AGREEMENT AND PLAN OF MERGER
AMONG
WOOLWORTH CORPORATION,
LIBERTY MERGER SUB INC.
AND
THE SPORTS AUTHORITY, INC.
DATED AS OF MAY 7, 1998
TABLE OF CONTENTS
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ARTICLE I
THE MERGER
SECTION 1.1 The Merger.......................................................2
SECTION 1.2 Closing..........................................................2
SECTION 1.3 Effective Time...................................................2
SECTION 1.4 Effects of the Merger............................................2
SECTION 1.5 Certificate of Incorporation and By-laws of the Surviv-
ing Corporation.......................................2
SECTION 1.6 Directors and Officers...........................................3
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock..........................................3
(a) Cancellation of Treasury Stock and Woolworth-Owned Stock.......3
(b) Conversion of Sports Authority Common Stock....................3
(c) Conversion of Common Stock of Sub..............................4
SECTION 2.2 Exchange of Certificates.........................................4
(a) Exchange Agent.................................................4
(b) Exchange Procedures............................................4
(c) Distributions with Respect to Unexchanged Shares...............5
(d) No Further Ownership Rights in Sports Authority
Common Stock...............................................6
(e) No Fractional Shares...........................................6
(f) Termination of Exchange Fund...................................8
(g) No Liability...................................................8
(h) Investment of Exchange Fund....................................8
(i) Lost Certificates..............................................9
SECTION 2.3 Certain Adjustments..............................................9
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of Sports Authority................9
(a) Organization, Standing and Corporate Power......................9
(b) Subsidiaries...................................................10
(c) Capital Structure..............................................10
(d) Authority; Noncontravention....................................12
(e) SEC Documents; Undisclosed Liabilities.........................13
(f) Information Supplied...........................................14
(g) Absence of Certain Changes or Events...........................15
(h) Compliance with Applicable Laws; Litigation....................16
(i) Absence of Changes in Benefit Plans............................16
(j) ERISA Compliance...............................................17
(k) Taxes..........................................................19
(l) Voting Requirements............................................20
(m) State Takeover Statutes........................................20
(n) Accounting Matters.............................................21
(o) Brokers........................................................21
(p) Opinion of Financial Advisor...................................21
(q) Ownership of Woolworth Common Stock............................21
(r) Intellectual Property..........................................22
(s) Certain Contracts..............................................22
SECTION 3.2 Representations and Warranties of Woolworth......................23
(a) Organization, Standing and Corporate Power.....................23
(b) Subsidiaries...................................................24
(c) Capital Structure..............................................24
(d) Authority; Noncontravention....................................25
(e) SEC Documents; Undisclosed Liabilities.........................27
(f) Information Supplied...........................................27
(g) Absence of Certain Changes or Events...........................28
(h) Compliance with Applicable Laws; Litigation....................28
(i) Absence of Changes in Benefit Plans............................29
(j) ERISA Compliance...............................................30
(k) Taxes..........................................................32
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(l) Voting Requirements............................................32
(m) Accounting Matters.............................................32
(n) Brokers........................................................33
(o) Opinion of Financial Advisor...................................33
(p) Ownership of Sports Authority Common Stock.....................33
(q) Certain Contracts..............................................33
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business..............................................34
(a) Conduct of Business by Sports Authority........................34
(b) Conduct of Business by Woolworth...............................36
(c) Other Actions..................................................37
(d) Advice of Changes..............................................37
SECTION 4.2 No Solicitation by Sports Authority..............................37
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4 and the Proxy State
ment/Prospectus; Stockholders Meeting.................40
SECTION 5.2 Letters of Sports Authority's Accountants........................42
SECTION 5.3 Letters of Woolworth's Accountants...............................42
SECTION 5.4 Access to Information; Confidentiality...........................43
SECTION 5.5 Reasonable Best Efforts..........................................43
SECTION 5.6 Stock Options....................................................44
SECTION 5.7 Indemnification, Exculpation and Insurance.......................46
SECTION 5.8 Fees and Expenses................................................46
SECTION 5.9 Public Announcements.............................................47
SECTION 5.10 Affiliates......................................................48
SECTION 5.11 NYSE Listing....................................................48
SECTION 5.12 Stockholder Litigation..........................................48
SECTION 5.13 Tax Treatment...................................................48
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SECTION 5.14 Pooling of Interests............................................49
SECTION 5.15 Standstill Agreements; Confidentiality Agreements...............49
SECTION 5.16 Conveyance Taxes................................................49
SECTION 5.17 Sports Authority Convertible Notes..............................49
SECTION 5.18 Sports Authority Headquarters...................................50
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger.......50
(a) Stockholder Approval...........................................50
(b) HSR Act........................................................50
(c) Governmental and Regulatory Approvals..........................50
(d) No Injunctions or Restraints...................................50
(e) Form S-4.......................................................51
(f) NYSE Listing...................................................51
(g) Pooling Letters................................................51
SECTION 6.2 Conditions to Obligations of Woolworth...........................51
(a) Representations and Warranties.................................51
(b) Performance of Obligations of Sports Authority.................52
(c) Tax Opinion....................................................52
(d) No Material Adverse Change.....................................52
SECTION 6.3 Conditions to Obligations of Sports Authority....................53
(a) Representations and Warranties.................................53
(b) Performance of Obligations of Woolworth........................53
(c) Tax Opinions...................................................53
(d) No Material Adverse Change.....................................54
SECTION 6.4 Frustration of Closing Conditions................................54
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination......................................................54
SECTION 7.2 Effect of Termination............................................55
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SECTION 7.3 Amendment........................................................56
SECTION 7.4 Extension; Waiver................................................56
SECTION 7.5 Procedure for Termination, Amendment, Extension
or Waiver.............................................56
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties....................57
SECTION 8.2 Notices..........................................................57
SECTION 8.3 Definitions......................................................58
SECTION 8.4 Interpretation...................................................59
SECTION 8.5 Counterparts.....................................................59
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries...................59
SECTION 8.7 Governing Law....................................................60
SECTION 8.8 Assignment.......................................................60
SECTION 8.9 Consent to Jurisdiction..........................................60
SECTION 8.10 Headings........................................................60
SECTION 8.11 Severability....................................................60
Exhibit A Form of Affiliate Letter
Exhibit B Sports Authority Tax Representations
Exhibit C Woolworth Tax Representations
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AGREEMENT AND PLAN OF MERGER dated as of May 7, 1998, between
WOOLWORTH CORPORATION, a New York corporation ("Woolworth"), LIBERTY MERGER SUB
INC., a Delaware corporation ("Sub"), and THE SPORTS AUTHORITY, INC., a Delaware
corporation ("Sports Authority").
WHEREAS, the respective Boards of Directors of Woolworth, Sub
and Sports Authority have each approved the merger of Sub with and into Sports
Authority (the "Merger"), upon the terms and subject to the conditions set forth
in this Agreement, whereby each issued and outstanding share of common stock,
par value $.01 per share, of Sports Authority ("Sports Authority Common Stock"),
other than shares owned by Woolworth or Sports Authority, will be converted into
the right to receive the Merger Consideration (as defined in Section 2.1(b));
WHEREAS, the respective Boards of Directors of Woolworth, Sub
and Sports Authority have each determined that the Merger and the other
transactions contemplated hereby are consistent with, and in furtherance of,
their respective business strategies and goals and are in the best interests of
their respective stockholders;
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that
the Merger will qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and this
Agreement is hereby adopted as a plan of reorganization; and
WHEREAS, for financial accounting purposes, it is intended
that the Merger will be accounted for as a pooling of interests transaction
under United States generally accepted accounting principles ("GAAP").
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Sub shall be merged with and into Sports
Authority at the Effective Time (as defined in Section 1.3). Following the
Effective Time, Sports Authority shall be the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL.
SECTION 1.2 CLOSING. The closing of the Merger (the "Closing")
will take place at 10:00 a.m. on a date to be specified by the parties (the
"Closing Date"), which shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Article VI, unless another
time or date is agreed to by the parties hereto. The Closing will be held at
such location in the City of New York as is agreed to by the parties hereto.
SECTION 1.3 EFFECTIVE TIME. Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date, the parties shall cause
the Merger to be consummated by filing a certificate of merger or other
appropriate documents (in any such case, the "Certificate of Merger") executed
in accordance with the relevant provisions of the DGCL and shall make all other
filings or recordings required under the DGCL. The Merger shall become effective
at such time as the Certificate of Merger is duly filed with the Secretary of
State of Delaware, or at such subsequent date or time as Sub and Sports
Authority shall agree and specify in the Certificate of Merger (the time the
Merger becomes effective being hereinafter referred to as the "Effective Time").
SECTION 1.4 EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 259 of the DGCL.
SECTION 1.5 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE
SURVIVING CORPORATION. The certificate of incorporation of Sub, as in effect
immediately prior to the Effective Time, shall be amended as of the Effective
Time so that Article First of such certificate of incorporation reads in its
entirety as follows: "The name of the Corporation is 'The Sports Authority,
Inc.'" and, as so amended, such certificate of incorporation shall be the
certificate of incorporation of the Surviving
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Corporation until thereafter changed or amended as provided therein or by
applicable law. The by-laws of Sub, as in effect immediately prior to the
Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.6 DIRECTORS AND OFFICERS. The directors of Sub and
the officers of Sports Authority at the Effective Time shall, from and after the
Effective Time, be the directors and officers, respectively, of the Surviving
Corporation until their successors shall have been duly elected or appointed or
qualified or until their earlier death, resignation or removal in accordance
with the certificate of incorporation and the by-laws of the Surviving
Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holder of any
shares of Sports Authority Common Stock:
(a) CANCELLATION OF TREASURY STOCK AND WOOLWORTH-OWNED STOCK.
Each share of Sports Authority Common Stock that is owned by Sports Authority or
Woolworth shall automatically be cancelled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
(b) CONVERSION OF SPORTS AUTHORITY COMMON STOCK. Subject to
Section 2.2(e), each issued and outstanding share of Sports Authority Common
Stock (other than shares to be cancelled in accordance with Section 2.1(a))
shall be converted into the right to receive 0.80 (the "Exchange Ratio") validly
issued, fully paid and nonassessable shares of common stock, par value $.01 per
share, of Woolworth (including the related Preferred Stock Purchase Rights
issued pursuant to the Rights Agreement, dated March 11, 1998, between Woolworth
and First Chicago Trust Company of New York (the "Rights Agreement"), the
"Woolworth Common Stock"). The consideration to be issued to holders of Sports
Authority Common Stock is referred to herein as the "Merger Consideration." As
of the Effective Time, all such shares of Sports Authority Common Stock shall no
longer be outstanding
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and shall automatically be cancelled and retired and shall cease to exist, and
each holder of a certificate representing any such shares of Sports Authority
Common Stock shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration and any cash in lieu of fractional
shares of Woolworth Common Stock to be issued or paid in consideration therefor
upon surrender of such certificate in accordance with Section 2.2, without
interest.
(c) CONVERSION OF COMMON STOCK OF SUB. Each issued and
outstanding share of common stock, par value $.01 per share, of Sub shall be
converted into one validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation.
SECTION 2.2 EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. As
of the Effective Time, Woolworth shall enter into an agreement with such bank or
trust company as may be designated by Woolworth and reasonably satisfactory to
Sports Authority (the "Exchange Agent"), which shall provide that Woolworth
shall deposit with the Exchange Agent as of the Effective Time, for the benefit
of the holders of shares of Sports Authority Common Stock, for exchange in
accordance with this Article II, through the Exchange Agent, certificates
representing the shares of Woolworth Common Stock (such shares of Woolworth
Common Stock, together with any dividends or distributions with respect thereto
with a record date after the Effective Time, any Excess Shares (as defined in
Section 2.2(e)) and any cash (including cash proceeds from the sale of the
Excess Shares) payable in lieu of any fractional shares of Woolworth Common
Stock being hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.1 in exchange for outstanding shares of Sports Authority Common Stock.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable
after the Effective Time, the Exchange Agent shall mail to each holder of record
of a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Sports Authority Common Stock (the
"Certificates") whose shares were converted into the right to receive the Merger
Consideration pursuant to Section 2.1, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Sports
Authority and Woolworth may reasonably specify) and (ii) instructions for use in
surrendering the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, and such other
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documents as may reasonably be required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Woolworth Common Stock which such
holder has the right to receive pursuant to the provisions of this Article II,
certain dividends or other distributions in accordance with Section 2.2(c) and
cash in lieu of any fractional share of Woolworth Common Stock in accordance
with Section 2.2(e), and the Certificate so surrendered shall forthwith be
cancelled. Notwithstanding anything to the contrary contained herein, no
certificate representing Woolworth Common Stock or cash in lieu of a fractional
share interest shall be delivered to a person who is an affiliate of Sports
Authority for purposes of qualifying the Merger for pooling of interests
accounting treatment under Opinion 16 of the APB and applicable Securities and
Exchange Commission ("SEC") rules and regulations, unless such person has
executed and delivered an agreement in the form of Exhibit A hereto. In the
event of a surrender of a Certificate representing shares of Sports Authority
Common Stock which are not registered in the transfer records of Sports
Authority under the name of the person surrendering such Certificate, a
certificate representing the proper number of shares of Woolworth Common Stock
may be issued to a person other than the person in whose name the Certificate so
surrendered is registered if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such issuance
shall pay any transfer or other taxes required by reason of the issuance of
shares of Woolworth Common Stock to a person other than the registered holder of
such Certificate or establish to the satisfaction of Woolworth that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the Merger
Consideration which the holder thereof has the right to receive in respect of
such Certificate pursuant to the provisions of this Article II, certain
dividends or other distributions in accordance with Section 2.2(c) and cash in
lieu of any fractional share of Woolworth Common Stock in accordance with
Section 2.2(e). No interest shall be paid or will accrue on any cash payable to
holders of Certificates pursuant to the provisions of this Article II.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions with respect to Woolworth Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Woolworth Common Stock
represented thereby, and, in the case of Certificates representing Sports
Authority Common Stock, no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.2(e), and all such dividends,
other distributions and cash in lieu
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of fractional shares of Woolworth Common Stock shall be paid by Woolworth to the
Exchange Agent and shall be included in the Exchange Fund, in each case until
the surrender of such Certificate in accordance with this Article II. Subject to
the effect of applicable escheat or similar laws, following surrender of any
such Certificate there shall be paid to the holder of the certificate
representing whole shares of Woolworth Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Woolworth Common Stock and, in the case of
Certificates representing Sports Authority Common Stock, the amount of any cash
payable in lieu of a fractional share of Woolworth Common Stock to which such
holder is entitled pursuant to Section 2.2(e) and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time and with a payment date subsequent to such surrender
payable with respect to such whole shares of Woolworth Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN SPORTS AUTHORITY COMMON
STOCK. All shares of Woolworth Common Stock issued upon the surrender for
exchange of Certificates in accordance with the terms of this Article II
(including any cash paid pursuant to this Article II) shall be deemed to have
been issued (and paid) in full satisfaction of all rights pertaining to the
outstanding shares of Sports Authority Common Stock, theretofore represented by
such Certificates, subject, however, to the Surviving Corporation's obligation
to pay any dividends or make any other distributions with a record date prior to
the Effective Time which may have been declared or made by Sports Authority on
such shares of Sports Authority Common Stock which remain unpaid at the
Effective Time, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Sports
Authority Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they shall be cancelled and
exchanged as provided in this Article II, except as otherwise provided by law.
(e) NO FRACTIONAL SHAREES. (i) No certificates or scrip
representing fractional shares of Woolworth Common Stock shall be issued upon
the surrender for exchange of Certificates, no dividend or distribution of
Woolworth shall relate to such fractional share interests and such fractional
share interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Woolworth.
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(ii) As promptly as practicable following the Effective Time,
the Exchange Agent shall determine the excess of (A) the number of
whole shares of Woolworth Common Stock delivered to the Exchange Agent
by Woolworth pursuant to Section 2.2(a) over (B) the aggregate number
of whole shares of Woolworth Common Stock to be distributed to former
holders of Sports Authority Common Stock pursuant to Section 2.2(b)
(such excess being herein called the "Excess Shares"). Following the
Effective Time, the Exchange Agent shall, on behalf of the former
stockholders of Sports Authority, sell the Excess Shares at
then-prevailing prices on the New York Stock Exchange, Inc. ("NYSE"),
all in the manner provided in Section 2.2(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of the
NYSE and shall be executed in round lots to the extent practicable. The
Exchange Agent shall use reasonable efforts to complete the sale of the
Excess Shares as promptly following the Effective Time as, in the
Exchange Agent's sole judgment, is practicable consistent with
obtaining the best execution of such sales in light of prevailing
market conditions. Until the net proceeds of such sale or sales have
been distributed to the holders of Certificates formerly representing
Sports Authority Common Stock, the Exchange Agent shall hold such
proceeds in trust for such holders (the "Common Shares Trust"). The
Surviving Corporation shall pay all commissions, transfer taxes and
other out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent incurred in connection with such
sale of the Excess Shares. The Exchange Agent shall determine the
portion of the Common Shares Trust to which each former holder of
Sports Authority Common Stock is entitled, if any, by multiplying the
amount of the aggregate net proceeds comprising the Common Shares Trust
by a fraction, the numerator of which is the amount of the fractional
share interest to which such former holder of Sports Authority Common
Stock is entitled (after taking into account all shares of Sports
Authority Common Stock held at the Effective Time by such holder) and
the denominator of which is the aggregate amount of fractional share
interests to which all former holders of Sports Authority Common Stock
are entitled.
(iv) Notwithstanding the provisions of Section 2.2(e)(ii) and
(iii), Woolworth may elect at its option, exercised prior to the
Effective Time, in lieu of the issuance and sale of Excess Shares and
the making of the
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payments hereinabove contemplated, to pay each former holder of Sports
Authority Common Stock an amount in cash equal to the product obtained
by multiplying (A) the fractional share interest to which such former
holder (after taking into account all shares of Sports Authority Common
Stock held at the Effective Time by such holder) would otherwise be
entitled by (B) the average of the closing prices of the Woolworth
Common Stock as reported on the NYSE Composite Transaction Tape (as
reported in The Wall Street Journal, or, if not reported therein, any
other authoritative source) during the ten trading days preceding the
fifth trading day prior to the Closing Date, and, in such case, all
references herein to the cash proceeds of the sale of the Excess Shares
and similar references shall be deemed to mean and refer to the
payments calculated as set forth in this Section 2.2(e)(iv).
(v) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Certificates formerly
representing Sports Authority Common Stock with respect to any
fractional share interests, the Exchange Agent shall make available
such amounts to such holders of Certificates formerly representing
Sports Authority Common Stock subject to and in accordance with the
terms of Section 2.2(c).
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the holders of the Certificates for six
months after the Effective Time shall be delivered to Woolworth, upon demand,
and any holders of the Certificates who have not theretofore complied with this
Article II shall thereafter look only to Woolworth for payment of their claim
for Merger Consideration, any dividends or distributions with respect to
Woolworth Common Stock and any cash in lieu of fractional shares of Woolworth
Common Stock.
(g) NO LIABILITY. None of Woolworth, Sub, Sports Authority,
the Surviving Corporation or the Exchange Agent shall be liable to any person in
respect of any shares of Woolworth Common Stock, any dividends or distributions
with respect thereto, any cash in lieu of fractional shares of Woolworth Common
Stock or any cash from the Exchange Fund, in each case delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(h) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Woolworth, on a
daily basis. Any interest and other income resulting from such investments shall
be paid to Woolworth.
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(i) LOST CERTIFICATES. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration and, if applicable, any unpaid dividends
and distributions on shares of Woolworth Common Stock deliverable in respect
thereof and any cash in lieu of fractional shares, in each case pursuant to this
Agreement.
SECTION 2.3 CERTAIN ADJUSTMENTS. If between the date hereof
and the Effective Time, the outstanding shares of Sports Authority Common Stock
or of Woolworth Common Stock shall be changed into a different number of shares
by reason of any reclassification, recapitalization, split-up, combination or
exchange of shares, or any dividend payable in stock or other securities shall
be declared thereon with a record date within such period, the Exchange Ratio
shall be adjusted accordingly to provide to the holders of Sports Authority
Common Stock the same economic effect as contemplated by this Agreement prior to
such reclassification, recapitalization, split-up, combination, exchange or
dividend.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF SPORTS
AUTHORITY. Except as disclosed in the Sports Authority Filed SEC Documents (as
defined in Section 3.1(g)) or as set forth on the Disclosure Schedule delivered
by Sports Authority to Woolworth prior to the execution of this Agreement (the
"Sports Authority Disclosure Schedule") and making reference to the particular
subsection of this Agreement to which exception is being taken, Sports Authority
represents and warrants to Woolworth as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. (i) Each of
Sports Authority and its subsidiaries (as defined in Section 8.3) is a
corporation or other legal entity duly organized, validly existing and in good
standing (with respect to jurisdictions which recognize such concept) under the
laws of the jurisdiction in
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which it is organized and has the requisite corporate or other power, as the
case may be, and authority to carry on its business as now being conducted,
except, as to subsidiaries, for those jurisdictions where the failure to be so
organized, existing or in good standing individually or in the aggregate would
not have a material adverse effect (as defined in Section 8.3) on Sports
Authority. Each of Sports Authority and its subsidiaries is duly qualified or
licensed to do business and is in good standing (with respect to jurisdictions
which recognize such concept) in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties makes such
qualification or licensing necessary, except for those jurisdictions where the
failure to be so qualified or licensed or to be in good standing individually or
in the aggregate would not have a material adverse effect on Sports Authority.
(ii) Sports Authority has delivered to Woolworth prior to the
execution of this Agreement complete and correct copies of its
certificate of incorporation and by-laws, as amended to date.
(iii) In all material respects, the minute books of Sports
Authority contain accurate records of all meetings and accurately
reflect all other actions taken by the stockholders, the Board of
Directors and all committees of the Board of Directors of Sports
Authority since March 31, 1995.
(b) SUBSIDIARIES. Exhibit 21 to Sports Authority's Annual
Report on Form 10-K for the fiscal year ended January 25, 1998 and Section
3.1(b) of the Sports Authority Disclosure Schedule together include all the
subsidiaries of Sports Authority which as of the date of this Agreement are
Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X of the SEC).
Except as set forth in Section 3.1(b) of the Sports Authority Disclosure
Schedule, all the outstanding shares of capital stock of, or other equity
interests in, each such Significant Subsidiary have been validly issued and are
fully paid and nonassessable and are owned directly or indirectly by Sports
Authority, free and clear of all pledges, claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever (collectively, "Liens")
and free of any other restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other ownership
interests).
(c) CAPITAL STRUCTURE. The authorized capital stock of Sports
Authority consists of 100,000,000 shares of Sports Authority Common Stock and
5,000,000 shares of preferred stock, par value $.01 per share. At the close of
business on April 27, 1998: (i) 31,732,167 shares of Sports Authority Common
10
Stock were issued and outstanding; (ii) 49,231 shares of Sports Authority Common
Stock were held by Sports Authority in its treasury; (iii) no shares of Sports
Authority Preferred Stock were issued and outstanding; (iv) 4,711,240 shares of
Sports Authority Common Stock were reserved for issuance pursuant to the Stock
Option Plan, the 1996 Stock Option and Restricted Stock Plan, the Director Stock
Option Plan, the Employee Stock Purchase Plan and the Management Stock Purchase
Plan, complete and correct copies of which have been delivered to Woolworth
(such plans, collectively, the "Sports Authority Stock Plans"); and (v)
4,580,964 shares of Sports Authority Common Stock were reserved for issuance
upon conversion of Sports Authority's 5.25% Convertible Subordinated Notes due
2001 (the "Sports Authority Convertible Securities"). Section 3.1(c) of the
Sports Authority Disclosure Schedule sets forth a complete and correct list, as
of April 27, 1998, of the number of shares of Sports Authority Common Stock
subject to employee stock options or other rights to purchase or receive Sports
Authority Common Stock granted under the Sports Authority Stock Plans
(collectively, "Sports Authority Employee Stock Options"), the dates of grant
and exercise prices thereof. All outstanding shares of capital stock of Sports
Authority are, and all shares which may be issued will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except as set forth in this Section 3.1(c) and except for
changes since April 27, 1998 resulting from the issuance of shares of Sports
Authority Common Stock pursuant to the Sports Authority Employee Stock Options,
the Sports Authority Convertible Securities or as permitted by Section
4.1(a)(i)(y) and 4.1(a)(ii), (x) there are not issued, reserved for issuance or
outstanding (A) any shares of capital stock or other voting securities of Sports
Authority, (B) any securities of Sports Authority or any Sports Authority
subsidiary convertible into or exchangeable or exercisable for shares of capital
stock or voting securities of Sports Authority, (C) any warrants, calls, options
or other rights to acquire from Sports Authority or any Sports Authority
subsidiary, and any obligation of Sports Authority or any Sports Authority
subsidiary to issue, any capital stock, voting securities or securities
convertible into or exchangeable or exercisable for capital stock or voting
securities of Sports Authority, and (y) there are no outstanding obligations of
Sports Authority or any Sports Authority subsidiary to repurchase, redeem or
otherwise acquire any such securities or to issue, deliver or sell, or cause to
be issued, delivered or sold, any such securities. Except as set forth in
Section 3.1(c) of the Sports Authority Disclosure Schedule, there are no
outstanding (A) securities of Sports Authority or any Sports Authority
subsidiary convertible into or exchangeable or exercisable for shares of capital
stock or other voting securities or ownership interests in any Sports Authority
subsidiary, (B) warrants, calls, options or other rights to acquire from Sports
Authority or any Sports Authority subsidiary, and any obligation of Sports
11
Authority or any Sports Authority subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any securities convertible into
or exchangeable or exercisable for any capital stock, voting securities or
ownership interests in, any Sports Authority subsidiary or (C) obligations of
Sports Authority or any Sports Authority subsidiary to repurchase, redeem or
otherwise acquire any such outstanding securities of Sports Authority
subsidiaries or to issue, deliver or sell, or cause to be issued, delivered or
sold, any such securities. Except as set forth in Section 3.1(c) of the Sports
Authority Disclosure Schedule, neither Sports Authority nor any Sports Authority
subsidiary is a party to any agreement restricting the transfer of, relating to
the voting of, requiring registration of, or granting any preemptive or, except
as provided by the terms of the Sports Authority Employee Stock Options and the
Sports Authority Convertible Securities, antidilutive rights with respect to,
any securities of the type referred to in the two preceding sentences. Other
than the Sports Authority subsidiaries, Sports Authority does not directly or
indirectly beneficially own any securities or other beneficial ownership
interests in any other entity except for non-controlling investments made in the
ordinary course of business in entities which are not individually or in the
aggregate material to Sports Authority and its subsidiaries as a whole.
(d) AUTHORITY; NONCONTRAVENTION. Sports Authority has all
requisite corporate power and authority to enter into this Agreement and,
subject, in the case of the Merger, to the Sports Authority Stockholder Approval
(as defined in Section 3.1(l)) to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement by Sports Authority
and the consummation by Sports Authority of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate action on
the part of Sports Authority, subject, in the case of the Merger, to the Sports
Authority Stockholder Approval. This Agreement has been duly executed and
delivered by Sports Authority and, assuming the due authorization, execution and
delivery by Woolworth and Sub, constitutes the legal, valid and binding
obligation of Sports Authority, enforceable against Sports Authority in
accordance with its terms. Except as set forth in Section 3.1(d) of the Sports
Authority Disclosure Schedule, the execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of Sports Authority or
any of its subsidiaries under, (i) the certificate of incorporation or by-laws
of Sports Authority or the comparable
12
organizational documents of any of its subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license or similar authorization
applicable to Sports Authority or any of its subsidiaries or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Sports Authority or
any of its subsidiaries or their respective properties or assets, other than, in
the case of clauses (ii) and (iii), any such conflicts, violations, defaults,
rights, losses or Liens that individually or in the aggregate would not (x) have
a material adverse effect on Sports Authority or (y) reasonably be expected to
impair the ability of Sports Authority to perform its obligations under this
Agreement. No consent, approval, order or authorization of, action by or in
respect of, or registration, declaration or filing with, any federal, state,
local or foreign government, any court, administrative, regulatory or other
governmental agency, commission or authority or any nongovernmental
self-regulatory agency, commission or authority (a "Governmental Entity") is
required by or with respect to Sports Authority or any of its subsidiaries in
connection with the execution and delivery of this Agreement by Sports Authority
or the consummation by Sports Authority of the transactions contemplated by this
Agreement, except for (1) the filing of a pre-merger notification and report
form by Sports Authority under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR Act"); (2) the filing with the SEC of (A) a proxy
statement relating to the Sports Authority Stockholders Meeting (as defined in
Section 5.1(b)) (such proxy statement, as amended or supplemented from time to
time, the "Proxy Statement/Prospectus"), and (B) such reports under Section
13(a), 13(d), 15(d) or 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as may be required in connection with this Agreement and
the transactions contemplated by this Agreement; (3) the filing of the
Certificate of Merger with the Secretary of State of Delaware and such filings
with Governmental Entities to satisfy the applicable requirements of state
securities or "blue sky" laws; (4) filings, if required, under the Competition
Act of Canada; and (5) such consents, approvals, orders or authorizations the
failure of which to be made or obtained individually or in the aggregate would
not (x) have a material adverse effect on Sports Authority or (y) reasonably be
expected to impair the ability of Sports Authority to perform its obligations
under this Agreement.
(e) SEC DOCUMENTS; UNDISCLOSED LIABILITIES. Sports Authority
has filed all required registration statements, prospectuses, reports,
schedules, forms, statements and other documents (including exhibits and all
other information incorporated therein) with the SEC since January 27, 1996 (the
"Sports Authority
13
SEC Documents"). As of their respective dates, the Sports Authority SEC
Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Sports Authority SEC Documents, and none of the
Sports Authority SEC Documents when filed (as amended, restated or supplemented
by subsequently filed Sports Authority SEC Documents) contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Sports Authority included in the Sports Authority SEC Documents
comply as to form, as of their respective dates of filing with the SEC, in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
the consolidated financial position of Sports Authority and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except (i) as
reflected in such financial statements or in the notes thereto or (ii) for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby, neither Sports Authority nor any of its subsidiaries has
any liabilities or obligations of any nature which, individually or in the
aggregate, would have a material adverse effect on Sports Authority.
(f) INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Sports Authority specifically for inclusion or incorporation
by reference in (i) the registration statement on Form S-4 to be filed with the
SEC by Woolworth in connection with the issuance of Woolworth Common Stock in
the Merger (the "Form S-4"), will at the time the Form S-4 becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) the Proxy
Statement/Prospectus will, at the date it is first mailed to Sports Authority's
stockholders or at the time of the Sports Authority Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement/Prospectus will comply as to form in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regula-
14
tions thereunder with respect to information supplied by Sports Authority
specifically for inclusion or incorporation by reference in the Proxy
Statement/Prospectus.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in Section 3.1(g) of the Sports Authority Disclosure Schedule and for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby and except as permitted by Section 4.1(a), since January 25,
1998, Sports Authority and its subsidiaries have conducted their business only
in the ordinary course or as disclosed in any Sports Authority SEC Document
filed since such date and prior to the date hereof, and there has not been (i)
any material adverse change (as defined in Section 8.3) in Sports Authority,
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of Sports
Authority's capital stock, (iii) any split, combination or reclassification of
any of Sports Authority's capital stock or any issuance or the authorization of
any issuance of any other securities in respect of, in lieu of or in
substitution for shares of Sports Authority's capital stock, except for
issuances of Sports Authority Common Stock upon conversion of Sports Authority
Convertible Securities or upon the exercise of Sports Authority Employee Stock
Options, in each case awarded prior to the date hereof in accordance with their
present terms or issued pursuant to Section 4.1(a), (iv)(A) any granting by
Sports Authority or any of its subsidiaries to any current or former director,
executive officer or other key employee of Sports Authority or its subsidiaries
of any increase in compensation, bonus or other benefits, except for normal
increases as a result of promotions, normal increases of base pay in the
ordinary course of business or as was required under any employment agreements
in effect as of January 25, 1998, (B) any granting by Sports Authority or any of
its subsidiaries to any such current or former director, executive officer or
key employee of any increase in severance or termination pay, or (C) any entry
by Sports Authority or any of its subsidiaries into, or any amendment of, any
employment, deferred compensation, consulting, severance, termination or
indemnification agreement with any such current or former director, executive
officer or key employee, (v) except insofar as may have been disclosed in Sports
Authority SEC Documents filed and publicly available prior to the date of this
Agreement (as amended to the date hereof, the "Sports Authority Filed SEC
Documents") or required by a change in GAAP, any change in accounting methods,
principles or practices by Sports Authority materially affecting its assets,
liabilities or business, (vi) except insofar as may have been disclosed in the
Sports Authority Filed SEC Documents, any tax election that individually or in
the aggregate would have a material adverse effect on Sports Authority or any of
its tax attributes or any settlement or compromise of any material income tax
liability, or (vii) any action taken by Sports Authority or any of the Sports
15
Authority subsidiaries during the period from January 25, 1998 through the date
of this Agreement that, if taken during the period from the date of this
Agreement through the Effective Time would constitute a breach of Section
4.1(a).
(h) COMPLIANCE WITH APPLICABLE LAWS; LITIGATION. (i) Except as
provided in Section 3.1(h) of the Sports Authority Disclosure Schedule,
Sports Authority and its subsidiaries and employees hold all permits,
licenses, variances, exemptions, orders, registrations and approvals of
all Governmental Entities which are required for the operation of the
businesses of Sports Authority and its subsidiaries (the "Sports
Authority Permits"), except where the failure to have any such Sports
Authority Permits individually or in the aggregate would not have a
material adverse effect on Sports Authority. Sports Authority and its
subsidiaries are in compliance with the terms of the Sports Authority
Permits and all applicable statutes, laws, ordinances, rules and
regulations, except where the failure so to comply individually or in
the aggregate would not have a material adverse effect on Sports
Authority. As of the date of this Agreement, except as disclosed in the
Sports Authority Filed SEC Documents or in Section 3.1(h) of the Sports
Authority Disclosure Schedule, no action, demand, requirement or
investigation by any Governmental Entity and no suit, action or
proceeding by any person, in each case with respect to Sports Authority
or any of its subsidiaries or any of their respective properties is
pending or, to the knowledge (as defined in Section 8.3) of Sports
Authority, threatened, other than, in each case, those the outcome of
which individually or in the aggregate would not (A) have a material
adverse effect on Sports Authority or (B) reasonably be expected to
impair the ability of Sports Authority to perform its obligations under
this Agreement or prevent or materially delay the consummation of any
of the transactions contemplated by this Agreement.
(ii) Neither Sports Authority nor any Sports Authority
subsidiary is subject to any outstanding order, injunction or decree
which has had or, insofar as can be reasonably foreseen, individually
or in the aggregate will have a material adverse effect on Sports
Authority.
(i) ABSSENCE OF CHANGES IN BENEFIT PLANS. Sports Authority has
delivered to Woolworth true and complete copies of (i) all severance and
employment agreements of Sports Authority with directors, executive officers or
key employees, (ii) all severance programs and policies of each of Sports
Authority and each Sports Authority subsidiary, and (iii) all plans or
arrangements of Sports
16
Authority and each Sports Authority subsidiary relating to its employees which
contain change in control provisions. Except as provided in Section 3.1(i) of
the Sports Authority Disclosure Schedule, since January 25, 1998 there has not
been any adoption or amendment in any material respect by Sports Authority or
any of its subsidiaries of any collective bargaining agreement, employment
agreement, consulting agreement, severance agreement or any material bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical or other plan,
arrangement or understanding providing benefits to any current or former
employee, officer or director of Sports Authority or any trade or business,
whether or not incorporated (an "ERISA Affiliate"), that would be deemed a
"single employer" within the meaning of Section 4001(b) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (collectively, the
"Sports Authority Benefit Plans"), or any material change in any actuarial or
other assumption used to calculate funding obligations with respect to any
Sports Authority pension plans, or any material change in the manner in which
contributions to any Sports Authority pension plans are made or the basis an
which such contributions are determined. Schedule 3.1(i) identifies each of the
Sports Authority Benefit Plans that is subject to Section 302 or Title IV of
ERISA or Section 412 of the Code.
(j) ERISA COMPLIANCE. (i) With respect to the Sports Authority
Benefit Plans, no event has occurred and, to the knowledge of Sports
Authority, there exists no condition or set of circumstances, in
connection with which Sports Authority or any of its subsidiaries could
be subject to any liability that individually or in the aggregate would
have a material adverse effect on Sports Authority under ERISA, the
Code or any other applicable law.
(ii) Each Sports Authority Benefit Plan has been administered
in accordance with its terms, except for any failures so to administer
any Sports Authority Benefit Plan that individually or in the aggregate
would not have a material adverse effect on Sports Authority. Sports
Authority, its subsidiaries and all the Sports Authority Benefit Plans
have been operated, and are, in compliance with the applicable
provisions of ERISA, the Code and all other applicable laws and the
terms of all applicable collective bargaining agreements, except for
any failures to be in such compliance that individually or in the
aggregate would not have a material adverse effect on Sports Authority.
Each Sports Authority Benefit Plan that is intended to be
17
qualified under Section 401(a) or 401(k) of the Code has received a
favorable determination letter from the IRS that it is so qualified and
each trust established in connection with any Sports Authority Benefit
Plan that is intended to be exempt from federal income taxation under
Section 501(a) of the Code has received a determination letter from the
IRS that such trust is so exempt. To the knowledge of Sports Authority,
no fact or event has occurred since the date of any determination
letter from the IRS which is reasonably likely to affect adversely the
qualified status of any such Sports Authority Benefit Plan or the
exempt status of any such trust.
(iii) Neither Sports Authority nor any of its ERISA Affiliates
has incurred any unsatisfied liability under Title IV of ERISA (other
than liability for premiums to the Pension Benefit Guaranty Corporation
arising in the ordinary course). No Sports Authority Benefit Plan has
incurred an "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA or Section 412 of the Code) whether or not waived.
To the knowledge of Sports Authority, there are not any facts or
circumstances that would materially change the funded status of any
Sports Authority Benefit Plan that is a "defined benefit" plan (as
defined in Section 3(35) of ERISA) since the date of the most recent
actuarial report for such plan. No Sports Authority Benefit Plan is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA.
(iv) With respect to each of the Sports Authority Benefit
Plans that is subject to Title IV of ERISA, the present value of
accrued benefits under each such plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial
report prepared by such plan's actuary with respect to such plan, did
not, as of its latest valuation date, exceed the then current value of
the aggregate assets of such plans allocable to such accrued benefits
in any material respect.
(v) No Sports Authority Benefit Plan provides medical benefits
(whether or not insured), with respect to current or former employees
after retirement or other termination of service (other than coverage
mandated by applicable law or benefits, the full cost of which is borne
by the current or former employee) other than individual arrangements
the amounts of which are not material.
18
(vi) As of the date of this Agreement, neither Sports
Authority nor any of its subsidiaries is a party to any collective
bargaining or other labor union contract applicable to persons employed
by Sports Authority or any of its subsidiaries and no collective
bargaining agreement is being negotiated by Sports Authority or any of
its subsidiaries. As of the date of this Agreement, there is no labor
dispute, strike or work stoppage against Sports Authority or any of its
subsidiaries pending or, to the knowledge of Sports Authority,
threatened which may interfere with the respective business activities
of Sports Authority or any of its subsidiaries, except where such
dispute, strike or work stoppage individually or in the aggregate would
not have a material adverse effect on Sports Authority. As of the date
of this Agreement, to the knowledge of Sports Authority, none of Sports
Authority, any of its subsidiaries or any of their respective
representatives or employees has committed any material unfair labor
practice in connection with the operation of the respective businesses
of Sports Authority or any of its subsidiaries, and there is no
material charge or complaint against Sports Authority or any of its
subsidiaries by the National Labor Relations Board or any comparable
governmental agency pending or threatened in writing.
(vii) Except as set forth in Section 3.1 (j)(vii) of the
Sports Authority Disclosure Schedule, no employee of Sports Authority
will be entitled to any material payment, additional benefits or any
acceleration of the time of payment or vesting of any benefits under
any Sports Authority Benefit Plan as a result of the transactions
contemplated by this Agreement (either alone or in conjunction with any
other event such as a termination of employment).
(k) TAXES. Except as set forth in Section 3.1(k) of the Sports
Authority Disclosure Schedule, (i) Each of Sports Authority and its
subsidiaries has filed all material tax returns and reports required to
be filed by it and all such returns and reports are complete and
correct in all material respects, or requests for extensions to file
such returns or reports have been timely filed, granted and have not
expired, except to the extent that such failures to file, to be
complete or correct or to have extensions granted that remain in effect
individually or in the aggregate would not have a material adverse
effect on Sports Authority. Sports Authority and each of its
subsidiaries has paid (or Sports Authority has paid on its behalf) all
taxes (as defined herein) shown as due on such returns, and the most
recent financial statements contained in the Sports Authority Filed SEC
Documents reflect an
19
adequate reserve in accordance with GAAP for all taxes payable by
Sports Authority and its subsidiaries for all taxable periods and
portions thereof accrued through the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed,
asserted or assessed against Sports Authority or any of its
subsidiaries that are not adequately reserved for, except for
deficiencies that individually or in the aggregate would not have a
material adverse effect on Sports Authority. The federal income tax
returns of Sports Authority and each of its subsidiaries consolidated
in such returns for tax years through 1991 have closed by virtue of the
applicable statute of limitations.
(iii) Neither Sports Authority nor any of its subsidiaries has
taken any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Code.
(iv) As used in this Agreement, "taxes" shall include all (x)
federal, state, local or foreign income, property, sales, excise and
other taxes or similar governmental charges, including any interest,
penalties or additions with respect thereto, (y) liability for the
payment of any amounts of the type described in (x) as a result of
being a member of an affiliated, consolidated, combined or unitary
group, and (z) liability for the payment of any amounts as a result of
being party to any tax sharing agreement or as a result of any express
or implied obligation to indemnify any other person with respect to the
payment of any amounts of the type described in clause (x) or (y).
(l) VOTING REQUIREMENTS. The affirmative vote at the Sports
Authority Stockholders Meeting (the "Sports Authority Stockholder Approval") of
the holders of a majority of all outstanding shares of Sports Authority Common
Stock to adopt this Agreement is the only vote of the holders of any class or
series of Sports Authority's capital stock necessary to approve and adopt this
Agreement and the transactions contemplated hereby, including the Merger.
(m) STATE TAKEOVER STATUTES. The Board of Directors of Sports
Authority has approved this Agreement and the transactions contemplated hereby
and, assuming the accuracy of Woolworth's representation and warranty contained
in Section 3.2(p), such approval constitutes approval of the Merger and the
other transactions contemplated hereby by the Sports Authority Board of
Directors under
20
the provisions of Section 203 of the DGCL such that Section 203 of the DGCL does
not apply to this Agreement and the transactions contemplated hereby. To the
knowledge of Sports Authority, no other state takeover statute is applicable to
the Merger or the other transactions contemplated hereby.
(n) ACCOUNTING MATTERS. To its knowledge, neither Sports
Authority nor any of its affiliates (as such term is used in Section 5.11) has
taken or agreed to take any action that would prevent the business combination
to be effected by the Merger from being accounted for as a pooling of interests
and Sports Authority has no reason to believe that the Merger will not qualify
for "pooling of interests" accounting.
(o) BROKERS. No broker, investment banker, financial advisor
or other person other xxxx Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
("Xxxxxxx Xxxxx"), the fees and expenses of which will be paid by Sports
Authority, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Sports Authority.
Sports Authority has furnished to Woolworth true and complete copies of all
agreements under which any such fees or expenses are payable and all
indemnification and other agreements related to the engagement of the persons to
whom such fees are payable.
(p) OPINION OF FINANCIAL ADVISOR. Sports Authority has
received the opinion of Xxxxxxx Xxxxx dated the date of this Agreement, to the
effect that, as of such date, the Exchange Ratio for the conversion of Sports
Authority Common Stock into Woolworth Common Stock is fair from a financial
point of view to holders of shares of Sports Authority Common Stock (other than
Woolworth and its affiliates), a signed copy of which opinion has been delivered
to Woolworth, it being understood and agreed by Woolworth that such opinion is
for the benefit of the Board of Directors of Sports Authority and may not be
relied upon by Woolworth, its affiliates or any of their respective
stockholders.
(q) OWNERSHIP OF WOOLWORTH COMMON STOCK. As of the date
hereof, neither Sports Authority nor, to its knowledge without independent
investigation, any of its affiliates, (i) beneficially owns (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, or (ii) is party to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of capital stock of Woolworth.
21
(r) INTELLECTUAL PROPERTY. Sports Authority and its
subsidiaries own or have a valid license to use all trademarks, service marks,
trade names, patents and copyrights (including any registrations or applications
for registration of any of the foregoing) (collectively, the "Sports Authority
Intellectual Property") necessary to carry on its business substantially as
currently conducted, except for such Sports Authority Intellectual Property the
failure of which to own or validly license individually or in the aggregate
would not have a material adverse effect on Sports Authority. Neither Sports
Authority nor any such subsidiary has received any notice of infringement of or
conflict with, and, to Sports Authority's knowledge, there are no infringements
of or conflicts (i) with the rights of others with respect to the use of, or
(ii) by others with respect to, any Sports Authority Intellectual Property that
individually or in the aggregate, in either such case, would have a material
adverse effect on Sports Authority.
(s) CERTAIN CONTRACTS. Except as set forth in the Sports
Authority Filed SEC Documents, neither Sports Authority nor any of its
subsidiaries is a party to or bound by (i) any "material contract" (as such term
is defined in Item 601(b)(10) of Regulation S-K of the SEC), (ii) any
non-competition agreement or any other agreement or obligation which purports to
limit in any material respect the manner in which, or the localities in which,
all or any material portion of the business of Sports Authority and its
subsidiaries (including, for purposes of this Section 3.1(s), Woolworth and its
subsidiaries, assuming the Merger has taken place), taken as a whole, is or
would be conducted, or (iii) any contract or other agreement which would
prohibit or materially delay the consummation of the Merger or any of the
transactions contemplated by this Agreement (all contracts of the type described
in clauses (i) and (ii) being referred to herein as "Sports Authority Material
Contracts"). Each Sports Authority Material Contract is valid and binding on
Sports Authority (or, to the extent a Sports Authority subsidiary is a party,
such subsidiary) and is in full force and effect, and Sports Authority and each
Sports Authority subsidiary have in all material respects performed all
obligations required to be performed by them to date under each Sports Authority
Material Contract, except where such noncompliance, individually or in the
aggregate, would not have a material adverse effect on Sports Authority. Neither
Sports Authority nor any Sports Authority subsidiary knows of, or has received
notice of, any material violation or material default under (nor, to the
knowledge of Sports Authority, does there exist any condition which with the
passage of time or the giving of notice or both would result in such a material
violation or material default under) any Sports Authority Material Contract,
PROVIDED, that for purposes of this sentence the term "material" shall mean
violations or defaults which would have an adverse impact of $5 million or more
in the aggregate
22
for all Material Contracts. With respect to Sports Authority contracts relating
to the lease of real property (whether or not such contracts constitute Sports
Authority Material Contracts, as defined herein), except as set forth in Section
3.1(s) of the Sports Authority Disclosure Schedule, the terms and conditions of
such Sports Authority contracts are not subject to a right of the lessor to
terminate or modify such contracts as a result of the consummation of the
Merger.
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF WOOLWORTH.
Except as disclosed in the Woolworth Filed SEC Documents (as defined in Section
3.2(g)) or as set forth on the Disclosure Schedule delivered by Woolworth to
Sports Authority prior to the execution of this Agreement (the "Woolworth
Disclosure Schedule") and making reference to the particular subsection of this
Agreement to which exception is being taken, Woolworth represents and warrants
to Sports Authority as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. (i) Each of
Woolworth and its subsidiaries (including Sub) is a corporation or
other legal entity duly organized, validly existing and in good
standing (with respect to jurisdictions which recognize such concept)
under the laws of the jurisdiction in which it is organized and has the
requisite corporate or other power, as the case may be, and authority
to carry on its business as now being conducted, except, as to
subsidiaries, for those jurisdictions where the failure to be so
organized, existing or in good standing individually or in the
aggregate would not have a material adverse effect on Woolworth. Each
of Woolworth and its subsidiaries is duly qualified or licensed to do
business and is in good standing (with respect to jurisdictions which
recognize such concept) in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties makes
such qualification or licensing necessary, except for those
jurisdictions where the failure to be so qualified or licensed or to be
in good standing individually or in the aggregate would not have a
material adverse effect on Woolworth.
(ii) Woolworth has delivered to Sports Authority prior to the
execution of this Agreement complete and correct copies of its
certificate of incorporation and by-laws, as amended to date.
(iii) Sub is a newly formed entity which has conducted no
business activities and incurred no liabilities other than incident to
its formation or pursuant to this Agreement.
23
(b) SUBSIDIARIES. Exhibit 21 to Woolworth's Annual Report on
Form 10-K for the fiscal year ended January 31, 1998 includes all the
subsidiaries of Woolworth which as of the date of this Agreement are Significant
Subsidiaries. Except as set forth in Section 3.2(b) of the Woolworth Disclosure
Schedule, all the outstanding shares of capital stock of, or other equity
interests in, each such Significant Subsidiary have been validly issued and are
fully paid and nonassessable and are owned directly or indirectly by Woolworth,
free and clear of all Liens and free of any other restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests).
(c) CAPITAL STRUCTURE. The authorized capital stock of
Woolworth consists of 500,000,000 shares of Woolworth Common Stock and 7,000,000
shares of preferred stock, par value $1.00 per share, of Woolworth ("Woolworth
Preferred Stock"). At the close of business on May 1, 1998: (i) 135,258,891
shares of Woolworth Common Stock were issued and outstanding; (ii) 19,350 shares
of Woolworth Common Stock were held by Woolworth in its treasury; (iii) no
shares of Woolworth Preferred Stock were issued and outstanding; (iv) 1,000,000
shares of Series B Participating Preferred Stock were reserved for issuance
pursuant to the Rights Agreement; and (v) 22,250,000 of Woolworth Common Stock
were reserved for issuance pursuant to the 1995 Stock Option and Award Plan, the
1986 Stock Option Plan, the Directors' Stock Plan and the 1994 Stock Purchase
Plan, complete and correct copies of which have been delivered to Sports
Authority (such plans, collectively, together with the 1998 Stock Option and
Award Plan which has been approved by the Woolworth Board of Directors, subject
to stockholder approval, and the Woolworth 401-K Plan, the "Woolworth Stock
Plans"). Section 3.2(c) of the Woolworth Disclosure Schedule sets forth a
complete and correct list, as of May 1, 1998, of the number of shares of
Woolworth Common Stock subject to employee stock options or other rights to
purchase or receive Woolworth Common Stock granted under the Woolworth Stock
Plans (collectively, "Woolworth Employee Stock Options"), the dates of grant and
exercise prices thereof. All outstanding shares of capital stock of Woolworth
are, and all shares which may be issued pursuant to this Agreement or otherwise
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as set forth in this
Section 3.2(c) and except for changes since May 1, 1998 resulting from the
issuance of shares of Woolworth Common Stock pursuant to the Woolworth Employee
Stock Options, as of the date hereof, (x) there are not issued, reserved for
issuance or outstanding (A) any shares of capital stock or other voting
securities of Woolworth, (B) any securities of Woolworth or any Woolworth
24
subsidiary convertible into or exchangeable or exercisable for shares of capital
stock or voting securities of Woolworth, (C) any warrants, calls, options or
other rights to acquire from Woolworth or any Woolworth subsidiary, and any
obligation of Woolworth or any Woolworth subsidiary to issue, any capital stock,
voting securities or securities convertible into or exchangeable or exercisable
for capital stock or voting securities of Woolworth, and (y) there are no
outstanding obligations of Woolworth or any Woolworth subsidiary to repurchase,
redeem or otherwise acquire any such securities or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities. As of the date
hereof, there are no outstanding (A) securities of Woolworth or any Woolworth
subsidiary convertible into or exchangeable or exercisable for shares of capital
stock or other voting securities or ownership interests in any Woolworth
subsidiary, (B) warrants, calls, options or other rights to acquire from
Woolworth or any Woolworth subsidiary, and any obligation of Woolworth or any
Woolworth subsidiary to issue, any capital stock, voting securities or other
ownership interests in, or any securities convertible into or exchangeable or
exercisable for any capital stock, voting securities or ownership interests in,
any Woolworth subsidiary or (C) obligations of Woolworth or any Woolworth
subsidiary to repurchase, redeem or otherwise acquire any such outstanding
securities of Woolworth subsidiaries or to issue, deliver or sell, or cause to
be issued, delivered or sold, any such securities. Neither Woolworth nor any
Woolworth subsidiary is a party to any agreement restricting the transfer of,
relating to the voting of, requiring registration of, or granting any preemptive
or, except as provided by the terms of the Woolworth Employee Stock Options,
antidilutive rights with respect to, any securities of the type referred to in
the two preceding sentences. The execution of this Agreement and the
consummation of the Merger will not constitute a Triggering Event (as defined in
the Rights Agreement) or result in a Distribution Date under Section 3(a) of
such Rights Agreement.
(d) AUTHORITY; NONCONTRAVENTION. Woolworth and Sub each has
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by each of Woolworth and Sub and the consummation by
each of Woolworth and Sub of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of
Woolworth and Sub. This Agreement has been duly executed and delivered by each
of Woolworth and Sub and, assuming the due authorization, execution and delivery
by Sports Authority, constitutes the legal, valid and binding obligations of
each of Woolworth and Sub, enforceable against each of Woolworth and Sub in
accordance with its terms. The execution and delivery of this Agreement does
not, and the consummation of the
25
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of a benefit under, or result in the creation of any Lien upon any of the
properties or assets of Woolworth or any of its subsidiaries (including Sub)
under, (i) the certificate of incorporation or by-laws of Woolworth or the
comparable organizational documents of any of its subsidiaries (including Sub),
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise, license or similar
authorization applicable to Woolworth or any of its subsidiaries (including Sub)
or their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Woolworth or any of its subsidiaries (including Sub) or their respective
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, violations, defaults, rights, losses or Liens that individually
or in the aggregate would not (x) have a material adverse effect on Woolworth or
(y) reasonably be expected to impair the ability of Woolworth to perform its
obligations under this Agreement. No consent, approval, order or authorization
of, action by, or in respect of, or registration, declaration or filing with,
any Governmental Entity is required by or with respect to Woolworth or any of
its subsidiaries (including Sub) in connection with the execution and delivery
of this Agreement by each of Woolworth or Sub or the consummation by Woolworth
and Sub of the transactions contemplated by this Agreement, except for (1) the
filing of a pre-merger notification and report form by Woolworth under the HSR
Act; (2) the filing with the SEC of (A) the Proxy Statement/Prospectus, (b) the
Form S-4 and (C) such reports under Section 13(a), 13(d), 15(d) or 16(a) of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated by this Agreement; (3) the filing of the Certificate
of Merger with the Secretary of State of Delaware and such filings with
Governmental Entities to satisfy the applicable requirements of state securities
or "blue sky" laws; (4) such filings with and approvals of the NYSE to permit
the shares of Woolworth Common Stock that are to be issued in the Merger and
under the Sports Authority Stock Plans to be listed on the NYSE; (5) filings, if
required, under the Competition Act of Canada; and (6) such consents, approvals,
orders or authorizations the failure of which to be made or obtained
individually or in the aggregate would not (x) have a material adverse effect on
Woolworth or (y) reasonably be expected to impair the ability of Woolworth to
perform its obligations under this Agreement.
26
(e) SEC DOCUMENTS; UNDISCLOSED LIABILITIES. Woolworth has
filed all required registration statements, prospectuses, reports, schedules,
forms, statements and other documents (including exhibits and all other
information incorporated therein) with the SEC since January 27, 1996 (the
"Woolworth SEC Documents"). As of their respective dates, the Woolworth SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Woolworth SEC
Documents, and none of the Woolworth SEC Documents when filed contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of Woolworth included in the Woolworth SEC Documents comply
as to form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of Woolworth and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except (i) as reflected in
such financial statements or in the notes thereto or (ii) for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, neither Woolworth nor any of its subsidiaries has any liabilities or
obligations of any nature which, individually or in the aggregate, would have a
material adverse effect on Woolworth.
(f) INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Woolworth specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) the Proxy
Statement/Prospectus will, at the date it is first mailed to Sports Authority's
stockholders or at the time of the Sports Authority Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Form S-4 and the Proxy Statement/Prospectus will comply as to
form in all material respects with the requirements of the Securities Act and
the Exchange Act and the rules and
27
regulations thereunder, except that no representation or warranty is made by
Woolworth with respect to statements made or incorporated by reference therein
based on information supplied by Sports Authority specifically for inclusion or
incorporation by reference in the Form S-4 or the Proxy Statement/Prospectus.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby, and except as permitted by Section 4.1(b), since January
31, 1998, Woolworth and its subsidiaries have conducted their business only in
the ordinary course or as disclosed in any Woolworth SEC Document filed since
such date and prior to the date hereof, and there has not been (i) any material
adverse change in Woolworth, (ii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to any of Woolworth's capital stock, (iii) any split, combination or
reclassification of any of Woolworth's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of Woolworth's capital stock, except for issuances
of Woolworth Common Stock upon exercise of Woolworth Employee Stock Options, in
each case, awarded prior to the date hereof in accordance with their present
terms or issued pursuant to Section 4.1(b), (iv) except insofar as may have been
disclosed in Woolworth SEC Documents filed and publicly available prior to the
date of this Agreement (as amended to the date hereof, the "Woolworth Filed SEC
Documents") or required by a change in GAAP, any change in accounting methods,
principles or practices by Woolworth materially affecting its assets,
liabilities or business, (v) except insofar as may have been disclosed in the
Woolworth Filed SEC Documents, any tax election that individually or in the
aggregate would have a material adverse effect on Woolworth or any of its tax
attributes or any settlement or compromise of any material income tax liability
or (vi), except as set forth in Section 3.2(g) of the Woolworth Disclosure
Schedule, any action taken by Woolworth or any of the Woolworth subsidiaries
during the period from January 31, 1998 through the date of this Agreement that,
if taken during the period from the date of this Agreement through the Effective
Time would constitute a breach of Section 4.1(b).
(h) COMPLIANCE WITH APPLICABLE LAWS; LITIGATION. (i)
Woolworth, its subsidiaries and employees hold all permits, licenses,
variances, exemptions, orders, registrations and approvals of all
Governmental Entities which are required for the operation of the
businesses of Woolworth and its subsidiaries (the "Woolworth Permits")
except where the failure to have any such Woolworth Permits
individually or in the aggregate would not have a material adverse
effect on Woolworth. Woolworth and its subsidiaries are in
28
compliance with the terms of the Woolworth Permits and all applicable
statutes, laws, ordinances, rules and regulations, except where the
failure so to comply individually or in the aggregate would not have a
material adverse effect on Woolworth. As of the date of this Agreement,
except as disclosed in the Woolworth Filed SEC Documents or as set
forth in Section 3.2(h) of the Woolworth Disclosure Schedule, no
action, demand, requirement or investigation by any Governmental Entity
and no suit, action or proceeding by any person, in each case with
respect to Woolworth or any of its subsidiaries or any of their
respective properties, is pending or, to the knowledge of Woolworth,
threatened, other than, in each case, those the outcome of which
individually or in the aggregate would not (A) have a material adverse
effect on Woolworth or (B) reasonably be expected to impair the ability
of Woolworth to perform its obligations under this Agreement or prevent
or materially delay the consummation of any of the transactions
contemplated by this Agreement.
(ii) Neither Woolworth nor any Woolworth subsidiary is subject
to any outstanding order, injunction or decree which has had or,
insofar as can be reasonably foreseen, individually or in the aggregate
will have a material adverse effect on Woolworth.
(i) ABSENCE OF CHANGES IN BENEFITS PLANS. Except as set forth
in Section 3.2(i) of the Woolworth Disclosure Schedule, since January 31, 1998,
there has not been any adoption or amendment in any material respect by
Woolworth or any of its subsidiaries of any collective bargaining agreement or
any material bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical or other plan, arrangement or understanding providing benefits to any
current or former employee, officer or director of Woolworth or any of its
wholly owned subsidiaries (collectively, the "Woolworth Benefit Plans"), or any
material change in any actuarial or other assumption used to calculate funding
obligations with respect to any Woolworth pension plans, or any material change
in the manner in which contributions to any Woolworth pension plans are made or
the basis on which such contributions are determined.
29
(j) ERISA COMPLIANCE
(i) With respect to the Woolworth Benefit Plans, no event has
occurred and, to the knowledge of Woolworth, there exists no condition
or set of circumstances, in connection with which Woolworth or any of
its subsidiaries could be subject to any liability that individually or
in the aggregate would have a material adverse effect on Woolworth
under ERISA, the Code or any other applicable law.
(ii) Each Woolworth Benefit Plan has been administered in
accordance with its terms, except for any failures so to administer any
Woolworth Benefit Plan that individually or in the aggregate would not
have a material adverse effect on Woolworth. Woolworth, its
subsidiaries and all the Woolworth Benefit Plans have been operated,
and are in compliance with the applicable provisions of ERISA, the Code
and all other applicable laws and the terms of all applicable
collective bargaining agreements, except for any failures to be in such
compliance that individually or in the aggregate would not have a
material adverse effect on Woolworth. Except as set forth in Section
3.2(j)(1) of the Woolworth Disclosure Schedule, each Woolworth Benefit
Plan that is intended to be qualified under Section 401(a) or 401(k) of
the Code has received a favorable determination letter from the IRS
that it is so qualified and each trust established in connection with
any Woolworth Benefit Plan that is intended to be exempt from federal
income taxation under Section 501(a) of the Code has received a
determination letter from the IRS that such trust is so exempt. To the
knowledge of Woolworth, no fact or event has occurred since the date of
any determination letter from the IRS which is reasonably likely to
affect adversely the qualified status of any such Woolworth Benefit
Plan or the exempt status of any such trust.
(iii) Neither Woolworth nor any of its ERISA Affiliates has
incurred any unsatisfied liability under Title IV of ERISA (other than
liability for premiums to the Pension Benefit Guaranty Corporation
arising in the ordinary course). No Woolworth Benefit Plan has incurred
an "accumulated funding deficiency" (within the meaning of Section 302
of ERISA or Section 412 of the Code) whether or not waived. To the
knowledge of Woolworth, there are not any facts or circumstances that
would materially change the funded status of any Woolworth Benefit Plan
that is a "defined benefit" plan (as defined in Section 3(35) of ERISA)
since the date of the most recent
30
actuarial report for such plan. No Woolworth Benefit Plan is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA.
(iv) With respect to each of the Woolworth Benefit Plans that
is subject to Title IV of ERISA, the present value of accrued benefits
under each such plan, based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared by such
plan's actuary with respect to such plan, did not, as of its latest
valuation date, exceed the then current value of the aggregate assets
of such plans allocable to such accrued benefits in any material
respect not reflected in the Woolworth SEC Documents.
(v) With respect to each Woolworth Benefit Plan which provides
medical benefits to former employees after retirement or other
termination of service, the amount of accrued postretirement benefit
obligation is reflected in all material respects in the Woolworth SEC
Documents.
(vi) Except as set forth in Section 3.2(j)(2) of the Woolworth
Disclosure Schedule, as of the date of this Agreement, neither
Woolworth nor any of its subsidiaries is a party to any collective
bargaining or other labor union contract applicable to persons employed
by Woolworth or any of its subsidiaries and no collective bargaining
agreement is being negotiated by Woolworth or any of its subsidiaries.
As of the date of this Agreement, there is no labor dispute, strike or
work stoppage against Woolworth or any of its subsidiaries pending or,
to the knowledge of Woolworth, threatened which may interfere with the
respective business activities of Woolworth or any of its subsidiaries,
except where such dispute, strike or work stoppage individually or in
the aggregate would not have a material adverse effect on Woolworth. As
of the date of this Agreement, to the knowledge of Woolworth, none of
Woolworth, any of its subsidiaries or any of their respective
representatives or employees has committed any material unfair labor
practice in connection with the operation of the respective businesses
of Woolworth or any of its subsidiaries, and there is no material
charge or complaint against Woolworth or any of its subsidiaries by the
National Labor Relations Board or any comparable governmental agency
pending or threatened in writing.
(vii) No employee of Woolworth will be entitled to any
material payment, additional benefits or any acceleration of the time
of
31
payment or vesting of any benefits under any Woolworth Benefit Plan as
a result of the transactions contemplated by this Agreement (either
alone or in conjunction with any other event such as a termination of
employment).
(k) TAXES. (i) Each of Woolworth and its subsidiaries has
filed all material tax returns and reports required to be filed by it
and all such returns and reports are complete and correct in all
material respects, or requests for extensions to file such returns or
reports have been timely filed, granted and have not expired, except to
the extent that such failures to file, to be complete or correct or to
have extensions granted that remain in effect individually or in the
aggregate would not have a material adverse effect on Woolworth.
Woolworth and each of its subsidiaries has paid (or Woolworth has paid
on its behalf) all taxes shown as due on such returns, and the most
recent financial statements contained in the Woolworth Filed SEC
Documents reflect an adequate reserve in accordance with GAAP for all
taxes payable by Woolworth and its subsidiaries for all taxable periods
and portions thereof accrued through the date of such financial
statements.
(ii) No deficiencies for any taxes have been proposed,
asserted or assessed against Woolworth or any of its subsidiaries that
are not adequately reserved for, except for deficiencies that
individually or in the aggregate would not have a material adverse
effect on Woolworth. The federal income tax returns of Woolworth and
each of its subsidiaries consolidated in such returns for tax years
through January 1991 have closed by virtue of the applicable statute of
limitations.
(iii) Neither Woolworth nor any of its subsidiaries has taken
any action or knows of any fact, agreement, plan or other circumstance
that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(l) VOTING REQUIREMENTS. Assuming the accuracy of the
representations of Sports Authority set forth in Section 3.1(c) hereof, no vote
of the holders of shares of Woolworth Common Stock is necessary to approve, in
accordance with the applicable rules of the NYSE, the issuance of Woolworth
Common Stock pursuant to the Merger.
(m) ACCOUNTING MATTERS. To its knowledge, neither Woolworth
nor any of its affiliates (as such term is used in Section 5.11) has taken or
agreed to take
32
any action that would prevent the business combination to be effected by the
Merger from being accounted for as a pooling of interests and has no reason to
believe that the Merger will not qualify for "pooling of interest" accounting.
(n) BROKERS. No broker, investment banker, financial advisor
or other person, other than Xxxxxx Xxxxxxx & Co. Incorporated ("Xxxxxx
Xxxxxxx"), the fees and expenses of which will be paid by Woolworth, is entitled
to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Woolworth.
(o) OPINION OF FINANCIAL ADVISOR. Woolworth has received the
opinion of Xxxxxx Xxxxxxx, dated the date of this Agreement, to the effect that,
as of such date, the Exchange Ratio for the conversion of Sports Authority
Common Stock into Woolworth Common Stock is fair from a financial point of view
to Woolworth, a signed copy of which opinion has been delivered to Sports
Authority, it being understood and agreed by Sports Authority that such opinion
is for the benefit of the Board of Directors of Woolworth and may not be relied
upon by Sports Authority, its affiliates or any of their respective
stockholders.
(p) OWNERSHIP OF SPORTS AUTHORITY COMMON STOCK. As of the date
hereof, neither Woolworth nor, to its knowledge without independent
investigation, any of its affiliates, (i) beneficially owns (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, or (ii) is party to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of capital stock of Sports
Authority.
(q) CERTAIN CONTRACTS. Neither Woolworth nor any of its
subsidiaries is a party to or bound by (i) any non-competition agreement or any
other agreement or obligation which purports to limit in any material respect
the manner in which, or the localities in which, all or any material portion of
the business of Sports Authority, is or would be conducted, or (ii) any contract
or other agreement which would prohibit or materially delay the consummation of
the Merger or any of the transactions contemplated by this Agreement.
33
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 CONDUCT OF BUSINESS. (a) CONDUCT OF BUSINESS BY
SPORTS AUTHORITY. Except as set forth in Section 4.1(a) of the Sports Authority
Disclosure Schedule, as otherwise expressly contemplated by this Agreement or as
consented to by Woolworth in writing, such consent not to be unreasonably
withheld or delayed, during the period from the date of this Agreement to the
Effective Time, Sports Authority shall, and shall cause its subsidiaries to,
carry on their respective businesses in the ordinary course consistent with past
practice and in compliance in all material respects with all applicable laws and
regulations and, to the extent consistent therewith, use all reasonable efforts
to preserve intact their current business organizations, use reasonable efforts
to assist Woolworth in keeping available the services of Sports Authority's
current officers and other key employees and to refrain from taking any actions
which would have a negative impact on such efforts, and use reasonable efforts
to preserve their relationships with those persons having business dealings with
them to the end that their goodwill and ongoing businesses shall be unimpaired
at the Effective Time. Without limiting the generality of the foregoing (but
subject to the above exceptions), during the period from the date of this
Agreement to the Effective Time, Sports Authority shall not, and shall not
permit any of its subsidiaries to:
(i) other than dividends and distributions by a direct or
indirect wholly owned subsidiary of Sports Authority to its parent, or
by a subsidiary that is partially owned by Sports Authority or any of
its subsidiaries, PROVIDED that Sports Authority or any such subsidiary
receives or is to receive its proportionate share thereof, (x) declare,
set aside or pay any dividends on, make any other distributions in
respect of, or enter into any agreement with respect to the voting of,
any of its capital stock, (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock, except for issuances of Sports Authority Common
Stock upon conversion of Sports Authority Convertible Securities or
upon the exercise of Sports Authority Employee Stock Options, in each
case, outstanding as of the date hereof in accordance with their
present terms, or (z) purchase, redeem or otherwise acquire any shares
of capital stock of Sports Authority or any of its subsidiaries or any
other securities thereof or any rights, warrants or options to acquire
any such shares or other securities;
34
(ii) except as set forth in Section 4.1(a)(ii) of the Sports
Authority Disclosure Schedule, issue, deliver, sell, pledge or
otherwise encumber or subject to any Lien any shares of its capital
stock, any other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities (other than (x) the issuance of
Sports Authority Common Stock upon conversion of Sports Authority
Convertible Securities in accordance with their present terms at the
option of the holders thereof, and (y) the issuance of Sports Authority
Common Stock upon the exercise of Sports Authority Employee Stock
Options, in each case, outstanding as of the date hereof in accordance
with their present terms);
(iii) amend its certificate of incorporation, by-laws or other
comparable organizational documents;
(iv) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
any other manner, any business or any person;
(v) subject to compliance with Section 5.14, sell, lease,
license, mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets (including
securitizations), other than in the ordinary course of business
consistent with past practice;
(vi) except for borrowings under existing lines of credit,
incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for the obligations of any person for borrowed
money;
(vii) authorize, or commit or agree to take, any of the
foregoing actions; or
(viii) take any action which would be reasonably likely to
interfere with Woolworth's ability to account for the Merger as a
pooling of interests;
35
PROVIDED that the limitations set forth in this Section 4.1(a) (other than
clause (iii)) shall not apply to any transaction between Sports Authority and
any wholly owned subsidiary or between any wholly owned subsidiaries of Sports
Authority.
(b) CONDUCT OF BUSINESS BY WOOLWORTH. Except as set forth in
Section 4.1(b) of the Woolworth Disclosure Schedule, as otherwise expressly
contemplated by this Agreement or as consented to by Sports Authority in
writing, such consent not to be unreasonably withheld or delayed, during the
period from the date of this Agreement to the Effective Time, Woolworth shall,
and shall cause its subsidiaries to, carry on their respective businesses in the
ordinary course consistent with past practice and in compliance in all material
respects with all applicable laws and regulations and, to the extent consistent
therewith, use all reasonable efforts to preserve intact their current business
organizations, use reasonable efforts to keep available the services of their
current officers and other key employees and preserve their relationships with
those persons having business dealings with them to the end that their goodwill
and ongoing businesses shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing (but subject to the above exceptions),
during the period from the date of this Agreement to the Effective Time,
Woolworth shall not, and shall not permit any of its subsidiaries to:
(i) other than dividends and distributions by a direct or
indirect wholly owned subsidiary of Woolworth to its parent, or by a
subsidiary that is partially owned by Woolworth or any of its
subsidiaries, PROVIDED that Woolworth or any such subsidiary receives
or is to receive its proportionate share thereof, declare, set aside or
pay any dividends on, make any other distributions in respect of, or
enter into any agreement with respect to the voting of, any of its
capital stock, other than reasonable quarterly dividends on Woolworth
Common Stock if the Board of Directors of Woolworth shall so determine;
(ii) except as contemplated hereby, amend its certificate of
incorporation;
(iii) authorize, or commit or agree to take, any of the
foregoing actions;
PROVIDED that the limitations set forth in this Section 4.1(b) shall not apply
to any transaction between Woolworth and any wholly owned subsidiary or between
any wholly owned subsidiaries of Woolworth. Notwithstanding anything herein to
the
36
contrary, the Board of Directors of Woolworth shall, pursuant to its fiduciary
duties, be permitted to authorize the acquisition or disposition of the
Company's assets, subsidiaries or businesses as it deems appropriate, PROVIDED
that Woolworth will not enter into any agreement to acquire all or substantially
all of the capital stock or assets of any other person or business unless upon
advice of counsel such transaction would not reasonably be expected to prevent,
materially delay or impede the consummation of the Merger.
(c) OTHER ACTIONS. Except as required by law, Sports Authority
and Woolworth shall not, and shall not permit any of their respective
subsidiaries to, voluntarily take any action that would, or that could
reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement that are qualified as to
materiality becoming untrue at the Effective Time, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect at the Effective Time, or (iii) any of the conditions to the
Merger set forth in Article VI not being satisfied. Woolworth will not take any
action which would be reasonably likely to interfere with Woolworth's ability to
account for the Merger as a pooling of interests.
(d) ADVICE OF CHANGES. Sports Authority and Woolworth shall
promptly advise the other party orally and in writing to the extent it has
knowledge of (i) any representation or warranty made by it contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect, (ii) the failure by it to
comply in any material respect with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement and (iii) any change or event having, or which, insofar as can
reasonably be foreseen, could reasonably be expected to have a material adverse
effect on such party or on the truth of their respective representations and
warranties or the ability of the conditions set forth in Article VI to be
satisfied; PROVIDED, HOWEVER, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties (or remedies
with respect thereto) or the conditions to the obligations of the parties under
this Agreement.
SECTION 4.2 NO SOLICITATION BY SPORTS AUTHORITY. (a) Sports
Authority shall not, nor shall it permit any of its subsidiaries to, nor shall
it authorize or permit any of its directors, officers or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, directly or
indirectly through another person, (i) solicit, initiate or
37
encourage (including by way of furnishing information), or take any other action
designed to facilitate, any inquiries or the making of any proposal which
constitutes any Sports Authority Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding any Sports Authority
Takeover Proposal; PROVIDED, HOWEVER, that if the Board of Directors of Sports
Authority determines in good faith, based on the advice of outside counsel, that
it is necessary to do so in order to act in a manner consistent with its
fiduciary duties to Sports Authority's stockholders under applicable law, Sports
Authority may, in response to a Sports Authority Superior Proposal (as defined
in Section 4.2(b)) which was not solicited by it, which did not otherwise result
from a breach of this Section 4.2(a) and which is made or received prior to the
obtaining of the Sports Authority Stockholder Approval, and subject to providing
prior written notice of its decision to take such action to Woolworth and
compliance with Section 4.2(c), (x) furnish information with respect to Sports
Authority and its subsidiaries to any person making a Sports Authority Superior
Proposal pursuant to a customary confidentiality agreement (as determined by
Sports Authority based on the advice of its outside counsel, the terms of which
are no more favorable to such person than the Confidentiality Agreement (as
defined herein)) and (y) participate in discussions or negotiations regarding
such Sports Authority Superior Proposal. For purposes of this Agreement, "Sports
Authority Takeover Proposal" means any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of a business
that constitutes 10% or more of the net revenues, net income or the assets of
Sports Authority and its subsidiaries, taken as a whole, or 10% or more of any
equity securities of Sports Authority, any tender offer or exchange offer that
if consummated would result in any person beneficially owning any equity
securities of Sports Authority, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Sports Authority (or any Sports Authority subsidiary whose business
constitutes 10% or more of the net revenues, net income or the assets of Sports
Authority and its subsidiaries, taken as whole) or the Sports Authority Common
Stock, other than the transactions contemplated by this Agreement.
(b) Except as expressly permitted by this Section 4.2, neither
the Board of Directors of Sports Authority nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Woolworth, the approval or recommendation by such Board of Directors
or such committee of the Merger or this Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Sports Authority Takeover
Proposal, or (iii) cause Sports Authority to enter into any letter of intent,
agreement in principle,
38
acquisition agreement or other similar agreement (each, an "Sports Authority
Acquisition Agreement") related to any Sports Authority Takeover Proposal.
Notwithstanding the foregoing, at any time prior to the obtaining of the Sports
Authority Stockholder Approval, the Board of Directors of Sports Authority, to
the extent that it determines in good faith, based upon the advice of outside
counsel, that it is necessary to do so in order to act in a manner consistent
with its fiduciary duties to Sports Authority's stockholders under applicable
law, may (subject to this and the following sentences) terminate this Agreement
solely in order to concurrently enter into a Sports Authority Acquisition
Agreement with respect to any Sports Authority Superior Proposal, but only at a
time that is after the fifth business day following Woolworth's receipt of
written notice advising Woolworth that the Board of Directors of Sports
Authority is prepared to accept a Sports Authority Superior Proposal, specifying
the material terms and conditions of such Sports Authority Superior Proposal and
identifying the person making such Sports Authority Superior Proposal, all of
which information shall be kept confidential by Woolworth. For purposes of this
Agreement, an "Sports Authority Superior Proposal" means any bona fide proposal
made by a third party to acquire, directly or indirectly, including pursuant to
a tender offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Sports Authority Common Stock then
outstanding or all or substantially all the assets of Sports Authority and
otherwise on terms which the Board of Directors of Sports Authority determines
in its good faith judgment (based on the advice of a financial advisor of
nationally recognized reputation) to be more favorable to Sports Authority's
stockholders than the Merger and for which financing, to the extent required, is
then committed or which, in the good faith judgment of the Board of Directors of
Sports Authority based on the advice of its financial advisor, is reasonably
capable of being obtained by such third party.
(c) In addition to the obligations of Sports Authority set
forth in paragraphs (a) and (b) of this Section 4.2, Sports Authority shall
immediately advise Woolworth orally and in writing of any request for
information or of any Sports Authority Takeover Proposal, the material terms and
conditions of such request or Sports Authority Takeover Proposal and the
identity of the person making such request or Sports Authority Takeover
Proposal. Sports Authority will keep Woolworth reasonably informed of the status
and details (including amendments or proposed amendments) of any such request or
Sports Authority Takeover Proposal.
39
(d) Nothing contained in this Section 4.2 shall prohibit
Sports Authority from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to Sports Authority's stockholders if, in the good faith judgment
of the Board of Directors of Sports Authority, after consultation with outside
counsel, failure so to disclose would be inconsistent with its obligations under
applicable law.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 PREPARATION OF THE FORM S-4 AND THE PROXY
STATEMENT/PROSPECTUS; STOCKHOLDERS MEETING . (a) As soon as practicable
following the date of this Agreement, Sports Authority and Woolworth shall
prepare and file with the SEC the Proxy Statement/Prospectus and Woolworth shall
prepare and file with the SEC the Form S-4, in which the Proxy
Statement/Prospectus will be included as a prospectus. Each of Sports Authority
and Woolworth shall use reasonable best efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such filing.
Sports Authority will use all reasonable best efforts to cause the Proxy
Statement/Prospectus to be mailed to Sports Authority's stockholders as promptly
as practicable after the Form S-4 is declared effective under the Securities
Act. Woolworth shall also take any action (other than qualifying to do business
in any jurisdiction in which it is not now so qualified or to file a general
consent to service of process) required to be taken under any applicable state
securities laws in connection with the issuance of Woolworth Common Stock in the
Merger and Sports Authority shall furnish all information concerning Sports
Authority and the holders of Sports Authority Common Stock as may be reasonably
requested in connection with any such action. No filing of, or amendment or
supplement to, the Form S-4 or the Proxy Statement/Prospectus will be made by
Woolworth without providing Sports Authority the opportunity to review and
comment thereon. Woolworth will advise Sports Authority, promptly after it
receives notice thereof, of the time when the Form S-4 has become effective or
any supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the Woolworth Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement/Prospectus or the Form
S-4 or comments thereon and responses thereto or requests by the SEC for
additional information. If at any time prior to the Effective Time any
information relating to Sports Authority or
40
Woolworth, or any of their respective affiliates, officers or directors, should
be discovered by Sports Authority or Woolworth which should be set forth in an
amendment or supplement to any of the Form S-4 or the Proxy
Statement/Prospectus, so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other parties hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to the
extent required by law, disseminated to the stockholders of Sports Authority and
Woolworth.
(b) Sports Authority shall, as promptly as practicable after
the Form S-4 is declared effective under the Securities Act, duly call, give
notice of, convene and (subject to the provisions of this Section 5.1(b)) hold a
meeting of its stockholders (the "Sports Authority Stockholders Meeting") in
accordance with the DGCL for the purpose of obtaining the Sports Authority
Stockholder Approval and, subject to its rights to terminate this Agreement
pursuant to Section 4.2(b), shall, through its Board of Directors, recommend to
its stockholders the approval and adoption of this Agreement, the Merger and the
other transactions contemplated hereby. The average of the closing price on the
NYSE for the Woolworth Common Stock for the twenty (20) consecutive trading days
prior to the third business day prior to the scheduled date of the Sports
Authority Stockholders Meeting (the "Measuring Period") is referred to as the
"Woolworth Average Price." If, during the Measuring Period for the Sports
Authority Stockholders Meeting as originally scheduled, the Woolworth Average
Price is less than $20.50, Sports Authority (by 5:00 p.m. eastern time on the
second business day prior to the scheduled date of such meeting) shall give
notice to Woolworth as to whether it intends to terminate the Agreement pursuant
to Section 7.1(f) or adjourn such meeting for 30 days. If Sports Authority
elects to terminate the Agreement pursuant to Section 7.1(f) (an "Election"),
Woolworth can rescind such Election (a "Rescission") by giving notice (by 5:00
p.m. eastern time on the business day prior to the scheduled date of such
meeting) that Woolworth elects to cause Sports Authority to adjourn such meeting
for 30 days (the "Adjournment Period"). The process set forth in the preceding
sentence will be followed with respect to the first adjourned meeting date and
each successive adjourned meeting date thereafter, and provided that revised
record dates will be established to the extent required by the DGCL and the
rules of the NYSE and appropriate notice and disclosure will be sent to the
stockholders of Sports Authority. If an Adjournment Period established pursuant
to the preceding two sentences would establish an adjourned meeting date after
January 1, 1999, the Adjournment Period will be
41
truncated, to the extent permitted by law and regulation, so that the Sports
Authority Stockholders Meeting will be held on December 31, 1998. Without
limiting the generality of the foregoing but subject to its rights to terminate
this Agreement pursuant to Section 4.2(b), Sports Authority agrees that its
obligations pursuant to this Section 5.1(b) shall not be affected by the
commencement, public proposal, public disclosure or communication to Sports
Authority of any Sports Authority Takeover Proposal.
SECTION 5.2 LETTERS OF SPORTS AUTHORITY'S ACCOUNTANTS. (a)
Sports Authority shall use reasonable best efforts to cause to be delivered to
Woolworth two letters from Sports Authority's independent accountants, one dated
a date within two business days before the date on which the Form S-4 shall
become effective and one dated a date within two business days before the
Closing Date, each addressed to Woolworth, in form and substance reasonably
satisfactory to Woolworth and customary in scope and substance for comfort
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
(b) Sports Authority shall use reasonable best efforts to
cause to be delivered to Woolworth and Woolworth's accountants a letter from
Sports Authority's independent accountants addressed to Woolworth and Sports
Authority, dated as of the date the Form S-4 is declared effective and as of the
Closing Date, stating that accounting for the Merger as a pooling of interests
under Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations is appropriate if the Merger is closed and consummated as
contemplated by this Agreement.
SECTION 5.3 LETTERS OF WOOLWORTH'S ACCOUNTANTS. (a) Woolworth
shall use reasonable best efforts to cause to be delivered to Sports Authority
two letters from Woolworth's independent accountants, one dated a date within
two business days before the date on which the Form S-4 shall become effective
and one dated a date within two business days before the Closing Date, each
addressed to Sports Authority, in form and substance reasonably satisfactory to
Sports Authority and customary in scope and substance for comfort letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4.
(b) Woolworth shall use reasonable best efforts to cause to be
delivered to Sports Authority and Sports Authority's accountants a letter from
Woolworth's independent accountants, addressed to Sports Authority and
Woolworth, dated as of the date the Form S-4 is declared effective and as of the
Closing
42
Date, stating that accounting for the Merger as a pooling of interests under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations is appropriate if the Merger is closed and consummated as
contemplated by this Agreement.
SECTION 5.4 ACCESS TO INFORMATION; CONFIDENTIALITY. Subject to
the Confidentiality Agreement dated June 6, 1997, as supplemented pursuant to
the Letter Agreement dated April 14, 1998, between Woolworth and Sports
Authority (the "Confidentiality Agreement"), and subject to restrictions
contained in confidentiality agreements to which such party is subject (which
such party will use its reasonable best efforts to have waived) and applicable
law, each of Sports Authority and Woolworth shall, and shall cause each of its
respective subsidiaries to, afford to the other party and to the officers,
employees, accountants, counsel, financial advisors and other representatives of
such other party, reasonable access during normal business hours during the
period prior to the Effective Time to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, each of
Sports Authority and Woolworth shall, and shall cause each of its respective
subsidiaries to, furnish promptly to the other party (a) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of federal or state securities laws and (b)
all other information concerning its business, properties and personnel as such
other party may reasonably request. No review pursuant to this Section 5.4 shall
affect any representation or warranty given by the other party hereto. Each of
Sports Authority and Woolworth will hold, and will cause its respective
officers, employees, accountants, counsel, financial advisors and other
representatives and affiliates to hold, any nonpublic information in accordance
with the terms of the Confidentiality Agreement.
SECTION 5.5 REASONABLE BEST EFFORTS. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement, including (i) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings and the taking of all steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
43
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated by this Agreement, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed, and (iv) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. Nothing
set forth in this Section 5.5(a) will limit or affect actions permitted to be
taken pursuant to Section 4.2.
(b) In connection with and without limiting the foregoing,
Sports Authority and Woolworth shall (i) take all action necessary to ensure
that no state takeover statute or similar statute or regulation is or becomes
applicable to the Merger, this Agreement, or any of the other transactions
contemplated by this Agreement and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to the Merger, this Agreement, or any
other transaction contemplated by this Agreement, take all action necessary to
ensure that the Merger and the other transactions contemplated by this Agreement
may be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger and the other transactions contemplated by this Agreement.
SECTION 5.6 STOCK OPTIONS. (a) As of the Effective Time, (i)
each outstanding Sports Authority Employee Stock Option shall be converted into
an option (an "Adjusted Option") to purchase the number of shares of Woolworth
Common Stock equal to the number of shares of Sports Authority Common Stock
subject to such Sports Authority Employee Stock Option immediately prior to the
Effective Time multiplied by the Exchange Ratio (rounded to the nearest whole
number of shares of Woolworth Common Stock), at an exercise price per share
equal to the exercise price for each such share of Sports Authority Common Stock
subject to such option divided by the Exchange Ratio (rounded down to the
nearest whole cent), and all references in each such option to Sports Authority
shall be deemed to refer to Woolworth, where appropriate; PROVIDED, HOWEVER,
that the adjustments provided in this clause (i) with respect to any options
which are "incentive stock options" (as defined in Section 422 of the Code) or
which are described in Section 423 of the Code, shall be affected in a manner
consistent with the requirements of Section 424(a) of the Code, and (ii)
Woolworth shall assume the obligations of Sports Authority under the Sports
Authority Stock Plans. The other terms of each Adjusted Option, and the plans or
agreements under which they were issued, shall
44
continue to apply in accordance with their terms. The date of grant of each
Adjusted Option shall be the date on which the corresponding Sports Authority
Employee Stock Option was granted.
(b) Sports Authority agrees that each of the Sports Authority
Stock Plans shall be amended, to the extent necessary, to reflect the
transactions contemplated by this Agreement, including, but not limited to the
conversion of shares of Sports Authority Common Stock held or to be awarded or
paid pursuant to such benefit plans, programs or arrangements into shares of
Woolworth Common Stock on a basis consistent with the transactions contemplated
by this Agreement. Sports Authority agrees to submit the amendments to the
Sports Authority Stock Plans to its stockholders, if such submission is
determined to be necessary by counsel to Sports Authority or Woolworth after
consultation with one another; PROVIDED, HOWEVER, that such approval shall not
be a condition to the consummation of the Merger.
(c) Woolworth shall (i) reserve for issuance the number of
shares of Woolworth Common Stock that will become subject to the benefit plans,
programs and arrangements referred to in this Section 5.6 and (ii) issue or
cause to be issued the appropriate number of shares of Woolworth Common Stock
pursuant to applicable plans, programs and arrangements, upon the exercise or
maturation of rights existing thereunder on the Effective Time or thereafter
granted or awarded. No later than the Effective Time, Woolworth shall prepare
and file with the SEC a registration statement on Form S-8 (or other appropriate
form) registering a number of shares of Woolworth Common Stock necessary to
fulfill Woolworth' obligations under this Section 5.6. Such registration
statement shall be kept effective (and the current status of the prospectus
required thereby shall be maintained) for at least as long as Adjusted Options
remain outstanding.
(d) As soon as practicable after the Effective Time, Woolworth
shall deliver to the holders of Sports Authority Employee Stock Options
appropriate notices setting forth such holders' rights pursuant to the
respective Sports Authority Stock Plans and the agreements evidencing the grants
of such Sports Authority Employee Stock Options and that such Sports Authority
Employee Stock Options and the related agreements shall be assumed by Woolworth
and shall continue in effect on the same terms and conditions (subject to the
adjustments required by this Section after giving effect to the Merger).
(e) Woolworth acknowledges that, for purposes of the Sports
Authority Benefit Plans other than those listed on Schedule 5.6(e) of the Sports
45
Authority Disclosure Schedule, the approval by the Sports Authority shareholders
of this Agreement shall constitute a "change in control" of Sports Authority.
SECTION 5.7 INDEMNIFICATION, EXCULPATION AND INSURANCE. (a)
Woolworth agrees to maintain in effect in accordance with their terms all rights
to indemnification and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time now existing in favor of the current
or former directors or officers of Sports Authority and its subsidiaries as
provided in their respective certificates of incorporation or by-laws (or
comparable organizational documents) and any indemnification agreements of
Sports Authority. In addition, from and after the Effective Time, directors and
officers of Sports Authority who become directors or officers of Woolworth will
be entitled to the same indemnity rights and protections as are afforded to
other directors and officers of Woolworth.
(b) In the event that Woolworth or any of its successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person, then, and in each such case, proper provision will be made so
that the successors and assigns of Woolworth assume the obligations set forth in
this Section 5.8.
(c) For four (4) years after the Effective Time, Woolworth
shall provide to Sports Authority's current directors and officers liability
insurance covering acts or omissions occurring prior to the Effective Time with
respect to those persons who are currently covered by Sports Authority's
directors' and officers' liability insurance policy on terms with respect to
such coverage and amount no less favorable than those of such policy in effect
on the date hereof, PROVIDED that in no event shall Woolworth be required to
expend more than 200% of the current amount expended by Sports Authority to
maintain such coverage.
(d) The provisions of this Section 5.8 (i) are intended to be
for the benefit of, and will be enforceable by, each indemnified party, his or
her heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 5.8 FEES AND EXPENSES. (a) Except as provided in this
Section 5.8, all fees and expenses incurred in connection with the Merger, this
46
Agreement, and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated.
(b) In the event that (i) (A) a Sports Authority Takeover
Proposal shall have been made known to Sports Authority or any of its
subsidiaries or has been made directly to its stockholders generally or any
person shall have publicly announced an intention (whether or not conditional)
to make a Sports Authority Takeover Proposal, (B) thereafter this Agreement is
terminated by either Woolworth or Sports Authority pursuant to Section 7.1(b)(i)
or 7.1(b)(ii) and (C) either (x) the Board of Directors of Sports Authority, or
a committee thereof, has prior to such termination withdrawn or modified in a
manner adverse to Woolworth the approval or recommendation by such Board or
committee of the Merger or this Agreement or (y) within the year following the
termination, Sports Authority enters into an agreement providing for in excess
of 25% of the equity or 50% of the assets of Sports Authority to be acquired by
another party, or (ii) this Agreement is terminated by Sports Authority pursuant
to Section 7.1(e), then Sports Authority shall promptly, but in no event later
than two days after the date of such termination, pay Woolworth a fee equal to
$8.5 million (the "Termination Fee"), payable by wire transfer of same day
funds. Sports Authority acknowledges that the agreements contained in this
Section 5.8(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Woolworth would not enter into
this Agreement; accordingly, if Sports Authority fails promptly to pay the
amount due pursuant to this Section 5.8(b), and, in order to obtain such
payment, Woolworth commences a suit which results in a judgment against Sports
Authority for the fee set forth in this Section 5.8(b), Sports Authority shall
pay to Woolworth its costs and expenses (including attorneys' fees and expenses)
in connection with such suit, together with interest on the amount of the fee at
the rate on six-month U.S. Treasury obligations plus 300 basis points in effect
on the date such payment was required to be made.
SECTION 5.9 PUBLIC ANNOUNCEMENTS. Woolworth and Sports
Authority will consult with each other before issuing, and provide each other
the opportunity to review, comment upon and concur with and use reasonable
efforts to agree on, any press release or other public statements with respect
to the transactions contemplated by this Agreement, including the Merger, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as either party may determine is required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange. The parties agree that the
initial press release to be issued with respect to the transac-
47
tions contemplated by this Agreement shall be in the form heretofore agreed to
by the parties.
SECTION 5.10 AFFILIATES. (a) As soon as practicable after the
date hereof, Sports Authority shall deliver to Woolworth a letter identifying
all persons who are, at the time this Agreement is submitted for adoption by the
stockholders of Sports Authority, "affiliates" of Sports Authority for purposes
of Rule 145 under the Securities Act or for purposes of qualifying the Merger
for pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations, and such list shall
be updated as necessary to reflect changes from the date hereof. Sports
Authority shall use reasonable best efforts to cause each person identified on
such list to deliver to Woolworth not less than 30 days prior to the Effective
Time, a written agreement substantially in the form attached as Exhibit A
hereto.
(b) Woolworth shall publish no later than 45 days after the
end of the first month after the Effective Time in which there are at least 30
days of post Merger combined operations (which month may be the month in which
the Effective Time occurs), combined sales and net income figures as
contemplated by and in accordance with the terms of SEC Accounting Series
Release No. 135.
SECTION 5.11 NYSE LISTING. Woolworth shall use reasonable best
efforts to cause the Woolworth Common Stock issuable under Article II and upon
exercise of Adjusted Options pursuant to Section 5.6 to be approved for listing
on the NYSE, subject to official notice of issuance, as promptly as practicable
after the date hereof, and in any event prior to the Closing Date.
SECTION 5.12 STOCKHOLDER LITIGATION. Each of Sports Authority
and Woolworth shall give the other the reasonable opportunity to participate in
the defense of any stockholder litigation against Sports Authority or Woolworth,
as applicable, and its directors relating to the transactions contemplated by
this Agreement.
SECTION 5.13 TAX TREATMENT. Each of Woolworth and Sports
Authority shall use reasonable best efforts to cause the Merger to qualify as a
reorganization under the provisions of Section 368 of the Code and to obtain the
opinions of counsel referred to in Sections 6.2(c) and 6.3(c).
48
SECTION 5.14 POOLING OF INTERESTS. Each of Sports Authority
and Woolworth shall use reasonable best efforts to cause the transactions
contemplated by this Agreement, including the Merger, to be accounted for as a
pooling of interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations, and such accounting treatment to be
accepted by the SEC, and each of Sports Authority and Woolworth agrees that it
shall take no action that would cause such accounting treatment not to be
obtained.
SECTION 5.15 STANDSTILL AGREEMENTS; CONFIDENTIALITY
AGREEMENTS. During the period from the date of this Agreement through the
Effective Time, Sports Authority shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to which it or any of
its respective subsidiaries is a party. During such period, Sports Authority
shall enforce, to the fullest extent permitted under applicable law, the
provisions of any such agreement, including by obtaining injunctions to prevent
any breaches of such agreements and to enforce specifically the terms and
provisions thereof in any court of the United States of America or of any state
having jurisdiction.
SECTION 5.16 CONVEYANCE TAXES. Woolworth and Sports Authority
shall cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees or any similar taxes
which become payable in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on or before the Effective
Time. Woolworth shall pay, and Sports Authority shall pay, without deduction or
withholding from any amount payable to the holders of Sports Authority Common
Stock, any such taxes or fees imposed by any Governmental Entity (and any
penalties and interest with respect to such taxes and fees), which become
payable in connection with the transactions contemplated by this Agreement, on
behalf of their respective stockholders.
SECTION 5.17 SPORTS AUTHORITY CONVERTIBLE NOTES. From and
after the date hereof and prior to the Effective Time, each of Woolworth or
Sports Authority, as applicable, shall take such actions (including entering
into supplemental indentures) with respect to the notes of Sports Authority
issued under the Indenture between Sports Authority and The Bank of New York,
dated September 20, 1996, relating to Sports Authority's 5.25% Convertible
Subordinated Notes due 2001, to implement the provisions of such Indenture
necessary in connection with the Merger, including to provide that such notes
shall be convertible into shares of
00
Xxxxxxxxx Xxxxxx Stock and not Sports Authority Common Stock, as adjusted, from
and after the Effective Time.
SECTION 5.18 SPORTS AUTHORITY HEADQUARTERS. Until the second
anniversary of the Effective Time, the headquarters of Sports Authority will be
maintained within 25 miles of its current location.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) STOCKHOLDER APPROVAL. The Sports Authority Stockholder
Approval shall have been obtained.
(b) HSR ACT. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c) GOVERNMENTAL AND REGULATORY APPROVALS. Other than the
filing provided for under Section 1.3 and filings pursuant to the HSR Act (which
are addressed in Section 6.1(b)), all consents, approvals and actions of,
filings with and notices to any Governmental Entity required of Sports
Authority, Woolworth or any of their subsidiaries to consummate the Merger and
the other transactions contemplated hereby, the failure of which to be obtained
or taken (i) is reasonably expected to have a material adverse effect on the
Surviving Corporation and its prospective subsidiaries, taken as a whole, or
(ii) will result in a violation of any laws, shall have been obtained, all in
form and substance reasonably satisfactory to Sports Authority and Woolworth.
(d) NO INJUNCTIONS OR RESTRAINTS. No judgment, order, decree,
statute, law, ordinance, rule or regulation, entered, enacted, promulgated,
enforced or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect (i) preventing the consummation of the Merger,
or (ii) which otherwise is reasonably likely to
50
have a material adverse effect on Sports Authority or Woolworth, as applicable;
PROVIDED, HOWEVER, that each of the parties shall have used its reasonable best
efforts to prevent the entry of any such Restraints and to appeal as promptly as
possible any such Restraints that may be entered.
(e) FORM S-4. The Form S-4 shall have become effective under
the Securities Act prior to the mailing of the Proxy Statement/Prospectus by
Sports Authority to its stockholders and no stop order or proceedings seeking a
stop order shall be threatened by the SEC or shall have been initiated by the
SEC.
(f) NYSE LISTING. The shares of Woolworth Common Stock
issuable to Sports Authority's stockholders as contemplated by Article II and
the shares of Woolworth Common Stock issuable upon exercise of Adjusted Options
pursuant to Section 5.6 shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(g) POOLING LETTERS. Woolworth and Sports Authority shall have
received letters from each of Sports Authority's independent accountants and
Woolworth's independent accountants, dated as of the date the Form S-4 is
declared effective and as of the Closing Date, in each case addressed to
Woolworth and Sports Authority, stating that accounting for the Merger as a
pooling of interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations is appropriate if the Merger is consummated
and closed as contemplated by this Agreement.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF WOOLWORTH. The
obligation of Woolworth to effect the Merger is further subject to satisfaction
or waiver of the following conditions:
(a) REPRESENTATIVES AND WARRANTIES. The representations and
warranties of Sports Authority set forth herein shall be true and correct both
when made and at and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such date), except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein) does not have, and
is not likely to have, individually or in the aggregate, a material adverse
effect on Sports Authority; provided that the representation and warranty set
forth in the last sentence of Section 3.1(s) shall be deemed true and correct
only if the "direct store profit" (as shown in the internal
51
financial records of Sports Authority) for the most recent fiscal year of all
stores in respect of which one or more contracts relating to the lease of real
property are subject to termination or modification is $3 million or less in the
aggregate (excluding stores as to which the lessor shall have waived its right
of termination or modification).
(b) PERFORMANCE OF OBLIGATIONS OF SPORTS AUTHORITY. Sports
Authority shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing Date.
(c) TAX OPINION. Woolworth shall have received from Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP, counsel to Woolworth, on a date immediately
prior to the mailing of the Proxy Statement/Prospectus and on the Closing Date,
an opinion dated as of such date, to the effect that: (i) the Merger will
constitute a "reorganization" within the meaning of Section 368(a) of the Code,
and Woolworth and Sports Authority will each be a party to such reorganization
within the meaning of Section 368(b) of the Code; (ii) no gain or loss will be
recognized by Woolworth or Sports Authority as a result of the Merger; (iii) no
gain or loss will be recognized by the stockholders of Sports Authority upon the
exchange of their shares of Sports Authority Common Stock solely for shares of
Woolworth Common Stock pursuant to the Merger, except with respect to cash, if
any, received in lieu of fractional shares of Woolworth Common Stock; (iv) the
aggregate tax basis of the shares of Woolworth Common Stock received solely in
exchange for shares of Sports Authority Common Stock pursuant to the Merger
(including fractional shares of Woolworth Common Stock for which cash is
received) will be the same as the aggregate tax basis of the shares of Sports
Authority Common Stock exchanged therefor; and (v) the holding period for shares
of Woolworth Common Stock received in exchange for shares of Sports Authority
Common Stock pursuant to the Merger will include the holding period of the
shares of Sports Authority Common Stock exchanged therefor, PROVIDED such shares
of Sports Authority Common Stock were held as capital assets by the stockholder
at the Effective Time. In rendering such opinions, counsel for Woolworth shall
be entitled to rely upon representations of officers of Woolworth, Sports
Authority and stockholders of Sports Authority substantially in the form of
Exhibits B and C hereto.
(d) NO MATERIAL ADVERSE CHANGE. At any time after the date of
this Agreement there shall not have occurred any material adverse change
relating to Sports Authority.
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SECTION 6.3 CONDITIONS TO OBLIGATIONS OF SPORTS AUTHORITY. The
obligation of Sports Authority to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Woolworth set forth herein shall be true and correct both when
made and at and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such date), except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
"materiality," or "material adverse effect" set forth therein) does not have,
and is not likely to have, individually or in the aggregate, a material adverse
effect on Woolworth.
(b) PERFORMANCE OF OBLIGATIONS TO WOOLWORTH. Woolworth shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date.
(c) TAX OPINIONS. Sports Authority shall have received from
Xxxxxx, Xxxxx & Xxxxxxx LLP, counsel to Sports Authority, on a date immediately
prior to the mailing of the Proxy Statement/Prospectus and on the Closing Date,
an opinion as of such date, to the effect that: (i) the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and Woolworth
and Sports Authority will each be a party to such reorganization within the
meaning of Section 368(b) of the Code; (ii) no gain or loss will be recognized
by Woolworth or Sports Authority as a result of the Merger; (iii) no gain or
loss will be recognized by the stockholders of Sports Authority upon the
exchange of their shares of Sports Authority Common Stock solely for shares of
Woolworth Common Stock pursuant to the Merger, except with respect to cash, if
any, received in lieu of fractional shares of Woolworth Common Stock; (iv) the
aggregate tax basis of the shares of Woolworth Common Stock received solely in
exchange for shares of Sports Authority Common Stock pursuant to the Merger
(including fractional shares or Woolworth Common Stock for which cash is
received) will be the same as the aggregate tax basis of the shares of Sports
Authority Common Stock exchanged therefor; and (v) the holding period for shares
of Woolworth Common Stock received in exchange for shares of Sports Authority
Common Stock pursuant to the Merger will include the holding period of the
shares of Sports Authority Common Stock exchanged therefor, PROVIDED such shares
of Sports Authority Common Stock were held as capital assets by the stockholder
at the Effective Time. In rendering such opinions, counsel for Sports Authority
shall be entitled to rely upon representations of officers of Woolworth,
53
Sports Authority and stockholders of Sports Authority substantially in the form
of Exhibits B and C hereto.
(d) NO MATERIAL ADVERSE CHANGE. At any time after the date of
this Agreement there shall not have occurred any material adverse change
relating to Woolworth.
SECTION 6.4 FRUSTRATION OF CLOSING CONDITIONS. Neither
Woolworth nor Sports Authority may rely on the failure of any condition set
forth in Section 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such
failure was caused by such party's failure to use reasonable best efforts to
consummate the Merger and the other trans-actions contemplated by this
Agreement, as required by and subject to Section 5.5.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 TERMINATION. This Agreement may be terminated at
any time prior to the Effective Time, and (except in the case of a termination
pursuant to Section 7.1(e)) whether before or after the Sports Authority
Stockholder Approval:
(a) by mutual written consent of Woolworth and Sports
Authority;
(b) by either Woolworth or Sports Authority:
(i) if the Merger shall not have been consummated by December
31, 1998, PROVIDED, HOWEVER, that the right to terminate this Agreement
pursuant to this Section 7.1(b)(i) shall not be available to any party
whose failure to perform any of its obligations under this Agreement
results in the failure of the Merger to be consummated by such time;
PROVIDED, HOWEVER, that this Agreement may be extended not more than 30
days by either party by written notice to the other party if the Merger
shall not have been consummated as a direct result of Woolworth or
Sports Authority having failed to receive all regulatory approvals
required to be obtained with respect to the Merger.
54
(ii) if the Sports Authority Stockholder Approval shall not
have been obtained at a Sports Authority Stockholders Meeting duly
convened therefor or at any adjournment or postponement thereof; or
(iii) if any Restraint having any of the effects set forth in
Section 6.1(d) shall be in effect and shall have become final and
nonappealable; PROVIDED, that the party seeking to terminate this
Agreement pursuant to this Section 7.1(b)(iii) shall have used
reasonable best efforts to prevent the entry of and to remove such
Restraint;
(c) by Woolworth, if Sports Authority shall have breached or
failed to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in this Agreement, which
breach or failure to perform (A) would give rise to the failure of a condition
set forth in Section 6.2(a) or (b), and (B) is incapable of being cured by
Sports Authority or is not cured within 45 days of written notice thereof;
(d) by Sports Authority, if Woolworth shall have breached or
failed to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in this Agreement, which
breach or failure to perform (A) would give rise to the failure of a condition
set forth in Section 6.3(a) or (b), and (B) is incapable of being cured by
Woolworth or is not cured within 45 days of written notice thereof;
(e) prior to receipt of the Sports Authority Stockholder
Approval, by Sports Authority in accordance with Section 4.2(b); PROVIDED that,
in order for the termination of this Agreement pursuant to this paragraph (e) to
be deemed effective, Sports Authority shall have complied with all provisions of
Section 4.2, including the notice provisions therein, and with applicable
requirements, including the payment of the Termination Fee, of Section 5.8; or
(f) by Sports Authority, if the Woolworth Average Price for a
Measuring Period is $20.50 or less, Sports Authority has made an Election and
Woolworth has not made a Rescission.
SECTION 7.2 EFFECT OF TERMINATION. In the event of termination
of this Agreement by either Sports Authority or Woolworth as provided in Section
7.1, this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Woolworth or Sports Authority, other than
the provisions
55
of Section 3.1(o), Section 3.2(n), the last sentence of Section 5.4, Section
5.9, this Section 7.2 and Article VIII, which provisions survive such
termination, and except to the extent that such termination results from the
willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
SECTION 7.3 AMENDMENT. This Agreement may be amended by the
parties at any time before or after the Sports Authority Stockholder Approval or
the Woolworth Stockholder Approval; PROVIDED, HOWEVER, that after any such
approval, there shall not be made any amendment that by law requires further
approval by the stockholders of Sports Authority or Woolworth without the
further approval of such stockholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties.
SECTION 7.4 EXTENSION; WAIVER. At any time prior to the
Effective Time, a party may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 7.3, waive compliance by the other party with any of
the agreements or conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
SECTION 7.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR
WAIVER. A termination of this Agreement pursuant to Section 7.1, an amendment of
this Agreement pursuant to Section 7.3 or an extension or waiver pursuant to
Section 7.4 shall, in order to be effective, require, in the case of Woolworth
or Sports Authority, action by its Board of Directors or, with respect to any
amendment to this Agreement, the duly authorized committee of its Board of
Directors to the extent permitted by law.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
SECTION 8.2 NOTICES. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Woolworth or Sub, to:
Woolworth Corporation
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
(b) if to Sports Authority, to:
The Sports Authority, Inc.
0000 Xxxxx Xxxxx Xxxx 0
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxx X. Xxxx, Esq.
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with a copy to:
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxxxx Xxxxx Xxxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx, Esq.
SECTION 8.3 DEFINITIONS. For purposes of this Agreement:
(a) except for purposes of Section 5.10, an "affiliate" of any
person means another person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
such first person, where "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management policies of a
person, whether through the ownership of voting securities, by contract, as
trustee or executor, or otherwise;
(b) "material adverse change" or "material adverse effect"
means, when used in connection with Sports Authority or Woolworth, any change,
effect, event, occurrence or state of facts that is, or would reasonably be
expected to be, materially adverse to the business, financial condition or
results of operations of such party and its subsidiaries taken as a whole, other
than any change, effect, event or occurrence constituting or relating to (i) the
United States economy or securities markets in general or (ii) this Agreement or
the transactions contemplated hereby or the announcement thereof. The terms
"material" and "materially" have correlative meanings;
(c) "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity;
(d) a "subsidiary" of any person means another person, an
amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned directly or indirectly by
such first person; and
58
(e) "knowledge" of any person which is not an individual means
the knowledge of such person's executive officers or senior management of such
person's operating divisions and segments, in each case after reasonable
inquiry.
SECTION 8.4 INTERPRETATION. When a reference is made in this
Agreement to an Article, Section or Exhibit, such reference shall be to an
Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. References to a person
are also to its permitted successors and assigns.
SECTION 8.5 COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 8.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement (including the documents and instruments referred to herein) and
the Confidentiality Agreement (a) constitute the entire agreement, and supersede
all prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter of this Agreement and (b) except for
the provisions of Article II and Section 5.6, are not intended to confer upon
any person other than the parties any rights or remedies.
59
SECTION 8.7 GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws thereof.
SECTION 8.8 ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by either of the parties
hereto without the prior written consent of the other party. Any assignment in
violation of the preceding sentence shall be void. Subject to the preceding two
sentences, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 8.9 CONSENT TO JURISDICTION. Each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of any federal
court located in the State of Delaware or any Delaware state court in the event
any dispute arises out of this Agreement or any of the transactions contemplated
by this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
federal court sitting in the State of Delaware or a Delaware state court.
SECTION 8.10 HEADINGS. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 8.11 SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, Woolworth, Sub and Sports Authority have
caused this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
WOOLWORTH CORPORATION
By /S/ XXXX X. XXXXXXX
-----------------------------------------
Title: President
LIBERTY MERGER SUB INC.
By /S/ M. XXXXXXX XXXXXXX
-----------------------------------------
Title: Senior Vice President
THE SPORTS AUTHORITY, INC.
By /S/ XXXX X. XXXXX
-----------------------------------------
Title: Chairman and Chief Executive Officer
61
