Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
among
BRANDS HOLDINGS LIMITED
EWI ACQUISITION, INC.
and
EVERLAST WORLDWIDE INC.
Dated as of June 28, 2007
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS................................................2
SECTION 1.01 - DEFINITIONS........................................2
ARTICLE 2 THE MERGER.................................................9
SECTION 2.01 - THE MERGER.........................................9
SECTION 2.02 - CLOSING............................................9
SECTION 2.03 - EFFECTIVE TIME.....................................9
SECTION 2.04 - EFFECT OF THE MERGER...............................9
SECTION 2.05 - CERTIFICATE OF INCORPORATION; BY-LAWS..............9
SECTION 2.06 - DIRECTORS AND OFFICERS............................10
ARTICLE 3 CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES........11
SECTION 3.01 - CONVERSION OF SECURITIES..........................11
SECTION 3.02 - SURRENDER OF CERTIFICATES.........................11
SECTION 3.03 - STOCK TRANSFER BOOKS..............................13
SECTION 3.04 - EMPLOYEE EQUITY AWARDS; WARRANTS..................13
SECTION 3.05 - DISSENTING SHARES.................................14
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............15
SECTION 4.01 - ORGANIZATION AND QUALIFICATION; SUBSIDIARIES......15
SECTION 4.02 - CERTIFICATE OF INCORPORATION AND BY-LAWS..........15
SECTION 4.03 - CAPITALIZATION....................................15
SECTION 4.04 - AUTHORITY RELATIVE TO THIS AGREEMENT..............17
SECTION 4.05 - NO CONFLICT; REQUIRED FILINGS AND CONSENTS........18
SECTION 4.06 - PERMITS; COMPLIANCE...............................19
SECTION 4.07 - SEC FILINGS; FINANCIAL STATEMENTS; UNDISCLOSED
LIABILITIES...................................................20
SECTION 4.08 - ABSENCE OF CERTAIN CHANGES OR EVENTS..............21
SECTION 4.09 - ABSENCE OF LITIGATION.............................22
SECTION 4.10 - EMPLOYEE BENEFIT PLANS............................22
SECTION 4.11 - LABOR MATTERS.....................................25
SECTION 4.12 - PROXY STATEMENT...................................27
SECTION 4.13 - PROPERTY; LEASES..................................27
SECTION 4.14 - CONTRACTS.........................................31
SECTION 4.15 - INTELLECTUAL PROPERTY.............................33
SECTION 4.16 - TAXES.............................................34
I
SECTION 4.17 - ENVIRONMENTAL MATTERS.............................35
SECTION 4.18 - BROKERS...........................................37
SECTION 4.19 - INSURANCE.........................................37
SECTION 4.20 - SUPPLIERS AND RETAILERS...........................38
SECTION 4.21 - TANGIBLE PERSONAL PROPERTY........................38
SECTION 4.22 - INVENTORIES.......................................38
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..39
SECTION 5.01 - CORPORATE ORGANIZATION............................39
SECTION 5.02 - AUTHORITY RELATIVE TO THIS AGREEMENT..............39
SECTION 5.03 - NO CONFLICT; REQUIRED FILINGS AND CONSENTS........39
SECTION 5.04 - PROXY STATEMENT...................................40
SECTION 5.05 - INTERIM OPERATIONS OF MERGER SUB..................40
SECTION 5.06 - OWNERSHIP OF COMPANY EQUITY INTERESTS.............40
SECTION 5.07 - SUFFICIENT FUNDS..................................41
SECTION 5.08 - INVESTIGATION BY PARENT AND MERGER SUB............41
ARTICLE 6 CONDUCT OF BUSINESS PENDING THE MERGER....................42
SECTION 6.01 - CONDUCT OF BUSINESS BY THE COMPANY
PENDING THE MERGER............................................42
ARTICLE 7 ADDITIONAL AGREEMENTS.....................................45
SECTION 7.01 - SPECIAL MEETING; PROXY STATEMENT..................45
SECTION 7.02 - ACCESS TO INFORMATION; CONFIDENTIALITY............46
SECTION 7.03 - SOLICITATION......................................47
SECTION 7.04 - DIRECTORS' AND OFFICERS' INDEMNIFICATION..........49
SECTION 7.05 - FURTHER ACTION; REASONABLE BEST EFFORTS...........50
SECTION 7.06 - PUBLIC ANNOUNCEMENTS..............................51
SECTION 7.07 - CONFIDENTIALITY AGREEMENT.........................51
SECTION 7.08 - FINANCING.........................................52
SECTION 7.09 - ADVICE OF CHANGES.................................52
SECTION 7.10 - ENVIRONMENTAL PERMIT TRANSFER, ASSIGNMENT AND
REISSUANCE....................................................52
SECTION 7.11 - TRANSFER STATUTES.................................52
ARTICLE 8 CONDITIONS TO THE MERGER..................................53
SECTION 8.01 - CONDITIONS TO THE MERGER..........................53
SECTION 8.02 - CONDITIONS TO THE OBLIGATIONS OF PARENT
AND MERGER SUB................................................53
SECTION 8.03 - CONDITIONS TO THE OBLIGATIONS OF THE COMPANY......54
II
ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER.........................55
SECTION 9.01 - TERMINATION.......................................55
SECTION 9.02 - EFFECT OF TERMINATION.............................56
SECTION 9.03 - FEES AND EXPENSES.................................57
SECTION 9.04 - AMENDMENT.........................................58
SECTION 9.05 - WAIVER............................................58
ARTICLE 10 GENERAL PROVISIONS.......................................60
SECTION 10.01 - NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS....................................................60
SECTION 10.02 - NOTICES..........................................60
SECTION 10.03 - SEVERABILITY.....................................61
SECTION 10.04 - ENTIRE AGREEMENT; ASSIGNMENT.....................61
SECTION 10.05 - PARTIES IN INTEREST..............................61
SECTION 10.06 - SPECIFIC PERFORMANCE.............................61
SECTION 10.07 - GOVERNING LAW....................................62
SECTION 10.08 - WAIVER OF JURY TRIAL.............................62
SECTION 10.09 - INTERPRETATION...................................62
SECTION 10.10 - COUNTERPARTS.....................................63
SECTION 10.11 - EFFECTIVENESS OF THIS AGREEMENT..................63
III
AGREEMENT AND PLAN OF MERGER, dated as of June 28, 2007 (this
"Agreement")
AMONG
(1) BRANDS HOLDINGS LIMITED, a private company limited by shares incorporated
in England and Wales ("Parent"),
(2) EWI ACQUISITION, INC., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), and
(3) EVERLAST WORLDWIDE INC., a Delaware corporation (the "Company").
(A) WHEREAS, as of June 1, 2007, the Company, Xxxxxx Group Acquisitions, LLC
and Xxxxxx Group Acquisitions, Inc. entered into that certain Agreement and Plan
of Merger (the "Original Merger Agreement");
(B) WHEREAS, the Original Merger Agreement provided that the Company was
permitted to conduct certain solicitation activities during the time period and
on the terms and conditions set forth therein, and in connection therewith, the
Company and Parent entered into discussions in respect of the terms and
conditions of this Agreement and the transactions contemplated hereby;
(C) WHEREAS, concurrently with the execution and delivery of this Agreement,
the Company terminated the Original Merger Agreement in accordance with the
terms thereof;
(D) WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company
have each determined that it is in the best interests of their respective
stockholders to consummate the merger (the "Merger"), upon the terms and subject
to the conditions of this Agreement, of Merger Sub with and into the Company in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL") and such Boards of Directors have approved this Agreement and declared
its advisability (and, in the case of the Board of Directors of the Company (the
"Board"), have recommended that this Agreement be adopted by the Company's
stockholders);
(E) WHEREAS, upon consummation of the Merger, each issued and outstanding
share of common stock, par value $0.002 per share, of the Company (the "Company
Common Stock"), will be converted into the right to receive $30.00 per share in
cash, upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Parent, Merger Sub and
the Company hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01 - DEFINITIONS
For purposes of this Agreement:
"Acceptable Confidentiality Agreement" means a confidentiality and standstill
agreement that contains provisions that are no less favorable to the Company
than those contained in the Confidentiality Agreement and that shall not contain
any exclusivity provision in favor of the counterparty thereto or any provision
having the effect of prohibiting the Company from satisfying its obligations
under this Agreement.
"Acquisition Proposal" means any inquiry, offer or proposal (other than from
Parent or Merger Sub or their respective Affiliates) concerning any (a) merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company or any of the Subsidiaries, (b)
direct or indirect sale, lease, pledge or other disposition of assets or
business of the Company and the Subsidiaries representing 20% or more of the
consolidated revenues, net income or assets of the Company and the Subsidiaries,
in a single transaction or a series of transactions, (c) issuance, sale or other
disposition by the Company to any person or group (other than Parent or Merger
Sub or any of their respective Affiliates) of securities (or options, rights or
warrants to purchase, or securities convertible into or exchangeable for, such
securities) representing 20% or more of the voting power of the Company, or (d)
transaction or series of transactions in which any person or group (other than
Parent and Merger Sub or their respective Affiliates) acquires beneficial
ownership, or the right to acquire beneficial ownership, of 20% or more of any
class or series of securities (or options, rights or warrants to purchase, or
securities convertible into or exchangeable for, such securities) of the Company
or any of the Subsidiaries. Notwithstanding the forgoing, with respect to the
payment of the Termination Fee pursuant to Section 9.03(b)(iii), an Acquisition
Proposal shall not include the sale of shares of Company Common Stock pursuant
to the Secondary Offering.
"Action" means any action, charge, claim, demand, complaint, arbitration, audit,
hearing, notice of violation, investigation, litigation, suit or other
proceeding (whether civil, criminal, administrative, investigative or informal).
"Affiliate" of a specified person means a person who, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such specified person.
"beneficial owner" has the meaning ascribed to such term under Rule 13d-3(a) of
the Exchange Act.
"business day" means any day on which the principal offices of the SEC in
Washington, D.C. are open to accept filings or, in the case of determining a
date when any payment is due, any day on which banks are not required or
authorized to close in New York City and are open in London.
"Company Reference Balance Sheet" means the audited consolidated balance sheet
of the Company and the Subsidiaries as of December 31, 2006 contained in its
Form 10-K, filed with the SEC on March 22, 2007.
2
"contract" means any agreement, contract, lease, mortgage, power of attorney,
evidence of indebtedness, letter of credit, undertaking, covenant not to
compete, license, instrument, obligation, commitment, understanding, policy,
purchase or sales order, quotation or other commitment, whether oral or written,
express or implied.
"control" (including the terms "controlled by" and "under common control with")
means the possession, directly or indirectly, or as trustee or executor, of the
power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, as trustee or
executor, by contract or credit arrangement or otherwise.
"Effective Time" means the date and time at which the Merger becomes effective.
"Encumbrance" means any charge, claim, community property interest, condition,
easement, covenant, warrant, demand, encumbrance, equitable interest, lien,
mortgage, option, purchase right, pledge, security interest, right of first
refusal or other right of third parties or restriction of any kind, including
any restriction on use, voting, transfer, receipt of income or exercise of any
other attribute of ownership.
"Environmental Laws" means Laws relating to, or establishing standards of
conduct for, human health and safety, worker health and safety, Hazardous
Substances, or injury to or pollution or protection of the environment or
natural resources, including air, land, soil, surface waters, ground waters,
stream and river sediments and biota.
"Environmental Liabilities" means any claims, judgments, damages (including
punitive damages), losses, penalties, fines, liabilities, Encumbrances,
violations, costs, and expenses (including attorneys' and consultants' fees)
that (a) are incurred as a result of (i) the existence or alleged existence of
Hazardous Substances in, on, under, at or emanating from any Property, (ii) the
off-site transportation, treatment, storage or disposal of Hazardous Substances,
or (iii) the violation of or non-compliance with or alleged violation of or
non-compliance with any Environmental Law, or (b) arise under the Environmental
Laws.
"Equity Interest" means (a) with respect to a corporation, any and all classes
or series of shares of capital stock, (b) with respect to a partnership, limited
liability company, trust or similar person, any and all classes or series of
units, interests or other partnership/limited liability company interests and
(c) with respect to any other person, any other security representing any direct
equity ownership or participation in such person.
"Governmental Authority" means any United States federal, state, provincial,
supranational, county or local or any foreign government, governmental,
regulatory or administrative authority, agency, self-regulatory body,
instrumentality or commission, and any court, tribunal, or judicial or arbitral
body (including private bodies) and any political or other subdivision,
department or branch of any of the foregoing.
"Hazardous Substances" means any chemicals, materials or substances, including
without limitation, any petroleum, petroleum products, petroleum-derived
substances, radioactive materials, hazardous wastes, polychlorinated biphenyls,
lead-based paint, radon, urea formaldehyde, asbestos or any materials containing
asbestos, pesticides regulated under Environmental Laws or defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"extremely hazardous substances," "hazardous materials," "hazardous
constituents," "toxic substances," "pollutants," "contaminants," or any similar
denomination intended to classify or regulate such chemicals, materials or
substances by reason of their toxicity, carcinogenicity, ignitability,
corrosivity or reactivity or other characteristics under any Environmental Law.
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"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Intellectual Property" means (a) United States, international, and foreign
patents and patent applications, including divisionals, continuations,
continuations-in-part, reissues, reexaminations, and extensions thereof and
counterparts claiming priority therefrom; utility models; invention disclosures;
and statutory invention registrations and certificates; (b) United States and
foreign registered, pending, and unregistered trademarks, service marks, trade
dress, logos, trade names, corporate names and other source identifiers, domain
names, Internet sites and web pages; and registrations and applications for
registration for any of the foregoing, together with all of the goodwill
associated therewith; (c) United States and foreign registered and unregistered
copyrights, and registrations and applications for registration thereof; rights
of publicity; and copyrightable works; (d) all inventions and design rights
(whether patentable or unpatentable) and all categories of trade secrets as
defined in the Uniform Trade Secrets Act including, business, technical and
financial information; and (e) confidential and proprietary information,
including know-how.
"knowledge" means the actual knowledge of one or more of the executive officers
of the Company after due inquiry.
"Laws" means any foreign, federal, state or local statute, law (including common
law), rule, ordinance, code or regulation, any Order, and any regulation, rule,
interpretation, guidance, directive, policy statement or opinion of any
Governmental Authority.
"liability" means any liability of any kind whatsoever (whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, due or to become due, and whether or not reflected
or required by GAAP to be reflected on the Company Reference Balance Sheet).
"Material Adverse Effect" means any change, event, violation, inaccuracy,
circumstance, occurrence, development or effect (any such item, an "Effect"),
individually or when taken together with all other Effects, that is, or would
reasonably be expected to be, materially adverse to (a) the properties, assets,
liabilities, business, financial condition or results of operations of the
Company and the Subsidiaries, taken as a whole or (b) the ability of the Company
to perform any of its obligations under this Agreement or timely consummate any
of the Transactions, except in each case for any such Effect resulting from or
arising out of (i) acts of war or terrorism; (ii) any changes in interest rates
or general economic or political conditions in the United States of America or
foreign countries in general or U.S. or foreign financial, banking or securities
markets; (iii) any change in conditions generally affecting the sporting goods
industry; or (iv) any change in or interpretations of (A) GAAP or (B) any Law,
in each case, applicable to the Company (except in the case of clauses (ii),
(iii) and (iv), if the Effect materially disproportionately affects the
properties, assets, liabilities, business, financial condition, or results of
operations of the Company and the Subsidiaries, taken as a whole relative to
other for profit industry participants).
"Order" means any award, writ, stipulation, determination, decision, injunction,
judgment, order, decree, ruling, subpoena or verdict entered, issued, made or
rendered by, or any contract with, any Governmental Authority.
"ordinary course of business" means the ordinary course of business of the
Company and the Subsidiaries consistent with past practice.
4
"Permits" means all Orders and all franchises, grants, authorizations, licenses,
permits, easements, variances, exceptions, consents, certificates and approvals
of any Governmental Authority.
"Permitted Encumbrances" means:
(i) statutory liens for Taxes, assessments and governmental
charges or levies imposed upon the Company or one of the
Subsidiaries not yet due and payable or that are being
contested in good faith by appropriate proceedings (provided
such contests do not exceed $1,000,000 in the aggregate) for
which reserves have been established on the most recent
financial statements included in the SEC Reports filed prior
to the date hereof;
(ii) mechanics', materialmen's or similar statutory liens for
amounts not yet due or being diligently contested in good
faith in appropriate proceedings;
(iii) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public
or statutory obligations;
(iv) zoning, entitlement and other land use regulations by
Governmental Authorities that do not, individually or in the
aggregate, materially impair the continued use of the Property
to which they relate;
(v) easements, survey exceptions, leases, subleases and other
occupancy contracts, reciprocal easements, restrictions and
other customary encumbrances on title to real property (other
than capital leases and leases underlying sale leaseback
transactions), that do not, individually or in the aggregate,
materially impair the continued use of the Real Property to
which they relate;
(vi) as to any Leased Real Property, Encumbrances affecting the
interest of the lessor thereof provided that such Encumbrances
do not individually or in the aggregate materially impair the
continued use of the Leased Real Property to which they
relate; and
(vii) liens relating to any indebtedness for borrowed money
identified on Section 1.01 of the Company Disclosure Letter.
"person" means an individual, corporation, partnership, limited partnership,
limited liability company, syndicate, person (including a "person" as defined in
Section 13(d)(3) of the Exchange Act), trust, association, Governmental
Authority or other entity.
"Property" means any real property currently or formerly owned, leased, operated
or managed by the Company or any of its past or present Subsidiaries.
"SDI Letter Agreement" means that certain letter agreement, dated as of the date
hereof and entered into concurrently herewith, pursuant to which Sports Direct
International plc has agreed to guarantee Parent's financial obligations
hereunder.
"Secondary Offering" means the Company's proposed public offering of Company
Common Stock described in its Form 8-K, filed with the SEC on March 22, 2007.
"Shares" means the shares of Company Common Stock outstanding immediately prior
to the Effective Time.
5
"subsidiary" means any person with respect to which a specified person directly
or indirectly (a) owns a majority of the Equity Interests, (b) has the power to
elect a majority of that person's board of directors or similar governing body,
or (c) otherwise has the power, directly or indirectly, to direct the business
and policies of that person.
"Subsidiary" means any subsidiary of the Company.
"Superior Proposal" means any bona fide binding written Acquisition Proposal not
obtained in violation of Section 7.03 that the Board determines in its good
faith judgment (after receiving the advice of its financial advisor and after
taking into account all appropriate legal (with the advice of outside counsel)
and financial (including the financing terms thereof) are more favorable to the
Company's stockholders (in their capacity as such) from a financial point of
view than this Agreement (considering any changes to this Agreement proposed by
Parent in response thereto) and which the Board determines in good faith is
reasonably capable of being consummated on the terms set forth therein; provided
that for purposes of the definition of "Superior Proposal", the references to
"20% or more" in the definition of Acquisition Proposal shall be deemed to be
references to "a majority" and the definition of Acquisition Proposal shall only
refer to a transaction or series of transactions (x) directly involving the
Company (and not exclusively its Subsidiaries) or (y) involving a sale or
transfer of all or substantially all of the assets of the Company and its
Subsidiaries, taken as a whole.
"Taxes" means any and all taxes, fees, levies, duties, tariffs, imposts and
other charges of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any Governmental Authority or other taxing authority, including: taxes or other
charges on or with respect to income, franchise, windfall or other profits,
gross receipts, property, sales, use, Equity Interests, payroll, employment,
social security, workers' compensation, unemployment compensation or net worth;
taxes or other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value-added or gains taxes; license, registration and documentation
fees; and customers' duties, tariffs and similar charges.
The following terms have the respective meanings set forth in the Sections set
forth below:
Defined Term Location of Definition
---------------------------------- ----------------------
Agreement Preamble
Applicable Non-U.S. Antitrust Laws ss.4.05(b)
Award Payment ss.3.04(b)
Board Recitals
Certificate of Merger ss.2.03
Certificates ss.3.02(b)
Closing ss.2.02
Code ss.4.10(a)
Company Preamble
Company Board Approval ss.4.04(b)
Company Class A Stock ss.4.03(a)
Company Common Stock Recitals
Company Disclosure Letter ss.4.01(a)
Company Intellectual Property ss.4.15 (a)
6
Company Preferred Stock ss.4.03(a)
Company Restricted Share ss.3.04(a)
Company Stock Award ss.3.04(a)
Company Stock Award Plans ss.3.04(a)
Confidentiality Agreement ss.7.02(c)
D&O Insurance ss.7.04(b)
DGCL Recitals
Dissenting Shares ss.3.05
Employees ss.4.11(b)
Employment Laws ss.4.11(b)
Environmental Permits ss.4.06(a)
ERISA ss.4.10(a)
ERISA Affiliate ss.4.10(a)
Estate ss.10.11
Exchange Act ss.4.05(b)
Excluded Party ss.7.03(b)
Existing Title Policies ss.4.13(e)
First Debt Letter ss.5.07
GAAP ss.4.07(b)
Indemnified Parties ss.7.04(a)
IRS ss.4.10(a)
Leased Real Property ss.4.13(a)
Licensed Intellectual Property ss.4.15(a)
Merger Recitals
Merger Consideration ss.3.01(a)
Merger Sub Preamble
Multiemployer Plan ss.4.10(c)
NASDAQ ss.4.05(b)
Notice Period ss.7.03(d)
Outside Date ss.9.01(b)
Owned Real Property ss.4.13(a)
Parent Preamble
Parent Termination Fee ss.9.03(f)
Paying Agent ss.3.02(a)
Payment Fund ss.3.02(a)
Plans ss.4.10(a)
Policies ss.4.19(a)
Proxy Statement ss.7.01(b)
Real Property ss.4.13(a)
Representatives ss.7.02(a)
Requisite Stockholder Vote ss.4.04(a)
Rights ss.4.03(b)(iii)
7
Xxxxxxxx-Xxxxx Act ss.4.07(d)
SEC ss.4.05(b)
SEC Reports ss.4.07(a)
Section 262 ss.3.05
Securities Act ss.4.07(a)
Surviving Corporation ss.2.01
Takeover Law ss.4.04(c)
Tax Returns ss.4.16(a)
Tenant Leases ss.4.13(a)
Terminating Company Breach ss.9.01(e)
Terminating Parent Breach ss.9.01(f)
Termination Date ss.9.01
Termination Expenses ss.9.03(d)
Termination Fee ss.9.03(c)
Transaction Costs ss.9.03(a)
Transactions ss.4.04(a)
2000 Stock Plan ss.3.04(a)(i)
8
ARTICLE 2
THE MERGER
SECTION 2.01 - THE MERGER
Upon the terms of this Agreement and subject to the satisfaction or, if
permissible, waiver of the conditions set forth in Article 8, and in accordance
with the DGCL, at the Effective Time, (a) Merger Sub shall be merged with and
into the Company, (b) the separate corporate existence of Merger Sub shall cease
and (c) the Company shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
SECTION 2.02 - CLOSING
Unless this Agreement shall have been terminated in accordance with Section
9.01, and subject to the satisfaction or waiver of the conditions set forth in
Article 8, the closing of the Merger (the "Closing") will take place at 10:00
a.m., New York City time, on a date to be specified by the parties, which shall
be not later than the second business day after the satisfaction or, if
permissible, waiver of the conditions set forth in Article 8 (other than those
that by their terms are to be satisfied or waived at the Closing), at the
offices of Freshfields Bruckhaus Xxxxxxxx LLP, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx,
Xxx Xxxx, XX 00000, unless another time, date or place is agreed to in writing
by Parent and the Company.
SECTION 2.03 - EFFECTIVE TIME
At the Closing, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "Certificate of Merger") with the Secretary
of State of the State of Delaware in such form as is required by, and executed
and acknowledged in accordance with, the relevant provisions of the DGCL and
shall make all other filings or recordings required under the DGCL in connection
with the Merger. The Merger shall become effective at such date and time as the
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware or at such subsequent date and time as Parent and the Company shall
agree and specify in the Certificate of Merger.
SECTION 2.04 - EFFECT OF THE MERGER
At the Effective Time, the effect of the Merger shall be as provided in Section
259 and the other applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of the Company and Merger Sub
shall become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation.
SECTION 2.05 - CERTIFICATE OF INCORPORATION; BY-LAWS
At the Effective Time:
(a) the Certificate of Incorporation of the Company, as in effect immediately
prior to the Effective Time, shall be amended to be in the form of Exhibit
A and as so amended, shall be the certificate of incorporation of the
Surviving Corporation until thereafter amended in accordance with the
provisions thereof and as provided by applicable Law; and
9
(b) the by-laws of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the by-laws of the Surviving Corporation until thereafter
amended in accordance with applicable Law, the Certificate of
Incorporation of the Surviving Corporation and such by-laws.
SECTION 2.06 - DIRECTORS AND OFFICERS
The directors of Merger Sub 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 individuals listed on Schedule 2.06 shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified or until the earlier of
their death, resignation or removal.
10
ARTICLE 3
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01 - CONVERSION OF SECURITIES
At the Effective Time, by virtue of the Merger and without any action on the
part of Merger Sub, the Company or the holders of any of the following
securities:
(a) Conversion of Company Common Stock. Each Share (including Company
Restricted Shares, but other than any Shares to be canceled pursuant to
Section 3.01(b), Shares owned by any direct or indirect wholly owned
Subsidiary and any Dissenting Shares) shall be canceled and converted
automatically into the right to receive $30.00 in cash (the "Merger
Consideration") payable, without interest, to the holder of such Share,
upon surrender, in the manner provided in Section 3.02, of the Certificate
that formerly evidenced such Share.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each Share held in
the treasury of the Company and each Share owned by Merger Sub, Parent or
any direct or indirect wholly owned subsidiary of Parent shall
automatically be canceled without any conversion thereof and no payment or
distribution shall be made with respect thereto.
(c) Equity Interests of Merger Sub. Each share of common stock, par value
$0.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one validly
issued, fully paid and nonassessable share of common stock, par value
$0.01 per share, of the Surviving Corporation.
SECTION 3.02 - SURRENDER OF CERTIFICATES
(a) Prior to the Effective Time, Parent shall (i) appoint a bank or trust
company reasonably acceptable to the Company (the "Paying Agent"), and
(ii) enter into a paying agent agreement, in form and substance reasonably
acceptable to the Company, with such Paying Agent for the payment of the
Merger Consideration in accordance with this Article 3. At the Effective
Time, Parent shall deposit, or cause the Surviving Corporation to deposit,
with the Paying Agent, for the benefit of the holders of Shares, cash in
an amount sufficient to pay the aggregate Merger Consideration required to
be paid pursuant to Section 3.01(a) (the "Payment Fund"). Except as
contemplated by Section 3.02(d), the Payment Fund shall not be used for
any other purpose. The Payment Fund shall be invested by the Paying Agent
as directed by Parent; provided, that, such investments shall be in
obligations of or guaranteed by the United States of America or any agency
or instrumentality 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 Service, Inc. or Standard & Poor's
Corporation, respectively, or in deposit accounts, certificates of deposit
or banker's acceptances of, repurchase or reverse repurchase contracts
with, or Eurodollar time deposits purchased from, commercial banks with
capital, surplus and undivided profits aggregating in excess of $1 billion
(based on the most recent financial statements of such bank which are then
publicly available). Any profit or loss resulting from, or interest and
other income produced by, such investments shall be for the account of
Parent.
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(b) Payment Procedures. Promptly after the Effective Time, Parent shall cause
the Paying Agent to mail to each person who was, at the Effective Time, a
holder of record of Shares entitled to receive the Merger Consideration
pursuant to Section 3.01(a): (i) a letter of transmittal (which shall be
in customary form and shall specify that delivery shall be effected, and
risk of loss and title to the certificates evidencing such Shares (the
"Certificates") shall pass, only upon proper delivery of the Certificates
to the Paying Agent) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration.
Upon surrender to the Paying Agent of a Certificate for cancellation,
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 then be canceled. In the event of
a transfer of ownership of Shares that is not registered in the transfer
records of the Company, payment of the Merger Consideration may be made to
a person other than the person in whose name the Certificate so
surrendered is registered if the Certificate representing such Shares
shall be properly endorsed or otherwise be in proper form for transfer and
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 such Certificate or established
to the reasonable satisfaction of the Surviving Corporation that such
Taxes either have been paid or are not applicable. Until surrendered as
contemplated by this Section 3.02, each Certificate shall be deemed at all
times after the Effective Time to represent only the right to receive upon
such surrender the Merger Consideration to which the holder of such
Certificate is entitled pursuant to this Article 3 No interest shall be
paid or will accrue on any cash payable to holders of Certificates
pursuant to the provisions of this Article 3.
(c) No Further Rights. From and after the Effective Time, holders of
Certificates shall cease to have any rights as stockholders of the
Company, except as provided in this Agreement or by applicable Law.
(d) Termination of Payment Fund. Any portion of the Payment Fund that remains
undistributed to the holders of Shares nine months after the Effective
Time shall be delivered to Parent, upon demand, and any holders of Shares
who have not theretofore complied with this Article 3 shall thereafter
look only to the Surviving Corporation for, and the Surviving Corporation
shall remain liable for, payment of their claim for the Merger
Consideration. Any portion of the Payment Fund remaining unclaimed by
holders of Shares as of a date that is immediately prior to such time as
such amounts would otherwise escheat to or become property of any
Governmental Authority shall, to the extent permitted by applicable Law,
become the property of the Surviving Corporation free and clear of any
claims or other Encumbrance of any person previously entitled thereto.
(e) No Liability. None of the Paying Agent, Merger Sub, Parent or the
Surviving Corporation shall be liable to any holder of Shares or any other
person for any such Shares (or dividends or distributions with respect
thereto) or cash or other consideration delivered to a public official
pursuant to any abandoned property, escheat or other Law.
(f) Withholding Rights. Each of the Paying Agent, the Surviving Corporation
and Parent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement such amounts as it is
required to deduct and withhold with respect to such payment under all
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applicable Laws. To the extent that amounts are so withheld by the Paying
Agent, the Surviving Corporation or Parent, as the case may be, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Shares in respect of which such
deduction and withholding was made.
(g) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by the Surviving Corporation, the posting by such person of a bond, in
such reasonable amount as the Surviving Corporation may direct, as
indemnity against any claim that may be made against it with respect to
such Certificate, the Paying Agent shall pay in respect of such lost,
stolen or destroyed Certificate the Merger Consideration to which the
holder thereof is entitled pursuant to Section 3.01(a).
SECTION 3.03 - STOCK TRANSFER BOOKS
At the Effective Time, the stock transfer books of the Company shall be closed
and thereafter there shall be no further registration of transfers of Shares on
the records of the Company. From and after the Effective Time, the holders of
Shares or Certificates shall cease to have any rights with respect to such
Shares, or in the case of Certificates, the Shares evidenced thereby, except as
otherwise provided in this Agreement or by applicable Law. On or after the
Effective Time, any Certificates presented to the Paying Agent, the Surviving
Corporation or Parent for any reason shall be cancelled against delivery of the
Merger Consideration to which the holders thereof are entitled pursuant to
Section 3.01(a).
SECTION 3.04 - EMPLOYEE EQUITY AWARDS; WARRANTS.
(a) Prior to the Effective Time, the Company shall take all necessary action
(which action shall be effective as of the Effective Time), including
using commercially reasonable efforts to obtain the consent of the
individual award holders and the adoption of Board resolutions, if
necessary, to:
(i) terminate Everlast Worldwide Inc. 2000 Stock Option and
Restricted Stock Plan, as amended (the "2000 Stock Plan"), the
2005 Non-Employee Director Stock Option Plan, the 1995
Non-Employee Director Stock Option Plan, 1993 Stock Option
Plan and any stock options granted outside of a formal plan,
in each case as amended through the date of this Agreement
(collectively, the "Company Stock Award Plans");
(ii) provide that each outstanding option to purchase shares of
Company Common Stock (each, a "Company Stock Award") granted
under the Company Stock Award Plans shall become fully vested,
to the extent not already vested, subject to, and conditioned
upon, the closing of the Merger;
(iii) cause any Company Stock Award that is not exchanged as
provided in Section 3.04(b) to be cancelled as of the
Effective Time;
(iv) provide that each Share subject to vesting or other forfeiture
conditions or repurchase by the Company (each, a "Company
Restricted Share") granted under the Company Stock Award Plans
shall become fully vested and shall be converted into the
right to receive the Merger Consideration in accordance with
Section 3.01(a), subject to any applicable federal, state and
local Tax withholding requirements.
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(b) Each holder of a Company Stock Award that is outstanding and unexercised
as of the Effective Time and has an exercise price per Share that is less
than the per share Merger Consideration shall (subject to the provisions
of this Section 3.04) be paid by the Surviving Corporation, in exchange
for the cancellation of such Company Stock Award, an amount in cash
(subject to any applicable withholding Taxes) equal to the product of (i)
the difference between the Merger Consideration and the applicable
exercise price of such Company Stock Award, and (ii) the aggregate number
of shares of Company Common Stock issuable upon exercise of such Company
Stock Award (the "Award Payment"). Except as otherwise expressly provided
for in any agreement between the Company and any such holder, the
Surviving Corporation or the Paying Agent shall make the Award Payments
promptly after the Effective Time. Any such payments shall be subject to
all applicable federal, state and local Tax withholding requirements.
(c) The Company shall promptly deliver to Parent (but in no event later than
the Effective Time) true and complete copies of all documentation relating
to or arising from the termination of the Company Stock Award Plans or
other actions required to be taken pursuant to this Section 3.04.
(d) The Company shall take all necessary action to approve the disposition of
the Company Stock Awards in connection with the transactions contemplated
by this Agreement to the extent necessary to exempt such dispositions
under Rule 16b-3 of the Exchange Act.
SECTION 3.05 - DISSENTING SHARES
Notwithstanding any provision of this Agreement to the contrary and to the
extent available under the DGCL, Shares held by any stockholder entitled to
demand and who properly demands the appraisal for such Shares (the "Dissenting
Shares") pursuant to, and who complies in all respects with, the provisions of
Section 262 of the DGCL ("Section 262") shall not be converted into, or
represent the right to receive, the Merger Consideration. Any such stockholder
shall instead be entitled to receive payment of the fair value of such
stockholder's Dissenting Shares in accordance with the provisions of Section
262; provided, that, all Dissenting Shares held by any stockholder who shall
have failed to perfect or who otherwise shall have withdrawn or lost such
stockholder's rights to appraisal of such Shares under Section 262 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
3.02 of the Certificate or Certificates that formerly evidenced such Shares. The
Company shall give Parent prompt notice of any demands received by the Company
for appraisal of shares of Company Common Stock, and Parent shall have the right
to participate in and direct all negotiations and proceedings with respect to
such demands. The Company shall not settle, make any payments with respect to,
or offer to settle, any claim with respect to Dissenting Shares without the
prior written consent of Parent.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Parent and Merger Sub to enter into this Agreement, the
Company hereby represents and warrants to Parent and Merger Sub that:
SECTION 4.01 - ORGANIZATION AND QUALIFICATION; SUBSIDIARIES
(a) Each of the Company and each Subsidiary is an entity duly organized,
validly existing and in good standing under the Laws of the jurisdiction
of its organization and 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. Each of the Company and each Subsidiary is duly qualified
or licensed to do business, and is in good standing, in each jurisdiction
where the character of the properties owned, leased or operated by it or
the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in
good standing that could not be reasonably expected to have a Material
Adverse Effect. Each such jurisdiction is listed in Section 4.01(a) of the
disclosure letter delivered by the Company to Parent on the date of the
execution of this Agreement (the "Company Disclosure Letter").
(b) Section 4.01(b) of the Company Disclosure Letter contains a true and
complete list of each Subsidiary, together with the jurisdiction of
incorporation or formation of each Subsidiary. The outstanding Equity
Interests of each of the Subsidiaries are all duly and validly authorized
and issued, fully paid and nonassessable. Except as set forth in Section
4.01(b) of the Company Disclosure Letter, (i) the Company and/or one or
more of the Subsidiaries is the record and beneficial owner of all of the
outstanding Equity Interests and other securities of each Subsidiary, free
and clear of all Taxes and Encumbrances and (ii) neither the Company nor
any Subsidiary directly or indirectly owns any Equity Interest in, or any
interest convertible into or exchangeable or exercisable for any Equity
Interests in, any person.
SECTION 4.02 - CERTIFICATE OF INCORPORATION AND BY-LAWS
The Company has heretofore made available to Parent a complete and correct copy
of the certificate of incorporation and the by-laws or equivalent organizational
documents, each as amended to date, of the Company and each Subsidiary. Such
Certificates of Incorporation, by-laws or equivalent organizational documents
are in full force and effect.
SECTION 4.03 - CAPITALIZATION
(a) The authorized Equity Interests of the Company consists of 19,000,000
shares of Company Common Stock, 100,000 shares of Class A Common Stock,
par value $0.01 per share (the "Company Class A Stock") and 1,000,000
shares of Preferred Stock, par value $0.01 per share ("Company Preferred
Stock"). As of the date hereof:
(i) 4,254,023 shares of Company Common Stock were issued and
4,080,023 shares of Company Common Stock were outstanding, all
of which were validly issued, fully paid and nonassessable and
were not issued in violation of any preemptive rights;
15
(ii) 174,000 shares of Company Common Stock were held in the
treasury of the Company;
(iii) no shares of Company Common Stock were held by the
Subsidiaries;
(iv) 727,870 shares of Company Common Stock were issuable upon
exercise of outstanding stock options granted pursuant to the
Company Stock Award Plans;
(v) 290,197 shares of Company Common Stock were issuable upon the
exercise of warrants;
(vi) 17,833 shares of restricted Company Common Stock were issued
pursuant to grants made under the 2000 Stock Plan;
(vii) no shares of Company Class A Stock were issued and
outstanding; and
(viii) no shares of Company Preferred Stock were issued and
outstanding.
(b) Except as set forth in Section 4.03(a), there are no:
(i) outstanding Equity Interests in the Company or securities
exercisable or exchangeable for or convertible into any Equity
Interests of the Company or any Subsidiary and no such
securities are reserved for issuance and there is no
obligation to authorize, issue or sell any such securities;
(ii) outstanding options, warrants, rights or contracts relating to
the issued or unissued Equity Interests of the Company or any
Subsidiary or obligating the Company or any Subsidiary to
issue or sell any Equity Interests in the Company or any
Subsidiary or obligations of the Company or any Subsidiary to
issue or sell any such options, warrants or rights or enter
into such contracts;
(iii) outstanding stock appreciation rights, stock awards,
restricted stock, restricted stock awards, performance units,
phantom stock, profit participation or similar rights with
respect to the Company, any Subsidiary or any of their
respective Equity Interests (collectively, "Rights") or
obligation of the Company or any Subsidiary to issue or sell
any such Right; or
(iv) voting trusts, proxies or other contracts with respect to the
voting of any Equity Interests of the Company or any
Subsidiary or giving any person any rights with respect to any
future issuance of securities by the Company or any
Subsidiary.
(c) All shares of Company Common Stock subject to issuance under the Company
Stock Award Plans, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable and not subject
to preemptive rights. There are no outstanding contractual obligations of
the Company or any Subsidiary to repurchase, redeem or otherwise acquire
any Equity Interests of the Company or any Subsidiary or to provide funds
to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any Subsidiary or any other person.
16
(d) The Company has not adopted a stockholder rights plan. The Company does
not have outstanding any bonds, debentures, notes or other obligations the
holders of which have the right to vote (or convertible into or
exercisable or exchangeable for securities having the right to vote or
other Equity Interests of the Company or any Subsidiary) with the
stockholders of the Company or any Subsidiary on any matter ("Voting
Debt").
(e) Section 4.03 of the Company Disclosure Letter sets forth a true and
complete list of each current or former Employee, officer, director,
consultant or other service provider of the Company and its Subsidiaries
who holds a Company Stock Award under the Company Stock Award Plans as of
the date hereof, together with the number of shares of Common Stock
subject to such Company Stock Awards, the date of grant of such Company
Stock Awards, the exercise price of such Company Stock Awards, the
expiration date of such Company Stock Awards, the vesting schedule for
such Company Stock Awards and whether or not such Company Stock Award is
intended to qualify as an "incentive stock option" within the meaning of
Section 422(b) of the Code. Except as set forth in Section 4.03 of the
Company Disclosure Letter, each Company Stock Award has an exercise price
at least equal to the fair market value of the Common Stock on a date no
earlier than the date of the corporate action authorizing the grant and no
Option has had its exercise date or grant date delayed or "backdated." All
Company Stock Awards have been issued in compliance with the Securities
Act and, to the Company's knowledge, any applicable state blue sky laws.
The Company has provided to Parent true and complete copies of the Company
Stock Award Plans and the forms of all stock option agreements evidencing
the Company Stock Awards. On and after the Effective Time, no Employee,
officer, director, consultant or other service provider of the Company and
its Subsidiaries shall have any right under the Company Stock Award Plans
to purchase Common Stock, or any other equity interest in the Company, any
of the Subsidiaries, Merger Sub, the Surviving Corporation, Parent or any
of their respective Affiliates or subsidiaries.
SECTION 4.04 - AUTHORITY RELATIVE TO THIS AGREEMENT
(a) The Company has all necessary power and authority to execute and deliver
this Agreement, to perform its obligations hereunder, and to consummate
the Merger and the other transactions contemplated by this Agreement
(collectively, the "Transactions"). The execution and delivery of this
Agreement by the Company and the consummation by the Company of the
Transactions have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
Transactions (other than, with respect to the Merger, the adoption of this
Agreement by the holders of a majority of the then-outstanding shares of
Company Common Stock (the "Requisite Stockholder Vote") and the filing and
recordation of appropriate merger documents as required by the DGCL). This
Agreement has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and
Merger Sub, constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except to the extent that enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by principles
of equity regarding the availability of remedies.
17
(b) The Board, by resolutions duly adopted by unanimous vote at a meeting duly
called and held and not subsequently rescinded or modified in any way (the
"Company Board Approval"), has duly (i) determined that this Agreement and
the Merger are advisable and fair to and in the best interests of the
Company and its stockholders, (ii) approved this Agreement and the Merger
and (iii) recommended that the stockholders of the Company adopt this
Agreement and directed that this Agreement and the Transactions be
submitted for consideration by the Company's stockholders in accordance
with this Agreement. The Company has terminated the Original Merger
Agreement and, following payment of the "Termination Fee" (as defined
thereunder) of $3,000,000 contemplated thereby, neither the Company nor
any Subsidiary has any liability, debts or other obligations to any person
in connection therewith or the transactions contemplated thereby.
(c) No "fair price," moratorium," "control share acquisition" or other similar
antitakeover Law (each, a "Takeover Law") is applicable to the
Transactions and the Company has taken all action to exempt the
Transactions from the Takeover Laws, including Section 203 of the DGCL,
and has taken all action required to make this Agreement and the
Transactions comply with any requirements of the organizational documents
of the Company and its Subsidiaries concerning "business combinations",
"fair pricing", "voting", "constituency requirements" or other similar
provisions. The approval of the Transactions by the Requisite Stockholder
Vote is the only vote of the holders of any class or series of Equity
Interests of the Company or any of the Subsidiaries necessary to adopt
this Agreement or approve the Transactions.
(d) The Board has received the opinion of its financial advisor, Xxxxx Xxxxxxx
& Co., dated the date, or shortly prior to the date, of this Agreement, to
the effect that, as of the date of such opinion, the Merger Consideration
is fair, from a financial point of view, to the stockholders of the
Company, a copy of which opinion has been delivered to Parent.
SECTION 4.05 - NO CONFLICT; REQUIRED FILINGS AND CONSENTS
(a) The execution and delivery of this Agreement by the Company do not, and
the consummation of the Transactions will not:
(i) conflict with or violate the certificate of incorporation or
by-laws or equivalent organizational documents of the Company
or any Subsidiary;
(ii) assuming that all consents, approvals, authorizations and
other actions described in Section 4.05(b) have been obtained
and all filings and obligations described in Section 4.05(b)
have been made, conflict with or violate any Law; or
(iii) except as set forth in Section 4.05(a) of the Company
Disclosure Letter, (A) require the consent of any person
under, (B) result in any breach or violation of or constitute
a default (or an event that, with notice or lapse of time or
both, would become a default) under, (C) give to others any
right of termination, amendment, acceleration or cancellation
of, result in the creation of any Encumbrance on any asset of
the Company or any Subsidiary under, or (D) obligate the
Company or any Subsidiary, to take any material action or
undertake any material obligation pursuant to, any contract,
except, with respect to clause (ii) of this Section 4.05(a),
for any such conflicts, violations, breaches, defaults,
obligations, or other occurrences that could not be reasonably
expected to have a Material Adverse Effect.
18
(b) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company will not, require any
Permit of, or filing with or notification to, any Governmental Authority,
except for:
(i) applicable requirements, if any, of the Securities Exchange
Act of 1934, as amended (the "Exchange Act");
(ii) the pre-merger notification requirements of the HSR Act and
the similar notification or filing requirements of applicable
Governmental Authorities pursuant to non-U.S. Laws relating to
or regulating antitrust, monopolies, fair competition, merger
control or similar matters applicable to the Transaction
("Applicable Non-U.S. Antitrust Laws");
(iii) the filing with the Securities and Exchange Commission (the
"SEC") of the Proxy Statement;
(iv) any filings required under the rules and regulations of the
NASDAQ Global Market ("NASDAQ"); and
(v) filing and recordation of appropriate merger documents as
required by the DGCL and appropriate documents with the
relevant authorities of other states in which the Company or
any Subsidiary is qualified to do business.
SECTION 4.06 - PERMITS; COMPLIANCE
(a) Each of the Company and the Subsidiaries is in possession of all material
Permits necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted, including Permits required
under Environmental Laws (the "Environmental Permits"). Section 4.06 of
the Company Disclosure Letter contains a complete and accurate list of all
such Permits. The Company and each of its Subsidiaries is, and has been,
in compliance in all material respects with the terms and conditions of
such Permits and, as of the date of this Agreement, no suspension or
cancellation of any Permit is pending or, to the Company's knowledge,
threatened.
(b) Neither the Company nor any Subsidiary is in conflict with, or in default,
breach or violation of, (i) its Certification of Incorporation or by-laws
or equivalent organizational documents, (ii) any Law, or (iii) any
contract to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or any property or asset of the Company or any
Subsidiary is bound, except with respect to clauses (ii) or (iii), for any
such conflicts, defaults, breaches or violations that could not be
reasonably expected to have a Material Adverse Effect.
(c) The execution and delivery of this Agreement by the Company do not, and
the consummation of the Transactions will not, result in any breach or
violation of or result in the termination or cancellation of any
Environmental Permit or other material Permit.
19
SECTION 4.07 - SEC FILINGS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES
(a) Other than as set forth in Section 4.07 of the Company Disclosure Letter,
the Company has timely filed all forms, reports, statements,
certifications and other documents (including all exhibits, supplements
and amendments thereto) required to be filed by it with the SEC since
January 1, 2004 (collectively, with any amendments thereto, the "SEC
Reports"). Each SEC Report (including any financial statements or
schedules included therein) (i) as of its date and if amended prior to the
date hereof as of the date of such amendment, complied or, if filed
subsequent to the date hereof, at the time of filing will comply, in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act") or the Exchange Act, as the case may be,
and (ii) did not, or, if filed subsequent to the date of this Agreement,
at the time of filing will not, contain any untrue statement of a material
fact or omit to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the
statements made therein, in the light of the circumstances under which
they were made, not misleading. No Subsidiary is or has been required to
file any form, report or other document with the SEC. Other than as set
forth in Section 4.07 of the Company Disclosure Letter, the Company has
not received notice from the SEC regarding any review or investigation and
there is no ongoing review or investigation of the Company or any of its
Affiliates by the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any notes and schedules thereto) included (or incorporated by reference)
in the SEC Reports (i) was prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods indicated (except as may be indicated in the
notes thereto), (ii) fairly present the consolidated financial position,
results of operations, cash flows and changes in stockholders' equity of
the Company and its consolidated Subsidiaries as at the respective dates
thereof and for the respective periods indicated therein except as
otherwise noted therein (subject, in the case of unaudited statements, to
normal and recurring year-end adjustments, none of which are material in
nature or amount) and (iii) are consistent with the books and records of
the Company and the Subsidiaries, which books and records are correct and
complete.
(c) Neither the Company nor any of the Subsidiaries has any liability (and
there is no basis for any present or future Action against any of them
giving rise to any liability), other than (i) liabilities set forth on the
face of the Company Reference Balance Sheet (rather than the notes
thereto), (ii) liabilities incurred subsequent to the date of the Company
Reference Balance Sheet, that, individually or in the aggregate, are not
material to the business, condition (financial or otherwise), results of
operations or prospects of the Company and the Subsidiaries, taken as a
whole.
(d) Since the enactment of the Xxxxxxxx-Xxxxx Act of 2002 (the "Xxxxxxxx-Xxxxx
Act"), the Company has been and is in compliance in all material respects
with (i) the current prevailing applicable provisions of the
Xxxxxxxx-Xxxxx Act and the rules and regulations promulgated thereunder
and (ii) the applicable listing and corporate governance rules and
regulations of NASDAQ and the Company has not received any notice from the
National Association of Securities Dealers or any other person regarding
any such non-compliance.
(e) The Company has designed and maintains disclosure controls and procedures
to ensure that material information relating to the Company and the
Subsidiaries is made known to the Chief Executive Officer and the Chief
Financial Officer of the Company by others within those entities. To the
20
extent applicable, the Company has disclosed, based on its most recent
evaluation prior to the date of this Agreement, to the Company's auditors
and the audit committee of the Board (i) any significant deficiencies and
material weaknesses in the design or operation of internal controls over
financial reporting that are reasonably likely to adversely affect in any
material respect the Company's ability to record, process, summarize and
report financial information and (ii) any fraud or allegation of fraud,
whether or not material, that involves management or other employees who
have a significant role in the Company's internal controls over financial
reporting.
SECTION 4.08 - ABSENCE OF CERTAIN CHANGES OR EVENTS
Except as set forth in the SEC Reports filed subsequent to December 31, 2006 and
prior to the date of this Agreement, as set forth in Section 4.08 of the Company
Disclosure Letter, or as expressly contemplated by this Agreement, since
December 31, 2006 and prior to the date of this Agreement, each of the Company
and the Subsidiaries has conducted its business in the ordinary course
consistent with past practice. Without limiting the foregoing, there has not,
directly or indirectly, occurred:
(i) any event, change, effect or circumstance, including any
damage to, destruction or loss of any asset of the Company or
a Subsidiary (whether or not covered by insurance)
constituting or that could reasonably be expected to result in
a Material Adverse Effect;
(ii) any amendment or change in the organizational documents of the
Company or any Subsidiary;
(iii) any change in the accounting reporting methods, principles,
periods, practices, policies or procedures of the Company or
any Subsidiary (other than as required by GAAP subsequent to
the date of this Agreement);
(iv) any acquisition, lease or license from any person (by merger,
consolidation, acquisition of stock or assets or otherwise) or
sale, lease, license, disposal or Encumbrance (by merger,
consolidation, sale of stock or assets or otherwise), of any
assets other than in the ordinary course of business;
(v) any waiver of a valuable right or of a debt owed to the
Company or any Subsidiary or satisfaction or discharge of any
Encumbrance or payment of any liability of the Company or any
Subsidiary, except in the ordinary course of business in an
aggregate amount that is not material;
(vi) change in any compensation arrangement or contract with any
present or former employee, officer, director, consultant,
stockholder or other service provider of the Company or any
Subsidiary or grant of any severance or termination pay to any
such present or former employee, officer, director,
consultant, stockholder or other service provider or increase
of any benefits payable under any severance or termination pay
policies or the establishment, amendment or termination of any
Plan or any increase in benefits made or proposed to be made
under such Plan, except as required by applicable Law or grant
of any Company Stock Awards or other awards under any Company
Stock Award Plan, other than (A) required pursuant to the
terms of any Plan as in effect on the date of this Agreement
or (B) required by Law;
21
(vii) declaration, setting aside or payment of any dividend or other
distribution with respect to Equity Interests of the Company
or any Subsidiary;
(viii) split, combination or reclassification of Equity Interests of
the Company or any Subsidiary or any issuance of or the
authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its
Equity Interests of the Company or any Subsidiary;
(ix) write up, write down or write off of the book value of any
assets of the Company and or any Subsidiary, other than in the
ordinary course of business or as required by GAAP;
(x) making, revoking or changing by the Company or any Subsidiary
of any Tax election, changing by the Company or any Subsidiary
of any method of Tax accounting, settlement or compromise by
the Company or any Subsidiary of any liability for Taxes,
filing by the Company or any Subsidiary of any amended Tax
Return or claim for refund, surrendering any right of the
Company or any Subsidiary to claim a Tax refund, or consent by
the Company or any Subsidiary to any extension or waiver of
the statute of limitations period applicable to any Tax claim
or assessment;
(xi) loans, advances or capital contributions by the Company or any
Subsidiary to, or investments in, any other Person, except for
(A) loans, advances, capital contributions or investments
between any wholly owned Subsidiary and the Company or another
wholly owned Subsidiary, or (B) employee advances for expenses
in the ordinary course of business;
(xii) authorization or entry by the Company or any Subsidiary into
any commitment with respect to any capital expenditure;
(xiii) any other action that would require Parent's consent under
Section 6.01; or
(xiv) any contract by the Company or any of the Subsidiaries to do
any of the foregoing.
SECTION 4.09 - ABSENCE OF LITIGATION
Except as set forth in Section 4.09 of the Company Disclosure Letter, there is
no Action pending or, to the Company's knowledge, threatened, against the
Company or any Subsidiary, or any Property or asset of the Company or any
Subsidiary that (i) could, if adversely determined against the Company or
Subsidiary, reasonably be expected to have a Material Adverse Effect or (ii)
seeks to materially delay or prevent the consummation of the Transactions.
Neither the Company nor any Subsidiary nor any Property or asset of the Company
or any Subsidiary is subject to any Order that has, or could reasonably be
expected to have, a Material Adverse Effect. To the Company's knowledge, there
are no inquiries or investigations of Governmental Authorities pending or
threatened regarding any accounting practices of the Company or any malfeasance
by any executive officer of the Company or any Subsidiary.
SECTION 4.10 - EMPLOYEE BENEFIT PLANS
(a) Section 4.10(a) of the Company Disclosure Letter lists:
22
(i) all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation,
relocation, fringe benefit, retiree medical or life insurance
(or other insurance), supplemental executive retirement plans,
health, welfare, severance or other benefit plans, programs,
trusts or arrangements, and all employment, change in control,
termination, severance, compensation or other contracts, and
(ii) all contracts between the Company or any of its Affiliates and
any employee, officer, director, consultant or other service
provider of the Company or of any Subsidiary, including any
contracts or change in control arrangements relating to a sale
of the Company (1) in the case of each of (i) and (ii),
established, maintained, sponsored or contributed to (or with
respect to which any obligation to contribute has been
undertaken) by the Company or any entity that would be deemed
a "single employer" with the Company under Section 414(b),
(c), (m) or (o) of the Internal Revenue Code of 1986, as
amended (the "Code") or Section 4001 of ERISA (an "ERISA
Affiliate") on behalf of any Employee, officer, director,
consultant, stockholder or other service provider of the
Company or any Subsidiary (whether current, former or retired)
or their dependents, spouses, or beneficiaries or (2) with
respect to which the Company or any of its Subsidiaries has or
could have any liability (collectively, the "Plans"). No Plan
is maintained outside of the jurisdiction of the United
States.
(b) Each Plan is in writing and the Company has delivered to Parent a true and
correct copy of (i) each Plan (including all amendments), (ii) the 2004
and 2005 annual reports (Form 5500) filed with the Internal Revenue
Service (the "IRS"), if any, --- (iii) the most recent summary plan
description for each Plan for which a summary plan description is required
by applicable Law, (iv) the three most recent actuarial reports or
valuations, if any, relating to a Plan and (v) the most recent
determination letter or opinion letter issued by the IRS with respect to
any Plan that is intended to qualify under Section 401(a) of the Code.
(c) Except as set forth in Section 4.10(c) of the Company Disclosure Letter,
none of the ERISA Affiliates, the Company, any Subsidiary or any of their
respective predecessors has contributed to, contributes to, has been
required to contribute to, or otherwise participated in or participates in
or in any way has any liability, directly or indirectly with respect to
any plan subject to Section 412 of the Code, Section 302 of ERISA or Title
IV of ERISA, including any "multiemployer plan" (within the meaning of
Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code) (a
"Multiemployer Plan") or any single employer pension plan (within the
meaning of Section 4001(a)(15) of ERISA) that is subject to Sections 4063,
4064 and 4069 of ERISA.
(d) The Company, any Subsidiary, each ERISA Affiliate, each Plan and each
"plan sponsor" (within the meaning of Section 3(16) of ERISA) of each
"welfare benefit plan" (within the meaning of Section 3(1) of ERISA) has
complied in all material respects with the requirements of Section 4980B
of the Code and Title I, Subtitle B, Part 6 of ERISA.
(e) Each Plan complies in form and has been operated in all material respects
in accordance with its terms and the requirements of all applicable Laws.
No Action is pending or, to the Company's knowledge, threatened, with
23
respect to any Plan, any trustee or fiduciaries thereof, the Company, any
Subsidiary, any ERISA Affiliate, any Employee, officer or director
thereof, or any of the assets of any trust of any of the Plans (other than
immaterial claims for benefits in the ordinary course) and, to the
Company's knowledge, no fact or event exists that would give rise to any
such Action.
(f) Each Plan that is intended to be qualified under Section 401(a) of the
Code is so qualified and has timely received a favorable determination
letter from the IRS upon which it may rely (or the Company and the
Subsidiaries are entitled to rely on a favorable opinion or advisory
letter issued by the IRS in accordance with Revenue Procedure 2005-16 with
respect to the qualified status of the plan document), and no fact or
event has occurred since the date of such determination letter or opinion
letter from the IRS that could reasonably be expected to adversely affect
the qualified status of any such Plan.
(g) With respect to each Plan: (i) all payments required by the Plan, any
contract, or by Law (including all contributions, insurance premiums or
intercompany charges) with respect to all prior periods have been made or
provided for by the Company as applicable, in accordance with the
provisions of each of the Plans, applicable Law and GAAP; (ii) no
non-exempt "prohibited transaction," within the meaning of Section 4975 of
the Code and Section 406 of ERISA, has occurred or is reasonably expected
to occur with respect to the Plan; (iii) no Plan is under, and the Company
or the Subsidiary has not received any notice of, an audit or
investigation by any Governmental Authority and no such completed audit,
if any, has resulted in the imposition of any Tax or penalty; (iv) with
respect to each Plan that is funded mostly or partially through an
insurance policy, neither the Company, nor any Subsidiary or ERISA
Affiliate (A) has any liability in the nature of retroactive rate
adjustment, loss sharing arrangement or other actual or contingent
liability arising wholly or partially out of events occurring on or before
the date of this Agreement or (B) is reasonably expected to have such
liability with respect to periods through the Effective Time; (v) neither
the Company nor any Subsidiary has incurred and or reasonably expects to
incur a material tax or penalty imposed by Section 4980 of the Code or
Section 502 of ERISA or any material liability under Section 4071 of
ERISA; or (vi) no fiduciary of any Plan has any liability for breach of
fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any Plan.
(h) Except as set forth in Section 4.10(h)(i) of the Company Disclosure
Letter, the consummation of the Transactions alone, or in combination with
a termination of any Employee, officer, director, consultant or other
service provider or stockholder of the Company or any Subsidiary (whether
current, former or retired) or any other event, will not give rise to any
liability under any Plan, including liability for severance pay,
unemployment compensation, termination pay or withdrawal liability, or
accelerate the time of payment or vesting or increase the amount of
compensation or benefits due to any Employee, officer, director,
consultant or other service provider or stockholder of the Company or any
Subsidiary (whether current, former or retired) or their dependents,
spouses, or beneficiaries. Except as set forth in Section 4.10(h)(ii) of
the Company Disclosure Letter, as of the Effective Time, no amounts
payable under any Plan or otherwise will (i) fail to be deductible for
federal income tax purposes by virtue of Section 280G of the Code or (ii)
result in any payment that would not be deductible under Section 162(m) of
the Code. No Plan or other agreement provides any Employee, officer,
director, consultant or other service provider or stockholder of the
Company or any Subsidiary with any amount of additional compensation if
such individual is provided amounts subject to excise or additional taxes
imposed under Sections 409A or 4999 of the Code.
24
(i) Neither the Company, nor any Subsidiary or ERISA Affiliate maintains,
contributes to or in any way provides for any benefits of any kind
whatsoever (other than under Section 4980B of the Code, the Federal Social
Security Act or a plan qualified under Section 401(a) of the Code) to any
current or future retiree or terminee.
(j) None of the Company, any Subsidiary, any ERISA Affiliate, any director,
officer or to the Company's knowledge, Employee thereof has made any
promises or commitments, whether legally binding or not, to create any
additional plan, contract or arrangement, or to modify or change in any
material way any existing Plan. No event, condition or circumstance exists
that could reasonably be expected to result in a material increase of the
benefits provided under any Plan or the expense of maintaining any Plan
from the level of benefits or expense incurred for the most recent fiscal
year ended before the Effective Time. No event, condition or circumstance
exists that would prevent the amendment or termination of any Plan.
(k) Any individual who performs or performed services for Company and who is
not treated as an employee for federal income tax purposes by Company or
any of the Subsidiaries is not an employee under applicable Law or for any
purpose, including, without limitation, for Tax withholding purposes or
Plan purposes; Company and the Subsidiaries have no liability by reason of
an individual who performs or performed services for Company or any of the
Subsidiaries in any capacity being improperly excluded from participating
in a Plan; and each of the Employees of Company and the Subsidiaries has
been properly classified by Company and the Subsidiaries as "exempt" or
"non-exempt" under applicable Law.
(l) Neither the Company, nor any Subsidiary or ERISA Affiliate has any
unfunded liabilities pursuant to any Plan that is not intended to be
qualified under Section 401(a) of the Code and that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA, a
nonqualified deferred compensation plan or an excess benefit plan. Each
Plan that is a "nonqualified deferred compensation plan" (as defined under
Section 409A(d)(1) of the Code) has been operated and administered in good
faith compliance with Section 409A of the Code and the guidance provided
thereunder from the period beginning January 1, 2005 through the date
hereof and no such Plan which was in effect prior to October 2, 2004,
which the Company determined to not be subject to Section 409A of the
Code, has been materially modified since October 2, 2004.
(m) There are no loans by the Company or any of its Subsidiaries to any
Employee, officer, director, consultant or other service provider or
stockholder of the Company or any Subsidiary outstanding, and there have
never been any loans or extensions of credit by the Company or any of its
Subsidiaries in violation of Section 402 of the Xxxxxxxx-Xxxxx Act, or
subject to Regulation U of the Board of Governors of the Federal Reserve
System as from time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
SECTION 4.11 - LABOR MATTERS
(a) Except as set forth in Section 4.11(a) of the Company Disclosure Letter,
neither the Company nor any Subsidiary (i) has been or is a party to any
collective bargaining or other labor union contract or (ii) has recognized
or bargained with any union or labor organization.
25
(b) Except as set forth in Section 4.11(b) of the Company Disclosure Letter,
there has not been, nor is there pending, or, to the Company's knowledge,
threatened:
(i) any strike, slowdown, picketing, work stoppage or material
dispute by or with respect to any employees of the Company or
any Subsidiary (collectively, "Employees");
(ii) any Action against or affecting the Company or any of its
Subsidiaries relating to a violation or alleged violation of
any Law relating to or establishing standards of conduct with
respect to labor relations or employment matters
(collectively, "Employment Laws"), including any material
charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment
Opportunity Commission, the Department of Labor or any other
Governmental Authority or in any grievance or arbitration
process;
(iii) any union organizing activity by any Employees;
(iv) any labor or employment dispute against or affecting the
Company or any of the Subsidiaries, or the premises of the
Company or any of the Subsidiaries;
(v) any petition or application for certification of a collective
bargaining agent to represent any of the Employees; or
(vi) any campaign, demand, request or other activity by any union
or labor organization to organize or represent any of the
Employees.
(c) No event has occurred or circumstance exists that could provide the basis
for any work stoppage or other labor dispute. Except as set forth in
Section 4.11(c) of the Company Disclosure Letter, there are no
controversies pending or, to the Company's knowledge, threatened, between
the Company or any Subsidiary and any of the Employees. There is no
lockout of any Employees, and no such action is contemplated by the
Company or any Subsidiary. Neither the Company nor any Subsidiary is
liable for the payment of any compensation, damages, Taxes, fines,
penalties, or other amounts, however designated, for failure to comply
with any Employment Laws.
(d) No officer or key Employee or group of Employees has expressed any
intention of terminating his or her employment in any capacity and the
Company and its Subsidiaries have no present intention to terminate the
employment of any officer or key Employee.
(e) The Company and the Subsidiaries are employing all of their Employees in
compliance in all material respects with all applicable Laws relating to
employment and employment practices, including, without limitation, all
applicable Laws related to taxation, employment standards, workers'
compensation, terms and conditions of employment, occupational health and
safety, disability benefits, wages and hours, termination of employment,
human rights, pay equity, employment equity, and, where applicable, the
Worker Adjustment and Retraining Notification Act. The Company and the
Subsidiaries are not in breach of any such Laws and there are no pending,
26
outstanding or threatened proceedings thereunder. There has been no
harassment, discrimination, retaliatory act or similar claim, action or
proceeding against the Company or any of its Subsidiaries or any of its or
their officers, directors or Employees.
(f) No Employee or former Employee of the Company is owed or has filed an
administrative complaint or Action alleging the Employee or former
Employee is owed any wages, benefits or other compensation for past
services (other than wages, benefits and compensation accrued in the
ordinary course of business during the current pay period and accrued
vacation).
(g) Section 4.11(g) of the Company Disclosure Letter sets forth a complete and
correct list of all agreements (including, without limitation, employment,
retention, change of control, consulting or severance agreements) between
the Company or any Subsidiary and any current or former Employee or
consultant/contractor whose compensation or severance benefits exceeded
$100,000 during the fiscal year ended December 31, 2006 and which may not
be terminated at will, or by giving notice of 30 days or less, without
cost or penalty. The Company has delivered to Parent true, correct and
complete copies of each such agreement, as amended to date. The employment
of each Employee is terminable at the will of the Company or its
Subsidiaries. Each former Employee whose compensation or severance
benefits exceeded $100,000 during the last year of such Employee's
employment with the Company or any Subsidiary signed a general release in
favor of the Company or such Subsidiary, as applicable, upon termination
of such Employee's employment therewith, releasing all claims by such
Employee against the Company and its Subsidiaries.
SECTION 4.12 - PROXY STATEMENT
At the date the Proxy Statement (or any amendment or supplement thereto) is
first mailed to stockholders of the Company the Proxy Statement shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading
(except that no representation or warranty is made by the Company with respect
to any information contained in the Proxy Statement that is based on, and in
conformity with, information supplied in writing by Parent, Merger Sub or any of
Parent's or Merger Sub's representatives expressly for inclusion in the Proxy
Statement). The Proxy Statement shall comply in all material respects as to form
with the requirements of the Exchange Act and the rules and regulations
thereunder. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any information supplied by Parent or Merger Sub in
writing for inclusion in the Proxy Statement.
SECTION 4.13 - PROPERTY; LEASES
(a) Section 4.13(a) of the Company Disclosure Letter contains a true, correct
and complete list of, and describes briefly, (i) all real property and
interests in real property, including improvements thereon and easements
appurtenant thereto owned in fee by the Company and the Subsidiaries
(collectively, the "Owned Real Property"), and (ii) all real property and
interests in real property leased or subleased by the Company and the
Subsidiaries from or to any person or otherwise having any right, title or
interest in or to or any liability with respect thereto (collectively, the
"Leased Real Property" and, together with the Owned Real Property, being
referred to herein collectively as the "Real Property") and briefly
describes the current use or non-use, as the case may be, of such Leased
Real Property. The list set forth in Section 4.13(a) of the Company
Disclosure Letter:
27
(i) contains, with respect to each of the Leased Real Properties,
all existing leases, subleases, licenses or other occupancy
contracts to which the Company or any of the Subsidiaries is a
party or by which the Company or any of the Subsidiaries is
bound, and all amendments, modifications, extensions and
supplements thereto (collectively, the "Tenant Leases"),
regardless of whether the terms thereof have commenced; and
(ii) sets forth, with respect to each Tenant Lease, as of the date
of this Agreement, (A) the name of the tenant, (B) the space
demised, (C) the monthly fixed rent and the date through which
it has been paid, (D) the unapplied amount of the security
deposit (if any), (E) the expiration date, and (F) any arrears
of rents or other payments and the amount thereof.
Such list (including all explanatory footnotes thereto) is true, correct
and complete in all material respects.
(b) The Company and the Subsidiaries have good and marketable fee simple title
to all Owned Real Property, free and clear of all Encumbrances, except (A)
those Encumbrances set forth in Section 4.13(b) of the Company Disclosure
Letter and (B) Permitted Encumbrances. The Real Property constitutes all
interests in real property currently used, occupied or currently held for
use in connection with the respective businesses of the Company and the
Subsidiaries and that are necessary for the continued operation in all
material respects of the respective businesses of the Company and the
Subsidiaries as such businesses are currently conducted. To the Company's
knowledge (i) all of the Real Property, fixtures and improvements thereon
owned or leased by the Company and the Subsidiaries are in good operating
condition without structural defects, (ii) all mechanical and other
building systems located thereon are (A) in good operating condition, and
no condition exists requiring material repairs, alterations or
corrections, (B) suitable, sufficient and appropriate in all respects for
their current and contemplated uses in all material respects, and (iii)
none of the improvements located on the Real Properties or uses being made
of the Real Properties constitute a legal non-conforming use or otherwise
require any special dispensation, variance or special Permit under any
Laws. The Company has made available to Parent true, correct and complete
copies of (i) all deeds, title reports and surveys for the Owned Real
Properties in the Company's possession or control and (ii) the Tenant
Leases, together with all amendments, modifications or supplements, if
any, thereto. The Owned Real Properties are not subject to any leases,
rights of first refusal, options to purchase or rights of occupancy,
except as set forth in Section 4.13(b) of the Company Disclosure Letter.
(c) The Company and the Subsidiaries, as applicable, have, and after the
Effective Time, will continue to have, a valid and enforceable leasehold
interest under each of the Tenant Leases until the termination or
expiration of such interest, free and clear of all Encumbrances other than
Permitted Encumbrances, and each of the Tenant Leases is, and after the
Effective Time, to the Company's knowledge, will continue to be, in full
force and effect until the termination or expiration of such interest. The
Company and the Subsidiaries, as applicable, are not in default under any
Tenant Lease, and to the Company's knowledge, no events have occurred and,
to the Company's knowledge, no circumstances exist that, if not remedied,
whether with or without notice or the passage of time or both, would
result in such a default. Neither the Company nor any Subsidiary has
28
received or given any notice of any default (after giving effect to any
applicable notice and cure period) or event that with notice or lapse of
time, or both, would constitute a default (after giving effect to any
applicable notice and cure period) by the Company or any Subsidiary under
any of the Tenant Leases which event or default remains uncured and, to
the Company's knowledge, no other party is in default (after giving effect
to any applicable notice and cure period) thereof, and no party to the
Tenant Leases has exercised any termination rights with respect thereto.
Except as otherwise set forth in Section 4.13(c) of the Company Disclosure
Letter, all leasing, brokerage, finder and other similar fees and
commissions that are due and payable by the Company or any of the
Subsidiaries with respect to the Tenant Leases have been paid in full. A
true, correct and complete copy of each Tenant Lease has been furnished or
made available to Parent. Each of the Tenant Leases constitutes the entire
agreement between the Company or one of the Subsidiaries, as applicable,
and each other party thereto, and neither the Company nor any of the
Subsidiaries has made any oral promises or agreements amending or
modifying the same. Except as set forth in Section 4.13(c) of the Company
Disclosure Letter, none of the Tenant Leases in which the Company or any
of the Subsidiaries is a tenant contain any rights of recapture or any
limitation on the use of the applicable Leased Real Property.
(d) There are no options, rights of first refusal or first offer to purchase
or contracts of sale for all or any part of the interest of the Company or
the Subsidiaries in, to and under any Tenant Lease.
(e) Section 4.13(e) of the Company Disclosure Letter contains a true, correct
and complete list of all of the most recent title insurance policies
("Existing Title Policies") in the Company's possession or control issued
by a title insurer insuring title to the Real Property. A true, correct
and complete copy of each Existing Title Policy has been furnished or made
available to Parent. Except as set forth in Section 4.13(e) of the Company
Disclosure Letter, the Existing Title Policies in the Company's possession
or control are in full force and effect and no claim has been made under
any of the Existing Title Policies.
(f) Except as set forth in Section 4.13(f) of the Company Disclosure Letter:
(i) none of the Owned Real Property is now damaged or injured as a
result of any fire, explosion, accident or other casualty that
is not adequately insured against under the insurance policies
maintained by the Company or the Subsidiaries with respect to
the Owned Real Property, and
(ii) none of the Leased Real Property is now damaged or injured as
a result of any fire, explosion, accident or other casualty
that, to the Company's knowledge, is not adequately insured
against under the insurance policies maintained by the lessor
of the Leased Real property, and
(iii) all work to be performed, payments to be made and actions to
be taken by the Company or any of the Subsidiaries and any
subleases of either the Company or any of the Subsidiaries on
or prior to the date of this Agreement pursuant to any Order
in connection with a site plan, approval, zoning
reclassification or similar action relating to any of the Real
Property, has been performed, paid or taken, as the case may
be, in all material respects and, to the Company's knowledge,
there is not any planned or proposed work, payment or action
that may be required after the date hereof pursuant to any
such Order, and
29
(iv) The current use and operation of the Owned Real Property by
the Company and the Subsidiaries does not violate in any
material respect any restrictive covenants of record affecting
any of such Owned Real Property and neither the Company nor
any Subsidiary is in default of the payment of any common area
maintenance or similar payments or reimbursements thereunder.
To the Company's knowledge, the current use and operation of
the Leased Real Property by the Company and the Subsidiaries
does not violate in any material respect any restrictive
covenants of record affecting any of such Leased Real
Property. Neither the Company nor any Subsidiary is in default
of the payment of any common area maintenance or similar
payments or reimbursements owned by the Company or any
Subsidiary with respect to the Leased Real Property. All
reciprocal easement contracts, conditions and restrictions and
similar public or private restrictive covenants to which any
of the Real Property is subject have not been violated and are
set forth in Section 4.13(f) of the Company Disclosure Letter;
provided, however, that the representations and warranties in
this sentence with respect to the Leased Real Property are
only to the Company's knowledge. Except as set forth in
Section 4.13(f) of the Company Disclosure Letter, to the
Company's knowledge, there exist no outstanding requirements
or recommendations by (i) any insurance company currently
insuring any Real Property, (ii) any board of fire
underwriters or other body exercising similar functions with
respect to any Real Property or (iii) the holder of any
Encumbrance on any Real Property, in each such case that
require or recommend any repairs or work of any material
nature be performed on such Real Property.
(g) Set forth in Section 4.13(g) of the Company Disclosure Letter is a true,
correct and complete list of all material plans and specifications
relating to the Real Property in the possession of the Company or any of
the Subsidiaries. True, correct and complete copies of such material plans
and specifications in the possession of the Company have been furnished or
made available to Parent. To the Company's knowledge, permanent
certificates of occupancy covering all portions of the Owned Real Property
that are improved and occupied, permitting such improvements to be legally
used and occupied in their current manner, have been issued by the
appropriate Governmental Authority and have not been withdrawn, revoked or
suspended. True, correct and complete copies of such certificates of
occupancy in the possession of the Company have been furnished or made
available to Parent. To the Company's knowledge, there does not exist and
there has not occurred since the Company's acquisition of the Owned Real
Property any alteration, improvement or change in the use of any building
or other improvement in the Owned Real Property that would require, the
issuance of any new or amended certificate of occupancy. No Owned Real
Property is and, to the Company's knowledge, no Leased Property is, or,
with respect to the Real Property, to the Company's knowledge, will be,
subject to zoning, use or building code restrictions that would prohibit,
and no state of facts exists with respect to the Owned Real Property and,
to the Company's knowledge, no state of facts exist with respect to the
Leased Real Property or, with respect to the Real Property, to the
Company's knowledge, will exist, that would prevent the continued
ownership, leasing or use of such real property in its business as now
conducted and proposed to be conducted. Without limiting the foregoing,
(i) with respect to the Owned Real Property there is no pending and, to
the Company's knowledge, with respect to the Leased Real Property there is
no pending or with respect to the Real Property, to the Company's
knowledge, threatened, condemnation or eminent domain Action affecting the
Owned Real Property and/or Leased Real Property, as applicable, that would
reasonably be expected to affect the use, operation, maintenance or
enjoyment of thereof in any material respect, (ii) to the Company's
30
knowledge, there are no plans of a Governmental Authority to change the
highway or road system in the vicinity of the Real Property or to restrict
or change access from any such highway or road to the Real Property that
could adversely affect access to any roads providing a means of ingress to
or egress from the Real Property, and (iii) to the Company's knowledge,
there is no pending or proposed Action to change or redefine the zoning
classification of all or any portion of any of the Real Property.
(h) Except as set forth in Section 4.13(h) of the Company Disclosure Letter,
no Action seeking a reduction in real estate Taxes imposed upon the Real
Property or the assessed valuation thereof (or any portion thereof) (i)
has been settled during the period in which the Real Property has been
owned or leased, as the case may be, by the Company or any of the
Subsidiaries or (ii) is currently pending; provided, however, with respect
to the Leased Real Property, the representations made in this Section
4.13(h) are only to the Company's knowledge.
(i) Except as set forth in Section 4.13(i) of the Company Disclosure Letter,
there are no restrictions on the rights of the Company and/or the
Subsidiaries to mortgage their interests in the Real Property.
SECTION 4.14 - CONTRACTS
(a) Section 4.14(a) of the Company Disclosure Letter lists the following
contracts to which any of the Company or the Subsidiaries is a party or by
which it is bound:
(i) any contract (or group of related contracts) involving the
performance of services or the purchase of goods, materials or
other assets by or to the Company or any of the Subsidiaries,
the performance of which will involve (A) annual payments to
or from the Company and the Subsidiaries of $250,000 or more,
or (B) aggregate payments (including termination penalties) to
or from the Company and the Subsidiaries of $1,000,000 or
more;
(ii) any contract concerning a partnership, limited liability
company or joint venture;
(iii) any contract (or group of related contracts) under which it
has (x) created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease
obligation, in excess of $500,000 or (y) imposed an
Encumbrance on any of its assets, tangible or intangible;
(iv) any contract concerning confidentiality or noncompetition or
that limits or otherwise restricts the Company or any of the
Subsidiaries or that would, after the Effective Time, limit or
restrict Parent, the Surviving Corporation or any of the
Subsidiaries or any successor thereto or any of their
respective Affiliates, from engaging or competing in any line
of business or in any geographic area, including any contract
containing any "radius clause" applicable to markets in which
the Company has operations;
(v) any contract relating to collective bargaining or employee
association;
(vi) any contract for the employment of any individual on a
full-time, part-time, consulting, or other basis who is an
officer or director of the Company or any of the Subsidiaries
or any Affiliate of any of them, or that provides for annual
compensation in excess of $100,000 or any severance benefits;
31
(vii) any contract under which the Company or any of the
Subsidiaries has advanced or loaned any amount to any of its
directors, officers or employees;
(viii) any contract under which the consequences of a default or
termination could reasonably be expected to have a Company
Material Adverse Effect;
(ix) any other contract (or group of related contracts) the
performance of which involves aggregate consideration in
excess of (A) $250,000 or more annually, or (B) $1,000,000 or
more in the aggregate;
(x) any contract that relates to any proposed Acquisition Proposal
as to which discussions have not been terminated prior to the
date of this Agreement, including all commitments containing
confidentiality, standstill, non-solicitation or similar
provisions;
(xi) any contract to which the Company or any of the Subsidiaries
has continuing indemnification obligations or potential
liability;
(xii) any contract providing for the sale or exchange of, or option
to sell or exchange, any Property, or for the purchase or
exchange of, or option to purchase or exchange, any real
estate;
(xiii) any contract for the acquisition or disposition, directly or
indirectly (by merger or otherwise), of assets or Equity
Interests of another person for aggregate consideration in
excess of $500,000, in each case other than in the ordinary
course of business;
(xiv) any contract pursuant to which the Company or any of the
Subsidiaries manages any real property;
(xv) any advertising or other promotional contract providing for
payment by the Company or any Subsidiary of $250,000 or more;
(xvi) any license, royalty or other contract concerning Intellectual
Property (other than shrink-wrap software and databases
licensed to the Company or to any of the Subsidiaries under
nonexclusive software licenses granted to end-user customers
by third parties in the ordinary course of business of such
third parties' businesses), such Company Disclosure Letter
indicating, in the case of any such license, whether the
Company or any of the Subsidiaries is the licensee or
licensor; and
(xvii) each amendment, supplement and modification (whether written
or oral) in respect of any of the foregoing.
(b) The Company has made available to Parent a correct and complete copy of
each written contract listed in Section 4.14(a) of the Company Disclosure
Letter and a written summary setting forth the terms and conditions of
each oral contract referred to in Section 4.14(a) of the Company
Disclosure Letter. With respect to each such contract (except as set forth
in Section 4.14(a) of the Company Disclosure Letter): (i) the contract is
legal, valid, binding, enforceable, and in full force and effect; (ii) the
32
contract will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the Effective Time;
(iii) no party is in breach or default, and no event has occurred that
with the passage of time or giving of notice would constitute a breach or
default, or permit termination, modification, or acceleration, under the
contract; and (iv) no party has repudiated any provision of the contract.
SECTION 4.15 - INTELLECTUAL PROPERTY
(a) Section 4.15(a) of the Company Disclosure Letter contains a detailed
description of all Intellectual Property (a) owned by the Company or any
of the Subsidiaries (the "Company Intellectual Property") or (b) licensed,
used or held for use by the Company or any of the Subsidiaries in the
conduct of their businesses ("Licensed Intellectual Property"). The
Company and the Subsidiaries have (i) all right, title and interest in and
to all Company Intellectual Property, free and clear of all Encumbrances,
other than Permitted Encumbrances and (ii) all necessary proprietary
rights in and to all Intellectual Property, including Licensed
Intellectual Property, used in, necessary for, or held for use in, their
businesses as now conducted and as proposed to be conducted, free and
clear of all Encumbrances, other than Permitted Encumbrances. Except as
set forth in Section 4.15(a) of the Company Disclosure Letter, there are
no outstanding contracts or Orders relating to the Company Intellectual
Property. Neither the Company nor any of the Subsidiaries (y) is bound by
or a party to any contract of any kind with respect to the Intellectual
Property of any other person, except with respect to a license contract
regarding Licensed Intellectual Property or (z) has received any
communication alleging that it has infringed or, by conducting its
business as proposed, would infringe the Intellectual Property rights of
any third person. Neither the execution and delivery of this Agreement nor
the carrying on of the Company's and the Subsidiaries' businesses as
currently conducted or proposed to be conducted will infringe the
Intellectual Property rights of any person; alter, impair or require the
consent of any other person in respect of any Company Intellectual
Property or Licensed Intellectual Property; or conflict with, or result in
a breach of the terms, conditions or provisions of, or constitute a
default under, any contract by which the Company or any of the
Subsidiaries is bound or to which it is a party. To the Company's
knowledge, there has been, and there is no unauthorized use, infringement
or misappropriation of the Company Intellectual Property or Licensed
Intellectual Property by any third party (including licensees, retailers,
employees, former employees and contract workers). All of the rights
within the Company Intellectual Property and Licensed Intellectual
Property are valid, enforceable and subsisting, and there is no claim or
demand of any person pertaining to, or any Action that is pending or, to
the Company's knowledge, threatened, that challenges the rights of the
Company or its Subsidiaries in respect of any Company Intellectual
Property or Licensed Intellectual Property or the validity, enforceability
or effectiveness thereof. No person has any option with respect to Company
Intellectual Property. The Company Intellectual Property and the Licensed
Intellectual Property constitute all Intellectual Property necessary for
the operation of the Company's and Subsidiaries' respective businesses as
currently conducted or proposed to be conducted. Neither the Company nor
any Subsidiary is in default (or would with the giving of notice or lapse
of time be in default) under any material license to use any of the
Licensed Intellectual Property.
(b) Except as set forth on Section 4.15(b) of the Company Disclosure Letter,
neither the Company nor any Subsidiary is a party to any contracts with
respect to the Company Intellectual Property. Section 4.15(b) of the
Company Disclosure Letter sets forth, with respect to each such contract,
33
(i) description of the products for which such Company Intellectual
Property may be used, (ii) the inception date and termination date, and
(iii) territory and, except as set forth on Section 4.15(b) of the Company
Disclosure Schedule, there are no contracts relating to options to extend
licenses, royalty percentages, minimum requirements under licenses or the
other matters described in this sentence. The royalty fee percentage
specified in each license remains in effect, is being paid when due and
has not been reduced, modified, waived or otherwise affected by any
license "side letter," modification, amendment, waiver or suspension, in
whole or in part. No right of rescission, counterclaim or defense has been
asserted by a licensee with respect to a license. There are no contract
limitations prohibiting the Company, any Subsidiary or any of their
respective Affiliates from operating their respective businesses or
granting any licenses in any geographic area or location, except as
expressly set forth in the licenses. There are no material disputes with
any licensees.
SECTION 4.16 - TAXES
(a) The Company and the Subsidiaries have (i) filed all federal, state, local
and foreign Tax returns and reports required to be filed by them
(collectively, "Tax Returns"), and all such Tax Returns were correct and
complete in all material respects, and (ii) paid and discharged all Taxes
required to be paid or discharged. The Company and the Subsidiaries have
paid all Taxes due whether or not shown on a Tax Return. The most recent
financial statements contained in the SEC Reports reflect an adequate
reserve for all Taxes payable by the Company or any Subsidiary for all
taxable periods or portions thereof through the date of such financial
statements. Since the date of the most recent financial statements
contained in the SEC Reports, no Taxes have accrued with respect to the
Company or any Subsidiary other than Taxes accrued in the ordinary course
of business. The Company and the Subsidiaries have duly and timely
withheld all Taxes required to be withheld by them and such withheld Taxes
have been duly and timely paid to the proper taxing authority. Section
4.16(a) of the Company Disclosure Letter lists all income and other
material Tax Returns filed with respect to any of the Company and the
Subsidiaries for taxable periods ended on or after December 31, 2001,
indicates those Tax Returns that have been audited and indicates those Tax
Returns that currently are the subject of audit. Parent has been furnished
by the Company with true and complete copies of all filed federal, state
and local income or franchise Tax Returns and state sales and use Tax
Returns for or including the Company and each of the Subsidiaries for all
periods after December 31, 2001.
(b) Except as described in Section 4.16(b) of the Company Disclosure Letter:
(i) no contract or other document waiving or extending the statute
of limitations or the period of assessment or collection of
any Taxes has been filed or entered into by the Company or any
of the Subsidiaries with any taxing authority;
(ii) no taxing authority is now asserting or, to the Company's
knowledge, threatening to assert against the Company or any of
the Subsidiaries any deficiency or claim for additional Taxes;
(iii) there are no pending audits of the Company or any of the
Subsidiaries by any taxing authority nor are there any Actions
currently being conducted with respect to any issue relating
to Taxes; and
34
(iv) there are no Encumbrances for Taxes (other than Taxes not yet
due and payable) upon any of the assets of the Company or any
Subsidiary.
(c) Neither the Company nor any Subsidiary is a party to any contract
providing for the allocation or sharing of, or indemnification from, Taxes
with any party other than the Company and/or one or more of the
Subsidiaries. Neither the Company nor any Subsidiary has any liability for
the Taxes of another person (other than the Company and the Subsidiaries)
under Treasury Regulations ss.1.1502-6 (or similar provision of state,
local or foreign law), or as transferee or successor, by contract, or
otherwise. There are no outstanding requests by the Company or any
Subsidiary for any Tax ruling from any taxing authority and neither the
Company nor any Subsidiary has (i) received a Tax ruling or (ii) entered
into any closing agreement or other similar contract with a taxing
authority relating to Taxes of the Company or any Subsidiary, in each
case, effective with respect to a taxable period for which the statute of
limitations is still open or a taxable period ending after the date of the
Closing. The Company is not, nor was it any time during the five-year
period ending on the date on which the Effective Time occurs, a "United
States real property holding corporation" within the meaning of Section
897(c) of the Code; at the Closing, Parent shall be provided with a
certificate of the Company to that effect that complies with the Treasury
Regulations under Sections 897 and 1445 of the Code. The utilization of
the net operating losses and tax credits of the Company and the
Subsidiaries is not subject to any limitation under Section 382 or Section
383 of the Code or the "separate return limitation year" rules of the
consolidated return regulations. Neither the Company nor any Subsidiary
has distributed the stock of another company in a transaction that was
purported or intended to be governed by Section 355 or Section 361 of the
Code. Neither the Company nor any Subsidiary has engaged in any listed or
other reportable transaction within the meaning of Treasury Regulations
ss.1.6011-4(b).
(d) No tax authority of a jurisdiction in which the Company or any Subsidiary
does not file Tax Returns has questioned whether, or asserted that, it may
be obligated to file Tax Returns in that jurisdiction. Neither the Company
nor any Subsidiary is a party to any tax sharing agreement. Neither the
Company nor any Subsidiary has been or is required to make any adjustment
pursuant to Section 481(a) of the Code or any similar provision of state,
local or foreign tax law by reason of any change in any accounting method,
there is no application pending with any taxing authority requesting
permission for any change in any accounting method for Tax purposes and no
taxing authority has proposed any such adjustment or change in accounting
method. Neither the Company nor any Subsidiary will be required to include
in the gross income of a taxable period ending after the date of the
Closing income or gain attributable to cash received, or an account
receivable that arose, in a prior taxable period and that was not
recognized in that prior taxable period, as a result of the installment
method, the completed contract method or the cash method of accounting or
any other method of accounting that defers the recognition of income. The
Company and each of its Subsidiaries has fully complied with all statutes
and regulations relating to the accounting for and paying over of
unclaimed or abandoned funds and other property.
SECTION 4.17 - ENVIRONMENTAL MATTERS
(a) Except as set forth in Section 4.17(a) of the Company Disclosure Letter,
all of the current and past operations of the Company and the
Subsidiaries, including any operations of the Company or its Subsidiaries
at any Property, comply in all material respects, and have at all times
during the Company's or any Subsidiary's ownership or operation thereof,
35
complied in all material respects with all applicable Environmental Laws.
Except as set forth in Section 4.17(a) of the Company Disclosure Letter,
neither the Company, nor, to the Company's knowledge, any other person has
engaged in, authorized, allowed or suffered any operations or activities
upon any Property involving the handling, manufacture, treatment,
processing, storage, use, generation, release, discharge, spilling,
emission, dumping or disposal of any Hazardous Substances at, on, under or
from such Property except in material compliance with all applicable
Environmental Laws.
(b) Except as set forth in Section 4.17(b) of the Company Disclosure Letter,
there are no Hazardous Substances in, on, over, under, at or from the
Owned Real Property or to the Company's knowledge, at any Leased Real
Property or any Property formerly owned, leased, managed or operated by
the Company or any Subsidiary at concentrations that would materially
violate applicable Environmental Laws or would reasonably be likely to
result in the imposition of material Environmental Liabilities on the
Company or any Subsidiary.
(c) Except as set forth in Section 4.17(c) of the Company Disclosure Letter,
no Owned Real Property nor, to the Company's knowledge, any Leased Real
Property and any Property formerly owned, leased, managed or operated by
the Company or any Subsidiary and any real property at which the Company
or any Subsidiary has disposed of Hazardous Substances, is listed or
proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42.
U.S.C. ss.9601 et seq., or any similar inventory of sites maintained by
any state or locality. Except as set forth in Section 4.17(c) of the
Company Disclosure Letter, neither the Company nor any Subsidiary has
received any notice from any Governmental Authority or third party of, or
is currently subject to, any actual or threatened material Environmental
Liabilities.
(d) Except as set forth in Section 4.17(d) of the Company Disclosure Letter,
to the Company's knowledge, there are no underground storage tanks or
Hazardous Substances (other than Hazardous Substances for use in the
ordinary course of business that are stored, issued and maintained in
accordance and compliance in all material respects with applicable
Environmental Laws and which are set forth in Section 4.17(d) of the
Company Disclosure Letter) in, on, under or at the Property.
(e) Except as set forth in Section 4.17(e) of the Company Disclosure Letter,
no conditions have arisen at any Owned Real Property since the Company's
or any Subsidiary's acquisition of the Owned Real Property that require,
or that with the giving of notice or the passage of time or both will
reasonably likely require, remedial or corrective action, removal,
monitoring or closure pursuant to the Environmental Laws. Except as set
forth in Section 4.17(e) of the Company Disclosure Letter, to the
Company's knowledge, no conditions have arisen at any Leased Real Property
since the Company's lease of the Leased Real Property that require, or
that with the giving of notice or the passage of time or both will
reasonably be likely to require, remedial or corrective action, removal,
monitoring or closure pursuant to the Environmental Laws.
(f) Except as set forth in Section 4.17(f) of the Company Disclosure Letter,
neither the Company nor any Subsidiary has contractually or, to the
Company's knowledge, by operation of law assumed or succeeded to any
Environmental Liabilities of any predecessors or any other person.
36
(g) The Company has provided to Parent all material written environmental
reports, assessments, audits, studies, investigations, data, Environmental
Permits and other written environmental or worker health and safety
information in its custody, possession or control concerning the Company,
the Subsidiaries and the Property.
(h) The representations in this Section 4.17, Sections 4.06(a) and 4.07 are
the sole and exclusive representations and warranties concerning
environmental matters, environmental compliance or the environmental
condition of the Property.
SECTION 4.18 - BROKERS
Except as provided in the agreement, dated May 3, 2007, between the Company and
Xxxxx Xxxxxxx & Co., a true and complete copy of which has been delivered to
Parent, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Transactions based
upon arrangements made by or on behalf of the Company.
SECTION 4.19 - INSURANCE
(a) Section 4.19(a) of the Company Disclosure Letter contains a true and
complete list of all insurance policies (including policies providing
property, liability, workers' compensation, and bond & surety
arrangements) and other forms of insurance required by Law, owned or held
by or for the benefit of the Company or any Subsidiary or for the benefit
of their respective directors, officers or employees (the "Policies").
True and complete copies of the Policies have been furnished or made
available to Parent. The Policies are of such types and in such amounts
and for such risks, casualties and contingencies as is reasonable based
upon the business of the Company and the Subsidiaries, as currently
conducted.
(b) Section 4.19(b) of the Company Disclosure Letter contains a true and
complete list of all pending claims in excess of $100,000 made pursuant to
each of the Policies or pursuant to any predecessor policy and identifies
any claims made pursuant to such policies where coverage was denied by the
insurer. The aggregate amount of all pending claims of $100,000 or less
made pursuant to each of the Policies or pursuant to any predecessor
policy is less than $100,000. Other than as set forth in Section 4.19(b)
of the Company Disclosure Letter, there is no claim under any Policy as to
which coverage has been denied or disputed by the applicable insurer or in
respect of which such insurer has reserved its rights.
(c) Each Policy is legal, valid, binding and enforceable in accordance with
its terms and is in full force and effect. Neither the Company nor any
Subsidiary is in breach or default (including any such breach or default
with respect to the payment of premiums or the giving of notice), and no
event has occurred that, with notice or the lapse of time, would
constitute such a breach or default, or permit termination or
modification, under any Policy. To the Company's knowledge, no insurer on
any Policy has been declared insolvent or placed in receivership,
conservatorship or liquidation.
(d) No notice of cancellation or termination has been received with respect to
any Policy and there are no historical gaps in coverage nor have policy
limits been exhausted or significantly diminished.
37
(e) The Policies are sufficient for compliance with all requirements of Law
and of all contracts to which the Company or the Subsidiaries are parties
or otherwise bound.
(f) After the Effective Time, the Company shall continue to have coverage
under the Policies with respect to events occurring prior to the Effective
Time and the Company or the Subsidiaries will be entitled to the benefit
of the Policies.
(g) After the Effective Time, no premiums or other payments will be due in
respect of the Policies for periods prior to the Effective Time.
SECTION 4.20 - SUPPLIERS AND RETAILERS
Section 4.20 of the Company Disclosure Letter sets forth a complete and accurate
list of the twenty suppliers with the greatest dollar volume of sales to the
Company and the Subsidiaries and the twenty retailers with the greatest dollar
volume of purchases from the Company and its Subsidiaries, in each case during
the fiscal year ended December 31, 2006, showing the approximate total purchases
and sales in dollars by the Company and the Subsidiaries from each such vendor
and to each such retailer during such fiscal year. Since January 1, 2006, to the
Company's knowledge, there has been no material adverse change in the business
relationship of the Company or any of the Subsidiaries with any vendor or
retailer named on Section 4.20 of the Company Disclosure Letter.
SECTION 4.21 - TANGIBLE PERSONAL PROPERTY
Except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, the Company and the Subsidiaries have
legal and valid title to, or in the case of leased assets and properties, valid
and subsisting leasehold interests in, all of the material tangible personal
assets and properties used or held for use by the Company and the Subsidiaries
in connection with the conduct of the business of the Company and the
Subsidiaries, free and clear of all Encumbrances other than Permitted
Encumbrances. Except as could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect, all tangible personal property
is in good condition, ordinary wear and tear excepted.
SECTION 4.22 - INVENTORIES
The inventories of the Company and its Subsidiaries consist in all material
respects of items of a quantity and quality usable or saleable in the ordinary
course of business net of reserves. All of such inventories were acquired in the
ordinary course of business and have been replenished in all material respects
in the ordinary course of business. All such inventories are valued in
accordance with GAAP applied on a basis consistent with the Company's past
practices, and provision has been made or reserves have been established in each
case in an amount believed by the Company as of the date of this Agreement to be
adequate, for all slow-moving, obsolete or unusable inventories.
38
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB
As an inducement to the Company to enter into this Agreement, Parent and Merger
Sub hereby, jointly and severally, represent and warrant to the Company that:
SECTION 5.01 - CORPORATE ORGANIZATION
Parent is a private company limited by shares incorporated in England and Wales,
and Merger Sub is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Delaware and has the requisite limited
liability company or corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted.
SECTION 5.02 - AUTHORITY RELATIVE TO THIS AGREEMENT
Each of Parent and Merger Sub has all necessary power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution and delivery of this Agreement by
Parent and Merger Sub and the consummation by Parent and Merger Sub of the
Transactions have been duly and validly authorized by all necessary corporate
action, and no other corporate proceedings on the part of Parent or Merger Sub
are necessary to authorize this Agreement or to consummate the Transactions
(other than, with respect to the Merger, the filing and recordation of
appropriate merger documents as required by the DGCL). This Agreement has been
duly and validly executed and delivered by Parent and Merger Sub and, assuming
due authorization, execution and delivery by the Company, constitutes a legal,
valid and binding obligation of each of Parent and Merger Sub enforceable
against each of Parent and Merger Sub in accordance with its terms, except to
the extent that enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by principles of equity regarding the
availability of remedies.
SECTION 5.03 - NO CONFLICT; REQUIRED FILINGS AND CONSENTS
(a) The execution and delivery of this Agreement by Parent and Merger Sub do
not, and the consummation of the Transactions will not:
(i) conflict with or violate the certificate of incorporation or
by-laws or other organizational or governing documents of
either Parent or Merger Sub;
(ii) assuming that all consents, approvals, authorizations and
other actions described in subsection (b) have been obtained
and all filings and obligations described in subsection (b)
have made, conflict with or violate any Law applicable to
Parent or Merger Sub or by which any property or asset of
either of them is bound or affected; or
(iii) result in any breach or violation of, or constitute a default
(or an event that, with notice or lapse of time or both, would
become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or
result in the creation of an Encumbrance on any property or
asset of Parent or Merger Sub pursuant to, any contract,
39
Permit or other instrument or obligation to which Parent or
Merger Sub is a party or by which Parent or Merger Sub or any
property or asset of either of them is bound or affected,
except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences
that would not prevent or delay consummation of the
Transactions or otherwise prevent Parent or Merger Sub from
performing its obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent and Merger Sub do
not, and the performance of this Agreement by Parent and Merger Sub will
not, require any consent, approval, authorization or Permit of, or filing
with, or notification to, any Governmental Authority, except where the
failure to obtain such consents, approvals, authorizations or Permits, or
to make such filings or notifications, would not prevent or delay
consummation of the Transactions, or otherwise prevent Parent or Merger
Sub from performing its obligations under this Agreement or for:
(i) applicable requirements, if any, of the Exchange Act;
(ii) the filing with the SEC of the Proxy Statement;
(iii) the pre-merger notification requirements of the HSR Act and
similar notification or filing requirements pursuant to
Applicable Non-US Antitrust Laws;
(iv) any filings required under the rules and regulations of the
NASD; and
(v) filing and recordation of appropriate merger documents as
required by the DGCL and appropriate documents with the
relevant authorities of other states in which the Company or
any Subsidiary is qualified to do business.
SECTION 5.04 - PROXY STATEMENT
None of the information supplied by Parent or Merger Sub in writing for
inclusion in the Proxy Statement shall, at the date the Proxy Statement (or any
amendment or supplement thereto) is first mailed to stockholders of the Company
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
SECTION 5.05 - INTERIM OPERATIONS OF MERGER SUB
Merger Sub was formed solely for the purpose of engaging in the Transactions and
has not engaged in any business activities or conducted any operations other
than in connection with the Transactions.
SECTION 5.06 - OWNERSHIP OF COMPANY EQUITY INTERESTS
As of the date of this Agreement, neither Parent nor Merger Sub is the
beneficial owner of any Equity Interests of the Company.
40
SECTION 5.07 - SUFFICIENT FUNDS
At the Effective Time, Parent and Merger Sub will have sufficient cash and cash
equivalent resources available to pay the aggregate Merger Consideration
pursuant to the Transactions.
SECTION 5.08 - INVESTIGATION BY PARENT AND MERGER SUB
Each of Parent and Merger Sub:
(a) acknowledges that, except as set forth in this Agreement, none of the
Company, its Subsidiaries or any of their respective directors, officers,
employees, Affiliates, agents or representatives makes any representation
or warranty, either express or implied, as to the accuracy or completeness
of any of the information provided or made available to Parent or Merger
Sub or their respective Representatives prior to the execution of this
Agreement; and
(b) agrees, to the fullest extent permitted by Law (except with respect to
claims of fraud), that none of the respective directors, officers,
employees, stockholders, Affiliates, or Representatives of the Company or
its Subsidiaries shall have any liability or responsibility whatsoever to
Parent and Merger Sub on any basis (including, in contract, tort or
otherwise) based upon any information provided or made available or
statements made, to Parent or Merger Sub prior to the execution of this
Agreement.
41
ARTICLE 6
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.01 - CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER
(a) Between the date of this Agreement and the Effective Time, except as set
forth in Section 6.01(a) of the Company Disclosure Letter or as
specifically required by another provision of this Agreement, the Company
shall, and shall cause each Subsidiary to, (i) conduct its business in,
and not take any action except in, the ordinary course of business; and
(ii) use its reasonable best efforts to preserve substantially intact the
business organization of the Company and the Subsidiaries, to keep
available the services of the current officers, employees and consultants
of the Company and the Subsidiaries, and to preserve, in all material
respects, the current relationships of the Company and the Subsidiaries
with customers, franchisees, licensees, suppliers and other persons with
which the Company or any Subsidiary has business relations.
(b) Without limiting the foregoing, except as required by this Agreement or as
disclosed in Section 6.01(b) of the Company Disclosure Letter, neither the
Company nor any Subsidiary shall, between the date of this Agreement and
the Effective Time, directly or indirectly, do or agree to do, any of the
following without the prior written consent of Parent:
(i) make, revoke or change any Tax election, change any method of
Tax accounting, settle, compromise or incur any liability for
Taxes, fail to timely file any Tax Return that is due, file
any amended Tax Return or claim for refund, surrender any
right to claim a Tax refund, or consent to any extension or
waiver of the statute of limitations period applicable to any
Tax claim or assessment;
(ii) change the accounting principles used by it unless required by
a change in GAAP or any Governmental Authority;
(iii) (A) except for short-term borrowings incurred in the ordinary
course of business under the existing credit facility, incur
or guarantee indebtedness for borrowed money or commit to
borrow money, (B) guarantee any indebtedness of another
person, (C) enter into any "keep well" or other contract to
maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of
any of the foregoing, or (D) make any loans or cancel, release
or assign any indebtedness to any person;
(iv) make any capital expenditure in excess of $1,200,000 in the
aggregate;
(v) subject to clause (xi), acquire, lease or license from any
person (by merger, consolidation, acquisition of stock or
assets or otherwise) or sell, lease, license, dispose or
effect an Encumbrance (by merger, consolidation, sale of stock
or assets or otherwise), of any assets other than inventory in
the ordinary course of business;
42
(vi) change any compensation arrangement or contract with any
present or former Employee (except for increases in the base
salaries of employees other than officers or senior managers
in the ordinary course of business), officer, director,
consultant, stockholder or other service provider of the
Company or any Subsidiary or grant any severance or
termination or change in control pay to any such present or
former Employee, officer, director, consultant, stockholder or
other service provider or increase any benefits payable under
any severance or termination or change in control pay policies
or establish, amend or terminate any Plan or increase benefits
made or proposed to be made under such Plan, except as
required by applicable Law or grant any Company Stock Awards
or other awards under any Company Stock Award plan, other than
(A) required pursuant to the terms of any Plan as in effect on
the date of this Agreement or (B) required by Law;
(vii) declare, set aside or pay any dividend or make any other
distribution with respect to Equity Interests of the Company
or any Subsidiary, or otherwise make any payments to
stockholders in their capacity as such, other than dividends
declared or paid by any Subsidiary to any other wholly owned
Subsidiary or to the Company;
(viii) effect a "plant closing" or "mass layoff," as those terms are
defined in the Worker Adjustment and Retraining Notification
Act;
(ix) (i) except as otherwise required pursuant to an existing
contract set forth on Section 4.03(a) of the Company
Disclosure Schedule, issue, deliver, sell, pledge, transfer,
convey, dispose or permit the imposition of an Encumbrance on
any Equity Interests, or any options, warrants, securities
exercisable, exchangeable or convertible into or other rights
award, unit or contracts of any kind relating to any Equity
Interest or any Right or Voting Debt other than the issuance
of Shares upon the exercise of Company Stock Awards
outstanding as of the date of this Agreement, (ii) redeem,
purchase or otherwise acquire, or propose to redeem, purchase
or otherwise acquire, any of its outstanding Equity Interests
or (iii) split, combine, subdivide or reclassify any Equity
Interests;
(x) enter into any contract (i) with an Affiliate, (ii) other than
in the ordinary course of business, (iii) that would have been
set forth on Section 4.14(a) of the Company Disclosure Letter
if in effect on the date of this Agreement or (iv) that
amends, extends or terminates any of the contracts set forth
on Section 4.14(a) of the Company Disclosure Letter;
(xi) enter into any contract providing for the sale of Intellectual
Property;
(xii) subject to Section 7.03, modify, amend or terminate, or waive,
release or assign any material rights or claims with respect
to any confidentiality agreement or non-competition agreement
or standstill contracts that relate to a business combination
involving the Company or any of the Subsidiaries;
(xiii) take any action to render inapplicable, or to exempt any third
party from, any Takeover Law or state Law that purports to
limit or restrict business combinations or the ability to
acquire or vote shares;
43
(xiv) lease, license, mortgage, hypothecate, pledge, sell, sublease,
grant any material Encumbrance affecting and/or transfer any
interest on any Owned Real Property or Leased Real Property,
or enter into any amendment, extension or termination of any
leasehold interest in any Leased Real Property or create any
new leasehold interest in any Leased Real Property;
(xv) except as permitted by Section 7.03, take any action that is
intended or would reasonably be expected to result in any of
the conditions to the Merger set forth in Article 8 not being
satisfied;
(xvi) make any acquisition of, capital contributions to, or
investment in, assets or stock of any person (other than any
wholly owned Subsidiary) (whether by way of merger,
consolidation, tender offer, share exchange or other
activity);
(xvii) merge or consolidate with any person (other than mergers among
wholly owned Subsidiaries;
(xviii)establish, adopt, enter into or materially amend any
collective bargaining contract;
(xix) waive, release, assign, settle or compromise any material
claims, or any material litigation or arbitration;
(xx) satisfy, discharge, waive or settle any material liabilities,
other than in the ordinary course of business;
(xxi) fail to maintain in full force and effect or fail to use
commercially reasonable efforts to replace or renew insurance
policies existing as of the date of this Agreement;
(xxii) amend the certificate of incorporation or by-laws of the
Company;
(xxiii)do any other thing that would have required disclosure under
Section 4.08; or
(xxiv) permit any Shares to be sold pursuant to any public offering,
including the Secondary Offering; or
(xxv) enter into any contract by the Company or any of the
Subsidiaries to do any of the foregoing.
Notwithstanding the foregoing, Parent and Merger Sub acknowledge that the
Company may enter into licenses in the ordinary course of business on terms
determined in good faith by the Company to be fair and reasonable to the
Company.
44
ARTICLE 7
ADDITIONAL AGREEMENTS
SECTION 7.01 - SPECIAL MEETING; PROXY STATEMENT
As promptly as practicable following the execution of this Agreement (but in any
event, in the case of Section 7.01(b) within 10 business days), the Company,
acting through its Board, shall in accordance with applicable Law:
(a) duly call, give notice of, convene and (unless this Agreement has been
terminated) hold a special meeting of its stockholders (the "Special
Meeting" for the purposes of considering and taking action upon the
approval and adoption of this Agreement and the Transactions, including
adjourning such meeting for up to ten (10) business days to obtain such
approval:
(i) use reasonable best efforts to solicit the approval of this
Agreement by the stockholders of the Company,
(ii) except to the extent that the Board shall have withdrawn or
modified its approval or recommendation of this Agreement as
permitted by Section 7.03, include in the Proxy Statement the
Board's declaration of the advisability of this Agreement and
its recommendation to the stockholders of the Company that
they adopt this Agreement and approve the Transactions, and
shall include disclosure regarding the approval of the Board;
and
(iii) without limiting the generality of the foregoing, the Company
agrees that its obligations under this Section 7.01(a) shall
not be affected by the commencement, public proposal, public
disclosure or other communication to the Company or any other
person of any Acquisition Proposal.
(b) prepare and file with the SEC a preliminary proxy statement relating to
the Transactions and this Agreement and obtain and furnish the information
required to be included by the SEC therein and, after consultation with
Parent, respond as promptly as reasonably practicable to any comments made
by the SEC with respect to the preliminary proxy statement (including
filing as promptly as reasonably practicable any amendments or supplements
thereto necessary to be filed in response to any such comments or as
required by Law), use its reasonable best efforts to have the SEC confirm
that it has no further comments and cause a definitive proxy statement,
including any amendments or supplements thereto (the "Proxy Statement"),
to be mailed to its stockholders at the earliest practicable date after
the date that the SEC confirms it has no further comments, provided that
no amendments or supplements to the Proxy Statement will be made by the
Company without prior consultation with Parent and its counsel; and
(c) notify Parent promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or for additional information and will
supply Parent with copies of all correspondence between the Company or any
of its representatives, on the one hand, and the SEC or its staff, on the
other hand, with respect to the Proxy Statement. The Company shall give
Parent a reasonable opportunity to comment on any correspondence with the
SEC or its staff or any proposed material to be included in the Proxy
Statement prior to transmission to the SEC or its staff and shall not,
45
unless required by Law, transmit any such material to which Parent
reasonably objects. If at any time prior to the Special Meeting there
shall be discovered any information that should be set forth in an
amendment or supplement, after obtaining the consent of Parent to such
amendment or supplement (which consent shall not be unreasonably withheld
or delayed), the Company shall promptly transmit such amendment or
supplement to its stockholders.
SECTION 7.02 - ACCESS TO INFORMATION; CONFIDENTIALITY
(a) From the date of this Agreement to the Effective Time and in compliance
with applicable Laws, the Company shall, and shall cause the Subsidiaries
and the officers, directors, employees, auditors, investment bankers,
counsel, agents and other representatives ("Representatives") of the
Company and the Subsidiaries to afford the Representatives of Parent and
Merger Sub reasonable access at all reasonable times to the officers,
employees, agents, properties, offices and other facilities, books and
records of the Company and each Subsidiary, and shall furnish Parent and
Merger Sub with such financial, operating and other data and information
as Parent or Merger Sub, through its officers, employees or agents, may
reasonably request.
(b) Without limiting the foregoing,
(i) Parent and its Representatives (including its financing
sources) shall have the right to conduct appraisal (including
appraisal of the Company's trademarks and other Intellectual
Property) and environmental and engineering inspections of
each of the Company's properties. With respect to
environmental matters, Parent shall have the right to retain a
consultant to undertake environmental assessments of the
Property. The Company shall provide access to the Real
Property for the conduct of the environmental assessments, and
shall provide to the environmental consultant all known and
available environmental and worker health and safety
information and documentation concerning any environmental
matters pertaining to the Company, any of the Subsidiaries or
the Property.
(ii) The Company shall furnish to Parent the following financial
information (all to be prepared in accordance with GAAP
consistently applied): (i) as soon as available but in any
event within 30 days of each calendar month (or within 45 days
of a calendar month that coincides with the end of the
Company's fiscal year) the unaudited consolidated balance
sheets and income statements of the Company, showing its
financial condition as of the close of such month and the
results of operations during such month and for the then
elapsed portion of the Company's fiscal year, in each case,
setting forth the comparative figures for the corresponding
month in the prior fiscal year and the corresponding elapsed
portion of the prior fiscal year; (ii) profit and loss
statements for each of the Company's sporting goods equipment
and licensed products divisions, showing the respective
financial condition as of the close of such month and the
results of operations during such month and for the then
elapsed portion of the Company's fiscal year, in each case,
setting forth the comparative figures for the corresponding
month in the prior fiscal year and the corresponding elapsed
portion of the prior fiscal year; and (iii) all documents
filed with or submitted to the SEC by the Company
simultaneously with such filing or submission. In addition,
the Company shall promptly notify Parent of any negotiations
regarding contracts or licenses with respect to the Company's
46
Intellectual Property, shall provide Parent with information
regarding the parties thereto and material terms and
conditions thereof, and shall promptly update Parent regarding
the status of such negotiations.
(c) All information obtained by Parent or Merger Sub pursuant to this Section
7.02 shall be kept confidential in accordance with the confidentiality
agreement, dated June 28, 2007 (the "Confidentiality Agreement"), between
Parent and the Company.
(d) No investigation pursuant to this Section 7.02 or otherwise shall affect
or be deemed to modify any representation or warranty in this Agreement of
any party hereto.
SECTION 7.03 - SOLICITATION
(a) [Intentionally omitted]
(b) From the date of this Agreement until the Effective Time or, if earlier,
the termination of this Agreement in accordance with Article 9, none of
the Company, its Subsidiaries or any of their respective Representatives
shall, directly or indirectly, (i) initiate, solicit or encourage
(including by way of providing information) the submission of any
inquiries, proposals or offers or any other efforts or attempts that
constitute or may reasonably be expected to lead to any Acquisition
Proposal or engage in any discussions or negotiations with respect thereto
or otherwise cooperate with or assist or participate in, or facilitate any
such inquiries, proposals, offers, efforts, discussions or negotiations,
or (ii) approve or recommend, or propose to approve or recommend, an
Acquisition Proposal or enter into any merger agreement, letter of intent,
agreement in principle, share purchase agreement, asset purchase agreement
or share exchange agreement, option agreement or other similar agreement
providing for or relating to an Acquisition Proposal or enter into any
agreement or agreement in principle requiring the Company to abandon,
terminate or fail to consummate the transactions contemplated hereby or
breach its obligations hereunder or propose or agree to do any of the
foregoing.
(c)(i)Notwithstanding anything to the contrary contained in Section 7.03(b), if
at any time following the date of this Agreement and prior to obtaining
the Requisite Stockholder Vote, the Company has otherwise complied with
its obligations under this Section 7.03 and the Company has received a
written Acquisition Proposal from a third party that the Board believes in
good faith to be bona fide and the Board determines in good faith, after
consultation with its independent financial advisors and outside counsel,
that such Acquisition Proposal constitutes or could reasonably be expected
to result in a Superior Proposal, then the Company may (A) furnish
information with respect to the Company and its Subsidiaries to the person
making such Acquisition Proposal and (B) participate in discussions or
negotiations with the person making such Acquisition Proposal regarding
such Acquisition Proposal; provided, that the Company (x) shall not, and
shall not allow Representatives to, disclose any material non-public
information to such person without entering into an Acceptable
Confidentiality Agreement, and (y) will promptly provide or make available
to Parent any material non-public information concerning the Company or
its Subsidiaries provided to such other person which was not previously
provided to Parent.
(ii) [Intentionally omitted]
47
(iii) From and after the date of this Agreement, the Company shall
promptly (and in any event within one business day) notify
Parent if it receives an Acquisition Proposal from a person or
group of related persons including the material terms and
conditions thereof and the identity of the person making such
Acquisition Proposal and shall keep Parent apprised and, at
Parent's request, shall update Parent as to the status and any
material developments, discussions and negotiations concerning
such Acquisition Proposal. Without limiting the foregoing, the
Company shall promptly (and in any event within one business
day) notify Parent orally and in writing if it determines to
begin furnishing information or to participate in negotiations
concerning an Acquisition Proposal from a person or group of
related persons pursuant to Section 7.03(c)(i)(A) or (B).
(d) Neither the Board nor any committee thereof shall directly or indirectly
(i) withdraw or modify in a manner adverse to Parent or Merger Sub, or
publicly propose to withdraw or modify in a manner adverse to Parent or
Merger Sub, its recommendation in favor of the Merger or (ii) take any
other action or make any other public statement in connection with the
Company Stockholder Meeting inconsistent with such recommendation;
provided, that at any time prior to obtaining the Requisite Stockholder
Vote, if the Company receives an Acquisition Proposal which the Board of
Directors of the Company concludes in good faith constitutes a Superior
Proposal, the Board of Directors of the Company may (i) cause the Company
to terminate this Agreement pursuant to Section 9.01(g) to concurrently
enter into a definitive agreement with respect to such Superior Proposal
or (ii) withdraw or modify its approval of this Agreement or its
recommendation that the Company's stockholders adopt this Agreement and
approve the Transactions if, in each case, the Board determines in good
faith, after consultation with outside counsel, that failure to take such
action would violate its fiduciary duties under applicable Law; provided,
however, that the Company shall not terminate this Agreement pursuant to
the foregoing clause (i) and any purported termination pursuant to the
foregoing clause (i) shall be void and of no force and effect, unless
prior to such termination the Company pays the Termination Fee payable
pursuant to Section 9.03, the Company has complied with this Section 7.03
and such Acquisition Proposal continues to constitute a Superior Proposal;
and provided, further, that the Company may not terminate this Agreement
pursuant to the foregoing clause (i) and the Board may not effect a
withdrawal or modification of its approval of this Agreement pursuant to
the foregoing clause (ii) unless the Company shall have provided prior
written notice to Parent, at least four business days in advance (the
"Notice Period"), of its intention to withdraw or modify its approval of
this Agreement or terminate this Agreement to enter into a definitive
agreement with respect to such Superior Proposal, which notice shall
include a written summary of the material terms and conditions of such
Superior Proposal (including the identity of the party making such
Superior Proposal), and shall have contemporaneously provided a copy of
the relevant proposed transaction agreements with the party making such
Superior Proposal and any other material documents relating thereto.
During the Notice Period, the Company shall, and shall cause its
Representatives to, negotiate with Parent and Merger Sub in good faith (to
the extent Parent and Merger Sub desire to negotiate) to make such
adjustments in the terms and conditions of this Agreement, and the Board
shall take into account any changes to the financial and other terms of
this Agreement proposed by Parent in response to any such written notice
by the Company or otherwise, so that the Acquisition Proposal ceases to
constitute a Superior Proposal (it being understood and agreed that any
amendment to the financial terms or other term of such Superior Proposal
shall require a new written notice by the Company and a new four-business
day period).
48
(e) Nothing contained in this Section 7.03 or elsewhere in this Agreement
shall prohibit the Company from taking and disclosing to its stockholders
a position contemplated by Rule 14d-9 and Rule 14e-2(a) promulgated under
the Exchange Act; provided, that any such disclosure (other than a "stop,
look and listen" letter or similar communication of the type contemplated
by Rule 14d-9(f) under the Exchange Act) shall be deemed to be a
withdrawal of the Board's recommendation in favor of this Agreement
pursuant to Section 7.03(d) unless the Board expressly publicly reaffirms
in such disclosure its recommendation in favor of the adoption of this
Agreement.
(f) The Company acknowledges and agrees that any violations of the
restrictions set forth in this Section 7.03 by any Representative of the
Company or any of its Subsidiaries, shall be deemed to be a breach of this
Section 7.03 by the Company.
(g) The Company shall not, directly or indirectly, pay, reimburse or otherwise
assume liability for, or agree or commit to pay, reimburse or otherwise
assume liability for, any fees or expenses of any person with whom the
Company holds discussions or to whom the Company provides information
pursuant to this Section 7.03.
SECTION 7.04 - DIRECTORS' AND OFFICERS' INDEMNIFICATION
(a) From and after the Effective Time, the Surviving Corporation shall
indemnify and hold harmless, to the fullest extent permitted under
applicable Law (and the Surviving Corporation shall also advance expenses
as incurred to the fullest extent permitted under applicable Law;
provided, that the person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that
such person is not entitled to indemnification), each present and former
director and officer of the Company and its Subsidiaries (collectively,
the "Indemnified Parties") against any and all costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any Action, whether
civil, criminal, administrative or investigative, arising out of or
pertaining to any action or omission or matters existing or occurring at
or prior to the Effective Time, including the Transactions, to the same
extent as provided in the certificate of incorporation or bylaws of the
Company, or any other applicable contract, in effect on the date hereof.
(b) For six years from the Effective Time, the Surviving Corporation shall
maintain in effect for the benefit of the directors and officers of the
Company currently covered by the officers' and directors' liability
insurance policies of the Company an insurance and indemnification policy
with an insurer with a Standard & Poor's rating of at least A that
provides coverage for acts or omissions occurring prior to the Effective
Time (the "D&O Insurance") covering each such person on terms with respect
to coverage and in amounts no less favorable than those of the Company's
directors' and officers' insurance policy in effect on the date of this
Agreement; provided, however, that the Surviving Corporation shall not be
required to pay an annual premium for the D&O Insurance in excess of 300%
of the annual premium currently paid by the Company for such coverage;
provided, further, that if the annual premiums for such insurance coverage
exceed 300% of such annual premium, the Surviving Corporation shall obtain
a policy with the greatest coverage available for a cost not exceeding
such amount. The Surviving Corporation may satisfy its obligations under
this Section 7.04(b) by purchasing a "tail" policy from an insurer with a
49
Standard & Poor's rating of at least A under the Company's existing
directors' and officers' insurance policy, that (i) has an effective term
of six years from the Effective Time, (ii) covers each director and
officer currently covered by the Company's directors' and officers'
insurance policy in effect on the date of this Agreement for actions and
omissions occurring on or prior to the Effective Time, and (iii) contains
terms that are no less favorable than those of the Company's directors'
and officers' insurance policy in effect on the date of this Agreement.
(c) The certificate of incorporation and bylaws of the Surviving Corporation
shall contain provisions no less favorable with respect to indemnification
than are set forth in the certificate of incorporation and bylaws,
respectively, of the Company, unless any modification thereof shall be
required by Law and then such modification shall be made only to the
minimum extent required by such Law, which provisions shall not be
amended, repealed or otherwise modified, except as provided in this
Section 7.04(c), for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals
who, at or prior to the Effective Time, were directors or officers of the
Company or any of its Subsidiaries.
(d) The provisions of this Section 7.04 are intended to be for the benefit of,
and will be enforceable by, each Indemnified Party, his or her heirs and
his or her representatives and are in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such
person may have by contract or otherwise.
(e) Notwithstanding anything herein to the contrary, if any claim, action,
suit, proceeding or investigation (whether arising before, at or after the
Effective Time) is made against any Indemnified Party or any other party
covered by directors' and officers' liability insurance, on or prior to
the sixth anniversary of the Effective Time, the provisions of this
Section 7.04 shall continue in effect until the final disposition of such
claim, action, suit, proceeding or investigation.
(f) If the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and
assets to any person, then, and in each such case, proper provision shall
be made so that the successors and assigns of the Surviving Corporation
shall assume the obligations set forth in this Section 7.04.
SECTION 7.05 - FURTHER ACTION; REASONABLE BEST EFFORTS
(a) As soon as practicable, and in any event no later than ten (10) business
days after the date hereof, each of the parties hereto shall (i) file any
Notification and Report Forms and related material required to be filed by
it with the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice under the HSR Act with respect to
transactions contemplated hereby and (ii) make all such other filings to
obtain the consent and approval of any Governmental Authorities under any
Applicable Non-U.S. Antitrust Laws, and in each case, shall promptly make
any further filings pursuant thereto that may be necessary, proper or
advisable. Each of the parties shall furnish to the other such information
and assistance as the other shall reasonably request in connection with
the preparation of any submissions to, or agency proceedings by, any
Governmental Authority under the HSR Act or any Non-U.S. Antitrust Law,
and each of the parties shall keep the other promptly apprised of the
content and status of any communications with, and communications from,
any Governmental Authority with respect to the Merger and the
Transactions. The parties shall seek early termination of the waiting
50
period under the HSR Act and, to the extent applicable, under any
Applicable Non-U.S. Antitrust Law in which a filing has been made in
respect of the Merger by the parties. Each party shall use its reasonable
best efforts to obtain any and all clearances pursuant to the filings made
under the HSR Act and the Applicable Non-U.S. Antitrust Laws. To the
extent practicable and permitted by a Governmental Authority, each party
hereto shall permit representatives of the other party to participate in
meetings (whether by telephone or in person) with such Governmental
Authority.
(b) Notwithstanding anything to the contrary in this Agreement, in connection
with obtaining any approval or consent from any person with respect to the
Merger, (i) without the prior written consent of Parent (which shall not
be unreasonably withheld or delayed), none of the Company or any of its
Subsidiaries shall pay or commit to pay to such person whose approval or
consent is being solicited any cash or other consideration, make any
commitment or incur any liability due to such person and (ii) no party or
its Affiliates shall be required to pay or commit to pay to such person
whose approval or consent is being solicited any cash or other
consideration, make any commitment or to incur any liability; provided,
however, that such party shall give the other parties hereto the
opportunity to make such payments.
SECTION 7.06 - PUBLIC ANNOUNCEMENTS
Parent and the Company agree that no public release or announcement concerning
the Transactions or the Merger shall be issued by either party without the prior
consent of the other party (which consent shall not be unreasonably withheld),
except as such release or announcement may be required by Law or the rules or
regulations of any securities exchange, in which case the party required to make
the release or announcement shall use its best efforts to allow the other party
reasonable time to comment on such release or announcement in advance of such
issuance; provided, however, that each of Parent and the Company may make any
public statement in response to specific questions by the press, analysts,
investors or those attending industry conferences or financial analyst
conference calls, so long as any such statements are not inconsistent with
previous public releases or announcements made by Parent or the Company in
compliance with this Section 7.06 and do not reveal non-public information
regarding the other party.
SECTION 7.07 - CONFIDENTIALITY AGREEMENT
The Company hereby waives the provisions of the Confidentiality Agreement as and
to the extent necessary to permit the consummation of the Transactions. At the
Effective Time, the Confidentiality Agreement shall be deemed to have terminated
without further action by the parties thereto. If this Agreement is terminated,
each party shall return to the other party or destroy any documents furnished by
the other party and all copies thereof any of them may have made and will hold
in confidence any information obtained from the other party except to the extent
(a) such party is required to retain or disclose such information by applicable
Law or such retention or disclosure is necessary in connection with the pursuit
or defense of a claim, (b) such information was known by such party prior to
such disclosure or was thereafter developed or obtained by such party
independent of such disclosure or (c) such information becomes generally
available to the public other than by breach of this Section 7.07. Prior to any
disclosure of information pursuant to the exception in clause (a) of the
preceding sentence, the party intending to disclose such information shall so
notify the party that provided such information in order that such party may
seek a protective order or other appropriate remedy should it choose to do so.
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SECTION 7.08 - FINANCING
[Intentionally omitted]
SECTION 7.09 - ADVICE OF CHANGES
The Company shall promptly advise Parent of any change or event (a) having or
that could be reasonably expected to have a Material Adverse Effect or (b) that
the Company believes would or would be reasonably likely to cause or constitute
a material breach of any of its representations, warranties or covenants
contained in this Agreement; provided, that no such notification shall affect
the representations, warranties, covenants or agreements of the Company (or
remedies with respect thereto) or the conditions to the obligations of the
parties under this Agreement. The Company shall give prompt written notice to
Parent of any notice or other communication (x) from any person and the response
thereto of the Company or the Subsidiaries or its or their Representatives
alleging that the consent of such person is or may be required in connection
with this Agreement or the Transactions, and (y) from any Governmental Authority
and the response thereto of the Company or the Subsidiaries or its or their
Representatives in connection with this Agreement or the Transactions.
SECTION 7.10 - ENVIRONMENTAL PERMIT TRANSFER, ASSIGNMENT AND REISSUANCE
Prior to and after the Effective Time, the Company shall assist Parent in the
transfer, assignment or securing of reissuance of any Environmental Permits and
in the provision of any required notice, to the extent necessary for Parent to
be capable of continued operation of the Company's business or to the extent
that such Environmental Permits are required under applicable Environmental Laws
to be transferred, assigned or reissued or notification is required to be
provided.
SECTION 7.11 - TRANSFER STATUTES
The Company shall have provided to Parent documentation satisfactory to Parent
that the Transactions do not trigger any filing requirement or other action
under any environmental transfer statute, including the Connecticut Transfer of
Hazardous Waste Establishments Act (Connecticut General Statutes ss.22a-134, ET
SEQ.) and the New Jersey Industrial Site Recovery Act (N.J.S.A. ss.13:1K-6, ET
SEQ.), as amended, and any rules or regulations promulgated thereunder.
52
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.01 - CONDITIONS TO THE MERGER
The obligations of each party to consummate the Merger shall be subject to the
satisfaction or waiver (where permissible), at or prior to the Effective Time,
of the following conditions:
(a) Stockholder Approval. This Agreement shall have been adopted by the
requisite affirmative vote of the stockholders of the Company in
accordance with the DGCL and the governing documents of the Company.
(b) No Order. No Governmental Authority in the United States shall have
enacted, issued, promulgated, enforced or entered any Law or Order
(whether temporary, preliminary or permanent) that is then in effect and
has the effect of making the Merger illegal or otherwise restricting,
preventing or prohibiting consummation of the Merger.
(c) HSR Act and Applicable Non-U.S. Antitrust Laws. The waiting period under
the HSR Act shall have expired or been terminated, and all other
authorizations, consents, orders or approvals of, or declarations with, or
expirations of waiting periods imposed by, any Governmental Authority
pursuant to all other Applicable Non-U.S. Antitrust Laws shall have been
obtained, or shall have occurred.
SECTION 8.02 - CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to consummate the Merger are subject to
the satisfaction or waiver (where permissible), at or prior to the Effective
Time, of the following additional conditions at or prior to the Effective Time:
(a) Representations and Warranties. Each of the representations and warranties
of the Company contained in this Agreement (i) shall be true and correct
as of the date of this Agreement and (ii) shall be true and correct in all
material respects as of the Effective Time, as though made at and as of
the Effective Time; provided, that (A) with respect to representations and
warranties contained in Section 4.03, such representations and warranties
shall be true and correct in all respects, (B) representations and
warranties that address matters only as of a particular date shall remain
true and correct in all respects as of such date, (C) in the case of this
clause (ii) only, all "Material Adverse Effect" qualifications and other
qualifications based on the word "material", the word "knowledge" or
similar phrases contained in such representations and warranties shall be
disregarded and (D) any update of or modification to the Company
Disclosure Letter made or purported to have been made after the date of
this Agreement shall be disregarded.
(b) Agreements and Covenants. The Company shall have performed, in all
material respects, all obligations and complied with, in all material
respects, its agreements and covenants to be performed or complied with by
it under this Agreement on or prior to the Effective Time.
(c) Officer Certificate. The Company shall have delivered to Parent a
certificate, dated the date of the Closing, signed by the President or any
executive officer of the Company, certifying in such capacity but not as
an individual as to the satisfaction of the conditions specified in
Sections 8.02(a) and 8.02(b).
53
(d) Material Adverse Effect. No Material Adverse Effect shall have occurred
since the date of this Agreement.
(e) No Restraints. There shall not be instituted or pending or threatened any
Action in which a Governmental Authority is challenging the Merger or the
Transactions or seeking to restrain or prohibit consummation of the Merger
or the Transactions or seeking to restrain or prohibit, limit or impose
restrictions on (or the disposition of any of) the operations of the
Company, Parent or their respective Affiliates, or any material portion of
their respective businesses or assets, and (i) all consents, approvals and
authorizations required to be obtained from Governmental Authorities to
consummate the Merger shall have been obtained and (ii) all consents,
approvals and authorizations from third parties under any contract set
forth on Section 4.05(a) of the Company Disclosure Letter, shall have been
obtained.
(f) Dissenting Shares. The number of shares of Company Common Stock held by
holders demanding appraisal rights, pursuant to the provisions of Section
262 shall represent less than 12 percent of the outstanding Company Common
Stock as of the Effective Time.
(g) Options. The number of shares of Company Common Stock held by holders of
Company Stock Awards granted under the 2000 Stock Plan that have not
consented to the acceleration of their Company Stock Awards shall
represent less than 2.50 percent of the outstanding Company Common Stock
as of the Effective Time.
SECTION 8.03 - CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions, at or prior to the Effective time:
(a) Representations and Warranties. Each of the representations and warranties
of Parent and Merger Sub contained in this Agreement (i) shall be true and
correct as of the date of this Agreement and (ii) shall be true and
correct in all material respects as of the Effective Time, as though made
at and as of the Effective Time, provided, that (A) representations and
warranties that address matters only as of a particular date shall remain
true and correct in all respects as of such date and (B) in the case of
this clause (ii) only, all qualifications based on the word "material" or
similar phrases contained in such representations and warranties shall be
disregarded.
(b) Agreements and Covenants. Parent and Merger Sub shall have performed, in
all material respects, all obligations or complied with, in all material
respects, all agreements and covenants to be performed or complied with by
them under this Agreement on or prior to the Effective Time.
(c) Officer Certificate. Parent shall have delivered to the Company a
certificate, dated the date of the Closing, signed by the President or any
executive officer of Parent, certifying in such capacity but not as an
individual as to the satisfaction of the conditions specified in Sections
8.03(a) and 8.03(b).
54
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 - TERMINATION
This Agreement may be terminated and the Merger and the other Transactions may
be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of this Agreement and the Transactions (the date
of any such termination, the "Termination Date") as follows:
(a) By mutual written consent of each of Parent, Merger Sub and the Company
duly authorized by the Boards of Directors of Parent, Merger Sub and the
Company; or
(b) By either Parent, Merger Sub or the Company, by written notice, if (i) the
Effective Time shall not have occurred on or before the later of (x)
November 30, 2007 and (y) the date that is six weeks following the date on
which the Requisite Stockholder Vote is obtained (the "Outside Date";
provided, however, that the right to terminate this Agreement under this
Section 9.01(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Merger to be consummated on or before such
date; or
(c) By either Parent, Merger Sub or the Company if any Governmental Authority
shall have enacted, issued, promulgated, enforced or entered any Order or
applicable Law or taken any other action (including the failure to take an
action) that is, in each case, then in effect and is final and
nonappealable and has the effect of preventing or prohibiting the
consummation of the Merger provided, however, that the right to terminate
this Agreement under this Section 9.01(c) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has
been the cause of , or resulted in, any such Order to have been enacted,
issued, promulgated, enforced or entered or any such action to have been
taken or omitted to be taken; or
(d) By written notice of Parent or Merger Sub if any of the following actions
or events occur or circumstances exist and whether or not they are
permitted by the terms hereof:
(i) the Board withholds, withdraws, amends, modifies or changes
its recommendation of the adoption of this Agreement in a
manner adverse to Parent or Merger Sub or shall have resolved
or publicly proposed to do so (including any disclosure as a
result of its fiduciary duty of disclosure having the effect
of an adverse modification) or been deemed to have effected
such a withdrawal pursuant to Section 7.03(e),
(ii) the Board shall have recommended to the stockholders of the
Company an Acquisition Proposal or shall have resolved or
publicly proposed to do so or shall have entered into any
letter of intent or similar document or any contract accepting
any Acquisition Proposal,
(iii) the Board fails to reaffirm its recommendation in favor of the
Merger within ten days following a request by Parent at any
time when an Acquisition Proposal has been made and not
rejected by the Board,
55
(iv) the Company shall have breached its obligations under Section
7.03,
(v) a tender offer or exchange offer for five percent or more of
the outstanding shares of Company Common Stock is commenced,
and the Board fails to recommend within ten days against
acceptance by its stockholders of such tender offer or
exchange offer (including by taking no position with respect
to the acceptance of such tender offer or exchange offer by
its stockholders), or
(vi) any securities shall have been sold pursuant to the Secondary
Offering; or
(e) By written notice of Parent or Merger Sub (if Parent is not in material
breach of its obligations or its representations and warranties under this
Agreement), if there has been a breach by the Company of any
representation, warranty, covenant or agreement contained in this
Agreement, or if any representation or warranty of the Company shall have
become untrue, in either case that would reasonably be expected to result
in a failure of a condition set forth in Section 8.02(a) or 8.02(b) (a
"Terminating Company Breach"); provided, that if such Terminating Company
Breach is reasonably curable by the Company within 20 days after the
occurrence of such Terminating Company Breach through the exercise of its
reasonable best efforts and for as long as the Company continues to
exercise such reasonable best efforts, Parent may not terminate this
Agreement under this Section 9.01(e) until the earlier of the expiration
of such 20-day period and the Outside Date;
(f) By written notice of the Company (if the Company is not in material breach
of its obligations or its representations and warranties under this
Agreement), if there has been a breach by Parent of any representation,
warranty, covenant or agreement contained in this Agreement, or if any
representation or warranty of Parent shall have become untrue, in either
case that would reasonably be expected to result in a failure of a
condition set forth in Section 8.03(a) or 8.03(b) (a "Terminating Parent
Breach"); provided, that if such Terminating Parent Breach is reasonably
curable by Parent within 20 days of the occurrence of such Terminating
Parent Breach through the exercise of its reasonable best efforts and for
as long as Parent continues to exercise such reasonable best efforts, the
Company may not terminate this Agreement under this Section 9.01(f) until
the earlier of the expiration of such 20-day period and the Outside Date;
or
(g) Prior to the approval of this Agreement by the requisite vote of the
stockholders of the Company, by written notice of the Company in
accordance with Section 7.03(d), if the Board shall have concurrently
entered into a definitive agreement with respect to a Superior Proposal;
or
(h) By Parent, Merger Sub or the Company, if, at the Special Meeting, the
Requisite Stockholder Vote is not obtained.
SECTION 9.02 - EFFECT OF TERMINATION
In the event of the termination of this Agreement pursuant to Section 9.01, this
Agreement shall forthwith become void, and there shall be no liability on the
part of any party hereto or any of their respective Affiliates or the directors,
officers, employees, agents or Representatives of any of them, and all rights
and obligations of each party hereto shall cease, except (i) as set forth in
this Section 9.02 and in Section 9.03 and Article 10; and (ii) nothing herein
shall relieve any party from liability for any breach of this Agreement. Without
limiting the foregoing, Sections 7.02(c), 7.06, 7.07, this Section 9.02, Section
9.03 and Article 10 shall survive the termination of this Agreement.
56
SECTION 9.03 - FEES AND EXPENSES
(a) Except as otherwise set forth in this Section 9.03, all Transaction Costs
incurred in connection with this Agreement and the Transactions shall be
paid by the party incurring such expenses, whether or not any of the
Transactions is consummated. As used in this Agreement, "Transaction
Costs" shall include all reasonable out-of-pocket expenses (including all
fees and expenses of counsel, accountants, investment bankers, financing
sources, experts and consultants to a party hereto and its Affiliates)
incurred by a party or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution or performance of this
Agreement, the preparation, printing, filing or mailing of the Proxy
Statement, the solicitation of stockholder approvals and all other matters
related to the consummation of the Transactions; PROVIDED THAT whether or
not the Transactions are consummated, the aggregate amount of all fees and
expenses incurred in connection with the filings and approvals
contemplated by Section 7.05(a) shall be borne fifty percent (50%) by
Parent and fifty percent (50%) by the Company.
(b) The Company agrees that if this Agreement shall be terminated by
(i) Parent or Merger Sub pursuant to Section 9.01(d) (other than
Section 9.01(d)(iii)),
(ii) the Company pursuant to Section 9.01(g), or
(iii) Parent, Merger Sub or the Company pursuant to Sections
9.01(b), 9.01(e) or 9.01(h), if prior to such termination an
Acquisition Proposal shall have been made to the Company,
publicly announced or otherwise disclosed to the stockholders
of the Company and within one year of the date of such
termination, the Company or any of its Subsidiaries enters
into a definitive agreement with respect to, or consummates
the transactions contemplated by, or the Board recommends that
the Company stockholders approve, adopt or accept, any
Acquisition Proposal, then the Company shall pay Parent the
Termination Fee in immediately available funds (x) within two
business days after the termination date, in the case of
clause (i), (y) prior to such termination, in the case of
clause (ii), and (z) within two business days after the date
of the event giving rise to the obligation to make such
payment, in the case of clause (iii).
In no event shall payment of more than one Termination Fee be made. In addition,
in the event of a termination pursuant to Sections 9.01(e) or 9.01(h), any
amounts paid under Section 9.03(d) shall be credited against the Termination
Fee.
(c) "Termination Fee" means $5,100,000.
(d) If this Agreement is terminated by Parent or Merger Sub, on the one hand,
or the Company, on the other hand, pursuant to Section 9.01(h) or by
Parent or Merger Sub pursuant to Section 9.01(e), then the Company shall
pay as promptly as possible (but in any event within two business days)
following receipt of an invoice therefor all the actual and reasonably
documented out-of-pocket fees and expenses (including reasonable legal
fees and expenses and loan commitment fees) actually incurred by Parent
57
and its Affiliates on or prior to the termination of this Agreement in
connection with the transactions contemplated by this Agreement, which, in
any event, shall not be greater than (x) $400,000 in the event this
Agreement is terminated pursuant to Section 9.01(h) and (y) $1,700,000 in
the event this Agreement is terminated pursuant to Section 9.01(e), as
directed in writing by Parent ("Termination Expenses"). If a Termination
Fee is paid by the Company to Parent at any time after the Company pays
Parent Termination Expenses, the Termination Fee shall be reduced by such
Termination Expenses previously paid.
(e) The Company acknowledges that the agreements contained in this Section
9.03 are an integral part of the transactions contemplated by this
Agreement and that without these agreements, neither the Company nor
Parent would enter into this Agreement. If the Company shall fail to pay
the Termination Fee or Termination Expenses when due, the Company shall
reimburse the other party for all costs and expenses actually incurred or
accrued by such other party (including reasonable fees and expenses of
counsel) in connection with the collection under and enforcement of this
Section 9.03, together with interest on the amount of the fee at the prime
rate of Citibank, N.A. in effect such payment was required to be made.
(f) Parent agrees that if this Agreement shall be terminated by the Company
pursuant to Section 9.01(f), then Parent shall pay the Company $3,800,000
(the "Parent Termination Fee") in immediately available funds within two
business days after the date of the event giving rise to the obligation to
make such payment.
(g) Notwithstanding anything to the contrary in this Agreement, the Company's
right to receive the Parent Termination Fee pursuant to Section 9.03(f)
shall be the exclusive remedy of the Company against Parent, Merger Sub or
any of their respective Affiliates, stockholders, partners, members,
directors, officers, agents or Representatives for any loss suffered as a
result of the breach of this Agreement by Parent or Merger Sub or the
failure of the Merger to be consummated and, upon payment of the Parent
Termination Fee pursuant to Section 9.03(f), none of Parent, Merger Sub or
any of their respective Affiliates, stockholders, partners, members,
directors, officers, agents or Representatives shall have any further
liability or obligation relating to or arising out of this Agreement or
the Transactions.
SECTION 9.04 - AMENDMENT
This Agreement may be amended by the parties hereto by action taken by or on
behalf of their respective Boards of Directors at any time prior to the
Effective Time; provided, that, after the adoption of this Agreement by the
stockholders of the Company, no amendment may be made that would reduce the
amount or change the type of consideration into which each Share shall be
converted upon consummation of the Merger or that would otherwise by Law require
approval of the stockholders of the Company, without approval of such
stockholders. This Agreement may only be amended pursuant to a written agreement
signed by each of the parties hereto.
SECTION 9.05 - WAIVER
At any time prior to the Effective Time, any party hereto may in its sole
discretion (i) extend the time for the performance of any obligation or other
act of any other party hereto, (ii) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto and
58
(iii) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
59
ARTICLE 10
GENERAL PROVISIONS
SECTION 10.01 - NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
The representations, warranties and agreements in this Agreement shall terminate
at the Effective Time or upon the termination of this Agreement pursuant to
Section 9.01, as the case may be, except that the agreements set forth in
Articles 3 and 10 and Section 7.04 shall survive the Effective Time and those
set forth in Sections 7.02(c), 7.06, 7.07, 7.10, 9.02 and 9.03 and Article 10
shall survive termination indefinitely.
SECTION 10.02 - NOTICES
All notices, requests, claims, demands and other communications hereunder shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, by facsimile, by a recognized overnight
courier service or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 10.02):
if to Parent or Merger Sub:
Brand Holdings Limited
Unit A, Brook Park, Meadow Lane
Shirebrook, Mansfield
XX00 0XX
XXXXXX XXXXXXX
Attention: Company Secretary
Facsimile: x00 000 000 0000
with a copy (which shall not constitute notice) to:
Freshfields Bruckhaus Xxxxxxxx Freshfields Bruckhaus Xxxxxxxx LLP
00 Xxxxx Xxxxxx 520 Madison Avenue, 34th Floor
London, EC4Y 1HS Xxx Xxxx, XX 00000
UNITED KINGDOM UNITED STATES OF AMERICA
Attention: Xxxxx Xxxx Attention: Xxxxxxx X. Xxxxxx, Esq.
Xxxxx Xxxxxx Fax: x0 000 000 0000
Fax:+ 00 000 000 0000
if to the Company:
Everlast Worldwide Inc.
0000 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx,
XX 00000
Attention: Xxxx Xxxxxxxx
Facsimile: 000-000-0000
60
with a copy (which shall not constitute notice) to:
Xxxxxx Xxxxxxxx Frome
Xxxxxxxxxx & Wolosky LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx,
XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
SECTION 10.03 - SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the Transactions
is not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the Transactions be
consummated as originally contemplated to the fullest extent possible.
SECTION 10.04 - ENTIRE AGREEMENT; ASSIGNMENT
This Agreement constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes, except as set forth in Section
7.02(c) and except for the SDI Letter Agreement, all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties, and any assignment without such consent shall be null and void. except
that Parent and Merger Sub may assign all or any of their rights and obligations
hereunder to any direct or indirect wholly owned subsidiary of Parent, provided
that no such assignment shall relieve the assigning party of its obligations
hereunder.
SECTION 10.05 - PARTIES IN INTEREST
This Agreement shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied, is intended to
or shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, other than Section 7.06 (which
is intended to be for the benefit of the persons covered thereby and may be
enforced by such persons).
SECTION 10.06 - SPECIFIC PERFORMANCE
The parties hereto agree that irreparable damage would occur in the event any
provision of this Agreement were not performed in accordance with the terms
hereof and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity.
61
SECTION 10.07 - GOVERNING LAW
This Agreement shall be governed by, construed and enforced in accordance with,
the Laws of the State of Delaware without regard to the conflict of laws
principles thereof. All actions and proceedings arising out of or relating to
this Agreement shall be heard and determined exclusively in any Delaware state
or federal court. The parties hereto hereby (a) submit to the exclusive
jurisdiction of any Delaware state or federal court for the purpose of any
Action arising out of or relating to this Agreement brought by any party hereto,
and (b) irrevocably waive, and agree not to assert by way of motion, defense, or
otherwise, in any such Action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the Action is brought in an
inconvenient forum, that the venue of the Action is improper, or that this
Agreement or the Transactions may not be enforced in or by any of the
above-named courts; provided, however, that such consent to jurisdiction is
solely for the purpose referred to in this Section 10.07 and shall not be deemed
to be a general submission to the jurisdiction of such court or in the State of
Delaware other than for such purposes.
SECTION 10.08 - WAIVER OF JURY TRIAL
Each of the parties hereto hereby waives to the fullest extent permitted by
applicable Law any right it may have to a trial by jury with respect to any
Action directly or indirectly arising out of, under or in connection with this
Agreement or the Transactions. Each of the parties hereto (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of any Action, seek
to enforce that foregoing waiver and (b) acknowledges that it and the other
parties hereto have been induced to enter into this Agreement and the
Transactions, as applicable, by, among other things, the mutual waivers and
certifications in this Section 10.08.
SECTION 10.09 - INTERPRETATION
(a) When a reference is made in this Agreement to an Article, a Section or
Exhibit, such reference shall be to an Article of, a Section of, or an
Exhibit to, this Agreement unless otherwise indicated.
(b) The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(c) Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
(d) The words "hereof," "herein," "hereby" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement.
(e) All terms defined in this Agreement shall have the defined meanings when
used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(f) The definitions contained in this Agreement are applicable to the singular
as well as the plural forms of such terms and to the masculine as well as
to the feminine and neuter genders of such term.
62
(g) Any contract, instrument or statute defined or referred to herein or in
any contract or instrument that is referred to herein means such contract,
instrument or statute as from time to time amended, modified or
supplemented (in the case of contracts to the extent permitted hereby),
including (in the case of contracts or instruments) by waiver or consent
and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments
incorporated therein. References to a person are also to its permitted
successors and assigns.
SECTION 10.10 - COUNTERPARTS
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
SECTION 10.11 - EFFECTIVENESS OF THIS AGREEMENT
Notwithstanding the execution and delivery of this Agreement on the date hereof
by the parties hereto, this Agreement shall not be effective (and binding
obligations shall not be created) unless and until each of the following shall
have been satisfied (or waived in writing by Parent):
(i) The Original Merger Agreement shall have been terminated in
accordance with its terms immediately prior to the execution
of this Agreement;
(ii) The "Termination Fee" (as defined in the Original Merger
Agreement) payable under the Original Merger Agreement shall
have been paid in full and shall not have exceeded $3,000,000,
and neither the Company nor any of its Subsidiaries shall have
any liability, debts or other obligations to any person in
connection therewith or the transactions contemplated thereby;
(iii) Parent and Merger Sub shall have entered into a voting
agreement with The Estate of Xxxxxx X Xxxxxxxx (the "Estate"),
pursuant to which the Estate will vote (or execute consents in
respect of) all of the shares owned by it (being at least
515,941 Shares) in favor of approval of this Agreement and the
transactions contemplated by this Merger Agreement, against
any action, proposal, transaction or agreement involving the
Company or its Subsidiaries that would reasonably be expected
to prevent, impede, frustrate, interfere with, delay, postpone
or adversely affect the Merger or the other transactions
contemplated by this Agreement and against any Acquisition
Proposal other than an Acquisition Proposal made by the
Parent, and otherwise on terms substantially identical to the
voting agreement entered into by the Estate in connection with
the Original Merger Agreement (which prior to the date hereof
has been amended or clarified to correct the factual error in
the definition of "Owned Shares" therein and (ii) thereby
terminate, with respect to all of the shares owned by the
Estate in connection with the termination of the Original
Merger Agreement);
(iv) The "Company Disclosure Letter" furnished in connection with
this Agreement not shall contain any information relating to
the Company or its Subsidiaries, its or their business
operations or prospects that is adverse when compared to the
information set forth in the "Company Disclosure Letter"
furnished in connection with the Original Merger Agreement.
63
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
BRANDS HOLDINGS LIMITED
By /s/ Xxxxxx Xxxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Group Financial Director
EWI ACQUISITION, INC.
By /s/ Xxxxx Xxxxxx
-----------------------------------------
Name: Xxxxx Xxxxxx
Title: Chairman, CEO and President
EVERLAST WORLDWIDE INC.
By /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: President and CEO
64
