollover Shares, the Rollover Options, the
Shares or the Amended Options (or the Shares issuable upon exercise of the
Amended Options) (in each case, as applicable), or the consequences of the
Merger, and none of Parent, the Company or any of their respective affiliates,
directors, officers, employees or representatives has made or is making any
representations to Investor about, or guaranties of, tax, financial or legal
outcomes of the acquisition, exercise, ownership or disposition of (as
applicable) the Rollover Shares, the Rollover Options, the Shares or the Amended
Options (or the Shares issuable upon exercise of the Amended Options) (in each
case, as applicable), or the consequences of the Merger. Investor has consulted
any tax, financial, legal and other consultants Investor deems advisable in
connection with the Transactions.
3.8 ACCURACY OF INFORMATION. As of the date hereof and as of the Closing,
the representations and warranties of Investor contained herein and all
information provided by Investor to Parent concerning Investor, its financial
position and its knowledge of financial and
8
business matters including, but not limited to, the information set forth in the
Investment Qualification Questionnaire, is correct and complete, and if there
should be any changes in that information prior to Investor receiving the Shares
and/or Amended Options, Investor will immediately provide Parent with the
correct information.
4. AGREEMENTS AND ACKNOWLEDGEMENTS OF INVESTOR. Investor hereby agrees and
acknowledges to Parent as follows.
4.1 NO REGISTRATION. Investor understands and agrees that the Shares and
the Amended Options (and the Shares issuable upon exercise of the Amended
Options), are being, or will be, acquired by Investor in a transaction not
involving any public offering within the meaning of the Securities Act, in
reliance on an exemption therefrom. Investor understands that the Shares and the
Amended Options (and the Shares issuable upon exercise of the Amended Options),
have not been, and will not be, approved or disapproved by the Securities and
Exchange Commission or by any other federal or state agency, and that no such
agency has passed on the accuracy or adequacy of disclosures made to Investor by
Parent. No federal or state governmental agency has passed on or made any
recommendation or endorsement of the Shares or the Amended Options (or the
Shares issuable upon exercise of the Amended Options) or an investment in
Parent.
4.2 LIMITATIONS ON DISPOSITION AND RESALE. Investor understands and
acknowledges that the Shares and the Amended Options (and the Shares issuable
upon exercise of the Amended Options), have not been and will not be registered
under the Securities Act or the securities laws of any state and, unless the
Shares are so registered, they may not be offered, sold, transferred or
otherwise disposed of except pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act and any
applicable securities laws of any state or foreign jurisdiction. Investor
understands that it may not be possible for Investor to liquidate Investor's
investment in Parent; and Investor agrees not to sell, transfer or otherwise
dispose of the Shares or the Amended Options (or the Shares issuable upon
exercise of the Amended Options), unless the Shares or the Amended Options have
been so registered or an exemption from the requirement of registration is
available under the Securities Act and any applicable state securities laws.
Investor further acknowledges and agrees that his or her ability to dispose of
the Shares and the Amended Options (and the Shares issuable upon exercise of the
Amended Options), will be subject to restrictions contained in the Stockholders
Agreement. Investor recognizes that there will not be any public trading market
for the Shares and, as a result, Investor may be unable to sell or dispose of
its interest in Parent. Investor further acknowledges and agrees that, except as
may be set forth in the Stockholders Agreement, Parent shall have no obligation
to register the Shares or the Amended Options.
4.3 LEGEND. (a) Investor acknowledges and agrees that the Amended Options
will bear the legend set forth in Section 7.4 of the Stockholders Agreement
(with such changes as may necessary to reflect the fact that security so
legended is an option and not a Share).
(b) Investor acknowledges and agrees that the Shares received in
pursuant to this Agreement and any Shares received upon exercise of the Amended
Options represented by physical certificates will bear the legend set forth in
Section 7.4 of the Stockholders Agreement.
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4.4 INFORMATION REGARDING PARENT. Investor acknowledges that (a) Parent has
made available to Investor, a reasonable time prior to the date of this
Agreement, information concerning Parent sufficient for Investor to make an
informed decision regarding an investment in the Shares and an opportunity to
ask questions and receive answers concerning the Shares; (b) Parent has made
available to Investor, a reasonable time prior to the date of this Agreement,
the opportunity to obtain any additional information that Parent possesses or
can acquire without unreasonable effort or expense deemed necessary by Investor
to verify the accuracy of the information provided, and has received all such
additional information requested; and (c) except for information contained in
documents filed by the Company with the Securities and Exchange Commission prior
to the date hereof and information provided by Parent to Investor contained, or
described, in the Stockholders Agreement and this Agreement, including, without
limitation EXHIBITS B-1 through B-3 hereto, Investor has not relied on Parent,
the Company or any of their respective affiliates, officers, employees or
representatives in connection with Investor's investigation or the accuracy of
the information provided or in making any investment decision.
4.5 COMPLIANCE WITH AGREEMENT. Investor agrees to execute any and all
further documents reasonably necessary to become an optionholder and a
stockholder of Parent. Investor agrees to execute and deliver any and all
further documents and writings, and to perform such other actions, as may be or
become reasonably necessary or expedient to effect and carry out the terms of
this Agreement.
4.6 IRREVOCABLE SUBSCRIPTION AND CANCELLATION. Each of Investor and Parent
understands that this subscription is irrevocable, except as expressly provided
herein or otherwise provided in any applicable federal or state law governing
this Agreement and the transactions contemplated herein.
4.7. TAX WITHHOLDING AND COOPERATION. Investor understands and agrees that
Parent or its affiliates and successors (including the Company) may withhold
taxes required by law to be withheld, and may withhold such taxes from the
proceeds of the Transactions, the Merger or other amounts due to the Investor
pertaining to the Equity Contribution Shares, Cash Contribution Shares or
Amended Options (or any successor securities), and may condition the issuance of
Shares or amendment of the Rollover Options (or successor securities) or the
sale thereof upon the payment by Investor to Parent or its affiliates and
successors of all applicable withholding taxes. Investor will cooperate as
reasonably requested by Parent with respect to Parent's and its affiliates' and
successors' compliance with applicable tax laws pertaining to such securities.
Investor shall be liable for and timely pay all taxes imposed on Investor with
respect to the Transactions and with respect to such securities (whether upon
receipt, exercise, sale or otherwise), and promptly following request from
Parent (or its successors) shall provide proof of such payment in form and
substance reasonably satisfactory to Parent (or its successors).
4.9 PURCHASER REPRESENTATIVE. If Investor used the services of a Purchaser
Representative (as defined in Rule 501 of the Securities Act) in connection with
the Transactions, such Purchaser Representative has disclosed or will disclose,
by submitting to Parent a Purchaser Representative Questionnaire in the form
given Investor by Parent, any material relationship which now exists between
each Purchaser Representative or its affiliates and Parent, the Company and
their respective affiliates, or which is mutually understood to be contemplated,
or which has existed at any time during the previous two (2) years, and further
10
setting forth any compensation received or to be received as a result of such
relationship. To the extent Investor has appointed a Purchaser Representative
and such Purchaser Representative may be an officer, director or employee of the
Company, Investor acknowledges and agrees that such Purchaser Representative has
acted as such solely in an individual capacity and not as an officer, director,
employee or representative of the Company.
5. GOVERNING LAW. This Agreement is governed by and shall be construed in
accordance with the law of the State of Delaware applicable to contracts made
and to be performed entirely in such state. If any provision of this Agreement
or the application thereof to any person or circumstance is held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of that provision to other persons or circumstances shall not be affected
thereby, and that provision shall be enforced to the greater extent permitted by
law.
6. ASSIGNMENT. Investor shall have neither the right nor the power to
assign or delegate any provision of this Agreement except with the prior written
consent of Parent (which may be withheld in Parent's sole discretion). Except as
provided in the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties' respective successors, assigns,
executors and administrators.
7. COUNTERPARTS. This Agreement may be executed in separate counterparts,
each of which shall be deemed an original and both of which shall constitute one
and the same document.
8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only in a writing executed by the party to be bound thereby.
9. TERMINATION OF AGREEMENT. This Agreement may be terminated: (i) by the
mutual written consent of the parties hereto or (ii) by either party if the
Merger Agreement is terminated for any reason whatsoever.
10. OTHER MANAGEMENT PARTIES. Each Management Party (as defined in the
Stockholders Agreement) other than Investor has entered (or will enter) into an
Option Assumption, Contribution and Subscription Agreement with Parent
containing terms and conditions identical to the terms and conditions contained
in this Agreement (other than variances in the amounts set forth on Schedule 1
to each such agreement).
11. FURTHER ASSURANCES. Subject to the terms and conditions provided
herein, each party hereto agrees to use all commercially reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable, whether under applicable laws and
regulations or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement.
[The remainder of this page is blank]
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IN WITNESS WHEREOF, the parties have hereby executed this Option
Assumption, Contribution and Subscription Agreement as of the date set forth
above.
INDIVIDUAL INVESTOR
------------------------------------------------
Name (Print or Type)
------------------------------------------------
Signature
------------------------------------------------
Signature of Spouse
------------------------------------------------
(Street Address)
------------------------------------------------
(City and State) (Zip Code)
------------------------------------------------
Telephone Number
------------------------------------------------
Social Security Number or
Taxpayer Identification Number
------------------------------------------------
Name of Purchaser Representative, if applicable
SIGNATURE PAGE TO OPTION ASSUMPTION, CONTRIBUTION AND SUBSCRIPTION AGREEMENT
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SLAP SHOT HOLDINGS CORP.,
a Delaware corporation
By: --------------------------------------------
Name:
Title:
SIGNATURE PAGE TO OPTION ASSUMPTION, CONTRIBUTION AND SUBSCRIPTION AGREEMENT
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INDEX OF SCHEDULES AND EXHIBITS
Schedule 1 Rollover Shares, Rollover Options and Cash Contribution
Exhibit A-1 Confidential Investment Qualification Questionnaire
Exhibit A-2 Confidential Purchaser Representative Questionnaire
Exhibit B-1 Form of of Stockholders Agreement
Exhibit B-2 Description of Series A Preferred Stock
Exhibit B-3 Description of Series B Preferred Stock
Exhibit C Amendment to Employment Agreement
Exhibit D Example of Option Assumption and Amendment
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EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
SAS ACQUISITION CORP.
(A DELAWARE CORPORATION)
ARTICLE I
NAME
The name of the corporation is SAS Acquisition Corp. (the
"CORPORATION").
ARTICLE II
AGENT
The address of the registered office of the Corporation in the State
of Delaware is 000 Xxxxxxxxx Xxxxx, in the City of Dover 19904, County of Kent,
and the name of its registered agent at that address is National Registered
Agents, Inc.
ARTICLE III
PURPOSE
The purposes for which the Corporation is formed are to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (the "DGCL").
ARTICLE IV
STOCK
Section 4.1 AUTHORIZED STOCK. The aggregate number of shares which the
Corporation shall have authority to issue is 750,000,000, of which 150,000,000
shall be designated as Common Stock, par value $0.01 per share (the "COMMON
STOCK"), and 600,000,000 shall be designated as Preferred Stock, par value $0.01
per share (the "PREFERRED STOCK").
Section 4.2 COMMON STOCK.
(a) VOTING. Each holder of Common Stock shall be entitled to
one (1) vote for each share of Common Stock held of record by such holder on all
matters submitted to a vote of stockholders of the Corporation.
(b) DIVIDENDS. Subject to the rights, if any, of the holders
of any outstanding series of Preferred Stock, the holders of shares of Common
Stock shall be entitled to receive dividends out of any funds of the Corporation
legally available therefor when and as declared by the Board of Directors.
(c) LIQUIDATION. Upon the dissolution, liquidation or
winding up of the Corporation, subject to the rights, if any, of the holders of
any outstanding series of Preferred
Stock, the holders of shares of Common Stock shall be entitled to receive the
assets of the Corporation available for distribution to its stockholders ratably
in proportion to the number of shares held by them.
Section 4.3 PREFERRED STOCK. Subject to limitations prescribed by law
and the provisions of this Article IV, the Board of Directors is hereby
authorized to provide by resolution for the issuance of the shares of Preferred
Stock in one or more series, and to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
privileges, preferences, and relative participating, optional or other rights,
if any, of the shares of each such series and the qualifications, limitations or
restrictions thereof.
The authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
(i) the number of shares constituting such series, including any
increase or decrease in the number of shares of any such series (but
not below the number of shares in any such series then outstanding),
and the distinctive designation of such series;
(ii) the dividend rate on the shares of such series, if any,
whether dividends shall be cumulative, and, if so, from which date or
dates, and the relative rights of priority, if any, of payment of
dividends on shares of such series;
(iii) whether the shares of such series shall have voting rights
(including multiple or fractional votes per share) in addition to the
voting rights provided by law, and, if so, the terms of such voting
rights;
(iv) whether the shares of such series shall have conversion
privileges, and, if so, the terms and conditions of such privileges,
including provision for adjustment of the conversion rate in such
events as the Board of Directors shall determine;
(v) whether or not the shares of such series shall be redeemable,
and if so, the terms and conditions of such redemption, including the
date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption rates;
(vi) whether a sinking fund shall be provided for the redemption
or purchase of shares of such series, and, if so, the terms and the
amount of such sinking fund;
(vii) the rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment
of shares of such series; and
(viii) any other relative rights, preferences and limitations of
such series.
ARTICLE V
BOARD OF DIRECTORS
Section 5.1 NUMBER. Except as otherwise fixed by or pursuant to the
provisions of Article IV of this Certificate of Incorporation relating to the
rights of the holders of any series of Preferred Stock to elect additional
directors in certain circumstances, the Board of Directors shall
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consist of such number of directors as fixed from time to time pursuant to the
Bylaws of the Corporation.
Section 5.2 POWERS. Except as otherwise expressly provided by the DGCL
or this Certificate of Incorporation, the management of the business and the
conduct of the affairs of the Corporation shall be vested in its Board of
Directors.
Section 5.3 ELECTION.
(a) BALLOT NOT REQUIRED. The directors of the Corporation
need not be elected by written ballot unless the Bylaws of the Corporation so
provide.
(b) NOTICE. Advance notice of stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the Corporation.
ARTICLE VI
EXISTENCE
The Corporation shall have perpetual existence.
ARTICLE VII
AMENDMENT
Section 7.1 AMENDMENT OF CERTIFICATE OF INCORPORATION. The Corporation
reserves the right to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, in the manner now or hereafter prescribed by
the laws of the State of Delaware, and all rights conferred herein are granted
subject to this reservation.
Section 7.2 AMENDMENT OF BYLAWS. In furtherance and not in limitation
of the powers conferred by the laws of the State of Delaware, the Board of
Directors is expressly authorized to adopt, amend or repeal the Bylaws of the
Corporation.
ARTICLE VIII
LIABILITY AND INDEMNIFICATION OF DIRECTORS
Section 8.1 NO PERSONAL LIABILITY. To the fullest extent permitted by
the DGCL as the same exists or as may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director.
Section 8.2 INDEMNIFICATION. The Corporation shall indemnify to the
full extent permitted by the laws of the State of Delaware as from time to time
in effect any person against all liability and expense (including attorneys'
fees) incurred by reason of the fact that he is or was a director or officer of
the Corporation, or, while serving as a director or officer of the Corporation,
he is or was serving at the request of the Corporation as a director, officer,
partner or trustee of, or in any similar managerial or fiduciary position of, or
as an employee or agent of another corporation, partnership, joint venture,
trust, association or other enterprise, or by reason of any action alleged to
have been taken or omitted in such capacity. Expenses (including
3
attorneys' fees) incurred in defending an action, suit, or proceeding may be
paid by the Corporation in advance of the final disposition of such action,
suit, or proceeding to the full extent and under the circumstances permitted by
Delaware law. The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, fiduciary, or agent of
the Corporation against any liability asserted against and incurred by such
person in any such capacity or arising out of such person's position, whether or
not the Corporation would have the power to indemnify against such liability
under the provisions of this Article VIII. The indemnification provided by this
Article VIII shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under this Certificate of Incorporation, any bylaw,
agreement, vote of stockholders or disinterested directors, statute, or
otherwise, and shall inure to the benefit of their heirs, executors, and
administrators. The provisions of this Article VIII shall not be deemed to
preclude the Corporation from indemnifying other persons from similar or other
expenses and liabilities as the Board of Directors or the stockholders may
determine in a specific instance or by resolution of general application.
Section 8.3 AMENDMENT OR REPEAL. Any amendment, alteration or repeal
of this Article VIII that adversely affects any right of an indemnitee or its
successors shall be prospective only and shall not limit or eliminate any such
right with respect to any proceeding involving any occurrence or alleged
occurrence of any action or omission to act that took place prior to such
amendment or repeal.
ARTICLE IX
CORPORATE POWER
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred on stockholders
herein are granted subject to this reservation.
ARTICLE X
INCORPORATOR
The name and mailing address of the incorporator of the Corporation
is:
Xxxxx Xxxxxxx
c/o Gibson, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxx.
Xxx Xxxxxxx, XX 00000-0000
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THE UNDERSIGNED, being the incorporator herein before named, for the
purpose of incorporating and organizing a corporation under the General
Corporation Law of the State of Delaware, does make and file this Certificate of
Incorporation.
Dated: January 19, 2006
/s/ Xxxxx Xxxxxxx
---------------------------
Xxxxx Xxxxxxx, Incorporator
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