Exhibit 2.1
EXECUTION DRAFT
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXX XXXXX HOLDINGS, INC.
XXXXX B HOLDING CORP.
AND
XXXXX B INTEGRATED, INC.
DATED AS OF NOVEMBER 13, 2006
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.................................................... 1
ARTICLE II THE MERGER.................................................... 9
SECTION 2.1. THE MERGER.............................................. 9
SECTION 2.2. CLOSING................................................. 9
SECTION 2.3. EFFECTIVE TIME.......................................... 9
SECTION 2.4. CERTIFICATE OF INCORPORATION AND BY-LAWS................ 10
SECTION 2.5. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION..... 10
ARTICLE III CONVERSION OF SECURITIES; TREATMENT OF COMPANY OPTIONS....... 10
SECTION 3.1. CONVERSION OF CAPITAL STOCK............................. 10
SECTION 3.2. EXCHANGE OF CERTIFICATES................................ 11
SECTION 3.3. DISSENTING SHARES....................................... 13
SECTION 3.4. TERMINATION AND SATISFACTION OF COMPANY OPTIONS AND
RSUS.................................................... 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 14
SECTION 4.1. ORGANIZATION............................................ 14
SECTION 4.2. CAPITALIZATION.......................................... 15
SECTION 4.3. AUTHORITY............................................... 16
SECTION 4.4. CONSENTS AND APPROVALS; NO VIOLATIONS................... 17
SECTION 4.5. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES........... 17
SECTION 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.................... 18
SECTION 4.7. LITIGATION.............................................. 20
SECTION 4.8. PERSONAL PROPERTY....................................... 21
SECTION 4.9. REAL PROPERTY........................................... 21
SECTION 4.10. TAXES................................................... 22
SECTION 4.11. COMPLIANCE WITH LAWS; PERMITS........................... 23
SECTION 4.12. EMPLOYEE BENEFITS....................................... 23
SECTION 4.13. LABOR AND EMPLOYMENT MATTERS............................ 25
SECTION 4.14. MATERIAL CONTRACTS...................................... 25
SECTION 4.15. INTELLECTUAL PROPERTY................................... 26
SECTION 4.16. ENVIRONMENTAL MATTERS................................... 26
SECTION 4.17. AFFILIATE TRANSACTIONS.................................. 27
SECTION 4.18. OPINION OF FINANCIAL ADVISOR............................ 27
SECTION 4.19. SECTION 203 OF THE DGCL................................. 27
SECTION 4.20. BROKER'S FEES........................................... 27
SECTION 4.21. NO OTHER REPRESENTATIONS OR WARRANTIES.................. 27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........ 28
SECTION 5.1. CORPORATE ORGANIZATION.................................. 28
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SECTION 5.2. AUTHORITY............................................... 28
SECTION 5.3. CONSENTS AND APPROVALS; NO VIOLATIONS................... 28
SECTION 5.4. MERGER SUB.............................................. 29
SECTION 5.5. SUFFICIENT FUNDS........................................ 29
SECTION 5.6. OWNERSHIP OF SHARES..................................... 29
SECTION 5.7. OTHER AGREEMENTS........................................ 29
SECTION 5.8. BROKER'S FEES........................................... 30
SECTION 5.9. SOLVENCY................................................ 30
ARTICLE VI COVENANTS..................................................... 30
SECTION 6.1. CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME......... 30
SECTION 6.2. STOCKHOLDERS' MEETING................................... 34
SECTION 6.3. NO SOLICITATION......................................... 36
SECTION 6.4. PUBLICITY............................................... 39
SECTION 6.5. ACCESS TO INFORMATION................................... 40
SECTION 6.6. FURTHER ASSURANCES; REGULATORY MATTERS; NOTIFICATION OF
CERTAIN MATTERS; FINANCING COOPERATION.................. 41
SECTION 6.7. EMPLOYEE BENEFIT PLANS.................................. 43
SECTION 6.8. INDEMNIFICATION AND INSURANCE........................... 44
SECTION 6.9. OBLIGATIONS OF MERGER SUB............................... 46
SECTION 6.10. STOCKHOLDER LITIGATION.................................. 47
ARTICLE VII CONDITIONS................................................... 47
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER.................................................. 47
SECTION 7.2. ADDITIONAL CONDITIONS TO OBLIGATION OF PARENT AND MERGER
SUB TO EFFECT THE MERGER IN CERTAIN CASES............... 48
SECTION 7.3. ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY TO
EFFECT THE MERGER IN CERTAIN CASES...................... 49
ARTICLE VIII TERMINATION................................................. 50
SECTION 8.1. TERMINATION............................................. 50
SECTION 8.2. EFFECT OF TERMINATION................................... 52
SECTION 8.3. TERMINATION FEE......................................... 52
SECTION 8.4. EXPENSE REIMBURSEMENT................................... 54
ARTICLE IX MISCELLANEOUS................................................. 54
SECTION 9.1. AMENDMENT AND MODIFICATION.............................. 54
SECTION 9.2. EXTENSION; WAIVER....................................... 54
SECTION 9.3. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES........... 55
SECTION 9.4. NOTICES................................................. 55
SECTION 9.5. COUNTERPARTS............................................ 56
SECTION 9.6. ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES............. 56
SECTION 9.7. SEVERABILITY............................................ 56
SECTION 9.8. GOVERNING LAW........................................... 57
SECTION 9.9. ASSIGNMENT.............................................. 57
SECTION 9.10. SCHEDULES............................................... 57
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SECTION 9.11. EXPENSES................................................ 57
SECTION 9.12. SUBMISSION TO JURISDICTION; WAIVERS..................... 57
SECTION 9.13. SPECIFIC PERFORMANCE.................................... 58
SECTION 9.14. CONSTRUCTION OF AGREEMENT............................... 58
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of November 13,
2006, by and among Xxxxx Xxxxx Holdings, Inc., a Delaware corporation (the
"Company"), Xxxxx B Holding Corp., a Delaware corporation ("Parent"), and Xxxxx
B Integrated, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub").
RECITALS
WHEREAS, the respective Boards of Directors of the Company, Parent and
Merger Sub have determined it to be advisable and in the best interests of their
respective stockholders for Parent to acquire the Company by means of the merger
of Merger Sub with and into the Company (the "Merger"), on the terms and subject
to the conditions set forth in this Agreement;
WHEREAS, the Board of Directors of each of the Company, Parent and Merger
Sub has approved and declared advisable this Agreement, including all the terms
and conditions set forth herein, and all the transactions contemplated hereby,
including the Merger (collectively, the "Transactions"); and
WHEREAS, each of the Company, Parent and Merger Sub desires to make certain
representations, warranties, covenants and agreements in connection with the
Transactions and also to prescribe various conditions to the consummation
thereof;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms have the following meanings:
"Affiliate" has the meaning assigned to that term in Rule 12b-2 of the
Exchange Act Rules.
"Agreement" has the meaning assigned to that term in the Preamble.
"Alternative Proposal" means any offer, proposal or indication of interest
(other than the Transactions), as the case may be, by any Person (or group of
Persons) that relates to (i) a transaction or series of transactions (including
any merger, consolidation, recapitalization, reorganization, liquidation or
other direct or indirect business combination) involving the Company or the
issuance or acquisition of Shares or other equity securities of the Company
representing 15% (in number or voting power) or more of the outstanding capital
stock of the Company, (ii) any tender offer (including a self-tender offer) or
exchange offer that, if consummated, would result in any Person, together with
all Affiliates thereof, becoming the beneficial owner of Shares or other equity
securities of the Company representing 15% (in number or voting power) or more
of the outstanding capital stock of the Company, or (iii) the acquisition,
license, purchase or other disposition of 15% or more of the consolidated assets
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(including the capital stock or assets of any Subsidiary) of the Company or of a
business that constitutes 15% or more of the consolidated revenues or
consolidated net income of the Company.
"Benefit Plan" and "Benefit Plans" have the respective meanings assigned to
those terms in Section 4.12(a).
"Business Day" means a day other than Saturday or Sunday or any other day
on which banks in New York City are required to or may be closed.
"Certificate" has the meaning assigned to that term in Section 3.1(c).
"Certificate of Merger" means a certificate of merger to be filed with the
Secretary of State.
"Closing" has the meaning assigned to that term in Section 2.2.
"Closing Date" has the meaning assigned to that term in Section 2.2.
"COBRA" means Part 6 of Subtitle B of Title I of ERISA, Section 4980B of
the Code, and any similar state Law.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning assigned to that term in the Preamble.
"Company By-Laws" has the meaning assigned to that term in Section 4.1(b).
"Company Cash Deposit" has the meaning assigned to that term in Section
3.2(a).
"Company Certificate" has the meaning assigned to that term in Section
4.1(b).
"Company Disclosure Schedule" has the meaning assigned to that term in the
introduction to Article IV.
"Company Intellectual Property" has the meaning assigned to that term in
Section 4.15(b).
"Company Material Adverse Effect" means any adverse effect, change, event,
occurrence, development, state of circumstances or facts affecting (i) the
assets and Liabilities, business, results of operations or financial condition,
in each case, which is material to the Company and the Company Subsidiaries,
taken as a whole, or (ii) which would materially impair or delay the Company's
ability to perform its material obligations under this Agreement; provided,
however, that any effect, change, event, occurrence, development, state of
circumstances or facts resulting from or attributable to any one or more of the
following matters shall not be taken into account in determining whether there
has been a Company Material Adverse Effect and shall not be deemed to constitute
a Company Material Adverse Effect: (1) general changes in economic, regulatory
or political conditions or financial or securities
2
markets, including the outbreak or escalation of hostilities, whether or not
pursuant to the declaration of a national emergency or war, or the occurrence of
any military or terrorist attack, (2) general changes in conditions affecting
any of the industries or markets in which the Company or any of the Company
Subsidiaries operates, (3) any change, occurrence, development, event, series of
events or circumstances arising out of, resulting from or attributable to the
execution and delivery of this Agreement or the consummation of any of the
Transactions, or the public announcement of this Agreement, (4) any change in
the market price or trading volume of the Company's securities, (5) any change
in Law, GAAP or interpretations thereof that apply to the Company or any of the
Company Subsidiaries, including the proposal or adoption of any new Law or any
change in the interpretation or enforcement of any existing Law, (6) the failure
of the Company to meet analysts' expectations, (7) any change in the expected
collections with respect to the securitization interests held by the Company
Subsidiaries Financial Services Acceptance Corporation and Spiegel Acceptance
Corporation, (8) the occurrence of any default or event of default under any of
the Company's loan, guaranty or security agreements included in the Material
Contracts unless as a result thereof the indebtedness subject to such agreement
automatically becomes, or is declared to be, due and payable prior to its
scheduled due date, (9) any change in the Company's deferred tax assets or
ability to use its net operating losses for tax purposes arising out of or
attributable to an election for the use of such losses to be governed by Section
382(l)(6) of the Code, (10) any challenge to or failure to sustain any position
taken by the Company with respect to the amount and use of its net operating
losses unless such challenge or failure would be reasonably likely to result in
a material reduction in the cumulative use of such losses after the Effective
Date after giving effect to the application of Section 382 of the Code thereto
as a result of the Transactions, (11) any impairment charge with respect to the
Company's intangible assets required by GAAP, or (12) any failures of the
Company to take any action referred to in Section 6.1 due to Parent's
withholding of consent following written notice from the Company that the
withholding of such consent would reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect (determined in accordance
with the balance of this definition), unless, in the case of the foregoing
clauses (1), (2) and (5), such changes or developments referred to therein would
reasonably be expected to have a materially disproportionate impact on the
Company and the Company Subsidiaries taken as a whole relative to other industry
participants.
"Company Option" has the meaning assigned to that term in Section 3.4.
"Company Option Plan" means the Company's 2005 Stock Incentive Plan.
"Company-Owned Intellectual Property" has the meaning assigned to that term
in Section 4.15(a).
"Company Preferred Stock" has the meaning assigned to that term in Section
4.2(a).
"Company RSU" has the meaning assigned to that term in Section 3.4.
"Company Stockholder Approval" has the meaning assigned to that term in
Section 4.3(a).
"Company Subsidiary" means any Subsidiary of the Company.
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"Company's Knowledge" means the actual knowledge of the Company's President
and Chief Executive Officer, Senior Vice Presidents and Interim Chief Financial
Officer, and each other member of the Board of Directors of the Company.
"Confidentiality Agreements" means the confidentiality agreements dated as
of June 16, 2006 between the Company and Sun Capital Partners Group IV, Inc. and
as of June 22, 2006 between the Company and Golden Gate Private Equity, Inc.
"Contract" means any contract, indenture, note, bond, lease, commitment or
other agreement, whether written or oral.
"DGCL" means the Delaware General Corporation Law, as amended.
"Dissenting Shares" has the meaning assigned to that term in Section 3.3.
"Effective Time" has the meaning assigned to that term in Section 2.3.
"Environmental Laws" means all applicable Laws and all common law as in
effect on or prior to the date of this Agreement relating to workplace health
and safety, the control of any pollutant or hazardous material, substance or
waste, the protection of the environment or the effect of the environment or
environmental hazards on human health, including the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601 et. seq.), the
Hazardous Materials Transportation Act (49 U.S.C. App. Section 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the
Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substance Control Act (15 U.S.C. Section 2601
et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C.
Section 651 et seq.)
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any trade or business at any relevant time
considered a single employer with the Company or any Company Subsidiary under
Section 414 of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Act Rules" means the rules promulgated under the Exchange Act.
"Expenses" has the meaning assigned to that term in Section 8.4.
"Financing" has the meaning assigned to that term in Section 6.6(e).
"Fiscal Year 2005" means the Company's fiscal year beginning on January 2,
2005 and ending on December 31, 2005.
"Fiscal Year 2006" means the Company's fiscal year beginning on January 1,
2006 and ending on December 30, 2006.
"Freely Available Cash" has the meaning assigned to that term in Section
3.2(a).
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"GAAP" means United States generally accepted accounting principles.
"Governmental Entity" means any federal, state, provincial, supra-national,
foreign or local government, court, tribunal, judicial or arbitral body,
administrative or regulatory agency or commission or any other governmental
authority or instrumentality (including any political or other subdivision,
department or branch of any of the foregoing).
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"Indemnified Liabilities" has the meaning assigned to that term in Section
6.8(a).
"Indemnified Parties" has the meaning assigned to that term in Section
6.8(a).
"Indemnified Party" has the meaning assigned to that term in Section
6.8(a).
"Intellectual Property" means any and all of the following in any
jurisdiction throughout the world: trade secrets, know-how, inventions (whether
or not patentable or reduced to practice), improvements, patents and patent
applications, together with all reissuances, continuations,
continuations-in-part, revisions, divisions, extensions and reexaminations
thereof; all registered trademarks, service marks, trade dress, logos, designs,
slogans, trade names, corporate names and other indicia of origin, together with
all translations, adaptations, derivations, and combinations thereof and all
goodwill associated with any of the foregoing, and applications for
registration, registrations, and renewals in connection therewith; copyrightable
works, all registered copyrights and applications for registration thereof, and
renewals in connection therewith; all Internet domain names; all computer
software (including source code, executable code, data, databases and related
documentation and programs) other than computer software programs that are
generally available in "off the shelf" commercial packages or by Internet
distribution having a replacement cost and/or annual license fee of less than
$25,000; confidential business information (including all ideas, marketing,
technical and other data, patterns, designs, drawings, specifications, research
and development, formulas, compositions, processes, methods and techniques,
customer and supplier lists, pricing and cost information, business and
marketing plans, studies and proposals); all copies and tangible embodiments of
any of the foregoing (in whatever form or medium); and together with all income,
royalties, damages and payments due or payable at the Closing or thereafter
(including damages and payments for infringements, misappropriations or other
conflicts with any intellectual property), and the right to xxx and recover for
infringements, misappropriations or other conflict with any Intellectual
Property.
"Joint Ventures" means, collectively, Xxxxx Xxxxx Japan, Inc. and Xxxxx
Xxxxx Gmbh & Co. KG.
"Law" means any law, statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction of any Governmental Entity.
"Leased Real Property" has the meaning assigned to that term in Section
4.9(b).
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"Liabilities" means any indebtedness and any other liabilities and
obligations whether accrued or fixed, absolute or contingent, known or unknown.
"Liens" means any pledges, rights of first refusal, options, liens,
encumbrances, mortgages, claims, security interests or charge of any kind.
"Material Contract" means each (i) Contract (including all amendments
thereto) that, as of the date of this Agreement, has been filed as a "material
contract" by the Company with the SEC as an exhibit to the SEC Documents (other
than Benefit Plans), (ii) Contract under which the Company or any of the Company
Subsidiaries expended in excess of $1,000,000 during Fiscal Year 2005 or expects
to expend in excess of $1,000,000 during Fiscal Year 2006 (other than Real
Property Leases and purchase orders for the purchase of inventory in the
ordinary course of business), including leases of personal property and
Contracts for the construction or modification of any building structure or
other capital expenditure or acquisition of assets (by way of merger,
consolidation, purchase or otherwise), (iii) Contract containing any
non-competition covenant binding upon the Company or any Company Subsidiary
(other than Real Property Leases), (iv) Real Property Lease under which the
Company or any of the Company Subsidiaries expended in excess of $750,000 during
Fiscal Year 2005 or expects to expend in excess of $750,000 during Fiscal Year
2006, (v) standby letter of credit obtained by the Company or any of the Company
Subsidiaries in an amount exceeding $500,000, (vi) loan or credit agreement,
indenture, note, debenture, mortgage, pledge, security agreement, guarantee or
any other obligation for borrowed money entered into by the Company or any of
the Company Subsidiaries in an amount exceeding $1,000,000 (other than items
referred to in the preceding clauses of this definition, intercompany items,
guarantees of the Company Subsidiaries' leases, deposits in the ordinary course
of business and any item constituting a portion of the restricted cash and cash
equivalents as reflected in the SEC Financial Statements or the notes thereto),
or (vii) written Contract that contains a put, call, right of first refusal or
similar right pursuant to which the Company or any Company Subsidiary would be
required to purchase or sell, as applicable, any securities or assets of any
Person. For the avoidance of doubt, only those Contracts referred to in the
preceding sentence that remain in effect, or pursuant to which the Company or
any of its Subsidiaries has any outstanding obligations, as of the date of this
Agreement shall be taken into account in determining the Company's Material
Contracts.
"Merger" has the meaning assigned to that term in the Recitals.
"Merger Consideration" has the meaning assigned to that term in Section
3.1(c).
"Merger Sub" has the meaning assigned to that term in the Preamble.
"Multiemployer Plan" means any "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
"Other Company Approvals" has the meaning assigned to that term in Section
4.4(a).
"Owned Real Property" has the meaning assigned to that term in Section
4.9(a).
"Parent" has the meaning assigned to that term in the Preamble.
6
"Parent Approvals" has the meaning assigned to that term in Section 5.3(a).
"Parent Material Adverse Effect" has the meaning assigned to that term in
Section 5.1.
"Parent Material Breach" has the meaning assigned to that term in Section
8.3(d)
"Parent Termination Fee" means (i) at any time prior to January 27, 2007
(but not after the Company Stockholder Approval is obtained), $12,150,000, (ii)
on or at any time after January 27, 2007 (but not after the Company Stockholder
Approval is obtained), $20,000,000 and (iii) at any time following the Company
Stockholder Approval, $30,000,000.
"Paying Agent" has the meaning assigned to that term in Section 3.2(a).
"Permits" has the meaning assigned to that term in Section 4.11.
"Permitted Liens" means (i) Liens for Taxes or other governmental charges
not yet delinquent, or the amount or validity of which is being contested in
good faith and for which the Company has established adequate reserves in its
financial statements in accordance with GAAP, (ii) mechanics', carriers',
workers', repairers', and similar Liens arising or incurred in the ordinary
course of business, (iii) pledges or deposits to secure obligations under
workers' compensation laws or similar legislation or to secure public or
statutory obligations, (iv) purchase money Liens arising in the ordinary course
of business, (v) zoning, entitlement and other land use and environmental
regulations by Governmental Entities, (vi) with respect to Owned Real Property,
any matters disclosed in title reports delivered or made available to Parent in
the electronic data room prepared by the Company prior to the date of this
Agreement or otherwise delivered by the Company to Parent and all Liens of
record, (vii) with respect to leasehold interests, Liens incurred, created,
assumed or permitted to exist and arising by, through or under a landlord or
owner of the leased property, with or without the consent of the lessee, (viii)
with respect to securities, Liens created as a result of federal or state
securities laws, (ix) Liens in favor of the Company or any Company Subsidiary
securing intercompany borrowing by any Company Subsidiary, and (x) Liens set
forth on Section 1.1 of the Company Disclosure Schedule.
"Person" shall be construed as broadly as possible and includes an
individual or natural person, a partnership, a corporation, an association, a
joint stock company, a limited liability company, a trust, a joint venture, an
unincorporated organization and a Governmental Entity.
"Proxy Statement" has the meaning assigned to that term in Section
6.2(a)(i).
"Real Property Lease" means any agreement (including all amendments and
guaranties thereof), written or oral, under which the Company or any Company
Subsidiary is the landlord, sublandlord, tenant, subtenant or occupant.
"Representatives" has the meaning assigned to that term in Section 6.3(a).
"Required Financial Information" has the meaning assigned to that term in
Section 6.6(e).
"Returns" has the meaning assigned to that term in Section 4.10.
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"SEC" means the U.S. Securities and Exchange Commission.
"SEC Documents" has the meaning assigned to that term in the introduction
to Article IV.
"SEC Financial Statements" has the meaning assigned to that term in Section
4.5(a).
"Secretary of State" means the Secretary of State of the State of Delaware.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" has the meaning assigned to that term in Section 4.2(a).
"Solvent" has the meaning assigned to that term in Section 5.9.
"Special Meeting" has the meaning assigned to that term in Section
6.2(a)(iii).
"Subsidiary", when used with respect to any Person, means any corporation,
limited liability company, partnership or other organization or entity, whether
incorporated or unincorporated, of which at least a majority of the securities
or other ownership interests having by their terms voting power to elect a
majority of the board of directors or others performing similar functions with
respect to such corporation or other organization, is beneficially owned or
controlled directly or indirectly by such Person or by one or more of its
Subsidiaries (as defined in the preceding clause), or by such Person and one or
more of its Subsidiaries.
"Superior Proposal" means any bona fide written Alternative Proposal
(provided, that for purposes of this definition, the applicable percentages in
clauses (i), (ii) and (iii) of the definition of Alternative Proposal shall be
50% rather than 15%), which (on its most recently amended or modified terms, if
amended or modified) did not otherwise result from a breach of Section 6.3 and
the Board of Directors of the Company determines in good faith (after
consultation with outside counsel and its financial advisor) (i) is reasonably
capable of being consummated without undue delay (taking into account all legal,
financial, regulatory, timing and similar aspects of, and conditions to, the
proposal, the likelihood of obtaining necessary financing, and the Person making
the proposal), (ii) for which financing, to the extent required, is then
committed, and (iii) if consummated, would result in a transaction that is more
favorable to the Company's stockholders in their capacity as stockholders (other
than Parent, Merger Sub and their respective Affiliates), from a financial point
of view, than the Merger.
"Superior Proposal Agreement" has the meaning assigned to that term in
Section 6.3(c).
"Surviving Corporation" has the meaning assigned to that term in Section
2.1.
"Tax" means (i) any United States federal, state or local or any non-United
States net or gross income, gross receipts, net proceeds, corporation, capital
gains, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs, capital stock, franchise, profits, withholding, national
insurance, social security (or similar), unemployment, disability, real
property, personal property, sales, inheritance, use, transfer, registration,
value added, alternative
8
or add-on minimum, estimated or other taxes, assessments, duties, fees, levies
or other governmental charges of any kind whatever, whether disputed or not,
including any interest, penalty or additional amount related thereto; (ii) any
Liability for or in respect of the payment of any amount of a type described in
clause (i) of this definition as a result of being a member of an affiliated,
combined, consolidated, unitary or other group for Tax purposes; or (iii) any
Liability for or in respect of the payment of any amount described in clauses
(i) or (ii) of this definition as a transferee or successor, by Contract or
otherwise.
"Termination Fee" has the meaning assigned to that term in Section 8.3.
"Transactions" has the meaning assigned to that term in the Recitals.
ARTICLE II
THE MERGER
SECTION 2.1. THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, (i) Merger Sub shall be merged with and into
the Company in accordance with the provisions of Section 251 of the DGCL, and
the separate existence of Merger Sub shall cease and (ii) the Company shall be
the surviving corporation in the Merger (the "Surviving Corporation") and shall
continue its corporate existence under the DGCL. The Merger shall have the
effects set forth in this Agreement and the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all property, rights, powers, privileges and franchises of
Merger Sub shall vest in the Company as the Surviving Corporation, and all
debts, Liabilities and duties of the Company shall become the debts, Liabilities
and duties of the Surviving Corporation. The Surviving Corporation may, at any
time after the Effective Time, take any action (including executing and
delivering any document) in the name and on behalf of either the Company or
Merger Sub in order to carry out and effectuate the transactions contemplated by
this Agreement. The Surviving Corporation shall thereafter be responsible and
liable for all the Liabilities and obligations of the Company and Merger Sub.
SECTION 2.2. CLOSING. The closing of the Merger (the "Closing") shall take
place at the offices of Xxxxxxxx & Xxxxx LLP, 000 Xxxx Xxxxxxxx Xxxxx, Xxxxxxx,
Xxxxxxxx, 00000, at 10:00 a.m., local time, on a date not later than two
Business Days after satisfaction or waiver of all of the conditions set forth in
Article VII (other than those conditions that by their nature must be satisfied
on the Closing Date, but the Closing shall be subject to the satisfaction or
waiver of those conditions), or at such other place, date and time as the
parties hereto shall agree (such date on which the Closing occurs being
hereinafter referred to as the "Closing Date").
SECTION 2.3. EFFECTIVE TIME. Subject to the terms and conditions of this
Agreement, as soon as practicable on the Closing Date, Merger Sub and the
Company shall cause the Merger to be consummated by filing all necessary
documentation, including a Certificate of Merger, with the Secretary of State as
provided in Section 251 of the DGCL. The Merger shall become effective at the
time that the Certificate of Merger is duly filed with the Secretary of State,
or such later time as is agreed upon by the parties hereto and specified in the
Certificate of Merger, such time being hereinafter referred to as the "Effective
Time."
9
SECTION 2.4. CERTIFICATE OF INCORPORATION AND BY-LAWS.
At the Effective Time the Company Certificate and Company By-Laws, as in
effect immediately prior to the Effective Time, shall be amended in their
entirety to read as set forth on Exhibit A and Exhibit B hereto, respectively,
and as so amended shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation until thereafter amended in compliance with the DGCL.
SECTION 2.5. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
The directors of Merger Sub and the officers of the Company immediately
prior to 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 and qualified or until
their earlier death, resignation or removal in accordance with the DGCL and the
Surviving Corporation's Certificate of Incorporation and By-Laws.
ARTICLE III
CONVERSION OF SECURITIES; TREATMENT OF COMPANY OPTIONS
SECTION 3.1. CONVERSION OF CAPITAL STOCK. At the Effective Time, by virtue
of the Merger and without any action on the part of the Company, Parent, Merger
Sub or any holders of shares of capital stock of the Company or Merger Sub:
(a) COMMON STOCK OF MERGER SUB. Each share of common stock, par value
$.01 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
(b) CANCELLATION OF CERTAIN SHARES. All Shares that are issued and
outstanding immediately prior to the Effective Time and owned by any of Parent,
Merger Sub and any other Subsidiary of Parent, and all Shares held in the
treasury of the Company or owned by any Company Subsidiary, shall automatically
be canceled and retired and shall cease to exist and no consideration shall be
delivered in exchange therefor.
(c) CONVERSION OF SHARES. Each Share issued and outstanding
immediately prior to the Effective Time (other than Shares to be canceled and
retired in accordance with Section 3.1(b) and any Dissenting Shares) shall be
converted into the right to receive $9.25 in cash, payable to the holder
thereof, without any interest thereon (the "Merger Consideration"), less any
required withholding taxes, upon surrender and exchange of a Certificate (as
defined below). All such Shares when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate (a "Certificate") that immediately prior
to the Effective Time represented any such outstanding Share (other than any
Dissenting Share) shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration therefor upon the surrender of
such Certificate in accordance with Section 3.2.
(d) ADJUSTMENT OF MERGER CONSIDERATION. Notwithstanding anything in
this Agreement to the contrary, if, between the date of this Agreement and the
Effective Time, the
10
issued and outstanding Shares shall have been changed into a different number of
shares or a different class by reason of any stock split, reverse stock split,
stock dividend, reclassification, redenomination, recapitalization, split-up,
combination, exchange of shares or other similar transaction, the Merger
Consideration and any other dependent items shall be appropriately adjusted to
provide to the holders of Shares the same economic effect as contemplated by
this Agreement prior to such action and as so adjusted shall, from and after the
date of such event, be the Merger Consideration or other dependent item, subject
to further adjustment in accordance with this sentence.
SECTION 3.2. EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Prior to the Effective Time, Parent shall designate
a bank or trust company (the "Paying Agent") reasonably acceptable to the
Company to act as paying agent for the holders of Shares in connection with the
Merger, pursuant to an agreement providing for the matters set forth in this
Section 3.2 and such other matters as may be appropriate and the terms of which
shall be reasonably satisfactory to the Company and Parent. Prior to the
Effective Time, the Company shall deposit with the Paying Agent the amount of
its Freely Available Cash less the aggregate amount payable pursuant to Section
3.4 (such net amount, the "Company Cash Deposit"), which amount shall be used to
pay the aggregate Merger Consideration payable upon conversion of Shares
pursuant to Section 3.1(c) and shall not be used to satisfy any other
obligations of the Company or any of the Company Subsidiaries. At or prior to
the Effective Time, Parent shall deposit or cause to be deposited with the
Paying Agent an amount of cash equal to (i) the amount necessary to pay the
aggregate Merger Consideration payable upon conversion of Shares pursuant to
Section 3.1(c) less (ii) the Company Cash Deposit. Such funds shall not be used
for any purpose other than as set forth in this Article III, and shall be
invested by the Paying Agent as directed by Parent or the Surviving Corporation
in (A) direct obligations of the United States of America, (B) obligations for
which the full faith and credit of the United States of America is pledged to
provide for the payment of principal and interest, (C) commercial paper rated
the highest quality by either Xxxxx'x Investors Service, Inc. or Standard and
Poor's Ratings Services or (D) investments in any money market funds investing
solely in any of the foregoing; provided, however, that no such investment or
losses therefrom shall affect the Merger Consideration, and Parent shall
promptly deposit or cause the Surviving Corporation promptly to deposit
additional cash with the Paying Agent for the benefit of the former stockholders
of the Company in the amount of any such losses. Any net profit resulting from,
or interest or income produced by, such investments will be payable to Merger
Sub or Parent, as Parent directs. "Freely Available Cash" means, as determined
by the Company, unrestricted cash on hand of the Company and the Company
Subsidiaries less (1) any unpaid fees and expenses incurred or expected to be
incurred by the Company in connection with this Agreement and the Transactions,
(2) the amount of any payments to employees and former employees required by any
of the Benefit Plans as a result of the Transactions, (3) the cost of the "tail"
policy contemplated by Section 6.8 and (4) an amount required to satisfy the
reasonable short-term working capital needs of the Company and the Company
Subsidiaries. With respect to the cash of any Company Subsidiaries, "Freely
Available Cash" shall exclude any cash which, as determined by the Company,
cannot be distributed, contributed or otherwise delivered to the Company (i) in
accordance with applicable Laws, including those relating to solvency, adequate
surplus and similar capital adequacy tests, (ii) without the incurrence of any
Tax obligation by the Company or any of the Company Subsidiaries attributable to
such distribution, contribution
11
or other delivery, or (iii) without breaching any obligation in any Contract to
which the Company or any Company Subsidiary is a party.
(b) EXCHANGE PROCEDURES. As promptly as practicable after the
Effective Time, but in no event more than five Business Days after the Effective
Time, Parent shall cause the Paying Agent to mail to each holder of record of a
Certificate representing Shares which were converted pursuant to Section 3.1(c)
into the right to receive the Merger Consideration, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to each Certificate shall pass, only upon delivery of such Certificate to the
Paying Agent and shall be in such form and have such other provisions as Parent
and the Company may reasonably specify) and (ii) instructions for use in
effecting the surrender of each such Certificate in exchange for payment of the
Merger Consideration. Upon surrender of a Certificate to the Paying Agent,
together with such letter of transmittal, duly executed, and such other
documents as the Paying Agent may reasonably require, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration (subject to subsection (e) of this Section 3.2) for each Share
formerly represented by such Certificate, to be mailed within ten Business Days
of receipt of such Certificate and letter of transmittal by the Paying Agent,
and the Certificate so surrendered shall forthwith be canceled. If payment of
the Merger Consideration is to be made to a Person other than the Person in
whose name the surrendered Certificate is registered, it shall be a condition of
payment of the Merger Consideration that the Certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that the
Person requesting such payment shall have paid any Tax required by reason of the
payment of the Merger Consideration to a Person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such Tax either has been paid or is not
applicable. After the Effective Time, each Certificate shall represent only the
right to receive the Merger Consideration in cash as contemplated by this
Section 3.2.
(c) TRANSFER BOOKS; NO FURTHER OWNERSHIP RIGHTS IN SHARES. After the
Effective Time, the stock transfer books of the Company shall be closed and
there shall be no further registration of transfers of Shares on the records of
the Company. After the Effective Time, the holders of Certificates evidencing
ownership of Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares, except as otherwise
provided for herein or by applicable Law. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article III.
(d) TERMINATION OF FUND; NO LIABILITY. At any time following 12 months
after the Effective Time, Parent shall be entitled to require the Paying Agent
to deliver to it any funds (including any interest received with respect
thereto) which had been made available to the Paying Agent for the payment of
the Merger Consideration and which have not been disbursed to holders of
Certificates, and thereafter such holders shall be entitled to look only to
Parent (subject to abandoned property, escheat or other similar Law) for payment
of any Merger Consideration that may be payable upon surrender of any
Certificate, as determined pursuant to this Agreement, without any interest
thereon. Any portion of the funds made available to the Paying Agent for the
payment of the Merger Consideration remaining unclaimed as of a date which is
immediately prior to such time as such amounts would otherwise escheat to or
become property of any Governmental Entity shall, to the extent permitted by
applicable Law, become
12
the property of the Surviving Corporation, free and clear of any claims or
interest of any Person previously entitled thereto. Notwithstanding the
foregoing, neither the Surviving Corporation, Parent nor the Paying Agent shall
be liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar Law.
(e) WITHHOLDING TAXES. The right of any Person to receive payment or
consideration payable upon surrender of a Certificate pursuant to the Merger
will be subject to any applicable requirements with respect to the withholding
of any Tax. To the extent amounts are so withheld by Parent, the Surviving
Corporation or the Paying Agent, (i) such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of Shares or
Certificates, as applicable, in respect of which the deduction and withholding
was made and (ii) Parent shall, or shall cause the Surviving Corporation or the
Paying Agent, as the case may be, to, promptly pay over such withheld amounts to
the appropriate Governmental Entity. This Section 3.2(e) shall apply, mutatis
mutandis, to any amounts payable pursuant to Section 3.4.
(f) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event 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 requested by Parent or the Surviving Corporation,
the delivery by such Person of a bond (in such amount as Parent or the Surviving
Corporation may reasonably direct) as indemnity against any claim that may be
made against the Paying Agent, Parent or the Surviving Corporation on account of
the alleged loss, theft or destruction of such Certificate, the Paying Agent
will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof as determined in accordance with
this Article III.
SECTION 3.3. DISSENTING SHARES.
Notwithstanding any provision of this Agreement to the contrary, Shares
which are issued and outstanding immediately prior to the Effective Time and
which are held by holders who shall have complied with the provisions of Section
262 of the DGCL (the "Dissenting Shares") shall not be converted into the right
to receive the Merger Consideration, and holders of such Dissenting Shares shall
be entitled to receive payment of the fair value of such Dissenting Shares in
accordance with the provisions of Section 262 of the DGCL, unless and until the
applicable holder fails to comply with the provisions of Section 262 of the DGCL
or effectively withdraws or otherwise loses such holder's rights to receive
payment of the fair value of such holder's Shares under Section 262 of the DGCL.
If, after the Effective Time, any such holder fails to comply with the
provisions of Section 262 of the DGCL or effectively withdraws or loses such
right, such Dissenting Shares shall thereupon be treated as if they had been
converted at the Effective Time into the right to receive the Merger
Consideration. Notwithstanding anything to the contrary contained in this
Section 3.3, if this Agreement is terminated prior to the Effective Time, then
the right of any holder of Shares to be paid the fair value of such holder's
Dissenting Shares pursuant to Section 262 of the DGCL shall cease. The Company
shall give Parent notice of any written demands for appraisal of Shares received
by the Company under Section 262 of the DGCL, and shall give Parent the
opportunity to participate in negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of
13
Parent, (i) make any payment with respect to any such demands for appraisal,
(ii) offer to settle or settle any such demands, (iii) waive any failure to
timely deliver a written demand for appraisal in accordance with the DGCL or
(iv) agree to do any of the foregoing.
SECTION 3.4. TERMINATION AND SATISFACTION OF COMPANY OPTIONS AND RSUS.
The Company shall take all actions necessary to terminate the Company
Option Plan effective as of the Effective Time. In addition, the Company shall
take all actions necessary to provide that, effective as of the Effective Time:
(a) each outstanding option ("Company Option") and each outstanding restricted
stock unit ("Company RSU") to buy or receive, as applicable, Shares granted
under the Company Option Plan, whether or not then exercisable and vested, shall
be cancelled; and (b) in consideration of such cancellation, Parent shall, or
shall cause the Surviving Corporation to: (i) pay to each holder of Company
Options, whether or not such Company Options are then exercisable and vested, an
amount in cash in respect thereof equal to the product of (A) the excess, if
any, of the Merger Consideration over the exercise price of each Company Option
held by such holder and (B) the number of Shares subject thereto (such payment,
if any, to be net of applicable withholding taxes) and (ii) pay to each holder
of Company RSUs an amount in cash in respect thereof equal to the product of (A)
the Merger Consideration and (B) the number of Shares underlying the Company
RSUs held by such holder (such payment to be net of applicable withholding
taxes). The Surviving Corporation shall (and Parent shall cause the Surviving
Corporation to) pay such amounts under this Section 3.4 as soon as practicable
following (but in no event more than three Business Days after) the Effective
Time to the holder of each such Company Option or Company RSU, as applicable.
Prior to the Effective Time, the Company shall take or cause to be taken all
actions necessary to effectuate the foregoing treatment in this Section 3.4 to
the extent such treatment is not expressly provided for by the terms of the
Company Option Plan and related award agreements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the applicable section of the disclosure schedule
delivered by the Company to Parent and Merger Sub simultaneously with the
execution and delivery of this Agreement (the "Company Disclosure Schedule"),
but subject to Section 9.10 of this Agreement, and except as disclosed in the
Company's reports, schedules, forms and registration statements filed with the
SEC pursuant to the Securities Act or the Exchange Act and the rules and
regulations of the SEC promulgated thereunder from June 21, 2005 through the
date of this Agreement (other than predictive or forward-looking disclosures in
the "Risk Factors" section of such filings and any other disclosures included in
such filings that are predictive or forward-looking in nature) (collectively,
the "SEC Documents"), the Company represents and warrants to Parent and Merger
Sub as follows:
SECTION 4.1. ORGANIZATION.
(a) Each of the Company and the Company Subsidiaries is a corporation
or limited liability company, as the case may be, duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or formed, as the case may be, and each has the requisite power and
authority to carry on its business as it is now being
14
conducted, except, in the case of the Company Subsidiaries, for any failure to
be so organized, existing and in good standing or to have such power and
authority which would not reasonably be expected to have, when aggregated with
all such other failures, a Company Material Adverse Effect. Each of the Company
and the Company Subsidiaries is duly licensed or qualified to do business in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not reasonably be expected to have, when aggregated
with all other such failures, a Company Material Adverse Effect.
(b) The copies of the Company's Certificate of Incorporation, as
amended (the "Company Certificate"), and By-Laws, as amended (the "Company
By-Laws"), most recently filed with the Company's SEC Documents are complete and
correct copies of such documents, and no other such documents are binding upon
the Company. The Company is not in violation of the provisions of the Company
Certificate or the Company By-Laws.
SECTION 4.2. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of (i)
100,000,000 shares of common stock, par value $0.01 per share ("Shares"), and
(ii) 5,000,000 shares of Preferred Stock, par value $0.01 per share ("Company
Preferred Stock"). As of the date of this Agreement there are, and as of the
Closing Date there will be 30,020,662 Shares issued and outstanding and no
shares of Company Preferred Stock issued and outstanding other than any Shares
issued after the date hereof pursuant to Company Options and Company RSUs
outstanding on the date of this Agreement. As of the date of this Agreement
there are, and as of the Closing Date there will be, Company Options to acquire
591,818 Shares outstanding and Company RSUs representing 892,802 Shares
outstanding, except for any Company Options or Company RSUs outstanding on the
date of this Agreement but exercised or settled after the date hereof. To the
Company's Knowledge, Section 4.2(a) of the Company Disclosure Schedule sets
forth, as of the date of this Agreement, a complete and accurate list of the
Company Options and Company RSUs, the number of shares issuable thereunder and
exercise or conversion price relating thereto. The exercise price of each
Company Option is greater than $13.00 per share. All of the issued and
outstanding Shares have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights. As of the date of this
Agreement, except as provided by this Agreement and except for the Company
Options and Company RSUs, there are no subscriptions, options, warrants, calls,
stock appreciation rights or other commitments, rights or agreements of any
character relating to dividend rights or the purchase, sale, issuance or voting
of any security of the Company to which the Company or any Company Subsidiary is
a party, including any securities convertible into, exchangeable for or
representing the right to purchase or otherwise receive, any Shares. There are
no bonds, debentures, notes or other indebtedness of the Company or any of the
Company Subsidiaries having the right to vote on any matters in which
shareholders of the Company may vote. There are no voting trusts or other
agreements or understandings to which the Company or any of the Company
Subsidiaries is a party with respect to the voting of the shares or other equity
interests of the Company or any of the Company Subsidiaries.
15
(b) The Company owns, directly or indirectly, all of the outstanding
shares of capital stock of, or other equity or voting interests in, the Company
Subsidiaries, free and clear of any Liens, other than Permitted Liens, and all
of such shares of capital stock or other equity or voting interests are fully
paid, nonassessable and free of preemptive rights. Neither the Company nor any
of the Company Subsidiaries nor, to the Company's Knowledge, either Joint
Venture has any outstanding subscriptions, options, warrants, calls, stock
appreciation rights or other commitments or agreements of any character calling
for the purchase, sale, issuance or voting of any security of any Company
Subsidiary or Joint Venture, including any securities convertible into,
exchangeable for or representing the right to purchase or otherwise receive any
security of any Company Subsidiary or Joint Venture. Except for the Joint
Ventures, the Company does not own, directly or indirectly, any capital stock of
(or other ownership interest in) or any other securities convertible or
exchangeable into or exercisable for capital stock of (or ownership interest in)
any Person other than the Company Subsidiaries. The outstanding shares of
capital stock of, or other equity or voting interests in, the Joint Ventures
owned, directly or indirectly, by the Company are free and clear of any Liens
other than Permitted Liens. Section 4.2(b) of the Company Disclosure Schedule
sets forth each direct and indirect Subsidiary of the Company.
(c) Except as set forth in Section 4.2(c) of the Company Disclosure
Schedule, neither the Company nor any of the Company Subsidiaries has any
indebtedness for borrowed money in excess of $2,000,000.
SECTION 4.3. AUTHORITY.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the Transactions to be
consummated by it, subject to obtaining the vote of holders of a majority of the
issued and outstanding Shares in favor of the approval and adoption of this
Agreement prior to the consummation of the Merger in accordance with Section 251
of the DGCL (the "Company Stockholder Approval"). The execution, delivery and
performance by the Company of this Agreement, and the consummation by the
Company of the Transactions to be consummated by it, have been duly authorized
and approved by the Company and, except for the receipt of the Company
Stockholder Approval, no other corporate action on the part of the Company is
necessary to authorize the execution and delivery by the Company of this
Agreement and the consummation by the Company of the Transactions to be
consummated by it. This Agreement has been duly executed and delivered by the
Company and, assuming due and valid authorization, execution and delivery by
Parent and Merger Sub of this Agreement, constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium or other similar Laws affecting or relating to the
enforcement of creditor's rights generally and (ii) is subject to general
principles of equity.
(b) At a meeting duly called and held, the Board of Directors of the
Company approved this Agreement, the Merger and the other Transactions and,
subject to Section 6.3, resolved to recommend that the Company's stockholders
vote in favor of the adoption of this Agreement at the Special Meeting.
16
SECTION 4.4. CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) No consent or approval of, or filing, notice to, declaration or
registration with, any Governmental Entity, which has not been obtained or made,
is required to be obtained or made by the Company for the execution and delivery
by the Company of this Agreement or the consummation by the Company or the
Company Subsidiaries of the Transactions to be consummated by it or them other
than (i) the consents and approvals set forth in Section 4.4(a) of the Company
Disclosure Schedule, (ii) the filing with the SEC of the Proxy Statement, (iii)
the filing of the Certificate of Merger with the Secretary of State, and (iv)
expiration or early termination of the waiting period under the HSR Act (all of
the foregoing, collectively, the "Other Company Approvals").
(b) Neither the execution and delivery by the Company of this
Agreement, the consummation by the Company or the Company Subsidiaries of the
Transactions to be consummated by it or them, nor compliance by the Company or
the Company Subsidiaries with any of the terms and provisions of this Agreement,
will (i) violate any provision of the Company Certificate or Company By-Laws or
any of the similar organizational documents of any Company Subsidiary or (ii)
assuming that the Company Stockholder Approval and the Other Company Approvals
are obtained or made, as the case may be, (A) violate any Law applicable to the
Company or any of the Company Subsidiaries or any of their respective properties
or assets or (B) violate, result in the loss of any material benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by,
require the consent of or notice to any Person under, or result in the creation
of any Lien upon any of the respective properties or assets of the Company or
any of the Company Subsidiaries under, any Material Contract, except, in the
case of clause (ii) above, for such violations, losses of benefits, defaults,
events, terminations, rights of termination or cancellation, accelerations or
Liens which would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
SECTION 4.5. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) The consolidated financial statements (including the related notes
and schedules) of the Company (the "SEC Financial Statements") included in the
SEC Documents have been prepared in accordance with GAAP (except as may be
otherwise indicated therein or in the notes thereto and except, in the case of
unaudited consolidated quarterly statements, as permitted by Form 10-Q of the
Exchange Act), applied on a consistent basis during the periods involved except
as noted therein, and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
respective dates thereof and the results of operations, cash flows and changes
in stockholders' equity for the respective periods then ended (subject, in the
case of unaudited quarterly statements, to normal year-end audit adjustments and
the absence of footnotes).
(b) The Company has designed disclosure controls and procedures to
ensure that material information relating to the Company, including its
consolidated Company Subsidiaries, is made known to the chief executive officer
and the interim chief financial officer of the Company by others within those
entities. The Company has disclosed, based on its most
17
recent evaluation prior to the date hereof, to the Company's auditors and the
audit committee of the Board of Directors of the Company, (i) any significant
deficiencies and material weaknesses in the design or operation of internal
controls over financial reporting which are reasonably likely to adversely
affect in any material respect the Company's ability to record, process,
summarize and report financial information and (ii) any fraud, whether or not
material, that involves management or other employees who have a significant
role in the Company's internal controls over financial reporting.
(c) Neither the Company nor any of the Company Subsidiaries has any
Liabilities that would be required by GAAP to be reflected in the consolidated
balance sheet of the Company, except (i) for such Liabilities (A) reflected,
reserved against or otherwise disclosed in the consolidated balance sheet of the
Company as of July 1, 2006 (including the notes thereto), which is included in
the SEC Financial Statements, (B) incurred in the ordinary course of business
consistent with past practice, (C) arising under the terms of (but not from any
breach or default under) any Contract or Permit binding upon the Company or any
of the Company Subsidiaries that is either (1) disclosed in the Company
Disclosure Schedule or (2) not required to be so disclosed by the terms of this
Agreement, and including any such Contract that is entered into, or such Permit
that is obtained, after the date of this Agreement, as long as entering into
such Contract or obtaining such permit does not violate any provision of this
Agreement, or (D) incurred pursuant to or in connection with this Agreement or
the Transactions and (ii) for such other Liabilities as would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
SECTION 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since July 1, 2006, no events, changes, conditions or developments have
occurred which have had or would reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect. From July 1, 2006 to the
date of this Agreement, (a) the Company and the Company Subsidiaries have
carried on and operated their respective businesses in all material respects in
the ordinary course of business, and (b) there has been no:
(i) (A) declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock of the Company (other than
dividends declared or paid by any Company Subsidiary to any other Company
Subsidiary or to the Company) or (B) issuance, sale, grant, disposal of, pledge
or other encumbrance by the Company or any Company Subsidiary, or any authorized
or proposed issuance, sale, grant, disposition or pledge or other encumbrance by
the Company or any Company Subsidiary of, any shares of the Company's capital
stock or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for any shares of the Company's capital stock,
or the grant by the Company or any Company Subsidiary of any rights, warrants,
options, calls, commitments or any other agreements of any character to purchase
or acquire any shares of the Company's capital stock or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for,
any shares of the Company's capital stock, other than upon exercise of Company
Options or settlement of vested Company RSUs;
(ii) redemption or other acquisition by the Company of any of its
capital stock;
18
(iii) stock split, reverse stock split, combination or
reclassification of the Shares;
(iv) creation, incurrence or assumption of any indebtedness for
borrowed money, issuance of any note, bond or other debt security, or guarantee
of any indebtedness (other than borrowings under the Company's existing line of
credit facilities and guarantees of Real Property Leases in the ordinary course
of business), in such cases in excess of $1,000,000 in the aggregate or any
loans, advances (other than advances to employees of the Company or any Company
Subsidiary in the ordinary course of business) or capital contributions by the
Company or any Company Subsidiary to, or investments in, any other Person other
than to any of the Company and the Company Subsidiaries;
(v) sale, transfer, license, mortgage, encumbrance or other
disposal of any of the Company's properties or assets with a value in excess of
$2,000,000 to any Person other than the Company or a wholly-owned Company
Subsidiary, other than sales of inventory or licenses in the ordinary course of
business, or cancellation, release or assignment of any indebtedness for
borrowed money in excess of $2,000,000 to any such Person;
(vi) grant of a license (whether written or oral, but excluding
any renewal, consistent with past practice, of any existing license) to, or any
other rights with respect to, any Company Intellectual Property to any Person
that would be material to the Company and the Company Subsidiaries when taken as
a whole;
(vii) material acquisition or investment by the Company or any
Company Subsidiary (other than purchases of inventory, supplies and other assets
in the ordinary course of business and investments made in accordance with the
Company's cash management policies in the ordinary course of business consistent
with past practice), whether by purchase of stock or securities, merger or
consolidation, contributions to capital, property transfers, or purchase or
exclusive license of any property or assets, of or in any Person other than a
wholly-owned Company Subsidiary or to the extent contemplated by the Company's
capital expenditure budget for Fiscal Year 2006 (as most recently updated if
applicable), a copy of which has been provided to Parent prior to the date of
this Agreement, or for the following fiscal year of the Company, if and to the
extent applicable;
(viii) (A) increase or decrease in the rate or terms of
compensation or benefits payable by the Company or any of the Company
Subsidiaries to any of their respective directors, officers or employees whose
annual base salary exceeds $150,000, (B) employment or severance agreement
entered into, or grant or increase by the Company or any Company Subsidiary in
the rate or terms of any bonus, pension, severance or other employee benefit
plan, policy, agreement or arrangement with, for or in respect of any of their
respective directors, officers or employees whose annual base salary exceeds
$150,000 or any severance or termination payment to any such Person or (C)
establishment, adoption, entrance into or termination by the Company or any
Company Subsidiary of any collective bargaining agreement or Benefit Plan or any
employee benefit plan, policy or arrangement or amendment or waiver of any
performance or vesting criteria or any acceleration of vesting, exercisability
or funding of any of the foregoing, except in any such case (1) as required
pursuant to the terms of plans or
19
agreements in effect on the date of this Agreement, (2) occurring in the
ordinary course of business and, in the aggregate, consistent with past practice
or (3) required by Law;
(ix) amendment to the Company Certificate or Company By-Laws (or
the equivalent governing documents of the Company Subsidiaries);
(x) material change by the Company in accounting methods,
principles or practices except as required by GAAP or by a Governmental Entity;
(xi) (A) except as required by applicable Law, change by the
Company or any Company Subsidiary in any election in respect of Taxes or any
material accounting method in respect of Taxes, (B) entry by the Company or any
Company Subsidiary into any tax allocation agreement, tax sharing agreement or
closing agreement, or (C) settlement or compromise by the Company or any Company
Subsidiary of any claim, notice, audit report or assessment in respect of Taxes
individually in excess of $500,000 or in the aggregate in excess of $2,000,000;
(xii) write up, write down or write off of the book value by the
Company or any Company Subsidiary of any assets, individually or in the
aggregate, for the Company and the Company Subsidiaries taken as a whole, in
excess of $1,000,000, except in accordance with GAAP consistently applied;
(xiii) subject to Section 6.3(c), any action taken by the Company
or any Company Subsidiary to exempt any Person (other than Parent or Merger Sub)
or any action taken by such Person from, or make such Person or action not
subject to, (A) the provisions of Section 203 of the DGCL, if applicable, or (B)
any other state takeover law or state law that purports to limit or restrict
business combinations or the ability to acquire or vote shares;
(xiv) layoff by the Company or any Company Subsidiary of
employees that would implicate the Worker Adjustment and Retraining Notification
Act of 1988, as amended;
(xv) settlement of litigation (or threatened litigation) by the
Company or any Company Subsidiary for an amount in excess of $375,000 per
litigation net of insurance proceeds or in the aggregate in excess of $1,500,000
net of insurance proceeds; or
(xvi) agreement or commitment, whether in writing or otherwise,
to take any action described in clauses (i) through (xv) above.
SECTION 4.7. LITIGATION. Except for any litigation (or threatened
litigation) concerning this Agreement or the Merger, if any, there is no action,
suit, proceeding, charge or complaint pending or, to the Company's Knowledge,
threatened against the Company or any of the Company Subsidiaries or any of
their respective properties or assets (including the Owned Real Property) or any
of their respective officers, directors or employees (in their capacities as
such) by or before (or, in the case of any such threatened matter, that would
come before) any Governmental Entity that is reasonably expected to result in a
Liability to the Company or any Company Subsidiaries in excess of $375,000 net
of insurance proceeds or in the aggregate in excess of $1,500,000 net of
insurance proceeds or have a Company Material Adverse Effect.
20
Neither the Company nor any Company Subsidiary is a party or subject to or in
default under any judgment, order, writ, decree or injunction of any
Governmental Entity, or is in default under any settlement agreement to which
the Company or any Company Subsidiary is a party, (a) as of the date of this
Agreement, that is material to the Company and the Company Subsidiaries, taken
as a whole, or that would otherwise prevent or materially delay the Company from
performing its obligations under this Agreement in any material respect or (b)
as of the Closing Date, except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. To the
Company's Knowledge, there are no SEC inquiries or investigations, other
governmental inquiries or investigations or internal investigations pending or
threatened, in each case regarding any accounting practices of the Company or
any Company Subsidiary or any malfeasance by any director, officer or employee
of the Company or any Company Subsidiary which would reasonably be expected to
have a Company Material Adverse Effect.
SECTION 4.8. PERSONAL PROPERTY.
The Company and the Company Subsidiaries have legal and valid title to, or
in the case of leased assets and properties, valid and subsisting leasehold
interests in, all of the material tangible personal assets and properties used
or held for use by the Company and the Company Subsidiaries in connection with
the conduct of the business of the Company and the Company Subsidiaries, free
and clear of all material Liens other than Permitted Liens. All tangible
personal property owned or leased by the Company or any Company Subsidiary is in
good condition, ordinary wear and tear excepted and except for such failures to
be in good condition as would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
SECTION 4.9. REAL PROPERTY.
(a) Section 4.9(a) of the Company Disclosure Schedule sets forth a
list as of the date of this Agreement of all real property owned by the Company
or any Company Subsidiary (collectively, the "Owned Real Property") and, for
each parcel of Owned Real Property, identifies the street address of such Owned
Real Property.
(b) Section 4.9(b) of the Company Disclosure Schedule sets forth a
list as of the date of this Agreement of all real property leased, subleased,
licensed or otherwise occupied (whether as tenant, subtenant or pursuant to
other occupancy arrangements) by the Company or any Company Subsidiary
(collectively, including the improvements thereon, the "Leased Real Property")
and, for each Leased Real Property, identifies the street address of such Leased
Real Property.
(c) The Company or a Company Subsidiary has good and marketable fee
simple title to all Owned Real Property and enjoys peaceful and undisturbed
possession of all Owned Real Property and, to the Company's Knowledge, all
Leased Real Property, free and clear of all material Liens, except Permitted
Liens. For the purposes of this Section 4.9(c), "marketable" title shall mean
title that a reasonable buyer would accept from a reasonable seller.
(d) The Company has made available to Parent and Merger Sub a true and
complete copy of each written Real Property Lease and a written summary of the
material terms
21
of any oral Real Property Lease in existence as of the date of this Agreement.
Neither the Company nor any Company Subsidiary has collaterally assigned or
granted any other security interest in any Real Property Lease or any interest
therein.
(e) Except (i) as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect and (ii) for
Permitted Liens, as of the date of this Agreement, none of the Owned Real
Properties or the Leased Real Properties is subject to any lease, sublease,
license or other agreement granting to any other Person any right to the use or
occupancy of such Owned Real Property or Leased Real Property or any part
thereof, and other than the right of Parent and Merger Sub pursuant to this
Agreement, as of the date of this Agreement there are no outstanding options,
rights of first offer or rights of first refusal to purchase the Owned Real
Property or any portion thereof or interest therein. As of the date of this
Agreement, neither the Company nor any Company Subsidiary is a party to any
agreement or option to purchase any real property or interest therein.
(f) To the Company's Knowledge, there does not exist any condemnation
or eminent domain proceedings that affect any material Owned Real Property or
material Leased Real Property.
(g) As of the date of this Agreement, the Owned Real Property and the
Leased Real Property comprise all the real property used in the respective
businesses of the Company and the Company Subsidiaries except for such other
real property, if any, which if unavailable would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
(h) All material buildings, structures, improvements, fixtures,
building systems and equipment, and all components thereof, included in the
Owned Real Property and the Leased Real Property are in good condition, ordinary
wear and tear excepted and except for such failures to be in good condition as
would not reasonably be expected to have a Company Material Adverse Effect.
SECTION 4.10. TAXES. Except as would not reasonably be expected to have a
Company Material Adverse Effect: (a) all Tax returns, reports and similar
statements, including information returns and reports, claims for refund, and
amended or substituted returns and reports (including any schedules attached
thereto) required to be filed by or on behalf of the Company or any of the
Company Subsidiaries (collectively, the "Returns"), have been timely filed
(taking into account any extensions); (b) as of the times of filing, the Returns
were correct; (c) all Taxes required to be paid by the Company and the Company
Subsidiaries (as shown on the Returns) have been timely paid or adequately
provided for on the most recent SEC Financial Statements filed prior to the date
hereof; (d) to the Company's Knowledge, as of the date of this Agreement, there
are no pending claims or claims threatened in writing against the Company or any
of the Company Subsidiaries in respect of any Tax; (e) as of the date of this
Agreement, neither the Company nor any Company Subsidiary has waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency; (f) the Company and each Company
Subsidiary have withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party; (g) neither the Company
nor any Company Subsidiary (i) has
22
been a member of an affiliated group filing a consolidated federal income tax
return (other than a group the common parent of which was the Company) or (ii)
has any liability for the Taxes of any Person (other than the Company or any
present or former Company Subsidiary) under Treasury regulation Section 1.1502-6
(or any similar provision of state, local or foreign Law) as a transferee or
successor, by contract or otherwise; (h) neither the Company nor any Company
Subsidiary has distributed the stock of another company in a transaction that
was purported or intended to be governed by Section 355 or Section 361 of the
Code; (i) neither the Company nor any Company Subsidiary has engaged in any
"listed transaction" described in Treasury regulation Section 1.6011-4(b)(2);
(j) neither the Company nor any Company Subsidiary is a party to or bound by any
Tax allocation or sharing agreement; and (k) an election under Section
382(l)(5)(H) of the Code and Treasury regulation 1.382-9(i) not to apply the
provisions of Section 382(l)(5) of the Code to the ownership change occurring
pursuant to the plan of reorganization confirmed by the bankruptcy court on June
21, 2005 has been made by each of Spiegel Holdings, Inc. and the Company on
their respective federal income tax returns for their 2005 fiscal years.
SECTION 4.11. COMPLIANCE WITH LAWS; PERMITS.
Except as would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, to the Company's Knowledge,
neither the Company nor any of the Company Subsidiaries is in violation of any
Law applicable to the Company or any of the Company Subsidiaries. Except as
would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect, the Company and the Company Subsidiaries, and
to the Company's Knowledge, the Joint Ventures, each holds all permits,
licenses, consents, authorizations, certificates, variances, exemptions, orders
and approvals (collectively, "Permits") of and from all, and has made all
material declarations and filings with, Governmental Entities necessary for the
lawful conduct of their respective businesses, as presently conducted, and to
own, lease, license and use their respective properties and assets. All of such
Permits are valid, and in full force and effect, except as would not reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect.
SECTION 4.12. EMPLOYEE BENEFITS.
(a) Set forth in Section 4.12(a) of the Company Disclosure Schedule is
a complete and correct list as of the date of this Agreement of each "employee
benefit plan" (within the meaning of Section 3(3) of ERISA), each stock
purchase, stock award, severance, retention, employment, change-in-control,
deferred compensation or supplemental retirement agreement, program, policy or
arrangement, and each material bonus, incentive, vacation or other material
benefit plan, agreement, program, policy or arrangement, any of which is
maintained, administered or sponsored by the Company or any of the Company
Subsidiaries or with respect to which the Company or any of the Company
Subsidiaries has or would reasonably be expected to have any material Liability.
All such plans, agreements, programs, policies and arrangements are hereinafter
referred to collectively as the "Benefit Plans" and individually as a "Benefit
Plan."
23
(b) With respect to each Benefit Plan, the Company has made available
to Parent (i) a complete and correct copy of such plan or a summary of such
plan, (ii) any summary plan description, and (iii) the most recent actuarial
valuation report, if applicable.
(c) Each Benefit Plan has been operated, funded and administered, in
all material respects, in accordance with its terms and the requirements of
ERISA and the Code and any other applicable Laws. All contributions and premium
payments that are due with respect to any Benefit Plan have been made and all
contributions for any period ending on or before the Closing Date that are not
yet due shall have been made or properly accrued.
(d) Any Benefit Plan that is (i) a "single-employer plan" within the
meaning of Section 4001(15) of ERISA or (ii) a Multiemployer Plan is set forth
in Section 4.12(a) of the Company Disclosure Schedule. Each Benefit Plan that is
intended to meet the requirements of a "qualified plan" under Section 401(a) of
the Code has received a determination from the Internal Revenue Service that
such Benefit Plan is so qualified (taking into account the legislation commonly
referred to as "GUST") or is a prototype plan which is the subject of an opinion
letter from the Internal Revenue Service on which the Company is entitled to
rely, and, to the Company's Knowledge, there are no facts or circumstances that
would be reasonably likely to adversely affect the qualified status of any such
Benefit Plan.
(e) To the Company's Knowledge, there have been no prohibited
transactions (as defined in Section 406 of ERISA or Section 4975 of the Code)
with respect to any Benefit Plan, and no fiduciary (as defined in Section 3(21)
of ERISA) has any Liability for breach of fiduciary duty or any other failure to
act or comply in connection with the administration or investment of the assets
of any Benefit Plan that, in either case, would reasonably be expected to result
in a material Liability to the Company or the Company Subsidiaries. There are no
actions, suits, proceedings, hearings, (to the Company's Knowledge)
investigations, claims (other than routine claims for benefits in the ordinary
course) pending or, to the Company's Knowledge, threatened in writing with
respect to any Benefit Plan, other than any such matters that would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(f) Neither the Company, any Company Subsidiary, nor any ERISA
Affiliate contributes to, has any obligation to contribute to, or has any
current or potential Liability or obligations under or with respect to any
"defined benefit plan" (as defined in Section 3(35) of ERISA) or any
Multiemployer Plan. Neither the Company, any Company Subsidiary, nor any ERISA
Affiliate has incurred any Liability or obligation on account of a "partial
withdrawal" or a "complete withdrawal" (within the meaning of Sections 4203 and
4205 of ERISA) from any Multiemployer Plan, no such Liability or obligation has
been asserted, and there are no events or circumstances that would reasonably be
expected to result in the incurrence by the Company or any Company Subsidiary of
any such Liability or obligation; and neither the Company, any Company
Subsidiary nor any ERISA Affiliate has any Liability or obligation described in
Section 4204 of ERISA.
(g) Neither the Company nor any Company Subsidiary maintains,
contributes to or has an obligation to contribute to, or has any Liability with
respect to, the provision of any health or life insurance or other welfare-type
benefits for current or future retirees or terminated
24
directors, officers, employees or contractors (or any spouse or other dependant
thereof) other than in accordance with COBRA. The Company, the Company
Subsidiaries and the ERISA Affiliates are in compliance in all material respects
with the requirements of COBRA.
(h) To the Company's Knowledge, Section 4.12(h) of the Company
Disclosure Schedule sets forth, in all material respects, the amount of any
compensation or remuneration of any kind or nature (including with respect to
any terminated employees) which is or may become payable to any employee of the
Company or the Company Subsidiaries, in whole or in part by reason of the
Transactions, including the payment of any benefits under any Benefit Plan (the
"Change of Control Payments") assuming the Effective Date is January 1, 2007 and
based on the assumptions and exclusions noted on Section 4.12(h) of the Company
Disclosure Schedule or the reports and/or documents (if any) referenced thereon.
To the Company's Knowledge, none of the assumptions and exclusions noted on
Section 4.12(h) of the Company Disclosure Schedule or the reports and/or
documents (if any) referenced thereon are unreasonable. The Transactions will
not cause the acceleration of vesting in, or payment of, any benefits under any
Benefit Plan and shall not otherwise accelerate or increase any Liability under
any Benefit Plan.
SECTION 4.13. LABOR AND EMPLOYMENT MATTERS.
With respect to the Company and the Company Subsidiaries, (a) as of the
date of this Agreement there is no collective bargaining agreement with any
labor organization; (b) no labor organization or group of employees has filed
any representation petition or made any written or oral demand for recognition;
(c) no union organizing or decertification efforts are underway or, to the
Company's Knowledge, threatened; (d) no labor strike, work stoppage, slowdown,
or other material labor dispute exists or, to the Company's Knowledge, is
threatened in writing; and (e) there is no employment-related charge, complaint,
grievance or, to the Company's Knowledge, investigation pending before the
National Labor Relations Board or any comparable Governmental Entity, or, to the
Company's Knowledge, threatened in writing.
SECTION 4.14. MATERIAL CONTRACTS.
Section 4.14 of the Company Disclosure Schedule sets forth a complete and
correct list as of the date of this Agreement of all Material Contracts. The
Company has made available to Parent complete and correct copies of each such
Material Contract. With respect to each Material Contract to which the Company
or any of the Company Subsidiaries is a party (and, for purposes of this Section
4.14, without giving effect to the execution and delivery of this Agreement or
the consummation of any of the Transactions), (a) neither the Company nor any of
the Company Subsidiaries has breached, or is in default under, nor has any of
them received written notice of breach or default under (or of any condition
which with the passage of time or the giving of notice would cause a violation
or default under), such Contract, (b) to the Company's Knowledge, no other party
to such Contract has breached or is in default of any of its obligations
thereunder, and (c) such Contract is in full force and effect and the Company or
the applicable Company Subsidiary party thereto, as the case may be, has
performed all obligations required to be performed by it under such Contract as
of the date of this Agreement or as of the date of the Closing, as the case may
be, except in any such case for breaches, defaults or failures to be in full
force and effect or to perform obligations that would not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
25
SECTION 4.15. INTELLECTUAL PROPERTY.
(a) Section 4.15(a) of the Company Disclosure Schedule sets forth a
complete and correct list as of the date of this Agreement of all of the
following that are owned by the Company or any of the Company Subsidiaries (the
"Company-Owned Intellectual Property"): (i) trademark and service xxxx
registrations and pending applications, copyright registrations and pending
applications; (ii) trade or corporate names, and Internet domain names; and
(iii) patents and patent applications. The Company and the Company Subsidiaries
as applicable are the sole and exclusive owners (including, as applicable,
record owners) of all such Company-Owned Intellectual Property. The Company may
also own common law rights in Intellectual Property that are not the subject of
registrations or pending applications.
(b) The Company and the Company Subsidiaries own, or possess the right
to use pursuant to a valid and enforceable license agreement, free and clear of
all Liens (other than Permitted Liens), all Intellectual Property used in or
necessary to conduct their respective businesses as currently conducted
(including the Company-Owned Intellectual Property, the "Company Intellectual
Property"), except where the failure to own or possess such rights would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. No loss or expiration of any material Company-Owned
Intellectual Property is pending or, to the Company's Knowledge, threatened in
writing and all material Company Intellectual Property will be owned or
available for use by the Company and/or one or more of the Company Subsidiaries,
as applicable, on identical terms and conditions immediately following the
Closing as such material Company Intellectual Property was owned or available
for use by the Company and/or the Company Subsidiaries immediately prior to the
Closing. There have been no written claims against the Company or any Company
Subsidiary during the period from June 21, 2005 until the date of this
Agreement, or which are pending as of the date of this Agreement, contesting the
validity, use, ownership or enforceability of any Company-Owned Intellectual
Property. Except as would not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect, to the Company's Knowledge,
neither the Company nor any of the Company Subsidiaries is infringing,
misappropriating or otherwise violating, and the operation of the business of
the Company or any of the Company Subsidiaries as currently conducted does not
infringe, misappropriate, or otherwise violate any Intellectual Property of any
other Person. Except as would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect, to the Company's
Knowledge, no Person is infringing, misappropriating or otherwise violating any
Company-Owned Intellectual Property.
(c) The computer systems, including the software, hardware, networks
and interfaces currently used in the conduct of the businesses of the Company
and the Company Subsidiaries are sufficient in all material respects for (i) the
current needs of such businesses and (ii) immediately following the Effective
Time, the continued use of such computer systems as currently used in such
businesses.
SECTION 4.16. ENVIRONMENTAL MATTERS.
26
Except as would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, (a) the Company and the Company
Subsidiaries are in compliance with all applicable Environmental Laws and (b) no
environmental condition, claim, suit, action, investigation or other proceeding
exists, is pending or, to the Company's Knowledge, is threatened against the
Company or any of the Company Subsidiaries.
SECTION 4.17. AFFILIATE TRANSACTIONS.
There are no transactions, agreements, arrangements or understandings
between the Company or any of the Company Subsidiaries, on the one hand, and any
Affiliate of the Company (other than the Company Subsidiaries), on the other
hand, of the type that would be required to be disclosed under Item 404 of
Regulation S-K under the Securities Act.
SECTION 4.18. OPINIONS OF FINANCIAL ADVISORS.
The Board of Directors of the Company has received the opinions of Xxxxxxx,
Xxxxx & Co. and Xxxxxxx Xxxxx & Company, the Company's financial advisors, that,
as of the date of this Agreement, the Merger Consideration is fair from a
financial point of view to the holders of Shares (other than Parent, Merger Sub
and their respective Affiliates). True and correct copies of such opinions shall
be delivered to Parent promptly after the execution of this Agreement.
SECTION 4.19. SECTION 203 OF THE DGCL.
The Board of Directors of the Company has taken all necessary action such
that the restrictions imposed on business combinations by Section 203 of the
DGCL are inapplicable to this Agreement and the Merger.
SECTION 4.20. BROKER'S FEES.
Except for Xxxxxxx, Xxxxx & Co. and Xxxxxxx Xxxxx & Company, no agent,
broker, finder or investment banker is entitled to any broker's fees,
commissions or finder's fees from the Company or any of the Company Subsidiaries
in connection with any of the Transactions. Section 4.20 of the Company
Disclosure Schedule sets forth the Company's good faith estimate of the fees and
commissions payable to Xxxxxxx, Xxxxx & Co. and Xxxxxxx Xxxxx & Company in
connection with the Transactions.
SECTION 4.21. NO OTHER REPRESENTATIONS OR WARRANTIES.
Except for the representations and warranties expressly contained in this
Article IV, neither the Company nor any other Person makes any express or
implied representation or warranty on behalf of the Company. The Company hereby
disclaims any such other representation or warranty, whether by the Company, any
Company Subsidiary, or any of their respective Representatives or any other
Person, notwithstanding the delivery or disclosure to Parent, Merger Sub or any
other Person of any documentation or other written or oral information by the
Company, any Company Subsidiary or any of their respective Representatives or
any other Person, and neither the Company nor any other Person will have or be
subject to any liability or indemnification obligation to Parent, Merger Sub or
any other Person resulting from such delivery or disclosure, or Parent's or
Merger Sub's or any of their respective
27
representatives' use, of any such documentation or other information (including
any information, documents, projections, forecasts or other material included in
any "teaser" or offering memorandum, or made available to Parent or Merger Sub
or any of their respective representatives in certain "data rooms" or management
presentations in expectation of the Transactions).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to the
Company as follows:
SECTION 5.1. CORPORATE ORGANIZATION.
Each of Parent and Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite power and authority to carry on its business
as it is now being conducted. Each of Parent and Merger Sub is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not, when
aggregated with all other such failures, reasonably be expected to have a
material adverse effect on Parent's or Merger Sub's ability to perform its
obligations under this Agreement or prevent or delay the consummation of the
Transactions (a "Parent Material Adverse Effect").
SECTION 5.2. AUTHORITY.
Each of Parent and Merger Sub has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
Transactions to be consummated by it. The execution, delivery and performance by
Parent and Merger Sub of this Agreement, and the consummation by each of Parent
and Merger Sub of the Transactions to be consummated by it, have been duly
authorized and approved by Parent and Merger Sub, and no other corporate action
on the part of Parent or Merger Sub is necessary to authorize the execution and
delivery by Parent and Merger Sub of this Agreement and the consummation by each
of Parent and Merger Sub of the Transactions to be consummated by it. This
Agreement has been duly executed and delivered by Parent and Merger Sub, and,
assuming due and valid authorization, execution and delivery by the Company of
this Agreement, constitutes a valid and binding obligation of each of Parent and
Merger Sub, enforceable against each of them in accordance with its terms,
except that such enforceability (a) may be limited by bankruptcy, insolvency,
moratorium or other similar Laws affecting or relating to the enforcement of
creditor's rights generally and (b) is subject to general principles of equity.
SECTION 5.3. CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) No consent or approval of, or filing, declaration or registration
with, any Governmental Entity which has not been received or made is required to
be obtained by or made by Parent or Merger Sub for the consummation by each of
Parent and Merger Sub of the
28
Transactions to be consummated by it other than (i) the filing of the
Certificate of Merger with the Secretary of State and (ii) such other filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Exchange Act Rules and
the HSR Act (all of the foregoing, collectively, the "Parent Approvals").
(b) Neither the execution and delivery by Parent and Merger Sub of
this Agreement, the consummation by each of Parent and Merger Sub of the
Transactions to be consummated by it, nor compliance by Parent and Merger Sub
with any of the terms and provisions of this Agreement, will (i) violate any
provision of the Certificate of Incorporation or By-Laws (or similar
organizational documents with different names) of Parent or Merger Sub or (ii)
assuming that the Parent Approvals are obtained or made, as the case may be, (A)
violate any Law applicable to Parent or Merger Sub or any of their respective
properties or assets or (B) violate, result in the loss of any material benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by,
require the consent of or notice to any Person under or result in the creation
of any Lien upon any of the respective properties or assets of Parent or Merger
Sub under any Contract to which Parent or Merger Sub is a party, or by which
either of them or any of their respective properties or assets may be bound or
affected, except, in the case of clause (ii) above, for such violations, losses
of benefits, defaults, events, terminations, rights of termination or
cancellation, accelerations or Lien creations which, in the aggregate, would not
reasonably be expected to have a Parent Material Adverse Effect.
SECTION 5.4. MERGER SUB.
Merger Sub was formed solely for the purpose of engaging in the Merger and
the other Transactions and has not engaged in any business activities or
conducted any operations, in each case since the date of its incorporation other
than in connection with the Merger and the other Transactions. Parent owns
beneficially and of record all issued and outstanding shares of capital stock of
Merger Sub.
SECTION 5.5. SUFFICIENT FUNDS.
Parent has committed debt and/or equity financing letters in force as of
the date hereof, copies of which have been provided to the Company, to pay the
Merger Consideration and to make the payments to holders of Company Options and
Company RSUs as contemplated in Section 3.4 and to make such other payments as
are required under the terms of the Benefit Plans as a result of the Closing.
SECTION 5.6. OWNERSHIP OF SHARES.
Neither of Parent and Merger Sub is, nor at any time during the last three
years has either of them been, an "interested stockholder" (as defined in
Section 203 of the DGCL) of the Company. None of Parent, Merger Sub and the
other Affiliates of Parent beneficially owns any Shares.
SECTION 5.7. OTHER AGREEMENTS.
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Except as disclosed by Parent to the Company in writing prior to the date
of this Agreement, neither Parent nor Merger Sub has entered into any Contract
with any officer or director of the Company in connection with the Transactions.
SECTION 5.8. BROKER'S FEES.
Neither Parent nor Merger Sub nor any of their Affiliates, nor any of their
respective officers or directors on behalf of Parent or Merger Sub or any of
their Affiliates, has employed any financial advisor, broker or finder in a
manner that would result in any Liability for any broker's fees, commissions or
finder's fees in connection with any of the Transactions.
SECTION 5.9. SOLVENCY. As of the Effective Time, assuming satisfaction of
the conditions to the obligation of Parent and Merger Sub to consummate the
Merger, or waiver of such conditions, and after giving effect to all of the
Transactions, including without limitation, the payment of the aggregate Merger
Consideration and payment in respect of the Company Options and Company RSUs
contemplated by Section 3.4, and payment of all related fees and expenses, each
of Parent and the Surviving Corporation will be Solvent. For the purposes of
this Section 5.9 the term "Solvent" when used with respect to any Person, means
that, as of any date of determination, (a) the amount of the "fair saleable
value" of the assets of such Person will, as of such date, exceed (i) the value
of all "liabilities" of such Person, including "contingent and other
liabilities", as of such date, as such quoted terms are generally determined in
accordance with applicable federal laws governing determinations of the
insolvency of debtors, and (ii) the amount that will be required to pay the
probable liabilities of such Person on its existing debts (including contingent
liabilities) as such debts become absolute and matured, (b) such Person will not
have, as of such date, an unreasonably small amount of capital for the operation
of the businesses in which it is engaged or proposed to be engaged following
such date, and (c) such Person will be able to pay its liabilities, including
contingent and other liabilities, as they mature. For purposes of this
definition, " not have an unreasonably small amount of capital for the operation
of the businesses in which it is engaged or proposed to be engaged" and "able to
pay its liabilities, including contingent and other liabilities, as they mature"
means that such Person will be able to generate enough cash from operations,
asset dispositions or refinancing, or a combination thereof, to meet its
obligations as they become due.
ARTICLE VI
COVENANTS
SECTION 6.1. CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME.
(a) Except as (i) set forth in Section 6.1(a) of the Company
Disclosure Schedule, (ii) expressly contemplated or permitted by this Agreement,
or (iii) required by Law, during the period from the date of this Agreement to
the earlier of the Effective Time or the termination of this Agreement in
accordance with Section 8.1, unless Parent otherwise agrees in writing, the
Company shall, and shall cause each of the Company Subsidiaries to, (A) conduct
its business in all material respects in the ordinary course of business
consistent with past practice and (B) use its reasonable best efforts to
maintain and preserve substantially intact its business organization and the
goodwill of those having business relationships with it.
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(b) Without limiting the generality of the foregoing, and except as
(1) set forth in Section 6.1(b) of the Company Disclosure Schedule, (2)
expressly contemplated or permitted by this Agreement, or (3) required by Law,
during the period from the date of this Agreement to the earlier of the
Effective Time or the termination of this Agreement in accordance with Section
8.1, the Company shall not, and shall not permit any of the Company Subsidiaries
to, without the prior written consent of Parent:
(i) (A) issue, sell, grant, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, sale, grant, disposition or
pledge or other encumbrance of, (1) any additional shares of its capital stock
or any securities or rights convertible into, exchangeable for, or evidencing
the right to subscribe for any shares of its capital stock, or any rights,
warrants, options, calls, commitments or any other agreements of any character
to purchase or acquire any shares of its capital stock or any securities or
rights convertible into, exchangeable for, or evidencing the right to subscribe
for, any shares of its capital stock, other than upon exercise of Company
Options or settlement of Company RSUs outstanding on the date of this Agreement
(each in accordance with the terms thereof on the date hereof), or (2) any other
securities in respect of, in lieu of, or in substitution for, any shares of its
capital stock outstanding on the date of this Agreement, (B) redeem, purchase or
otherwise acquire, or propose to redeem, purchase or otherwise acquire, any of
its outstanding shares of capital stock or any options, warrants or convertible
securities or other rights to acquire any shares of its capital stock, or (C)
split, combine, subdivide or reclassify any shares of its capital stock or
declare, set aside for payment or pay any dividend, or make any other
distribution in respect of any shares of capital stock or any options, warrants,
convertible securities or other rights to acquire any capital stock, or
otherwise make any payments to stockholders in their capacity as such, other
than dividends declared or paid by any Company Subsidiary to any other Company
Subsidiary or to the Company;
(ii) other than borrowings under the Company's existing line of
credit facility and guaranties of Real Property Leases in the ordinary course of
business, create, incur, assume or modify in any material respect any
indebtedness for borrowed money, or issue any note, bond or other debt security,
or guarantee any indebtedness, in such cases in excess of $1,000,000 in the
aggregate or make any loans, advances (other than advances to employees of the
Company or any Company Subsidiary in the ordinary course of business) or capital
contributions to or investments in any other Person other than to any of the
Company and the Company Subsidiaries;
(iii) sell, transfer, mortgage, encumber or otherwise dispose of
any of its properties or assets with a value in excess of $2,000,000 to any
Person other than the Company or a wholly-owned Company Subsidiary, or cancel,
release or assign any indebtedness in excess of $2,000,000 to any such Person,
except (A) pursuant to contracts and agreements in force at the date of this
Agreement or renewals of any such contract or agreement, (B) pursuant to plans
disclosed in the Company Disclosure Schedule, (C) the disposition of property
identified as "excess property" on Section 6.1(b)(iii) of the Company Disclosure
Schedule or (D) sales of inventory in the ordinary course of business;
(iv) grant a license (whether written or oral but excluding any
renewal, consistent with past practice, of any existing license) to, or any
other rights with respect to, any
31
material Company Intellectual Property to any Person except in the ordinary
course of business consistent with past practice; provided in no event may the
Company or the Company Subsidiaries grant a license (whether written or oral but
excluding any renewal, consistent with past practice, of any existing license)
that would be material to the Company's licensing program;
(v) enter into any Contract containing any non-competition
covenant binding upon the Company or any Company Subsidiary (other than Real
Property Leases or license agreements in the ordinary course of business and not
otherwise prohibited by this Section 6.1);
(vi) make any material acquisition or investment (other than
purchases of inventory, supplies and other assets in the ordinary course of
business and investments made in accordance with the Company's cash management
policies in the ordinary course of business consistent with past practice),
whether by purchase of stock or securities, merger or consolidation,
contributions to capital, property transfers, or purchases or exclusive licenses
of any property or assets, of or in any Person other than a wholly-owned Company
Subsidiary or to the extent contemplated by the Company's capital expenditure
budget for Fiscal Year 2006 (as most recently updated if applicable), a copy of
which has been provided to Parent prior to the date of this Agreement, or for
the following fiscal year of the Company, if and to the extent applicable;
(vii) take any action (or fail to take any action) that would
have the effect of allowing any employee who is not currently a participant in
the Xxxxx Xxxxx Holdings, Inc. Senior Officer Change in Control Compensation
Plan and set forth on Section 4.12(h) of the Company Disclosure Schedule, to
become a participant or become eligible for any benefit under such plan;
(viii) except for binding written commitments outstanding as of
the date hereof and set forth on Section 4.12(a) of the Company Disclosure
Schedule, provide any outplacement services to any employee or former employee
of the Company at a cost in excess of $50,000 in the aggregate; provided that
the Company shall be permitted to provide outplacement services to "Tier 1" and
"Tier 2" participants in an aggregate amount not to exceed $125,000 as required
pursuant to the Xxxxx Xxxxx Holdings, Inc. Senior Officer Change in Control
Compensation Plan;
(ix) (A) increase or decrease the rate or terms of compensation
or benefits payable by the Company or any of the Company Subsidiaries to any of
their respective directors, officers or employees, (B) enter into any employment
or severance agreement with or grant or increase or otherwise modify the rate or
terms of any bonus, pension, severance or other employee benefit plan, policy,
agreement or arrangement with, for or in respect of any of their respective
directors, officers or employees, or otherwise make any material amendment to
any employee benefit plan, (C) establish, adopt, enter into or terminate any
collective bargaining agreement or Benefit Plan or any employee benefit plan,
policy or arrangement that, if it were in effect on the date of this Agreement,
would be a Benefit Plan, or take any affirmative action to amend or waive any
performance or vesting criteria or accelerate vesting, exercisability or funding
of any of the foregoing, or (D) hire any person as a director or officer of the
Company or
32
any Company Subsidiary whose annual base salary exceeds $150,000, except in any
such case for grants, increases or other actions described in the foregoing
clauses (A) and (B), (1) required pursuant to the terms of plans or agreements
in effect on the date of this Agreement, (2) occurring in the ordinary course of
business consistent with past practice with respect to any Person who is not a
director or officer of the Company or a Company Subsidiary or (3) required by
Law; provided, however, that notwithstanding this Section 6.1(b)(vii) or
anything else to the contrary in this Agreement, the Company shall be permitted
to enter into employment agreements with the individuals set forth on Section
6.1(b)(vii) of the Company Disclosure Schedule for the purpose of assuring
continuity of management on such terms as the Company and Parent shall mutually
agree on or prior to the Effective Date (in which case all applicable Sections
of the Company Disclosure Schedule shall be deemed amended as of the date of
this Agreement to reflect disclosure of, and the Company's entry into, such
employment agreements);
(x) amend the Company Certificate or Company By-Laws (or the
equivalent governing documents of the Company Subsidiaries);
(xi) make any material change in accounting methods, principles,
or practices, except as required by GAAP or by a Governmental Entity;
(xii) (A) except as required by applicable Law, make or change
any election in respect of Taxes or adopt or change any material accounting
method in respect of Taxes, (B) enter into any tax allocation agreement, tax
sharing agreement or closing agreement, or (C) settle or compromise any claim,
notice, audit report or assessment in respect of Taxes individually in excess of
$500,000 or, except settlements consented to by Parent, in the aggregate in
excess of $2,000,000;
(xiii) write up, write down or write off the book value of any
assets, individually or in the aggregate, for the Company and the Company
Subsidiaries taken as a whole, in excess of $1,000,000, except in accordance
with GAAP consistently applied;
(xiv) subject to Section 6.3(c), take any action to exempt any
Person (other than Parent or Merger Sub) or any action taken by such Person
from, or make such Person or action not subject to, (A) the provisions of
Section 203 of the DGCL, if applicable, or (B) any other state takeover law or
state law that purports to limit or restrict business combinations or the
ability to acquire or vote shares;
(xv) implement any layoff of employees that would implicate the
Worker Adjustment and Retraining Notification Act of 1988, as amended;
(xvi) settle any litigation (or threatened litigation) for an
amount in excess of $375,000 per litigation net of insurance proceeds or, except
for settlements consented to by Parent, in the aggregate in excess of $1,500,000
net of insurance proceeds;
(xvii) (A) amend or modify in any material respect or terminate
(other than in accordance with its terms) any Material Contract or (B) enter
into any Material Contract (other than (1) purchases of inventory, supplies and
assets in the ordinary course of business, (2) renewals of existing Real
Property Leases in the ordinary course of business and on terms reflecting
arms-length negotiations and otherwise consistent with the existing Real
Property
33
Leases, (3) except for renewals of existing Real Property Leases, as
contemplated by the Company's budget for Fiscal Year 2006 (as most recently
updated if applicable), a copy of which has been provided to Parent prior to the
date of this Agreement, and (4) with respect to the other subsections of this
Section 6.1, Contracts not prohibited thereby);
(xviii) other than in the ordinary course of business consistent
with past practice, commence or undertake any extraordinary sales events or
significant discounting of merchandise;
(xix) take any actions intended to materially change in a manner
adverse to the Company or the Company Subsidiaries, relationships with material
product vendors and suppliers; provided, however, that the foregoing shall not
prohibit the Company or the Company Subsidiaries from taking any action in good
faith and in a manner consistent with its prior practices to enforce its
existing agreements with such vendors and suppliers;
(xx) except as permitted by Section 6.3, amend, modify or waive
any provision of any confidentiality agreement (or other similar agreement) or
any agreement that restricts a Person's ability to acquire securities of, or
other interests in, the Company;
(xxi) voluntarily fail to maintain in full force and effect or
fail to use reasonable best efforts to replace or renew material insurance
policies existing as of the date hereof and covering the Company or the Company
Subsidiaries and their respective properties, assets and businesses;
(xxii) sell or enter into any material agreement with respect to
the use or ownership of the Company's Groveport, Ohio distribution center;
(xxiii) open or commit to open any retail locations, or close, or
commit to close any retail locations; or
(xxiv) terminate, other than for cause, any employee covered by
the Change-in-Control Plan;
(xxv) take any action intended to, or which the Company
reasonably expects will, change the status of its control of Xxxxx Xxxxx GmbH &
Co. KG, as control is defined under the German Act Against Restraints of
Competition;
(xxvi) agree to take any of the actions prohibited by this
Section 6.1.
SECTION 6.2. STOCKHOLDERS' MEETING.
(a) Subject to the terms and conditions of this Agreement (including
the rights of the Company under Sections 6.3(c) and 8.1(c), the Company, acting
through its Board of Directors, shall:
(i) as promptly as practicable following the date of this
Agreement but in no event more than ten (10) calendar days thereafter (or the
next Business Day if the tenth (10th) calendar day is not a Business Day),
prepare and file with the SEC a preliminary proxy
34
statement (such proxy statement, as amended and supplemented, the "Proxy
Statement") relating to the Merger and this Agreement and use its reasonable
best efforts to (A) obtain and furnish the information required to be included
by applicable federal securities laws (and the rules and regulations thereunder)
in the Proxy Statement and, after consultation with Parent, Merger Sub and their
counsel, to respond promptly to any comments received from the SEC with respect
to the preliminary Proxy Statement and promptly, but in no event more than five
(5) calendar days (or the next Business Day if the fifth (5th) calendar day is
not a Business Day) after the clearance of the Proxy Statement by the SEC, cause
to be mailed to the Company's stockholders a definitive Proxy Statement, a copy
of this Agreement or a summary thereof and a copy of Section 262 of the DGCL
(relating to dissenters' rights) and (B) obtain the necessary approval by its
stockholders of this Agreement and the consummation of the Merger;
(ii) include in the Proxy Statement the recommendations referred
to in Section 4.3(b); provided, however, that such recommendations may be
withdrawn, modified or amended, in each case in accordance with the provisions
of Section 6.3(c); and
(iii) as promptly as practicable following the clearance of the
Proxy Statement by the SEC, duly call, give notice of, convene and hold a
special meeting of its stockholders (the "Special Meeting") for the purpose of
considering and taking action upon this Agreement; it being agreed that the
Company will convene and hold the Special Meeting in no event more than
thirty-five (35) calendar days (or the next Business Day if the thirty-fifth
(35th) calendar day is not a Business Day) after the clearance of the Proxy
Statement by the SEC. Without limiting the generality of the foregoing, the
Company's obligations pursuant to the first sentence of this Section 6.2(a)(iii)
shall not be affected by (i) the Board's taking any action permitted by Section
6.3 (including withdrawing or modifying its approval or recommendation of the
Merger and this Agreement) or (ii) the commencement, public announcement,
disclosure or other communication to the Company's Board of Directors of any
Alternative Proposal or any intention (whether or not conditional) with respect
to any potential or future Alternative Proposal, unless, in the case of clause
(i), this Agreement is terminated pursuant to Section 8.1(d)(i), or, in the case
of clause (ii), this Agreement is terminated pursuant to Section 8.1(c)(i).
(b) The Company, Parent and Merger Sub shall cooperate with each other
in the preparation of the Proxy Statement. Parent, Merger Sub and their counsel
shall be given a reasonable opportunity to review and comment upon the Proxy
Statement and any amendments or supplements thereto (and shall provide any
comments thereon as soon as practicable, but in no event later than three
Business Days after being asked to comment) prior to the filing thereof with the
SEC. The Company shall use its reasonable best efforts to cause the Proxy
Statement to comply as to form in all material respects with the applicable
requirements of the Exchange Act. The Company shall provide Parent, Merger Sub
and their counsel with copies of any written comments or other material
communications the Company or its counsel receives from time to time from the
SEC or its staff with respect to the Proxy Statement promptly after receipt of
such comments or other material communications, and with copies of any written
responses to and telephonic notification of any material verbal responses
received from the SEC or its staff by the Company or its counsel with respect to
the Proxy Statement. The Company shall update Parent with respect to proxy
solicitation results as reasonably requested by Parent.
35
Each of Parent and the Company agrees to correct any information provided
by it for use in the Proxy Statement which, to the Company's Knowledge (in the
case of information provided by the Company) or to Parent's knowledge (in the
case of information provided by Parent), shall have become false or misleading
in any material respect. The Company shall use its reasonable best efforts,
after consultation with Parent, to resolve all SEC comments with respect to the
Proxy Statement as promptly as practicable after receipt thereof. If at any time
prior to the approval and adoption of this Agreement by the Company's
stockholders there shall occur any event that is required to be set forth in an
amendment or supplement to the Proxy Statement, the Company shall promptly
prepare and file with the SEC such amendment or supplement. The Company shall
not mail the Proxy Statement, or any amendment or supplement thereto, without
reasonable advance consultation with Parent, Merger Sub and their counsel.
(c) The Company agrees that the information relating to the Company
and the Company Subsidiaries contained in the Proxy Statement, or in any other
document filed in connection with this Agreement or the Transactions with any
other Governmental Entity (to the extent such information was provided by the
Company for inclusion therein), at the respective times that the applicable
document is filed with the SEC or such other Governmental Entity and first
published, sent or given to stockholders of the Company and, in addition, in the
case of the Proxy Statement, at the date it or any amendment or supplement
thereto is mailed to the Company's stockholders and at the time of the Special
Meeting, will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(d) Parent shall provide the Company with the information concerning
Parent and Merger Sub required to be included in the Proxy Statement. Parent
agrees that the information relating to Parent and Merger Sub contained in the
Proxy Statement, or in any other document filed in connection with this
Agreement or the Transactions with any other Governmental Entity (to the extent
such information was specifically provided in writing by Parent or Merger Sub
for inclusion therein), at the respective times that the applicable document is
filed with the SEC or such other Governmental Entity and first published, sent
or given to stockholders of the Company and, in addition, in the case of the
Proxy Statement, at the date it or any amendment or supplement thereto is mailed
to the Company's stockholders and at the time of the Special Meeting, will not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(e) Parent and Merger Sub shall, at the Special Meeting, vote, or
cause to be voted, all Shares owned by any of Parent, Merger Sub and any other
Affiliate of Parent in favor of the approval and adoption of this Agreement and
the consummation of the Merger.
SECTION 6.3. NO SOLICITATION.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement in accordance with Section
8.1, the Company agrees that (i) subject to Section 6.3(b), the Company and the
Company Subsidiaries shall not, and the Company and the Company Subsidiaries
shall cause each of their respective officers, directors, agents and
representatives (including any investment banker, financial advisor, attorney or
36
accountant retained by the Company or any of the Company Subsidiaries or any of
the foregoing), and shall use reasonable best efforts to cause their other
employees (such officers, directors, agents, representatives and employees,
collectively, "Representatives"), not to, directly or indirectly, initiate or
solicit (including by way of furnishing non-public information; it being
understood and agreed that inadvertent disclosures of non-public information
shall not be deemed a breach of this Section 6.3(a)) or knowingly take or fail
to take any other action to facilitate (including by waiving or failing to
enforce any standstill agreement other than in a situation where the Company's
Board of Directors concludes that a Person who is subject to a standstill
agreement could reasonably be expected to submit a Superior Offer and the
Company's Board of Directors determines that failing to waive or enforcing such
provision of any standstill agreement would result in a breach of fiduciary
duties of the Company's Board of Directors to the Company's stockholders under
applicable Laws) or encourage any inquiries or the making or reaffirmation of
any proposal or offer that constitutes, or is reasonably expected to lead to, an
Alternative Proposal or engage in any discussions (it being understood a
statement that this Agreement is available on the SEC's website and that the
Company and the Company Subsidiaries (and their Representatives) cannot engage
in discussions other than as explicitly set forth in this Agreement shall not
violate this Section 6.3) or any negotiations concerning, or provide any
non-public information to any Person that has made or to the Knowledge of the
Company, is considering making an Alternative Proposal, and (ii) the Company and
the Company Subsidiaries shall immediately cease, and cause their respective
Representatives (other than non-officer employees, for whom they shall use
reasonable best efforts) to cease, any existing solicitation, discussions or
negotiations by or on behalf of the Company with any Person conducted heretofore
with respect to any Alternative Proposal. The Company will promptly request that
each Person who has executed a confidentiality agreement with the Company in
connection with that Person's consideration of an Alternative Proposal return or
destroy all non-public information furnished to that Person by or on behalf of
the Company. The Company shall use its reasonable best efforts to take the
necessary steps promptly to inform its and any of the Company Subsidiaries'
Representatives of the obligations undertaken in this Section 6.3.
(b) Notwithstanding anything in this Agreement to the contrary, the
Company (directly or through its Representatives) may (i) until receipt of the
Company Stockholder Approval, engage in substantive discussions or in
negotiations with a Person that makes an unsolicited bona fide written
Alternative Proposal (under circumstances in which the Company has complied in
all respects with its non-solicitation obligations under Section 6.3(a)) and may
furnish such Person and its representatives information concerning, and may
afford such Person and its representatives access to, the Company and the
Company Subsidiaries and their businesses, properties, assets, books and
records, if (A) in the good faith judgment of the Company's Board of Directors
(after consultation with the Company's financial advisor and outside counsel)
such Alternative Proposal constitutes, or is reasonably likely to lead to, a
Superior Proposal, and (after consultation with the Company's outside counsel)
the failure to take such action would result in a breach of fiduciary duties of
the Company's Board of Directors to the Company's stockholders under applicable
Laws and (B) prior to furnishing such information or access to, or entering into
substantive discussions (except as to the existence of this Section 6.3) or
negotiations with, such Person, (1) the Company receives from such Person an
executed confidentiality agreement not less restrictive of such Person than the
Confidentiality Agreement (including with respect to the standstill provisions),
(2) the Company notifies Parent to the effect that it intends to furnish
information or access to, or intends to enter into substantive
37
discussions or negotiations with, such Person and (3) the Company concurrently
discloses or makes available to Parent the same information provided to such
Person; (ii) comply with Rules 14e-2 and 14d-9 of the Exchange Act Rules with
regard to a tender or exchange offer, (iii) make a "stop-look-and-listen"
communication to its stockholders of the nature contemplated by Rule 14d-9 of
the Exchange Act Rules and (iv) make such other disclosures to the Company's
stockholders, and take such other actions, as are required by Law. In addition
to the obligations of the Company and the Company Subsidiaries set forth in
clause (i) of this Section 6.3(b), the Company shall promptly (and in no event
more than one Business Day after receipt) advise Parent in writing of any
Alternative Proposal or of any request for information or inquiry that could
reasonably be expected to lead to an Alternative Proposal, the terms and
conditions of such Alternative Proposal, request or inquiry, and the identity of
the Person making such Alternative Proposal, request or inquiry. The Company
shall inform Parent on a current basis of the status and terms of any
discussions regarding, or relating to, any such Alternative Proposal (including
amendments and proposed amendments) and, as promptly as practicable, of any
change in the price, structure or form of the consideration or material terms of
and conditions regarding the Alternative Proposal. In fulfilling its obligations
under this Section 6.3(b), the Company shall provide promptly to Parent copies
of all written materials between the Company and the party making such
Alternative Proposal. Immediately upon determination by the Board of Directors
of the Company that an Alternative Proposal constitutes a Superior Proposal, the
Company shall deliver to Parent a written notice ("Notice of Superior Proposal")
advising Parent that the Board of Directors of the Company has so determined,
specifying the terms and conditions of such Superior Proposal (including the
amount per share that the Company's shareholders will receive (valuing any
non-cash consideration at what the Board of Directors of the Company determines
in good faith, after consultation with a financial advisor of nationally
recognized reputation, to be the fair value of the non-cash consideration)) and
including a copy thereof with all accompanying documentation and the identity of
the Person making such Superior Proposal and providing Parent with a copy of the
Superior Proposal and all documents relating thereto.
(c) The Board of Directors of the Company may not (i) withdraw or
modify the approval or recommendation by the Board of Directors of the Company
of the Merger or this Agreement (except as set forth below in this Section
6.3(c)), (ii) approve, adopt or recommend an Alternative Proposal or (iii) cause
the Company or any of the Company Subsidiaries to enter into any letter of
intent, agreement in principle, merger agreement, acquisition agreement, option
agreement, joint venture agreement, partnership agreement or other agreement
related to any Alternative Proposal (other than a confidentiality agreement in
accordance with Section 6.3(b)). Notwithstanding the foregoing, at any time
prior to receipt of the Company Stockholder Approval, if the Board of Directors
of the Company (after consultation with the Company's financial advisor and
outside counsel) determines in good faith that any Alternative Proposal which
was not solicited in violation of Section 6.3(a) constitutes a Superior Proposal
and (after consultation with the Company's outside counsel) the failure to take
such action would result in a breach of fiduciary duties to the Company's
stockholders under applicable Laws, the Board of Directors of the Company may,
if it has fully complied with Section 6.3(b): (A) withdraw or modify its
approval or recommendation of the Merger and this Agreement, (B) approve or
recommend such Superior Proposal, (C) cause the Company or any of the Company
Subsidiaries to enter into a binding written agreement (other than a
confidentiality agreement as aforesaid) with respect to, and containing the
terms of, such Superior Proposal (a "Superior Proposal Agreement") and (D)
terminate this Agreement in accordance with, and after complying with all
38
of the provisions of, Section 8.1(c); provided, however, that prior to
terminating this Agreement or entering into a Superior Proposal Agreement, the
Company shall give Parent at least three Business Days' notice thereof (which
notice need only be given once with respect to any Superior Proposal, unless
such Superior Proposal is modified in any material respect) to permit Parent to
propose revisions to the terms of this Agreement (or make another proposal) and
the Company shall negotiate in good faith with Parent with respect to such
proposed revisions or other proposal, if any. If, following this three Business
Day period, the Board of Directors of the Company again determines in good faith
(after consultation with the Company's financial advisor and outside counsel)
that such Alternative Proposal remains a Superior Proposal and (after
consultation with the Company's outside counsel) the failure to take such action
would result in a breach of fiduciary duties to the Company's stockholders under
applicable Laws, the Company may enter into a Superior Proposal Agreement, but
not prior to such time as the Company has provided Parent with written notice
that the Company has elected to terminate this Agreement pursuant to Section
8.1(c) and otherwise complied with the Company's obligations pursuant to Section
8.1(c).
SECTION 6.4. PUBLICITY.
The initial press release with respect to the execution of this Agreement
shall be a joint press release reasonably acceptable to Parent and the Company.
Thereafter, so long as this Agreement is in effect, none of the Company, Parent
or any of their respective Affiliates shall issue or cause the publication of
any press release or other announcement with respect to the Merger, this
Agreement or the other Transactions without the prior approval of the Company
and Parent, except as may be required by Law or by any listing agreement with a
securities exchange or Nasdaq as determined in the good faith judgment, upon
advice of counsel, of the party wishing to make such release or announcement (in
which case the party shall use commercially reasonable efforts to receive the
approval of the other party prior to issuing such release). In addition,
promptly following the date of this Agreement, the Company and Parent shall
establish mutually agreeable talking points that may be made to any supplier,
vendor or other third parties with material business relations with the Company
and the Company Subsidiaries regarding the Transactions and the impact of
Transactions on the business of the Company and the Company Subsidiaries (the
"Approved Communications"). The Company shall inform its directors, officers and
any direct reports to officers who communicate with the Company's suppliers,
vendors or other third parties with material business relations in the ordinary
course of their employment that all communications made to such suppliers,
vendors or other third parties with material business relations regarding the
Transactions and the impact of Transactions on the business of the Company and
the Company Subsidiaries must comply with the Approved Communications, and the
Company shall use its reasonable best efforts to ensure such compliance.
Furthermore, the Company shall use its reasonable best efforts to ensure that
all communications made by directors and executive officers of the Company and
any of the Company Subsidiaries to non-executive employees of the Company and
any of the Company Subsidiaries regarding the Transactions, and the impact of
the Transactions on the business of the Company and the Company Subsidiaries,
comply in all material respects with the Approved Communications. For the
avoidance of doubt, nothing in this Section 6.4 shall prohibit any communication
to any supplier, vendor or other third party with a material business
relationship made in the ordinary course of business.
39
SECTION 6.5. ACCESS TO INFORMATION.
(a) Subject to the terms of the Confidentiality Agreement, upon
reasonable notice and subject to applicable Law, the Company shall, and shall
cause each of the Company Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of Parent and its debt financing
sources, during normal business hours during the period prior to the Effective
Time, reasonable access to all its properties, books, contracts, commitments and
records, and to its officers, employees, accountants, counsel and other
representatives and, during such period, the Company shall, and shall cause the
Company Subsidiaries to, make available to Parent and the appropriate
representatives of Parent (i) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal securities Laws (other than reports or documents
which the Company is not permitted to disclose under applicable Law), (ii) the
unaudited monthly consolidated balance sheet of the Company and its Subsidiaries
for the month then ended and the related consolidated statements of earnings,
cash flows and stockholders' equity (which the Company will use reasonable best
efforts to furnish within thirty (30) days after the end of each month; provided
that with respect to such financial reports for the month ended December 31,
2006, the Company will furnish preliminary estimates of the results for that
month (which may not include all adjustments required for a fair presentation by
GAAP) no later than January 22, 2007 and will review with Parent the status of
open analyses and closing procedures yet to be performed as of that date), (iii)
a copy of the weekly internal management report generated by the Company in the
ordinary course of its business, which shows sales (including any comparable
sales analyses), merchandise margins, inventory, outstanding debt and cash
(including cash bank and cash book balances) as soon as practicable, but in no
event later than 5 calendar days after the end of each week and (iv) all other
information concerning its business, properties and personnel as Parent may
reasonably request. Parent shall designate two individuals who shall be the sole
source authorized to convey requests for information and access by Parent and
its debt financing sources to the Company. The Company shall designate one
individual to whom all such requests shall be delivered. Notwithstanding any
provision of this Agreement to the contrary, the Company may limit requests for
information and access so as not to unreasonably interfere with the ongoing
operations of the Company and the Company Subsidiaries and neither the Company
nor any of the Company Subsidiaries shall be required to provide access to or to
disclose information if such access or disclosure would jeopardize the work
product privilege or the attorney-client privilege of the institution in
possession or control of such information or violate any Law or any binding
agreement entered into prior to the date of this Agreement. The relevant parties
will use their reasonable best efforts to make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
(b) The Company makes no representation or warranty as to the accuracy
of any information provided pursuant to Section 6.5(a), and neither Merger Sub
nor Parent may rely on the accuracy of any such information, in each case other
than as expressly set forth in the Company's representations and warranties
contained in Article IV.
(c) The information provided pursuant to Section 6.5(a) will be used
solely for the purpose of effecting the Transactions and will be governed by all
the terms and conditions of the Confidentiality Agreement.
40
SECTION 6.6. FURTHER ASSURANCES; REGULATORY MATTERS; NOTIFICATION OF
CERTAIN MATTERS; FINANCING COOPERATION.
(a) Subject to the terms and conditions of this Agreement, each of
Parent, Merger Sub and the Company shall, and Parent shall cause Merger Sub to,
use all reasonable best efforts (i) to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal requirements
which may be imposed on such party with respect to the Merger or the other
Transactions and, subject to the conditions set forth in Article VII, to
consummate the Transactions as promptly as practicable and (ii) promptly to
prepare and file all necessary documentation, to effect all necessary
applications, notices, petitions, filings and other documents, and to use all
reasonable best efforts to obtain, all necessary permits, consents, approvals
and authorizations of all Governmental Entities necessary or advisable in
connection with consummating the Transactions, including the Other Company
Approvals and Parent Approvals. Without limiting the generality of this Section
6.6(a), each party shall, within ten Business Days after the execution of this
Agreement, file all necessary documentation required to obtain all requisite
approvals or termination of applicable waiting periods for the Transactions
under the HSR Act.
(b) In furtherance and not in limitation of the covenants of the
parties contained in Section 6.6(a), each of the parties hereto shall take all
such actions as may be within its power to resolve such objections, if any, as
may be asserted with respect to any of the Transactions under the HSR Act by the
Federal Trade Commission or the Department of Justice, including taking all such
actions as may be within its power to obtain clearance, or if such clearance
cannot be obtained, to reach an agreement, settlement or consent providing for
divestiture, a "hold separate" agreement, contractual undertakings with third
Persons or any other relief with the Governmental Entity investigating the
Transactions. In connection with the foregoing, if any administrative or
judicial action or proceeding, including any proceeding by a private Person, is
instituted (or threatened to be instituted) challenging any of the Transactions
as violative of the HSR Act or any other antitrust or other Law in any
jurisdiction, the parties hereto shall cooperate in all respects with each other
and take all such actions as may be within their power to contest and resist any
such action or proceeding and to have vacated, lifted, reversed or overturned
any judgment or other order, whether temporary, preliminary or permanent, that
is in effect and that prohibits, prevents or restricts consummation of the
Transactions, including defending through litigation on the merits any claim
asserted in any such action or proceeding by any Person.
(c) Each party hereto shall give prompt notice (or in the case of
clause (iii), use its reasonable best efforts to give prompt notice) to the
other party hereto if any of the following occur after the date of this
Agreement: (i) receipt of any notice or other communication in writing from any
Person alleging that the consent or approval of such Person is or may be
required in connection with the Transactions; (ii) receipt of any notice or
other communication from any Governmental Entity or any securities market or
securities regulator in connection with the Transactions; or (iii) the
occurrence of an event which individually has had or would be reasonably likely
in the future to (A) have a Company Material Adverse Effect or a Parent Material
Adverse Effect, as applicable, or prevent or delay the consummation of the
Merger or (B) cause any condition to the obligations of any party hereto to
consummate the Merger to be unsatisfied; provided, however, that no disclosure
by any party hereto pursuant to
41
this Section 6.6(c) shall be deemed to amend or supplement this Agreement or the
schedules hereto or to prevent or cure any breach of any representation,
warranty, or covenant contained herein.
(d) If Parent is notified or becomes aware that the committed
financing on which it is relying in making the representation and warranty
contained in Section 5.5 that borrowings or contributions will be restricted or
unavailable under such facility for any reason in an amount such that, or if
Parent otherwise determines at any time that, it is reasonably likely that the
representation and warranty contained in Section 5.5 will not be true on the
Closing Date, it shall notify the Company thereof within 48 hours after
receiving such notice or making such determination. In addition, Parent shall
use its reasonable best efforts to obtain committed replacement financing from
alternative sources in an amount sufficient to reasonably assure the Company
that the representation and warranty contained in Section 5.5 will be true on
the Closing Date and shall provide the Company with a copy of the commitment
letter or other documentation reasonably satisfactory to the Company evidencing
such financing. If Parent is unable to obtain such committed replacement
financing within 15 days of the date it becomes obligated to provide the
foregoing notice to the Company, then the Company or the Company's financial
advisor may, but shall not be obligated to, arrange such committed replacement
financing on behalf of Parent with third party financial institutions (including
the Company's financial advisor) and Parent shall cooperate with such
arrangements and take such actions, including entering into such agreements and
undertaking such obligations, as may be required to complete and obtain the
proceeds from such financing in order to consummate the Merger as contemplated
herein. Notwithstanding the foregoing, Parent shall not be required to complete
any such financing if the terms and conditions thereof are materially less
favorable to Parent than any committed financing which such financing will
replace in satisfying the representation and warranty contained in Section 5.5,
in each case when considered as a whole.
(e) Prior to the Effective Time, the Company shall provide and shall
cause the Company Subsidiaries to, and shall use its reasonable best efforts to
cause their respective Representatives, including legal and accounting advisors,
to provide all cooperation reasonably requested by Parent in connection with the
arrangement of the financing to be obtained by Parent, Merger Sub or the
Surviving Corporation in connection with the Transactions (the "Financing") (it
being understood that the completion of any Financing is not a condition to the
obligation of Parent or Merger Sub to effect the Merger), provided that such
requested cooperation does not unreasonably interfere with the ongoing
operations of the Company and the Company Subsidiaries), including (i)
participation in meetings, presentations, road shows, due diligence sessions and
sessions with rating agencies, (ii) assisting with the preparation of materials
for rating agency presentations, offering documents, private placement memoranda
and bank Financing; (iii) executing and delivering any pledge and security
documents, other definitive financing documents, or other certificates, legal
opinions or documents as may be reasonably requested by Parent (including a
certificate of the chief financial officer of the Company or any of the Company
Subsidiaries with respect to solvency matters and consents of accountants for
use of their reports in any materials relating to the Financing) and otherwise
reasonably facilitating the pledging of collateral (provided that no such pledge
or security documents shall be effective until the Effective Time), (iv)
furnishing Parent and its Financing sources as promptly as practicable with
financial and other pertinent information regarding the Company as may be
reasonably requested by Parent, including all financial statements and
42
financial data of the type required by Regulation S-X and Regulation S-K under
the Securities Act and of the type and form customarily included in private
placements under Rule 144A of the Securities Act to consummate the offering of
debt securities at the time during the Company's fiscal year such offerings will
be made (the "Required Financial Information"), (v) using reasonable best
efforts to obtain accountants' comfort letters, legal opinions, surveys and
title insurance as reasonably requested by Parent, (vi) providing monthly
financial statements (excluding footnotes) within the time frame, and to the
extent, the Company prepares such financial statements, (vii) taking all actions
reasonably necessary to (A) permit the prospective lenders involved in the
Financing to evaluate the Company's current assets, cash management and
accounting systems, policies and procedures relating thereto for the purpose of
establishing collateral arrangements and (B) establish bank and other accounts
and blocked account agreements and lock box arrangements in connection with the
foregoing, (viii) entering into one or more credit or other agreements on terms
satisfactory to Parent in connection with the Financing immediately prior to
(but not effective until) the Effective Time; (ix) taking all corporate actions,
subject to the occurrence of the Closing, reasonably requested by Parent to
permit the consummation of the Financing and the direct borrowing or incurrence
of all of the proceeds of the Financing, by the Surviving Corporation
immediately following the Effective Time. The Company hereby consents to the use
of its and the Company Subsidiaries' logos in connection with the Financing;
provided that such logos are used solely in a manner that is not intended to nor
reasonably likely to harm or disparage the Company or any of the Company
Subsidiaries or the reputation or goodwill of the Company or any of the Company
Subsidiaries and its or their marks.
SECTION 6.7. EMPLOYEE BENEFIT PLANS.
(a) Parent shall, and shall cause the Surviving Corporation to, honor
in accordance with their terms all the Benefit Plans.
(b) For a period of twelve months following the Closing, Parent shall,
and shall cause the Surviving Corporation to, provide active employees of the
Surviving Corporation and its Subsidiaries with base salary and base wages
substantially similar to such employees' base wages or base salary as of the
Closing Date and benefits (but specifically excluding any equity-based benefits,
defined benefit plan benefits or retiree medical benefits) which, in the
aggregate, are competitive in the industry for companies of similar size and
nature and in similar locations. Notwithstanding the foregoing, nothing in this
Agreement shall be construed to (i) require Parent or the Surviving Corporation
or its Subsidiaries to provide equity-based benefits or otherwise issue equity
to any employee, (ii) require Parent or the Surviving Corporation to continue to
maintain any particular Benefit Plan or provide any specific benefit or (iii)
restrict the ability of the Company, the Company Subsidiaries, Parent, the
Surviving Corporation or any of their Affiliates to terminate the employment of
any employee at any time and for any or no reason.
(c) Parent shall, and shall cause the Surviving Corporation and its
Subsidiaries to, (i) credit all service with the Company and any of the Company
Subsidiaries (including service recognized by the Company or any of the Company
Subsidiaries for service with other Persons) for purposes of eligibility,
vesting and, with respect to vacation and severance entitlement only, beneficial
accrual under any employee benefit plan, policy or
43
program applicable to employees of the Surviving Corporation or any of its
Subsidiaries after the Closing to the extent recognized by the Company under a
corresponding Benefit Plan, (ii) in the plan year in which the Closing occurs,
use reasonable best efforts to waive any pre-existing condition or limitation or
exclusion with respect to employees of the Company or any of the Company
Subsidiaries under any group health plan or other welfare benefit plan to the
extent waived or satisfied under an analogous Benefit Plan as of the Closing
Date, and (iii) in the plan year in which the Closing occurs use reasonable best
efforts to recognize the dollar amount of all expenses incurred by employees of
the Company or any of the Company Subsidiaries and their dependents for purposes
of deductibles, co-payments and maximum out-of pocket limits under any group
health plan to the extent recognized under an analogous Benefit Plan as of the
Closing Date.
(d) Nothing in this Section 6.7 or any other provision of this
Agreement shall be construed to modify, amend, or establish any benefit plan,
program or arrangement or in any way affect the ability of the parties hereto or
any other Person to modify, amend or terminate any of its benefit plans,
programs or arrangements. This Section 6.7 is not intended to, and shall not be
construed to, confer upon any Person other than the parties to this Agreement
any rights or remedies hereunder.
SECTION 6.8. INDEMNIFICATION AND INSURANCE.
(a) Without limiting any additional rights that any director, officer
or other employee of the Company may have under any indemnification or other
agreement, any Benefit Plan or the Company Certificate or Company By-laws, from
and after the Effective Time, Parent and the Surviving Corporation shall,
jointly and severally (and Parent shall cause the Surviving Corporation to),
indemnify, defend and hold harmless, to the fullest extent authorized or
permitted under the DGCL or other applicable Law, each Person who is now, or has
been at any time prior to the date of this Agreement or who becomes such prior
to the Effective Time, (i) an officer or director of the Company or any of the
Company Subsidiaries or (ii) an employee of the Company or any of the Company
Subsidiaries providing services to or for such director or officer in connection
with this Agreement or any of the Transactions (such officers, directors and
employees, individually, an "Indemnified Party," and collectively, the
"Indemnified Parties") (in such Person's capacity as such and not as
stockholders or option holders of the Company) against any and all losses,
claims, damages, costs, expenses (including attorneys' fees and disbursements),
fines, liabilities and judgments and amounts that are paid in settlement with
the approval of the indemnifying party (which approval shall not be unreasonably
withheld or delayed) (collectively, "Indemnified Liabilities") incurred in
connection with any pending, threatened or completed claim, action, suit,
proceeding or investigation (each, a "Proceeding") arising out of or pertaining
to (A) the fact that such Person is or was an officer, director, employee,
fiduciary or agent of the Company or any of the Company Subsidiaries or (B)
matters occurring or existing at or prior to the Effective Time (including acts
or omissions occurring in connection with this Agreement and the Transactions),
whether asserted or claimed prior to, at or after, the Effective Time. In the
event any claim for Indemnified Liabilities is asserted or made by an
Indemnified Party, any determination required to be made with respect to whether
such Indemnified Party's conduct complies with the standards set forth under the
DGCL or other applicable Law shall be made jointly by an independent legal
counsel selected by the Surviving Corporation and such Indemnified Party, each
acting reasonably. Parent shall, or shall cause the
44
Surviving Corporation to, promptly advance all reasonable out-of-pocket expenses
of each Indemnified Party in connection with any Proceeding as such expenses
(including attorneys' fees and disbursements) are incurred upon receipt from
such Indemnified Party of a request therefor (accompanied by invoices or other
relevant documentation), provided (if and to the extent required by the DGCL or
other applicable Law) that such Indemnified Party undertakes to repay such
amount if it is ultimately determined that such Indemnified Party is not
entitled to be indemnified under the DGCL or other applicable Law with respect
to such Proceeding. In the event any Proceeding is brought against any
Indemnified Party, Parent and the Surviving Corporation shall each use all
reasonable best efforts to assist in the vigorous defense of such matter,
provided that neither Parent nor the Surviving Corporation shall settle,
compromise or consent to the entry of any judgment in any Proceeding (and in
which indemnification could be sought by such Indemnified Party hereunder)
without the prior written consent of such Indemnified Party if and to the extent
the claimant seeks any non-monetary relief from such Indemnified Party.
(b) All rights to indemnification existing in favor of, and all
exculpations and limitations of the personal Liability of, the directors,
officers, employees, fiduciaries and agents of any of the Company and the
Company Subsidiaries in the Company Certificate or Company By-Laws (or
comparable organizational documents of the Company Subsidiaries) as in effect as
of the Effective Time with respect to matters occurring at or prior to the
Effective Time, including the Merger and the other Transactions, shall continue
in full force and effect for a period of not less than six years from the
Effective Time; provided, however, that all rights to indemnification in respect
of any claims asserted or made within such period shall continue until the final
disposition of such claim.
(c) For a period of six years after the Effective Time, the Surviving
Corporation shall, and shall cause its Subsidiaries to, and Parent shall cause
the Surviving Corporation and its Subsidiaries to, maintain in effect the
current directors' and officers' liability insurance policies maintained by any
of the Company and the Company Subsidiaries for the benefit of those Persons who
are covered by such policies at the date of this Agreement or the Effective Time
with respect to claims arising in whole or in part from matters occurring or
allegedly occurring prior to the Effective Time (provided that the Surviving
Corporation and its Subsidiaries may substitute therefor policies of at least
the same coverage containing terms and conditions that are at least as
beneficial to the beneficiaries of the current policies and with reputable
carriers having a rating comparable to the Company's current carrier); provided,
however, that each of Parent and the Surviving Corporation and its Subsidiaries
shall, and Parent shall cause the Surviving Corporation and its Subsidiaries to,
first use its reasonable best efforts to obtain a "tail" policy on substantially
the same terms and conditions for claims arising out of acts or conduct
occurring on or prior to the Effective Time and effective for claims asserted
during the full six-year period referred to above, and only if Parent and the
Surviving Corporation and its Subsidiaries are unable, after exerting their
reasonable best efforts, to obtain such a "tail" policy, then Parent or the
Surviving Corporation and its Subsidiaries will be required to obtain such
coverage from such carriers in annual policies; and, provided further, that if
the existing policies expire or are terminated or canceled during such six-year
period, each of Parent and the Surviving Corporation and its Subsidiaries shall,
and Parent shall cause the Surviving Corporation and its Subsidiaries to, use
its reasonable best efforts to obtain substantially similar policies with
reputable carriers having a rating comparable to the
45
Company's current carrier. Parent or the Surviving Corporation and its
Subsidiaries, as the case may be, shall not be required in any event to spend
for such coverage as an annual premium therefor an amount in excess of 300% of
the annual premium therefor as of the date of this Agreement, and if, during
such six-year period, such insurance coverage cannot be obtained at all or can
be obtained only for an amount in excess of 300% of the current annual premium
therefor, Parent or the Surviving Corporation and its Subsidiaries, as the case
may be, shall use all reasonable best efforts to cause to be obtained as much
directors' and officers' liability insurance coverage as can be obtained for an
amount equal to 300% of the current annual premium therefor, on terms and
conditions substantially similar to the Company's and the Company Subsidiaries'
existing directors' and officers' liability insurance.
(d) Notwithstanding the foregoing, prior to the Effective Time the
Company shall be permitted to purchase prepaid "tail" policies in favor of the
individuals referred to in Section 6.8(c) with respect to the matters described
therein (provided that the annual premium therefor shall not exceed 300% of the
annual premium therefor as of the date of this Agreement). If and to the extent
such policies have been obtained prior to the Effective Time, Parent shall, and
shall cause the Surviving Corporation to, maintain such policies in effect and
continue to honor the obligations thereunder.
(e) Parent shall, and shall cause the Surviving Corporation to, honor
and perform in accordance with their terms all indemnification agreements
identified on Section 4.14 of the Company Disclosure Schedule and in effect as
of the date of this Agreement between the Company, on the one hand, and any
director or officer of the Company, on the other hand.
(f) The provisions of this Section 6.8 (i) are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her personal representatives, (ii) shall be binding on Parent
and the Surviving Corporation and their respective successors and assigns and
(iii) 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.
(g) In the event that Parent or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
in such consolidation or merger, or (ii) transfers all or a majority of its
properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be (and such Person's ultimate parent
entity, if applicable), assume the obligations thereof set forth in this Section
6.8.
SECTION 6.9. OBLIGATIONS OF MERGER SUB.
Prior to the earlier of the Effective Time or the termination of this
Agreement in accordance with Section 8.1:
(a) Merger Sub shall not, and Parent shall cause Merger Sub not to,
undertake any business or activities other than in connection with this
Agreement and engaging in the Merger and the other Transactions.
46
(b) Parent shall take all action necessary to cause Merger Sub to
perform its obligations under this Agreement and to consummate the Merger and
the other Transactions on the terms and subject to the conditions set forth in
this Agreement.
(c) Parent and Merger Sub shall not engage in any action or enter into
any transaction or permit any action to be taken or transaction to be entered
into that would reasonably be expected to materially delay the consummation of,
or otherwise adversely affect, the Merger or any of the other Transactions.
Without limiting the generality of the foregoing, Parent shall not, and shall
cause its Subsidiaries not to, acquire (whether via merger, consolidation, stock
or asset purchase or otherwise), or agree to so acquire, any material amounts of
assets of or any equity in any Person or any business or division thereof,
unless that acquisition or agreement would not (i) impose any delay in the
obtaining of, or increase the risk of not obtaining, any authorizations,
consents, orders, declarations or approvals of any Governmental Entity necessary
to consummate the Merger or the other Transactions or the expiration or
termination of any waiting period under applicable Law, or (ii) increase the
risk of any Governmental Entity entering an order prohibiting the consummation
of the Merger, or the other Transactions or increase the risk of not being able
to remove any such order on appeal or otherwise.
SECTION 6.10. STOCKHOLDER LITIGATION. The parties to this Agreement shall
cooperate and consult with one another in connection with any stockholder
litigation against any of them or any of their respective directors or officers
with respect to the transactions contemplated by this Agreement; provided,
however, nothing herein shall require either party to take any action that would
jeopardize the work product privilege or the attorney-client privilege or
violate any Law or, provided the Company uses its reasonable efforts to obtain
appropriate relief from the restrictions set forth in such agreement, any
binding agreement. In furtherance of and without in any way limiting the
foregoing, each of the parties shall use its respective reasonable best efforts
to prevail in such litigation so as to permit the consummation of the
Transactions in the manner contemplated by this Agreement. Notwithstanding the
foregoing, the Company agrees that it will give due consideration to Parent's
advice with respect to any such stockholder litigation, and will not compromise
or settle any litigation commenced against it or its directors or officers
relating to this Agreement or the transactions contemplated hereby (including
the Merger) without Parent's prior written consent (which shall not be
unreasonably withheld) (other than a settlement which only requires the Company
to pay money damages which are fully covered and paid by the Company's insurance
carrier except for deductibles (up to but in no case exceeding $500,000 in the
aggregate) provided in the relevant insurance policy and which settlement
expressly and unconditionally releases the Company, and its directors, officers,
and other Representatives from all liabilities and obligations with respect to
such claim, with prejudice).
ARTICLE VII
CONDITIONS
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligation of each party to effect the Merger shall be subject to
the satisfaction on or prior to the Closing Date of each of the following
conditions (which may be waived in whole or in part by such party):
47
(a) STOCKHOLDER APPROVAL. The Company Stockholder Approval shall have
been obtained.
(b) STATUTES. No statute, rule or regulation shall have been enacted
or promulgated by any Governmental Entity of competent jurisdiction which
prohibits the consummation of the Merger or the Transactions.
(c) GERMAN APPROVALS. Any required approvals, to the extent a failure
to obtain such approval would be a violation of Law and subject the respective
entity to material fines or other material consequences, pursuant to the German
Act Against Restraints of Competition shall have been obtained or waiting
periods thereunder shall have expired without the addition of any material and
adverse conditions or obligations;
(d) INJUNCTIONS. There shall be no judgment, order, writ, decree or
injunction of any Governmental Entity of competent jurisdiction in effect
precluding, restraining, enjoining or prohibiting consummation of the Merger or
the Transactions.
SECTION 7.2. ADDITIONAL CONDITIONS TO OBLIGATION OF PARENT AND MERGER SUB
TO EFFECT THE MERGER IN CERTAIN CASES.
The obligation of Parent and Merger Sub to effect the Merger shall be
further subject to the satisfaction on or prior to the Closing Date of each of
the following conditions (which may be waived in whole or in part by Parent and
Merger Sub):
(a) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects its agreements and covenants contained in
this Agreement to be performed by the Company at or prior to the Effective Time
pursuant to the terms of this Agreement, other than the Company's agreements and
covenants contained in Sections 3.2(a) (unless the Company Cash Deposit would be
de minimis), 6.1(b)(i) and 6.1(b)(ii), each of which the Company shall have
performed in all respects.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company set forth in Article IV shall be true and correct in all material
respects on the Closing Date as if made on and as of the Closing Date (except
for representations and warranties that expressly speak only as of a specific
date or time other than the Closing Date, which need only be true and correct in
all material respects as of such date or time), except (i) that representations
and warranties of the Company set forth in Sections 4.2(a) and (b), 4.12(h) and
4.20 shall be true and correct in all respects (other than changes in Section
4.2(a) relating to the exercise of Company Options or settlement of Company RSUs
granted on or prior to the date hereof), (ii) that representations and
warranties that contain qualifications with respect to Company Material Adverse
Effect shall be true and correct in all respects (giving effect to such
qualifications) and (iii) in the case of all other representations and
warranties, where the failure of such representations and warranties to be so
true and correct would not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect (disregarding any
qualifications with respect to materiality contained therein, other than
provisions that expressly require the listing of material items on the Company
Disclosure Schedule or expressly permit the exclusion of immaterial items from
any such list).
48
(c) CLOSING CERTIFICATES. Parent shall have received a certificate
signed by an authorized executive officer of the Company, dated the Closing
Date, to the effect that the conditions set forth in Section 7.2(a) and Section
7.2(b) have been satisfied.
(d) OTHER COMPANY APPROVALS. (i) Any applicable waiting period under
the HSR Act relating to the Merger shall have expired or been terminated and
(ii) the Company shall have obtained all Other Company Approvals and all third
party consents and approvals set forth on Section 7.2(d) of the Company
Disclosure Schedule.
(e) NO GOVERNMENTAL PROCEEDINGS. No suit, proceeding, hearing or
investigation initiated by a Governmental Entity shall be pending involving the
Company, Parent or Merger Sub wherein an unfavorable judgment, order, writ,
decree or injunction would (i) prevent the Transactions, (ii) cause any of the
Transactions to be rescinded following consummation or (iii) affect adversely
the right of Parent to own the capital stock of the Surviving Corporation and to
operate its business.
(f) DISSENTING SHARES. Holders of no more than 15% of the Shares shall
have exercised appraisal rights in accordance with Section 262 of the DGCL
(including therein only such appraisal rights which have not been withdrawn or
failed to be perfected by the holders of such Shares).
(g) TAX MATTERS. At or prior to the Closing, the Company shall deliver
to Parent an affidavit, under penalties of perjury, stating that the Company is
not and has not been a United States real property holding corporation, dated as
of the Closing Date and in form and substance required under Treasury Regulation
Section 1.897-2(h) so that Parent is exempt from withholding any portion of the
purchase price thereunder.
SECTION 7.3. ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT
THE MERGER IN CERTAIN CASES. The obligation of the Company to effect the Merger
shall be further subject to the satisfaction on or prior to the Closing Date of
each of the following conditions (which may be waived in whole or in part by the
Company):
(a) PERFORMANCE OF OBLIGATIONS OF PARENT. Parent and Merger Sub each
shall have performed in all material respects its agreements and covenants
contained in this Agreement to be performed by Parent and Merger Sub,
respectively, at or prior to the Effective Time pursuant to the terms of this
Agreement.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent and Merger Sub set forth in Article V shall be true and correct in all
material respects on the Closing Date as if made on and as of the Closing Date
(except for representations and warranties that expressly speak only as of a
specific date or time other than the Closing Date, which need only be true and
correct in all material respects as of such date or time), except that
representations and warranties that contain qualifications with respect to
materiality or Parent Material Adverse Effect shall be true and correct in all
respects (giving effect to such qualifications).
49
(c) CLOSING CERTIFICATES. The Company shall have received a
certificate signed by an authorized executive officer of Parent, dated the
Closing Date, to the effect that the conditions set forth in Section 7.3(a) and
Section 7.3(b) have been satisfied.
(d) PARENT APPROVALS. (i) Any applicable waiting period under the HSR
Act relating to the Merger shall have expired or been terminated and (ii) Parent
and Merger Sub shall have obtained the other Parent Approvals except for those
the failure of which to obtain would not reasonably be expected to have a Parent
Material Adverse Effect.
ARTICLE VIII
TERMINATION
SECTION 8.1. TERMINATION.
Anything herein or elsewhere to the contrary notwithstanding, this
Agreement may be terminated and the Merger contemplated herein may be abandoned
at any time prior to the Effective Time:
(a) By the mutual written consent of the Company and Parent;
(b) By either the Company or Parent:
(i) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action in each case permanently restraining,
enjoining or otherwise prohibiting any of the Transactions and such order,
decree, ruling or other action shall have become final and non-appealable;
provided, however, that the party seeking to terminate this Agreement shall have
taken all actions within its power to challenge such order, decree, ruling or
other action;
(ii) if the Merger has not been consummated by March 15, 2007;
provided, however, that if at such time all conditions of each party hereunder
to effect the Merger have been satisfied or waived in writing except the
condition set forth in Section 7.1(a) and if at such time the Company has not
held the Special Meeting as a result of the Proxy Statement not having been
cleared by the SEC in time to permit such meeting to be held by such date, such
date shall be extended 45 days (the "Termination Date"); and provided further,
that the right to terminate this Agreement pursuant to this Section 8.1(b)(ii)
shall not be available to the party seeking to terminate if any action of such
party or the failure of such party to perform any of its obligations under this
Agreement or required to be performed at or prior to the Closing Date has been
the cause of, or resulted in, the failure of the Closing Date to occur on or
before the Termination Date and such action or failure to perform constitutes a
material breach of this Agreement;
(iii) if any state or federal law, order, rule or regulation is
adopted or issued which has the effect of prohibiting the Merger;
(iv) if upon a vote thereon taken at the Special Meeting
(including any adjournment or postponement thereof) the Company Stockholder
Approval shall not have been obtained; or
50
(v) if Parent receives notice that any funds committed to be
provided to Parent pursuant to the commitment letter delivered to Parent (and a
copy of which was provided to the Company) or any replacement commitment
provided pursuant to the provisions of this Section 8.1(b)(v) are withdrawn and,
in the case of a termination by the Company, Parent does not, within five (5)
Business Days of written notice of the Company's intention to terminate the
Agreement pursuant to this Section 8.1(b)(v), provide to the Company a copy of
in force commitments for additional debt and/or equity financing which
commitments (A) in the aggregate shall be sufficient to replace the withdrawn
funds, (B) shall be from Persons that have funds (or access to funds based on
uncalled commitments) sufficient to fulfill such commitments, and (C) shall be
from Persons that have prior experience providing financing for transactions
similar to the Transaction; provided, however, that any purported termination by
Parent pursuant to this Section 8.1(b)(v) shall be void and of no force and
effect unless, concurrent with such termination, Parent pays to the Company the
Parent Termination Fee if due pursuant to Section 8.3(d).
(c) By the Company:
(i) if prior to the approval and adoption of this Agreement by
the stockholders of the Company, the Board of Directors of the Company approves
a Superior Proposal as provided in Section 6.3(c), provided that the provisions
of Section 6.3 have been complied with by the Company, and provided, further,
that any purported termination pursuant to this Section 8.1(c)(i) shall be void
and of no force or effect, unless concurrently with such termination, the
Company pays to Parent the Termination Fee pursuant to Section 8.3;
(ii) if (A) Parent or Merger Sub has breached or failed to
perform any of its covenants or other agreements contained in this Agreement
such that the closing condition set forth in Section 7.3(a) would not be
satisfied or (B) there exists a breach of any representation or warranty of
Parent or Merger Sub contained in this Agreement such that the closing condition
set forth in Section 7.3(b) would not be satisfied and, in the case of both (A)
and (B), such breach or failure to perform (1) is not cured within 30 days after
receipt of written notice thereof specifically referencing this Section
8.1(c)(ii) or (2) is incapable of being cured by Parent or Merger Sub by the
date set forth in Section 8.1(b)(ii); or
(iii) pursuant to Section 8.3(d)(iii).
(d) By Parent:
(i) if the Board of Directors of the Company (A) withdraws or
modifies, in a manner adverse to Parent, the Company's recommendation referred
to in Section 4.3(b) (it being understood and agreed that any
"stop-look-and-listen" communication to the Company's stockholders of the nature
contemplated by Rule 14d-9 of the Exchange Act Rules shall not be deemed to
constitute a withdrawal or modification of such recommendation), or, upon the
request of Parent, fails, within five (5) Business Days of Parent's written
request, to reaffirm its recommendation of the Merger and this Agreement or (B)
recommends an Alternative Proposal or Superior Proposal to the stockholders of
the Company or enters into any letter of intent, agreement in principle, merger
agreement, acquisition agreement, option
51
agreement, joint venture agreement, partnership agreement or other agreement
(other than a confidentiality agreement in accordance with Section 6.3(b)) with
respect thereto;
(ii) if (A) the Company has breached or failed to perform any of
its covenants or other agreements contained in this Agreement such that the
closing condition set forth in Section 7.2(a) would not be satisfied or (B)
there exists a breach of any representation or warranty of the Company contained
in this Agreement such that the closing condition set forth in Section 7.2(b)
would not be satisfied and, in the case of both (A) and (B) (other than (i) with
respect to a breach or failure to perform any of the covenants or agreements of
the Company set forth in Section 6.3 or (ii) with respect only to the covenants
which set forth the timeframe for which the Proxy Statement must be filed with
the SEC, the mailing of the Proxy Statement to the Company's stockholders, and
the holding of the Special Meeting, in Section 6.2(a), for which, in each case,
there shall be no cure period), such breach or failure to perform (1) is not
cured within 30 days after receipt of written notice thereof specifically
referencing this Section 8.1(d)(ii) or (2) is incapable of being cured by the
Company by the date set forth in Section 8.1(b)(ii); or
(iii) pursuant to Section 8.3(d)(iii).
SECTION 8.2. EFFECT OF TERMINATION.
In the event of the termination of this Agreement as provided in this
Article VIII, written notice thereof shall forthwith be given to the other party
or parties specifying the provision of this Agreement pursuant to which such
termination is made, and this Agreement (other than Section 8.2, Section 8.3 (if
applicable), Section 8.4 and Article IX, which shall survive any termination of
this Agreement) shall forthwith become null and void, and there shall be no
Liability on the part of Parent, Merger Sub or the Company under this Agreement,
except as provided in this Section 8.2; provided, however, that, subject to
Section 8.3(e) hereof, none of the parties shall be relieved from Liability for
fraud or for any knowing or willful breach of any of its covenants,
representations or warranties contained in this Agreement.
SECTION 8.3. TERMINATION FEE.
(a) If (i) the Company terminates this Agreement pursuant to Section
8.1(c)(i), or (ii) Parent terminates this Agreement pursuant to Section
8.1(d)(i), then the Company shall pay to Parent $8,000,000 in cash, plus all of
Parent's Expenses (such amount, the "Termination Fee"), at or prior to the time
of termination in the case of such termination by the Company or as promptly as
reasonably practicable (and in any event within five Business Days) after
termination in the case of such termination by Parent, payable by wire transfer
of same day funds.
(b) If (i) either party terminates this Agreement pursuant to Section
8.1(b)(ii) or Section 8.1(b)(iv), and an Alternative Proposal shall have been
publicly announced or otherwise made known to the Company (unless in the case of
termination pursuant to Section 8.1(b)(iv), such Alternative Proposal is
publicly withdrawn at least three Business Days prior to the Special Meeting)
and (ii) the Company consummates a transaction agreement with respect to any
Alternative Proposal within 12 months of the date of such termination, then the
Company shall pay to Parent the Termination Fee less any Expenses paid to Parent
pursuant to Section 8.4
52
upon consummation of such Alternative Proposal, payable by wire transfer of same
day funds. Notwithstanding anything in this Agreement to the contrary, for
purposes of this Section 8.3(b) and Section 8.3(c), the term "Alternative
Proposal" shall have the meaning assigned to such term in Article I, except that
the applicable percentages in clauses (i), (ii) and (iii) of such definition
shall be 50% rather than 15%.
(c) If Parent terminates this Agreement pursuant to Section
8.1(d)(ii), and the breach or failure to perform referred to therein is a
knowing breach or failure to perform, as the case may be, and (i) an Alternative
Proposal shall have been made prior to such termination and (ii) the Company
consummates a transaction agreement with respect to any Alternative Proposal
within 12 months of the date of such termination, then the Company shall pay to
Parent the Termination Fee less any Expenses paid to Parent pursuant to Section
8.4 upon such consummation, payable by wire transfer of same day funds.
(d) If (i) the Company terminates this Agreement pursuant to Section
8.1(b)(ii) and at the time of such termination, (A) Parent or Merger Sub has
breached or failed to perform any of its covenants or other agreements contained
in this Agreement such that the closing condition set forth in Section 7.3(a)
would not be satisfied or (B) there exists a breach of any representation or
warranty of Parent or Merger Sub contained in this Agreement such that the
closing condition set forth in Section 7.3(b) would not be satisfied (the
foregoing (A) or (B) referred to herein as a "Parent Material Breach"), (ii) the
Company terminates this Agreement pursuant to Section 8.1(c)(ii), (iii) the
Transactions contemplated hereby are not consummated on or prior to the
Termination Date as a result of a Parent Material Breach (in which event either
party may terminate this Agreement upon the first to occur of (A) the
Termination Date and (B) 30 days following the satisfaction of each of the
conditions set forth in Section 7.1 and Section 7.2 hereof), or (iv) either
party terminates this Agreement pursuant to Section 8.1(b)(v) and, at the time
of such termination, (A) there does not exist any breach or failure to perform
the covenants or other agreements contained in this Agreement to be performed by
the Company that would prevent the Company from satisfying the closing condition
set forth in Section 7.2(a) and (B) there does not exist any breach of a
representation or warranty made by the Company in this Agreement that would
prevent the Company from satisfying the closing condition set forth in Section
7.2(b) (provided, however, that any such breach or failure to perform shall be
disregarded for purposes hereof if it is cured within the period provided in
Section 8.1(c)(ii)), then, in any such case, Parent shall pay to the Company the
Parent Termination Fee at or prior to the time of termination in the case of
such termination by Parent or as promptly as reasonably practicable (and in any
event within five Business Days) after termination in the case of such
termination by the Company, payable by wire transfer of same day funds.
(e) Except to the extent required by applicable Law, neither the
Company nor Parent shall withhold any taxes from any payment under this Section
8.3. Notwithstanding anything in this Agreement to the contrary, (i) Parent and
Merger Sub agree that payment of the Termination Fee and the Expense
Reimbursement, if such payments are payable and actually paid, shall be the sole
and exclusive remedy of Parent and Merger Sub upon the termination of this
Agreement in the circumstances described in Sections 8.1(b), 8.1(c) and 8.1(d),
and (ii) the Company agrees that payment of the Parent Termination Fee, if such
payment is payable and actually paid, shall be the sole and exclusive remedy of
the Company upon the termination of this Agreement in the circumstances
described in Sections 8.1(b), 8.1(c), and 8.1(d) (including in
53
the circumstances described in Section 8.3(d)). Under no circumstances shall the
Termination Fee or the Parent Termination Fee be payable more than once pursuant
to this Section 8.3.
(f) Each of the Company, Parent and Merger Sub acknowledges and agrees
that the agreements contained in this Section 8.3 are an integral part of the
transactions contemplated by this Agreement. In the event that the Company shall
fail to pay the Termination Fee when due, or Parent shall fail to pay the Parent
Termination Fee when due, the Company or Parent, as the case may be, shall
reimburse the other party for all reasonable costs and expenses incurred or
accrued by such other party (including reasonable fees and expenses of counsel)
in connection with the collection under and enforcement of this Section 8.3.
SECTION 8.4. EXPENSE REIMBURSEMENT. Notwithstanding anything in this
Agreement to the contrary, if this Agreement is terminated by Parent pursuant to
Section 8.1(d)(ii), or by Parent or the Company pursuant to Section 8.1(b)(iv),
then the Company shall pay Parent an amount equal to the sum of Parent's
Expenses for which Parent has not theretofore been reimbursed by the Company
(the "Expense Reimbursement"). "Expenses" include all reasonable out-of-pocket
expenses (including, without limitation, all fees and expenses of financing
sources, counsel, accountants, investment bankers, experts and consultants to a
party hereto and its affiliates) up to $5,000,000 in the aggregate and
documented in the manner described in the following sentence incurred by a party
or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and the
transactions contemplated hereby, including the Financing. Payment of Parent's
Expenses pursuant to this Section 8.4 shall be made not later than five (5)
Business Days after delivery to the Company of notice of demand for payment and
a documented itemization setting forth in reasonable detail all Expenses of
Parent (which itemization may be supplemented and updated from time to time by
Parent until the ninetieth day after Parent delivers such notice of demand for
payment).
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. AMENDMENT AND MODIFICATION.
Subject to applicable Law, this Agreement may be amended, modified or
supplemented in any and all respects, whether before or after any vote of the
stockholders of the Company contemplated hereby, solely by written agreement of
the parties hereto authorized by action of their respective Boards of Directors
at any time prior to the Effective Time.
SECTION 9.2. EXTENSION; WAIVER.
At any time prior to the Effective Time, the parties may (a) extend the
time for the performance of any of the obligations or other acts of any party,
(b) waive any inaccuracies in the representations and warranties contained in
this Agreement or in any document delivered pursuant to this Agreement and (c)
waive compliance 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.
54
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 9.3. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations and warranties contained in this Agreement or
in any schedule, instrument or other document delivered pursuant to this
Agreement shall survive the Effective Time.
SECTION 9.4. NOTICES.
Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section 9.4, and confirmation of such transmission is received
prior to 5:00 p.m. at the place to which such notice was sent on a Business Day,
or the following Business Day if confirmation of transmission is received
thereafter, (ii) when received, if sent by nationally recognized overnight
courier service, or (iii) upon actual receipt by the party to whom such notice
is required to be given. The address for such notices and communications (unless
changed by the applicable party by like notice) shall be as follows:
(a) if to the Company, to:
Xxxxx Xxxxx Holdings, Inc.
00000 XX 00xx Xxxxxx
Xxxxxxx, XX 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Akin Gump Xxxxxxx Xxxxx & Xxxx LLP
0000 Xxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: J. Xxxxxx Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to Parent or Merger Sub, to:
c/o Golden Gate Private Equity, Inc.
Xxx Xxxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx and Xxxxxx Xxxxxxx
Facsimile No: (000) 000-0000
and
c/o Sun Capital Securities Group, LLC
55
000 Xxxx Xxx., Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxx and Xxxxxxx Fieldstone
Facsimile No: (000) 000-0000
and
c/o Sun Capital Securities Group, LLC
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attention: C. Xxxxx Xxxxx
Facsimile No: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, P.C. and Xxxx X. Xxxxxxx, P.C.
Facsimile No: (000) 000-0000
SECTION 9.5. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when each party has received counterparts signed by each
of the other parties, it being understood that one or more parties may sign
separate counterparts and such counterparts may be delivered by facsimile.
SECTION 9.6. ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES.
This Agreement (including the documents, schedules 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,
among the parties with respect to the subject matter of this Agreement, and (b)
except with respect to Article III and Section 6.8 (which shall inure to the
Persons benefiting therefrom who are intended to be third party beneficiaries
thereof), and the right of the Company, acting on behalf of its stockholders, to
pursue any remedies on behalf of its stockholders pursuant to the proviso set
forth in Section 8.2, are not intended to confer upon any Person other than the
parties hereto any rights or remedies whatsoever.
SECTION 9.7. SEVERABILITY.
If any term, provision, covenant or restriction of this Agreement is held
by a court (or other authority) of competent jurisdiction to be invalid, void,
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
56
SECTION 9.8. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
Laws of the State of Delaware that apply to agreements made and performed
entirely within the State of Delaware, without regard to the conflicts of laws
provisions thereof or of any other jurisdiction.
SECTION 9.9. ASSIGNMENT.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties;
provided, however, that Parent and Merger Sub may assign their rights hereunder
and under all other documents executed in connection with the Transaction to any
lender as security in connection with any financing obtained in connection with
the Transactions; provided further that Parent may assign its rights hereunder
to an Affiliate but shall remain fully liable for its obligations under this
Agreement. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and permitted assigns. Any purported assignment in
violation of the provisions of this Agreement shall be null and void ab initio.
SECTION 9.10. SCHEDULES.
Information disclosed under one Section of the Company Disclosure Schedule
shall be deemed to be disclosed in any other Section or Sections of the Company
Disclosure Schedule where such disclosure is reasonably apparent on the face of
such disclosure and would be relevant or applicable. The fact that any
information is disclosed in the Company Disclosure Schedule shall not be
construed to mean that such information is required to be disclosed by this
Agreement. Without limiting the foregoing, the information set forth in the
Company Disclosure Schedule, and the dollar thresholds set forth in this
Agreement, shall not be used as a basis for interpreting the terms "material" or
"Company Material Adverse Effect" or other similar terms in this Agreement.
SECTION 9.11. EXPENSES.
Except as otherwise expressly set forth in this Agreement, all fees and
expenses incurred by the parties hereto shall be borne solely and entirely by
the party that has incurred such fees and expenses.
SECTION 9.12. SUBMISSION TO JURISDICTION; WAIVERS.
(a) Each of the Company, Parent and Merger Sub irrevocably agrees that
any legal action or proceeding arising out of or relating to this Agreement or
any of the Transactions shall be brought and determined in any federal court
located in the State of Delaware or any Delaware state court, and each of the
Company, Parent and Merger Sub hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally
and unconditionally, to the exclusive jurisdiction of the aforesaid court. Each
of the Company, Parent and Merger Sub hereby irrevocably waives, and agrees not
to assert, by way of motion, as a defense, counterclaim or otherwise, in any
such action or proceeding, (i) any claim that it is not personally subject to
the jurisdiction of the above-named courts for any reason other
57
than the failure to lawfully serve process, (ii) that it or its property is
exempt or immune from jurisdiction of such court or from any legal process
commenced in such court (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and (iii) that (A) such action or proceeding in such court is
brought in an inconvenient forum, (B) the venue of such action or proceeding is
improper or (C) this Agreement, the Transactions or the subject matter hereof or
thereof, may not be enforced in or by such court.
(b) EACH OF THE COMPANY, PARENT AND MERGER SUB HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS.
SECTION 9.13. SPECIFIC PERFORMANCE.
The parties agree that, subject to Section 8.3(e) hereof, irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that, subject to Section 8.3(e) hereof, the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in addition to any other remedy to which such party is entitled at law
or in equity. Each party agrees that, subject to Section 8.3(e) hereof, it shall
not oppose the granting of such relief and hereby irrevocably waives any
requirement for the security or posting of any bond in connection with such
relief.
SECTION 9.14. CONSTRUCTION OF AGREEMENT.
(a) The terms and provisions of this Agreement represent the results
of negotiations among the parties, each of which has been represented by counsel
of its own choosing, and none of which has acted under duress or compulsion,
whether legal, economic or otherwise. Accordingly, the terms and provisions of
this Agreement shall be interpreted and construed in accordance with their usual
and customary meanings, and each of the parties hereto hereby waives the
application in connection with the interpretation and construction of this
Agreement of any Law to the effect that ambiguous or conflicting terms or
provisions contained in this Agreement shall be interpreted or construed against
the party whose attorney prepared the executed draft or any earlier draft of
this Agreement.
(b) All references in this Agreement to Sections and Articles without
further specification are to Sections of, and Articles of, this Agreement.
(c) The Table of Contents and the captions and headings of Sections
and Articles in this Agreement are for convenience only and shall not in any way
affect the meaning or construction of any provisions of this Agreement.
(d) Unless the context otherwise requires, "or" is not exclusive.
(e) Unless the context otherwise requires, "including" means
"including but not limited to".
58
(f) 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 terms.
59
IN WITNESS WHEREOF, the Company, Parent and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
XXXXX XXXXX HOLDINGS, INC.
By: /s/ Xxxxxxx X. End
------------------------------------
Name: Xxxxxxx X. End
Title: Chairman of the Board of
Directors
XXXXX B HOLDING CORP.
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Vice President
XXXXX B INTEGRATED, INC.
By: /s/ Xxxx X. Xxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Vice President
