As Executed
MERGER AGREEMENT
by and among
DOLLAR TREE STORES, INC.,
DOLLAR TREE NEW YORK, INC.,
▇▇▇▇▇'▇ MERCHANDISING, INC. AND
THE SHAREHOLDERS OF
▇▇▇▇▇'▇ MERCHANDISING, INC.
As of June 15, 1999
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TABLE OF CONTENTS
ARTICLE 1
THE MERGER................................................................2
1.1 Surviving Corporation...............................................2
1.2 Certificate of Incorporation; Bylaws................................2
1.3 Directors and Officers..............................................2
1.4 Effective Time......................................................2
1.5 Other Effects of the Merger.........................................3
1.6 Tax-Free Reorganization.............................................3
1.7 Registration of Shares..............................................3
ARTICLE 2
PURCHASE PRICE; CONVERSION OF SHARES......................................3
2.1 Conversion or Cancellation of Shares; Escrow........................3
(a) Exchange Ratio.................................................3
(b) Escrows of Shares..............................................4
(c) Stock Splits, etc..............................................4
(d) Stock of Sub...................................................4
2.2 Fractional Shares...................................................4
2.3 Procedures Relating to Company Shares...............................4
(a) Exchange of Certificates.......................................4
(b) Cash Payments..................................................5
(c) Lost, Mislaid, Stolen or Destroyed Certificates................5
(d) No Stock Transfers.............................................6
(e) Unclaimed Merger Consideration.................................6
(f) Dissenting Shares..............................................6
2.4 Post-Closing Adjustment.............................................7
ARTICLE 3
CLOSING...................................................................7
3.1 The Closing.........................................................7
ARTICLE 4
SHAREHOLDER REPRESENTATIONS AND WARRANTIES................................7
4.1 Corporate Organization; Authorization...............................7
4.2 No Violation........................................................8
4.3 Enforceability......................................................9
4.4 Capitalization......................................................9
4.5 Subsidiaries; Affiliates; Conflict of Interest.....................10
4.6 Investments in Others..............................................11
4.7 Financial Statements...............................................11
4.8 Unreported and Contingent Liabilities..............................11
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4.9 Absence of Certain Changes.........................................12
4.10 [Reserved].........................................................12
4.11 Licenses and Permits...............................................13
4.12 Litigation.........................................................13
4.13 Inventory..........................................................13
4.14 Real Property......................................................14
4.15 Environmental Matters..............................................15
4.16 Compliance With Laws Generally.....................................16
4.17 Employee Benefit Plans.............................................17
4.18 Intellectual Property..............................................19
4.19 Tax Matters........................................................20
4.20 No Broker Involved.................................................22
4.21 Contracts..........................................................22
4.22 Officers and Employees.............................................24
4.23 Labor Relations....................................................24
4.24 Insurance..........................................................26
4.25 Title to Property and Related Matters..............................26
4.26 Accounts and Notes Receivable......................................26
4.27 Nondisclosed Payments..............................................26
4.28 Credit Cards.......................................................26
4.29 Business Practices.................................................27
4.30 Bank Accounts......................................................27
4.31 Affiliates.........................................................27
4.32 Pooling............................................................27
4.33 Reorganization Under Section 368 of the Code.......................28
4.34 Full Disclosure....................................................28
4.35 Securities Law Matters.............................................28
4.36 Due Diligence......................................................29
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.........................30
5.1 Corporate Organization.............................................30
5.2 Authorization and Approval of Agreement............................30
5.3 Ability to Carry Out Agreement.....................................30
5.4 Investment Representation..........................................31
5.5 No Broker Involved.................................................31
5.6 Parent Common Stock................................................31
5.7 ...................................................................31
ARTICLE 6
CERTAIN COVENANTS........................................................31
6.1 Conduct of Business................................................31
6.2 Public Announcements...............................................33
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6.3 Supplements to Schedules...........................................34
6.4 Pooling of Interests Accounting....................................34
6.5 Antitrust Filing...................................................34
6.6 No Solicitation of Transactions....................................34
6.7 Shareholder Approval...............................................35
6.8 Dissenters' Rights Notices.........................................35
6.9 Shareholder Representative.........................................35
6.10 Certain Shareholder Covenants......................................36
6.11 Access to Information..............................................37
6.12 Legal Requirements.................................................37
6.13 Third Party Consents...............................................37
6.14 FIRPTA.............................................................38
6.15 Notification of Certain Matters....................................38
6.16 Tax Matters........................................................38
(a) Termination of S Corporation Election........................38
(b) Allocation of Income..........................................38
(c) Tax Returns...................................................38
(d) Post-Closing Tax Audits.......................................38
6.17 Best Efforts and Further Assurances................................38
6.18 Post-Closing Audit.................................................39
6.19 Cooperation Following the Closing..................................40
ARTICLE 7
SURVIVAL AND INDEMNIFICATION.............................................40
7.1 Indemnification Obligations of the Shareholders....................40
7.2 Indemnification Obligations of Parent..............................41
7.3 Limitations on Indemnification.....................................42
7.4 Indemnification Procedure..........................................43
7.5 Survival; Claims Period............................................44
7.6 Recovery...........................................................45
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND SUB....................45
8.1 Conditions Precedent...............................................45
(a) Representations, Warranties and Covenants.....................45
(b) Legal Actions.................................................46
(c) Consents......................................................46
(d) Deliveries....................................................46
(e) Antitrust Filing..............................................46
(f) Pooling Opinion...............................................47
(g) Stock Price of Parent Common Stock............................47
(h) Escrow Agreement..............................................47
(i) Non-Competition Agreements....................................47
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(j) No Material Adverse Change....................................47
(k) Related Party Debt............................................47
(l) Dissenting Shares.............................................47
(m) Shareholder Approval..........................................48
(n) Corporate Documents...........................................48
(o) Registration Rights Agreement.................................48
(p) Termination of Certain Agreements.............................48
8.2 Waiver.............................................................48
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE SHAREHOLDERS AND COMPANY..........................................48
9.1 Conditions Precedent...............................................48
(a) Representations, Warranties and Covenants.....................48
(b) Legal Actions.................................................48
(c) Deliveries....................................................48
(d) Antitrust Filing..............................................49
(e) Stock Price of Parent Common Stock...........................49
(f) Registration Rights Agreement.................................49
(g) No Material Adverse Change....................................49
9.2 Waiver.............................................................49
ARTICLE 10
TERMINATION..............................................................50
10.1 Termination........................................................50
10.2 Effect of Termination..............................................51
ARTICLE 11
CERTAIN EXPENSES.........................................................51
11.1 Deal Expenses......................................................51
11.2 Deal Expenses Paid in Event of Closing.............................51
11.3 Deal Expenses Paid in Event of Termination.........................51
ARTICLE 12
MISCELLANEOUS............................................................52
12.1 Benefits and Burdens: Assignment...................................52
12.2 Amendment..........................................................52
12.3 Notices............................................................52
12.4 Entire Agreement...................................................53
12.5 Headings...........................................................53
12.6 Construction.......................................................54
12.7 Incorporation of Exhibits and Schedules............................54
12.8 Counterparts.......................................................54
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12.9 Governing Law......................................................54
12.10 Enforcement; Jurisdiction; Waiver of Jury Trial....................54
12.11 Severability.......................................................55
12.12 Time...............................................................55
12.13 Knowledge..........................................................55
12.14 Statutes...........................................................55
12.15 Specific Performance and Other Remedies............................55
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DEFINED TERMS
The following is a list of the defined terms used in this Agreement:
TERMS SECTION
1996 Financial Statements.........................................Section 4.7(a)
1997 Financial Statements.........................................Section 4.7(a)
1998 Financial Statements.........................................Section 4.7(a)
Affiliate.........................................................Section 4.5(a)
Agreement..............................................Recitals and Section 12.7
Alternative Transaction........................................Section 6.6(a)(i)
Ancillary Agreements..............................................Section 4.1(b)
Antitrust Filing.....................................................Section 6.5
Average Closing Price.............................................Section 2.1(a)
Benefit Plans....................................................Section 4.17(b)
C Corporation Period.............................................Section 4.19(j)
CERCLA...........................................................Section 4.15(b)
Certificate(s)....................................................Section 2.3(a)
Certificate of Merger................................................Section 1.4
Claims Period........................................................Section 7.5
Closing..............................................................Section 3.1
Closing Balance Sheet............................................Section 6.18(a)
Closing Date.........................................................Section 3.1
Closing Equity...................................................Section 6.18(b)
COBRA............................................................Section 4.17(e)
Code....................................................................Recitals
Company.................................................................Recitals
Company Ancillary Agreements......................................Section 4.1(a)
Company Contracts...................................................Section 4.21
Company Shareholders Meeting......................................Section 4.1(a)
Company Shares.......................................................Section 2.1
Deal Expenses.......................................................Section 11.1
Deficit Amount.......................................................Section 2.4
Disclosure Schedule....................................................Article 4
Dissenting Shares..............................................Section 2.3(f)(i)
Effective Time.......................................................Section 1.4
Employees........................................................Section 4.17(b)
Environmental Laws...............................................Section 4.15(a)
ERISA............................................................Section 4.17(a)
Escrow Agreement.......................................Section 2.1(b) and 8.1(h)
Escrow Shares.....................................................Section 2.1(b)
Exchange Act.........................................................Section 5.3
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Exchange Ratio....................................................Section 2.1(a)
Financial Statement Date..........................................Section 4.7(a)
Financial Statements..............................................Section 4.7(a)
Fully Diluted Company Shares......................................Section 2.1(a)
HSR Act..............................................................Section 5.3
Indemnified Party.................................................Section 7.4(a)
Indemnifying Party................................................Section 7.4(a)
Intellectual Property............................................Section 4.18(a)
Interim Balance Sheet.............................................Section 4.7(b)
Interim Financial Statements......................................Section 4.7(b)
Inventory...........................................................Section 4.13
Leased Real Property.............................................Section 4.14(a)
Material Adverse Change..............................................Section 4.9
Merger..................................................................Recitals
Merger Consideration..............................................Section 2.1(a)
Multiemployer Plan...............................................Section 4.17(h)
Nasdaq ...........................................................Section 2.1(a)
New York Law............................................................Recitals
NLRB.............................................................Section 4.23(a)
Non-Competition Agreements........................................Section 8.1(i)
OSHA.............................................................Section 4.23(e)
Parent..................................................................Recitals
Parent Ancillary Agreements..........................................Section 5.2
Parent Basket Amount..............................................Section 7.3(b)
Parent Common Stock..................................................Section 1.7
Parent Losses........................................................Section 7.1
Parent Indemnified Parties...........................................Section 7.1
Parent SEC Reports..................................................Section 4.36
Personal Assets...................................................Section 6.1(m)
Proceeding..........................................................Section 4.12
Qualified Retirement Plan........................................Section 4.17(k)
Registration Rights Agreement........................................Section 1.7
Related Party Obligations.........................................Section 4.5(c)
Rule 145 Affiliates.................................................Section 4.31
S Corporation Period.............................................Section 4.19(j)
S Election.......................................................Section 4.19(j)
Securities Act.......................................................Section 1.7
Shareholder Ancillary Agreements..................................Section 4.1(b)
Shareholder Indemnification Parties..................................Section 7.2
Shareholder Losses...................................................Section 7.2
Shareholder Basket Amount.........................................Section 7.3(a)
Shareholder Representative........................................Section 6.9(a)
Shareholder(s)..........................................................Recitals
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Statement of Closing Equity......................................Section 6.18(b)
Sub.....................................................................Recitals
Surviving Corporation................................................Section 1.1
Target Amount........................................................Section 2.4
Tax..............................................................Section 4.19(a)
Tax Return.......................................................Section 4.19(b)
Termination Date....................................................Section 10.1
Third Party....................................................Section 6.6(a)(i)
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EXHIBITS
Exhibit A Registration Rights Agreement
Exhibit B Escrow Agreement
Exhibit C Opinion of Counsel for the Company and the Shareholders
Exhibit D Non-Competition Agreement
Exhibit E Opinion of Counsel for Parent and Sub
Exhibit F One Year Employment Agreement Between Company and
▇▇▇▇▇ ▇. ▇▇▇▇▇
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MERGER AGREEMENT
THIS MERGER AGREEMENT, dated as of June 15, 1999 (the
"Agreement"), by and among DOLLAR TREE STORES, INC., a Virginia corporation
("Parent"), DOLLAR TREE NEW YORK, INC., a New York corporation and a wholly
owned subsidiary of Parent ("Sub"), ▇▇▇▇▇'▇ MERCHANDISING, INC., a New York
corporation (the "Company"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, and ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, the sole shareholders of the
Company (each may be referred to herein as a "Shareholder" or collectively as
the "Shareholders").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have each determined that it is in the best interests of their
respective shareholders that, upon the terms and subject to the conditions of
this Agreement and in accordance with the New York Business Corporation Law
("New York Law"), Sub and the Company will enter into a business combination
transaction pursuant to which Sub will merge with and into the Company (the
"Merger");
WHEREAS, Parent and Sub require the Merger to be accounted for
as a pooling of interests and to qualify as a "reorganization" within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code");
WHEREAS, the parties have determined that the Merger and the
other transactions contemplated hereby are consistent with, and in furtherance
of, their respective business strategies and goals;
WHEREAS, the Board of Directors of Sub and Parent has approved
this Agreement, the Merger, and the transactions contemplated hereby in
accordance with applicable law and the Articles or Certificate of Incorporation
and By-laws of Parent and Sub;
WHEREAS, the Board of Directors of the Company has (i)
approved this Agreement, the Merger, and the transactions contemplated hereby in
accordance with the requirements of New York Law and the Certificate of
Incorporation and the By-laws of the Company; (ii) found this Agreement, the
Merger, and the transactions contemplated hereby to be fair to the Shareholders;
and (iii) directed this Agreement and the Merger to be submitted to, and
recommended approval by, the Shareholders;
WHEREAS, the Company and the Shareholders, on the one hand,
and Parent and Sub, on the other hand, desire to make certain representations,
warranties, covenants and other agreements in connection with the Merger; and
WHEREAS, a portion of the shares of common stock of Parent
otherwise issuable by Parent in connection with the Merger shall be placed in
escrow by Parent for purposes of
1
satisfying damages, losses, expenses and other similar charges which result from
breaches of the representations, warranties and covenants of the Company and the
Shareholders contained herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements set forth herein, the parties hereto agree as
follows:
ARTICLE 1
THE MERGER
1.1 Surviving Corporation. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with New York Law, at
the Effective Time (as defined in Section 1.4), Sub shall be merged with and
into the Company. The separate corporate existence of Sub shall cease and the
Company shall continue as the surviving corporation of the Merger (sometimes
referred to herein as the "Surviving Corporation") as a wholly-owned subsidiary
of Parent under the name of the Sub and shall continue its corporate existence
under the laws of the State of New York.
1.2 Certificate of Incorporation; Bylaws. At the Effective
Time, the Certificate of Incorporation of the Surviving Corporation shall
amended to take the same form as the Certificate of Incorporation of the Sub
until thereafter amended as provided by law. The Bylaws of Sub, as in effect
immediately prior to the Effective Time, shall become the Bylaws of the
Surviving Corporation until thereafter amended.
1.3 Directors and Officers. The directors of Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
immediately after the Effective Time, each to hold the office of director of the
Surviving Corporation in accordance with the provisions of the applicable laws
of the State of New York and the Certificate of Incorporation and Bylaws of the
Surviving Corporation until their successors are duly qualified and elected. The
officers of Sub immediately prior to the Effective Time shall be the officers of
the Surviving Corporation immediately after the Effective Time, each to hold
office in accordance with the provisions of the Bylaws of the Surviving
Corporation.
1.4 Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Articles 8 and 9, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger (the "Certificate of Merger"), together with any required related
certificates, with the Secretary of State of the State of New York, in such form
as required by, and executed in accordance with the relevant provisions of, New
York Law and in such form as approved by the Company and Parent prior to such
filing. The Merger shall become effective on the later of (i) the time of filing
by the Department of State of the State of New York in accordance with New York
Law of the original, properly executed Certificate of Merger, or (ii) 11:59 p.m.
on June 30, 1999, which is the time specified to be the effective time in the
Certificate of Merger. The time at which the Merger shall become effective is
referred to herein as the
2
"Effective Time." The Certificate of Merger shall be submitted for filing at the
time of the Closing and a draft thereof may be submitted prior thereto for
clearance.
1.5 Other Effects of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of New
York Law. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the rights, privileges, immunities, powers and
purposes and all the property, real and personal, including subscriptions to
shares, causes of action and every other asset of the Company and Sub shall vest
in the Surviving Corporation without further act or deed, and all liabilities,
obligations and penalties of the Company and Sub shall become the liabilities,
obligations and penalties of the Surviving Corporation.
1.6 Tax-Free Reorganization. The Merger is intended to
constitute a reorganization within the meaning of Section 368(a) of the Code,
and this Agreement is intended to constitute a plan of reorganization within the
meaning of the regulations promulgated under Section 368(a) of the Code.
1.7 Registration of Shares. Parent and Shareholders shall
execute and deliver at Closing a Registration Rights Agreement in the form
attached hereto as Exhibit A (the "Registration Rights Agreement") regarding the
filing of a registration statement covering the resale by the Shareholders of
the shares of voting common stock, par value $.01 per share, of Parent (the
"Parent Common Stock") to be issued in the Merger and other matters all as set
forth in such Registration Rights Agreement.
ARTICLE 2
PURCHASE PRICE; CONVERSION OF SHARES
2.1 Conversion or Cancellation of Shares; Escrow. Subject to
the provisions of this Article 2, at the Effective Time, by virtue of the Merger
and without any further action by the Shareholders, the shares of capital stock
of the Company outstanding immediately prior to the Effective Time (the "Company
Shares") shall be canceled and extinguished and automatically converted into
shares of Parent Common Stock, as follows:
(a) Exchange Ratio. Each Company Share issued and
outstanding immediately prior to the Effective Time shall be converted, subject
to Sections 2.1(c) and 2.2, into that number of shares of Parent Common Stock as
is determined by multiplying such Company Share by a ratio equal to (i) Merger
Consideration divided by (ii) Fully Diluted Company Shares (such ratio shall be
referred to herein as the "Exchange Ratio"). The "Merger Consideration" shall be
a number of shares of Parent Common Stock equal to $20,000,000 divided by the
arithmetic average of the closing price per share of Parent Common Stock, as
reported on the Nasdaq National Market System (the "Nasdaq"), for each of the
four (4) consecutive trading days ending with the trading day which occurs
immediately prior to the Closing Date (the "Average Closing Price"). "Fully
Diluted Company Shares" means the total number of shares of Company common stock
issued and outstanding immediately prior to the Effective Time plus any such
shares which may be
3
or become issuable by the Company pursuant to options, warrants, convertible
securities or other stock rights as of the Effective Time.
(b) Escrows of Shares. An aggregate of five percent
(5%) of the shares of Parent Common Stock issuable with respect to Company
Shares in the Merger (together with any dividends or distributions accrued or
made with respect to such shares of Parent Common Stock after the Effective Time
and any other securities or property which may be issued after the Effective
Time in exchange for such shares of Parent Common Stock in any merger or
recapitalization or similar transaction involving Parent, the "Escrow Shares")
shall be transferred and pledged when and as issued on a pro rata basis to the
Escrow Agent (as defined in the "Escrow Agreement" attached as Exhibit B) to
secure the payment of any Deficit Amount pursuant to Section 2.4 hereof and the
indemnification obligations of the Shareholders pursuant to this Agreement and
the Escrow Agreement.
(c) Stock Splits, etc. If after the date of the
signing of this Agreement but prior to the Effective Time, Parent should split
or combine the Parent Common Stock, or pay a stock dividend or other stock
distribution in Parent Common Stock, or otherwise change the Parent Common Stock
into any other securities, or make any other dividend or distribution on the
Parent Common Stock, then the Exchange Ratio and the number of shares of Parent
Common Stock constituting the aggregate consideration issuable in the Merger in
respect of Company Shares shall be appropriately adjusted to reflect such
change.
(d) Stock of Sub. Each share of common stock, par
value $.01 per share, of Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one (1) duly and
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
2.2 Fractional Shares. No scrip or fractional shares of Parent
Common Stock shall be issued in the Merger. For purposes of determining the
number of shares of Parent Common Stock to be issued to each Shareholder in the
Merger, all the Company Shares owned by such Shareholder shall be aggregated
prior to applying the Exchange Ratio. If, after such aggregation, any
Shareholder is to receive a fractional share, such Shareholder shall be
entitled, after the later of (a) the Effective Time or (b) the surrender of such
Shareholder's Certificate(s) (as defined below) that represent such Company
Shares, to receive from Parent an amount in cash in lieu of such fractional
share, based on the Average Closing Price.
2.3 Procedures Relating to Company Shares.
(a) Exchange of Certificates. On or prior to the
Closing Date, each Shareholder shall surrender all outstanding certificates
which immediately prior to the Effective Time represented Company Shares (the
"Certificate" or "Certificates") for payment therefor and conversion thereof.
Delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to Parent. Upon surrender to
Parent of a Certificate, the
4
holder of such Certificate shall be entitled to receive in exchange therefor (i)
one or more certificates as requested by the holder (properly issued, executed
and countersigned, as appropriate) representing that number of whole shares of
fully paid and nonassessable shares of Parent Common Stock to which such holder
of Company Shares shall have become entitled pursuant to the provisions of
Section 2.1 hereof; (ii) as to any fractional share of Parent Common Stock, a
check representing the cash consideration to which such holder shall have become
entitled pursuant to Section 2.2 hereof; and (iii) any dividend or other
distribution to which such holder is entitled pursuant to Section 2.3(b) hereof,
and the Certificate so surrendered shall forthwith be canceled. No interest will
be paid or accrued on the cash payable upon the surrender of the Certificates.
If any portion of the consideration to be received pursuant to Sections 2.1, 2.2
and 2.3(b) upon exchange of a Certificate (whether a certificate representing
shares of Parent Common Stock or by check representing cash for a fractional
share) is to be issued or paid to a person other than the person in whose name
the Certificate surrendered in exchange therefor is registered, it shall be a
condition of such issuance and payment that the Certificate so surrendered shall
be properly endorsed or otherwise in proper form for transfer and that the
person requesting such exchange shall pay in advance any transfer or other taxes
required by reason of the issuance of a Certificate or a check representing cash
for a fractional share to such other person, or established to the satisfaction
of Parent that such tax has been paid or that such tax is not applicable. From
the Effective Time until surrender in accordance with the provisions of this
Section 2.3, each Certificate shall represent for all purposes only the right to
receive the consideration provided in Sections 2.1, 2.2 and 2.3(b). All payments
of respective shares of Parent Common Stock that are made upon surrender of
Certificates in accordance with the terms hereof shall be deemed to have been
made in full satisfaction of rights pertaining to the Company Shares evidenced
by such Certificates.
(b)Cash Payments. No dividends or other distributions
with respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock, and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section 2.2, in each case until the
surrender of such Certificate in accordance with this Article 2. Following
surrender of any such Certificate, there shall be paid to the holder of the
certificate representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.2 and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock; and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole shares of Parent
Common Stock.
(c) Lost, Mislaid, Stolen or Destroyed Certificates.
In the case of any lost, mislaid, stolen or destroyed Certificate, the holder
thereof may be required, as a condition precedent to delivery to such holder of
the consideration described in Sections 2.1, 2.2 and 2.3(b) hereof, to deliver
to Parent a bond in such reasonable sum or a reasonably satisfactory indemnity
agreement
5
as Parent may direct as indemnity against any claim that may be made against
Parent or the Surviving Corporation with respect to the Certificate alleged to
have been lost, mislaid, stolen or destroyed.
(d) No Stock Transfers. After the Effective Time,
there shall be no transfers on the stock transfer books of the Surviving
Corporation of the Company Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for transfer, they shall be canceled and exchanged for the
consideration described in Sections 2.1, 2.2 and 2.3(b) hereof.
(e) Unclaimed Merger Consideration. Any shares of
Parent Common Stock or cash due former shareholders of the Company pursuant to
Sections 2.1, 2.2 and 2.3(b) hereof that remain unclaimed by such former
shareholders for six (6) months after the Effective Time shall be held by
Parent, and any former holder of Company Shares who has not theretofore complied
with Section 2.3(a) shall thereafter look only to Parent for issuance of the
number of shares of Parent Common Stock and other consideration to which such
holder has become entitled pursuant to the provisions of Sections 2.1, 2.2 and
2.3(b) hereof; provided, however, that neither Parent nor any party hereto shall
be liable to a former holder of Company Shares for any amount required to be
paid to a public official pursuant to any applicable abandoned property, escheat
or similar law.
(f) Dissenting Shares.
(i) To the extent that the availability of
appraisal rights are mandated under New York Law, Company Shares that have not
been voted for adoption of the Merger and with respect to which appraisal rights
have been properly demanded in accordance with New York Law (the "Dissenting
Shares") shall not be converted pursuant to this Article 2 or transferred to the
Escrow Agent at or after the Effective Time unless and until the holder of such
shares becomes ineligible for such appraisal rights. If a holder of Dissenting
Shares becomes ineligible for appraisal, then, as of the Effective Time or the
occurrence of such event, whichever later occurs, such holder's Dissenting
Shares shall cease to be Dissenting Shares and shall be converted pursuant to
this Article 2 (subject to all of the rights and obligations of the Shareholders
hereunder). The Company shall immediately give Parent notice of such assertion
and Parent shall have the right to participate in all negotiations and
proceedings with respect to any such demands. The Company shall not, except with
the prior written consent of Parent, voluntarily make any payment with respect
to, or settle or offer to settle, any such demand for payment. Holders of
Dissenting Shares shall have those rights, but only those rights, of holders of
"dissenting shares" under Sections 623 and 910 et seq. of the New York Law, and
payment for Dissenting Shares shall only be made as required by New York Law.
(ii) Each Shareholder hereby irrevocably
disclaims and relinquishes, for himself, his personal representative,
successors, heirs and assigns any and all rights to demand or be paid for the
fair value of such Company Shares as described above.
6
2.4 Post-Closing Adjustment. If the Closing Equity as
determined in accordance with Section 6.18 is less than $3,500,000 (the "Target
Amount"), then the excess of the Target Amount over the Closing Equity (as
defined in Section 6.18) shall be referred to as the "Deficit Amount" and,
within five (5) business days of the date on which the final Statement of
Closing Equity (as defined in Section 6.18) is determined (or on such earlier
date as may be set forth in the Escrow Agreement), the Escrow Agent shall
surrender to Parent, out of the Escrow Shares, a number of shares of Parent
Common Stock for cancellation without consideration determined by dividing (i)
the Deficit Amount by (ii) the Average Closing Price; provided, however, that
the Shareholders shall be responsible for paying the Deficit Amount in
accordance with Article 7, if such Escrow Shares are insufficient to pay the
Deficit Amount.
ARTICLE 3
CLOSING
3.1 The Closing. The closing ("Closing") will take place at
10:00 a.m. New York time on a date to be specified by the parties, at a mutually
agreed location, no later than the second business day after fulfillment of all
the conditions set forth in Article 8 which have not been waived by Parent, and
all the conditions set forth in Article 9 which have not been waived by the
Company. The parties will use all commercially reasonable efforts to close on
June 25, 1999, but shall have no obligation to waive any conditions to closing
that have not been fulfilled by June 25, 1999. The date on which the Closing is
held is referred to as the "Closing Date." In the event the Closing is held
before the Effective Time, all deliveries at Closing shall be held in escrow by
counsel to the parties until the Effective Time, at which time the deliveries
shall be released.
ARTICLE 4
SHAREHOLDER REPRESENTATIONS AND WARRANTIES
Each Shareholder severally and jointly represents and warrants
to Parent and Sub, that subject only to the exceptions specifically stated in
this Article and contained in the disclosure schedule delivered by the Company
to Parent concurrently and identified as the "Disclosure Schedule," the
following representations, warranties and schedules are true, accurate, and
complete as of the date of this Agreement and as of the Closing Date:
4.1 Corporate Organization; Authorization.
(a) The Company has the requisite power and authority
to execute and deliver this Agreement and all agreements, documents and
instruments executed and delivered by the Company in connection with the
transactions contemplated by this Agreement (the "Company Ancillary Agreements")
and to fully perform its respective obligations hereunder and thereunder, and
the execution and delivery of this Agreement and the Company Ancillary
Agreements by the Company and the Company's performance of the transactions
contemplated herein and therein have been duly authorized by all requisite
corporate and shareholder action. Pursuant to that certain unanimous consent in
writing dated June 15, 1999, a certified copy of which is attached as Schedule
7
4.1(a) hereto, the Board of Directors and Shareholders of Company have, as of
the date of this Agreement, determined unanimously that this Agreement and the
Merger is fair to, and in the best interests of the Company and its
shareholders, recommended that the shareholders of the Company approve this
Agreement and irrevocably approved the Agreement and the Merger subject only to
conditions precedent set forth in Article 8. Pursuant to such consent, (i) the
Company has, in accordance with New York Law and other applicable law and its
Certificate of Incorporation and Bylaws, convened a meeting of its shareholders
(the "Company Shareholders Meeting") to consider and vote upon the Merger; (ii)
the Board of Directors of the Company has recommended and declared advisable
approval of this Agreement, the Certificate of Merger, the Merger and the other
transactions contemplated hereby; and (iii) the shareholders of the Company have
voted the requisite number of Company Shares for, or otherwise granted their
approval of, the Merger, this Agreement, and the Certificate of Merger.
(b) Each of the Shareholders has the requisite power
and capacity to execute and deliver this Agreement and all agreements, documents
and instruments executed and delivered by such Shareholder in connection with
the transactions contemplated by this Agreement (the "Shareholder Ancillary
Agreements" and, together with the Shareholder Ancillary Agreements, the
"Ancillary Agreements") and to fully perform his respective obligations
hereunder and thereunder, and the execution and delivery of this Agreement.
(c) The Company is a corporation validly existing and
in good standing under the laws of the State of New York and has all requisite
corporate power and authority to own, operate and lease its property and to
carry on its business as now being conducted. The ownership or leasing of the
Company's properties and the conduct of its business do not require that the
Company be qualified to conduct business as a foreign corporation in any
jurisdiction.
(d) The Company has previously delivered to Parent a
true, correct, and complete copy of its Certificate of Incorporation, By-laws
and all amendments to the foregoing. The minute books of Company made available
to counsel for Parent are the only minute books of Company and contain a
reasonably accurate summary, in all material respects, of all meetings of
directors (or committees thereof) and the shareholders or actions by written
consent since the time of incorporation of Company.
4.2 No Violation.
(a) Neither the execution and delivery of this
Agreement or any of the Ancillary Agreements by the Company or the Shareholders
nor the consummation of the transactions contemplated hereby or thereby by the
Company or the Shareholders shall (i) violate or result in a breach of or
constitute a default under any provision of the Company's certificate of
incorporation or bylaws; (ii) violate any order, arbitration award, judgment,
decree, law, ordinance, regulation or any other restriction of any kind or
character to which the Company or any Shareholder is a party or is bound or to
which any property of the Company or any Shareholder is subject or is bound;
(iii) except as described in Section 4.2 (b) of the Disclosure Schedule, violate
or result in a breach
8
of or constitute a default (or would result in or constitute such a breach or
default with notice or lapse of time or both) under any provision of any Company
Contract (as defined below); (iv) except as described in Section 4.2 (b) of the
Disclosure Schedule, require the consent of any other party to any of the items
described in this subsection; or (v) except as described in the last sentence of
Section 5.3, require the consent or approval of any governmental body, agency or
authority.
(b) Attached as Section 4.2 (b) of the Disclosure
Schedule is a description of (i) all amounts that may become payable; (ii) all
Company Contracts that may be in default or be breached, assuming no consents or
waivers are obtained; and (iii) any expense or loss that may be realized under
GAAP, as a result of or in connection with the Merger or the transactions
contemplated by this Agreement.
4.3 Enforceability. The Company and the Shareholders have duly
executed and delivered this Agreement and each of the Ancillary Agreements, and
this Agreement and each of the Ancillary Agreements constitutes a valid and
binding agreement, enforceable against the Company and the Shareholders in
accordance with its terms, except as enforceability may be limited by laws of
general application relating to bankruptcy, insolvency and debtors' relief, and
by general principles of equity.
4.4 Capitalization.
(a) The authorized capital stock of the Company and
the issued and outstanding shares of capital stock are set forth in Section
4.4(a) of the Disclosure Schedule. Section 4.4(a) of the Disclosure Schedule
also sets forth a true and complete list of all of the shareholders of the
Company as of the date of this Agreement, the number of shares of capital stock
owned by each of them, the date such shares were transferred to the
shareholders, and each shareholder's social security number and address. All of
the Company's issued and outstanding shares of capital stock have been duly
authorized and validly issued, are fully paid and nonassessable, are not subject
to preemptive rights, and have been issued in compliance with all applicable
federal and state securities laws.
(b) Except for the Shareholders, no person owns or
has a beneficial or legal interest in any portion of the Company's capital
stock. Except as set forth in Section 4.4(b) of the Disclosure Schedule, there
are no warrants, options, agreements, calls, rights (including preemptive
rights), convertible or exchangeable securities or other commitments pursuant to
which the Company is or may become obligated to grant, issue, extend, accelerate
vesting, sell, purchase, retire or redeem any shares of capital stock or other
securities. There is no right of first refusal, co-sale right, right of
participation, right of first offer demand, registration rights, restriction on
transfer (other than pursuant to applicable securities laws), or other agreement
or understanding applicable to the Company's capital stock or securities.
Neither the Company nor any Shareholder is a party or subject to any agreement
or understanding, and, to the Company's knowledge, there is no agreement or
understanding between or among any other persons, that affects or relates to the
voting
9
or giving of written consent with respect to any outstanding security of the
Company, other than as contemplated hereby.
(c) The Company Shares set forth as owned by each
Shareholder on Section 4.4(a) of the Disclosure Schedule are in fact owned
individually only by such Shareholder and are free and clear of all liens,
encumbrances, security interests, mortgages, pledges, charges, agreements,
rights, options, warrants, restrictions and claims.
4.5 Subsidiaries; Affiliates; Conflict of Interest.
(a) The Company has no subsidiaries. The business
of the Company is conducted by the Company and is not directly or indirectly
conducted through a subsidiary or Affiliate (as defined below) of Company, or by
any other entity. The term "Affiliate" with respect to any person means any
person or entity which controls such person, which that person controls, or
which is under common control with that person. In the case of the Company, the
term "Affiliate" shall include, but not be limited to, the Shareholders and the
Shareholders' Affiliates. Affiliates of Shareholders include the spouse of a
Shareholder, siblings and lineal descendants or ancestors of Shareholders, and
any corporation, partnership, joint venture or other entity which any of the
Shareholders, any spouse, sibling or lineal descendant or ancestor of a
Shareholder, or a trust for the benefit of any of them, controls. For purposes
of the preceding sentences, the term "control" means the power, direct or
indirect, to direct or cause the direction of the management and policies of a
person or entity through voting securities, contract or otherwise. Except as set
forth in Section 4.5(a) of the Disclosure Schedule, no Affiliate of the Company
has any direct or indirect interest (other than an investment interest in no
more than five percent (5%) of the stock of a publicly traded company) in any
creditor, competitor, supplier, customer, or lessor of Shareholders.
(b) Except as set forth in Section 4.5(b) of the
Disclosure Schedule, no Affiliate of the Company is presently a party to any
agreement or arrangement with the Company: (i) providing for the furnishing of
raw materials, products or services to or by, or (ii) providing for the sale or
rental of real or personal property to or from, any such entity.
(c) Except as set forth in Section 4.5(c) of the
Disclosure Schedule, no Affiliate of the Company has any interest in: (i) any
contract, arrangement or understanding with, or relating to, the business or
operations of the Company; (ii) any loan, arrangement, understanding, agreement
or contract for or relating to indebtedness of the Company; or (iii) any
property (real, personal or mixed), tangible or intangible, used or currently
intended to be used in, the business or operations of the Company. Following the
Closing, the Company will not have any obligations of any kind to any
Shareholder or any Affiliate of a Shareholder except for (i) accrued salary for
the pay period commencing immediately prior to the Closing Date; and (ii) the
obligations set forth at Section 4.5(c) of the Disclosure Schedule
(collectively, the "Related Party Obligations").
10
4.6 Investments in Others. The Company does not have any
investment in or advance or loan to or guarantee of, or any commitment to make
any investment in, advance or loan to or guarantee of, any person, except as set
forth in the Interim Balance Sheet (as defined below).
4.7 Financial Statements.
(a) The Company's audited balance sheets as of the
end of, and related audited statements of income, retained earnings and cash
flow for, the fiscal years ended December 31, 1998 (the "Financial Statement
Date"), December 31, 1997, and December 31, 1996 are attached hereto at Section
4.7(a) of the Disclosure Schedule and are referred to herein collectively as the
"Financial Statements" and individually as the "1998 Financial Statements,"
"1997 Financial Statements" and "1996 Financial Statements," respectively. The
Financial Statements (i) present fairly, in all material respects, the financial
position, results of operations and changes in cash flows, as the case may be,
of the Company at the Financial Statement Date; and (ii) were prepared in
accordance with GAAP in a manner consistent with the Company's historic GAAP
accounting practices applied on a consistent basis, except as otherwise
indicated in the text of such statements.
(b) The unaudited balance sheet of the Company as of
May 31, 1999 (the "Interim Balance Sheet"), and the related statements of income
for the five (5) months ended May 31, 1999 attached at Section 4.7(b) of the
Disclosure Schedule, are referred to herein as the "Interim Financial
Statements." The Interim Financial Statements (i) present fairly, in all
material respects, the financial position and results of operations, as the case
may be, of the Company at May 31, 1999; and (ii) except as described in Section
4.7(b) of the Disclosure Schedule were prepared in conformity with GAAP and in a
manner consistent with the Company's historic accounting practices applied on a
consistent basis, subject to normal and customary year-end closing adjustments,
the lack of full footnote presentations, and lack of statements of cash flows
and retained earnings.
(c) Attached as Schedule 4.7(c) are reports showing
year-to-date sales information and comparable store net sales information for
each of the Company's retail store locations (i) on an annual basis for the year
ended December 31, 1998 compared with the year ended December 31, 1997; (ii) on
a monthly basis for the five-month period ended May 31, 1999 compared with the
five-month period ended May 31, 1998; and (iii) on a weekly basis for the period
from June 1, 1999 to the date hereof compared with the same period in 1998. Such
reports are true and complete and correctly present actual year-to-date sales
and comparable store net sales of Seller in all material respects.
4.8 Unreported and Contingent Liabilities. Except as set forth
at Section 4.8 of the Disclosure Schedule or as set forth in the 1998 Financial
Statements and the Interim Financial Statements, the Company has no liabilities
or obligations, whether accrued, absolute, fixed, known or unknown, contingent
or otherwise, existing, arising out of or relating to any transaction entered
into, or state of facts existing, on or prior to the date of this Agreement. The
Company's liabilities under Guardian Life Insurance Company and State Workers
Compensation claims have been fully accrued on the Financial Statements in an
amount not less than that required by GAAP.
11
4.9 Absence of Certain Changes. Since December 31, 1998, the
business of the Company has been conducted only in the ordinary course and
consistent with past practices, and except as set forth at Section 4.9 of the
Disclosure Schedule, there has not been (a) any material adverse change (or any
event that will have a material adverse change) in the condition (financial or
otherwise), assets, liabilities, earnings, business, operations or prospects of
the Company ("Material Adverse Change"); (b) any damage, destruction, casualty
or other similar occurrence or event (whether or not insured against), which
either singly or in the aggregate materially adversely affects the assets,
liabilities, earnings, business or operations of the Company; (c) any mortgage
or pledge of or encumbrance attached to any of the properties or assets of the
Company not in the ordinary course of business; (d) any incurrence or creation
of any liability, commitment or obligation in excess of $10,000 by the Company,
except unsecured trade payables and other unsecured liabilities incurred in the
ordinary course of business, and capital expenditures or contracts and
commitments for capital expenditures made or entered into in the ordinary course
of business; (e) any sale, transfer or other disposition by the Company of any
of its assets (other than the Personal Assets as defined in Section 6.1(m)) in
excess of $50,000 in the aggregate, except for inventory sold by the Company in
the ordinary course of business; (f) any amendments or changes to the
Certificate of Incorporation or Bylaws of Company; (g) any labor trouble, claim
of wrongful discharge, or unlawful labor practice or claim (except matters in
the aggregate will not result in potential damages greater than $20,000); (h)
any change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by Company; (i) any revaluation
by Company of any of its assets; (j) any declaration, setting aside or payment
of a dividend or other distribution or deposit with respect to the capital stock
of Company or a Shareholder, or direct or indirect redemption, purchase or other
acquisition by Company of any of its capital stock except such dividends or
other distributions totaling $1,410,000 which dividends and distributions were
consistent with the historical practice and policy of Company; (k) any increase
in the salary or other compensation payable or to become payable to any of its
officers, directors, employees or advisors, or the declaration, payment or
commitment or obligation of any kind for the payment of a bonus or other
additional salary or compensation to any such person and except for increases,
payments or commitments in the ordinary course of business and consistent with
past practices; (l) any amendment or termination of any material contract,
agreement or license to which Company is a party or by which it is bound; (m)
any loan by Company to any person or entity, incurring by Company of any
indebtedness, guaranteeing by Company of any indebtedness, issuance or sale of
any debt securities of Company or guaranteeing of any debt securities of others,
except for advances to employees for travel and business expenses in the
ordinary course of business, consistent with past practices; (n) any waiver or
release of any material right or claim of Company, including any write-off or
other compromise of any account receivable of Company other than in the ordinary
course of business and consistent with past practices; (o) any commencement or
notice or threat of commencement of any lawsuit or proceeding against or
governmental investigation of Company or its affairs; or (p) any issuance or
sale by Company of any of its shares of capital stock, or securities or option
or warrants exchangeable, convertible or exercisable therefor, or of any other
of its securities.
4.10 [Reserved].
12
4.11 Licenses and Permits. Section 4.11(a) of the Disclosure
Schedule sets forth all licenses and permits (including food stamp licenses, FDA
licenses, food permits, liquor licenses, business licenses, fictitious name
certificates, etc.) necessary for the conduct of the Company's business as now
operated. Such licenses and permits are valid and in full force and effect. No
action or claim is pending, or, to the knowledge of the Company, threatened, to
revoke or terminate any such licenses or permits or declare any of them invalid
in any respect and, except as set forth on Section 4.11(b) of the Disclosure
Schedule, the transactions contemplated by this Agreement will not result in the
revocation or termination of any such licenses or permits. A list of all such
licenses and permits is attached at Section 4.11 of the Disclosure Schedule.
4.12 Litigation. Except as set forth at Section 4.12 of the
Disclosure Schedule, there is not pending against the Company or, to the
knowledge of the Company, threatened against the Company any claim, action,
suit, arbitration proceeding, governmental proceeding or investigation or other
proceeding of any character (the "Proceeding") (a) demanding money damages from
the Company, or (b) demanding a temporary restraining order, preliminary
injunction or a permanent injunction or order of specific performance against
the Company. All of the items set forth on Section 4.12 of the Disclosure
Schedule are fully covered by insurance except as indicated on such section of
the Disclosure Schedule. All pending Proceedings relating to or involving the
Company (or any of its officers or directors as such) are adequately provided
for in the Interim Balance Sheet in accordance with GAAP. The Company is not
subject to any judgment, decree, injunction, rule or order of any court, and the
Company is not subject to any governmental restriction which is reasonably
likely (i) to have a material adverse effect on the assets, liabilities, results
of operations, financial condition, business or prospects of the Company or (ii)
to cause a material limitation on Parent's ability to operate the business of
the Company after the Closing. There are no Proceedings pending, nor to the best
of the Company's knowledge, threatened, under or pursuant to any warranty,
whether expressed or implied, on products sold by the Company.
4.13 Inventory. All of the Company's Inventory was purchased
in the ordinary course of business. The Inventory is maintained on the financial
records of the Company using historical valuation methods and practices
consistent with those used in preparing the 1998 and 1997 Financial Statements
as well as the Interim Financial Statements. All items of Inventory (i) are of
good and merchantable quality for sale or use in the ordinary course of
business; (ii) are not spoiled, damaged, crushed, defaced, defective, past their
expiration date, or subject to recall; (iii) are in conformity with all
applicable government requirements (including the Consumer Product Safety Act,
Federal Hazardous Substances Act, Flammable Fabrics Act, and other federal and
state product safety and labeling laws); and (iv) do not violate the
intellectual property rights of any third party (including trademark, service
▇▇▇▇, patent, or trade dress). Any items of Inventory which do not satisfy the
requirements of the foregoing sentence shall be marked down to $0.00 on the
Closing Balance Sheet and removed and retained by Shareholders. "Inventory"
shall mean all of the Company's inventory and merchandise whether located in the
stores, in a warehouse, or in transit to the stores, together with the Company's
packaging Inventory and displays.
13
4.14 Real Property.
(a) The Company does not own, nor has it ever owned,
any real property. Section 4.14(a) of the Disclosure Schedule sets forth a true
and correct list of all real property currently leased by the Company (together
with all fixtures and improvements thereon, the "Leased Real Property," broken
down as follows:
(A) all leases for retail stores of the
Company open on the date hereof;
(B) all leases for retail stores of the
Company that are not open as of the
date hereof;
(C) a list of all leases for retail stores
of the Company under negotiation; and
(D) all other real property leases of
the Company, including the warehouse
and office leases.
(b) The Company is not a tenant under any leases of
real property used by the Company except as reflected in Section 4.14(a) of the
Disclosure Schedule. The Company has previously delivered to Parent correct and
complete copies of all of the leases and related amendments, modifications,
subleases, and store, warehouse or headquarters license agreements.
(c) Except as set forth at Section 4.14(c) of the
Disclosure Schedule, the Company has a valid leasehold interest in the Leased
Real Property, free and clear of any mortgages, pledges, liens, security
interests or other encumbrances of any nature.
(d) The leases of the Leased Real Property are in
full force and effect. The Company has neither sent nor received written notice
of any default under the leases of the Leased Real Property, and the Company has
not breached any material covenant, agreement or condition contained in any
lease of the Leased Real Property, nor has there occurred any event which with
the passage of time or the giving of notice or both would constitute such a
breach by the Company. The Company has paid in full or accrued all amounts due
and owing, and has satisfied in full or accrued all of its liabilities and
obligations, under the leases. The Company has not received any notice of any
pending claim by any landlord or other third party adverse to the possessory
rights of the Company under any leases, nor any other written notice of uncured
default by the Company regarding any of the Leased Real Estate. The Company has
the right to use such Leased Real Estate for the operations presently conducted.
The Company is the tenant under all of the leases. The leases for any Leased
Real Property which constitutes warehouse, office or other non-retail space may
be terminated without penalty upon not more than six months' notice to the
landlord thereunder.
14
(e) To the best of Company's knowledge, no portion
of the Leased Real Property, or any of the buildings and improvements located
thereon, violates in any material respect any law, rule, regulation, ordinance,
or statute, including those relating to zoning, building, land use,
environmental, health and safety, fire, air, sanitation and noise control. To
the knowledge of the Company, except as set forth in Section 4.14(e) of the
Disclosure Schedule, no pending or threatened condemnation or similar proceeding
exists with respect to the Leased Real Property.
(f) Except as set forth at Section 4.14(f) of the
Disclosure Schedule, the improvements and fixtures located on the Leased Real
Property are in good condition and working order, without any material defect of
any kind. The Company is in possession of all of the Leased Real Property and
all improvements and fixtures located thereon, and the Company has adequate
rights of ingress and egress with respect to such Leased Real Property and the
improvements and fixtures located thereon.
4.15 Environmental Matters. Except as set forth at Section
4.15 of the Disclosure Schedule:
(a) the Company possesses, and is in compliance in
all material respects with, all permits, licenses and government authorizations
and has filed all notices that are required under local, state and federal laws
and regulations relating to protection of the environment, pollution control,
product registration and hazardous materials (as defined below) ("Environmental
Laws"), and the Company is in compliance in all material respects with all
applicable limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in those laws or
contained in any law, regulation, code, plan, order, decree, judgment, notice,
permit or demand letter issued, entered, promulgated or approved thereunder;
(b) the Company has not received any notice of actual
or threatened liability under the Federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or any similar state or local statute
or ordinance from any governmental agency or any third party and there are no
facts or circumstances which could reasonably form the basis for the assertion
of any claim against the Company under any Environmental Laws including, without
limitation, CERCLA or any similar local, state or foreign law with respect to
any on-site or off-site location;
(c) the Company has not entered into, agreed to nor
contemplates entering into any consent decree or order, and is not subject to
any judgment, decree or judicial or administrative order relating to compliance
with, or the cleanup of hazardous materials under, any applicable Environmental
Laws;
(d) the Company has not been alleged to be in
violation of, and has not been subject to any administrative or judicial
proceeding pursuant to, applicable Environmental Laws or regulations either now
or any time during the past five years;
15
(e) the Company is not subject to any claim,
obligation, liability, loss, damage or expense of whatever kind or nature,
contingent or otherwise, incurred or imposed or based upon any provision of any
Environmental Law and arising out of any act or omission of the Company or its
respective employees, agents or representatives or arising out of the ownership,
use, control or operation by the Company of any plant, facility, site, area or
property (including, without limitation, any plant, facility, site, area or
property currently or previously owned or leased by the Company) from which any
hazardous materials were released into the environment (the term "release"
meaning any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing into the
environment, and the term "environment" meaning any surface or ground water,
drinking water supply, soil, surface or subsurface strata or medium, or the
ambient air);
(f) the Company has heretofore provided Parent with
true, correct and complete copies of all files of the Company relating to
environmental matters (or an opportunity to review such files), and Section
4.15(f) of the Disclosure Schedule sets forth the amount of all fines, penalties
or assessments paid within the last five years by the Company with respect to
environmental matters, including the date of payment and the basis for the
assertions of liability; and
(g) to the best of Company's and Shareholder's
knowledge, neither the Leased Real Property nor improvements or equipment
included within the Leased Real Property contains any asbestos, PCBs or
underground storage tanks.
As used in this Section 4.15, the term "hazardous materials" means any
pollutant, hazardous substance, toxic, ignitable, reactive or corrosive
substance, hazardous waste, special waste, industrial substance, by-product,
process intermediate product or waste, petroleum or petroleum-derived substance
or waste, chemical liquids or solids, liquid or gaseous products, or any
constituent of any such substance or waste, the use, handling or disposal of
which by the Company is in any way governed by or subject to any applicable law,
rule or regulation of any governmental or regulatory authority.
4.16 Compliance With Laws Generally. The Company has complied
and is in current compliance with all laws, rules, regulations and ordinances to
which it is subject or by which it is bound (including the Product Safety Laws),
except those that will not result in claims, liabilities or obligations which,
in the aggregate, exceed $20,000. The Company's purchasing and sales practices
comply with all laws, rules, regulations and ordinances as well as all
restrictions to which the Company is subject. No action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed, commenced, or, to the best of the Company's knowledge, threatened against
the Company alleging any uncured failure so to comply. There are no existing or,
to the knowledge of the Company, proposed laws, rules, regulations or ordinances
of such a nature as could reasonably be expected to materially adversely affect
the continued conduct or profitability of the Company's business in the manner
presently conducted.
16
4.17 Employee Benefit Plans.
(a) Company has previously provided Parent with a
document setting forth a true and complete list of (i) the names, titles,
locations of employment, annual salaries and other compensation and benefits of
all employees of the Company; and (ii) the wage rates for non-salaried employees
of the Company. Except as set forth at Section 4.17(a) of the Disclosure
Schedule, there are no employees of the Company who are on military, disability,
family or other leave of absence (whether or not approved) and who have
reemployment rights or rights to health care continuation coverage under Part 6
of Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or similar rights to benefits continuation.
(b) Section 4.17(b) of the Disclosure Schedule
contains a true and complete list of all the following agreements or plans
("Benefit Plans") which are presently in effect or which have previously been in
effect and which cover or covered any current or former employees, officers,
directors or independent contractors of the Company ("Employees"):
(i) any employee benefit plan as defined in
Section 3(3) of ERISA, under which the Company has any outstanding, present, or
future obligation or liability, or under which any Employee has any present or
future right to benefits which are covered by ERISA; or
(ii) any other pension, profit sharing,
retirement, deferred compensation, stock purchase, stock option, incentive,
bonus, vacation, severance, disability, hospitalization, medical, life
insurance, or other employee benefit plan, program, policy, or arrangement,
written or oral, which the Company maintains or to or under which the Company
has any outstanding, present, or future obligations to contribute or make
payments, whether voluntary, contingent or otherwise.
(c) The Company has made available to Parent true,
correct and complete copies of all documents relating to the Benefit Plans,
including but not limited to: (i) all plan documents, amendments, trust
instruments and other material agreements adopted or entered into in connection
with each of the Benefit Plans; (ii) all insurance and annuity contracts related
to any Benefit Plans; (iii) all administrative notices and forms used for the
Benefit Plans, including the notices and election forms used to notify employees
and their dependents of their continuation coverage rights under the Company's
group health plans; and (iv) the most recently available Form 5500 annual
reports, certified financial statements, actuarial reports, summary plan
descriptions and favorable determination letters for the Benefit Plans. Since
the date these documents were supplied to Parent, no plan amendments have been
adopted, no changes to these documents have been made, and no amendments or
changes will be adopted or made prior to the Closing Date.
(d) All of the Benefit Plans and the related trusts
subject to ERISA comply and have been administered in compliance with (i) the
provisions of ERISA; (ii) all provisions of the Code applicable to secure the
intended tax consequences; (iii) all applicable state and federal securities
laws; and (iv) all other applicable laws, rules, regulations and collective
bargaining
17
agreements, except where the failure to so comply or to be so administered would
not result in any monetary penalty against the Company. The Company has not
received any written notice from any governmental agency or instrumentality
questioning or challenging such compliance.
(e) The Company has complied with the continuation
coverage requirements of Section 1001 of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and ERISA Sections 601 through 608
("COBRA").
(f) Neither the Company, its ERISA Affiliates (that
is, any entity which, together with the company, will be treated as a single
employer within the meaning of Code Section 414(b), (c), (m) or (o)), nor any
administrator or fiduciary of any Benefit Plan (or agent or delegate of any of
the foregoing) has engaged in any transaction or acted or failed to act in any
manner that could subject the Company to any direct or indirect liability (by
indemnity or otherwise) for a breach of any fiduciary or co-fiduciary duty under
ERISA. No party in interest (as defined in ERISA) or disqualified person (as
defined in the Code) of any Benefit Plan has engaged in any prohibited
transaction (within the meaning of ERISA Section 406 or Code Section 4975).
(g) No Benefit Plan is subject to Title IV of ERISA,
and neither the Company nor any of its ERISA Affiliates have incurred any
liability under Title IV of ERISA arising in connection with the termination of
any plan covered or previously covered by Title IV of ERISA that could become,
after the Closing Date, an obligation of Sub or any of its ERISA Affiliates.
(h) Neither the Company nor any of its ERISA
Affiliates currently is a party to any pension or welfare plan that is a
multiemployer plan within the meaning of ERISA Section 4001(a)(3)
("Multiemployer Plan"). Neither the Company nor any of its ERISA Affiliates (i)
currently has any liability to make any withdrawal liability payment to any
Multiemployer Plan; (ii) will incur any such liability for which Sub or its
affiliates may become liable; (iii) is delinquent in making any contributions
required to be paid to any Multiemployer Plan; or (iv) is involved in any
pending dispute with any Multiemployer Plan.
(i) None of the Benefit Plans provides welfare
benefits, including, without limitation, death or medical benefits (whether or
not insured), with respect to current or former Employees beyond their
retirement or other termination of service (other than coverage required by
COBRA or any similar state law).
(j) Levels of insurance reserves, trust funding and
accrued liabilities with regard to all Benefit Plans (to which such reserves or
liabilities do or should apply) are described at Section 4.17(j) of the
Disclosure Schedule, and such levels are reasonable and sufficient to provide
for all incurred but unreported claims and any retroactive or prospective
premium adjustments.
(k) Each Benefit Plan which is intended to be
qualified under Code Section 401(a) ("Qualified Retirement Plan") is qualified
in form and operation under Code Section 401(a) and its related trust is
tax-exempt under Code Section 501. For each such plan, the Company
18
has received from the Internal Revenue Service a favorable determination letter
to the effect that the plan in form satisfies the requirements for qualification
under Code Section 401(a) (taking into account the provisions of the Tax Reform
Act of 1986 and all subsequent legislation). No amendment to any Qualified
Retirement Plan made since applying for such determination letter could cause a
disqualification of such plan. Any noncompliance or failure prior to the Closing
Date properly to maintain, operate, or administer any Qualified Retirement Plan
has not rendered and will not render: (i) such plan or its related trust or Sub
or its ERISA Affiliates subject to, or liable (directly or indirectly) for, any
taxes, penalties, or liabilities to any person or governmental agency; (ii) such
plan subject to disqualification; or (iii) the trust under such plan subject to
any liability for taxes.
(l) All contributions (including all employer
contributions and employee salary reduction contributions) which are due or
withheld have been paid to each such Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any period ending on or before
the Closing Date which are not yet due have been paid to each such Employee
Pension Benefit Plan or accrued in accordance with the past custom and practice
of the Company. All premiums or other payments for all periods ending on or
before the Closing Date have been paid with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan.
(m) The Company's records accurately reflect its
Employees' employment histories, including their hours of service and years of
vesting and eligibility service.
(n) There is no pending or threatened complaint,
claim (other than a routine claim for benefits), proceeding, audit, or
investigation of any kind in or before any court, tribunal, or governmental
agency with respect to any Benefit Plan.
4.18 Intellectual Property.
(a) "Intellectual Property" means (a) all inventions,
patents, and patent applications; (b) all trademarks, service marks, trade
dress, logos, trade names and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals thereof,
including any such Intellectual Property associated with the name "Only $1",
"Only $One" or other similar store or trade name used by the Company; (c) all
copyrightable works and copyrights, and all applications, registrations, and
renewals thereof; (d) all trade secrets and confidential business information
(including ideas, research, and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals); (e) all other
proprietary rights; and (f) all copies and tangible embodiments thereof (in
whatever medium).
(b) The Company owns (or has the royalty-free right
to use pursuant to license, sublicense, agreement, or permission) all
Intellectual Property necessary and used for the operation of its business
activities as presently conducted. Each item of Intellectual Property owned
19
or available for use prior to the Closing hereunder will be owned or available
for the royalty-free use by the Company immediately subsequent to the Closing.
The Company has taken all necessary action to protect each item of Intellectual
Property that it owns or uses. The Company has not interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and neither the Company nor any officers,
directors, or employees of the Company has ever received any charge, complaint,
claim, demand, or notice alleging such interference, infringement,
misappropriation, or violation (including any claim that Company must license or
refrain from using any Intellectual Property rights of any third party). To the
best of the knowledge of the Company, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Company.
(c) Section 4.18(c)(i) of the Disclosure Schedule
identifies each Intellectual Property registration which has been issued to the
Company and each pending Intellectual Property application which has been made
by the Company. Section 4.17(c)(ii) of the Disclosure Schedule identifies each
license, agreement, or other permission which the Company has granted to any
third party with respect to any of its Intellectual Property. Section
4.17(c)(iii) of the Disclosure Schedule identifies each license, agreement, or
other permission which has been granted to the Company by any third party with
respect to any Intellectual Property used in the operation of the Company's
business.
(d) Nothing herein shall entitle Parent to the
post-closing use or other right to the name "▇▇▇▇▇'▇" either alone or in other
form.
4.19 Tax Matters.
(a) "Tax" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
ss.59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
(b) "Tax Return" means any return, declaration,
report, claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
(c) The Company has filed all Tax Returns that it
was required to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Company (whether or not shown on any Tax Return)
have been paid. The Company is not currently the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where the Company does not file Tax Returns that it
is or may
20
be subject to taxation by that jurisdiction. There are no Security Interests on
any of the assets of the Company that arose in connection with any failure (or
alleged failure) to pay any Tax.
(d) The Company has withheld, paid or will pay before
Closing (subject to the terms of this Agreement) all Taxes required to have been
withheld, paid or will pay before Closing (subject to the terms of this
Agreement) in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
(e) No director or officer (or employee responsible
for Tax matters) of the Company expects any authority to assess any additional
Taxes for any period for which Tax Returns have been filed. There is no dispute
or claim concerning any Tax Liability of the Company either (A) claimed or
raised by any authority in writing or (B) as to which any of the directors and
officers (and employees responsible for Tax matters) of the Company has
knowledge based upon personal contact with any agent of such authority. Section
4.19(e) of the Disclosure Schedule lists all federal, state, local, and foreign
income Tax Returns filed with respect to the Company for taxable periods ended
on or after December 31, 1994, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of
audit. The Company has delivered to Parent correct and complete copies of all
federal income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by the Company since December 31, 1994.
(f) The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(g) The Company has not filed a consent under Code
ss.341(f) concerning collapsible corporations. The Company has not made any
payments, is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Code ss.280G. The Company has not been a United States real
property holding corporation within the meaning of Code ss.897(c)(2) during the
applicable period specified in Code ss.897(c)(1)(A)(ii). The Company has
disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Code ss.6662. The Company is not a party to any Tax allocation or
sharing agreement. The Company (A) has not been a member of an Affiliated Group
filing a consolidated federal income Tax Return (other than a group the common
parent of which was the Target) or (B) has any Liability for the Taxes of any
Person (other than any of the Target and its Subsidiaries) under Reg.
ss.1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(h) Section 4.19(h) of the Disclosure Schedule sets
forth the following information with respect to the Company as of the most
recent practicable date (as well as on an estimated pro forma basis as of the
Closing giving effect to the consummation of the transactions contemplated
hereby): (A) the basis of the Company in its assets; (B) the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess
21
charitable contribution allocable to the Company; and (C) the amount of any
deferred gain or loss allocable to the Company arising out of any Deferred
Intercompany Transaction.
(i) The unpaid Taxes of the Company (A) did not, as
of the Most Recent Fiscal Month End, exceed the reserve for Tax Liability by
more than $5,000 (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the face of
the Most Recent Balance Sheet (rather than in any notes thereto) and (B) do not
exceed that reserve by more than $5,000 as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of the
Company in filing its Tax Returns.
(j) Company made a valid election under Subchapter S
of the Code (the "S Election") to which all persons who were shareholders on the
date of such election gave their consent and which became effective on February
1, 1993 (a copy of which is attached as Section 4.19(j) of the Disclosure
Schedule and Company is, has been at all times since February 1, 1993 and will
continue to be an S corporation (as defined in Section 1361 of the Code) until
the day prior to the Effective Time (such period being called the "S Corporation
Period"). The cause of the termination of Company's status as an "S" corporation
will be the Merger. The period after the S Corporation Period is referred to as
the "C Corporation Period."
4.20 No Broker Involved. Neither the Shareholders nor the
Company has engaged any broker, finder or agent with respect to the transactions
contemplated by this Agreement or with respect to the Company's sale or merger
or any other transaction relating to the disposition of the Company's assets.
4.21 Contracts. Section 4.21 of the Disclosure Schedule
contains a true and complete list of the following (hereinafter referred to as
the "Company Contracts"):
(a) all bonds, debentures, notes, mortgages,
indentures or guarantees to which the Company is a party or by which any of its
properties or assets (real, personal or mixed, tangible or intangible) is bound
pursuant to which any indebtedness of the Company in the aggregate principal
amount in excess of $10,000 is outstanding;
(b) all leases to which the Company is a party or
by which any of its properties or assets (real, personal or mixed, tangible or
intangible) is bound involving an annual rental payment in excess of $10,000
individually;
(c) all loans and credit commitments to the Company
which are outstanding and pursuant to which any indebtedness of the Company in
the aggregate principal amount in excess of $10,000 is outstanding, together
with a brief description of such commitments and the name of each financial
institution granting the same;
(d) all contracts or agreements which limit or
restrict in any respect the Company from engaging in any business in any
jurisdiction;
22
(e) all agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations;
(f) all bonuses, deferred compensation, incentive
compensation, pension, profit-sharing or retirement plans, or any other employee
benefit plans or arrangements;
(g) all employment or consulting agreements,
contracts or commitments with any employee, not terminable by Company on thirty
days notice without liability;
(h) all agreements or plans, including, without
limitation, any stock option plans, stock appreciation right plans or stock
purchase plans, any of the benefits of which will be increased, or the vesting
of benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement;
(i) all agreements of indemnification or guaranties;
(j) all agreements, contracts or commitments
containing any covenant limiting the freedom of Company to engage in any line of
business or compete with any person;
(k) all agreements, contracts or commitments
relating to capital expenditures and involving future obligations in excess of
$5,000 and not cancelable without penalty;
(l) all agreements, contracts or commitments
currently in force relating to the disposition or acquisition of assets not in
the ordinary course of business or any ownership interest in any corporation,
partnership, joint venture or other business enterprise;
(m) all joint marketing or development agreements
or distribution agreements; or
(n) all existing agreements, contracts and
commitments, written or oral (other than those described in the foregoing
provisions of this Section 4.21) to which the Company is a party or by which the
Company or any of their respective properties or assets may be bound (i)
involving an annual commitment or annual payment by any party thereto of more
than $10,000 individually; (ii) which cannot be terminated by the Company
without penalty or further obligations on not more than 90 days' notice; or
(iii) which is otherwise material to the Company.
True and complete copies of all Company Contracts, including
all amendments thereto, have been made available to Parent. The Company
Contracts are valid and enforceable in accordance with their respective terms
with respect to the Company (as applicable) and valid and enforceable in
accordance with their respective terms with respect to any other party thereto,
except as the enforceability may be limited by laws of general application
relating to bankruptcy,
23
insolvency, and debtor's relief and by the general principles of equity. The
Company has physical possession of all equipment and other tangible physical
assets which are covered by leases. There is not under any of the Company
Contracts any existing breach, default or event of default by the Company or
event that with notice or lapse of time or both would constitute a breach,
default or event of default by the Company, nor does the Company know of, and
nor has the Company received notice of, or made a claim with respect to, any
breach or default by any other party thereto. To the knowledge of the Company,
no customer or supplier which paid the Company or was paid by the Company more
than $10,000 during calendar year 1997 or 1998 intends to terminate or
materially alter its level of business with the Company as a result of the
transactions contemplated by this Agreement.
4.22 Officers and Employees. Section 4.22 of the Disclosure
Schedule contains a true and complete list of all of the officers and managers
(except for store managers and warehouse managers) of the Company, specifying
their title and annual rate of compensation, bonus eligibility and a true and
complete list of all of the employees of the Company as of the date hereof with
whom the Company has a written employment agreement or to whom the Company has
made verbal commitments which are binding on the Company under applicable law.
To Company's knowledge after reasonable inquiry, no employee of Company (i) is
in violation of any term of any employment contract, patent disclosure
agreement, non-competition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by Company
because of the nature of the business conducted or presently proposed to be
conducted by Company or to the use of trade secrets or proprietary information
of others; and (ii) has given notice to Company, nor is Company otherwise aware,
that any employee intends to terminate his or her employment with Company except
for terminations of a nature and number that are consistent with Company's prior
experience.
4.23 Labor Relations.
(a) Since January 1, 1996, (1) employees of the
Company have not been and are not represented by a labor organization which was
either National Labor Relations Board ("NLRB") certified or voluntarily
recognized or recognized under foreign law; (2) the Company has not been and is
not a signatory to a collective bargaining agreement with any labor
organization; (3) no representation election petition has been filed by
employees of the Company or is pending with the NLRB and no union organizing
campaign involving employees of the Company has occurred or is in progress; (4)
no NLRB unfair labor practice claims have been filed and/or are presently
pending against the Company or any labor organization representing its
employees; (5) no grievance or arbitration demand, whether or not filed pursuant
to a collective bargaining agreement, has been filed or is pending against the
Company; (6) no hand billing, picketing, work stoppage (sympathetic or
otherwise), or other "concerted action" involving the employees of the Company
has occurred or is in progress; and/or (7) no breach of contract and/or denial
of fair representation claim has been filed or is pending against the Company
and/or any labor organization representing its employees;
24
(b) Except as set forth in Section 4.23(b) of the
Disclosure Schedule, since January 1, 1996, no claim for unpaid wages or
overtime or for child labor or record keeping violations has been filed or is
pending under the Fair Labor Standards Act, ▇▇▇▇▇-▇▇▇▇▇ Act, ▇▇▇▇▇-▇▇▇▇▇▇ Act,
or Service Contract Act or any other Federal, state, local or foreign law,
regulation, or ordinance;
(c) Except as set forth in Section 4.23(c) of the
Disclosure Schedule, since January 1, 1996, no discrimination and/or retaliation
claim has been filed or is pending against the Company under the 1866 or 1964
Civil Rights Acts, as amended, the Equal Pay Act, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, the Family and Medical
Leave Act, the Fair Labor Standards Act, ERISA or any other Federal law or any
comparable state fair employment practices act or foreign law regulating
discrimination in the workplace;
(d) Since January 1, 1996, if the Company is
obligated to develop and maintain an affirmative action plan, no discrimination
claim, show cause notice, conciliation proceeding, sanctions or debarment
proceeding has been filed or is pending with any Federal agency or any
comparable State or foreign agency or court and no desk audit or on-site review
is in progress;
(e) Since January 1, 1996, no citation has been
issued by Occupational Safety and Health Administration ("OSHA") against the
Company and no notice of contest or OSHA administrative enforcement proceeding
involving the Company has been filed or is pending;
(f) Since January 1, 1996, no workers' compensation
or retaliation claim has been filed or is pending against the Company;
(g) Since January 1, 1996, no citation of the
Company has occurred and no enforcement proceeding has been initiated or is
pending under Federal or foreign immigration law; and
(h) The Company has not taken any action which
would constitute a "mass layoff" or "plant closing" within the meaning of the
Worker Adjustment and Retraining Notification Act or otherwise trigger notice
requirements or liability under any local or state plant closing notice law.
(i) No employee of the Company is indebted to the
Company except in the ordinary course of business consistent with past practices
and in no event in excess of $15,000 in the aggregate.
(j) Except as disclosed on Section 4.23(j) of the
Disclosure Schedule, the Company has not entered into any written employment,
covenant-not-to-compete, confidentiality, proprietary rights, restrictive
covenant, severance, or golden parachute agreement with any present or former
employee, consultant, or Affiliate which is currently in effect. The Company has
not entered into any agreement, oral or written, with any present or former
employee that by its terms
25
obligates (either on an absolute or contingent basis) the Company or Parent to
make any payment on, after, or in connection with the Closing to any present or
former employee following his or her termination of employment.
(k) Other than the Shareholders and ▇▇▇ ▇▇▇▇▇, none
of the key operations employees of the Company has, to the best of Company's
knowledge, expressed an intention to resign or retire as a result of the
transaction contemplated by this Agreement or for any other reason.
(l) All of Company's employees are employed at the
will of the Company and can be terminated by Company without cause at any time
after the Closing without liability, penalty, salary continuation, or severance
obligations of any sort whatsoever (including without limitation attorneys'
fees).
4.24 Insurance. Section 4.24 of the Disclosure Schedule sets
forth a true and complete list of the current insurance coverages for the
Company, including names of carriers, amounts of coverage and premiums therefor.
The Company has made available to the Parent true and complete copies of all
such insurance policies.
4.25 Title to Property and Related Matters. The Company has
good and valid title to or valid leasehold interest in its assets and property,
as reflected in the Interim Balance Sheet or acquired after the date thereof
(other than property sold or otherwise disposed of in the ordinary course of
business since such date), and all of such assets and property is held free and
clear of all title defects, liens, encumbrances, security interests and
restrictions whatsoever, except, with respect to all such properties, (a) liens
securing debt reflected as liabilities on the Interim Balance Sheet and (b) (i)
liens for current taxes and assessments not overdue or in default; and (ii)
mechanics', carriers', workmen's, repairmen's, statutory or common law liens
relating to payments that are not delinquent.
4.26 Accounts and Notes Receivable. The accounts and notes
receivable of the Company reflected on the Interim Balance Sheet arose from bona
fide transactions in the ordinary course of business, have been extended on
terms consistent with the past practice of the Company, and are not subject to
any counterclaims or setoffs other than in the ordinary course (except for the
amount of any applicable existing reserves for counterclaims or setoffs), and
are fully collectible. At Closing, all loans payable to or receivable from any
employees or the Shareholders or their Affiliates will be paid in full.
4.27 Nondisclosed Payments. Neither the Company nor any of the
Company's officers or directors, nor anyone acting on behalf of any of them, has
made or received any payments not correctly categorized and fully disclosed in
the Company's books and records in connection with or in any way relating to or
affecting the Company.
4.28 Credit Cards. Section 4.28 of the Disclosure Schedule
sets forth a complete and correct list of all credit cards issued or caused to
be issued by the Company to any person, firm or entity or under which the
Company is or may be liable for charges or payments.
26
4.29 Business Practices.
(a) Neither the Company nor any director, officer,
agent, employee or other Person acting on behalf of the Company has used any
Company funds for improper or unlawful contributions, payments, gifts or
entertainment, or made any improper or unlawful expenditures relating to
political activity to domestic or foreign governmental officials or others. The
Company has adequate financial controls to prevent such improper or unlawful
contributions, payments, gifts, entertainment or expenditures. Neither the
Company nor any current director, officer, agent, employee or other Person
acting on behalf of the Company has accepted or received any improper or
unlawful contributions, payments, gifts or expenditures. The Company has at all
times complied, and is in compliance, in all respects with the Foreign Corrupt
Practices Act and all foreign laws and regulations relating to prevention of
corrupt practices and similar matters.
(b) There is no agreement (noncompete or otherwise),
commitment, judgment, injunction, order or decree to which Company is a party
or, to the knowledge of Company, otherwise binding upon Company, which has or
reasonably could be expected to have the effect of prohibiting or impairing any
business practice of Company, any acquisition of property (tangible or
intangible) by Company or the conduct of business by Company. Without limiting
the foregoing, Company has not entered into any agreement under which Company is
restricted from selling, licensing or otherwise distributing any of its products
to any class of customers, in any geographic area, during any period of time or
in any segment of the market.
4.30 Bank Accounts. A true and correct list of the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which the Company maintains safe deposit boxes or
accounts of any nature (together with the relevant account numbers and the names
of all Persons authorized to draw thereon, make withdrawals therefrom or have
access thereto) has been furnished to Parent.
4.31 Affiliates. Section 4.31 of the Disclosure Schedule lists
each Person which is an "affiliate" of the Company within the meaning of Rule
145(c) promulgated under the Securities Act (the "Rule 145 Affiliates"). None of
the Shareholders nor any Rule 145 Affiliates has, within the 30 days prior to
the date of this Agreement, sold, transferred or otherwise disposed of, or in
any other way reduced such person's risk with respect to, any shares of Parent
Common Stock or other shares of the capital stock of Parent or shares of the
capital stock of the Company held by such person.
4.32 Pooling. Since the date two (2) years prior to the
date hereof:
(a) the Company has not been a subsidiary or division
of another corporation or other entity;
(b) the Company has not effected any transactions
changing the relative percentage ownership of the Shareholders in the Company;
27
(c) the Company has not purchased any treasury shares
or redeemed any shares of capital stock or effected any exchange of securities;
or
(d) the Company has not paid nor shall it pay any
dividend or made any distribution in excess of amounts consistent with
historical Company policies and practices or paid any bonus to shareholder
employees that are not consistent with historical company policies and
practices.
In addition, the shares of Parent Common Stock issued in the Merger will be
shared ratably by the Shareholders based on their respective percentage
ownership of the Company capital stock, and there is no agreement among the
Shareholders providing for any reallocation of such Parent Common Stock among
the Shareholders.
4.33 Reorganization Under Section 368 of the Code. The Company
has not taken any action that would cause the Merger to fail to qualify as a
reorganization with the meaning of Sections 368(a)(1)(A) and (a)(2)(E) of the
Code.
4.34 Full Disclosure. Shareholders have disclosed in writing,
or pursuant to this Agreement and the Schedules attached hereto, all facts
material to the business, assets, prospects and condition (financial or
otherwise) of Company. No representation or warranty to Parent by the Company or
Shareholders contained in this Agreement, and no statement contained in the
Schedules attached hereto (including the Financial Statements and the Interim
Financial Statements), any certificate, list or other writing furnished to
Parent by the Company or Shareholders pursuant to the provisions hereof or in
connection with the transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein not misleading. All statements
contained in this Agreement, the Schedules attached hereto, and any certificate,
list, document or other writing delivered pursuant hereto or in connection with
the transactions contemplated hereby shall be deemed a representation and
warranty of the Shareholders for all purposes of this Agreement. Each
representation, warranty, covenant, and agreement of the Company or Shareholders
contained in this Agreement is independent of each other representation,
warranty, covenant and agreement.
4.35 Securities Law Matters.
(a) Each Shareholder is acquiring the Parent Common
Stock issuable in the Merger for his own account, and not as nominee or agent.
Such Parent Common Stock is being and will be acquired for the purpose of
investment and not with a view to distribution or resale thereof; subject,
nevertheless, to the condition that, except as otherwise provided herein or in
the Registration Rights Agreement and subject to compliance with applicable
securities laws, the disposition of the property of such Shareholder shall at
all times be within his control.
(b) Each Shareholder understands that he must bear
the economic risk of its investment for an indefinite period of time because the
Parent Common Stock issuable in the
28
Merger is not, and may not be, registered under the Securities Act or any
applicable state securities laws, except as may be provided in this Agreement
and the Registration Rights Agreement, and may not be resold unless subsequently
registered under the Securities Act and such other laws or unless in the opinion
of counsel to Parent an exemption from such registration is available.
(c) Each Shareholder represents that he is a
sophisticated investor and has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of its
investment in the Parent Common Stock issuable in the Merger. Such Shareholder
further represents that he is an "accredited investor" as such term is defined
in Rule 501 of Regulation D of the SEC under the Securities Act with respect to
the purchase of the Parent Common Stock pursuant to the Merger.
(d) Each Shareholder hereby acknowledges that the
shares of Parent Common Stock to be issued in the Merger (unless no longer
required in the opinion of counsel to Parent) shall bear a legend substantially
in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL
AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
(e) Each Shareholder certifies that: (i) the name,
address and social security number set forth on Section 4.4(a) of the Disclosure
Schedule are each true, complete and correct; and (ii) such Shareholder is not
subject to backup withholding because (A) the undersigned has not been notified
that the undersigned is subject to backup withholding as a result of a failure
to report all interest or dividends; or (B) the Internal Revenue Service has
notified the undersigned that the undersigned is no longer subject to backup
withholding.
(f) Each Shareholder represents that he has carefully
reviewed this Agreement and understands its contents and the significance
thereof and has consulted with counsel with regard thereto. Each Shareholder
understands that (i) in issuing the Parent Common Stock issuable in the Merger,
Parent is relying upon the representations and warranties of such Shareholder in
this Section 4.35 and (ii) receipt by Parent of the Certificates and the
representations in this Agreement is an inducement and a condition to Parent's
obligation to deliver any shares of Parent Common Stock to such Shareholder. The
acquisition by such Shareholder of such Parent Common Stock shall constitute a
confirmation by him of the foregoing.
4.36 Due Diligence. Each Shareholder acknowledges that he has
been given full and fair opportunity to review and discuss, and has in fact,
reviewed and discussed information relating to the Parent's business, affairs
and current prospects with such officers of the Parent and
29
others as he has deemed appropriate or desirable in connection with the
transactions contemplated by this Agreement (including without limitation each
registration statement, report and proxy or information statement filed by
Parent with the SEC (collectively, the "Parent SEC Reports")). Such Shareholder
further acknowledges that he has requested, received and reviewed such
information, undertaken such investigation and made such further inquiries of
officers of the Parent and others as it has deemed appropriate or desirable in
connection with such transactions.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to
the Company that, as of the date of this Agreement and on the Closing Date:
5.1 Corporate Organization. Parent is a corporation validly
existing and in good standing under the laws of the Commonwealth of Virginia and
has all requisite corporate power and authority to own, operate and, lease its
property and to carry on its business as now being conducted. The Sub is a
corporation validly existing and in good standing under the laws of the State of
New York and has all requisite corporate power and authority to own, operate
and, lease its property and to carry on its business as now being conducted.
5.2 Authorization and Approval of Agreement. Parent and Sub
have all requisite corporate power and authority to execute and deliver this
Agreement and the other agreements, documents and instruments executed and
delivered by Parent or Sub in connection with the transactions contemplated by
this Agreement (the "Parent Ancillary Agreements"), and to fully perform the
obligations required to be performed by them hereunder and thereunder. All
corporate proceedings required by Parent's and Sub's respective charter
documents or otherwise required by law for the execution and delivery of this
Agreement and the Parent Ancillary Agreements and for the consummation of the
transactions provided for herein and therein have been duly taken. This
Agreement and each of the Parent Ancillary Agreements has been duly and validly
executed and delivered by Parent and Sub and is enforceable against Parent and
Sub in accordance with its terms, except as the enforceability may be limited by
laws of general application relating to bankruptcy, insolvency and debtors'
relief, and by the general principles of equity.
5.3 Ability to Carry Out Agreement. The execution and delivery
of this Agreement and the Parent Ancillary Agreements by Parent and Sub and the
performance by Parent and Sub of their obligations hereunder and thereunder will
not conflict with, violate or result in any breach of or constitute a default
under any provisions of Parent's and Sub's Articles or Certificate of
Incorporation or Bylaws or, except for the Parent's credit facilities and
private placement notes, of any of the provisions of any indenture, mortgage,
lease, agreement, license, permit, instrument, order, arbitration award,
judgment, decree, law, ordinance, regulation or any other restriction of any
kind or character to which Parent or Sub is a party or by which either of them
is bound. Except for compliance with the applicable requirements of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") and the
Securities Act, the Securities Exchange Act of 1934 (the
30
"Exchange Act"), applicable state securities laws, the bylaws of the NASD, any
listing agreement with respect to the Parent Common Stock, and the filing of the
Certificate of Merger with the State of New York, no consent of any governmental
authority or other third party is required to be obtained on the part of Parent
in connection with Parent's execution, delivery or performance of this Agreement
or the Parent Ancillary Agreements.
5.4 Investment Representation. Parent and Sub are acquiring
the Company Shares for investment and not with a view to, or for resale in
connection with, any distribution of the Company Shares.
5.5 No Broker Involved. Parent and Sub have not expressly or
impliedly engaged any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
5.6 Parent Common Stock. The shares of Parent Common Stock to
be issued in the Merger will be validly issued, fully paid, nonassessable and
free of preemptive rights.
5.7 Parent Common Stock Price. Between the date of this
Agreement and the Effective Time, Parent shall not make any public announcements
or governmental filings which, as of their respective release or filing dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, the effect of which is to cause an increase in the trading price of
Parent Common Stock. The foregoing sentence shall in no way restrict the ability
of Parent, its officers and directors and the officers and directors of its
Affiliates from making public announcements or governmental filings, presenting
at investment conferences or otherwise communicating with shareholders,
analysts, or the general public concerning this transaction or the Parent's
business, operations, or prospects.
ARTICLE 6
CERTAIN COVENANTS
6.1 Conduct of Business. The Company covenants and agrees that
from the date of this Agreement to the Closing Date, the Company shall (except
as otherwise consented to in writing by Parent):
(a) carry on its business in a manner consistent with
prior practice and only in the usual and ordinary course, and use reasonable
efforts to preserve its business organization intact and conserve the good will
and relationships of its customers, suppliers and others having business
relations with it;
(b) maintain its existence and good standing in its
jurisdiction of organization plus in each jurisdiction in which the ownership or
leasing of its property or the conduct of its business requires such
qualification;
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(c) duly and timely file or cause to be filed all
reports and returns required to be filed with any governmental body, agency or
authority and promptly pay or cause to be paid when due all taxes, assessments
and governmental charges, including interest and penalties levied or assessed,
unless diligently contested in good faith by appropriate proceedings;
(d) maintain in existing condition and repair,
consistent with past practice, all buildings, offices, shops and other
structures located on the Leased Real Property, and all equipment, fixtures and
other tangible personal property located on the Leased Real Property;
(e) give Parent and Parent's employees, counsel,
accountants and advisors, full access upon reasonable notice during normal
business hours to all of the properties, personnel, financial and operating
data, books, tax returns, contracts, commitments, and records of the Company in
connection with reviewing the Company and its respective properties and
operations;
(f) maintain in full force and effect all existing
policies of insurance except for replacements or renewals in the ordinary course
of business;
(g) use its reasonable best efforts to permit the
Company to retain the material benefits provided by all existing contracts and
licenses to which the Company is a party under arrangements similar to those in
effect prior to the Closing Date;
(h) use its reasonable best efforts to assist
Parent and Sub in retaining the continued services of the Company's key
employees, except for Shareholders and ▇▇▇ ▇▇▇▇▇.
(i) not amend its charter documents or bylaws;
(j) not authorize for issuance, issue or deliver
any additional shares of its capital stock or securities convertible into or
exchangeable for shares of its capital stock, or issue or grant any right,
option or other commitment for the issuance of shares of its capital stock or of
such securities, or split, combine or reclassify any shares of its capital
stock;
(k)not incur any liability, commitment or obligation,
except unsecured current and trade liabilities and other unsecured liabilities
incurred in the ordinary course of business;
(l) not borrow, or agree to borrow, any funds
other than pursuant to its existing loan agreements or otherwise in the ordinary
course of business;
(m) not sell, transfer or otherwise dispose of
assets, except for the sale or disposition of obsolete or damaged tangible
personal property and except for (i) the sale of inventory and other assets in
the ordinary course of business; and (ii) sales of Company-owned vehicles, art,
and other assets identified on Schedule 6.1(m) ("Personal Assets") to one or
more Shareholders for cash equal to the book value of the Personal Assets);
32
(n) except for amounts committed for emergency
repairs, not make any material capital commitments;
(o) not mortgage, pledge or encumber any of its
assets or guaranty the obligations of any party except in the ordinary course of
business;
(p) except as set forth in Section 11.4, not make
any adjustments in the salary or wage rate of, or make or authorize any bonus,
severance, or termination payments to or consulting arrangements with, any
officer or employee or amend or adopt any employee benefit plan, without
Parent's prior written consent, other than salary increases for the 1999 year
which shall be made in amounts consistent with past practices;
(q) take any action with the intention of causing
any of the representations and warranties made herein to be inaccurate on the
Closing Date;
(r) not dispose of or permit to lapse any rights
to the use of any patent, trademark, trade name, license or copyright, or
dispose of or disclose to any person, any trade secret, formula, process,
technology or know-how not heretofore a matter of public knowledge;
(s) not declare, pay or set aside for payment any
dividend or other distribution in respect of the capital stock or other equity
securities or equity interests of the Company and not redeem, purchase or issue
any shares of the capital stock or other securities or equity interests of the
Company or rights or obligations convertible into or exchangeable for any shares
of the capital stock or other securities or equity interests of the Company or
obligations convertible into such, or any options, warrants or other rights to
purchase or subscribe to any of the foregoing;
(t) deliver to Parent on or prior to the fifteenth
(15th) business day of each month a balance sheet of the Company in the form of
the Interim Balance Sheet as of the end of the prior month and an income
statement for such month in each case accompanied by a certificate executed by
the chief financial officer on behalf of the Company that such statements have
been prepared in accordance with the standards set forth in Section 4.7(b); and
(u) not take any action outside the ordinary
course of business consistent with past practice (unless contemplated by this
Agreement) without having notified Parent and KPMG of such proposed action and
obtaining the advice of KPMG that such action will not jeopardize the
characterization of the Mergers as a "pooling of interests" for accounting
purposes.
6.2 Public Announcements. As soon after execution of this
Agreement as is practicable, Parent, at its option, shall have the right to
issue a press release relating to the subject matter of this Agreement and the
transactions contemplated thereby. The timing and content of all other
announcements regarding any aspect of this Agreement or the Merger to the
financial community, government agencies, employees or the general public shall
be mutually agreed upon
33
by Parent and the Company in advance (unless Parent or the Company is advised by
counsel that any such announcement or other disclosure not mutually agreed upon
in advance is required to be made by law, SEC policy or regulation, any
applicable bylaw of the NASD or any listing agreement relating to the Parent
Common Stock).
6.3 Supplements to Schedules. From time to time prior to the
Closing Date, the Company and Parent will each promptly supplement or amend the
respective disclosure schedules which they have delivered pursuant to this
Agreement with respect to any matter hereafter arising which, if existing or
occurring at or prior to the date of this Agreement, would have been required to
be set forth or described in the disclosure schedule or which is necessary to
correct any information in any such disclosure schedule which has been rendered
inaccurate thereby. No supplement or amendment to any such disclosure schedule
shall have any effect for the purpose of determining satisfaction of the
conditions set forth in Sections 8.1(a) or 9.1(a) of this Agreement or
establishing the existence of any breach or inaccuracy of any representation or
warranty made by the Company or any Shareholder in this Agreement.
6.4 Pooling of Interests Accounting. From and after the date
hereof and until the Closing Date, neither Company nor the Shareholders, nor any
of their respective subsidiaries or other Affiliates, shall take any of the
actions specified in Section 4.32 or any other action that might jeopardize the
characterization of the Merger as a "pooling of interests" for accounting
purposes, except as expressly authorized by this Agreement.
6.5 Antitrust Filing. As soon as practicable following the
execution of this Agreement, both Parent and Company shall file an Antitrust
Improvements Act Notification and Report Form under the HSR Act (the "Antitrust
Filing") relating to the transactions contemplated by this Agreement with the
Federal Trade Commission and the Department of Justice. Parent and Company shall
use their respective commercially reasonable efforts to take all action
necessary, proper and advisable under applicable laws and regulations to cause
the expiration or termination of the waiting periods under the HSR Act as soon
as practicable.
6.6 No Solicitation of Transactions.
(a) Until the earlier of (i) the Closing or (ii)
the termination of this Agreement pursuant to Article 10, the Company agrees
that neither it nor its officers, directors, key employees, agents,
representatives (including, without limitation, investment bankers, attorneys,
accountants, financial advisors and consultants), Affiliates (or to Company's
knowledge, any other Shareholder) shall directly or indirectly:
(i) Solicit, encourage, initiate or further
the submission of proposals or offers from any Third Party relating to any
Alternative Transaction. A "Third Party" is any individual, firm, corporation,
partnership, association, group (as defined in Section 13(d)(3) of the Exchange
Act) or person or entity, individually or collectively (including, without
limitation, any managers or other employees of the Company or any affiliates)
other than Parent or Merger Sub.
34
An "Alternative Transaction" is any acquisition or purchase of all or any
substantial portion of the assets of, or any equity interest (excluding the
exercise of outstanding stock options under the Company Stock Option Plan) in,
the Company or any merger, consolidation, business combination, or similar
transaction with the Company, other than the transactions contemplated by this
Agreement;
(ii) Participate in any discussions or
negotiations regarding, or furnish to any Third Party, any confidential
information with respect to the Company in connection with any Alternative
Transaction;
(iii) Enter into or approve or recommend any
agreement, plan or understanding with any Third Party with respect to any
Alternative Transaction; or
(iv) Otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage, or publicly announce any
effort or attempt by any Third Party to undertake or seek to undertake any
Alternative Transaction.
(b) In the event the Company receives any offer
or indication of interest from any Third Party relating to any Alternative
Transaction, the Company shall promptly (and in no event later than 24 hours)
notify Parent in writing of the details of the offer or indication of interest,
except that the identity of the Third Party is not required to be disclosed.
(c) The Company shall immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
Third Party relating to Alternative Transaction, whether conducted prior to the
date of this Agreement or thereafter. The Company agrees not to release any
Third Party from any confidentiality or standstill agreement to which the
Company is a party.
(d) The Company shall ensure that the officers,
directors, key employees, agents, representatives and Affiliates of the Company
are aware of the restrictions described in this Section 6.6.
6.7 Shareholder Approval. The Company and Shareholders will
take all action necessary to carry out the purposes of this Agreement including
without limitation acting by unanimous written consent to approve the Merger and
the adoption of this Agreement by Company.
6.8 Dissenters' Rights Notices. The Company, in cooperation
with Parent, shall timely provide all notices and other communications as are
required under New York Law in connection with statutory dissenters' rights, to
the extent applicable to the Merger.
6.9 Shareholder Representative.
35
(a) The Shareholders hereby select ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ (the "Shareholder Representative") to act for and on behalf of all such
Shareholders with respect to all matters arising in connection with Article 8
and the Escrow Agreement, including, without limitation, the power and
authority, in his or her sole discretion, to:
(i) negotiate, determine, defend and settle
any dispute which may arise under Article 8 or the Escrow Agreement; and
(ii) make, execute, acknowledge and deliver
any releases, assurances, receipts, requests, instructions, notices, agreements,
certificates and any other instruments, and to generally do any and all things
and to take any and all actions which may be requisite, proper or advisable in
connection with Article 7 or under the Escrow Agreement.
(b) The Shareholders by majority vote may replace
the Shareholder Representative at any time with a substitute Shareholder
Representative who shall have all the powers and responsibilities of the
Shareholder Representative set forth in this Section 6.9.
(c) Neither the Shareholder Representative, nor
any substitute Shareholder Representative, shall be liable to any Person for any
action taken or any omission to act, in good faith, in connection with the
Shareholder Representative's responsibilities as Shareholder Representative.
(d) Upon request by Parent, the Shareholder
Representative, or any substitute Shareholder Representative, shall promptly
provide Parent with a written certification of his or her selection and of the
address for notices to such Shareholder Representative. Parent may thereafter
deal exclusively with the Shareholder Representative in connection with the
claims procedure in reliance on such certification. Whenever in connection with
the provisions of this Agreement or the Escrow Agreement, Parent shall receive
any certificate or other written correspondence from the Shareholder
Representative, such certificate or other written correspondence shall be full
authorization to Parent for any action taken or suffered in good faith by it
under the provisions of this Agreement or the Escrow Agreement in reliance
thereon.
6.10 Certain Shareholder Covenants.
(a) No Shareholder shall sell, transfer or otherwise
dispose of, or in any other way reduce such person's risk with respect to, any
shares of Parent Common Stock received in the Merger or other shares of the
capital stock of Parent until after such time as financial results covering at
least 30 days of post merger combined operations of Parent and the Company have
been published (within the meaning of Section 201.01 of the SEC's Codification
of Financial Reporting Policies) by Parent, in the form of a post-effective
amendment, issuance of a quarterly earnings report, a Form 10-K, 10-Q or 8-K
filing, or any other public issuance which includes the combined sales and net
income. Parent shall use its commercially reasonable efforts to make such public
36
issuance promptly after such financial information becomes available; provided,
however, that Parent shall not be required to prepare such information on other
than a calendar-month basis.
(b) Each Shareholder hereby irrevocably waives
(a) any and all restrictions on the sale of Company Shares contained in any
agreement in favor of such Shareholder or to which such Shareholder is a party
relating to Company Shares and any rights such Shareholder may have under any
such agreement; (b) any and all preemptive rights, rights of first refusal or
first offer and registration rights with respect to any Company Shares or other
securities of the Company or any securities issued in exchange therefor; and (c)
any and all stock purchase agreements or other agreements pursuant to which
securities were purchased from the Company and any and all shareholders
agreements or other agreements among shareholders of the Company or between
shareholders and the Company.
(c) At Closing, each Shareholder agrees to release
and forever discharge the Company, its affiliates, officers, directors and their
respective heirs, personal representatives, successors and assigns (including
Parent), from any and all claims, damages, losses, liabilities, demands,
charges, suits, penalties, actions and causes of action, whether accrued,
absolute, contingent, known or unknown, which such Shareholder may now or
hereafter have.
6.11 Access to Information. Each party will afford the other
party and its accountants, counsel and other representatives reasonable access
during normal business hours to the properties, books, records and personnel of
the other party during the period prior to the Effective Time to obtain all
information concerning the business, including the status of merchandising
efforts, leasing activities, distribution center relocation efforts, properties,
results of operations and personnel of such party, as the other party may
reasonably request. No information or knowledge obtained in any investigation
pursuant to this Section 6.11 will affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
6.12 Legal Requirements. Each of Parent, Merger Sub and
Company will take all reasonable actions necessary or desirable to comply
promptly with all legal requirements which may be imposed on them with respect
to the consummation of the transactions contemplated by this Agreement
(including furnishing all information required in connection with approvals of
or filings with any governmental entity, and prompt resolution of any litigation
prompted hereby) and will promptly cooperate with and furnish information to any
party hereto necessary in connection with any such requirements imposed upon any
of them in connection with the consummation of the transactions contemplated by
this Agreement.
6.13 Third Party Consents. As soon as practicable following
the date hereof and before the Closing, Company shall use its best efforts to
obtain all material consents, waivers, estoppels and approvals under any of its
agreements, contracts, licenses or leases reasonably requested by Parent or
required by this Agreement to be obtained in connection with the consummation of
the transactions contemplated hereby.
37
6.14 FIRPTA. At or prior to the Closing, Company shall deliver
to the IRS a notice that the Company Capital Stock is not a "US Real Property
Interest" as defined and in accordance with the requirements of Treasury
Regulation Section 1.897-2(h)(2).
6.15 Notification of Certain Matters. Parent and Merger Sub
will give prompt notice to Company, and Company will give prompt notice to
Parent, of the occurrence, or failure to occur, of any event, which occurrence
or failure to occur would be reasonably likely to cause (a) any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to the Effective
Time; or (b) any material failure of Parent and Merger Sub or Shareholders and
Company, as the case may be, or of any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement. Notwithstanding the
above, the delivery of any notice pursuant to this section will not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
6.16 Tax Matters.
(a) Termination of S Corporation Election. The
parties acknowledge and intend that Company's status as an "S" corporation will
end on the last day of the S Corporation Period in accordance with the
provisions of Section 1362(e)(1)(A) of the Code and Company's status as a "C"
corporation will begin immediately after the S Corporation Period in accordance
with the provisions of Section 1362(e)(1)(B) of the Code.
(b) Allocation of Income. The parties acknowledge
and intend that taxable income shall be allocated between Company's calendar
year beginning January 1, 1999 through the Effective Time between its S
Corporation Period and C Corporation Period based on the interim closing of the
books method in accordance with the provisions of Section 1362(e)(6)(D) of the
Code.
(c) Tax Returns. Parent shall cause all income
tax returns due from Company for periods beginning January 1, 1999 and ending on
the day before Effective Time to be prepared subject to review and consent by
Shareholders which consent will not be unreasonably withheld.
(d) Post-Closing Tax Audits. In the event the
Company or Shareholders shall incur additional federal or State Income Taxes
(including, for all purposes of this Agreement, New York franchise taxes)
relating to the Company's income and operations during the S Corporation Period
due to a post-Closing tax audit, the Shareholders agree to pay such additional
Taxes.
6.17 Best Efforts and Further Assurances. Subject to the
respective rights and obligations of Parent, Shareholders and Company under this
Agreement, each of the parties to this
38
Agreement will use its best efforts to effectuate the Merger and the other
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement. Each party hereto, at the reasonable
request of another party hereto, will execute and deliver such other instruments
and do and perform such other acts and things as may be necessary or desirable
for effecting completely the consummation of the transactions contemplated
hereby.
6.18 Post-Closing Audit.
(a) Promptly following the Effective Time, and in
any event not later than 60 days following the Effective Time, Parent shall
cause Company to prepare a balance sheet of the Company (the "Closing Balance
Sheet") as of the Effective Time. Such financial statements shall be derived
from and in accordance with the books and records of the Company and determined
in accordance with GAAP applied on a basis consistent with the GAAP principles
used in the preparation of the 1998 Financial Statements (as defined in Section
4.7(b)). Such financial statements shall be audited by KPMG and accompanied by
KPMG's opinion that such financial statements present fairly in all material
respects the financial position and results of operations of the Company.
(b) Promptly following the Effective Time, and in
any event not later than 60 days following the Effective Time, Parent shall also
cause Company to prepare a statement of Closing Equity ("Statement of Closing
Equity") which shall calculate Closing Equity, and KPMG will opine that the
Statement of Closing Equity was prepared in accordance with the requirements of
this Section 6.18. For purposes of this Agreement, "Closing Equity" shall be
defined as the assets of the Company reduced by its liabilities as shown in the
Closing Balance Sheet with the following clarifications, adjustments, and
exceptions (regardless of whether such clarifications, adjustments, and
exceptions are in accordance with GAAP, GAAS, or the Company's past practices):
(i) Inventory shall be based on a physical
count of the Inventory conducted by Parent's designee at Parent's expense and
rolled forward to the Effective Time and valued in accordance with GAAP and
Section 4.13; and
(ii) Deal Expenses within the limitations
of Sections 11.1 and 11.2 that have been paid prior to the Effective Date or
accrued on the Closing Balance Sheet shall be added back to arrive at Closing
Equity.
(iii) To the extent any of the payments to
be made pursuant to Section 11.4(i) are accrued before closing, they shall be
added back to arrive at Closing Equity.
(iv) The matters described in Section
11.4(ii) together with an estimate of the Company's calendar year 1999 bonus
payment (as described in Section 4.21(f) of the Disclosure Schedule), pro-rated
as of June 30, 1999, shall be accrued and reduce Closing Equity.
39
(v) The amount accrued or reserved in the
Closing Balance Sheet for all pending or threatened Proceedings (including those
set forth on Section 4.12 of the Disclosure Schedule) shall be $95,000.00.
(c) Company's CPA shall have the right to observe
all steps (including any physical inventory) taken by Parent in connection with
the preparation of the Closing Balance Sheet and Statement of Closing Equity.
Company's CPA shall have a period of 30 days following his receipt of the
Closing Balance Sheet and Statement of Closing Equity to review the same.
Promptly following completion of Company's CPA review, Company's CPA shall
submit to KPMG a letter regarding his concurrence or disagreement with the
accuracy of the Closing Balance Sheet and Statement of Closing Equity. Unless
Company's CPA delivers a letter disagreeing with the accuracy within such 30-day
period, the Closing Balance Sheet and Statement of Closing Equity shall be
binding upon the parties. Following delivery of such letter, if Company's CPA
shall disagree as to the computation of any item, Company's CPA and KPMG shall
attempt promptly to resolve such disagreement in good faith. If a resolution of
such disagreement has not been effected within 15 days (or longer, as mutually
agreed by the parties) after delivery of such letter, such disagreement shall be
submitted to a nationally recognized independent accounting firm (other than
Company's CPA or KPMG) jointly selected by Parent and Shareholders. The
determination of such firm with respect to such disagreement and the accuracy of
the Closing Balance Sheet and Statement of Closing Equity as a result shall be
completed within 120 days of the effective time and shall be final and binding
upon the parties. The fees, costs and expenses of the independent accounting
firm selected in the event of a dispute shall be shared equally by Parent and
Shareholders.
6.19 Cooperation Following the Closing. Following the Closing,
Parent and the Shareholders each shall deliver to the other such further
information and documents and shall execute and deliver to the other such
further information and documents and shall execute and deliver such further
instruments and agreements as the other shall reasonably request in order to
consummate or confirm the transactions provided for herein, to accomplish the
purpose of this Agreement or to assure to the other the benefits of this
Agreement. Without reducing the generality of the foregoing, Shareholders shall
permit Parent to use the services of ▇▇▇▇▇▇ ▇▇▇▇▇ at a reasonable charge to
Parent until the Statement of Closing Equity has been finalized and to make him
reasonably available thereafter from time to time to consult on various
operational and other post-Closing issues.
ARTICLE 7
SURVIVAL AND INDEMNIFICATION
7.1 Indemnification Obligations of the Shareholders. To the
extent provided in Section 7.3, the Shareholders agree to indemnify, defend and
hold harmless Parent and its subsidiaries and Affiliates (including Sub and the
Surviving Corporation), each of their respective officers, directors, employees,
agents and representatives and each of the heirs, executors, successors and
assigns of any of the foregoing (collectively, the "Parent Indemnified Parties")
from, against and in respect of any and all claims, liabilities, obligations,
losses, costs, expenses, penalties, fines and
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judgments (at equity or at law) and damages (consequential or otherwise)
whenever arising or incurred (including, without limitation, amounts paid in
settlement, costs of investigation and reasonable attorneys' fees and expenses)
("Damages") arising out of or relating to:
(i) any breach or inaccuracy of any
representation or warranty made by or with respect to the Company or any
Shareholder in this Agreement;
(ii) any breach of any covenant, agreement
or undertaking made by or with respect to the Company or any Shareholder in this
Agreement;
(iii) any fraud, fraud in the inducement or
intentional misrepresentation made by or with respect to the Company or any
Shareholder in connection with this Agreement and the transactions contemplated
hereby;
(iv) any exercise of dissenters' rights
incident to the Merger including, without limitation, the payment of any amounts
paid or incurred (including reasonable expenses) with respect to Company Shares
held by any dissenter;
(v) attorney's fees incurred by the Company
in excess of $100,000 (as provided in Article 11) or aggregate Deal Expenses (as
defined in Article 11) incurred by the Company in excess of $150,000;
(vi) the Deficit Amount; and
(vii) the aggregate Damages paid, accrued,
or incurred after the date of this Agreement which relate to any of the
Company's pending or threatened Proceedings as of the Effective Time which are
described on Section 4.12 of the Disclosure Schedule (as supplemented at
Closing).
The claims, liabilities, obligations, losses, costs, expenses, penalties, fines
and damages of the Parent Indemnified Parties described in this Section 7.1 as
to which the Parent Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "Parent Losses."
7.2 Indemnification Obligations of Parent. To the extent
provided in Section 7.3, Parent shall indemnify and hold harmless the
Shareholders and each of the affiliates, heirs, executors, successors and
assigns of such Shareholders (collectively, the "Shareholder Indemnification
Parties") from, against and in respect of any and all claims, liabilities,
obligations, losses, costs, expenses, penalties, fines and judgments (at equity
or at law) and damages (consequential or otherwise) whenever arising or incurred
(including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) arising out of or
relating to:
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(a) any breach or inaccuracy of any representation
or warranty made by or with respect to Parent in this Agreement;
(b) any breach of any covenant, agreement or
undertaking made by or with respect to Parent or Sub in this Agreement; or
(c) any fraud, or fraud in the inducement or
intentional misrepresentation made by or with respect to Parent in connection
with this Agreement and the transactions contemplated hereby.
The claims, liabilities, obligations, losses, costs, expenses, penalties, fines
and damages of the Shareholder Indemnification Parties described in this Section
7.2 as to which the Shareholder Indemnification Parties are entitled to
indemnification are hereinafter collectively referred to as "Shareholder
Losses."
7.3 Limitations on Indemnification.
(a) Except for the specific exceptions contained
in this Section 7.3(a), the Parent Indemnified Parties will not be entitled to
seek indemnification under Section 7.1(i) (excepting misrepresentations under
Sections 4.1 (Corporate Organization; Authorization), 4.2 (No Violation), 4.3
(Enforceability), 4.4 (Capitalization), 4.5 (Subsidiaries; Affiliates; Conflicts
of Interest), 4.15 (Environmental Matters), 4.17 (Employee Benefit Plans), 4.19
(Tax Matters), 4.25 (Title to Property and Related Matters), or 4.32 (Pooling)),
which is referred to as "Parent Basket Losses," unless and until the aggregate
of all Parent Basket Losses incurred by the Parent Indemnified Parties exceeds
$75,000 (the "Shareholder Basket Amount"). In the event that the aggregate of
all Parent Basket Losses exceeds the Shareholder Basket Amount, the Parent
Indemnified Parties will only be entitled to seek indemnification in respect of
Parent Basket Losses in excess of the Shareholder Basket Amount, but in no event
will the Shareholders obligations for Parent Losses under Section 7.1 (excepting
Section 7.1(iii), Section 7.1(iv) or a misrepresentation under Sections 4.4
(Capitalization), 4.32 (Pooling), or 4.35 (Securities Law Matters)) be greater
than Ten Million Dollars ($10,000,000.00). The Parent Indemnified Parties will
not be entitled to seek indemnification under Section 7.1(vii), except to the
extent the aggregate of all Parent Losses under Section 7.1(vii) incurred by the
Parent Indemnified Parties exceeds $195,000.00.
(b) The Shareholder Indemnification Parties will
not be entitled to seek indemnification under Section 7.2(a) for Shareholder
Losses unless and until the aggregate amount of all Shareholder Losses incurred
by the Shareholder Indemnification Parties exceeds $75,000 (the "Parent Basket
Amount"). In the event that the aggregate of all Shareholder Losses exceeds the
Parent Basket Amount, the Shareholder Indemnification Parties will only be
entitled to seek indemnification in respect of Shareholder Losses in excess of
the Parent Basket Amount, but in no event will Parent's obligation for
Shareholder Losses under Section 7.2 (a) or (b) be greater than Ten Million
Dollars ($10,000,000.00).
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(c) The obligation of the Shareholders under Section
7.1 to indemnify, defend and hold harmless Parent Indemnified Parties from,
against and in respect of Parent Losses arising out of or relating to Section
7.1 (v), (vi), or (vii) or arising out of or relating to any fraud, fraud in the
inducement, breach or inaccuracy of any representation, warranty, covenant,
undertaking, or agreement made by or with respect to the Company shall be
several in accordance with stock ownership (i.e., each of the five Shareholders
shall be liable for twenty percent (20%) of such Damages). Each Shareholder
shall indemnify, defend and hold harmless Parent Indemnified Parties from,
against and in respect of one hundred percent (100%) of all Parent Losses
arising out of or relating to any fraud, fraud in the inducement, breach or
inaccuracy of any representation, warranty, covenant, undertaking, or agreement
made by or with respect to such Shareholder or any dissenter's rights claimed by
such Shareholder, but in no event will any single Shareholder's obligations for
such Parent Losses described in this last sentence of Section 7.3(c) be greater
than Four Million Dollars ($4,000,000.00).
7.4 Indemnification Procedure.
(a) Promptly after receipt by a Parent Indemnified
Party or a Shareholder Indemnified Party (hereinafter collectively referred to
as an "Indemnified Party") of notice from a third party of any complaint or the
commencement of any action, proceeding or claim with respect to which such
Indemnified Party may be entitled to receive payment from the other party for
any Parent Losses or Shareholder Losses (as the case may be and subject to the
limitation on Parent Losses and Shareholder Losses in Section 7.3), such
Indemnified Party shall notify Parent or the Shareholders (through the
Shareholder Representative), whoever is the appropriate indemnifying party
hereunder (the "Indemnifying Party"), of the commencement of such action,
proceeding or claim; provided, however, that the failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party from liability for
such claim arising otherwise than under this Agreement and such failure to so
notify the Indemnifying Party shall relieve the Indemnifying Party from
liability under this Agreement with respect to such matter only if, and only to
the extent that, such failure to notify the Indemnifying Party results in the
forfeiture by the Indemnifying Party of rights and defenses otherwise available
to the Indemnifying Party with respect to such matter. The Indemnifying Party
shall have the right, upon written notice delivered to the Indemnified Party
within twenty (20) days thereafter, to assume the defense of such matter,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of the fees and disbursements of such counsel. In the
event, however, that the Indemnifying Party declines or fails to assume the
defense of the matter or to employ counsel reasonably satisfactory to the
Indemnified Party, in either case within such twenty (20) day period, then such
Indemnified Party may employ counsel to represent or defend it in any such
action or proceeding and the Indemnifying Party shall pay the reasonable fees
and disbursements of such counsel as incurred; provided, however, that the
Indemnifying Party shall not be required to pay the fees and disbursements of
more than one counsel for all Indemnified Parties in any jurisdiction in any
single action or proceeding. In any action or proceeding with respect to which
indemnification is being sought hereunder, the Indemnified Party or the
Indemnifying Party, whichever is not assuming the defense of such action, shall
have the right to participate in such matter and to retain its own counsel at
such party's own expense. The
43
Indemnifying Party or the Indemnified Party, as the case may be, shall at all
times use reasonable efforts to keep the Indemnifying Party or the Indemnified
Party, as the case may be, reasonably apprised of the status of the defense of
any action the defense of which they are maintaining and to cooperate in good
faith with each other with respect to the defense of any such action.
(b) No Indemnified Party may settle or compromise
any claim or consent to the entry of any judgment with respect to which
indemnification is being sought hereunder without the prior written consent of
the Indemnifying Party, unless (i) the Indemnifying Party fails to assume and
maintain the defense of such claim pursuant to Section 7.4(a); or (ii) such
settlement, compromise or consent includes an unconditional release of the
Indemnifying Party from all liability arising out of such claim. An Indemnifying
Party may not, without the prior written consent of the Indemnified Party,
settle or compromise any claim or consent to the entry of any judgment with
respect to which indemnification is being sought hereunder unless such
settlement, compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any of the
Indemnified Party's respective affiliates.
(c) In the event an Indemnified Party shall claim a
right to payment (or, a credit towards the Shareholders Basket Amount or Parent
Basket Amount) pursuant to this Agreement, such Indemnified Party shall send
written notice of such claim to the appropriate Indemnifying Party. Such notice
shall specify the basis for such claim. As promptly as possible after the
Indemnified Party has given such notice, such Indemnified Party and the
appropriate Indemnifying Party shall establish the merits and amount of such
claim (by mutual agreement, litigation, arbitration or otherwise) and, within
five business days of the final determination of the merits and amount of such
claim, the Indemnifying Party shall pay to the Indemnified Party immediately
available funds (or, if applicable, shall provide notice to the escrow agent
regarding disbursement of the appropriate portion of the escrow fund) in an
amount equal to such claim as determined hereunder (or shall record an
appropriate credit against the Shareholder Basket Amount or Parent Basket
Amount).
7.5 Survival; Claims Period. All representations and
warranties contained in this Agreement or any certificate delivered pursuant to
Sections 8.1(d)(i) and 9.1(c)(i) hereof shall survive the Effective Time for the
applicable Claims Period specified in this Section 7.5, and shall not be deemed
waived or otherwise affected by any investigation made or any knowledge acquired
with respect thereto. The covenants and agreements contained in this Agreement
shall also survive the Effective Time and shall continue until the expiration of
the applicable Claims Period specified in this Section 7.5. For purposes of this
Agreement, a "Claims Period" shall be the period during which a claim for
indemnification may be asserted under this Agreement by an Indemnified Party.
The Claims Periods under this Agreement shall commence on the date of this
Agreement and shall terminate as follows:
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(a) with respect to Parent Losses arising under
Section 7.1(i) with respect to Sections 4.7 (Financial Statements), 4.10
(Absence of Certain Changes), and 4.26 (Accounts and Notes Receivable) or with
respect to Section 7.1(vi), the Claims Period shall terminate on the date which
is thirty (30) days following the final determination of the Closing Balance
Sheet;
(b) with respect to any other Parent Losses arising
under Section 7.1(i) or any Parent Losses arising under Section 7.1(ii), (iii),
(iv) or (v), the Claims Period shall terminate one (1) year following the
Closing Date;
(c) with respect to Parent Losses arising under
Sections 7.1(vii), the Claims Period shall continue indefinitely, except as
limited by law (including by applicable statutes of limitation);
(d) with respect to Shareholder Losses arising
under Section 7.2, the Claims Period shall terminate one (1) years following the
Closing date;
Notwithstanding the foregoing, if, prior to the close of
business on the last day of the applicable Claims Period, an Indemnifying Party
shall have been properly notified as provided hereunder of a claim for indemnity
hereunder and such claim shall not have been finally resolved or disposed of at
such date, such claim shall continue to survive and shall remain a basis for
indemnity hereunder until such claim is finally resolved or disposed of in
accordance with the terms hereof.
7.6 Recovery. Parent may recover Parent Losses in accordance
with the provisions of the Escrow Agreement; provided, however, that Parent's
ability to recover Parent Losses in accordance with the Escrow Agreement shall
not in any way be construed to limit any remedy Parent may have against the
Shareholders under this Article 7.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND SUB
8.1 Conditions Precedent. Parent's and Sub's obligation to
consummate the Merger and the transactions contemplated by this Agreement is
subject to the fulfillment on or before the Closing Date of each of the
following conditions:
(a) Representations, Warranties and Covenants.
The representations and warranties of the Shareholders set forth herein shall be
accurate in all material respects on and as of the Closing Date as if made on
and as of such date (or any date, including the date of this Agreement, at which
a representation or warranty is expressly made), and the Company and the
Shareholders shall have complied in all material respects with or performed in
all material respects all agreements, covenants and conditions on their part to
be performed or complied with on or prior to the Closing Date.
45
(b) Legal Actions. No suit, action or other
proceeding by any third party shall be pending before any court or governmental
agency seeking to restrain or prohibit, or to obtain damages or other relief in
connection with, this Agreement or the consummation of the transactions
contemplated hereby or which is likely to materially adversely affect the value
of the assets or business of the Company (taken as a whole).
(c) Consents. All consents, authorizations, orders
and approvals of (or filings or registrations with) any governmental commission,
board or other regulatory body required in connection with the execution,
delivery and performance of this Agreement by the Company shall have been
obtained or made, except for filing of the Certificate of Merger and any other
documents required to be filed after the Effective Time and except where the
failure to have obtained or made any such consent, authorization, order
approval, filing or registration would not have a material adverse effect on the
business of Parent and the Company following the Effective Time. Parent shall
also have received consents to assignment of all Company Contracts (including
leases for the Leased Real Estate) or written waivers of the provisions of any
Company Contracts (including leases for the Leased Real Estate) requiring the
consents of third parties.
(d) Deliveries. The Company and/or Shareholders
shall have delivered to Parent:
(i) A certificate executed by the
Shareholders certifying to the accuracy on the Closing Date of their respective
representations and warranties set forth in Article 4;
(ii) A certificate by the Secretary of the
Company as to the Board of Directors and Shareholders of the Company having
taken all actions necessary to authorize the execution, delivery and performance
of this Agreement by the Company and the consummation of the transactions
contemplated thereby;
(iii) The minute books, stock transfer books
(containing canceled stock certificates representing all transfers of its
capital stock prior to the Closing Date) and corporate seal of the Company which
are in the Company's possession;
(iv) The opinion of counsel for the Company
and the Shareholders in the form of Exhibit C hereto; and
(v) Such other documents and items as are
contemplated by this Agreement or as Parent may reasonably request.
(e) Antitrust Filing. The waiting period required
in connection with the Antitrust Filing, if any, shall have expired or been
terminated.
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(f) Pooling Opinion. KPMG shall have delivered to
Parent a letter dated as of the Closing Date to the effect that, based upon
discussions with officials responsible for financial and accounting matters, and
information to be furnished to KPMG through such date, KPMG concurs with
management's conclusion that, as of such date, no conditions exist which would
preclude Parent from accounting for the merger with the Company as a pooling of
interests under Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations. In addition, Company's CPA shall deliver to Parent, and
the Company and KPMG, an opinion letter dated as of the Closing Date in
customary form satisfactory to Parent that, based upon inquiries and their
examination of the financial statements of the Company, stating that the
accounting for the Merger as a pooling of interest under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations is
appropriate if the Merger is closed and consummated in accordance with the terms
of this Agreement.
(g) Stock Price of Parent Common Stock. The Average
Closing Price shall not be less than $25.00 per share.
(h) Escrow Agreement. The Shareholder Representative
shall have executed and delivered the Escrow Agreement, substantially in the
form attached hereto as Exhibit B (the "Escrow Agreement"), pursuant to which
there shall be deposited with the Escrow Agent named therein on the Closing Date
the Escrow Shares to secure the Shareholders' obligations under this Agreement.
(i) Non-Competition Agreements. The Shareholders
shall have executed and delivered to Parent Non-Competition Agreements
substantially in the form attached hereto as Exhibit D ("Non-Competition
Agreements").
(j) No Material Adverse Change. There shall not
have occurred after the date hereof any material adverse change in the financial
condition, properties, business, or results of operations of the Company;
provided, however, any material adverse change that relates primarily to (i)
general economic conditions (including those in the United States or any region
of the United States); (ii) general political conditions (including those in the
United States or any region of the United States); (iii) the announcement of the
transactions contemplated hereby; or (iv) any combination of the foregoing,
shall not be considered a material adverse change.
(k) Related Party Debt. Each Shareholder or its
Affiliate shall have paid in full all amounts of any kind owed by such
Shareholder or its Affiliate to the Company, or such amount shall have been
offset on a dollar-for-dollar basis against any indebtedness for borrowed money
owed by the Company to such Shareholder or its Affiliate.
(l) Dissenting Shares. No holders of Company Shares
shall have the right to elect to exercise dissenters' rights pursuant to New
York Law.
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(m) Shareholder Approval. This Agreement, the
Certificate of Merger, and the Merger shall have been duly approved by the
shareholders of the Company in accordance with all applicable laws, the
Certificate of Incorporation and Bylaws of the Company and otherwise.
(n) Corporate Documents. The Certificate of Merger
relating to the Merger and the related officers' certificates required by New
York Law shall have been executed by the Company and delivered to Parent for
filing.
(o) Registration Rights Agreement. The Shareholders
shall have executed and delivered to Parent the Registration Rights Agreement
substantially in the form attached hereto as Exhibit A.
(p) Termination of Certain Agreements. The agreements
described on Schedule 8.1(p) shall have been terminated by all parties thereto
or assigned to affiliates of Shareholders without any obligation on the part of
the Company, in each case in a form and upon such terms as shall be reasonably
acceptable to Parent.
8.2 Waiver. The Parent and the Sub shall have the right to
waive the foregoing conditions, or any of them, wholly or in part; provided,
however, that no such waiver shall be deemed to have occurred unless the same is
set out in writing and executed by the Parent and the Sub.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE SHAREHOLDERS AND COMPANY
9.1 Conditions Precedent. The obligation of the Shareholders
and Company to consummate the Merger and the transactions contemplated by this
Agreement is subject to the fulfillment, on or before the Closing Date, of each
of the following conditions:
(a) Representations, Warranties and Covenants.
The representations and warranties made by Parent and Sub herein shall be
accurate in all material respects on and as of the Closing Date to the same
extent as if made on and as of such date, and Parent and Sub shall have complied
in all material respects with or performed in all material respects all
agreements, covenants and conditions on their part to be performed or complied
with on or prior to the Closing Date.
(b) Legal Actions. No suit, action or other
proceeding by any third party shall be pending before any court or governmental
agency seeking to restrain or prohibit, or to obtain damages or other relief in
connection with, this Agreement or the consummation of the transactions
contemplated hereby or which is likely to have a material adverse effect on the
value of the assets or business of the Parent (taken as a whole).
(c) Deliveries. Parent shall have delivered to the
Company:
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(i) A certificate executed by Parent and
Sub certifying to the accuracy on the Closing Date of Parent's and Sub's
representations and warranties set forth in Article 5;
(ii) A certificate by the Secretary or any
Assistant Secretary of Parent and Sub as to the due adoption by the Board of
Directors of Parent and the Board of Directors and shareholders of Sub of the
required corporate resolutions authorizing the execution, delivery and
performance of this Agreement by Parent and Sub and the consummation of the
transactions contemplated thereby;
(iii) Such other documents and items as are
contemplated by this Agreement or as the Company may reasonably request;
(iv) A one year employment agreement in
the form of Exhibit E between Company and ▇▇▇▇▇ ▇. ▇▇▇▇▇ shall be executed and
delivered.; and
(v) The opinion of counsel for Parent and
Sub in the form of Exhibit E.
(d) Antitrust Filing. The waiting period required
in connection with the Antitrust Filing, if any, shall have expired or been
terminated.
(e) Stock Price of Parent Common Stock. The Average
Closing Price shall not exceed $51.00.
(f) Registration Rights Agreement. Parent shall
have executed and delivered to Shareholders the Registration Rights Agreement
substantially in the form attached hereto as Exhibit A.
(g) No Material Adverse Change. There shall not
have occurred after the date hereof any material adverse change in the financial
condition, business or results of operations of Parent (taken as a whole
together with its subsidiaries); provided, however, any material adverse change
that relates primarily to (i) general economic conditions (including those in
the United States, any region of the United States, or any nation in which
Parent conducts a material transactions); (ii) general political conditions
(including those in the United States, any region of the United States, or any
nation in which Parent conducts a material transactions); (iii) general stock
market conditions (including those that adversely effect one or more publicly
traded value retailers in addition to Parent); (iv) the announcement of the
transactions contemplated hereby; or (v) any combination of the foregoing, shall
not be considered a material adverse change.
9.2 Waiver. The Company and Shareholders shall have the right
to waive the foregoing conditions, or any of them, wholly or in part; provided,
however, that no such waiver shall be deemed to have occurred unless the same is
set out in writing and executed by the Company and
49
Shareholders. Any waiver made by the Company and Shareholders hereunder shall
also constitute a waiver with respect to any rights or remedies that the Company
or Shareholders may otherwise have against Parent in respect of or relating to
the specific conditions waived.
ARTICLE 10
TERMINATION
10.1 Termination. This Agreement may be terminated at any time
at or prior to the Closing (the "Termination Date"):
(a) in writing by mutual consent of Parent and the
Company;
(b) by written notice from the Company to Parent
if (i) Parent or Sub shall breach or fail to perform in any material respect any
of its agreements contained herein required to be performed by it on or prior to
the Closing Date or (ii) any of the representations and warranties of Parent and
Sub contained herein shall be inaccurate in any material respect, which breach,
failure or inaccuracy is not cured within ten (10) days after the Company has
notified Parent of its intent to terminate this Agreement pursuant to this
subparagraph (b); provided that if any such breach, failure or inaccuracy is not
reasonably capable of cure within such 10-day period and Parent is using its
good faith efforts to effect such cure at the earliest practicable time, the
Company shall not be permitted to terminate this Agreement pursuant to this
subparagraph (b) unless such breach, failure or inaccuracy is not cured within
thirty (30) days after the Company has notified Parent of its intent to
terminate this Agreement pursuant to this subparagraph (b);
(c) by written notice from Parent to the Company,
if (i) the Company shall breach or fail to perform in any material respect any
of its agreements contained herein required to be performed by it on or prior to
the Closing Date; or (ii) any of the representations and warranties of the
Company contained herein shall be inaccurate in any material respect, which
breach, failure or inaccuracy is not cured within ten (10) days after Parent has
notified the Company of its intent to terminate this Agreement pursuant to this
subparagraph (c); provided that if any such breach, failure or inaccuracy is not
reasonably capable of cure within such 10-day period and Company is using its
good faith efforts to effect such cure at the earliest practicable time, the
Company shall not be permitted to terminate this Agreement pursuant to this
subparagraph (c) unless such breach, failure or inaccuracy is not cured within
thirty (30) days after Parent has notified the Company of its intent to
terminate this Agreement pursuant to this subparagraph (c);
(d) by written notice by Parent to the Company,
if the Closing has not occurred by August 31, 1999, for any reason other than
delay or nonperformance by Parent or Sub.
(e) by written notice by Company to the Parent,
if the Closing has not occurred by August 31, 1999, for any reason other than
delay or nonperformance by Company or any Shareholder.
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10.2 Effect of Termination. Each party's right of termination
under Section 10.1 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. In the event of termination of this Agreement pursuant
to this Article 10, all further obligations of the parties will terminate for
acts or omissions occurring after the Termination Date, except for obligations
under Article 7 for any breach occurring on or before the Termination Date
described in the next sentence, Article 11, Article 12 and this Section 10.2,
all of which shall survive the Termination Date. Notwithstanding the foregoing,
nothing contained herein shall relieve any party from liability for (i) such
party's breach of this Agreement occurring on or before the Termination Date, or
(ii) such party's failure to comply with an obligation hereunder on or before
the Termination Date which results in a failure of one or more conditions to the
terminating party's obligations hereunder.
ARTICLE 11
CERTAIN EXPENSES
Except as set forth in this Article 11 or as otherwise
provided herein, all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, whether or not the Merger is consummated.
11.1 Deal Expenses. "Deal Expenses" shall mean all
out-of-pocket expenses of the Company payable to accountants, lawyers, and
consultants relating to the negotiation, execution, and closing of this
Agreement; provided, that Shareholder's agree that expenses which constitute
legal fees shall not exceed $100,000.00 and the aggregate of all Deal Expenses
including legal fees but excluding the Antitrust Filing Fee shall not exceed
$150,000. The term "Deal Expense" shall exclude expenses payable to Company's
CPA for work to be conducted on Company's behalf after the Closing Date.
11.2 Deal Expenses Paid in Event of Closing. In the event
Closing occurs, Parent shall cause the Company to pay all Deal Expenses incurred
through the Closing; and Shareholders shall pay for all Deal Expenses incurred
after the Closing.
11.3 Deal Expenses Paid in Event of Termination. In the event
the transaction contemplated hereby is terminated, Parent shall be responsible
for only those Deal Expenses which constitute the Antitrust Filing fee;
provided, however, in the event the transaction is terminated pursuant to
Section 10.1(c), Company shall pay or reimburse Parent for the Antitrust Filing
Fee.
11.4 Severance, Bonus Payments; Accrued Vacation. In the event
Closing occurs, Parent shall cause Company (i) to pay an aggregate of up to
$142,200 in severance and bonus payments to Company non-Shareholder employees
reasonably designated by Shareholders (subject to Parent's right to veto such
payments if, in the opinion of KPMG, any such payments jeopardize treatment of
the Merger as a pooling of interests) and (ii) to compensate Company
non-Shareholder employees who are terminated following Closing for unused
vacation days which would have accrued to such employees as of a date that is 60
days after the Closing Date.
51
ARTICLE 12
MISCELLANEOUS
12.1 Benefits and Burdens: Assignment.
(a) Upon the execution of this Agreement by
Shareholders, Parent, Sub, and the Company, this Agreement shall become a
binding and enforceable agreement with respect to Shareholders, Parent, Sub and
the Company.
(b) This Agreement shall inure to the benefit of
and shall be binding upon the Shareholders, Company, Sub and Parent, and each of
their respective personal representatives, successors, heirs and permitted
assigns. No party to this Agreement may assign its rights or obligations
hereunder without the prior written consent of each of the other parties hereto;
provided however, that this Agreement may be assigned by Parent to a
corporation, all of whose issued and outstanding capital stock is owned directly
or indirectly by Parent, but in such event Parent shall not be released from its
obligations hereunder.
(c) Nothing contained in this Agreement or in any
instrument or document executed by any party in connection with the transactions
contemplated hereby shall create any rights in, or be deemed to have been
executed for the benefit of, any person or entity that is not a party hereto, a
successor or permitted assign of such a party or a person or entity expressly
entitled to indemnification hereunder
12.2 Amendment. This Agreement may be amended by the Company,
Sub and Parent and Shareholders, by or pursuant to action taken by their
respective Boards of Directors and the Shareholders at any time; provided
however that no amendment shall be made which by law requires further approval
by Shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
12.3 Notices. All notices, communications and deliveries
hereunder shall be made in writing signed by or on behalf of the party making
the same, shall specify the Section hereunder pursuant to which it is given or
being made, and shall be delivered personally or by telecopy transmission or
sent by registered or certified mail (return receipt requested) or by any
national overnight courier service (with postage and other fees prepaid) as
follows:
If to Parent or, after the Closing, With a required copy to:
the Company:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.C.
Dollar Tree Stores, Inc. ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
500 Volvo Parkway P. O. Box 3460
Chesapeake, Virginia 23320 ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. H. ▇▇▇ ▇▇▇▇▇▇▇ Attention: ▇▇▇▇▇▇▇ ▇. Old, Jr., Esquire
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
52
If, prior to Closing, to the Company: With a required copy to:
Tehan's Merchandising, Inc. t/a Only $One Steates ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇)▇▇▇-▇▇▇▇ Telecopier: (▇▇▇)▇▇▇-▇▇▇▇
If to the Shareholders, at the addresses shown on Section 4.4(a) of the
Disclosure Schedule with a required copy to:
Steates ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or to such other person or persons designated in
writing by such party or counsel, as the case may be. Any such notice,
communication or delivery shall be deemed given or made (a) on the date of
delivery if delivered in person; (b) on the date after delivery to a national
overnight courier service; (c) upon transmission by facsimile if receipt is
confirmed by telephone; or (d) on the fifth (5th) business day after it is
mailed by registered or certified mail.
12.4 Entire Agreement. Those certain letters dated May 6, 1999
by and between Parent and Company relating to confidentiality and the terms of a
possible transaction are hereby terminated and shall be deemed void ab initio;
provided however upon termination of this Agreement pursuant to Article 10
hereof, the letter relating to confidentiality shall be deemed revived and in
full force and effect as of such termination; however, no action by Parent
permitted under this Agreement prior to termination of this Agreement pursuant
to Article 10 hereof shall be deemed to be a violation of such revived letter.
This Agreement embodies the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, representations, warranties, covenants or undertakings
other than those expressly set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings between the parties. The
parties make no representations or warranties to each other, except as contained
in this Agreement, and any and all prior representations, warranties, assurances
and promises made by any party or its representatives, whether verbally or in
writing, are deemed to have been merged into this Agreement, it being intended
that no such prior representations, warranties, assurances and promises shall
survive the execution and delivery of this Agreement.
12.5 Headings. The section headings in this Agreement are
intended solely for convenience and shall be given no effect in the construction
and interpretation hereof.
53
12.6 Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without limitation. The
parties intend that each representation, warranty, and covenant contained herein
shall have independent significance. 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. If any party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty, or covenant.
12.7 Incorporation of Exhibits and Schedules. The exhibits and
schedules identified in this Agreement, including the Disclosure Schedule (and
any certificates or documents delivered at Closing pursuant to Sections 8.1 and
9.1), are incorporated herein by reference and made a part hereof. The term
"Agreement" shall include all such exhibits, schedules, certificates, and
writings. The inclusion of any item in the Disclosure Schedule is not evidence
of the materiality or immateriality of such item for the purposes of this
Agreement.
12.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument, and, when signed by all
of the parties hereto, shall become legally binding on such parties effective as
of the date set forth at the beginning of this Agreement.
12.9 Governing Law. This Agreement shall be governed by and
interpreted under the laws of the Commonwealth of Virginia applicable to
contracts made and to be performed entirely within such Commonwealth and without
giving effect to the choice of law principles of such Commonwealth.
12.10 Enforcement; Jurisdiction; Waiver of Jury Trial. The
parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, such remedy
being in addition to any other remedy to which any party is entitled at law or
in equity. Each party hereby irrevocably submits to the exclusive jurisdiction
of the United States District Court for the Eastern District of Virginia or any
court of the Commonwealth of Virginia located in the City of Norfolk in any
action, suit or proceeding arising in connection with this Agreement and agrees
that any such action, suit or proceeding shall be brought only in such court
(and irrevocably waives any objection based on forum non conveniens
54
or any other objection to venue therein). Parent and the Company hereby waive
any right to a trial by jury in connection with any such action, suit or
proceeding.
12.11 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
12.12 Time. Time is of the essence under this Agreement.
12.13 Knowledge. The phrase "to the knowledge of the Company"
or its equivalent as used herein shall mean to the knowledge of the Company, its
directors and officers, or any of the Shareholders after appropriate inquiry.
12.14 Statutes. Any reference herein to any federal, state or
local statute shall include all amendments to such statute through the date of
this Agreement or the Effective Time, as applicable.
12.15 Specific Performance and Other Remedies. The parties
hereto each acknowledge that the rights of each party to consummate the
transactions contemplated hereby are special, unique and of extraordinary
character, and that, in the event that any party violates or fails or refuses to
perform any covenant or agreement made by it herein, the non-breaching party may
be without an adequate remedy at law. The parties each agree, therefore, that in
the event that either party violates or fails or refuses to perform any covenant
or agreement made by such party herein, the non-breaching party or parties may,
subject to the terms of this Agreement and in addition to any remedies at law
for damages or other relief, institute and prosecute an action in any court of
competent jurisdiction to enforce specific performance of such covenant or
agreement or seek any other equitable relief. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy.
[The remainder of this page is left intentionally blank.]
55
IN WITNESS WHEREOF, the parties have executed or caused to be
executed this Agreement effective as of the day and year first above written.
COMPANY: ▇▇▇▇▇'▇ MERCHANDISING, INC. [SEAL]
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
__________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
PARENT: DOLLAR TREE STORES, INC. [SEAL]
By: /s/ Macon ▇. ▇▇▇▇▇, ▇▇.
__________________________________
Macon ▇. ▇▇▇▇▇, ▇▇.
President and Chief Executive Officer
SUB: DOLLAR TREE NEW YORK, INC. [SEAL]
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
_________________________________
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President - Chief Financial Officer
SHAREHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
__________________________________ [SEAL]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
__________________________________ [SEAL]
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
__________________________________ [SEAL]
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
__________________________________ [SEAL]
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
__________________________________ [SEAL]
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
56
State of (Commonwealth of) New York, City/County of Oneida, to-wit:
The foregoing instrument was acknowledged before me this 15th day of
June, 1999, by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President of ▇▇▇▇▇'▇ Merchandising, Inc., on
behalf of the corporation.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Notary Public
My commission expires: May 5, 2000
State of (Commonwealth of) Virginia, City/County of Chesapeake, to-wit:
The foregoing instrument was acknowledged before me this 15th day of
June, 1999, by Macon ▇. ▇▇▇▇▇, President and chief Executive Officer of Dollar
Tree Stores, Inc., on behalf of the corporation.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇
------------------------------------
Notary Public
My commission expires: August 31, 1999
State of (Commonwealth of) Virginia, City/County of Chesapeake, to-wit:
The foregoing instrument was acknowledged before me this 15th day of
June, 1999, by ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Senior Vice-President and Chief Financial
Officer of Dollar Tree New York, Inc., on behalf of the corporation.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇
------------------------------------
Notary Public
My commission expires: August 31, 1999
57
State of (Commonwealth of) New York, City/County of Oneida, to-wit:
The foregoing instrument was acknowledged before me this 15th day of
June, 1999 by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Notary Public
My commission expires: May 5, 2000
State of (Commonwealth of) New York, City/County of Oneida, to-wit:
The foregoing instrument was acknowledged before me this 15th day
of June, 1999, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Notary Public
My commission expires: May 5, 2000
State of (Commonwealth of) New York, City/County of Oneida, to-wit:
The foregoing instrument was acknowledged before me this 15th day
of June, 1999, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Notary Public
My commission expires: May 5, 2000
State of (Commonwealth of) New York, City/County of Oneida, to-wit:
The foregoing instrument was acknowledged before me this 15th day
of June, 1999, by ▇▇▇▇▇ ▇. ▇▇▇▇▇.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Notary Public
My commission expires: May 5, 2000
58
State of (Commonwealth of) New York, City/County of Oneida, to-wit:
The foregoing instrument was acknowledged before me this 15th day
of June, 1999, by ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Notary Public
My commission expires: May 5, 2000
59