Exhibit (c)(1)
TRANSACTION AGREEMENT
by and between
THE NORTH FACE, INC.
and
TNF ACQUISITION LLC
Dated as of February 27, 1999
TRANSACTION AGREEMENT
THIS TRANSACTION AGREEMENT (this "Agreement") is made and entered into as
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of February 27, 1999 by and between The North Face, Inc., a Delaware corporation
(together with its Subsidiaries from time to time (except as the context may
otherwise require), the "Company"), and TNF Acquisition LLC, a Delaware limited
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liability company ("TNF") and whose sole member is TNF Investment LLC, which in
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turn is a Delaware limited liability company and whose sole member is Green
Equity Investors III, L.P., a Delaware limited partnership ("GEI").
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RECITALS
WHEREAS, the Company Board (as defined below) or sole member, as the case
may be, of each of the Company and TNF has determined that it is in the best
interests of its stockholders or member, as the case may be, for TNF to acquire
the Company upon the terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance of such acquisition, it is proposed that the
Company shall make a cash tender offer (the "Offer") to acquire all of the
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issued and outstanding shares of Common Stock, par value $0.0025 per share, of
the Company (shares of Common Stock of the Company, including the associated
preferred share purchase rights issued pursuant to the Rights Plan, being
collectively referred to as "Shares") for $17.00 per Share (such amount, or any
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greater amount per Share paid pursuant to the Offer, being referred to herein as
the "Per Share Amount") net to the seller in cash, upon the terms and subject to
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the conditions set forth herein and in the Offer; and
WHEREAS, the Board of Directors of the Company (the "Company Board") has
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approved the making of the Offer and resolved and agreed to recommend that
holders of Shares tender their Shares pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the Company Board or sole
member, as the case may be, of each of the Company and TNF has approved the
purchase by TNF and the sale by the Company (the "Stock Purchase"), concurrently
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with the consummation of the Offer, of a number of Shares in excess of that
number of Shares remaining outstanding (on a fully diluted basis) after the
consummation of the Offer for a per share purchase price equal to the Per Share
Amount; and
WHEREAS, also in furtherance of such acquisition, the Company Board or sole
member, as the case may be, of each of the Company and TNF has approved the
merger (the "Merger") of TNF with and into the Company in accordance with the
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General Corporation Law and the Limited Liability Company Act of the State of
Delaware ("Delaware Law") following the consummation of the Offer and upon the
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terms and subject to the conditions set forth herein.
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AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants, agreements and other promises set forth herein, the mutual benefits
to be gained by the performance thereof, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and
accepted, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Certain Terms. For all purposes of this Agreement, except as
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otherwise expressly provided:
1.1.1. the terms defined in this Article I have the meanings
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assigned to them in this Article I and include the plural as well as the
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singular;
1.1.2. all accounting terms not otherwise defined herein have the
meanings assigned under GAAP;
1.1.3. all references in this Agreement to designated
"Articles, "Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of the body of this Agreement;
1.1.4. pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms;
1.1.5. the words "include," "includes" and "including" shall be
deemed in each case to be followed by the words "without limitation;"
1.1.6. the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision; and
1.1.7. the term "party" or "parties" when used herein refer to
TNF, on the one hand, and the Company and Company Sub, on the other.
1.2. Definitions. As used in this Agreement and the Exhibits and
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Schedules delivered pursuant to this Agreement, the following definitions shall
apply:
1.2.1. "Acquisition Proposal" has the meaning set forth in
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Section 8.5 hereof.
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1.2.2. "Action" means any action, complaint, petition,
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investigation, suit,Section 8.5 hereof. litigation or other proceeding, whether
civil or criminal, in law or in equity, or before any arbitrator or Governmental
Entity.
1.2.3. "Agreement" means this Agreement, as amended or
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supplemented.
1.2.4. "Approval" means any approval, authorization, consent,
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qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental Entity
or any other Person.
1.2.5. "Asset Dropdown" means the transactions described in
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Section 4.1 hereof.
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1.2.6. "Authorization" has the meaning set forth in Section 4.2
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hereof.
1.2.7. "Balance Sheet" has the meaning set forth in Section 6.13
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hereof.
1.2.8. "Business Day" means any day that is not a Saturday,
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Sunday or legal holiday in the State of California.
1.2.9. "BT Alex. Xxxxx" has the meaning set forth in
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Section 2.2.1 hereof.
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1.2.10. "Certificate" has the meaning set forth in
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Section 5.9.2 hereof.
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1.2.11. "Certificate of Merger" has the meaning set forth in
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Section 5.2 hereof.
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1.2.12. "Code" means the Internal Revenue Code of 1986, as
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amended.
1.2.13. "Company" has the meaning set forth in the preamble
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hereto.
1.2.14. "Company Assets" has the meaning set forth in
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Section 4.1 hereof.
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1.2.15. "Company Board" has the meaning set forth in the
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recitals hereto.
1.2.16. "Company Disclosure Letter" has the meaning set forth
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in the preamble of Article VI hereof.
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1.2.17. "Company Sub" has the meaning set forth in Section 4.1
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hereof.
1.2.18. "Competitive Bid" means any written offer to acquire all
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or a controlling interest in the Existing Stock of the Company, or all or
substantially all of the Company Assets, that is communicated to the Company or
disseminated to the public.
1.2.19. "Debt Funding" has the meaning set forth in
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Section 7.6 hereof.
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1.2.20. "Delaware Law" has the meaning set forth in the
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recitals hereto.
1.2.21. "Dissenting Shares" has the meaning set forth in
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Section 5.8.1 hereof.
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1.2.22. "Effective Time" has the meaning set forth in
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Section 5.2 hereof.
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1.2.23. "Encumbrance" means any charge, encumbrance, security
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interest, lien, option, equity, adverse claim or restriction, except for any
restrictions on transfer generally arising under any applicable federal or state
securities law.
1.2.24. "Environmental Laws" has the meaning set forth in
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Section 6.9.3 hereof.
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1.2.25. "ERISA" has the meaning set forth in Section 6.16.1
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hereof.
1.2.26. "ERISA Affiliate" has the meaning set forth in
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Section 6.16.1 hereof.
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1.2.27. "Equity Funding" has the meaning set forth in
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Section 7.6 hereof.
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1.2.28. "Exchange Act" means the Securities Exchange Act of
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1934, as amended.
1.2.29. "Existing Stock" means the Company's common stock, par
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value $0.0025 share.
1.2.30. "Expenses" has the meaning set forth in Section 10.3
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hereof.
1.2.31. "Fiscal 1997 Form 10-K" has the meaning set forth in
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Section 6.7 hereof.
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1.2.32. "GAAP" means generally accepted accounting principles
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in the United States, as in effect from time to time, consistently applied.
1.2.33. "GEI" has the meaning set forth in the preamble hereto.
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1.2.34. "Governmental Entity" means any government or any
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agency, bureau, board, commission, court, department, official, political
subdivision, tribunal or other instrumentality of any government, whether
federal, state or local, domestic or foreign.
1.2.35. "Hazardous Substances" has the meaning set forth in
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Section 6.9.3 hereof.
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1.2.36. "H-S-R Act" has the meaning set forth in Section 8.6
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hereof.
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1.2.37. "Indebtedness" means all obligations for borrowed money
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and accounts payable, however evidenced, including principal and interest.
1.2.38. "Indemnified Liability" has the meaning set forth in
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Section 8.13. hereof.
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1.2.39. "Indemnified Party" has the meaning set forth in
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Section 8.13 hereof.
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1.2.40. "Instruments" has the meaning set forth in Section 4.2
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hereof.
1.2.41. "Law" means any statute, rule, regulation, published
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administrative requirement, code or ordinance of any Governmental Entity.
1.2.42. "Leased Real Estate" has the meaning set forth in
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Section 6.12.2 hereof.
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1.2.43. "Liabilities" means all liabilities, obligations, debts
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whatsoever of the business of the Company, whether matured or unmatured,
liquidated or unliquidated, fixed or contingent, including the obligations of
the Company under Section 8.13.
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1.2.44. "Material Adverse Effect" means a material adverse
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effect on (i) the ability of the subject Person to perform its obligations
under, and consummate the transactions contemplated by, this Agreement on a
timely basis or (ii) the condition (financial or otherwise), results of
operations, assets, liabilities, Prospects or business of the subject Person
and its Subsidiaries taken as a whole.
1.2.45. "Merger" has the meaning set forth in the recitals
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hereto.
1.2.46. "Merger Consideration" has the meaning set forth in
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Section 5.6.1 hereof.
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1.2.47. "Minimum Condition" has the meaning set forth in
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Section 2.1.1 hereof.
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1.2.48. "Monthly Financial Statements" has the meaning set
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forth in Section 8.7 hereof.
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1.2.49. "Offer" has the meaning set forth in the recitals hereto.
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1.2.50. "Offer Documents" has the meaning set forth in
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Section 2.1.3 hereof.
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1.2.51. "Offer to Purchase" has the meaning set forth in
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Section 2.1.3 hereof.
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1.2.52. "Option Plans" has the meaning set forth in Section 6.3
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hereof.
1.2.53. "Options" means the outstanding options to purchase
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Existing Stock.
1.2.54. "Order" means any decree, injunction, judgment, order,
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ruling, arbitration award, assessment or writ issued by any Governmental Entity.
1.2.55. "Owned Real Estate" has the meaning set forth in Section
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6.12.1 hereof.
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1.2.56. "Paying Agent" has the meaning set forth in Section
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5.9.1 hereof.
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1.2.57. "Permit" means any license, permit, franchise or
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authorization.
1.2.58. "Permitted Encumbrances" means (i) Encumbrances disclosed
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in Section 1.2.58 of the Company Disclosure Letter, (ii) liens for Taxes,
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assessments, governmental charges or levies or mechanics' and other statutory
liens which are not material in amount relative to the property affected, or
which are not yet delinquent or can be paid without penalty or are being
contested in good faith and by appropriate proceedings in respect thereof, and
(iii) imperfections of title which are not substantial in amount relative to the
property affected and which do not materially interfere with the present use of
the property subject thereto or affected thereby.
1.2.59. "Person" means an association, a corporation, an
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individual, a partnership, a limited liability company or limited liability
partnership, a trust or any other entity or organization, including a
Governmental Entity.
1.2.60. "Per Share Amount" has the meaning set forth in the
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recitals hereto.
1.2.61. "Plans" has the meaning set forth in Section 6.16.1
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hereof.
1.2.62. "Prospects" means circumstances, which are actually known
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by the Company's management, that indicate that it is reasonably likely that
there will be a substantial decrease in sales or increase in costs which is not
otherwise anticipated in the Company's current financial plans for its 1999
fiscal year.
1.2.63. "Recap Closing" has the meaning set forth in Section 3.2
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hereof.
1.2.64. "Recap Closing Date" has the meaning set forth in Section
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3.2 hereof.
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1.2.65. "Recap Purchase Price" has the meaning set forth in
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Section 3.1.2 hereof.
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1.2.66. "Recap Shares" has the meaning set forth in Section 3.1.1
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hereof.
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1.2.67. "Representatives" means Persons acting on behalf of
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another Person, including their respective officers, directors, management
employees, representatives, agents, independent accountants, investment bankers
and counsel.
1.2.68. "Rights Agreement" has the meaning set forth in Section
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6.28 hereof.
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1.2.69. "SEC" means the United States Securities and Exchange
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Commission or any successor entity.
1.2.70. "SEC Documents" means any reports, schedules, forms,
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statements or other documents filed by the Company with the SEC.
1.2.71. "SEC Reports" has the meaning set forth in Section 6.7
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hereof.
1.2.72. "Securities Act" means the Securities Act of 1933, as
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amended.
1.2.73. "Service" means the United States Internal Revenue Service
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or any successor entity.
1.2.74. "Schedule 13E-3" has the meaning set forth in Section
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2.1.3 hereof.
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1.2.75. "Schedule 13E-4" has the meaning set forth in Section
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2.1.3 hereof.
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1.2.76. "Shares" has the meaning set forth in the recitals hereto.
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1.2.77. "Stock Purchase" has the meaning set forth in the recitals
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hereto.
1.2.78. "Subsidiary" of a company means any Person in which such
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company has a direct or indirect equity or ownership interest by vote or value
of in excess of 50%. Subsidiaries of the Company shall include Company Sub for
all purposes except where the context otherwise requires.
1.2.79. "Superior Consideration" has the meaning set forth in
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Section 8.5 hereof.
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1.2.80. "Superior Proposal" has the meaning set forth in Section
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8.5 hereof.
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1.2.81 "Surviving Corporation" has the meaning set forth in
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Section 5.1 hereof.
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1.2.82. "Takeover Statute" has the meaning set forth in Section
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8.14 hereof.
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1.2.83. "Tax" or "Taxes", as the context may require, include: (i)
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any income, alternative or add-on minimum tax, gross income, gross receipts,
franchise, profits, sales, use, ad valorem, business license, withholding,
payroll, employment, excise, stamp, transfer, recording, occupation, premium,
property, value added, custom duty, severance, windfall profit or license tax,
governmental fee, including estimated taxes relating to any of the foregoing, or
other similar tax or other like assessment or charge of similar kind whatsoever
together with any interest and any penalty, addition to tax or additional amount
imposed by any Governmental Entity responsible for the imposition of any such
Tax; or (ii) any liability of a Person for the payment of any taxes, interest,
penalty, addition to tax or like additional amount resulting from the
application of Treas. Reg. (S) 1.1502-6 or comparable provisions of any
Governmental Entity in respect of a consolidated or combined return.
1.2.84. "Tax Return" means any return (including any information
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return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Entity in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Law
relating to any Tax.
1.2.85. "Termination Fee" has the meaning set forth in Section
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10.3 hereof.
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1.2.86. "TNF" has the meaning set forth in the preamble hereto.
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1.2.87. "Transactions" has the meaning set forth in Section 2.1.3
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hereof.
1.2.88. "Transfer" has the meaning set forth in Section 4.2
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hereof.
1.2.89. "Unsolicited Proposal" has the meaning set forth in
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Section 8.5 hereof.
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ARTICLE II
THE OFFER
2.1. The Offer.
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2.1.1. Provided that (i) this Agreement shall not have been
terminated in accordance with Section 10.1, and (ii) none of the events set
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forth in Annex A hereto shall have occurred or be existing, upon the terms and
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subject to the conditions set forth herein and as soon as practicable following
the execution and delivery hereof by the parties hereto, the Company shall
commence a cash tender offer to acquire all of the issued and outstanding
Shares, including the associated preferred share purchase rights, for $17.00 per
Share (as defined in the recitals hereto, the "Offer"). The Company shall not be
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required to accept for payment and pay for Shares tendered pursuant to the
Offer,
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in accordance with the terms hereof and the terms of the Offer, unless (i) at
least seventy-five percent (75%) of the outstanding Shares (on a fully diluted
basis) after giving effect to Section 2.4 shall have been validly tendered and
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not withdrawn prior to the expiration of the Offer (the "Minimum Condition"),
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and (ii) the other conditions set forth in Annex A hereto shall have been
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satisfied. The Per Share Amount payable by the Company in respect of each Share
tendered pursuant to the Offer shall, subject to applicable withholding of
taxes, be net to the seller in cash, upon the terms and subject to the
conditions of the Offer. Subject to the terms and conditions of the Offer
(including, without limitation, the Minimum Condition), as promptly as
practicable following the expiration of the Offer, the Company shall deliver, or
cause to be delivered, the Per Share Amount to each Person who has validly
tendered (and not withdrawn) Shares pursuant to the Offer, in exchange for each
Share so tendered and not withdrawn.
2.1.2. Provided that this Agreement shall not have been terminated
in accordance with Article X hereof and all of the conditions set forth in Annex
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A shall not have been satisfied, the Company shall, at the direction of TNF,
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extend the expiration date of the Offer from time to time until a date not later
than July 31, 1999.
2.1.3. Upon the terms and subject to the conditions set forth
herein, concurrently with the commencement of the Offer, the Company shall file
with the SEC an Issuer Tender Offer Statement on Schedule 13E-4 (together with
all amendments and supplements thereto, the "Schedule 13E-4") with respect to
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the Offer, and the Company, Xxxxx Xxxxxxx and TNF shall file with the SEC a Rule
13E-3 Transaction Statement on Schedule 13E-3 (together with all amendments and
supplements thereto, the "Schedule 13E-3") with respect to the Offer, the Stock
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Purchase, the Asset Dropdown, the Merger and the other transactions contemplated
hereby (collectively, the "Transactions"). The Schedule 13E-4 and the Schedule
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13E-3 shall contain, or shall incorporate by reference, an offer to purchase
(the "Offer to Purchase") and forms of the related letter of transmittal, any
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related summary advertisement and any other documents related to the Offer (the
Schedule 13E-4, the Schedule 13E-3, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "Offer Documents"). Each of the Company and TNF
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shall correct promptly any information provided by it for use in the Offer
Documents which shall have become false or misleading, and each of the Company
and TNF shall take all actions necessary to cause the Schedule 13E-4 and the
Schedule 13E-3, as so corrected, to be filed with the SEC and the other Offer
Documents, as so corrected, to be disseminated to holders of Shares, in each
case as and to the extent required by applicable securities laws.
2.2. Company Action.
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2.2.1. The Company hereby represents and warrants that (i) the
Company Board, at a meeting duly called and held on February 27, 1999, has (A)
determined that this Agreement and the Transactions are fair to, and in the best
interests of, the holders of Shares, (B) approved and adopted this Agreement and
the Transactions, and (C) recommended that the stockholders of the Company
accept the Offer and approve
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and adopt this Agreement and the Transactions, and (ii) BT Alex. Xxxxx
Incorporated ("BT Alex. Xxxxx") has delivered to the Company Board an opinion to
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the effect that, as of the date of this Agreement, the cash consideration to be
received in the Offer and the Merger by the holders of Shares (other than TNF or
its affiliates or any holders of Shares who will retain Shares following
consummation of the Offer and the Merger) is fair, from a financial point of
view, to such holders. The Company shall include in the Offer Documents the
recommendation of the Company Board described in the immediately preceding
sentence.
2.2.2. The Company shall take all actions necessary to effect the
Offer as contemplated by this Agreement, including, without limitation, promptly
mailing the Offer Documents to the record holders and beneficial owners of the
Shares in accordance with the terms and conditions set forth herein.
2.3. Directors.
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2.3.1. Subject to compliance with applicable law, promptly after
the Recap Closing, and from time to time thereafter, TNF shall be entitled to
designate all of the directors on the Company Board, and the Company shall,
subject to compliance with Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, upon request of TNF, promptly take all actions necessary
to cause TNF's designees to be so elected, including obtaining the resignations
of one or more existing directors.
2.3.2. The Company's obligation to appoint TNF's designees to the
Company Board shall be subject to Section 14(f) of the Exchange Act and Rule
14f-l thereunder. The Company shall promptly take all actions required pursuant
to such Section and Rule in order to fulfill its obligations under this Section
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2.3 and shall include in the Schedule 13E-3 and Schedule 13E-4 such information
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with respect to the Company and its officers and directors as is required under
such Section and Rule in order to fulfill its obligations under this Section
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2.3. TNF will supply to the Company in writing any information with respect to
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TNF and its officers, directors and affiliates required by such Section and
Rule.
2.4. Options. On the Recap Closing Date, the holders of Options that have
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vested immediately prior to the Effective Time shall be entitled to receive the
aggregate spread (i.e., the difference between the exercise price and the Per
Share Amount multiplied by the underlying shares of Existing Stock immediately
prior to the Effective Time), except in the case of certain holders who have
entered into or will enter into agreements with the Company to convert such
Options at the Effective Time into options to purchase shares of the common
stock of the Surviving Corporation. All Options that have not vested immediately
prior to the Effective Time shall be terminated in accordance with their
respective terms.
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ARTICLE III
THE STOCK PURCHASE
3.1. Stock Purchase.
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3.1.1. Purchase and Sale of the Shares. Upon the terms and subject
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to the conditions set forth herein, at the Recap Closing (as hereinafter
defined), the Company shall sell to TNF, and TNF shall purchase from the
Company, a number of Shares in excess of the number of Shares remaining
outstanding (on a fully diluted basis taking into account only Options that
are vested or will vest prior to the Recap Closing) after the consummation of
the Offer (and in no event less than the number of Shares required to be
purchased under the commitment letter from GEI referred to in Section 7.6
hereof, as it may be amended between now and the Recap Closing).
3.1.2. Purchase Price. The aggregate purchase price for the Recap
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Shares shall be equal to the product obtained by multiplying (x) the aggregate
number of Recap Shares, and (x) the Per Share Amount (the "Recap Purchase
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Price").
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3.2. Closing. Upon the terms and subject to the conditions set forth
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herein, the sale and purchase of the Recap Shares pursuant to the terms and
provisions of this Article III shall take place at a closing (the "Recap
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Closing") to be held at the offices of Irell & Xxxxxxx XXX, 000 Xxxxx Xxxx
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Street, Los Angeles, California concurrently with the acceptance by the Company
for payment of the Shares tendered and not withdrawn pursuant to the Offer on
the day the Offer is scheduled to expire, or at such other place, and/or at such
other time and/or on such other date as the Company and TNF mutually agree upon
in writing (the day on which the Recap Closing actually takes place being
referred to herein as the "Recap Closing Date").
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3.3. Closing Deliveries by the Company. At the Recap Closing, the
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Company shall deliver, or cause to be delivered, to TNF each of the following:
3.3.1. a certificate or certificates evidencing the Recap Shares;
3.3.2. a receipt for the Recap Purchase Price; and
3.3.3. the certificates and other documents required to be
delivered pursuant to Section 9.3 hereof.
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3.4. Closing Deliveries by TNF. At the Recap Closing, TNF shall
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deliver, or cause to be delivered, to the Company each of the following:
3.4.1. an amount in cash equal to the Recap Purchase Price, by
wire transfer of immediately available funds as directed in writing by the
Company at least one (1) business day prior to the Recap Closing; and
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3.4.2. the certificates and other documents required to be
delivered pursuant to Section 9.2 hereof.
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ARTICLE IV
THE ASSET DROPDOWN
4.1. The Asset Dropdown. Promptly after the Recap Closing Date, the
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Company shall organize, or cause to be organized under the laws of the State of
Delaware a limited liability company ("Company Sub") and thereafter maintain
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its good standing under the laws of the State of Delaware and qualify it to do
business in such jurisdictions as may be necessary to comply with the terms of
Section 6.1 hereof. TNF shall be afforded the opportunity to review and approve
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all documents prepared in connection with the formation of Company Sub. Promptly
after the Recap Closing Date, the Company shall sell, convey, assign, transfer
and deliver to Company Sub, and the Company shall cause Company Sub to purchase
and acquire from the Company, all of the rights, title and interests of the
Company in and to all of the assets, properties, operations and businesses and
all other rights and privileges of every nature, kind and description, whether
tangible or intangible (including goodwill), whether accrued, contingent or
otherwise, of the Company as such assets, properties, operations, businesses,
rights and privileges may exist on the date of the transfer and as of the Recap
Closing Date (collectively, the "Company Assets"); provided, however, that the
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Company shall retain sufficient cash or cash equivalents in order to finance the
consummation of the Merger. The transfer of the Company Assets contemplated by
this Section 4.1 shall be effected by appropriate bills of sale and other
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evidences of transfer or assignment, all in forms reasonably satisfactory to the
Company and TNF. Simultaneously therewith, the Company shall assign to Company
Sub, and shall cause Company Sub to assume and agree to pay, perform and be
liable and responsible for, any and all of its Liabilities. The assumption of
the Liabilities by Company Sub pursuant to this Section 4.1 shall be evidenced
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by an assumption agreement or other comparable document in form and substance
reasonably satisfactory to the Company and TNF.
4.2. Non-Assignment Under Certain Circumstances. Notwithstanding
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anything contained in this Agreement to the contrary, this Agreement shall not
constitute an agreement to sell, convey, assign, transfer or deliver
("Transfer") any interest in any instruments, commitments, contracts, leases,
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permits or other agreements or arrangements or any claim, right or benefit, or
any Liability arising thereunder or resulting therefrom, including, without
limitation, those items set forth in Section 6.5 of the Company Disclosure
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Letter ("Instruments"), if such a Transfer or an attempt to make such a Transfer
-----------
without authorization, approval, consent or waiver of a third Person
("Authorizations") would constitute a breach or violation thereof or affect
--------------
adversely the rights of Company Sub or the Company thereunder; and any transfer
hereunder of such Instruments that requires Authorizations shall be made subject
to such Authorizations being obtained. In the event that any such Authorizations
are not obtained on or prior to the Recap Closing Date, the Company shall use
commercially reasonable efforts to obtain any such Authorization after the Recap
Closing Date, and the Company shall, to the
-13-
fullest extent permitted by law and any Instruments (including by acting as an
agent of Company Sub), hold such Instruments in trust for the exclusive use and
benefit of Company Sub such that Company Sub receives the interest of the
Company in the benefits therefrom until such time as such Authorizations are
obtained.
ARTICLE V
THE MERGER
5.1. The Merger. Upon the terms and subject to the conditions set
----------
forth herein, at the Effective Time (as hereinafter defined), TNF shall be
merged with and into the Company in accordance with Delaware Law (as defined in
the recitals hereto, the "Merger"). TNF shall take all action required under
------
Delaware Law to cause the approval of the Merger as soon as practicable after
the Recap Closing, including (if required) the holding of a meeting of
stockholders and the voting of all the Recap Shares in favor of the Merger. As a
result of the Merger, the separate corporate existence of TNF shall thereupon
cease and the Company shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
---------------------
5.2. Effective Time; Closing. As promptly as practicable following
-----------------------
the Recap Closing, the parties hereto shall cause the Merger to be consummated
by taking all necessary steps and filing a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware,
---------------------
in such form or forms as is required by, and executed in accordance with the
relevant provisions of, Delaware Law (the date and time of such filing being
referred to herein as the "Effective Time"). Prior to such filing, a closing
--------------
shall be held at the offices of Irell & Xxxxxxx LLP, 000 Xxxxx Xxxx Xxxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx, or such other place as the parties shall mutually agree,
for the purpose of confirming the satisfaction or waiver, as the case may be, of
the conditions set forth in Article IX hereof.
----------
5.3. Effects of Merger. At the Effective Time, the effect of the
-----------------
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and TNF shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of the Company
and TNF shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
5.4. Certificate of Incorporation; By-laws.
-------------------------------------
5.4.1. At the Effective Time, the Certificate of Incorporation
of the Company, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation.
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5.4.2. At the Effective Time, the By-laws of the Company, as in
effect immediately prior to the Effective Time, shall be the By-laws of the
Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Company and such By-laws.
5.5. Directors and Officers. The directors of the Company immediately
----------------------
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
5.6. Conversion of Securities. At the Effective Time, by virtue of the
------------------------
Merger and without any action on the part of either the Company, TNF or the
holders of any of the following securities:
5.6.1. Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled pursuant to Section
-------
5.6.2, any Merger Shares to remain outstanding pursuant to Section 5.6.4 and
----- -------------
any Dissenting Shares (as hereinafter defined)) shall be cancelled and
extinguished, and automatically converted into the right to receive an amount in
cash equal to the Per Share Amount (the "Merger Consideration") payable, without
--------------------
interest, to the holder of such Share, upon surrender, in the manner provided in
Section 5.8, of the certificate formerly evidencing such Share.
-----------
5.6.2. Each Share (i) held in the treasury of the Company, (ii)
owned by any direct or indirect wholly owned Subsidiary of the Company, or (iii)
owned by TNF immediately prior to the Effective Time, shall be cancelled without
any conversion thereof and no payment or distribution shall be made with respect
thereto.
5.6.3. Each limited liability company interest of TNF outstanding
immediately prior to the Effective Time shall be converted and exchanged for a
number of validly issued, fully paid and nonassessable shares of common stock of
the Surviving Corporation equal to the number of Recap Shares then held by TNF.
The foregoing exchange ratio has been established assuming that there is only
one limited liability company interest of TNF outstanding immediately prior to
the Effective Time, and, in the event of a change in the number of such
outstanding limited liability interests, the exchange ratio will be adjusted
proportionately.
5.6.4. Any Shares held by and registered in the name of Xxxxx
Xxxxxxx, his spouse or any of the individuals or entities identified in Section
-------
5.6.4 of the TNF Disclosure Letter (as it may be updated up to the Effective
-----
Time) at the Effective Time shall not be cancelled as provided above in Section
-------
5.6.1 hereof, but shall remain outstanding.
-----
5.7. [Intentionally Omitted]
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5.8. Dissenting Shares. Notwithstanding any term or provision of this
-----------------
Agreement to the contrary, Shares that are outstanding immediately prior to the
Effective Time and that are held by stockholders who shall not have voted in
favor of the Merger or consented thereto in writing and who shall have properly
perfected appraisal rights for such Shares in accordance with Section 262 of
Delaware Law (collectively, the "Dissenting Shares") shall not be converted into
-----------------
or represent the right to receive the Merger Consideration unless and until such
stockholders shall have withdrawn or lost such appraisal rights. Such
stockholders shall be entitled to receive payment of the fair value of such
Shares held by them in accordance with the provisions of Section 262 of Delaware
Law, except that all Dissenting Shares held by stockholders who shall have
withdrawn or lost such appraisal rights under Section 262 of Delaware Law shall
thereupon be deemed to have been converted into and to have become exchangeable
for, as of the Effective Time, the right to receive the Merger Consideration,
without any interest thereon, upon surrender, in the manner provided in Section
-------
5.6.1 hereof, of the certificate or certificates that formerly evidenced such
-----
Shares.
5.9. Surrender of Shares; Stock Transfer Books.
-----------------------------------------
5.9.1. Prior to the Effective Time, the Company and TNF shall
mutually designate a bank or trust company to act as agent (the "Paying Agent")
------------
for the holders of Shares in connection with the Merger to receive the funds to
which holders of Shares shall become entitled pursuant to Section 5.6.1. Such
-------------
funds shall be invested by the Paying Agent as directed by the Surviving
Corporation, provided that such investments shall be in obligations of, or
guaranteed by, the United States of America, or any agency thereof, and backed
by the full faith and credit of the United States of America, in commercial
paper obligations rated A-1 or P-1 or better by Xxxxx'x Investors Services, Inc.
or Standard & Poor's Corporation, respectively, or in deposit accounts,
certificates of deposit or banker's acceptances of, repurchase or reverse
repurchase agreements with, or Eurodollar time deposits purchased from,
commercial banks with capital, surplus and undivided profits aggregating in
excess of $1.0 billion (based on the most recent financial statements of such
bank which are then publicly available at the SEC or otherwise).
5.9.2. Promptly after the Effective Time, the Surviving Corporation
or the Company, as the case may be, shall cause to be mailed to each Person who
was, at the Effective Time, a holder of record of Shares entitled to receive the
Merger Consideration pursuant to Section 5.6.1 hereof, a form of letter of
-------------
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the certificates evidencing Shares (the "Certificates") shall
------------
pass, only upon proper delivery of the Certificates to the Paying Agent) and
instructions for use in effecting the surrender of the Certificates pursuant to
such letter of transmittal. Upon surrender to the Paying Agent of a Certificate,
together with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration for each Share
formerly evidenced by such Certificate, and such Certificate shall thereupon be
cancelled. No interest shall accrue or be paid on the Merger Consideration
payable upon the surrender of any Certificate for the benefit of
-16-
the holder of such Certificate. 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 on the stock transfer books of the Company, it shall be a
condition of payment that the Certificate so surrendered shall be endorsed
properly or otherwise be in proper form for transfer and that the Person
requesting such payment shall have paid all transfer and other taxes 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 taxes either have been
paid or are not applicable.
5.9.3. At any time following the sixth month following the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holder of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it), and thereafter such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any Merger Consideration
that may be payable upon due surrender of the Certificate held by them.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Share for any Merger Consideration
delivered in respect of such Share to a public official pursuant to any
abandoned property, escheat or other similar law.
5.9.4. From and after the Effective Time, the holders of Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Shares except as otherwise provided herein
(including pursuant to Section 5.6.4) or by applicable law.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to TNF that, except as set forth
in the Disclosure Letter delivered at or prior to the date hereof by the Company
to TNF (the "Company Disclosure Letter"), dated as of the date hereof, the
-------------------------
information set forth in any section of which shall be deemed to provide an
exception to or otherwise qualify the representations and warranties of the
Company in the corresponding section of this Agreement to the extent that it is
apparent to which section of this Agreement such information relates:
6.1. Organization and Good Standing. Each of the Company and the
------------------------------
Company's Subsidiaries is, and at the Recap Closing Company Sub will be, a
corporation duly organized, validly existing and in good standing under the laws
of its respective state of incorporation, except where the failure to be so
organized would not, individually or in the aggregate, reasonably be expected to
be material. Each of the Company and the Company's Subsidiaries has, and at the
Recap Closing Company Sub will have, the
-17-
corporate power and authority to carry on its business as the same is now being,
or is planned by the Company to be at the Recap Closing, conducted and to own
all its properties and assets, except where the failure to have such power or
authority would not, individually or in the aggregate, reasonably be expected to
be material. Each of the Company and the Company's Subsidiaries is, and at the
Recap Closing Company Sub will be, duly qualified to transact business as a
foreign corporation in each of the jurisdictions in which the nature of its
business as the same is now being conducted or the ownership of its properties
and assets require it to be qualified, except for those jurisdictions in which
failure to be so qualified would not, individually or in the aggregate,
reasonably be material. Section 6.1 of the Company Disclosure Letter
-----------
lists the true, accurate and complete legal names, jurisdiction of incorporation
or organization and foreign qualification of each of the Company and its
Subsidiaries.
6.2. Corporate Records. The Company has made available to TNF a complete
-----------------
and correct copy of the certificate of incorporation and by-laws, each as
amended to date, of each of the Company and the Company's Subsidiaries. Each of
the certificates of incorporation and by-laws so delivered is in full force and
effect. The corporate records and minute books of the Company and the Company's
Subsidiaries reflect all material action taken and authorizations made at
meetings of such companies' Boards of Directors or any committees thereof and at
any stockholders' meetings thereof.
6.3. Authorized Capital; Subsidiaries. The authorized capital stock of
--------------------------------
the Company consists of 50,000,000 shares of Existing Stock, of which 12,711,072
shares were issued and outstanding as of February 24, 1999 and 3,186,137
additional shares were reserved for issuance upon exercise of the Options. All
of the outstanding shares of Existing Stock have been duly authorized and
validly issued and are fully paid and non-assessable and not subject to any
preemptive rights. The Company has no shares of its capital stock reserved for
issuance, except for, as of the date of this Agreement, shares reserved for
issuance pursuant to Options issued under the Company's 1994 Stock Incentive
Plan, 1995 Stock Incentive Plan, 1996 Stock Incentive Plan, 1996 Directors'
Stock Option Plan and 1998 Nonstatutory Stock Option Plan (the "Option Plans"),
------------
which Options cover the number of shares, and have the vesting dates and
exercise prices, as set forth in Section 6.3(a) of the Company Disclosure
--------------
Letter, and all of such Options will be (i) exercised or terminated before the
Recap Closing Date or (ii) converted at the Recap Closing as contemplated by
Section 2.4 hereof. Except as set forth in Section 6.3(b) of the Company
----------- --------------
Disclosure Letter, each of the outstanding shares of capital stock of each of
the Company's Subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable and not subject to any preemptive right and owned,
either directly or indirectly, by the Company free and clear of all
Encumbrances. Except as set forth in Section 6.3(a) of the Company Disclosure
--------------
Letter, there are no pre-emptive rights or outstanding subscriptions, options,
warrants, rights, convertible securities or other agreements or commitments of
any character relating to the issued or unissued capital stock or other
securities of the Company or any of the Company's Subsidiaries. After the
Effective Time, the Surviving Corporation will have no obligation to issue,
transfer or sell any shares of the Company's capital stock or capital stock of
the Surviving
-18-
Corporation pursuant to any Plan (as defined in Section 6.16.1) or
--------------
otherwise (except as contemplated by Section 2.4 hereof). There are no voting
-----------
trust agreements, proxies or other contracts or arrangements restricting or
relating to voting or dividend rights or the transferability of the Company's
capital stock. The Company has, and at the Recap Closing will have, no
Subsidiaries other than the Company's Subsidiaries set forth in Section 6.1 of
-----------
the Company Disclosure Letter or as otherwise contemplated by this Agreement.
6.4. Corporate Authority. The Company has the corporate power and
-------------------
authority and has taken all corporate action necessary in order to execute and
deliver this Agreement and, to consummate the Stock Purchase and the Merger
provided that the Merger has, if required by law, been approved by the vote of
the holders of a majority of the outstanding shares of Existing Stock. This
Agreement has been duly executed and delivered by the Company and is a valid and
binding agreement of the Company enforceable against the Company in accordance
with its terms.
6.5. Absence of Conflict. Except as set forth in Section 6.5 of the
------------------- -----------
Company Disclosure Letter, the execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby, and
compliance with the provisions hereof do not and will not (i) conflict with or
result in any breach of the terms, conditions, or provisions of the respective
charter and bylaws of the Company and each of the Company's Subsidiaries; (ii)
violate, or conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or give rise to a right of termination,
cancellation, modification or acceleration of the performance required by or a
loss of a material benefit under, or result in the creation or imposition of (or
the obligation to create or impose) any Encumbrance (other than Permitted
Encumbrances) upon any of the material properties or assets of the Company
under, any of the terms, conditions or provisions of any material agreement,
indenture, note, bond, mortgage, deed of trust, undertaking, permit, lease,
franchise, license or other instrument to which the Company is a party or by
which it or any of its properties or assets may be bound; or (iii) violate any
Law or Order applicable to the Company, except for any such violations of Law or
Order which would not, individually or in the aggregate, reasonably be expected
to be material.
6.6. Approvals.
---------
6.6.1. Section 6.6.1 of the Company Disclosure Letter contains a
-------------
list of all Approvals of Governmental Entities that, to the knowledge of the
Company, are required to be given or obtained by the Company from any and all
Governmental Entities in connection with the consummation of the transactions
contemplated by this Agreement, except where the failure to be given or obtain
such Approvals, individually or in the aggregate, would not reasonably be
expected to be material.
6.6.2. Section 6.6.2 of the Company Disclosure Letter contains a
-------------
list of all non-governmental Approvals that, to the knowledge of the Company,
are required to be given or obtained by the Company from any and all third
parties in connection with
-19-
the consummation of the transactions contemplated by this Agreement, except
where the failure to give or obtain such Approvals, individually or in the
aggregate, would not reasonably be expected to be material.
6.7. SEC Filings; Financial Statements. The Company has heretofore
---------------------------------
delivered or made available to TNF a complete and correct copy of each
registration statement, offering circular relating to the offering of
securities, report, proxy statement or information statement prepared by it
since December 31, 1995, including, without limitation, (A) its Annual Report on
Form 10-K (the "Fiscal 1997 Form 10-K") for the year ended December 31, 1997,
---------------------
and (B) its Quarterly Report on Form 10-Q for the period ended September 30,
1998, each in the form (including exhibits and any amendments thereto) filed
with the SEC (collectively, the "SEC Reports"). As of their respective dates or,
-----------
if amended, as of the date of the last such amendment prior to the date of this
Agreement, the Company's SEC Reports did not contain, and its Annual Report on
Form 10-K for the fiscal year ended December 31, 1998 when filed will not
contain (and at such time will constitute an SEC Report), any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Each of the Company's
consolidated balance sheets included in or incorporated by reference into its
SEC Reports (including the related notes and schedules) fairly presents, in all
material respects, the consolidated financial position of the Company as of its
date and each of the consolidated statements of income, cash flows and
stockholders' equity included in or incorporated by reference into its SEC
Reports (including any related notes and schedules) fairly presents the
consolidated results of operations, retained earnings and cash flows, as the
case may be, of the Company for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments), in each
case in accordance with GAAP (other than the absence of footnotes in the case of
unaudited statements) consistently applied through the periods indicated. A
true, correct and complete copy of the Company's unaudited 1998 financial
statements is included in Section 6.7 of the Company Disclosure Letter. Except
-----------
as set forth in Section 6.7 of the Company Disclosure Letter, there will be no
-----------
material deviation between such unaudited 1998 financial statements and the
audited 1998 financial statements to be included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1998. Without limiting the
foregoing, the Company maintains appropriate reserves under GAAP for warranty
claims, product liability claims, and severance payments that may be incurred by
the Company in connection with the termination of arrangements with
international sales representatives.
6.8. Accounts Payable and Inventory; Conduct of Business.
---------------------------------------------------
6.8.1. Accounts Payable and Inventory. Except as disclosed in
------------------------------
Section 6.8.1 of the Company Disclosure Letter, since December 31, 1998 to the
-------------
date hereof the Company has (i) discharged its material accounts payable and
other material current liabilities and obligations in accordance with past
practice, and (ii) purchased and maintained inventory in an amount which it
reasonably believes to be appropriate for normal seasonal requirements of the
Company's business and current business conditions.
-20-
6.8.2. Conduct of Business. Except as disclosed in the SEC
-------------------
Documents, in Section 6.8.2 of the Company Disclosure Letter, or as contemplated
-------------
by this Agreement, since December 31, 1998 to the date hereof, the Company's
business has been conducted in the ordinary course, and there has not been any:
(a) adverse and material change in the condition (financial or
otherwise), results of operations, assets, liabilities, Prospects or business of
the Company;
(b) amendment to the Company's or any of the Company's
Subsidiaries' charter or by-laws;
(c) sale, assignment, disposition, transfer, pledge, mortgage or
lease of any material asset primarily used or held for use in the Company's
business, other than sales of inventory in the ordinary course of business
generally consistent with past practice;
(d) incurrence of any Indebtedness, other than accounts payable
arising in the ordinary course of business, consistent with past practice, and
other than under the existing revolving credit facility in the ordinary course
of business;
(e) material decline in the backlog of the Company and its
Subsidiaries;
(f) material reduction in any cash or short-term investments
or their equivalent, other than to meet cash needs arising in the ordinary
course of business, generally consistent with past practices;
(g) sale, assignment, disposition, transfer, pledge, mortgage
or lease of any Owned Real Estate or Leased Real Estate;
(h) increase in the compensation or fringe benefits payable
or to become payable to any officers or salaried employees of the Company, other
than routine increases made in the ordinary course of business and generally
consistent with past practice or as required by Law or under any existing
agreements set forth in Section 6.8.2(h) of the Company Disclosure Letter;
-----------------
(i) issuance, sale or disposition of any capital stock or other
equity interest in the Company, except upon the valid exercise of Options in
accordance with the terms thereof, or issuance or grant of any options, warrants
or other rights to purchase any such capital stock or equity interest or any
securities convertible into or exchangeable for such capital stock or equity
interest or any other change in the issued and outstanding capitalization of the
Company;
(j) any amendment, alteration or modification in the terms of
any currently outstanding options, warrants or other rights to purchase any
capital stock or equity interest in the Company or any securities convertible
into or exchangeable for such
-21-
capital stock or equity interest, including without limitation any reduction in
the exercise or conversion price of any such rights or securities, any change to
the vesting or acceleration terms of any such rights or securities, or any
change to terms relating to the grant of any such rights or securities;
(k) declaration or payment of any dividend or other
distribution, or the transfer of any assets, by the Company to any stockholders
of the Company in their capacity as such, or any redemption, repurchase or other
acquisition by the Company of its capital stock, except in the ordinary course
of business;
(l) change by the Company in any of its accounting principles,
methods or practices, including any change in its policies with respect to
reserves (whether for bad debts, contingent liabilities or otherwise), any
change in depreciation or amortization policies or rates or any change in the
policies pertaining to the recognition of accounts receivable or the discharge
of accounts payable or accounting for inventories;
(m) material adverse changes in the business policies
(including advertising, investment, marketing, pricing, purchasing, production,
personnel, sales or budgeting) or organization of the Company, the Company's
relationships with employees or the Company's relationships with suppliers,
agents, servicers or customers that are material to the Company;
(n) except in the ordinary course of business and generally
consistent with past practice, or as necessary to consummate the transactions
contemplated hereby, entering into or amending any contract identified in the
Company Disclosure Letter under Sections 6.11, 6.12, 6.16, 6.19 or 6.22;
------------- ---- ---- ---- ----
(o) closure, shut down or other elimination of any of the
Company's stores, offices, franchises or any material change in the basic
character of its business, properties or assets, except in the ordinary course
of business, consistent with past practice;
(p) loan or advance to or other such agreement with any of
its stockholders, officers, directors, employees, agents, consultants or other
Representatives, except in the ordinary course of business, consistent generally
with past practice;
(q) material damage, destruction or loss with respect to any of
the properties or assets of the Company; or
(r) agreement to do, cause or suffer any of the foregoing.
6.9. Compliance with Law.
-------------------
6.9.1. Except as set forth in Section 6.9.1 of the Company
-------------
Disclosure Letter, the operations of the Company are in all material respects in
compliance with and do not in any material respect violate any applicable
material Laws or Orders (including
-22-
the Foreign Corrupt Practices Act, as amended, and any Laws or Orders relating
to employment discrimination, occupational safety, manufacture, warehousing,
conservation or corrupt practices, but excluding matters subject to the
remainder of this Section 6.9), and the Company has not received any notice
-----------
alleging any such violation that remains pending or unsatisfied. None of the
Company or the respective directors, officers, employees or Representatives of
the Company and the Company's Subsidiaries have offered, proposed, promised or
made any illegal payment to officials, officers, employees or Representatives of
any Governmental Entity or political party, or engaged in any illegal reciprocal
practices or made any illegal payment or given any other illegal consideration
to any third party.
6.9.2. Except as set forth in Section 6.9.2 of the Company
-------------
Disclosure Letter and as would not, individually or in the aggregate, reasonably
be expected to be material:
(a) all of the Company's assets (including assets and
properties that are owned, leased or operated or otherwise used) and their
existing and prior uses comply and complied with, and the Company is not in
violation of and has not violated, in connection with the ownership, use,
maintenance or operation of any such assets or properties or the conduct of the
Company's business, any Environmental Laws;
(b) there are no conditions or circumstances that may currently
oblige or may reasonably be expected to oblige the Company pursuant to any
Environmental Laws to conduct or to make any investigation, work, repairs,
construction, remediation or capital or other expenditures with respect to any
parcel of Owned Real Estate, Leased Real Estate or other property or asset (real
or personal) of the Company or any third party or used in the Company's
business, nor has the Company received any inquiry or notice regarding any
violation of Environmental Law;
(c) The Company does not have, and there are no facts or
circumstances known to the Company that would be reasonably likely to result in,
any material liabilities whether absolute, accrued, contingent or otherwise,
arising out of or related to, directly or indirectly, any Environmental Laws;
(d) there has been no actual or threatened release of Hazardous
Substances for which the Company may be liable at, from, in, to, on, under or
affecting (i) any parcel of Owned Real Estate or Leased Real Estate (real or
personal); (ii) any other current property or asset of the Company or used in
the Company's business (real or personal); or (iii) any former property or asset
of the Company or used in the Company's business (real or personal) during the
time that any such former property or asset was owned, leased, subleased by the
Company or used in the Company's business, no Hazardous Substance is present in,
on, about, or migrating to or from any site described in (i), (ii) or (iii)
herein, and the Company is not, nor could it reasonably be expected to be,
liable for any potential investigation or cleanup of any property or facility as
the result of treating, storing, disposing, transporting or arranging for the
disposal of Hazardous Substances or their presence thereon; and
-23-
(e) The Company and any predecessors of the Company have
provided all notifications and warnings, made all reports, and kept and
maintained all records required pursuant to Environmental Laws.
6.9.3. For purposes of this Agreement, the terms "Hazardous
Substance" and "Environmental Laws" shall have the following meanings:
(a) "Hazardous Substance" shall mean any pollutant,
contaminant, chemical, waste and any toxic, infectious, carcinogenic, reactive,
corrosive, ignitable or flammable chemical or chemical compound or hazardous
substance, material or waste, whether solid, liquid or gas, including, without
limitation, any quantity of asbestos in any form, urea formaldehyde, PCB's,
radon gas, crude oil or any fraction thereof, all forms of natural gas,
petroleum products or by-products or derivatives, radioactive substance or
material, pesticide waste waters, sludges, slag and any other substance,
material or waste that is subject to regulation, control or remediation under
any Environmental Laws. Hazardous Substances shall not include office and
janitorial products.
(b) "Environmental Laws" shall mean all laws, statutes,
regulations, rules, ordinances, by-laws, orders or determinations of any
governmental or judicial authority at the federal, state or local level, whether
existing as of the date hereof, previously enforced, or subsequently enacted
which regulate or relate to the protection or clean-up of the environment, the
use, treatment, storage, transportation, generation, manufacture, processing,
distribution, handling or disposal of, or emission, discharge or other release
or threatened release of Hazardous Substances or otherwise dangerous substances,
wastes, pollution or materials (whether gas, liquid or solid), the preservation
or protection of waterways, groundwater, drinking water, air, wildlife, plants
or other natural resources, or the health and safety of persons or property,
including, without limitation, protection of the health and safety of employees.
Environmental Laws shall include, without limitation, the Federal Insecticide,
Fungicide, Rodenticide Act, Resource Conservation & Recovery Act, Clean Water
Act, Safe Drinking Water Act, Atomic Energy Act, Occupational Safety and Health
Act, Toxic Substances Control Act, Clean Air Act, Comprehensive Environmental
Response, Compensation and Liability Act, Emergency Planning and Community
Right-to-Know Act and the Hazardous Materials Transportation Act.
6.10. Permits. Except as set forth in Section 6.10 of the Company
------- ------------
Disclosure Letter, the Company has and is in material compliance with, or has a
valid exemption from the requirement to obtain, all material Permits and
Approvals from Governmental Entities necessary to conduct its business and own
its properties and assets in all material respects in the manner it is currently
being conducted. All such Permits are in full force and effect and no material
violation exists with respect to any such Permit and no proceeding is pending,
or to the knowledge of the Company threatened, to revoke, cancel, terminate,
modify or limit any such Permit.
-24-
6.11. Contracts.
---------
6.11.1. Section 6.11.1 of the Company Disclosure Letter lists
--------------
(a) all contracts or commitments that provide for the aggregate payments to or
from the Company in excess of One Hundred Thousand Dollars ($100,000) per
contract; (b) all contracts or commitments involving an obligation which cannot
or in reasonable probability will not be completed or terminated within ninety
(90) days from the Recap Closing Date or can be terminated within ninety (90)
days from the Recap Closing Date only upon the payment of a penalty or the
equivalent thereof; (c) all contracts or commitments affecting ownership of,
title to, use of, or any interest in real property; (d) all bonuses, incentive
compensation, pension, group insurance, collective bargaining agreements, labor
agreements or employee welfare plans of any nature whatsoever; (e) all documents
evidencing any Indebtedness to or from the Company; (f) employment contracts and
all other contracts, agreements or commitments to or with individual employees
or agents that extend for a period of more than ninety (90) days from the date
hereof or can be terminated within ninety (90) days from the Recap Closing Date
only upon the payment of a penalty or the equivalent thereof; (g) all other
contracts or commitments providing for payments in excess of One Hundred
Thousand Dollars ($100,000) based in any manner upon the sales, fees, services,
purchases or profits of the Company per annum; (h) all contracts or commitments,
whether in the ordinary course of business or not, which involve future
payments, performance of services or delivery of goods, equipment or supplies to
or by the Company of an aggregate amount or value in excess of One Hundred
Thousand Dollars ($100,000); (i) all business acquisition agreements and merger
agreements (whether by sale of assets, consolidation, reorganization or
otherwise); (j) all material distribution agreements, sales representative,
marketing, advertising, agency, dealership, license or royalty agreements,
nondisclosure agreements, non-compete agreements, partnership, joint-venture
agreements and commission agreements; (k) all agreements between the Company and
any stockholders or a related party thereto or any officer or director of the
Company; (l) all other material agreements and commitments with respect to
intellectual property; (m) all contracts to indemnify or share tax liability or
sharing of fees, rebating charges or similar arrangements; (n) all material
contracts relating to the Company's Summit Shop program; and (o) all other
agreements and commitments the absence or termination of which would be
material; provided that Section 6.11.1 of the Company Disclosure Letter shall
-------- ---- --------------
not include (i) contracts and agreements that are set forth in a Section of the
Company Disclosure Letter identified under Sections 6.12, 6.16 or 6.19 hereof or
------------- ---- ----
(ii) any leases for tangible personal property requiring monthly payments of
less than Ten Thousand Dollars ($10,000). Copies of all of the agreements,
contracts and arrangements referred to in this Section have been heretofore made
available to TNF.
6.11.2. Except as set forth in Section 6.11.2 of the Company
--------------
Disclosure Letter, (i) the Company is not, and to the knowledge of the Company
no other party to any contract listed on said Schedule is, in material violation
thereof or in material default with respect thereto; (ii) each contract listed
on said Schedule is a valid, binding and enforceable obligation of the Company
and, to the knowledge of the Company, the other
-25-
parties thereto and is in full force and effect, except where the failure to be
valid, binding, enforceable and in full force and effect would not, individually
or in the aggregate, reasonably be expected to be material; and (iii) none of
the contracts listed on said schedule contains provisions adverse to the Company
upon a change in control thereof.
6.11.3. Except as set forth in Section 6.11.3 of the Company
--------------
Disclosure Letter, no officer or director of the Company, no stockholder of the
Company related to any such officer or director, and no "associate" (as such
term is defined in Rule 14a-1 under the Exchange Act) of any of them, has any
interest in any material contract or agreement (including all leases of real
property) of, or other business arrangement with, the Company, or in any
material property (including any real property and any material personal
property, tangible or intangible) used in or pertaining to the business of the
Company.
6.12. Real Property and Leaseholds.
----------------------------
6.12.1. Section 6.12.1 of the Company Disclosure Letter lists
--------------
and identifies all parcels of real property currently owned in fee by the
Company (the "Owned Real Estate"). The Company holds, and at the Recap Closing
-----------------
Company Sub will (subject to Section 2.3 hereof) hold, marketable and legal
-----------
title to each of the real properties constituting Owned Real Estate, free and
clear of all Encumbrances, except for Permitted Encumbrances.
6.12.2. Section 6.12.2(a) of the Company Disclosure Letter lists
-----------------
and identifies all parcels of real property leased or subleased to the
Company (collectively, the "Leased Real Estate"). Except as set forth in Section
------------------ -------
6.12.2(b) of the Company Disclosure Letter, the Company holds, and at the Recap
---------
Closing Company Sub will (subject to Section 2.3 hereof) hold, valid and
-----------
subsisting leasehold interests to each of the leaseholds constituting Leased
Real Estate, free and clear of all Encumbrances, except for Permitted
Encumbrances.
6.12.3. With respect to each lease, master lease or sublease of
any real estate described in Section 6.12.2 of the Company Disclosure Letter,
--------------
except as set forth in Section 6.12.3 of the Company Disclosure Letter, the
--------------
Company is not and, to the knowledge of the Company no other party thereto is,
in default with respect to any material term or condition thereof, nor has any
event occurred that through the passage of time or the giving of notice, or
both, would constitute a material default thereunder, except in each such case
for such defaults as would not reasonably be expected to result in (i) a
material payment being made by the Company to the landlord, (ii) termination of
the lease, or (iii) any other material adverse consequence, individually or in
the aggregate, to the Company.
6.12.4. Except as set forth in Section 6.12.4(a) of the Company
-----------------
Disclosure Letter, all the real property leases relating to the Leased Real
Estate are in full force and effect (including those that have expired original
terms and are continuing on a month-to-month or similar basis) and the Company
is entitled to all the rights of a tenant
-26-
thereunder, taking into account the consummation of the transactions
contemplated by this Agreement. Except as set forth in Section 6.12.4(b) of the
----------------
Company Disclosure Letter, none of such real property leases contains any
requirements for notice or consent with respect to, or otherwise provides
restrictions against, a change in control of the Company. Except as set forth in
Section 6.12.4(c) of the Company Disclosure Letter, no Action against the
-----------------
Company is pending or, to the knowledge of the Company, threatened in connection
with any such real property leases, except for any Action (not involving the
failure to pay rent) that is not, individually or in the aggregate, reasonably
expected to be material.
6.13. Absence of Undisclosed Liabilities. Except as accrued on the
----------------------------------
balance sheet of the Company at December 31, 1998 included in Section 6.7 of the
-----------
Company Disclosure Letter (the "Balance Sheet") or set forth in the notes
-------------
thereto, and except as set forth in Section 6.13 of the Company Disclosure
------------
Letter, the Company does not have any liability (whether absolute, accrued,
contingent, or otherwise, matured or unmatured, and whether due or to become
due), which liability is required (or would be required had such liabilities
existed at December 31, 1998) to be reflected on the Balance Sheet or the notes
thereto in accordance with GAAP, except for liabilities and obligations incurred
since December 31, 1998 in the ordinary course of business and generally
consistent with past practice or those which would not, individually or in the
aggregate, reasonably be expected to be material.
6.14. Litigation. Except as set forth in Section 6.14 of the Company
---------- ------------
Disclosure Letter, there are no Actions pending or, to the knowledge of the
Company, claims threatened against the Company, at law, in equity or in any
arbitral proceeding, and there is no investigation or proceeding pending or, to
the knowledge of the Company, threatened before or by any Governmental Entity
nor is there any currently effective Order against the Company, except for any
such Actions, claims, investigations, proceedings or Orders that would not,
individually or in the aggregate, reasonably be expected to be material. Section
-------
6.14 of the Company Disclosure Letter accurately identifies those pending or, to
----
the knowledge of the Company, threatened claims listed therein which are
material and (i) may not be covered by third party insurance or (ii) with
respect to which the insurance carrier has denied coverage or has advised the
Company that it is defending such claim under reservation of rights or (iii) for
which the Company is self-insured.
6.15. Tax Matters.
-----------
6.15.1. Except as set forth in Section 6.15.1 of the Company
--------------
Disclosure Letter, the Company (i) has (or by the Recap Closing Date will have)
timely filed all material Tax Returns required to be filed by it as of the Recap
Closing Date or requests for extensions of time to file such returns have been
timely filed, granted and have not expired, (ii) has used its commercially
reasonable efforts to maintain all required records with respect to any
liability for Taxes for taxable years with respect to which the statute of
limitations has not yet expired, regardless of whether such liability has been
previously assessed in whole or in part or is assessed in whole or in part after
the date of this
-27-
Agreement and (iii) has timely paid, or has made appropriate provision on its
balance sheet (in accordance with GAAP) for, all Taxes due or claimed to be due
from it by any Governmental Entity with respect to any liability for Taxes.
Except as set forth in Section 6.15.1 of the Company Disclosure Letter, all
--------------
Tax Returns described in clause (i) are true, correct and complete in all
material respects. Except as set forth in Section 6.15.1 of the
--------------
Company Disclosure Letter, with respect to periods commencing on or after
December 31, 1997, the Company has not incurred any material liability for Taxes
other than as reflected on the Balance Sheet. Except as set forth in Section
-------
6.15.1 of the Company Disclosure Letter, there are no material Encumbrances with
------
respect to Taxes upon any of the Company's properties or assets, except for
current Taxes not yet due.
6.15.2. The appropriate Tax Returns of the Company have been
examined by the Service for all periods up to and including [to be updated].
Except to the extent reserved for in the Balance Sheet or as shown in Section
-------
6.15.2 of the Company Disclosure Letter, no material issue has been raised by a
------
Governmental Entity in any such examination which reasonably could be expected
to result in a proposed deficiency, penalty or interest for any other period.
6.15.3. Except as set forth in Section 6.15.3 of the Company
--------------
Disclosure Letter, there are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Returns required to be
filed by, or which include or are treated as including, the Company.
6.15.4. Except as set forth in Section 6.15.4 of the Company
--------------
Disclosure Letter, the Company is not involved in or subject to any joint
venture, partnership or other arrangement or contract which is treated as a
partnership for federal, state, local or foreign income tax purposes.
6.15.5. All material elections with respect to Taxes affecting
the Company as of the date hereof are set forth in Section 6.15.5 of the Company
--------------
Disclosure Letter. No consent to the application of section 341(f)(2) of the
Code has been filed with respect to any property or assets held, acquired, or to
be acquired by the Company. No property of the Company is "tax exempt use
property" within the meaning of Section 168(n) of the Code. The Company is not a
party to any lease made pursuant to Section 168(f)(8) of the Internal Revenue
Code of 1954.
6.15.6. Except as set forth in Section 6.15.6 of the Company
--------------
Disclosure Letter, there are no tax sharing agreements or similar arrangements
with respect to or involving the Company.
6.15.7. The Company was not included and is not includable in
any consolidated or unitary Tax Return with any corporation other than such a
return of which the Company is the common parent corporation.
-28-
6.15.8. Except as set forth in Section 6.15.8 of the Company
--------------
Disclosure Letter, the Company has not agreed to and is not required to make any
material adjustment under section 481(a) of the Code.
6.15.9. Except as set forth in Section 6.15.9 of the Company
--------------
the Company has not entered into any compensatory agreements with respect to the
performance of services which payment thereunder would result in a non-
deductible expense to such company pursuant to Section 280G of the Code or an
excise tax to the recipient of such payment pursuant to Section 4999 of the
Code.
6.16. ERISA Plans.
-----------
6.16.1. Existence of Plans. For purposes of this Agreement, the
------------------
term "Plans" shall mean (i) all "Employee Benefit Plans" (as such term is
-----
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), of which the Company, any of its Subsidiaries or any
-----
member of the same controlled group of businesses as the Company or any of its
Subsidiaries within the meaning of Section 4001(a)(14) of ERISA (an "ERISA
-----
Affiliate") is or ever was a sponsor or participating employer or as to which
---------
the Company or any of its Subsidiaries or any of their respective ERISA
Affiliates makes contributions or is required to make contributions and (ii) any
similar employment, severance or other arrangement or policy of the Company or
any of its Subsidiaries or of any of their respective ERISA Affiliates (whether
written or oral) providing for insurance coverage (including self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits or retirement benefits, or for profit
sharing, deferred compensation, bonuses, stock options, stock appreciation or
other forms of incentive compensation or post-retirement insurance, compensation
or benefits. Except as is disclosed in Section 6.16.1 of the Company Disclosure
--------------
Letter, (i) neither the Company, any of its Subsidiaries nor any of their
respective ERISA Affiliates maintains or sponsors (or ever maintained or
sponsored), or makes or is required to make contributions to, any Plans, (ii)
none of the Plans is or was a "multi-employer plan," as defined in Section 3(37)
of ERISA, (iii) none of the Plans is or was a "defined benefit pension plan"
within the meaning of Section 3(35) of ERISA, and (iv) none of the Plans
provides or provided post-retirement medical or health benefits, (v) none of the
Plans is or was a "welfare benefit fund," as defined in Section 419(e) of the
Code, or an organization described in Sections 501(c)(9) or 501(c)(20) of the
Code, (vi) neither the Company, any of its Subsidiaries, nor any ERISA Affiliate
is or was a party to any collective bargaining agreement, and (vii) neither the
Company, any of its Subsidiaries, nor any ERISA Affiliate has announced or
otherwise made any commitment to create or amend any Plan (except with respect
to amendments required by law or regulation). Notwithstanding any statement or
indication in this Agreement to the contrary, there are no Plans (a) as to which
the Surviving Corporation will be required to make any contributions or with
respect to which the Surviving Corporation shall have any obligation or
liability whatsoever, whether on behalf of any of the current employees of the
Surviving Corporation or on behalf of any other Person, after the Recap Closing,
or (b) which the Surviving Corporation will not be able to terminate immediately
after the Recap Closing
-29-
in accordance with their terms and ERISA. With respect to each of such Plans, at
the Recap Closing there will be no unrecorded liabilities with respect to the
establishment, implementation, operation, administration or termination of any
such Plan, or the termination of the participation in any such Plan by the
Company, any of its Subsidiaries or any of their respective ERISA Affiliates.
The Company has made available to TNF true and complete copies of: (i) each of
the Plans and any related funding agreements thereto (including insurance
contracts) including all amendments, all of which are legally valid and binding
and in full force and effect and there are no material defaults thereunder, (ii)
the currently effective Summary Plan Description pertaining to each of the Plans
required to have a Summary Plan Description, (iii) the three most recent annual
reports for each of the Plans (including all relevant schedules), (iv) the most
recently filed PBGC Form 1 (if applicable), (v) the most recent Service
determination letter, if any, for each Plan which is intended to constitute a
qualified plan under Section 401 of the Code and each amendment to each of the
foregoing documents, and (vi) for each funded Plan, financial statements
consisting of (A) the consolidated statement of assets and liabilities of such
Plan as of its most recent valuation date, and (B) the statement of changes in
fund balance and in financial position or the statement of changes in net assets
available for benefits under such Plan for the most recently-ended plan year,
which such financial statements shall fairly present the financial condition and
the results of operations of such Plan in accordance with GAAP as of such dates.
6.16.2. Present Value of Benefits. The present value of all accrued
-------------------------
benefits under any Plans subject to Title IV of ERISA shall not, as of the Recap
Closing Date, exceed the value of the assets of such Plans allocated to such
accrued benefits, based upon the applicable provisions of the Code and ERISA,
and each such Plan shall be capable of being terminated as of the Recap Closing
Date in a "standard termination" under Section 4041(b) of ERISA. With respect to
each Plan that is subject to Title IV of ERISA, (i) no amount is due or owing
from the Company or any of its Subsidiaries or their respective ERISA Affiliates
to the Pension Benefit Guaranty Corporation or to any "multi-employer plan," as
defined in Section 3(37) of ERISA on account of any withdrawal therefrom, and
(ii) no such Plan has been terminated other than in accordance with ERISA or at
a time when the Plan was not sufficiently funded. The transactions contemplated
hereunder, including without limitation the termination of the Plans at or prior
to the Recap Closing, shall not result in any such withdrawal or other liability
under any applicable Laws.
6.16.3. Penalties; Reportable Events. Neither the Company, its
----------------------------
Subsidiaries nor any ERISA Affiliate of either is subject to any material
liability, tax or penalty whatsoever to any Person or agency whomsoever as a
result of engaging in a prohibited transaction under ERISA or the Code, and
neither the Company, its Subsidiaries nor any ERISA Affiliate of either has any
knowledge of any circumstances which reasonably might result in any material
liability, tax or penalty, including, but not limited to, a penalty under
Section 502 of ERISA, as a result of a breach of any duty under ERISA or under
other Laws. Each Plan which is required to comply with the provisions of
Sections 4980B and 4980C of the Code, or with the requirements referred
-30-
to in Section 4980D(a) of the Code, has complied in all material respects. No
event has occurred which could subject any Plan to tax under Section 511 of the
Code. None of the Plans subject to Title IV of ERISA has, since September 2,
1974, been completely or partially terminated nor has there been any "reportable
event," as such term is defined in Section 4043(b) of ERISA, with respect to any
of the Plans since the effective date of ERISA nor has any notice of intent to
terminate been filed or given with respect to any such Plan. There has been no
(i) withdrawal by the Company, any of its Subsidiaries or any of their
respective ERISA Affiliates that is a substantial employer from a single-
employer plan which is a Plan and which has two or more contributing sponsors at
least two of whom are not under common control, as referred to in Section
4063(b) of ERISA, or (ii) cessation by the Company, any of its Subsidiaries or
any of their respective ERISA Affiliates of operations at a facility causing
more than 20% of Plan participants to be separated from employment, as referred
to in Section 4062(f) of ERISA. Neither the Company, any of its Subsidiaries,
nor any ERISA Affiliate, nor any other organization of which any of them are a
successor or parent corporation as defined in Section 4069(b) of ERISA, have
engaged in any transaction described in Section 4069(a) of ERISA.
6.16.4. Deficiencies; Qualification. None of the Plans nor any
---------------------------
trust created thereunder has incurred any "accumulated funding deficiency," as
such term is defined in Section 412 of the Code, whether or not waived, since
the effective date of said Section 412, and no condition has occurred or exists
which by the passage of time could be expected to result in an accumulated
funding deficiency as of the last day of the current plan year of any such Plan.
Furthermore, neither the Company, any of its Subsidiaries nor any of their
respective ERISA Affiliates has any unfunded liability under ERISA in respect of
any of the Plans. Each of the Plans which is intended to be a qualified plan
under Section 401(a) of the Code is a standardized prototype plan or either (i)
has received a favorable determination letter from the Service, or (ii) has time
remaining under applicable treasury regulations or Service pronouncements in
which to apply for such a determination letter and make any amendments necessary
to obtain a favorable determination and has been operated in all material
respects in accordance with its terms and with the provisions of the Code. All
of the Plans have been administered and maintained in substantial compliance
with ERISA, the Code and all other applicable Laws. All contributions required
to be made to each of the Plans under the terms of that Plan, ERISA, the Code or
any other applicable Laws have been timely made. Each Plan intended to meet the
requirements for tax-favored treatment under Subchapter B of Chapter 1 of the
Code meets such requirements in all material respects. There are no liens
against the property of the Company or any of its Subsidiaries (including the
Transferred Assets) or any ERISA Affiliate under Section 412(n) of the Code or
Sections 302(f) or 4068 of ERISA. The Balance Sheet and the Monthly Financial
Statements properly reflect all amounts required to be accrued as liabilities to
date under each of the Plans. Except as disclosed in Section 6.16.4 of the
--------------
Company Disclosure Letter, there is no contract, agreement or benefit
arrangement covering any employee of the Company which, individually or
collectively, could give rise to the payment of any amount which would
constitute an "excess parachute payment" (as defined in Section 280G of the
Code). Except as disclosed in Section 6.16.4 of the Company
--------------
-31-
Disclosure Letter, the execution and performance of this Agreement will not (i)
result in any obligation or liability (with respect to accrued benefits or
otherwise) of the Surviving Corporation or any of its Subsidiaries to the
Pension Benefit Guaranty Corporation, any Plan, or any present or former
employee of the Surviving Corporation, (ii) be a trigger event under any Plan
that will result in any payment (whether of severance pay or otherwise) becoming
due to any present or former employee, officer, director, stockholder,
contractor, or consultant, or any of their dependents, or (iii) accelerate the
time of payment or vesting, or increase the amount, of compensation due to any
employee, officer, director, stockholder, contractor, or consultant of the
Company or of any of its Subsidiaries. With respect to any insurance policy
which provides, or has provided, funding for benefits under any Plan, (A) there
is and will be no liability of the Company, any of its Subsidiaries, or the
Surviving Corporation in the nature of a retroactive or retrospective rate
adjustment, loss sharing arrangement, or actual or contingent liability as of
the Recap Closing Date, nor would there be any such liability if such insurance
policy were terminated as of the Recap Closing Date, and (B) no insurance
company issuing any such policy is in receivership, conservatorship, bankruptcy,
liquidation, or similar proceeding, and, to the knowledge of the Company, no
such proceedings with respect to any insurer are imminent.
6.16.5. Litigation. Other than routine claims for benefits under
----------
the Plans, there are no pending, or, to the best knowledge of the Company and
its Subsidiaries, threatened, investigations, proceedings, claims, lawsuits,
disputes, actions, audits or controversies involving the Plans, or the
fiduciaries, administrators, or trustees of any of the Plans or the Company, any
of its Subsidiaries or any ERISA Affiliate of either as the employer or sponsor
under any Plan, with any of the Service, the Department of Labor, the Pension
Benefit Guaranty Corporation, any participant in or beneficiary of any Plan or
any other Person whomsoever. The Company knows of no reasonable basis for any
such claim, lawsuit, dispute, action or controversy.
6.17. Assets.
------
6.17.1. Except as indicated in Section 6.17 of the Company
------------
Disclosure Letter, the Company holds, and at the Recap Closing Company Sub will
hold (subject to Section 4.2 hereof), title to or a leasehold, consignment or
-----------
license in each item of material tangible personal property owned by or in the
possession of the Company. Except as indicated in Section 6.17 of the Company
------------
Disclosure Letter or on the Balance Sheet or the notes thereto:
(a) each item of tangible personal property listed in the fixed
asset ledger of the Company as being owned is owned by the Company, and will
(subject to Section 4.2 hereof) at the Recap Closing be owned by Company Sub,
-----------
free and clear of all Encumbrances except for Permitted Encumbrances; and
(b) the Company is not in default with respect to any material
term or condition of any lease of personal property, nor has any event occurred
which through the passage of time or the giving of notice, or both, would result
in such a
-32-
default, in each case except as would not individually or in the aggregate
reasonably be expected to be material to the Company; and
(c) except for such items of equipment as are undergoing repair
or refurbishment or are being held for replacement, in each case in the ordinary
course of business and consistent with past practice, and except to the extent
that no material liability will be incurred in restoring equipment to reasonable
operating condition, all of the equipment (including machinery, spare parts,
automobiles, trucks, other vehicles, tools, operating and office supplies, and
computer hardware and softwares) owned or leased or otherwise used by the
Company is in reasonable operating condition and, subject to normal maintenance,
is available for use.
6.17.2. All accounts receivable, unbilled invoices and other
receivables of the Company due or recorded in the records and books of account
of the Company as being due to the Company (less the amount of any provision or
reserve therefor made in the records and books of account of the Company) (a)
arose in the ordinary course of business, and (b) in the aggregate are
reasonably expected to be collectible.
6.17.3. Except as set forth in Section 6.17.3 of the Company
--------------
Disclosure Letter, the values at which inventories of the Company are carried on
the Balance Sheet reflect the inventory valuation policy of the Company
consistent with its past practice and in accordance with GAAP.
6.18. Intellectual Property. Section 6.18(a) of the Company Disclosure
--------------------- ---------------
Letter sets forth a list of all registered trade names, patents, trademarks,
service marks and copyrights and applications for any of the foregoing which are
used or held for use by the Company. Except as set forth in Section 6.18(b) of
---------------
the Company Disclosure Letter, the Company has the sole right to use in the
manner in which it uses such trade names in the Company's business the trade
name (and related trademark) "The North Face" and "La Sportiva" in all
jurisdictions in which such trade name and related trademark are in use by the
Company, and, to the Company's knowledge, there is not any conflict in any
jurisdiction in which such trade name and related trademark are in use by any
Person with the rights of the Company therein or any conflict by the Company
with the rights of any other Person therein. No license to use such name has
been granted to any Person. Except as set forth in Section 6.18(c) of the
---------------
Company Disclosure Letter, the Company has all patents, trademarks, trade names,
service marks, trade secrets, copyrights and other proprietary intellectual
property rights, or licenses in respect of any such rights owned by others, as
are necessary to continue the Company's business substantially as currently
conducted, and, to the Company's knowledge, there is not any conflict in any
jurisdiction in which any such proprietary intellectual property is in use by
any Person with the rights of the Company therein or any conflict by the Company
with the rights of any other Person therein, except where in any case or in the
aggregate such failure to have such rights or such conflict would not be likely
to be material. Section 6.18(d) of the Company Disclosure Letter sets forth a
---------------
list of all license agreements that the Company or any of its Subsidiaries have
entered into in connection with the Company's trade names, patents, trademarks,
service marks, copyrights or other intellectual property
-33-
rights, all of which such license agreements are valid and binding upon the
Company and, to the Company's knowledge, the other parties thereto.
6.19. Labor and Employment Matters.
----------------------------
6.19.1. Section 6.19(a) of the Company Disclosure Letter is a
---------------
complete copy of all current employee handbooks utilized by the Company.
Section 6.19(b) of the Company Disclosure Letter is an accurate list of each
---------------
employment contract of the Company which provides for aggregate annual payments
of more than $50,000 for personal services or employment which is not terminable
on 30 days (or less) notice by the Company without penalty or obligation to make
payments related to such termination. Except in accordance with the contracts,
agreements, plans or programs identified in Section 6.16 or Section 6.19 of the
------------ ------------
Company Disclosure Letter no individual will accrue or receive material
additional benefits, service or accelerated rights to payment of benefits as a
result of the transactions contemplated by this Agreement (either alone or
combined with any other event or transaction). There are no collective
bargaining agreements or other labor agreements to which the Company is a party.
6.19.2. The Company is in compliance in all material respects with
all applicable Laws relating to the employment of labor, including those related
to wages, hours, occupational safety and health, plant closings and mass
layoffs, collective bargaining and the payment and withholding of taxes and
other sums as required by appropriate Governmental Entities, and there has been
withheld and paid to the appropriate Governmental Entities, or there is being
held for payment not yet due to such Governmental Entities, all amounts required
to be withheld from the employees of the Company, and the Company is not liable
for any arrears of wages, taxes, penalties or other sums for failure to comply
with any of the foregoing except for such failures which would not, individually
or in the aggregate, be expected to be material.
6.19.3. As of the date hereof, and except as set forth in Section
-------
6.19.3 of the Company Disclosure Letter, there is no (i) unfair labor practice
------
complaint against the Company pending before the National Labor Relations Board
or any other federal, state, local or foreign agency; (ii) pending labor strike,
work stoppage, work slow down or lockout affecting the Company; (iii) pending
material grievance or unfair dismissal proceeding relating to the Company; (iv)
material claim by employees of the Company alleging discrimination under any
federal, state or local law or constitution, including claims of discrimination
or retaliation based on race, color, creed, age, sex, sexual orientation,
national origin, religion or disability; (v) other material claims affecting the
Company relating to employment, including those based on statute, contract or
tort; (vi) pending representation question or union organizing activities
respecting a significant number of the employees of the Company; or (vii) to the
knowledge of the Company, threat, investigation, charge or complaint with regard
to any of the foregoing relating to the Company.
6.20. Suppliers. Set forth in Section 6.20 of the Company Disclosure
--------- ------------
Letter is a list of the ten largest suppliers of the Company based on the dollar
value of materials or
-34-
products purchased by the Company for the year ended December 31, 1998. Since
December 31, 1998, there has not been, nor as a result of the Transactions is
there at present anticipated to be, any material adverse change in relations
with any of the major suppliers of the Company and its Subsidiaries that,
individually or in the aggregate, would be material. The existing suppliers of
the Company and its Subsidiaries are adequate for the operation of the Company's
business as operated on the date hereof. To the knowledge of the Company and its
Subsidiaries, such suppliers currently are conducting, and in the past have
conducted, their respective business in compliance with all applicable Laws and
Orders, including without limitation Laws and Orders governing labor practices.
6.21. Customers. Set forth in Section 6.21 of the Company Disclosure
--------- ------------
Letter is a list of the ten largest customers (including without limitation
retail customers, wholesale customers and independent sales representatives)
based on the dollar value of products sold of the Company for the year ended
December 31, 1998 in each of the following regions: United States, Canada,
Europe and Asia. Since December 31, 1998, there has not been, nor as a result of
the Transactions is there at present anticipated to be, any material adverse
change in relations with any of the major customers of the Company and its
Subsidiaries that, individually or in the aggregate, would be material.
6.22. Personnel, etc. Set forth in Section 6.22 of the Company Disclosure
--------------- ------------
Letter is a list setting forth:
(a) the name of each officer of each of the Company and the
Company's Subsidiaries, specifying the title of each such Person; and
(b) the name of each director of each of the Company and the
Company's Subsidiaries.
The Company has heretofore provided TNF with a complete and accurate
schedule of compensation which each of the officers referred to in clause (a)
above is currently entitled to receive, and all payroll records relating to non-
officer employees heretofore provided to TNF are accurate and complete.
6.23. Insurance. The Company is currently insured for reasonable amounts
---------
with reputable insurance companies, against such risks as the Company reasonably
believes is customary in the business in which it is engaged. All of the
insurance policies and bonds maintained by the Company are in full force and
effect, the Company is not in default in any material respect thereunder and all
material claims thereunder have been filed in due and timely fashion or as
required by any such insurance policies. Since December 31, 1998, no material
claim by the Company on or in respect of an insurance policy or bond has been
declined or refused by the relevant insurer or insurers. Section 6.23 of the
------------
Company Disclosure Letter lists all insurance policies maintained by or for the
benefit of the Company or its directors, officers, employees or agents,
specifying (i) the type of policy, (ii) policy limits and (iii) self insurance
amounts.
-35-
6.24. Computer Systems. Except as set forth in Section 6.24 of the Company
---------------- ------------
Disclosure Letter, the Company does not plan or anticipate any material
expenditure in relation to the hardware or software or communications systems
used or planned to be used in connection with the Company's business. All
computer equipment and systems used by any of the Company and its Subsidiaries
and, to the knowledge of the Company, any major supplier of the Company or its
Subsidiaries recognize the advent of the year 2000 and can or will correctly
recognize and manipulate date information relating to dates on or after January
1, 2000, and the operation and functionality of such computer systems will not
be adversely affected by the advent of the year 2000 or any manipulation of data
featuring date information relating to dates before, on or after January 1,
2000, in each case except for such failures to recognize, manipulate, operate or
function as are set forth in Section 6.24 of the Company Disclosure Letter.
-------------
6.25. Takeover Statutes. No Takeover Statute applicable to the Company is
-----------------
applicable to the Transactions or the other transactions contemplated hereby.
6.26. Brokers. Except as set forth in Section 6.26 of the Company
------- ------------
Disclosure Letter, the consummation of the transactions contemplated hereby will
not give rise to, any valid claim against TNF or the Company or any of their
respective directors, officers, stockholders or affiliates for a brokerage
commission, finder's fee or other like payment to any person or entity.
6.27. Opinion. The Company Board has received an opinion of BT Alex. Xxxxx
-------
to the effect that, as of the date of this Agreement, the Per Share Amount to be
received in the Offer and Merger by the holders of Shares (other than TNF or its
affiliates and any holders of Shares who will retain Shares following the
consummation of the Offer and the Merger) is fair, from a financial point of
view, to such holders.
6.28. Rights Plan. The Company Board has approved and adopted an amendment
-----------
to the Preferred Shares Rights Agreement between the Company and American Stock
Transfer and Trust Co. dated as of July 6, 1998 (the "Rights Agreement") which
----------------
provides that neither the execution and delivery of this Agreement nor the
consummation of any of the Transactions contemplated by this Agreement (and any
purchase of Recap Shares by Xxxxx Xxxxxxx by assignment from TNF) shall be
deemed to cause any of TNF, GEI, Xxxxx Xxxxxxx or any of their respective
affiliates to be deemed to be "Acquiring Persons" within the meaning of the
Rights Agreement, the net effect of which is that neither the execution or
delivery of this Agreement nor the consummation of the transactions contemplated
by the Agreement (including the consummation of the Merger) will (i) constitute
a "Triggering Event" within the meaning of the Rights Agreement, (ii) cause any
rights granted under the Rights Agreement to become exercisable or to separate
from the shares of Existing Stock to which they are attached, or (iii) trigger
any other provisions of the Rights Agreement, including giving rise to a
Distribution Date (as defined in the Rights Agreement) in connection with the
transactions contemplated hereby and such amendment shall remain in full force
and effect at all times from and after the date hereof.
-36-
6.29. La Sportiva. The parties hereto acknowledge that none of the
-----------
representations and warranties made by the Company in this Agreement shall apply
with respect to La Sportiva S.r.l.; provided, however, that, to the knowledge of
the Company (without independent investigation), none of such representations
and warranties would be breached if such representations and warranties applied
with respect to La Sportiva S.r.l.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF TNF
TNF hereby represents and warrants to the Company that, except as set forth
in the Disclosure Letter delivered at or prior to the date hereof by TNF to the
Company (the "TNF Disclosure Letter"), dated as of the date hereof, the
information set forth in any section of which shall be deemed to provide an
exception to or otherwise qualify the representations and warranties of TNF in
the corresponding section of this Agreement to the extent that it is apparent to
which section of this Agreement such information relates:
7.1. Organization and Good Standing; Authority. TNF (i) is a limited
-----------------------------------------
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware, except where the failure to be so organized
would not reasonably be expected to have a Material Adverse Effect on TNF, (ii)
has the requisite power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted, (iii) is in good
standing and duly qualified to do business in each jurisdiction in which the
transaction of its business makes such qualification necessary, except where the
failure to be so organized, existing, qualified and in good standing or to have
such power or authority would not materially restrict or prevent the
consummation of the Offer, the Asset Dropdown, the Merger or the other
transactions contemplated hereby, and (iv) and has the limited liability company
power and authority and has taken all limited liability company action necessary
in order to execute and deliver this Agreement and consummate the transactions
contemplated hereby. The sole member of TNF has duly authorized the execution,
delivery and performance of this Agreement and no other action or other
proceedings on the part of TNF is necessary to authorize this Agreement or the
Transactions. This Agreement has been duly executed and delivered by TNF and is
a valid and legally binding obligation of it, enforceable against TNF in
accordance with its terms.
7.2. Absence of Conflict. Except as set forth in Section 7.2 of the TNF
------------------- -----------
Disclosure Letter, the execution, delivery and performance of this Agreement,
the consummation of the transactions contemplated hereby, and compliance with
the provisions hereof do not and will not (i) violate, or conflict with, or
result in a breach of any provisions of, or constitute a default (or an event
that, with the notice or lapse of time or both, would constitute a default)
under, or give rise to a right of termination, cancellation, modification or
acceleration of the performance required by or a loss of a material benefit
under, or result in the creation or imposition of (or the obligation to create
or impose) any Encumbrance upon any of the properties or assets of TNF under
-37-
any of the terms, conditions or provisions of the charter and bylaws of TNF or
any material agreement, indenture, note, bond, mortgage, deed of trust,
undertaking, permit, lease, franchise, license or other instrument to which TNF
is a party or by which it or any of its properties or assets may be bound or
affected; or (ii) violate any Law or Order applicable to TNF, except for any
such violations of Law or Order which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on TNF.
7.3. Approvals. Section 7.3 of the TNF Disclosure Letter contains a
--------- -----------
list of all Approvals of Governmental Entities which, to the knowledge of TNF,
required to be given or obtained by TNF from any and all Governmental Entities
in connection with the consummation of the transactions contemplated by this
Agreement, except where the failure to be given or obtain such Approvals,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on TNF.
7.4. Brokers. Except as set forth in Section 7.4 of the TNF Disclosure
------- -----------
Letter, the consummation of the transactions contemplated hereby will not give
rise to, any valid claim against the Company or any of its directors, officers,
stockholders or affiliates for a brokerage commission, finder's fee or other
like payment to any person or entity.
7.5. Offer Documents; Schedule 13E-3; Schedule 13E-4. No information
-----------------------------------------------
supplied by or on behalf of TNF specifically for inclusion in the Schedule 13E-3
or Schedule 13E-4 will, at the respective times filed with the SEC or other
Governmental Entity, or at any time thereafter when the information included
therein is required to be updated pursuant to applicable law, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The
Schedule 13E-3 will, when filed by TNF with the SEC or other Governmental
Entity, comply as to form in all material respects with the provisions of the
Exchange Act and the SEC's rules and regulations promulgated thereunder.
7.6. Financing. TNF has delivered to the Company copies of (i) a
---------
commitment letter from GEI with respect to equity funding (the "Equity
------
Funding") of up to $88 million, and (ii) a commitment letter from The Chase
-------
Manhattan Bank and a "highly confident" letter from Chase Securities Inc.
relating to such financing as, in TNF's judgment, is reasonably expected to be
necessary, together with the Equity Funding, to consummate the Offer, the Merger
and the other transactions contemplated hereby (the "Debt Funding"). If TNF
------------
purchases the Recap Shares, it will do so for investment solely for its own
account and not with a view to distribution. TNF understands that the sale of
the Recap Shares to TNF will not be registered under the Securities Act and will
bear a legend to that effect.
7.7. Interim Operation of TNF. TNF was formed solely for the purpose of
------------------------
engaging in the transactions contemplated by this Agreement, has engaged in no
other business activities and has conducted its operations solely as
contemplated by this Agreement.
-38-
7.8. Other Agreements. There are no material agreements, arrangements,
----------------
transactions or other relationships between (i) Xxxxx Xxxxxxx and (ii) TNF or
GEI, other than such agreements, arrangements, transactions or other
relationships set forth in the letters from GEI to Xxxxx Xxxxxxx, dated
February 26, 1999.
ARTICLE VIII
COVENANTS
8.1. Conduct of Business Pending Closing. The Company agrees that on
-----------------------------------
and after the date hereof and prior to the Recap Closing Date, except as
otherwise consented to by TNF in writing (which consent shall not be
unreasonably withheld), except as set forth in Section 8.1 of the Company
-----------
Disclosure Letter , or except as otherwise contemplated by this Agreement:
8.1.1. The Company shall conduct its business in the ordinary
course in all material respects;
8.1.2. The Company shall (i) discharge accounts payable and other
current liabilities and obligations of the Company in accordance with past
practice, (ii) purchase and maintain inventory in an amount consistent with
normal seasonal requirements of the Company, and (iii) discharge on a timely
basis any and all liabilities as and to the extent such liabilities or any
portion thereof become due prior to the Recap Closing; provided, however, that
the Company shall not prepay, redeem or repurchase any Indebtedness or other
obligations that are not due and payable prior to the Recap Closing other than
pursuant to its existing revolving credit facility in the ordinary course of
business;
8.1.3. The Company shall use commercially reasonable efforts to
preserve the business organization of the Company intact, to preserve its
existing relationship with suppliers, customers, employees and others with whom
business relationships exist as of the date hereof;
8.1.4. The Company shall not borrow any money, incur any
Indebtedness or guarantee any Indebtedness or obligation of any Person, other
than accounts payable arising in the ordinary course of business, consistent
with past practice, and other than pursuant to its existing revolving credit
facility in the ordinary course of business;
8.1.5. The Company shall not issue, sell or dispose of any capital
stock or other equity interest in the Company, except upon the valid exercise of
Options in accordance with the terms thereof, or issue or grant any options,
warrants or other rights to purchase any such capital stock or equity interest
or any securities convertible into or exchangeable for such capital stock or
equity interests or otherwise make or effect any change in the issued and
outstanding capitalization of the Company;
-39-
8.1.6. The Company shall not cause or permit any amendment,
alteration or modification in the terms of any currently outstanding options,
warrants or other rights to purchase any capital stock or equity interest in the
Company or any securities convertible into or exchangeable for such capital
stock or equity interest, including without limitation any reduction in the
exercise or conversion price of any such rights or securities, any change to the
vesting or acceleration terms of any such rights or securities, or any change to
terms relating to the grant of any such rights or securities;
8.1.7. Except as set forth in Section 8.1.7 of the Company
-------------
Disclosure Letter, the Company shall not declare or pay any dividend or make any
other distribution, or transfer any assets, to any stockholders of the Company
in their capacity as such, or redeem, repurchase or otherwise reacquire any of
its capital stock, except in the ordinary course of business;
8.1.8. Except for transactions with Company vendors and suppliers
in the ordinary course of business consistent generally with past practice, the
Company shall not enter into any contracts or agreements (written or oral) that
provide for aggregate payments by any party in excess of $100,000 per contract
and that are not terminable upon 90 days (or less) notice by the Company without
penalty or obligation to make payments related to such termination and, to the
extent the Company is a party to any such contract or agreement as of the date
hereof, the Company shall not amend or waive any rights under any such contract;
8.1.9. The Company shall not purchase all or any substantial part
of the properties or assets of, or otherwise acquire, merge or consolidate with,
any Person, (or division thereof);
8.1.10. The Company shall not sell, lease, transfer, assign or
otherwise dispose of any material properties or assets, except for (i) sales of
inventory in the ordinary course of business consistent with past practice, and
(ii) sales in connection with any transaction to which the Company is
contractually obligated prior to the date hereof described in Section 8.1.10 of
--------------
the Company Disclosure Letter, and except as otherwise provided by this
Agreement;
8.1.11. Except as set forth in Section 8.1.11 of the Company
--------------
Disclosure Letter, the Company shall not sell, lease, transfer, assign or
otherwise dispose of any Owned Real Estate or Leased Real Estate, and the
Company shall not permit any lease or sublease of Leased Real Estate to
terminate or expire, in each case except as otherwise provided in this
Agreement;
8.1.12. Except as set forth in Section 8.1.12 of the Company
--------------
Disclosure Letter, the Company shall not purchase, lease or otherwise acquire
any material properties or assets except for purchases of inventory in the
ordinary course of business;
8.1.13. Except as may be required by law or under any existing
agreements set forth in Section 8.1.13 of the Company Disclosure Letter, the
--------------
Company
-40-
shall not increase the compensation or fringe benefits payable or to become
payable by the Company to any of the officers or salaried employees of the
Company, other than routine or customary increases made in the ordinary course
of business and consistent with past practice;
8.1.14. Except as set forth in Section 8.1.14 of the Company
--------------
Disclosure Letter, the Company shall not close, shut down or otherwise
eliminate any of its stores and offices or make any other material change in the
character of its business, properties or assets other than in the ordinary
course of business consistent with past practice;
8.1.15. The Company shall maintain in all material respects its
existing advertising programs and policies without material modification except
for any changes made in the ordinary course of business;
8.1.16. The Company shall not materially reduce the personnel
headcount of the Company and shall use commercially reasonable efforts (but not
requiring the expenditure of funds) to keep available the services of the
present employees of the Company;
8.1.17. The Company shall not change its accounting principles,
methods or practices, including any change in its policies with respect to
reserves (whether for bad debts, contingent liabilities or otherwise), any
change in depreciation or amortization policies or rates or any change in the
policies pertaining to the recognition of accounts receivable or the discharge
of accounts payable or accounting for inventories, except as may be required
under GAAP or as may be required from time to time by the SEC, the Financial
Accounting Standards Board or any other Governmental Entity or accounting body
with jurisdiction or authority over the financial reporting practices and
policies of the Company;
8.1.18. Other than in the ordinary course, the Company shall not
make any representation or proposal to, or engage in substantive discussions
with, any of the holders (or their representatives) of any Indebtedness, or to
or with any party which has issued a letter of credit that benefits the Company,
without prior consultation with and approval of TNF (which shall not be
unreasonably withheld);
8.1.19. The Company shall (i) use commercially reasonable efforts
to maintain in all material respects its existing material Permits and Approvals
which are necessary to the conduct or operation of the Company's business as it
is conducted or operated as of the date hereof, and (ii) not violate any Law of
which the Company is aware or has knowledge regarding its existence;
8.1.20. The Company shall use commercially reasonable efforts to
maintain in full force and effect all policies of insurance now in effect;
8.1.21. The Company shall not enter into any agreement or take or
commit to take any action that would, if taken on or before the Recap Closing,
result in a breach
-41-
of any of the foregoing covenants contained in this Section 8.1 or of any
-----------
representation or warranty of the Company contained in this Agreement as made as
of the Recap Closing;
8.1.22. The Company shall not take any action, enter into any
agreement or alter any policy that would delay or hinder the consummation of
the Asset Dropdown or delay or hinder the ability of TNF to accomplish
recapitalization accounting treatment of the Transactions and the transactions
contemplated herein; and
8.1.23. The Company shall not initiate, settle or resolve any
material litigation, arbitration or other adjudication.
8.2. Access. The Company shall permit TNF and its Representatives to have
------
reasonable access during normal business hours, upon reasonable notice and in
such manner as will not unreasonably interfere with the conduct of the Company's
business, to all of the directors, officers, employees, agents and
Representatives of the Company and all properties, books, records, operating
instructions, procedures and Tax Returns of the Company and all other
information with respect to the Company, its business and operations and its
assets and properties as TNF or its Representatives may from time to time
reasonably request, and to make copies of such books, records and other
documents.
8.3. Permits and Approvals. The Company and TNF shall use commercially
---------------------
reasonable efforts to obtain all Permits and Approvals reasonably necessary for
the consummation of the transactions contemplated hereby and to permit the
Company, following the Recap Closing, to continue to conduct its business in
substantially the manner it is being conducted as of the date hereof. The
Company shall use commercially reasonable efforts to obtain all authorizations
from any Person as may be required for it to consummate the Asset Dropdown and
the other transactions contemplated hereby in accordance with the terms of this
Agreement, and if the Company, despite such efforts, is unable to obtain any
such authorizations, the Company shall take, or cause to be taken, all other
actions necessary, proper or advisable in order for it to fulfill its
obligations hereunder and to carry out the intentions of the parties expressed
herein, including without limitation such actions described in Section 4.2
-----------
hereof.
8.4. Litigation. Until the Recap Closing, each of the Company and TNF
----------
shall promptly notify the other of any action, suit, proceeding, claim or
investigation which is threatened or commenced that materially relates to or
materially affects the Company, its business, its properties or assets, this
Agreement or the transactions contemplated hereby.
8.5. Acquisition Proposals. Except as otherwise provided in this Section
--------------------- -------
8.5, the Company, from the date of this Agreement until the earlier of
---
termination of this Agreement and the Effective Time, agrees that neither it nor
any of its officers and directors shall, and the Company shall direct and use
its best efforts to cause its management employees and Representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making of any proposal or offer
-42-
(including, without limitation, any proposal or offer to stockholders of the
Company) with respect to a merger, consolidation or similar transaction, other
than pursuant to this Agreement, involving, or any purchase of all or any
significant portion of the properties and assets or any equity securities of,
the Company (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or engage in any negotiations concerning, or provide any
--------------------
confidential information or data to, or have any discussions with, any Person
relating to an Acquisition Proposal, or otherwise knowingly facilitate any
effort or attempt to make or implement an Acquisition Proposal. The Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing and shall make all reasonable efforts to enforce any
confidentiality agreements to which it is a party. The Company will take the
necessary steps to inform the appropriate individuals and entities referred to
in the first sentence hereof of the obligations under this Section 8.5. The
Company promptly will notify TNF if any such inquiries or proposals are received
by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with the Company.
Notwithstanding the foregoing, in the event the Company receives an Acquisition
Proposal that was not solicited by it and that did not result from a breach of
this Section 8.5 (an "Unsolicited Proposal"), the Company may in response
----------- --------------------
thereto provide confidential information or data (subject to the execution of a
customary confidentiality agreement) to, or engage in discussions or
negotiations with, Representatives of a proposed acquiror in connection with the
transaction(s) contemplated by the Acquisition Proposal, provided that (x) the
transaction contemplated by the Acquisition Proposal is for all or substantially
all of the outstanding shares of Existing Stock held by non-affiliates of the
Company (and may include or exclude shares held by affiliates of the Company),
(y) the Company Board determines in good faith, after receiving advice from a
nationally recognized investment banking firm, that the consideration offered in
the Acquisition Proposal is superior to the Per Share Amount and that such
transaction(s) represents a transaction superior to the Transactions for holders
of the Existing Stock (taking into account, among other things, the expected
time to close the transaction, the certainty of closing the transaction, and the
other terms and conditions as compared with the Transactions, and (z) in the
opinion of the Company Board, after consultation with its outside legal counsel
and financial adviser, the failure to provide such information or data or engage
in such discussions or negotiations may reasonably be determined to constitute a
breach of fiduciary duties by the Company Board under applicable law (an
Acquisition Proposal which satisfies the foregoing clauses (x) and (y) being
referred to herein as a "Superior Proposal"). Nothing contained in this Section
-----------------
8.5 shall prohibit the Company from complying with its obligations under Rule
14d-9 and Rule 14e-2 promulgated under the Exchange Act; provided, however,
that, in complying with such rules, the Company will not make or authorize any
recommendations of any Acquisition Proposal unless it constitutes a Superior
Proposal.
-43-
8.6. H-S-R Notification.
------------------
8.6.1. Filings. As soon as practicable after the execution of
-------
this Agreement, to the extent required by law, each of the Company and TNF shall
file, or cause to be filed, with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice pursuant to the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended (the "H-S-R Act"), the
---------
notification and documentary material required in connection with the
transactions contemplated hereby.
8.6.2. Cooperation. TNF and the Company shall promptly file any
-----------
additional information requested as soon as practicable after receipt of a
request for additional information. TNF and the Company shall use their
commercially reasonable efforts to obtain early termination of the applicable
waiting period under the H-S-R Act. The parties hereto will coordinate and
cooperate with one another in exchanging such information and providing such
reasonable assistance as may be requested in connection with such filings.
8.6.3. Other Actions. The Company agrees that, in order to
-------------
comply with the H-S-R Act in connection with the transactions contemplated
hereby, TNF shall be entitled, in its sole discretion, to acquiesce to any
divestitures, operating restrictions or other constraints imposed or required by
any Governmental Entity, provided that such divestitures, operating restrictions
or other constraints shall not have any material effect on the terms of the
Transactions.
8.7. Financial Statement Deliveries. As soon as is reasonably
------------------------------
practicable and in no event later than twenty-five (25) days from the last day
of each fiscal month between the date of this Agreement and the Recap Closing
Date, the Company shall prepare and provide to TNF monthly historical financial
statements (the "Monthly Financial Statements") for the Company, utilizing the
----------------------------
same methodology currently used in preparing the financial statements included
in the Company's unaudited 1998 financial statements.
8.8. Covenant to Satisfy Conditions. Each of the Company and TNF will use
------------------------------
commercially reasonable efforts to ensure that the conditions set forth in
Article IX hereof are satisfied, insofar as such matters are within the control
----------
of such party. Each such party shall promptly consult with the other with
respect to, and provide to the other any legally permitted information and
copies of all filings made by such party with any Governmental Entity or any
other information supplied by such party to a Governmental Entity (other than
confidential personnel information) in connection with this Agreement and the
transactions contemplated hereby. TNF and the Company further covenant and
agree, with respect to any pending or threatened Action, preliminary or
permanent injunction or other Order, decree or ruling or statute, rule,
regulation or executive order that would adversely affect the ability of the
parties hereto to consummate the transactions contemplated hereby, to use
reasonable best efforts to prevent or lift the entry, enactment or promulgation
thereof, as the case may be. Upon the request of TNF, the Company agrees that
it shall use commercially reasonable efforts to secure waivers
-44-
and/or consents from such third parties as may be necessary or desirable in
TNF's reasonable judgment in order to consummate the transactions contemplated
hereby.
8.9. Financing. Each of the Company and TNF agrees to use its
---------
commercially reasonable efforts to obtain, on terms satisfactory to TNF in its
sole discretion, all of the financing necessary in connection with the
consummation of the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, the Company acknowledges receipt of
the commitment and "highly confident" letters referred to in Section 7.6 hereof
-----------
and undertakes to use its commercially reasonable efforts to fulfill, or cause
to be fulfilled, the obligations of the Company and "Borrower" thereunder.
8.10. Disclosure Prior to Closing. In the event that, at any time prior
--------------------------
to the Recap Closing, the Company or TNF becomes aware of any matter that, if
existing or known as of the date of this Agreement, would have been required to
be set forth or described in the Schedules hereto or would otherwise have
rendered any representation or warranty false, such party shall promptly provide
written notice of such matters to the other party. However, no such notice
provided under this Section 8.10 shall be deemed to cure any breach of any
------------
representation or warranty made in this Agreement whether for purposes of
determining whether or not the conditions set forth in Article IX hereof have
----------
been satisfied or otherwise. In addition, the Company shall promptly provide
written notice of any events occurring after the date hereof that individually
or in the aggregate have had or are reasonably expected to have a Material
Adverse Effect on the Company.
8.11. Public Announcements. Each of the Company and TNF will obtain the
--------------------
consent of the other prior to issuing any press release or otherwise making any
public statements with respect to the transactions contemplated hereby and shall
not issue any such press release or make any public statement prior to obtaining
such consent, except as may be required by applicable law or pursuant to the
rules and regulations of the NASDAQ National Market.
8.12. Employee Benefits. From and after the Effective Time, TNF and the
-----------------
Surviving Corporation and their respective affiliates will honor in accordance
with their terms all existing employment, severance, consulting and salary
continuation agreements between the Company and any current or former officer,
director, employee or consultant of the Company.
8.13. Directors' and Officers' Insurance and Indemnification. The
------------------------------------------------------
Company will indemnify each person who is now, or has been at any time prior to
the date hereof, a director or officer of the Company or its successors and
assigns (individually an "Indemnified Party" and collectively the "Indemnified
----------------- -----------
Parties"), to the fullest extent required or permitted under the certificate of
-------
incorporation or by-laws of the Company, or any agreement with the Company in
each case as in effect immediately prior to the execution of this Agreement,
with respect to any claim, liability, loss, damage, judgment, fine, penalty,
amount paid in settlement or compromise, cost or expense, including reasonable
fees and expenses of legal counsel (whenever asserted or claimed)
-45-
("Indemnified Liability"), based in whole or in part on, or arising in whole or
---------------------
in part out of, any matter, state of affairs or occurrence existing or occurring
at or prior to the Recap Closing Date whether commenced, asserted or claimed
before or after the Recap Closing Date, including, without limitation, liability
arising under the Securities Act, the Exchange Act, or state law. The Company
will maintain in effect for not less than six years after the Recap Closing Date
the current policies of directors' and officers' liability insurance maintained
by the Company on the date hereof (provided that the Company may substitute
therefor policies having at least the same coverage, a comparably rated issuer
and containing terms and conditions which are no less advantageous to the
persons currently covered by such policies as insured) with respect to matters
existing or occurring at or prior to the Recap Closing Date; provided, however,
that if the aggregate annual premiums for such insurance during such period
exceed 200% of the per annum rate of the aggregate premium currently paid by the
Company for such insurance on the date of this Agreement, then the Company will
provide the maximum coverage that will then be available at an annual premium
equal to 200% of such rate. The rights under this Section 8.13 are in addition
------------
to rights that an Indemnified Party may have under the certificate of
incorporation, by-laws, other similar organizational documents of the Company or
the DGCL. The rights under this Section 8.13 are contingent upon the occurrence
------------
of, and will survive consummation of, the Transactions and are expressly
intended to benefit each Indemnified Party. The certificate of incorporation and
by-laws of the Surviving Corporation following the Transactions shall contain
provisions identical with respect to elimination of personal liability and
indemnification to those set forth in Articles 8 and 9 of the Certificate of
Incorporation of the Company and Article 8 of the by-laws of the Company,
respectively, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Recap Closing Date in any manner
that would adversely affect the rights thereunder of individuals who immediately
prior to the Recap Closing Date were directors, officers, agents or employees of
the Company.
8.14. Antitakeover Statutes. If any Takeover Statute (as defined below) is or
---------------------
may become applicable to the transactions contemplated hereby, the Company Board
will grant such approvals and take such actions as are necessary so that the
transactions contemplated hereby and thereby may be consummated as promptly as
practicable on the terms contemplated hereby and thereby and otherwise act to
eliminate the effects of any Takeover Statute on any of the transactions
contemplated hereby or thereby. For purposes of this Agreement, a "Takeover
Statute" means a "fair price", "moratorium", "control share acquisition" or
other similar antitakeover statute or regulation enacted under state or federal
laws in the United States, including without limitation Section 203 of the DGCL.
-46-
ARTICLE IX
CONDITIONS
9.1. Conditions to the Stock Purchase. The respective obligations of each
--------------------------------
party to effect the Stock Purchase shall be subject to the satisfaction at or
prior to the Recap Closing Date of each of the following conditions unless
waived:
9.1.1. No Order. No United States or state governmental
--------
authority or other agency or commission or United States or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect and
has the effect of making the acquisition of Shares by TNF or any of its
affiliates illegal or otherwise restricting, preventing or prohibiting
consummation of the Transactions (including by imposing material limitations on
the ability of TNF to exercise full rights of ownership of the Recap Shares,
including the right to vote such Recap Shares on all matters properly presented
to the Company's stockholders).
9.1.2. Offer. The conditions to the Offer set forth in Annex A
----- -------
hereto shall have been satisfied and the Company shall simultaneously with the
Recap Closing purchase all Shares validly tendered and not withdrawn pursuant to
the Offer.
9.2. Additional Conditions of Company Obligation to Effect Stock
-----------------------------------------------------------
Purchase. The obligations of the Company to effect the Stock Purchase shall
--------
also be subject to the satisfaction at or prior to the Recap Closing Date of
each of the following additional conditions, unless waived by the Company:
9.2.1. Accuracy of Representations and Warranties. All
------------------------------------------
representations and warranties made by TNF in this Agreement or the TNF
Disclosure Letter shall be true and correct in all respects on the date when
made and on and as of the Recap Closing Date (unless the representations and
warranties address matters as of a particular date, in which case they shall
remain true and correct in all respects as of such date) with the same effect as
if made on and as of the Recap Closing Date (without regard to any amendment or
supplement of the TNF Disclosure Letter after the date hereof), except where
such failures to be true and correct, in each case or in the aggregate, have not
had and are not reasonably expected to have a Material Adverse Effect on TNF.
9.2.2. Compliance with Covenants. TNF shall have performed in
-------------------------
all material respects all obligations and agreements, and complied in all
material respects with covenants, contained in this Agreement to be performed or
complied with by it prior to or on the Recap Closing Date.
9.2.3. Officer's Certificates. The Company shall have received
----------------------
such certificates of TNF, dated as of the Recap Closing Date, signed by an
executive officer of
-47-
TNF to evidence satisfaction of the conditions set forth in this Article IX as
----------
may be reasonably requested by the Company.
9.3. Additional Condition to TNF Obligation to Effect Stock Purchase. The
---------------------------------------------------------------
obligation of TNF to effect the Stock Purchase is also subject to the
satisfaction at or prior to the Recap Closing Date of each of the following
additional conditions, unless waived by TNF:
9.3.1. Accuracy of Representations and Warranties. All
------------------------------------------
representations and warranties made by the Company in this Agreement or the
Company Disclosure Letter shall be true and correct in all respects on the date
when made and on and as of the Recap Closing Date (unless the representations
and warranties address matters as of a particular date, in which case they shall
remain true and correct in all respects as of such date) with the same effect as
if made on and as of the Recap Closing Date (without regard to any amendment or
supplement of the Company Disclosure Letter after the date hereof), except where
such failures to be true and correct, in each case or in the aggregate, have not
had and are not reasonably expected to have a Material Adverse Effect on the
Company.
9.3.2. Compliance with Covenants. The Company shall have
-------------------------
performed in all material respects all obligations and agreements, and complied
in all material respects with covenants, contained in this Agreement to be
performed or complied with by it prior to or on the Recap Closing Date.
9.3.3. Company Adverse Changes. There shall not have occurred
-----------------------
after the date hereof any events that individually or in the aggregate are or
may reasonably be expected to have a Material Adverse Effect on the Company.
9.3.4. Financing. TNF shall have obtained, on terms satisfactory
---------
to TNF in its sole discretion, all financing necessary to consummate the
transactions contemplated by this Agreement and that are necessary to continue
after the Recap Closing the business of the Surviving Corporation in
substantially the manner it is currently being conducted or is planned to be
conducted.
9.3.5. Accounting Principles. The Company shall not have altered,
---------------------
modified or amended, and the Company shall not have been required in the future
to make any alteration, modification or amendment (which in TNFs' reasonable
belief would be material to the Company) of, any of its material accounting
principles, methods or practices, whether or not required or requested to make
such alteration, modification or amendment by any Governmental Entity, by the
Company's independent auditors or otherwise.
9.3.6. Officer's Certificates. TNF shall have received such
----------------------
certificates of the Company, dated as of the Recap Closing Date, signed by the
President and Chief Financial Officer of the Company to evidence satisfaction of
the conditions set forth in
-48-
this Article IX (insofar as it relates to the Company).
----------
9.4. Conditions to the Merger. The respective obligations of each party
------------------------
to effect the Merger shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions:
9.4.1. Stockholder Approval. This Agreement and the transactions
--------------------
contemplated hereby shall have been approved and adopted by the affirmative
vote of the stockholders of the Company to the extent required by Delaware Law
and the Certificate of Incorporation of the Company;
9.4.2. No Order. No United States or state governmental
--------
authority or other agency or commission or United States or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect and
has the effect of making the Merger illegal or otherwise restricting, preventing
or prohibiting consummation of the Transactions; and
9.4.3. Stock Purchase. TNF shall have purchased the Recap Shares
--------------
pursuant to the Stock Purchase.
ARTICLE X
TERMINATION
10.1. Termination. Anything herein or elsewhere to the contrary
-----------
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time on or prior to the Recap Closing Date:
10.1.1. Mutual Consent. By mutual written consent of the parties
--------------
hereto.
10.1.2. By TNF. By TNF, if (i) any of the conditions set forth
------
in Section 9.1 or 9.3 shall have become incapable of fulfillment (other than
----------- ---
as a result of a breach of this Agreement by TNF), or (ii) the Company Board or
any committee thereof withdraws or modifies, or resolves to withdraw or modify,
its recommendation of the Transactions, for any reason.
10.1.3. By the Company. By the Company, if any of the conditions
--------------
set forth in Section 9.1 or 9.2 shall have become incapable of fulfillment
----------- ---
(other than as a result of a breach of this Agreement by the Company).
10.1.4. Fiduciary Duties. By the Company, by written notice to TNF
----------------
prior to the consummation of the Stock Purchase, if the Company receives an
Unsolicited Proposal that constitutes a Superior Proposal and the Company Board
accepts such Superior Proposal; provided, however, that the Company shall not be
entitled to terminate this Agreement pursuant to this Section 10.1.4 unless it
--------------
shall have provided TNF with
-49-
written notice of such a possible determination (which written notice will
inform TNF of the material terms and conditions of the proposal, including the
identity of the proponent) at least three (3) Business Days prior to such
determination.
10.1.5. Termination Date. By TNF or the Company, if the
----------------
transactions contemplated hereby are not consummated on or before July 31, 1999,
and if the failure to consummate such transactions on or before such date did
not result from the breach of any representation, warranty or agreement herein
of the party seeking such termination.
10.1.6. Breach of Covenant. By TNF or the Company, if the
------------------
other party shall be in material breach of any of its covenants contained in
this Agreement and such breach either is incapable of cure or is not cured
within fifteen (15) days after notice from the party wishing to terminate;
provided, however, that the party seeking such termination shall not also then
be in material breach of this Agreement; and provided further that any breach of
the provisions of Section 8.5 hereof shall entitle TNF to an immediate right of
-----------
termination without any notice or cure requirement.
10.1.7. Breach of Representations and Warranties. By TNF or the
----------------------------------------
Company, if the other party shall be in breach of any of its representations
or warranties contained in this Agreement, which breach, individually or
together with all other breaches, is reasonably expected to have a Material
Adverse Effect on TNF or the Company, as applicable, and such breach either is
incapable of cure or is not cured within fifteen (15) days after notice from the
party wishing to terminate, provided that the party seeking such termination
shall not also then be in material breach of this Agreement.
10.2. Manner and Effect of Termination. Termination shall be effected by
--------------------------------
the giving of written notice to that effect by the party seeking termination.
If this Agreement is validly terminated and the transactions contemplated hereby
are not consummated, this Agreement shall become null and void and of no further
force and effect and no party shall be obligated to the others hereunder;
provided, however, that termination shall not affect (i) the rights and remedies
available to a party as a result of the breach by the other party hereunder
(provided that, subject to clause (iv) below, the provisions of Section 10.3
------------
shall constitute the exclusive legal remedy of TNF with respect to breach by the
Company described therein), (ii) the provisions of Sections 6.26 and 7.4 hereof,
------------- ---
(iii) the obligations of the Company pursuant to Section 10.3 below, or (iv) the
------------
rights available to the parties under Section 12.10 hereof.
-------------
10.3. Certain Payments Upon Termination. In the event that (a) either
---------------------------------
Agreement under Section 10.1.2(i), 10.1.3 or 10.1.5 due to the failure of the
----------------- ------ ------
Offer to be consummated due to failure of the Minimum Condition to be satisfied
(but only if all conditions to the Offer in Annex A other than the Minimum
-------
Condition shall have been satisfied or waived), provided that either there has
been a Competitive Bid or the Company has become a party to, or within twelve
(12) months following the date hereof enters into, an agreement for any Person
to acquire a controlling interest or all of the Existing Stock or all or
substantially all of the Company Assets), (b) TNF terminates this Agreement
under Section 10.1.2(ii) or under Section 10.1.6 (provided that the
------------------ --------------
-50-
covenant(s) breached are contained in Section 8.1.6 or 8.5) or (c) the Company
terminates this Agreement pursuant to Section 10.1.4, the Company shall pay to a
--------------
TNF termination fee in the amount of $7,000,000 (the "Termination Fee") plus
---------------
all Expenses. If (a) either party terminates this Agreement under Section
10.1.2(i), 10.1.3 or 10.1.5 due to the failure of the Offer to be consummated
--------- ------ ------
due to failure of the Minimum Condition to be satisfied (but only if all
conditions to the Offer in Annex A other than the Minimum Condition shall have
-------
been satisfied or waived, and the proviso in clause (a) in the preceding
sentence is not applicable), or (b) TNF terminates this Agreement under Section
-------
10.1.6 (but the proviso in clause (b) in the preceding sentence is not
------
applicable) or 10.1.7, the Company shall pay to TNF all Expenses. For purposes
------
of this Section 10.3, "Expenses" shall mean all fees and expenses (including
------------ --------
those of counsel, accountants and other advisors and in connection with
financing commitments) incurred by any of TNF and its affiliates in connection
with the transactions contemplated by this Agreement, up to an aggregate maximum
of $5,500,000 if the Termination Fee is also payable in accordance with the
first sentence of this Section 10.3, or $5,000,000 if the Termination Fee is not
------------
payable. All payments required to be made hereunder shall be made by wire
transfer of immediately available funds within two (2) Business Days of the
event giving rise to the payment of such expenses. The Company acknowledges
that the agreements contained in this Section 10.3 are an integral part of the
------------
transactions contemplated by this Agreement and that, without said agreements,
TNF would not enter into this Agreement; accordingly, if the Company fails
promptly to pay the Termination Fee and Expenses due pursuant to this Section
-------
10.3, and, in order to obtain such payment, TNF commences a suit which results
----
in a judgment against the Company for the fees and expenses set forth herein,
the Company will pay to TNF TNF's reasonable expenses (including attorneys' fees
and expenses) in connection with such suit, together with interest on the
amounts due hereunder at the legal rate determined by the court rendering such
judgment.
ARTICLE XI
OTHER AGREEMENTS
11.1. Confidentiality. The Company agrees that from the date hereof
---------------
until the Recap Closing Date or earlier termination of this Agreement it will
not, and will use reasonable best efforts to ensure that none of its directors,
officers, Representatives, agents or employees will, without the prior written
consent of TNF, submit or disclose to or file with any other Person, or use, any
confidential or non-public information relating to the Company or TNF, except
for such disclosure as may be required by Law or applicable accounting
regulations. TNF agrees that from the date hereof until the Recap Closing Date
or earlier termination of this Agreement it will not, and will use reasonable
best efforts to ensure that none of its directors, officers, Representatives,
agents or employees will, without the prior written consent of the Company,
submit or disclose to or file with any other Person, or use, any confidential or
non-public information relating to the Company, except for such disclosure as
may be required by Law or applicable accounting regulations. Without limiting
the generality of the foregoing, TNF and the Company agree and acknowledge that,
until the Recap Closing, they will continue to be bound by the Confidentiality
Agreement between Xxxxxxx Xxxxx & Partners, L.P. and the
-51-
Company and the letter agreement between Xxxxxxx Xxxxx & Partners, L.P. and the
Company.
ARTICLE XII
MISCELLANEOUS
12.1. Expenses. Except as otherwise specifically provided for herein,
--------
each of the Company, on the one hand, and TNF, on the other, shall pay all of
its costs and expenses (including attorneys', accountants' and investment
bankers' fees) incurred in connection with this Agreement and the transactions
contemplated hereby.
12.2. Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given upon receipt if delivered personally or sent by facsimile
transmission (receipt of which is confirmed) or by courier service promising
overnight delivery (with delivery confirmed the next day) or three (3) Business
Days after sent by registered or certified mail (postage prepaid, return receipt
requested). Notices shall be addressed as follows:
To The Company: The North Face, Inc.
0000 Xxxxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Marsden X. Xxxxx
Facsimile: (000) 000-0000
With a copy to: Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
To TNF: TNF Acquisition LLC
c/o Xxxxxxx Xxxxx & Partners, L.P.
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
With a copy to: Irell & Xxxxxxx LLP
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
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Either party may from time to time change its address for the purpose of notices
by a similar notice specifying the new address but no such change shall be
effective as against any Person until such Person shall have actually received
it.
12.3. Entire Agreement. This Agreement contains the final and entire
----------------
agreement between the parties with respect to the transactions contemplated
hereby and supersedes all written or verbal representations, warranties,
commitments and other understandings prior to the date hereof. No reference
shall be made to any draft of this Agreement for purposes of interpretation or
resolution of ambiguity or otherwise. All Exhibits annexed hereto, and all
Schedules referred to herein, are hereby incorporated in and made a part of this
Agreement as if set forth in full herein.
12.4. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12.5. Severability. If any provision hereof shall be held to be
------------
unenforceable or invalid by any court of competent jurisdiction or as a result
of future legislative action, such holding or action shall be strictly
construed and shall not alter the enforceability, validity or effect of any
other provision hereof.
12.6. Assignability. This Agreement shall be binding upon, inure to the
-------------
benefit of, and be enforceable by, the parties hereto and their respective
successors and permitted assigns; provided, however, that neither this Agreement
nor any right or obligation hereunder may be assigned by either party without
the prior written consent of the other to be given in the other party's sole
discretion, except that TNF may assign in part its right to purchase Recap
Shares to Xxxxx Xxxxxxx so long as TNF will still own a majority of the
outstanding shares of Existing Stock of the Company immediately following the
Recap Closing.
12.7. Third Party Beneficiaries. Nothing in this Agreement, express or
-------------------------
implied, is intended to confer upon any other Person (other than the Indemnified
Parties as provided in Section 8.13 hereof from and after the Recap Closing) any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
12.8. Captions. The descriptive headings herein are inserted for
--------
convenience only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
12.9. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware.
12.10. Specific Performance. The parties hereto agree that if any of the
--------------------
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be
-53-
entitled to specific performance of the terms hereof (without requirement to
post bond), in addition to any and all other remedies at law or in equity.
12.11. Amendment and Waiver. This Agreement may be amended, modified or
--------------------
supplemented only by an instrument in writing signed by all parties hereto. No
waiver by any party of any of the provisions hereof shall be effective unless
set forth in writing and executed by the party so waiving. Any waiver or
failure to insist upon strict compliance with any obligation, covenant,
agreement, provision, term or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure to comply.
12.12. Further Assurances. Subject to the terms and conditions herein
------------------
provided, each of the parties hereto agrees to use all commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable, whether under applicable laws
and regulations or otherwise, to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement.
12.13. Publicity. Except as hereinafter provided, the Company, TNF shall
---------
not, and each of them shall use commercially reasonable efforts to cause their
respective directors, officers, employees, Representatives and agents not to,
discuss publicly or make any public statement with respect to this Agreement or
the transactions contemplated here-by without the other party's approval.
Before making any such public announcements, the parties hereto shall use good
faith efforts to agree upon the text of a joint announcement to be made by the
parties hereto or use good faith efforts to obtain the other party's approval of
the text of any public announcement to be made solely on behalf of such party.
If the parties hereto are unable to agree on or approve such a public statement
or announcement and legal counsel for a party is of the opinion that such
statement or announcement is required by law or the rules of any stock exchange
on which the parties' securities are traded, then such party may make or issue
the legally required statement or announcement.
12.14. Force Majeure. Anything to the contrary in this Agreement
-------------
notwithstanding, no party hereto shall be liable to the other parties hereto for
any loss, injury, delay, damages or other casualty suffered or incurred by such
other party hereto due to strikes, riots, storms, fires, explosions, acts of
God, war, governmental action, or any other cause similar thereto which is
beyond the reasonable control of such parties, and any failure or delay by any
party hereto in performance of any of its obligations under this Agreement due
to one or more of the foregoing causes shall not be considered as a breach of
this Agreement. In the event that performance of any of the material
obligations under this Agreement shall be suspended due to one or more of the
foregoing causes and such suspension shall have a material adverse impact on
consummation of the transactions as contemplated in this Agreement or on the
operations or financial conditions or Prospects of the Company, then the
aggrieved party which shall be materially and adversely affected thereby may
terminate this Agreement.
-54-
12.15. Attorney's Fees. In any suit or proceeding arising out of this
---------------
Agreement or to interpret or enforce any provision of this Agreement, the
prevailing party shall be entitled to all reasonable out-of-pocket expenses and
reasonable attorneys' fees incurred by such party in connection with such suit
or proceeding.
12.16. Nonsurvival of Representations, Warranties and Agreements. None
---------------------------------------------------------
of the representations, warranties, covenants and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for the agreements contained in Article V and Section
--------- -------
8.17 hereof. None of the representations and warranties made by the Company
----
herein shall apply with respect to Article IV (other than with respect to
----------
Company Board authorizations).
-55-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
THE NORTH FACE, INC.
a Delaware corporation
By:-------------------------------
Name:
Title:
TNF ACQUISITION LLC
a Delaware limited liability company
By:-------------------------------
Name:
Title:
SIGNATURE PAGE TO TRANSACTION AGREEMENT
ANNEX A
-------
Conditions to the Offer
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment or pay for any Shares tendered pursuant to the
Offer, if (i) the Minimum Condition shall not have been satisfied, (ii) any
applicable waiting period under the H-S-R Act shall not have expired or been
terminated prior to the expiration of the Offer, (iii) the Debt Funding shall
not have been obtained, (iv) the Recap Closing shall not have occurred, or (v)
at any time on or after the date of this Transaction Agreement to which this
Annex A is appended, and prior to the acceptance for payment of Shares, any of
-------
the conditions set forth below shall exist; provided, however, that none of
these conditions will be waived by the Company without the consent of TNF
(which may be granted or withheld in its sole discretion); and provided
further, that the following conditions shall be waived by the Company at the
request of TNF: (x) the condition set forth in clause (i) of this preamble to
this Annex A (the Minimum Condition), but only if Shares constituting at least
-------
a majority of the outstanding shares of Existing Stock shall have been validly
tendered pursuant to the Offer and not withdrawn; (y) the condition set forth
in clause (iii) of this preamble to this Annex A (the Debt Funding condition),
-------
but only if sufficient funds to purchase all tendered Shares are available
from a combination of the sale of Recap Shares and alternate debt or equity
financing on terms that the Company determines in its reasonable good faith
judgment will not jeopardize the likelihood of consummating the Merger (it
being understood that a change in the term of the debt (other than to less
than one year) or the interest rate therefor shall not, of themselves, be
deemed to jeopardize the likelihood of consummating the Merger); and the
conditions set forth in clause (c) or (d) below in this Annex A:
-------
(a) there shall have been entered by any court of competent
jurisdiction or other Governmental Entity an Order, preliminary or permanent
injunction, decree, judgment or ruling in any suit, action or proceeding that
(i) makes illegal or otherwise directly or indirectly restrains or prohibits the
acquisition by the Company of any Shares under the Offer or the making or
consummation of the Offer or the Merger, the performance by the Company of any
of its material obligations under the Transaction Agreement or the consummation
of any purchase of Shares contemplated by the Transaction Agreement or related
agreements, or (ii) imposes material limitations on the ability of the Company
to acquire any Shares accepted for payment pursuant to the Offer;
(b) there shall have been enacted, entered, enforced, promulgated or
deemed applicable to the Offer, the Stock Purchase or the Merger any statute,
rule, regulation, legislation, interpretation, judgment, order or injunction, or
any other action is taken, by any Governmental Entity, other than the
application to the Offer, the Stock Purchase or the Merger of applicable waiting
periods under the H-S-R Act, that results or may result, directly or indirectly,
in any of the consequences referred to in clauses (i) or (ii) of paragraph (a)
of this Annex A;
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(c) the Company Board or any committee thereof shall have (A)
withdrawn or modified in a manner adverse to TNF its approval or recommendation
of the Offer, the Merger or the Transaction Agreement, (B) approved or
recommended any transaction that is the subject of an Acquisition Proposal, or
(C) authorized the Company to enter into any agreement to consummate any
transaction that is the subject of an Acquisition Proposal;
(d) there shall have occurred after the date hereof any events that
individually or in the aggregate have had or are reasonably expected to have a
Material Adverse Effect on the Company; or
(e) the Transaction Agreement shall have been terminated in
accordance with its terms.
The capitalized terms used in this Annex A shall have the meanings set
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forth in the Transaction Agreement to which it is appended, except that the term
"Transaction Agreement" shall be deemed to refer to the Transaction Agreement to
which this Annex A is appended.
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