EXHIBIT 10.1
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STOCK PURCHASE AGREEMENT AND PLAN OF MERGER
by and among
TYCO HEALTHCARE RETAIL GROUP, INC.
TYCO HEALTHCARE ACQUISITION CORP.,
PARAGON TRADE BRANDS, INC.,
PTB ACQUISITION COMPANY, LLC,
CO-INVESTMENT PARTNERS, L.P.,
ONTARIO TEACHERS PENSION PLAN BOARD
and
CITICORP NORTH AMERICA, INC.
including
GUARANTEE
of
TYCO INTERNATIONAL LTD.
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December 3, 2001
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TABLE OF CONTENTS
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ARTICLE 1 SALE AND PURCHASE OF SELLERS' SHARES...........................7
1.1 Sale of Sellers' Shares......................................7
1.2 Payment of Per Share Purchase Price..........................7
1.3 Delivery of Seller Shares....................................7
1.4 Closing......................................................7
1.5 Seller's Representative......................................8
ARTICLE 2 THE MERGER.....................................................8
2.1 The Merger...................................................8
2.2 Effective Time...............................................8
2.3 Certificate of Incorporation.................................9
2.4 By-laws......................................................9
2.5 Directors and Officers.......................................9
ARTICLE 3 CONVERSION OF SECURITIES.......................................9
3.1 Merger Sub Common Stock......................................9
3.2 Common Stock.................................................9
3.3 Treasury Stock..............................................10
3.4 Options.....................................................10
3.5 Dissenting Shares...........................................11
3.6 Exchange of Company Capital.................................11
3.7 No Further Ownership Rights in Common Stock.................12
3.8 No Liability................................................12
3.9 Withholding Rights..........................................12
ARTICLE 4 INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF EACH SELLER......12
4.1 Authorization...............................................12
4.2 Title to Shares.............................................13
4.3 Governmental Approval.......................................13
4.4 Organization................................................13
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................14
5.1 Organization and Qualification; Subsidiaries................14
5.2 Certificate of Incorporation and By-laws....................14
5.3 Capitalization..............................................14
5.4 Authorization; Binding Agreement............................15
5.5 Noncontravention............................................16
5.6 Governmental Approvals......................................16
5.7 SEC Filings; Financial Statements; Regulatory Filings.......17
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(continued)
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5.8 Absence of Certain Changes or Events........................17
5.9 No Undisclosed Liabilities..................................18
5.10 Absence of Litigation.......................................18
5.11 Material Contracts..........................................18
5.12 Absence of Questionable Payments............................19
5.13 Interest Rate and Foreign Exchange Contracts................20
5.14 Compliance; Permits.........................................20
5.15 Taxes.......................................................21
5.16 Employee Benefit Plans; Employment Agreements...............22
5.17 Environmental Matters.......................................26
5.18 Intellectual Property.......................................28
5.19 Certain Intellectual Property Agreements....................29
5.20 Title to Property...........................................29
5.21 Employment and Labor Matters................................30
5.22 Insurance...................................................30
5.23 Restrictions on Business Activities.........................31
5.24 Interested Party Transactions...............................31
5.25 Finders and Investment Bankers..............................31
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.......31
6.1 Organization and Qualification; Subsidiaries................31
6.2 Authority Relative to this Agreement........................32
6.3 No Conflicts; Required Filings and Consents.................32
6.4 Brokers.....................................................33
6.5 Ownership of Parent and Merger Sub; No Prior Activities.....33
6.6 Funds.......................................................33
6.7 Purchase for Investment.....................................33
6.8 No Vote Required............................................33
ARTICLE 7 COVENANTS OF THE SELLERS AND THE COMPANY......................34
7.1 Agreements Relating to Sellers..............................34
7.2 Conduct of Business by the Company..........................35
7.3 Access and Information......................................37
7.4 No Solicitation.............................................38
7.5 OTTPPB Certificate..........................................39
ARTICLE 8 OTHER AGREEMENTS..............................................40
8.1 Reasonable Efforts; Additional Actions......................40
8.2 Notification of Certain Matters.............................41
8.3 Public Announcements........................................41
8.4 Indemnification and Insurance...............................41
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TABLE OF CONTENTS
(continued)
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8.5 Accountant's Letter.........................................43
8.6 Obligations of Merger Sub...................................43
8.7 Employee Matters............................................43
8.8 Warrants....................................................45
8.9 Certain Employees...........................................45
8.10 SAP Settlement Agreements...................................45
ARTICLE 9 CONDITIONS....................................................45
9.1 Conditions to Closing of Sale Transaction Obligations.......45
9.2 Conditions to Obligation of Parent and Merger Sub...........46
9.3 Conditions to Obligations of Sellers........................49
9.4 Conditions to Consummation of the Merger....................50
ARTICLE 10 TERMINATION...................................................50
10.1 Termination.................................................50
10.2 Effect of Termination.......................................51
ARTICLE 11 MISCELLANEOUS.................................................52
11.1 Certain Definitions.........................................52
11.2 Amendment and Modification..................................53
11.3 Waiver of Compliance; Consents..............................54
11.4 Notices.....................................................54
11.5 Payments....................................................56
11.6 Assignment..................................................56
11.7 Expenses....................................................56
11.8 Effectiveness of Representations, Warranties
and Agreements; Survival....................................57
11.9 GOVERNING LAW...............................................57
11.10 Jurisdiction................................................57
11.11 Counterparts................................................57
11.12 Interpretation..............................................57
11.13 Entire Agreement............................................57
11.14 No Third Party Beneficiaries................................57
11.15 WAIVER OF JURY TRIAL........................................58
11.16 Performance of Obligations..................................58
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STOCK PURCHASE AGREEMENT AND PLAN OF MERGER
STOCK PURCHASE AGREEMENT AND PLAN OF MERGER dated as of December 3,
2001 (the "AGREEMENT") by and among TYCO HEALTHCARE RETAIL GROUP, INC.
("PARENT"), a Delaware corporation and an indirect wholly-owned subsidiary of
TYCO INTERNATIONAL LTD. ("GUARANTOR"), a Bermuda company, TYCO HEALTHCARE
ACQUISITION CORP., a Delaware corporation and a wholly-owned subsidiary of
Parent ("MERGER Sub"), PARAGON TRADE BRANDS, INC., a Delaware corporation (the
"COMPANY"), PTB ACQUISITION COMPANY, LLC, a Delaware limited liability company
("PTB ACQUISITION"), CO-INVESTMENT PARTNERS, L.P., a Delaware limited
partnership ("CIP"), ONTARIO TEACHERS PENSION PLAN BOARD, a non-share capital
corporation continued under Teachers' Pension Act, R.S.O., 1990 Chapter T.1
("OTTPPB"), and CITICORP NORTH AMERICA, INC., a Delaware corporation
("CITICORP"). Merger Sub and the Company are sometimes collectively referred to
herein as the "CONSTITUENT CORPORATIONS."
WHEREAS, PTB Acquisition, CIP, OTTPPB and Citicorp (together,
"SELLERS") own beneficially and of record, in the aggregate, in excess of 96% of
the outstanding shares of common stock, par value $.01 per share (the "COMMON
STOCK"), of the Company;
WHEREAS, Sellers desire to sell all of their shares (the "SELLER
SHARES") of the Company's Common Stock to Merger Sub, and Merger Sub desires to
purchase such shares upon the terms and conditions of this Agreement (the sale
and purchase of the Seller Shares being referred to herein as the "SALE
TRANSACTION");
WHEREAS, the respective boards of directors or analogous governing
bodies of Parent, Merger Sub, each Seller and the Company have approved this
Agreement pursuant to which, among other things, immediately following the
closing of the Sale Transaction, Merger Sub will be merged with and into the
Company (the "MERGER") on the terms and conditions contained herein and in
accordance with Section 253 of the General Corporation Law of the State of
Delaware (the "DGCL");
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and inducement to the Company's willingness to enter into this
Agreement, Guarantor has agreed fully and unconditionally to guarantee all the
representations, warranties, covenants, agreements and other obligations of
Parent and Merger Sub in this Agreement (the "GUARANTEE"); and
WHEREAS, Parent, Merger Sub, Sellers and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Sale Transaction and the Merger (the "CONTEMPLATED TRANSACTIONS") and to
prescribe various conditions to the consummation thereof.
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
DEFINITIONS:
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"2001 BONUS PAYMENT DATE" is defined in Section 8.7(g).
"2001 COMPANY BALANCE SHEET" is defined in Section 5.9.
"ACQUISITION PROPOSAL" is defined in Section 7.4(a).
"AFFILIATE PLAN" is defined in Section 5.16(a).
"AFFILIATE" is defined in Section 11.1(a).
"AGREEMENT" is defined in the preamble.
"ALTERNATIVE TRANSACTION" is defined in Section 7.4(c).
"BENEFITS CONTINUATION PERIOD" is defined in Section 8.7(a).
"BONUS PLAN" is defined in Section 8.7(g).
"BUSINESS DAY" is defined in Section 11.1(b).
"CERCLA" is defined in Section 5.17(f)(ii).
"CERTIFICATE" is defined in Section 3.2.
"CERTIFICATE OF MERGER" is defined in Section 2.2.
"CIP" is defined in the preamble.
"CIP SHARES" is defined in Section 1.2.
"CITICORP" is defined in the preamble.
"CITICORP SHARES" is defined in Section 1.2.
"CLOSING" is defined in Section 1.4.
"CLOSING DATE" is defined in Section 1.4.
"COBRA" is defined in Section 5.16(b).
"CODE" is defined in Section 5.16(a).
"COMMON STOCK" is defined in the recitals.
"COMPANY" is defined in the preamble.
"COMPANY CHARTER DOCUMENTS" is defined in Section 5.2.
"COMPANY EMPLOYEE" is defined in Section 8.7(a).
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"COMPANY EMPLOYEE PLANS" is defined in Section 5.16(a).
"COMPANY INTELLECTUAL PROPERTY ASSETS" is defined in Section 5.18(a).
"COMPANY PERMITS" is defined in Section 5.14(c).
"COMPANY SEC DOCUMENTS" is defined in Section 5.8.
"CONFIDENTIALITY AGREEMENT" is defined in Section 7.3.
"CONSTITUENT CORPORATIONS" is defined in the preamble.
"CONTEMPLATED TRANSACTIONS" is defined in the recitals.
"CONTRACTS AND OTHER AGREEMENTS" is defined in Section 5.5.
"CONTROL" is defined in Section 11.1(c).
"COVERED PERSONS" is defined in Section 8.4(c).
"D&O INSURANCE" is defined in Section 8.4(d).
"DGCL" is defined in the recitals.
"DEFINITIVE CERTIFICATE OF MERGER" is defined in Section 9.3(e).
"DISSENTING HOLDER" is defined in Section 3.5.
"DISSENTING SHARES" is defined in Section 3.5.
"DOL" is defined in Section 5.16(a).
"EFFECTIVE TIME" is defined in Section 2.2.
"EMPLOYEE OPTION PLAN" is defined in Section 3.4.
"ENVIRONMENTAL CLAIM" is defined in Section 5.17(f)(i).
"ENVIRONMENTAL LAWS" is defined in Section 5.17(f)(ii).
"ERISA" is defined in Section 5.16(a).
"EXCHANGE ACT" is defined in Section 5.7(a).
"GAAP" is defined in the Section 5.7(b).
"GOODBABY" is defined in Section 9.2(k)(iii).
"GOODBABY DOCUMENTS" is defined in Section 11.1(d).
"GOVERNMENTAL ENTITY" is defined in Section 5.6.
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"GUARANTEE" is defined in the recitals.
"GUARANTOR" is defined in the preamble.
"GUARANTOR MATERIAL ADVERSE EFFECT" is defined in Section 6.1.
"HSR ACT" is defined in Section 5.6.
"INDEMNIFIED PARTIES" is defined in Section 8.4(b).
"INTELLECTUAL PROPERTY ASSETS" is defined in Section 5.18(a).
"IRS" is defined in Section 5.16(b).
"ISO" is defined in Section 5.16(c).
"JOINT VENTURES" is defined in Section 11.1(e).
"KNOWLEDGE" is defined in Section 11.1(f).
"LEGAL REQUIREMENTS" is defined in Section 5.5.
"LIENS" is defined in Section 11.1(g).
"MABESA" is defined in Section 9.2(k)(i).
"MABESA DOCUMENTS" is defined in Section 11.1(h).
"MARIN" is defined in Section 11.1(h).
"MATERIAL ADVERSE EFFECT" is defined in Section 11.1(i).
"MATERIALS OF ENVIRONMENTAL CONCERN" is defined in Section
5.17(f)(iii).
"MATERIAL CONTRACTS" is defined in Section 5.11(b).
"MERGER" is defined in the recitals.
"MERGER CONSIDERATION" is defined in Section 3.6(a).
"MERGER FILING" is defined in Section 2.2.
"MERGER SUB" is defined in the preamble.
"NON-COMPETITION AGREEMENT" is defined in Section 5.16(h).
"NON-EMPLOYEE DIRECTOR OPTION PLAN" is defined in Section 3.4(a).
"NON-U.S. MONOPOLY LAWS" is defined in Section 5.6.
"NON-U.S. PLAN" is defined in Section 5.16(a)
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"OPTION" is defined in Section 3.4(a).
"OPTION HOLDER" is defined in Section 3.4(a).
"OPTION PLANS" is defined in Section 3.4(a).
"ORDERS" is defined in Section 5.10.
"OSHA" is defined in Section 5.17(f)(ii).
"OTTPPB" is defined in the preamble.
"OTTPPB SHARES" is defined in Section 1.2.
"PARENT" is defined in the preamble.
"PAYING AGENT" is defined in Section 3.6(a).
"PBGC" is defined in Section 5.16(b).
"PCBS" is defined in Section 5.17(d).
"PERSON" is defined in Section 11.1(j).
"PMI" is defined in Section 8.9.
"POST-BANKRUPTCY COMPANY SEC DOCUMENTS" is defined in Section 5.7(a).
"PRICE PER SHARE" is defined in Section 1.1.
"PTB ACQUISITION" is defined in the preamble.
"PTBI" is defined in Section 9.2(k)(iv).
"PTB ACQUISITION SHARES" is defined in Section 1.2.
"RCRA" is defined in Section 5.17(f)(ii).
"REGISTRATION RIGHTS AGREEMENT" is defined in Section 7.1(b).
"REGULATORY AGENCY" is defined in Section 5.7(c).
"RESPONSIBLE EMPLOYEES" is defined in Section 11.1(f).
"SALE TRANSACTION" is defined in the recitals.
"SAP SETTLEMENT AGREEMENTS" is defined in Section 5.19.
"SEC" is defined in Section 5.7(a).
"SECURITIES ACT" is defined in Section 4.2(a).
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"SELLERS" is defined in the recitals.
"SELLER SHARES" is defined in the recitals.
"SELLING PARTIES" is defined in Section 10.1(d).
"SHAREHOLDER AGREEMENT" is defined in Section.7.1(a).
"SSB" is defined in Section 5.25.
"STRONGER" is defined in Section 9.2(k)(ii).
"STRONGER DOCUMENTS" is defined in Section 11.1(k).
"STRONGER SHAREHOLDER AGREEMENT" is defined in Section 11.1(k).
"SUBSIDIARY" is defined in Section 11.1(l).
"SUBSIDIARY DOCUMENTS" is defined in Section 5.2.
"SURVIVING CORPORATION" is defined in Section 2.1.
"TAX" is defined in Section. 5.15(b).
"TAX RETURN" is defined in Section 5.15(b).
"TERMINAL DATE" is defined in Section 10.1(b)(ii).
"TERMINATING BREACH" is defined in Section 10.1(e).
"TERMINATING MISREPRESENTATION" is defined in Section 10.1(d).
"THIRD PARTY" is defined in Section 7.4(c).
"THIRD PARTY INTELLECTUAL PROPERTY ASSETS" is defined in Section
5.18(c).
"TREASURY SHARES" is defined in Section 3.3.
"TSCA" is defined in Section 5.17(f)(ii).
"WARRANTS" is defined in Section 5.3(a).
"WARRANT AGREEMENT" is defined in Section 5.3(a).
"▇▇▇▇▇▇" is defined in Section 9.2(k)(vi).
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ARTICLE 1
SALE AND PURCHASE OF SELLERS' SHARES
1.1 SALE OF SELLERS' SHARES. At the Closing and subject to the
terms and conditions of this Agreement, (i) each Seller shall sell to Merger Sub
all of the shares of Common Stock held of record by such Seller, and (ii) Merger
Sub shall purchase from each Seller all such Seller's shares of Common Stock for
a purchase price per share (the "PRICE PER SHARE") of $43.50 in cash payable at
the Closing, as set forth in SECTION 1.2.
1.2 PAYMENT OF PER SHARE PURCHASE PRICE. At the Closing, Parent
shall cause Merger Sub to deliver cash by wire transfer of immediately available
funds to an account specified by each Seller to Merger Sub not later than two
Business Days prior to the Closing, an amount equal, in the case of each Seller,
to the product obtained by multiplying (i) the number of shares of Common Stock
being sold hereunder by such Seller, by (ii) the Price Per Share. Based on each
Seller's representations and warranties contained herein regarding its
respective Common Stock ownership (i.e., that PTB Acquisition owns beneficially
and of record an aggregate of 6,712,499 shares of Common Stock (the "PTB
ACQUISITION Shares"), that CIP owns beneficially and of record 2,401,953 shares
of Common Stock (the "CIP SHARES"), that OTTPPB owns beneficially and of record
2,401,953 shares of Common Stock (the "OTTPPB SHARES"), and that Citicorp owns
beneficially and of record 75,000 shares of Common Stock (the "CITICORP
SHARES")), the aggregate amount to be paid by or on behalf of Merger Sub at the
Closing shall be $291,993,706.50 paid to PTB Acquisition, $104,484,955.50 paid
to each of CIP and OTTPPB and $3,262,500.00 paid to Citicorp.
1.3 DELIVERY OF SELLER SHARES. At the Closing (i) PTB Acquisition
shall deliver or cause to be delivered to Merger Sub a stock certificate or
stock certificates representing all of the PTB Acquisition Shares, (ii) CIP
shall deliver or cause to be delivered to Merger Sub a stock certificate or
stock certificates representing all of the CIP Shares, (iii) OTTPPB shall
deliver or cause to be delivered to Merger Sub a stock certificate or stock
certificates representing all of the OTTPPB Shares and (iv) Citicorp shall
deliver or cause to be delivered to Merger Sub a stock certificate or stock
certificates representing all of the Citicorp Shares. The delivery by each
Seller of the above referenced stock certificates shall be against payment to
each Seller of the appropriate purchase price therefor as specified in SECTION
1.2. Each stock certificate to be delivered by a Seller to Merger Sub pursuant
to this SECTION 1.3 shall be duly endorsed in blank or accompanied by a stock
power, in either case with a medallion signature guarantee.
1.4 CLOSING. Subject to the provisions of ARTICLE 9, the closing
of the Sale Transaction (the "CLOSING") shall take place in New York City at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, as soon as practicable, but in no event later than the second
Business Day after the date on which each of the conditions set forth in ARTICLE
9 have been satisfied or waived by the party or parties entitled to the benefit
of such condition, or at such other place, at such other time or on such other
date as Parent, Merger Sub, Sellers and the Company may mutually agree. The date
on which the Closing actually occurs is hereinafter referred to as the "CLOSING
DATE."
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1.5 SELLER'S REPRESENTATIVE. Each of CIP, OTTPPB and Citicorp
hereby appoint PTB Acquisition as such Seller's attorney-in-fact and
representative, to do any and all things and to execute any and all documents or
other papers in such Seller's name, place and stead, in any way which such
Seller could do if personally present, in connection with this Agreement and the
Contemplated Transactions. The authority granted by each of CIP, OTTPPB and
Citicorp to PTB Acquisition pursuant to this SECTION 1.5 shall include, without
limitation, the power and authority to agree on behalf of such Seller to any
amendment to this Agreement as well as the power and authority to deliver or
receive and accept on such Seller's behalf any notices permitted or required to
be given hereunder and to deliver such further certificates or agreements on
such Seller's behalf as may be contemplated hereby or otherwise reasonably
determined by PTB Acquisition to be necessary or useful to consummate the
Contemplated Transactions; PROVIDED, HOWEVER, that PTB Acquisition, acting as
attorney-in-fact and representative of any Seller, may not, without the consent
of such Seller, agree to amend this Agreement in any manner which would (i)
alter the representations and warranties being made by such Seller pursuant to
ARTICLE 4 hereof, (ii) increase the liability (actual or potential) of any
Seller hereunder, (iii) result in such Seller receiving a Price Per Share that
is less than the Price Per Share payable to any other Seller, (iv) reduce the
number of shares being sold by such Seller hereunder on other than a PRO RATA
basis with the number of shares being sold by all Sellers hereunder or (v)
endorse or execute any certificate representing any Seller Shares or stock power
in respect thereof. Parent, Merger Sub and the Company shall be entitled to
rely, as being binding upon such Seller, upon any document or other paper signed
and delivered by PTB Acquisition in its capacity as such Seller's
attorney-in-fact and representative. PTB Acquisition hereby accepts such
appointment and agrees to act as each such Seller's attorney-in-fact and
representative in connection with this Agreement.
ARTICLE 2
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time and in accordance with the DGCL, Merger
Sub shall be merged with and into the Company, which shall be the surviving
corporation in the Merger (the "SURVIVING CORPORATION"). At the Effective Time,
the separate existence of Merger Sub shall cease and the other effects of the
Merger shall be as set forth in Section 259 of the DGCL.
2.2 EFFECTIVE TIME. Immediately following the Closing of the Sale
Transaction, Merger Sub shall cause to be duly prepared, executed, acknowledged
and thereafter delivered to the Secretary of State of the State of Delaware, for
filing on the Closing Date, a certificate of ownership and merger (the
"CERTIFICATE OF MERGER") effecting the Merger. The Merger shall become effective
as of the date and at such time as the Certificate of Merger pursuant to Section
253 of the DGCL and any other documents necessary to effect the Merger in
accordance with the DGCL are duly filed (the "MERGER FILING") with the Secretary
of State of the State of Delaware (the time the Merger becomes effective
pursuant to the DGCL is referred to herein as the "EFFECTIVE TIME"). The
resolutions adopted by the board of directors of Merger Sub and incorporated in
the Certificate of Merger shall set forth the terms for the Merger which are in
all ways consistent with the terms contemplated by ARTICLES 2 AND 3 of this
Agreement.
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2.3 CERTIFICATE OF INCORPORATION. The certificate of incorporation
of the Company, as in effect immediately prior to the Effective Time, shall be
amended and restated in its entirety at the Effective Time to read as set forth
on Exhibit A, and as so amended and restated shall be the certificate of
incorporation of the Surviving Corporation, until thereafter altered, amended or
repealed as provided therein and in accordance with applicable law.
2.4 BY-LAWS. The by-laws of the Company, as in effect immediately
prior to the Effective Time, shall be amended and restated in their entirety at
the Effective Time to read as set forth on Exhibit B, and as so amended and
restated shall be the by-laws of the Surviving Corporation, until thereafter
altered, amended or repealed as provided therein and in accordance with
applicable law.
2.5 DIRECTORS AND OFFICERS. The directors and officers of Merger
Sub immediately prior to the Effective Time shall become, from and after the
Effective Time, the directors and officers of the Surviving Corporation, until
their respective successors are duly elected or appointed and qualified or their
earlier resignation or removal.
ARTICLE 3
CONVERSION OF SECURITIES
3.1 MERGER SUB COMMON STOCK. Each share of common stock of Merger
Sub issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into one share of common stock of the Surviving Corporation.
3.2 COMMON STOCK. Each issued and outstanding share of Common
Stock (other than (x) shares held by Merger Sub, Parent, Guarantor or any of
their respective subsidiaries, including all shares purchased by Merger Sub
pursuant to the Sale Transaction, which shall be cancelled, (y) shares to be
cancelled in accordance with SECTION 3.3 and (z) Dissenting Shares (as defined
below)) shall be converted into the right to receive an amount in cash equal to
the Price Per Share payable to the holder thereof, without interest thereon,
upon surrender of the certificate formerly representing such share of Common
Stock in accordance with this SECTION 3.2. Upon the Effective Time, the Price
Per Share shall be payable by Parent or the Surviving Corporation to the holders
of the Common Stock, without interest thereon, immediately upon delivery of the
certificate formerly representing such share of Common Stock to Parent. Each
share of Common Stock held immediately prior to the Effective Time by Merger
Sub, Parent or any of their respective subsidiaries, including all shares
purchased by Merger Sub pursuant to the Sale Transaction, shall, by virtue of
the Merger, automatically be cancelled and no consideration shall be delivered
in exchange therefor.
If any certificate (a "CERTIFICATE") formerly representing shares of
Common Stock converted into the right to receive cash in an amount per share
equal to the Price Per Share pursuant to this SECTION 3.2 shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond, in such
reasonable
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amount as the Surviving Corporation may direct, as indemnity against any claim
that may be made against Guarantor, Parent, Merger Sub, the Surviving
Corporation or the Payment Agent with respect to such Certificate, Parent or the
Surviving Corporation will pay, in exchange for such lost, stolen or destroyed
Certificate, the Price Per Share to be paid in respect of the shares represented
by such Certificate.
3.3 TREASURY STOCK. Each share of Common Stock held in the
Company's treasury immediately prior to the Effective Time (in each case,
"TREASURY SHARES"), if any, shall, by virtue of the Merger, automatically be
cancelled and retired and cease to exist and no consideration shall be delivered
in exchange therefor.
3.4 OPTIONS. (a) Each holder (an "OPTION HOLDER") of an option
(each, an "OPTION") issued under the Paragon Trade Brands, Inc. Stock Option
Plan (the "EMPLOYEE OPTION PLAN") or the Paragon Trade Brands, Inc. Stock Option
Plan for Non-Employee Directors (the "NON-EMPLOYEE DIRECTOR OPTION PLAN," and
together with the Employee Option Plan, the "OPTION PLANS") which is outstanding
immediately prior to the Effective Time, shall be entitled to receive from the
Surviving Corporation as soon as practical following the surrender of such
Option to the Surviving Corporation for cancellation (and in any event no later
than thirty days following such surrender), in settlement and cancellation of
such Option, an amount in cash equal to (i) the product of (a) the excess of the
Price Per Share over the exercise price of each such Option, multiplied by (b)
the number of shares of Common Stock covered by such Option (regardless of
whether vested with respect to all such shares) less (ii) the amount of all
applicable federal, state and local withholding taxes in connection with the
cash payments made in settlement and cancellation of such Option. Prior to the
Effective Time, the Company's Board of Directors or Compensation Committee shall
take such action as may be necessary under the Employee Option Plan in order to
cause all Options outstanding under such Option Plan to be cancelled at the
Effective Time and to otherwise give effect to the intent of this SECTION 3.4.
The Company represents and warrants that it has heretofore obtained, from each
holder of an Option issued under the Non-Employee Director Plan, the consent of
such Option Holder to the cancellation of such Option at the Effective Time
under the terms contemplated by this SECTION 3.4. After the Effective Time, the
Surviving Corporation shall pay to the applicable authorities all applicable
federal, state and local withholding taxes due in connection with the settlement
and cancellation of all such Options.
(a) Notwithstanding SECTION 3.4(A) above, Options held by ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ to acquire 266,000 shares of Common Stock as of the date hereof shall
be settled and cancelled on or prior to December 31, 2001 by payment by the
Company to ▇▇. ▇▇▇▇▇▇▇ of an amount in cash for each such Option equal to (i)
the product of (a) the excess of the Price Per Share over the exercise price of
such Option, multiplied by (b) the number of shares of Common Stock covered by
such Option less (ii) the amount of all applicable federal, state and local
withholding taxes in connection with the cash payment made in settlement and
cancellation of such Option, PROVIDED, HOWEVER, that no Option or portion of an
Option may be settled and cancelled or otherwise accelerated prior to the date
on which such Option or portion of an Option shall become vested pursuant to
Section 2 of the Option Agreement between the Company and ▇▇. ▇▇▇▇▇▇▇, dated as
of May 4, 2000.
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3.5 DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, each share of Common Stock that is issued and outstanding
immediately prior to the Effective Time and that is held by a stockholder (a
"DISSENTING HOLDER") who has properly exercised and perfected appraisal rights
under Section 262 of the DGCL (the "DISSENTING SHARES"), shall not be converted
into or exchangeable for the right to receive the Price Per Share, but shall be
entitled to receive from the Surviving Corporation such consideration as shall
be determined pursuant to Section 262 of the DGCL; PROVIDED, HOWEVER, that if,
after the Effective Time, such holder shall have effectively withdrawn, waived
or lost the right to appraisal and payment under the DGCL, each share of Common
Stock of such holder shall thereupon be deemed to have been converted into and
to have become exchangeable for the right to receive from the Surviving
Corporation the Price Per Share, without any interest thereon.
3.6 EXCHANGE OF COMPANY CAPITAL.
(a) PAYING AGENT. Prior to the Closing Date, Parent shall
designate a bank or trust company reasonably acceptable to the Company to act as
agent (the "PAYING AGENT") for the payment of all amounts payable as a result of
the Merger to the holders of Certificates (the aggregate amount payable to
holders of Certificates is referred to as the "MERGER CONSIDERATION"). As
necessary from time to time following the Effective Time, Parent and Merger Sub
shall transfer by wire transfer of immediately available funds to an account or
accounts established by the Paying Agent for the purposes of paying all Merger
Consideration, an amount equal to all Merger Consideration which will be payable
following the Effective Time to the holders of Certificates. Any and all
interest or income earned on funds made available to the Paying Agent pursuant
to this Agreement shall be turned over to Parent. Parent shall pay the fees and
expenses of the Paying Agent.
(b) EXCHANGE PROCEDURE FOR CERTIFICATES. As soon as
reasonably practicable after the Effective Time, the Paying Agent shall mail to
each holder of record of a Certificate (i) a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates held by such person shall pass, only upon proper delivery of
the Certificates to the Paying Agent and shall be in customary form and have
such other provisions as Parent may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for cancellation to the
Paying Agent or to such other agent or agents as may be appointed by Parent,
together with such letter of transmittal, duly completed and validly executed,
and such other documents as may reasonably be required by the Paying Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor the
amount of cash into which the shares formerly represented by such Certificate
shall have been converted pursuant to SECTION 3.2 into the right to receive, and
the Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Common Stock that is not registered in the stock
transfer books of the Company, the proper amount of cash may be paid in exchange
therefor to a person other than the person in whose name the Certificate so
surrendered is registered if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer, together with any signature guarantee
as may reasonably be requested by Parent or the Surviving Corporation, and the
person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of Parent that such tax has been
paid or is not
- 11 -
applicable. No interest shall be paid or shall accrue on the cash payable upon
surrender of any Certificate.
3.7 NO FURTHER OWNERSHIP RIGHTS IN COMMON STOCK. All cash paid
upon the surrender of a Certificate in accordance with the terms of this ARTICLE
3 shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Common Stock formerly represented by such
Certificate. At the close of business on the day on which the Effective Time
occurs the stock transfer books of the Company shall be closed, and there shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent for
transfer or any other reason, they shall be cancelled and exchanged as provided
in this ARTICLE 3.
3.8 NO LIABILITY. None of Guarantor, Parent, Merger Sub, the
Company, the Sellers or the Paying Agent shall be liable to any person in
respect of any cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
3.9 WITHHOLDING RIGHTS. Parent, the Surviving Corporation or the
Paying Agent shall be entitled to deduct and withhold any applicable taxes from
the consideration otherwise payable pursuant to this Agreement to any holder of
Certificates. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the person to whom such amounts would otherwise have been paid.
ARTICLE 4
INDIVIDUAL REPRESENTATIONS AND
WARRANTIES OF EACH SELLER
Each Seller represents and warrants to Parent and Merger Sub as to
itself as follows:
4.1 AUTHORIZATION. Such Seller has the requisite capacity, power
and authority to execute and deliver this Agreement and to consummate the
transactions involving such Seller which are contemplated hereby. The execution
and delivery of this Agreement by such Seller, and the consummation by such
Seller of all transactions involving such Seller contemplated hereby, have been
duly authorized by all requisite action on the part of such Seller. This
Agreement constitutes the valid and legally binding obligations of such Seller,
enforceable against such Seller in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
limiting creditor's rights generally and to general equitable principles. The
execution, delivery and performance by such Seller of this Agreement and the
consummation by such Seller of the Contemplated Transactions do not, with or
without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to such Seller; (b) violate
the charter, bylaws, partnership or other governing documents, as the case may
be, of such Seller or violate any judgment, decree, order or award of any court,
governmental body or arbitrator applicable to such Seller; or
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(c) conflict with or result in a material breach or termination of, or
constitute a material default under, any indenture, mortgage, deed of trust,
contract, lease, license, permit, franchise or other instrument or agreement to
which such Seller is a party or by which any of the Shares being sold by such
Seller hereunder is or may be bound; PROVIDED THAT no representation or warranty
is made in the foregoing clauses (a) and (c) with respect to matters that would
not reasonably be expected, individually or in the aggregate, to prevent such
Seller from consummating the Contemplated Transactions or to have a Material
Adverse Effect.
4.2 TITLE TO SHARES. (a) Such Seller has good title to, and is the
sole record and beneficial owner of, the number of shares of Common Stock listed
opposite such Seller's name on Schedule 4.2 hereto, free and clear of any Liens,
restrictions on transfer (other than restrictions under the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
"SECURITIES ACT") and state securities law) and rights of first refusal (other
than those set forth in the Shareholders' Agreement which have been waived for
purposes of the transaction contemplated hereby). Upon consummation of the
Closing in accordance with the terms set forth in this Agreement, Merger Sub
shall acquire good, valid and marketable title to the shares being sold by such
Seller hereunder, free and clear of any Liens or restrictions on transfer (other
than restrictions under the Securities Act and state securities laws) and free
and clear of any other claims, taxes, options, warrants, rights, contracts,
calls, commitments, equities or demands attributable to such Seller.
(b) Other than the Shareholders Agreement and the
Registration Rights Agreement, such Seller is not a party to any non-expired
option, warrant, right, contract, call, put, or other agreement or commitment
relating to the issued capital stock of the Company or providing for the
disposition or acquisition of any capital stock of the Company, including the
shares of Common Stock being sold by such Seller hereunder (other than this
Agreement), or any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of the Company, other than
irrevocable proxies granted by each of CIP, OTTPPB and Citicorp to PTB
Acquisition, which irrevocable proxies shall terminate upon the Closing in
accordance with SECTION 7.1 hereof.
4.3 GOVERNMENTAL APPROVAL. No consent, approval or authorization
of, or declaration or filing with any Governmental Entity on the part of such
Seller that has not been obtained or made is required in connection with the
execution or delivery by such Seller of this Agreement or the sale by such
Seller to Merger Sub of the shares of Common Stock listed beside such Seller's
name on Schedule 4.2 hereto, other than filings under the HSR Act or under any
Non-U.S. Monopoly Law.
4.4 ORGANIZATION. Such Seller is duly organized, validly existing
and in good standing under the laws of its jurisdiction of formation. PTB
Acquisition further represents that it is a limited liability company organized
and existing under the laws of the State of Delaware. CIP further represents
that it is a limited partnership organized and existing under the laws of the
State of Delaware. OTTPPB further represents that it is a non-share capital
corporation continued under the Teachers' Pension Act, R.S.O., 1990 Chapter T.1
and existing under the laws of the Province of Ontario, Canada. Citicorp further
represents that it is a corporation organized and existing under the laws of the
State of Delaware.
- 13 -
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as
follows:
5.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the
Company and its subsidiaries is an entity duly organized, validly existing and
(to the extent the concept of good standing exists in the applicable
jurisdiction) in good standing under the laws of the jurisdiction of its
organization and has the requisite corporate or other power and authority
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being conducted. Each of the
Company and its subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. A list of all subsidiaries of the Company together with the
jurisdiction of organization of each such subsidiary and the percentage of each
such subsidiary's outstanding capital stock owned by the Company or another
subsidiary of the Company is contained in Schedule 5.1. Except as set forth in
Schedule 5.1 or the Company SEC Documents, neither the Company nor any of its
subsidiaries directly or indirectly owns any equity or similar interest in, or
any interest convertible into or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity (other than its wholly-owned subsidiaries), (i)
with respect to which interest the Company or a subsidiary has invested (and
currently owns) or is required to invest $500,000 or more, or (ii) which is a
publicly-traded entity unless such interest is held for investment by the
Company or its subsidiary and comprises less than five percent of the
outstanding stock of such entity.
5.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Company has
heretofore made available to Parent and Merger Sub complete and correct copies
of its Certificate of Incorporation, By-laws and shareholder agreements as
amended to date (the "COMPANY CHARTER DOCUMENTS"), and the certificates of
incorporation, by-laws (or equivalent organizational documents) and agreements
among owners of each of its subsidiaries (the "SUBSIDIARY DOCUMENTS"). All such
Company Charter Documents and Subsidiary Documents are in full force and effect,
except in the case of Subsidiary Documents where the failure to be in force and
effect would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect. Neither the Company nor any of its subsidiaries
is in violation of any of the provisions of its Restated Certificate of
Incorporation or By-laws or equivalent organizational documents, except for
violations of the documents of subsidiaries which do not and are not reasonably
likely to materially interfere with the operations of such entity or to have a
Material Adverse Effect.
5.3 CAPITALIZATION. (a) The Company is authorized to issue
20,000,000 shares of Common Stock, of which as of the date of this Agreement
11,996,969 shares of Common Stock are issued and outstanding, and 5,000,000
shares of preferred stock, none of which are outstanding on the date of this
Agreement. All issued and outstanding shares of Common Stock
- 14 -
have been duly authorized and are validly issued, fully paid and nonassessable
and none of which has been issued in violation of preemptive or similar rights.
Except as set forth in Schedule 5.3(a) or the Company SEC Documents, no change
in the Company's capitalization has occurred since the date of this Agreement,
except for changes resulting from the exercise or termination of Options or
Warrants which were outstanding and exercisable as of such date (or were
outstanding as or such date and became exercisable in accordance with their
terms thereafter). Except for the Options to purchase 1,321,222 shares of the
Company's Common Stock heretofore granted pursuant to the Employee Option Plan,
Options to purchase 48,000 shares of the Company's Common Stock heretofore
granted pursuant to the Non-Employee Director Option Plan, and warrants (the
"WARRANTS") to purchase 625,173 shares of the Company's Common Stock heretofore
outstanding pursuant to that certain Warrant Agreement, dated as of January 28,
2000 (the "WARRANT AGREEMENT") between the Company and ChaseMellon Shareholder
Services, L.L.C., as Warrant Agent, there are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts, arrangements or commitments of any
character binding on the Company relating to the issued or unissued capital
stock of the Company or obligating the Company to issue, sell, or otherwise
cause to become outstanding any shares of capital stock, or other equity
interests in, the Company. All shares of Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable and will not be issued in violation
of preemptive or similar rights.
(a) Except as set forth in Schedule 5.3(b) or the Company
SEC Documents or, the Company Charter Documents, the Subsidiary Documents or the
business organization laws governing the Company or any of its subsidiaries,
there are no obligations, contingent or otherwise, of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any of the Common Stock
or the capital stock of any subsidiary. There are no obligations, contingent or
otherwise, of the Company or any of its subsidiaries to provide funds to, or
make any investment (in the form of a loan, capital contribution or otherwise)
in, any such subsidiary or any other entity other than guarantees of bank
obligations of subsidiaries and intercompany book entry transactions, in either
case entered into in the ordinary course of business. Except as set forth in
Schedule 5.3(b), the Company SEC Documents or, in the case of clause (ii) below,
the Company Charter Documents, the Subsidiary Documents or the business
organization laws governing the Company or any of its subsidiaries, (i) all of
the outstanding shares of capital stock (other than directors' qualifying
shares) of each of the Company's subsidiaries are duly authorized, validly
issued, fully paid and nonassessable, and (ii) all such shares (other than
directors' qualifying shares) are owned by the Company or another subsidiary
free and clear of all security interests, liens, claims, pledges, agreements,
limitations on the Company's voting rights, charges or other encumbrances of any
nature whatsoever. Except as set forth in Schedule 5.3(b) or the Company SEC
Documents, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character binding on the Company's
subsidiaries relating to the issued or unissued capital stock of the Company's
subsidiaries or obligating the Company's subsidiaries to issue or sell any
shares of capital stock of, or other equity interests in, the Company's
subsidiaries.
5.4 AUTHORIZATION; BINDING AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its
- 15 -
obligations hereunder and to consummate the Contemplated Transactions. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the Contemplated Transactions have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a legal, valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms.
5.5 NONCONTRAVENTION. Neither the execution and delivery of this
Agreement nor the performance of this Agreement by the Company nor the
consummation of the Contemplated Transactions will (a) conflict with or result
in any breach of any provision of the Company Charter Documents or any
Subsidiary Documents, (b) except as set forth on Schedule 5.5, require any
consent, approval or notice under or conflict with or result in a violation or
breach of, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or impair the Company's or any of
its subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of, or cause any, termination, amendment,
redemption, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on (including a right to purchase) any of the properties or
assets of the Company or any of its subsidiaries pursuant to, any note, bond,
mortgage, indenture, credit facility, contract, agreement, lease, license,
permit, franchise or other instrument or obligation (collectively, "CONTRACTS
AND OTHER AGREEMENTS") to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties is bound or affected or (c) violate any order, judgment,
writ, injunction, determination, award, decree, law, statute, rule or regulation
(collectively, "LEGAL REQUIREMENTS") applicable to the Company or any of its
subsidiaries or any material portion of their properties or assets, except, in
the case of clause (b) or (c) for any such conflicts, violations, breaches,
defaults or other occurrences that would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
5.6 GOVERNMENTAL APPROVALS. Except as set forth on Schedule 5.6,
no consent, approval or authorization of or declaration or filing with or
notification to any foreign, federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality (each, a
"GOVERNMENTAL ENTITY") on the part of the Company or any of its subsidiaries
that has not been obtained or made is required in connection with the execution
or delivery by the Company of this Agreement or the consummation by the Company
of the Contemplated Transactions, other than (a) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, (b) the
pre-merger notification requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR ACT"), (c) filings and consents under any applicable non-United States
laws intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade ("NON-U.S. MONOPOLY LAWS"), (d)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not reasonably be expected,
individually or in the aggregate, to prevent or materially delay consummation of
the Contemplated Transactions, or otherwise prevent or materially delay the
Company from performing its material obligations under this Agreement, or would
not otherwise reasonably be expected, individually or in the aggregate, to have
a Material
- 16 -
Adverse Effect, and (e) as to which any necessary consents, approvals,
authorizations, permits, filings or notifications have heretofore been obtained
or filed, as the case may be, by the Company.
5.7 SEC FILINGS; FINANCIAL STATEMENTS; REGULATORY FILINGS. (a) The
Company and its subsidiaries have filed all reports, schedules, forms,
statements and other documents (including all exhibits thereto) required to be
filed with the Securities and Exchange Commission (the "SEC") since January 28,
2000 (the "POST-BANKRUPTCY COMPANY SEC DOCUMENTS"). Except as set forth in
Schedule 5.7 or the Company SEC Documents, such Post-Bankruptcy Company SEC
Documents (i) were prepared in all material respects in accordance with the
applicable requirements of the Securities Act or the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"EXCHANGE ACT"), as the case may be, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light and at the time
of the circumstances under which they were made, not misleading. Except as set
forth on Schedule 5.7, since January 28, 2000, none of the Company's
subsidiaries is or has been required to file any forms, reports or other
documents with the SEC.
(a) Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the
Post-Bankruptcy Company SEC Documents was prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto), and each fairly presents in all material respects the consolidated
financial position of the respective reporting company at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements (i)
should be read in conjunction with the consolidated financial statements
contained in the year-end report on Form 10-K, and (ii) were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount.
(b) Except as set forth in Schedule 5.7 or the Company
SEC Documents, the Company and each of its subsidiaries have timely filed all
material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
January 28, 2000, with any U.S., state or foreign regulatory authority or
self-regulatory organization (each, a "REGULATORY AGENCY"), and have paid all
material fees and assessments due and payable in connection therewith. Except
for normal examinations conducted by a Regulatory Agency in the regular course
of the business of the Company and its subsidiaries, and except as set forth in
Schedule 5.7, no Regulatory Agency has initiated any proceeding or investigation
or, to the knowledge of the Company, threatened any investigation into the
business or operations of the Company or any of its subsidiaries since January
28, 2000, except for such proceedings or investigations the outcomes of which
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed on
Schedule 5.8 or in the reports, schedules and statements filed since December
31, 2000 by the Company pursuant to Section 13(a), 14(a), 14(c) or 15(d) of the
Exchange Act (the "COMPANY SEC
- 17 -
DOCUMENTS"), since December 31, 2000 the Company and its subsidiaries have
conducted their respective businesses in the ordinary course, and there has not
occurred: (i) any changes, effects or circumstances constituting, or which would
reasonably be expected to constitute, individually or in the aggregate, a
Material Adverse Effect; (ii) any amendments or changes in the Company Charter
Documents; (iii) any material changes to any Company Employee Plans or other
employee benefit arrangements or agreements, including the establishment of any
new such plans, arrangements or agreements or any amendment that extends the
extension of coverage under any such plans, arrangements or agreements to new
groups of employees or other individuals not previously covered, (iv) any
restructuring or reorganization of the Company or any of its subsidiaries, (v)
any damage to, destruction or loss of any asset of the Company (whether or not
covered by insurance) that would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect; (vi) any material change by the
Company in its accounting methods, principles or practices (other than as
required by GAAP subsequent to the date hereof); (vii) other than in the
ordinary course of business, any sale of a material amount of assets of the
Company; (viii) any declaration, setting aside or payment of any dividend or
other distribution with respect to its capital stock or any redemption, purchase
or other acquisition of any of its capital stock; or (ix) any split, combination
or reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock.
5.9 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule
5.9 or the Company SEC Documents, neither the Company nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise),
except liabilities (i) in the aggregate adequately provided for or disclosed in
the Company's unaudited balance sheet (including any related notes thereto) as
of September 30, 2001 included in the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2001 (the "2001 COMPANY BALANCE SHEET"),
(ii) incurred in the ordinary course of business and not required under GAAP to
be reflected on the 2001 Company Balance Sheet, (iii) incurred since September
30, 2001 in the ordinary course of business, (iv) incurred in connection with
this Agreement (including, without limitation, the conditions set forth in
SECTION 9.2(K)) or the Contemplated Transactions or (v) which would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
5.10 ABSENCE OF LITIGATION. Except as set forth in Schedule 5.10 or
the Company SEC Documents or arising out of the Contemplated Transactions, there
are no claims, actions, suits, proceedings or investigations pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries, or any properties or rights of the Company or any of its
subsidiaries, before any court, arbitrator or Governmental Entity, that would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. Except as disclosed on Schedule 5.10 or in the Company SEC
Documents, as of the date hereof, neither the Company nor any of its
subsidiaries is subject to any order, judgment, injunction or decree
(collectively, "ORDERS") of any court or Governmental Entity.
5.11 MATERIAL CONTRACTS. (a) Subject to the following sentence,
Schedule 5.11 includes, as of the date hereof, a list of (i) other than
intercompany, all loan agreements, indentures, mortgages, pledges, conditional
sale or title retention agreements, security agreements, guaranties, standby
letters of credit, equipment leases or lease purchase agreements, each in an
amount equal to or exceeding $1 million to which the Company or any of its
- 18 -
subsidiaries is a party or by which any of them is bound; (ii) all written or
oral contracts, agreements, commitments or other understandings or arrangements
to which the Company or any of its subsidiaries is a party or by which any of
them or any of their respective properties or assets are bound or affected, but
excluding contracts, agreements, commitments or other understandings or
arrangements entered into in the ordinary course of business and involving, in
the case of any such contract, agreement, commitment, or other understanding or
arrangement, individual payments or receipts by the Company or any of its
subsidiaries of less than $2 million over the term of such contract, commitment,
agreement, or other understanding or arrangement; (iii) all material partnership
or joint venture agreements of the Company and its subsidiaries and (iv) all
agreements which are required to be filed as "material contracts" with the SEC
pursuant to the requirements of the Exchange Act but which have not been so
filed with the SEC. With regard to agreements for the purchase or sale of raw
materials or inventory or for the provision of services in the ordinary course
of business and licensing or royalty arrangements, the thresholds referred to in
clauses (i) and (ii) of the preceding sentence shall be measured on an annual
basis.
(a) The Company has heretofore made available to Parent
and Merger Sub true, correct and complete copies of all of the following
contracts and agreements (and all amendments, modifications and supplements
thereto) to which the Company or any of its subsidiaries is a party or by which
any of its properties or assets are bound as of the date hereof: (i) the
contracts and agreements listed in Schedule 5.11; (ii) any contracts or
agreements listed in Schedule 5.23; and (iii) commitments and agreements to
enter into any of the foregoing (collectively, the "MATERIAL CONTRACTS").
(b) Each of the Material Contracts constitutes the valid
and legally binding obligation of the parties thereto, enforceable in accordance
with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and is in full force and effect, except as
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect. There is no default under any Material Contract either
by the Company or, to the Company's knowledge, by any other party thereto, and
no event has occurred that with the lapse of time or the giving of notice or
both would constitute a default thereunder by the Company or, to the Company's
knowledge, any other party, except for such default, or events of default as
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(c) Except as set forth in Schedule 5.11 or the Company
SEC Documents, no party to any such Material Contract has given notice to the
Company of or made a claim against the Company with respect to any breach or
default thereunder, except for such breaches or defaults as would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.
5.12 ABSENCE OF QUESTIONABLE PAYMENTS. Neither the Company nor any
of its subsidiaries nor, to the knowledge of the Company, any director, officer,
agent, employee or other person acting on behalf of the Company or any of its
subsidiaries, has used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others or established or
maintained any unlawful or unrecorded funds in material violation of Section 30A
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of the Exchange Act. Neither the Company nor any of its subsidiaries nor, to the
Company's knowledge, any director, officer, agent, employee or other person
acting on behalf of the Company or any of its subsidiaries, has accepted or
received any unlawful contributions, payments, gifts, or expenditures.
5.13 INTEREST RATE AND FOREIGN EXCHANGE CONTRACTS. All interest
rate swaps, caps, floors and option agreements and other interest rate risk
management arrangements and foreign exchange contracts to hedge its investments
in foreign subsidiaries, whether entered into for the account of the Company or
one of its subsidiaries, were entered into in the ordinary course of business
and, to the Company's knowledge, in accordance with prudent business and
applicable rules, regulations and policies of any Governmental Entity and with
counterparties believed to be financially responsible at the time, and are valid
and binding obligations of the Company or one of its subsidiaries enforceable in
accordance with their terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally and the availability of equitable remedies), and are in full force and
effect. The Company and each of its subsidiaries have duly performed in all
material respects all of their material obligations thereunder to the extent
that such obligations to perform have accrued, and, to the Company's knowledge,
there are no breaches, violations or defaults or allegations or assertions of
such by any party thereunder, except for such breaches as would not reasonable
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
5.14 COMPLIANCE; PERMITS. (a) Except as set forth in Schedule
5.14(a) or in the Company SEC Documents, neither the Company nor any of its
subsidiaries is (or has been) in conflict with, or in breach, default or
violation of, (i) its certificate of incorporation or by-laws (or analogous
organizational documents), (ii) any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries or by which its or
any of their respective properties is bound or affected, (iii) any note, bond,
debenture, indenture, credit agreement or facility, commercial paper facility,
sale-leaseback arrangement or financing lease pursuant to which the Company or
any of its subsidiaries has or may incur indebtedness for borrowed money or any
security, pledge, mortgage or trust agreement or arrangement in respect thereof
or (iv) any other contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties is bound or affected, except for any such conflicts,
defaults or violations which would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect; provided, the Company makes
no representation in this SECTION 5.14 with respect to matters covered by
SECTION 5.15, SECTION 5.16 and SECTION 5.17.
(a) No investigation by any Governmental Entity with
respect to the Company or its subsidiaries is pending or, to the knowledge of
the Company, threatened, except for such investigations which would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect or are disclosed in the Company SEC Documents; PROVIDED that the
Company makes no representation in this SECTION 5.14(B) with respect to matters
covered by SECTION 5.15, SECTION 5.16, SECTION 5.17 and SECTION 5.21.
(b) Except as set forth in Schedule 5.14(c)(x) or the
Company SEC Documents, the Company and its subsidiaries hold all permits,
licenses, easements, variances, exemptions, consents, certificates, orders and
approvals from Governmental Entities needed for
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the operation of the business of the Company and/or its subsidiaries as it is
now being conducted (collectively, the "COMPANY PERMITS"), except where the
failure to hold such Company Permits would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. The Company
and its subsidiaries are in compliance with the terms of the Company Permits,
except as described in Schedule 5.14(c)(y) and in the Company SEC Documents or
where the failure to so comply would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
5.15 TAXES. Except as set forth or referred to in Schedule 5.15:
(a) The Company and each of its subsidiaries has timely
and accurately filed, or caused to be timely and accurately filed, all Tax
Returns required to be filed by it, and has timely paid, collected or withheld,
or caused to be timely paid, collected or withheld, all amounts of Taxes
required to be paid, collected or withheld, other than such Taxes for which
adequate reserves in the 2001 Company Balance Sheet have been established or
which are being contested in good faith. There are no claims or assessments
pending against the Company or any of its subsidiaries for any alleged
deficiency in any Tax. There are no pending or, to the knowledge of the Company,
threatened audits or investigations for or relating to any liability in respect
of any Taxes, and the Company has not been notified in writing of any proposed
Tax claims or assessments against the Company or any of its subsidiaries. To the
knowledge of the Company, no claim has ever been made by any Governmental Entity
in a jurisdiction where any of the Company and its subsidiaries does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction.
Neither the Company nor any of its subsidiaries has executed any waivers or
extensions of any applicable statute of limitations to assess any amount of
Taxes. There are no outstanding requests by the Company or any of its
subsidiaries for any extension of time within which to file any Tax Return or
within which to pay any amounts of Taxes shown to be due on any Tax Return.
There are no outstanding rulings of, or requests for rulings with, any
Governmental Entity addressed to the Company or any of its subsidiaries that
are, or if issued, would be, binding on the Company or any of its subsidiaries
with respect to any Tax. There are no material elections regarding Taxes
affecting the Company or any of its subsidiaries. To the best knowledge of the
Company, there are no liens for amounts of Taxes on the assets of the Company or
any of its subsidiaries except for statutory liens for current Taxes not yet due
and payable. There are no outstanding powers of attorney enabling any party to
represent the Company or any of its subsidiaries with respect to Taxes. Other
than with respect to the Company and its subsidiaries, neither the Company nor
any of its subsidiaries is liable for Taxes of any other Person, or is currently
under any contractual obligation to indemnify any person with respect to any
amounts of Taxes (except for customary agreements to indemnify lenders or
security holders in respect of Taxes and except for provisions in agreements for
the divestiture of subsidiaries, assets or business lines of the Company or its
subsidiaries that require the Company or its subsidiaries (as applicable) to
indemnify a purchaser or purchaser group for amounts of Taxes of the Company or
its subsidiaries (as applicable) in the nature of sales or similar Taxes
incurred as a consequence of any such divestiture transactions), or is a party
to any tax sharing agreement or any other agreement providing for payments by
the Company or any of its subsidiaries with respect to any amounts of Taxes. The
Company is not, and has not been, a United States real property holding company
within the meaning of Section 897(c) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code. Neither the Company nor any
of its subsidiaries has participated in an international boycott as
- 21 -
defined in Section 999 of the Code. The transactions contemplated herein are not
subject to any tax withholding provisions.
(b) For purposes of this Agreement, the term "TAX" shall
mean any United States federal, national, state, provincial, local or other
jurisdictional income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, estimated, alternative, or add-on minimum, ad
valorem, transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge imposed by any Governmental Entity,
together with any interest or penalty imposed thereon. The term "TAX RETURN"
shall mean a report, return or other information (including any attached
schedules or any amendments to such report, return or other information)
required to be supplied to or filed with a Governmental Entity with respect to
any Tax, including an information return, claim for refund, amended return or
declaration or estimated Tax; provided that the Company makes no representation
in this SECTION 5.15 with respect to matters covered by SECTION 5.16.
5.16 EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS. (a) "COMPANY
EMPLOYEE PLANS" shall mean all "employee pension benefit plans" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), all "employee welfare benefit plans" (as defined in Section 3(1) of
ERISA), all similar plans maintained outside the United States and not required
by applicable law (any non-U.S., non-statutory Company Employee Plan, a
"NON-U.S. PLAN") and all other bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or employee benefit plans, programs or arrangements (including those
which contain change of control provisions or pending change of control
provisions), and any employment, executive compensation or severance agreements
(including those which contain change of control provisions or pending change of
control provisions), whether maintained in the U.S. or a Non-U.S. Plan, as
amended, modified or supplemented, maintained or contributed to by the Company
or a subsidiary of the Company for the benefit of any former or current
employee, officer or director (or any of their beneficiaries) of the Company or
a subsidiary of the Company. The term "AFFILIATE PLAN" shall mean any other such
plan, program, arrangement or agreement with respect to which the Company or any
subsidiary of the Company has or would reasonably be expected to have any
liability, either as a member of a controlled group of corporations or trades or
businesses, as defined under ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Internal Revenue
Code of 1986, as amended (the "CODE"), and comparable provisions of ERISA, or by
contractual arrangement. Schedule 5.16(a) lists each material Company Employee
Plan and each material Affiliate Plan. With respect to each plan included on the
Schedule 5.16(a), the Company shall indicate whether such plan includes an
explicit change in control provision. With respect to each Company Employee Plan
or Affiliate Plan listed in Schedule 5.16(a), the Company has provided or made
available to Parent and Merger Sub: (i) each such written Company Employee Plan
(or a written description in English of (x) any Company Employee Plan which is
not written and (y) any Company Employee Plan that provides equity-based
benefits or that covers 50 or more participants and is written in a language
other than English) and any related trust agreement, insurance and other
contract (including a policy), if any, the most recently prepared summary plan
description, if any, summary of material modifications the substance of which is
not already incorporated in the corresponding summary plan description or
Company Employee Plan document, if any, and communications distributed to plan
participants that could reasonably be expected to materially modify the terms of
any Company Employee Plan, whether through information actually
- 22 -
conveyed in the communication or a failure to convey information; (ii) the three
most recent annual reports on Form 5500 series (or equivalent filing with
respect to Non-U.S. Plans), with accompanying schedules and attachments, filed
with respect to each Company Employee Plan required to make such a filing; (iii)
the most recent actuarial valuation, if any, for each Company Employee Plan and
Affiliate Plan subject to Title IV of ERISA and for each Non-U.S. Plan, to the
extent applicable; (iv) the latest reports, if any, which have been filed with
the Department of Labor ("DOL") to satisfy the alternative method of compliance
for pension plans for certain selected employees pursuant to DOL regulation
Section 2520.104-23; and (v) the most recent favorable determination letters
issued for each Company Employee Plan and related trust which is intended to be
qualified under Section 401(a) of the Code (and, if an application for such
determination is pending, a copy of the application for such determination).
(a) Except as set forth in Schedule 5.16(b), (i) none of
the Company Employee Plans or Affiliate Plans promises or provides material
medical or other material welfare benefits to any director, officer, employee or
consultant (or any of their beneficiaries) after their service with the Company
or its subsidiary or affiliate terminates, other than as required by Section
4980B of the Code or Part 6 of Subtitle B of Title I of ERISA (hereinafter,
"COBRA"), or any similar state or non-U.S. laws and no liability for such
benefits has been transferred from a Company Employee Plan or Affiliate Plan to
another plan; (ii) none of the Company Employee Plans or Affiliate Plans is a
"multiemployer plan" as such term is defined in Section 3(37) of ERISA and no
Non-U.S. Plan is a multiemployer plan, no Company Employee Plan or Affiliate
Plan has incurred any withdrawal liability that remains unsatisfied and the
Contemplated Transactions are not reasonably likely to result in the assessment
of any withdrawal liability that would, in either case, reasonably be expected
to be a material liability to the Company; (iii) neither the Company, any of its
subsidiaries, nor, to the knowledge of the Company, any other party in interest
or disqualified person (as defined in Section 3(14) of ERISA and Section 4975 of
the Code) has engaged in a transaction with respect to any Company Employee Plan
or Affiliate Plan which would reasonably be expected to subject the Company or
any subsidiary, directly or indirectly, to a tax, penalty or other liability for
prohibited transactions under ERISA or Section 4975 of the Code that could
reasonably be expected to have a Material Adverse Effect; (iv) with respect to
the Company Employee Plans and Affiliate Plans, neither the Company or any of
its subsidiaries, nor any executive of the Company or one of its subsidiaries as
fiduciary of the Company Employee Plans or Affiliate Plans or, to the knowledge
of the Company, any other fiduciary of any Company Employee Plan or Affiliate
Plan has breached any of the responsibilities or obligations imposed upon
fiduciaries under Title I of ERISA, except for such breach as could not
reasonably be expected to have a Material Adverse Effect; (v) all Company
Employee Plans and all Affiliate Plans have been established and maintained in
accordance with their terms and have been operated in compliance with the
requirements of applicable law (including to the extent applicable, the
notification and other requirements of COBRA, the Health Insurance Portability
and Accountability Act of 1996, the Newborns' and Mothers' Health Protection Act
of 1996, the Mental Health Parity Act of 1996, and the Women's Health and Cancer
Rights Act of 1998) except for such failure as could not reasonably be expected
to have a Material Adverse Effect; (vi) each Company Employee Plan which is
intended to be qualified under Section 401(a) of the Code is the subject of a
favorable determination letter from the Internal Revenue Service (the "IRS"),
and nothing has occurred which would reasonably be expected to result in the
disqualification of any such plan; (vii) all contributions required to be made
with respect to any Company Employee Plan (whether
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pursuant to the terms of such plan, Section 412 of the Code, any collective
bargaining agreement, or otherwise) have been made on or before their due dates
(including any extensions thereof), except to the extent any failure to have
made such a contribution on or before its due date could not reasonably be
expected to result in a current or future liability that could reasonably be
expected to have a Material Adverse Effect; (viii) with respect to each Company
Employee Plan and, to the knowledge of the Company, Affiliate Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the 30-day notice requirement has been waived under the
regulations to Section 4043 of ERISA) has occurred with respect to which the
Company or one of its subsidiaries has any material outstanding liability, and
no Company action has occurred that resulted or, pursuant to applicable non-U.S.
law, is reasonably likely to result in any adverse liability for any Non-U.S.
Plan that, in any case, reasonably could be expected to have a Material Adverse
Effect; (ix) none among the Company or any subsidiary thereof has incurred (or
would reasonably be expected to incur) any liability that remains unsatisfied,
or reasonably expects to incur any liability, under Title IV of ERISA with
respect to either a Company Employee Plan or, to the knowledge of the Company,
an Affiliate Plan including with respect to an event described in Section 4062,
4063 or 4041 of ERISA (other than liability for premium payments to the Pension
Benefit Guaranty Corporation (the "PBGC") arising in the ordinary course) that
could reasonably be expected to have a Material Adverse Effect; and (x) other
than routine claims for benefits made in the ordinary course of the operation of
the Company Employee Plans or, to the knowledge of the Company, Affiliate Plans,
there are no pending, nor to the Company's knowledge, any threatened, claims,
investigations or causes of action with respect to any Company Employee Plan or
to the knowledge of the Company, an Affiliate Plan, whether maintained in the
U.S. or a Non-U.S. Plan, whether made by a participant or beneficiary of such a
plan, a governmental agency or otherwise, against the Company or any subsidiary
of the Company, any Company director, officer or employee, any Company Employee
Plan, or Affiliate Plan or any fiduciary of a Company Employee Plan or Affiliate
Plan that could reasonably be expected to have a Material Adverse Effect.
(b) Schedule 5.16(c) sets forth a true and complete list
of each current or former employee, consultant, officer or director of the
Company or any of its subsidiaries who, as of the date hereof, holds (i) any
option to purchase the Common Stock or commitments for future options, together
with the number of shares of the Common Stock subject to such option, the
exercise price of such option (to the extent determined as of the date hereof),
whether such option is intended to qualify as an incentive stock option within
the meaning of Section 422(b) of the Code (an "ISO"), and the expiration date of
such option; (ii) any shares of Common Stock that are unvested or subject to a
repurchase option, risk of forfeiture or other condition providing that such
shares may be forfeited or repurchased by the Company upon any termination of
the stockholder's employment, directorship or other relationship with the
Company or any of its subsidiaries or which shares are subject to
performance-based vesting; and (iii) any other award or right (including share
units or stock appreciation rights), directly or indirectly, to receive Common
Stock (or any other unit of Company equity) or any amount payable by reference
to Common Stock (or any other unit of Company equity), together with the number
of shares of Common Stock (or any other unit of Company equity) subject to such
right.
(c) Schedule 5.16(d) sets forth a true and complete (i)
list of all material outstanding agreements with any individual consultants who
provide services to the Company or any of its subsidiaries; (ii) list of all
outstanding material agreements with respect to
- 24 -
the services of individual independent contractors or individual leased
employees who provide services to the Company or any of its subsidiaries; (iii)
list of all material outstanding agreements with companies or organizations that
employ individuals who provide on-site consultants, contracting or leased
services to the Company or any of its subsidiaries; (iv) description of any
situation in which a material portion of the workforce of a component of the
Company or its subsidiaries, whether such component is a subsidiary, unit, work
location, line of business or otherwise, is composed of non common law
employees, whether consultants, independent contractors or otherwise, which
description shall include, if applicable, representative samples of agreements
with such non common law employees; and (iv) list of all worker council
agreements of the Company or any of its subsidiaries with or relating to its
employees.
(d) Except as set forth in Schedule 5.16(e), with respect
to each Company Employee Plan or Affiliate Plan that is subject to Title IV of
ERISA, since the date of the most recent actuarial report prepared by each such
plan's actuary with respect to that plan's most recently completed fiscal year,
to the knowledge of the Company after due inquiry, nothing has occurred that
would materially adversely affect the funding status of such Company Employee
Plan.
(e) Except as set forth in Schedule 5.16(f), the
consummation of the Contemplated Transactions will not, either alone or in
combination with another event (but excluding such other event standing alone),
(i) result in any payment (including severance payments, payments likely to be
non-deductible pursuant to Section 280G of the Code or bonus payments or
otherwise) becoming due pursuant to any Company Employee Plan to any current or
former director, officer, employee or consultant of the Company, (ii) result in
any increase in the amount of compensation or benefits payable pursuant to any
Company Employee Plan in respect of any director, officer, employee or
consultant of the Company, or (iii) accelerate the vesting or timing of payment
of any benefits or compensation payable pursuant to any Company Employee Plan in
respect of any director, officer, employee or consultant of the Company.
(f) There are no complaints, charges or claims against
the Company or any of its subsidiaries pending or, to the knowledge of the
Company, threatened to be brought by or filed with any Governmental Entity based
on, arising out of, in connection with or otherwise relating to the
classification of any individual by the Company as an independent contractor or
"leased employee" (within the meaning of Section 414(n) of the Code) rather than
as an employee, and no conditions exist under which the Company or any of its
subsidiaries is reasonably likely to incur any such liability that in each case
could reasonably be expected to have a Material Adverse Effect.
(g) The Company shall indicate on Schedule 5.16(h): (i)
with respect to each participant in the Company's executive severance plans,
whether such employee has entered into an agreement or a provision of an
agreement prohibiting or restricting such employee from accepting employment or
otherwise engaging in activity that is in competition with the business of the
Company or its subsidiaries (other than with respect to the use of confidential
information or trade secrets) after the termination of such individual's
employment with the Company (a "NON-COMPETITION AGREEMENT"); and (ii) a
description of those classes of employees that are required to execute a
Non-Competition Agreement. Other than as set forth on
- 25 -
Schedule 5.16(h), no employee is entitled to any benefits that include a
gross-up with respect to excise taxes pursuant to Section 4999 of the Code.
5.17 ENVIRONMENTAL MATTERS. (a) Except as set forth in Schedule
5.17(a) or in the Company SEC Documents or as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, the
operations and properties of the Company and its subsidiaries are and at all
times have been in compliance with the Environmental Laws, which compliance
includes the possession by the Company and its subsidiaries of all permits and
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof.
(a) Except as set forth in Schedule 5.17(b) or in the
Company SEC Documents or as would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect, there are no Environmental
Claims, including claims based on "arranger liability," pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries.
(b) Except as set forth in Schedule 5.17(c) or in the
Company SEC Documents, there are no past or present actions, circumstances,
conditions, events or incidents, including the release, emission, discharge,
presence or disposal of any Materials of Environmental Concern, that are
reasonably likely to form the basis of any Environmental Claim against the
Company or any of its subsidiaries, except for such Environmental Claims that
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
(c) Except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, (i) there
are no off-site locations where the Company or any of its subsidiaries has
stored, disposed or arranged for the disposal of Materials of Environmental
Concern which have been listed on the National Priority List, CERCLIS, or state
Superfund site list, and the Company and its subsidiaries have not been notified
that any of them is a potentially responsible party at any such location; (ii)
there are no underground storage tanks located on property owned or leased by
the Company or any of its subsidiaries; (iii) there is no friable asbestos
containing material contained in or forming part of any building, building
component, structure or office space owned, leased or operated by the Company or
any of its subsidiaries; and (iv) there are no polychlorinated biphenyls
("PCBS") or PCB-containing items contained in or forming part of any building,
building component, structure or office space owned, leased or operated by the
Company or any of its subsidiaries.
(d) Except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect or as set
forth in Schedule 5.17(e) or in the Company SEC Documents, all Company Permits
that the Company and each of its subsidiaries is required to have obtained under
Environmental Laws have been obtained and are maintained by the Company, were
duly issued by the appropriate Governmental Entity, are in full force and effect
and are not subject to appeal. The Company has not received notice, or otherwise
has no knowledge, that any Company Permit has been or will be, rescinded,
terminated, limited, or amended, which rescission, termination, limitation or
amendment would reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect. To the Company's knowledge, no additional
capital expenditures will be required by the Company for purposes of
- 26 -
compliance with the terms or conditions of any Company Permits or Company Permit
renewals, except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. To the Company's knowledge, the
execution, delivery and performance of this Agreement and the consummation of
the Contemplated Transactions will not require the assignment or transfer of any
Company Permit, except for (i) Company Permits, the non-assignability or
non-transferability of which would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect and (ii) those Company
Permits that may be assigned or transferred on or prior to the Effective Time
causing any such Company Permit to be rescinded, terminated or limited in any
material respect.
(e) For purposes of this SECTION 5.17:
(i) "ENVIRONMENTAL CLAIM" means any claim,
action, cause of action, investigation or notice (in each case in
writing or, if not in writing, to the knowledge of the Company) by any
person or entity alleging potential liability (including potential
liability for investigatory costs, cleanup costs, governmental response
costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from the presence,
or release or threat of release into the environment, of any Material
of Environmental Concern at any location, whether or not owned or
operated by the Company or any of its subsidiaries.
(ii) "ENVIRONMENTAL LAWS" means, as they exist on
the date hereof, all applicable United States federal, state, local and
non-U.S. laws, regulations, codes and ordinances, relating to pollution
or protection of human health (as relating to the environment or the
workplace) and the environment (including ambient air, surface water,
ground water, land surface or sub-surface strata), including laws and
regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating
to the use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern, including the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42
U.S.C.ss.9601 et seq., Resource Conservation and Recovery Act ("RCRA"),
42 U.S.C.ss.6901 et seq., Toxic Substances Control Act ("TSCA"), 15
▇.▇.▇.▇▇. 2601 et seq., Occupational Safety and Health Act ("OSHA"), 29
U.S.C.ss.651 et seq., the Clean Air Act, 42 U.S.C.ss.7401 et seq., the
Clean Water Act, 33 U.S.C.ss.1251 et seq., each as may have been
amended or supplemented, and any applicable environmental transfer
statutes or laws.
(iii) "MATERIALS OF ENVIRONMENTAL CONCERN" means
chemicals, pollutants, contaminants, hazardous materials, hazardous
substances and hazardous wastes, medical waste, toxic substances,
petroleum and petroleum products and by-products, asbestos-containing
materials, PCBs, and any other chemicals, pollutants, substances or
wastes, in each case regulated under any Environmental Law.
- 27 -
(iv) "SUBSIDIARY" includes, in addition to
current subsidiaries of the Company, any person or entity whose
liability for any Environmental Claim the Company or any of its current
subsidiaries has retained or assumed or for which liability is imposed
on the Company or any current subsidiary under any Environmental Law,
but only to the extent and in respect of such retained, assumed or
imposed liability.
5.18 INTELLECTUAL PROPERTY. (a) As used herein, the term
"INTELLECTUAL PROPERTY ASSETS" shall mean all worldwide intellectual property
rights, including patents, trademarks, service marks, copyrights, and
registrations and applications therefor, licenses, trade names, Internet domain
names, know-how, trade secrets, computer software programs and development tools
and proprietary information, technologies and processes, and all documentation
and media describing or relating to the above, in any format, whether hard copy
or machine-readable only. As used herein, "COMPANY INTELLECTUAL PROPERTY ASSETS"
shall mean the Intellectual Property Assets used or owned by the Company or any
of its subsidiaries.
(a) Except as set forth in Schedule 5.18(b), the Company
and/or each of its subsidiaries owns, or is licensed or otherwise possesses
legally enforceable rights to use, all the Company Intellectual Property Assets
that are used in and are material to the business of the Company and its
subsidiaries as currently conducted, without infringing or violating the rights
of others, except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(b) Except as set forth in Schedule 5.18(c) or as would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, no claims (i) are currently pending or, to the Company's
knowledge, are threatened by any person with respect to, the Company
Intellectual Property Assets, or (ii) are currently pending or, to the Company's
knowledge, threatened by any person with respect to the Intellectual Property
Assets of a third party (the "THIRD PARTY INTELLECTUAL PROPERTY ASSETS") to the
extent arising out of any use, reproduction or distribution of, or of products
or methods covered by, such Third Party Intellectual Property Assets by or
through the Company or any of its subsidiaries.
(c) Except as set forth in Schedule 5.18(d), there are no
valid grounds for any bona fide claim to the effect that the manufacture, offer
for sale, sale, licensing or use of any product, system or method either (i) now
used, offered for sale, sold or licensed or, (ii) as of the date hereof,
scheduled for commercialization prior to the first anniversary of the date
hereof, in each case by or for the Company or any of its subsidiaries, infringes
on any Third Party Intellectual Property Assets, except as would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
(d) Schedule 5.18(e) sets forth a list of (i) all patents
and patent applications owned by the Company and/or each of its subsidiaries
worldwide; (ii) all trademark and service ▇▇▇▇ registrations and all trademark
and service ▇▇▇▇ applications; (iii) all material common law trademarks,
material trade dress and material slogans; (iv) all material trade names owned
by the Company and/or each of its subsidiaries worldwide; (v) all copyright
registrations and copyright applications owned by the Company and/or each of its
subsidiaries worldwide; (vi) all Internet domain name registrations owned by the
Company and/or its subsidiaries
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worldwide; and (vii) all licenses owned by the Company and/or each of its
subsidiaries in which the Company and/or each of its subsidiaries is (A) a
licensor with respect to any of the patents, trademarks, service marks, trade
names, Internet domain names, or copyrights listed in Schedule 5.18(e) or (B) a
licensee of any other person's patents, trade names, trademarks, service marks
or copyrights material to the Company. Schedule 5.18(e) includes but is not
necessarily limited to each Company Intellectual Property Asset where the
failure to own or license such Company Intellectual Property Asset would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. Except as set forth in Schedule 5.18(e) the Company and/or each
of its subsidiaries has made all necessary filings and recordations to protect
and maintain its interest in the patents, patent applications, trademark and
service ▇▇▇▇ registrations, trademark and service ▇▇▇▇ applications, Internet
domain names, copyright registrations and copyright applications and licenses
set forth in Schedule 5.18(e), except where the failure to so protect or
maintain would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
(e) Except as set forth in Schedule 5.18(f), in all
material respects: (i) each patent, trademark or service ▇▇▇▇ registration and
copyright registration listed in Schedule 5.18(e) is valid and subsisting and
(ii) each license of the Company Intellectual Property Assets listed in Schedule
5.18(e) is valid, subsisting and enforceable.
(f) Except as set forth in Schedule 5.18(g), to the
Company's knowledge, there is no unauthorized use, infringement or
misappropriation of any of the Company's Intellectual Property Assets by any
third party, including any employee, former employee, independent contractor or
consultant of the Company or any of its subsidiaries.
5.19 CERTAIN INTELLECTUAL PROPERTY AGREEMENTS. Each of the
Settlement Agreement, dated February 2, 1999, by and between the Company and The
Procter & ▇▇▇▇▇▇ Company, the Settlement Agreement, dated March 19, 1999, by and
between the Company and ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Corporation and the Settlement Agreement,
dated July 31, 2000, between the Company and ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Worldwide, Inc.
(collectively, the "SAP SETTLEMENT AGREEMENTS"), remains in full force and
effect; PROVIDED, HOWEVER, that no representation or warranty is made that such
SAP Settlement Agreements shall remain in full force and effect from and after
the Closing.
5.20 TITLE TO PROPERTY. (a) The Company has delivered all existing
title reports in its possession, if any, with respect to all of its owned real
property to Parent and Merger Sub. Except as set forth in Schedules 5.18(b) and
5.20 or the Company SEC Documents, each of the Company and its subsidiaries has
good title to all of its owned real properties and other owned assets, free and
clear of all liens, charges and encumbrances, except liens for taxes not yet due
and payable and such liens or other imperfections of title, if any, as do not
materially interfere with the present use of the property affected thereby or
which would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect, and except for liens which secure indebtedness
reflected in the 2001 Balance Sheet; and, to the knowledge of the Company, all
leases pursuant to which the Company or any of its subsidiaries lease from
others material amounts of real or personal property are in good standing, valid
and effective in accordance with their respective terms, and there is not, to
the knowledge of the Company, under any of such leases, any default or event of
default (or event which with notice or lapse of time, or both,
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would constitute a material default or event of default), except where the lack
of such good standing, validity and effectiveness or the existence of such
default or event of default would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
(a) All tangible assets owned or used by the Company and
its subsidiaries in the operation of their respective businesses are in good
operating condition and in a good state of maintenance and repair and are
adequate for the such businesses as currently conducted and as contemplated to
be conducted following the Closing, except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
5.21 EMPLOYMENT AND LABOR MATTERS. Except as set forth in Schedule
5.21 or the Company SEC Documents:
(a) Each of the Company and its subsidiaries is in
compliance, and has not failed to be in compliance as a result of which it would
reasonably be expected now or in the future to have liability, with all
applicable U.S. and non-U.S. laws, agreements and contracts relating to
employment practices, terms and conditions of employment, and the employment of
former, current, and prospective employees, independent contractors and "leased
employees" (within the meaning of Section 414(n) of the Code) of the Company or
any of its subsidiaries including all such U.S. and non-U.S. laws, agreements
and contracts relating to wages, hours, collective bargaining, employment
discrimination, immigration, disability, civil rights, human rights, fair labor
standards, occupational safety and health, workers' compensation, pay equity,
wrongful discharge and violation of the potential rights of such former,
current, and prospective employees, independent contractors and leased
employees, and has timely prepared and filed all appropriate forms (including
Immigration and Naturalization Service Form I-9) required by any relevant
Governmental Entity, except where the failure to be or have been in compliance
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(b) Neither the Company nor any of its subsidiaries is a
party to any U.S. or non-U.S. collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or its
subsidiaries, nor, to the knowledge of the Company, are there any activities or
proceedings of any labor union to organize any employees of the Company or any
of its subsidiaries.
(c) Neither the Company nor any of its subsidiaries is in
breach of any collective bargaining agreement or labor union contract, nor are
there any strikes, slowdowns, work stoppages, lockouts, or, to the knowledge of
the Company, threats thereof, by or with respect to any employees of the Company
or any of its subsidiaries which breach, strike, slowdown, work stoppage,
lockout or threat would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
5.22 INSURANCE. Except as set forth in Schedule 5.22 or the Company
SEC Documents, all material fire and casualty, general liability, business
interruption, product liability and sprinkler and water damage insurance
policies maintained by the Company are with reputable insurance carriers,
provide adequate coverage for all normal risks incident to the business of the
Company and its subsidiaries and their respective properties and assets and are
in character and amount appropriate for the businesses currently conducted by
the Company, except
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as would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
5.23 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this Agreement
or as set forth in Schedule 5.23, to the Company's knowledge, there is no
agreement, judgment, injunction, order or decree binding upon the Company or any
of its subsidiaries which has or would reasonably be expected to have the effect
of prohibiting or impairing the conduct of business by the Company or any of its
subsidiaries as currently conducted by the Company or such subsidiary (or as it
would be conducted absent such prohibition or impairment), or restricting any
transactions (including payment of dividends and distributions) between the
Company and its subsidiaries, except for any prohibition or impairment as would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
5.24 INTERESTED PARTY TRANSACTIONS. Except as set forth in Schedule
5.24 or the Company SEC Documents or for events as to which the amounts involved
do not, in the aggregate, exceed $250,000, since the Company's proxy statement
dated April 18, 2001, no event has occurred that would be required to be
reported as a Certain Relationship or Related Transaction pursuant to Item 404
of Regulation S-K promulgated by the SEC.
5.25 FINDERS AND INVESTMENT BANKERS. Except as set forth in
Schedule 5.25, neither the Company nor any of its officers or directors has
employed any investment banker, financial advisor, broker or finder in
connection with the Contemplated Transactions, except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Inc. ("SSB"), or incurred any liability for any investment banking, business
consultancy, financial advisory, brokerage or finders' fees or commissions in
connection with the Contemplated Transactions, except for fees payable to SSB.
The Company has heretofore furnished to Parent a complete and correct copy of
all agreements between the Company and SSB pursuant to which such firm would be
entitled to any payment relating to the Contemplated Transactions.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company and each
Seller as follows:
6.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
Guarantor, Parent and Merger Sub is duly incorporated, validly existing and in
good standing (to the extent the concept of good standing exists in the
applicable jurisdiction) under the laws of its jurisdiction of incorporation and
has the requisite corporate power and authority necessary to own, lease and
operate the properties it purports to own, lease and operate and to carry on its
business as now conducted, except where the failure to be so organized, existing
and in good standing or to have such power and authority would not reasonably be
expected to have a Guarantor Material Adverse Effect. Each of Parent and Merger
Sub is duly qualified or licensed as a foreign corporation to do business, and
is in good standing, in each jurisdiction where the character of its
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properties owned, leased or operated by it or the nature of its activities make
such qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing that would not, individually or
in the aggregate, reasonably be expected to have a material adverse effect on
the business, assets (including intangible assets), financial condition or
results of operations of Guarantor and its subsidiaries taken as a whole (a
"GUARANTOR MATERIAL ADVERSE EFFECT").
6.2 AUTHORITY RELATIVE TO THIS AGREEMENT. (a) The execution,
delivery and performance by Parent and Merger Sub of this Agreement and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
are within the corporate powers of Parent and Merger Sub, as the case may be,
and have been duly and validly authorized by all necessary corporate action. The
execution, delivery and performance by Guarantor of the Guarantee are within the
corporate powers of the Guarantor. This Agreement has been duly and validly
executed and delivered and constitutes a valid and binding agreement of Parent
and Merger Sub enforceable against such parties in accordance with its terms,
and the Guarantee has been duly and validly executed and delivered and
constitutes a valid and binding agreement of Guarantor enforceable against
Guarantor in accordance with its terms.
(a) At a meeting duly called and held, or by written
consent in lieu of meeting, the Board of Directors of each Parent and Merger Sub
has (i) determined that this Agreement and the Contemplated Transactions are
fair to and in the best interests of such party, and (ii) approved this
Agreement and the Contemplated Transactions.
6.3 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS. (a) The
execution, delivery and performance by Parent and Merger Sub of this Agreement,
the execution, delivery and performance by Guarantor of the Guarantee and the
consummation by Parent, Merger Sub and Guarantor of the Contemplated
Transactions require no action by or in respect of, or filing with, any
Governmental Entity, other than (i) the filing of a Certificate of Merger with
respect to the Merger with the Secretary of State of the State of Delaware, (ii)
compliance with any applicable requirements of the HSR Act and applicable
Non-U.S. Monopoly Laws, (iii) compliance with any applicable requirements of the
Securities Act, the Exchange Act and any applicable state securities laws, and
(iv) any actions or filings the absence of which would not be reasonably
expected, individually or in the aggregate, to have a Guarantor Material Adverse
Effect or materially impair the ability of Parent and Merger Sub to consummate
the Contemplated Transactions or the ability of Guarantor to fulfill its
obligations under the Guarantee.
(a) The execution, delivery and performance by Parent and
Merger Sub of this Agreement, the execution, delivery and performance by
Guarantor of the Guarantee and the consummation by Parent, Merger Sub and
Guarantor of the Contemplated Transactions, as applicable, do not and will not
(i) contravene, conflict with, or result in any violation or breach of any
provision of memorandum of association or bye-laws of Guarantor or the
certificate of incorporation or by-laws of Parent or Merger Sub, (ii) assuming
compliance with the matters referred to in SECTION 6.3(A), contravene, conflict
with or result in a violation or breach of any provision of any law, rule,
regulation, judgment, injunction, order or decree applicable to Guarantor or any
of its subsidiaries, (iii) require any consent or other action by any person
under, constitute a default under, or cause or permit the termination,
cancellation, acceleration or other change of any right or obligation or the
loss of any benefit to which Guarantor or any of its
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subsidiaries is entitled under any provision of any Material Agreement or
instrument binding upon Guarantor or any of its subsidiaries or any material
license, franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of Parent or Merger
Sub or their respective subsidiaries; or (iv) result in the creation or
imposition of any encumbrance on any material asset of Guarantor or any of its
subsidiaries.
6.4 BROKERS. There is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Parent, Merger Sub or Guarantor who might be entitled to any fee or
commission from Parent, Merger Sub, Guarantor or any of their respective
affiliates in connection with the Contemplated Transactions.
6.5 OWNERSHIP OF PARENT AND MERGER SUB; NO PRIOR ACTIVITIES. (a)
Merger Sub is a direct, wholly-owned subsidiary of Parent, and Parent is an
indirect, wholly-owned subsidiary of Guarantor. Merger Sub was formed solely for
the purpose of engaging in the Contemplated Transactions.
(a) Except for obligations or liabilities incurred by
Merger Sub in connection with its incorporation or organization and the
Contemplated Transactions and except for this Agreement and any other agreements
or arrangements contemplated by this Agreement, Merger Sub has not incurred,
directly or indirectly, through any subsidiary or affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any person.
6.6 FUNDS. Merger Sub will have sufficient funds available when
due, timely: (i) to pay (or, in the case of SECTION 3.4, to permit the Surviving
Corporation to pay) all amounts payable under SECTIONS 1.2, 3.4 AND 3.6; (ii) to
satisfy all payment obligations under the Warrants, either upon call or exercise
thereof; (iii) to pay all indebtedness of the Company under the Existing Credit
Agreement and to repurchase all of the Company's outstanding Notes issued under
the Indenture, dated January 28, 2000, among the Company, PTBI, PTB Acquisition
Sub, Inc. PTB Holdings, Inc. and Norwest Bank Minnesota, National Association;
and (iv) to consummate the transactions contemplated by this Agreement.
6.7 PURCHASE FOR INVESTMENT. Merger Sub is purchasing the Shares
for its own account for investment and not with a view to public resale or
distribution thereof.
6.8 NO VOTE REQUIRED. No vote of the shareholders of Guarantor is
required by law, Guarantor's Charter Documents or otherwise in order for Parent
and Merger Sub to consummate the Contemplated Transactions.
ARTICLE 7
COVENANTS OF THE SELLERS AND THE COMPANY
7.1 AGREEMENTS RELATING TO SELLERS.
(a) Sellers and the Company hereby agree that effective
immediately upon the Closing, the Shareholders' Agreement, dated January 28,
2000 (the "SHAREHOLDERS
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AGREEMENT"), among the Company and each of the Sellers shall terminate, and
neither the Company nor any other party thereto shall have any further rights or
obligations thereunder. Without limiting the foregoing, Sellers and the Company
acknowledge and agree that effective immediately upon the Closing, the
irrevocable proxies granted to PTB Acquisition pursuant to the Shareholders
Agreement shall terminate, and PTB Acquisition shall have no further rights
thereunder.
(b) Sellers and the Company further agree that effective
upon the Closing, that certain Registration Rights Agreement, dated January 28,
2000 (the "REGISTRATION RIGHTS AGREEMENT"), among the Company and each of the
Sellers shall terminate and that no party thereto shall thereafter have any
rights or obligations thereunder.
(c) Sellers and the Company hereby waive any rights which
may exist in their favor under the terms of the Shareholders Agreement or the
Registration Rights Agreement to the extent necessary to allow Sellers and the
Company to consummate the transaction contemplated hereby. Without limiting the
foregoing, the Company and Sellers expressly waive compliance by any Seller with
the restrictions on transfer contained in Sections 2.1 and 2.2 of the
Shareholders Agreement as well as the application of the tag along rights
provisions contained in Section 3 of the Shareholders Agreement in connection
with the sale by Sellers to Merger Sub of Seller Shares as contemplated by this
Agreement.
(d) Until the earlier to occur of (x) the registration of
such Seller's Shares of record in the name of Merger Sub following the Closing
and (y) the termination of this Agreement, each Seller shall vote, at any
meeting of the stockholders of the Company, however called, and in any action by
consent of the stockholders of the Company, (i) against any such action,
proposal, agreement or transaction that would result in a breach of any
covenant, obligation, agreement, representation or warranty of the Company or of
Seller contained in this Agreement, and (ii) against any action, agreement,
transaction or proposal (including any Acquisition Proposal) that could result
in any of the conditions to the Company's obligations under this Agreement not
being fulfilled or that is intended, or would reasonably be expected, to impede,
interfere, delay, discourage or adversely affect this Agreement or the
Contemplated Transactions.
(e) Each Seller agrees that until the earlier to occur of
the Closing and the termination of this Agreement, except as required by this
Agreement, such Seller shall not (i) sell, transfer, tender, pledge, assign,
contribute to the capital of any entity, hypothecate, give or otherwise dispose
of, grant a proxy or power of attorney with respect to, or create or permit to
exist any Liens of any nature whatsoever with respect to, any Seller Shares (or
agree or consent to, or offer to do, any of the foregoing), (ii) take any action
that would make any representation or warranty of Seller herein untrue or
incorrect in any material respect or have the effect of preventing or disabling
Seller from performing Seller's obligations hereunder or (iii) directly or
indirectly, initiate, solicit or encourage any person to take actions that could
reasonably be expected to lead to the occurrence of any of the foregoing.
7.2 CONDUCT OF BUSINESS BY THE COMPANY. The Company covenants and
agrees that, during the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the Effective Time,
unless Parent and Merger Sub shall
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otherwise agree in writing, and except as set forth in Schedule 7.2, the Company
shall conduct its business and shall cause the businesses of its subsidiaries to
be conducted only in, and the Company and its subsidiaries shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice; and the Company shall use reasonable commercial efforts to
preserve substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its subsidiaries and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any of its subsidiaries has significant
business relations. By way of amplification and not limitation, except as
contemplated by this Agreement (including Schedule 7.2), neither the Company nor
any of its subsidiaries shall, during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Effective Time, directly or indirectly do, or propose to do, any of the
following without the prior written consent of Parent, which, in the case of
clauses (c), (d)(iv), (e)(iv), (f), (h), (i) or (j) will not be unreasonably
withheld or delayed:
(a) amend or otherwise change the Company Charter
Documents or Subsidiary Documents;
(b) issue, sell, pledge, dispose of or encumber, or
authorize the issuance, sale, pledge, disposition or encumbrance of, any shares
of capital stock of any class, or any options, warrants, convertible securities
or other rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) in the
Company, any of its subsidiaries or affiliates (except for the issuance of
shares of Common Stock pursuant to the exercise of Options and Warrants
outstanding on the date hereof in accordance with their terms on such date);
(c) sell, pledge, dispose of or encumber any assets of
the Company or any of its subsidiaries (except for (i) sales of assets in the
ordinary course of business and in a manner consistent with past practice, (ii)
dispositions of obsolete or worthless assets, and (iii) sales of immaterial
assets not in excess of $1 million in the aggregate);
(d) Except as set forth in Schedule 7.2, (i) declare, set
aside, make or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of any of its capital stock,
except that a wholly-owned subsidiary of the Company) may declare and pay a
dividend to its parent that is not a cross-border dividend, (ii) split, combine
or reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, (iii) except (A) as required by the terms of
any security or agreement as in effect on the date hereof and set forth in
Schedule 7.2 and (B) to the extent necessary to effect withholding to meet
minimum tax withholding obligations in connection with the exercise of any
Option, amend the terms or change the period of exercisability of, purchase,
repurchase, redeem or otherwise acquire, or permit any subsidiary to amend the
terms or change the period of exercisability of, purchase, repurchase, redeem or
otherwise acquire, any of its securities or any securities of its subsidiaries,
including, without limitation, shares of Common Stock, or any option, warrant or
right, directly or indirectly, to acquire any such securities, or propose to do
any of the foregoing, (iv) settle, pay or discharge any claim, suit or other
action brought or threatened against the
- 35 -
Company with respect to or arising out of a stockholder equity interest in the
Company, or (v) make any cross-border capital contributions to a subsidiary;
(e) (i) acquire (by merger, consolidation, or acquisition
of stock or assets) any corporation, partnership or other business organization
or division thereof; (ii) incur any indebtedness for borrowed money, except for,
after providing Parent and Merger Sub with prior notice of any such borrowing or
reborrowing, borrowings and reborrowings under the Company's or any of its
subsidiaries' existing committed or uncommitted credit facilities listed in the
Company SEC Documents or on Schedule 7.2 in an amount not to exceed the maximum
amount available under such credit facilities on the date hereof; (iii) issue
any debt securities or assume, guarantee (other than guarantees of the Company's
subsidiaries entered into in the ordinary course of business and except as
required by any agreement in effect on the date hereof and identified in
Schedule 7.2) or endorse, or otherwise as an accommodation become responsible
for, the obligations of any person, or make any loans or advances, except in the
ordinary course of business consistent with past practice (but not loans or
advances to employees of the Company to fund the exercise price of Options or
otherwise to purchase shares of the Common Stock); (iv) authorize any capital
expenditures or purchases of fixed assets which are, in the aggregate, in excess
of $5 million over the next 12-month period; or (v) enter into or materially
amend any contract, agreement, commitment or arrangement to effect any of the
matters prohibited by this SECTION 7.2(E);
(f) except as set forth in Schedule 7.2, as required by
law or as provided in an existing obligation of the Company, (i) increase the
compensation or severance payable or to become payable to its directors,
officers, employees or consultants, except for increases in salary, wages or
bonuses of employees of the Company or its subsidiaries, including in connection
with promotions, in accordance with past practices; (ii) grant any severance or
termination pay (except to make payments required to be made under obligations
existing on the date hereof in accordance with the terms of such obligations or
in accordance with past practice) to, or enter into or amend any employment or
severance agreement with, any current or prospective employee of the Company or
any of its subsidiaries, except for new hire employees and promotions in the
ordinary course of business whose annual salary does not exceed $100,000 and
whose severance benefits do not exceed one times annual salary; or (iii)
establish, adopt, enter into or amend any collective bargaining agreement,
Company Employee Plan, including, without limitation, any plan that provides for
the payment of bonuses or incentive compensation, trust, fund, policy or
arrangement for the benefit of any current or former directors, officers,
employees or consultants or any of their beneficiaries, except, in each case, as
may be required by law or existing agreement or as would not result in a
material increase in the cost of maintaining such collective bargaining
agreement, Company Employee Plan, trust, fund, policy or arrangement; PROVIDED,
HOWEVER, that, prior to, and effective upon, the Closing of the Sales
Transaction, the Company may amend the severance provisions of the employment
agreements of the individuals whose names appear on Schedule 7.2(f), in
accordance with the terms and conditions set forth in such Schedule;
(g) take any action to change accounting policies or
procedures (including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable), except as required by a change in GAAP occurring after the date
hereof;
- 36 -
(h) make any Tax election or settle or compromise any
United States federal, state, local or non-U.S. Tax liability;
(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or otherwise)
in excess of $1 million in the aggregate, other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities reflected or reserved against in the financial
statements contained in the Company SEC Documents or incurred in the ordinary
course of business and consistent with past practice or incurred in connection
with this Agreement and the transactions contemplated hereby;
(j) enter into, modify, terminate, allow to expire or
renew any contract, agreement or arrangement, whether or not in writing, for the
licensing of any Company Intellectual Property Assets or Third Party
Intellectual Property Assets; or
(k) take, or agree in writing or otherwise to take, any
of the actions described in SECTIONS 7.2(A) THROUGH (J) above, or any action
which would reasonably be expected to make any of the representations or
warranties of the Company contained in this Agreement untrue or incorrect or
prevent the Company from performing or cause the Company not to perform its
covenants hereunder.
Additionally, the Company shall use its commercially reasonable efforts
to obtain any and all written consents of customers which, pursuant to the terms
of any contracts, agreements or arrangements with such customers, are required
to prevent the termination of such contracts, agreements or arrangements in
connection with, or as a result of, the transactions contemplated by this
Agreement, except if and insofar as the failure to obtain such consents would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
7.3 ACCESS AND INFORMATION. Between the date of this Agreement and
the Closing Date, the Company shall, and shall cause its subsidiaries to, afford
Parent and its authorized representatives (including its accountants, financial
advisors and legal counsel) reasonable access during normal business hours to
all of the properties, executive officers, Contracts and Other Agreements, books
and records of the Company and its subsidiaries and shall exert its commercially
reasonable efforts to promptly deliver or make available to Parent information
concerning the business, properties, assets and personnel of the Company and its
subsidiaries as Parent may from time to time reasonably request solely for the
purposes of performing, satisfying and monitoring the performance and
satisfaction of the terms and conditions of this Agreement. In connection
therewith, Parent and Merger Sub shall maintain confidentiality pursuant to the
Confidentiality Agreement dated May 23, 2001 (the "CONFIDENTIALITY AGREEMENT"),
which shall remain in full force and effect and is incorporated herein by
reference.
7.4 NO SOLICITATION. (a) Neither the Company nor any Seller nor
any of their respective subsidiaries, nor any of their respective officers,
directors, employees or representatives, shall, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations with,
or provide any information to, any person or group (other than
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Parent and Merger Sub or any affiliate, associate or designee of Parent or
Merger Sub) concerning any proposal (an "ACQUISITION PROPOSAL") that if
consummated would constitute an Alternative Transaction. Nothing contained in
this Agreement shall prevent the Board of Directors of the Company from (i)
furnishing information to a third party which has made a bona fide Acquisition
Proposal not solicited in violation of this Agreement, provided that such third
party has executed an agreement with confidentiality provisions substantially
similar to those of the Confidentiality Agreement or (ii) subject to compliance
with the other terms of this SECTION 7.4, considering and negotiating a bona
fide Acquisition Proposal; PROVIDED, HOWEVER, that, as to each of clauses (i)
and (ii), the Board of Directors of the Company reasonably determines in good
faith (after due consultation with independent counsel, which may be ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇) that it is or is reasonably likely to be required to
do so in order to discharge properly its fiduciary duties.
(a) The Company shall notify Parent promptly (but in no
event later than 24 hours) after receipt of any Acquisition Proposal, or any
modification of or amendment to any Acquisition Proposal, or any request for
nonpublic information relating to the Company or any of its subsidiaries in
connection with an Acquisition Proposal or for access to the properties, books
or records of the Company or any subsidiary by any person or entity that informs
the Board of Directors of the Company or such subsidiary that it is considering
making, or has made, an Acquisition Proposal. Such notice to Parent shall be
made orally and in writing, and shall indicate the identity of the person making
the Acquisition Proposal or intending to make an Acquisition Proposal or
requesting non-public information or access to the books and records of the
Company, the terms of any such Acquisition Proposal or modification or amendment
to an Acquisition Proposal, and whether the Company is providing or intends to
provide the person making the Acquisition Proposal with access to information
concerning the Company as provided in SECTION 7.4(A). The Company shall keep
Parent fully informed, on a current basis, of any material changes in the status
and any material changes or modifications in the material terms of any such
Acquisition Proposal, indication or request. The Company shall also promptly
notify Parent, orally and in writing, if it enters into negotiations concerning
any Acquisition Proposal.
(b) For purposes of this Agreement, "ALTERNATIVE
TRANSACTION" means any of (i) a transaction pursuant to which any person (or
group of persons) other than Parent or its affiliates (a "THIRD PARTY") acquires
or would acquire more than 25% of the outstanding shares of any class of equity
securities of the Company, whether from the Company or pursuant to a tender
offer or exchange offer or otherwise, (ii) a merger or other business
combination involving the Company pursuant to which any Third Party acquires or
would acquire more than 25% of the outstanding equity securities of the Company
or the entity surviving such merger or business combination, (iii) any
transaction pursuant to which any Third Party acquires or would acquire control
of assets (including for this purpose the outstanding equity securities of
subsidiaries of the Company and securities of the entity surviving any merger or
business combination including any of the Company's subsidiaries) of the
Company, or any of its subsidiaries having a fair market value (as determined by
the Board of Directors of the Company in good faith) equal to more than 25% of
the fair market value of all the assets of the Company and its subsidiaries,
taken as a whole, immediately prior to such transaction, or (iv) any other
consolidation, business combination, recapitalization or similar transaction
involving the
- 38 -
Company or any Company Significant Subsidiary, other than the transactions
contemplated by this Agreement.
(c) Unless this Agreement is terminated in accordance
with its terms, the Company and the Board of Directors of the Company shall not
enter into any agreement with respect to, or otherwise approve or recommend, or
propose to approve or recommend, any Acquisition Proposal or Alternative
Transaction.
(d) The Company shall immediately cease and cause to be
terminated any existing discussions or negotiations with any persons (other than
Parent and Merger Sub) conducted heretofore with respect to any of the
foregoing. The Company agrees not to release any third party from the
confidentiality and standstill provisions of any agreement to which the Company
is a party.
(e) The Company and each Seller shall ensure that the
officers and directors of the Company and the Company's subsidiaries and any
investment banker or other advisor or representative retained by the Company or
by such Seller, as the case may be, is aware of the restrictions described in
this SECTION 7.4. It is understood that any violation of the restrictions set
forth in this SECTION 7.4 by any officer or director of the Company or its
subsidiaries or of a Seller, as the case may be, by any investment banker,
attorney or other advisor or representative of the Company or a Seller, as the
case may be, retained in connection with this Agreement and the Contemplated
Transactions or by any other advisor or representative of the Company or a
Seller at the direction or with the consent of the Company or such Seller, as
the case may be, shall be deemed to be a breach of this SECTION 7.4 by the
Company or the respective Seller, as the case may be.
(f) Nothing contained in this SECTION 7.4 shall prohibit
the Company from taking and disclosing to its shareholders a position, to the
extent required by Rule 14e-2(a) promulgated under the Exchange Act, or from
making any disclosure to its shareholders required by applicable law, rule or
regulation of the SEC, the New York Stock Exchange or the National Association
of Securities Dealers.
7.5 OTTPPB CERTIFICATE. The Company undertakes for the benefit of
OTTPPB that the Company shall provide on or prior to the Closing Date, the
certificate referred to in SECTION 9.2(J).
ARTICLE 8
OTHER AGREEMENTS
8.1 REASONABLE EFFORTS; ADDITIONAL ACTIONS.
(a) Upon the terms and subject to the conditions hereof,
each of the parties hereto shall use commercially reasonable efforts to, take,
or cause to be taken, all actions and to do, or cause to be done, all other
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement, to
obtain in a timely manner all necessary waivers, consents and approvals and to
effect all
- 39 -
necessary registrations and filings, and otherwise to satisfy or cause to be
satisfied all conditions precedent to its obligations under this Agreement. By
way of amplification and not limitation, each of the Company, the Sellers and
Parent agrees to use its reasonable best efforts (and Parent agrees to cause
Guarantor to use its reasonable best efforts) to obtain and to cooperate with
each other in order to obtain as promptly as practicable all consents, waivers,
approvals, authorizations or orders (including, without limitation, all United
States and non-U.S. governmental and regulatory rulings and approvals), and the
Company, the Sellers and Parent agree to make (and Parent agrees to cause
Guarantor to make) as promptly as practicable all filings (including, without
limitation, all filings with United States and non-U.S. governmental or
regulatory agencies) required in connection with the authorization, execution
and delivery of this Agreement by the Company, the Sellers and Parent and the
consummation by them of the Contemplated Transactions. The foregoing covenant
shall not include any obligation by Guarantor or any of its subsidiaries to
agree to divest, abandon, license, hold separate or take similar action with
respect to any assets (tangible or intangible) that are, in the aggregate,
material to the Company or to the absorbent personal care product business of
Guarantor.
(b) Parent and the Company shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time.
(c) The Company shall use its reasonable commercial
efforts to comply promptly with all requirements of applicable state property
transfer laws as may be required by the relevant state agency and shall take all
action necessary to cause the transactions contemplated hereby to be effected in
compliance with applicable state property transfer laws. The Company, after
consultation with Parent, shall determine which actions must be taken prior to
or after the Effective Time to comply with applicable state property transfer
laws, except where the failure to so comply will not materially affect the right
to use or enjoy any applicable property after the Effective Time. The Company
agrees to provide Parent with any documents required to be submitted to the
relevant state agency prior to submission. Parent shall provide, and shall cause
Guarantor to provide, to the Company any assistance reasonably requested by the
Company with respect to such compliance.
(d) If, at any time after the Effective Time, the
Surviving Corporation shall determine or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation the right, title or interest in, to or under any of the rights,
properties or assets of either of the Constituent Corporations acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to
- 40 -
and under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out this Agreement.
8.2 NOTIFICATION OF CERTAIN MATTERS. The Company shall give notice
to Parent, and Parent and Merger Sub shall give notice to the Company, promptly
upon becoming aware of (i) any occurrence, or failure to occur, of any event,
which occurrence or failure to occur has caused or will cause any representation
or warranty in this Agreement to be untrue or inaccurate in any material respect
at any time after the date hereof and prior to the Closing Date and (ii) any
material failure on its part to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; PROVIDED,
HOWEVER, that the delivery of any notice pursuant to this SECTION 8.2 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice; and PROVIDED FURTHER that failure to give such notice
shall not be treated as a breach of covenant for purposes of SECTION 10.1(E)
unless the failure to give such notice results in material prejudice to the
other party.
8.3 PUBLIC ANNOUNCEMENTS. The Company, Parent and PTB Acquisition
in its capacity as the representative of the Sellers (each, a "party") shall
consult with each other before issuing any press release or making any written
public statement with respect to this Agreement or the Contemplated
Transactions, and no party to the Agreement shall issue or cause to be issued
any such press release or make or cause to be made any such public statement
without the prior consent of each party, which shall not be unreasonably
withheld; PROVIDED, HOWEVER, that a party may, without the prior consent of any
other party, issue such press release or make such public statement as may upon
the advice of counsel be required by law (including, without limitation, the
Exchange Act and the Securities Act) or the rules and regulations of the New
York Stock Exchange, the National Association of Securities Dealers or the
Securities and Exchange Commission if it has used all reasonable efforts to
consult with the other parties.
8.4 INDEMNIFICATION AND INSURANCE. (a) The certificate of
incorporation and by-laws of the Surviving Corporation shall contain all the
provisions with respect to indemnification set forth in the Company Charter
Documents on the date hereof, which provisions shall not be amended, modified or
otherwise repealed for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder as of the Effective
Time of individuals who at or prior to the Effective Time were directors,
officers, employees or agents of the Company, unless such modification is
required after the Effective Time by law and then only to the minimum extent
required by such law.
(a) The Surviving Corporation shall, to the fullest
extent permitted under applicable law or under the Surviving Corporation's
certificate of incorporation or by-laws, indemnify and hold harmless each
present and former director, officer or employee of the Company or any of its
subsidiaries (collectively, the "INDEMNIFIED PARTIES") against any costs or
expenses (including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, (x) arising out of or pertaining to the Contemplated Transactions
or (y) otherwise with respect to any acts or omissions occurring at or prior to
the Effective Time, to the same extent as provided in the Company Charter
Documents or any applicable contract or agreement as in effect on the date
hereof, in each case for a period of six years after the Effective Time. In the
event of any such
- 41 -
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time) and subject to the specific terms of any
indemnification contract, (i) any counsel retained by the Indemnified Parties
for any period after the Effective Time shall be reasonably satisfactory to the
Surviving Corporation, (ii) after the Effective Time, the Surviving Corporation
shall pay the reasonable fees and expenses of such counsel, promptly after
statements therefor are received; PROVIDED that the Indemnified Parties shall be
required to reimburse the Surviving Corporation for such payments in the
circumstances and to the extent required by the Company Charter Documents, any
applicable contract or agreement or applicable law; and (iii) the Surviving
Corporation will cooperate in the defense of any such matter; PROVIDED, HOWEVER,
that the Surviving Corporation shall not be liable for any settlement effected
without its written consent (which consent shall not be unreasonably withheld);
and PROVIDED, FURTHER, that, in the event that any claim or claims for
indemnification are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until the
disposition of any and all such claims. The Indemnified Parties as a group may
retain only one law firm to represent them in each applicable jurisdiction with
respect to any single action unless there is, under applicable standards of
professional conduct, a conflict (as reasonably determined by such Indemnified
Party's counsel) on any significant issue between the positions of any two or
more Indemnified Parties, in which case each Indemnified Party with respect to
whom such a conflict exists (or group of such Indemnified Parties who among them
have no such conflict) may retain one separate law firm in each applicable
jurisdiction.
(b) The Surviving Corporation shall honor and fulfill in
all respects the obligations of the Company pursuant to indemnification
agreements and employment agreements (the employee parties under such agreements
being referred to as the "COVERED PERSONS") with the Company's directors and
officers existing at or before the Effective Time, provided that they have not
been entered into in violation of the terms of this Agreement.
(c) In addition, Parent shall provide, or cause the
Surviving Corporation to provide, for a period of not less than six years after
the Effective Time, the Company's current directors and officers with an
insurance and indemnification policy that provides coverage for events occurring
at or prior to the Effective Time (the "D&O INSURANCE") that is no less
favorable than the existing policy or, if substantially equivalent insurance
coverage is unavailable, the best available coverage; PROVIDED, HOWEVER, that
the Surviving Corporation shall not be required to pay an annual premium for the
D&O Insurance in excess of 200% of the annual premium currently paid by the
Company for such insurance, but in such case shall purchase as much such
coverage as possible for such amount.
(d) This SECTION 8.4 shall survive the consummation of
the Merger at the Effective Time, is intended to benefit the Company, the
Surviving Corporation, the Indemnified Parties and the Covered Persons, shall be
binding on all successors and assigns of the Surviving Corporation and shall be
enforceable by the Indemnified Parties and the Covered Persons. From and after
the Effective Date, Parent shall unconditionally guarantee the timely payment of
all funds owing by, and the timely performance of all other obligations of, the
Surviving Corporation under this SECTION 8.4.
8.5 ACCOUNTANT'S LETTER. Upon reasonable notice from the other,
the Company shall use its reasonable efforts to cause Ernst & Young LLP to
deliver to Parent a letter covering
- 42 -
such matters as are reasonably requested by Parent and as are customarily
addressed in accountants' "comfort letters."
8.6 OBLIGATIONS OF MERGER SUB. Parent will take all action
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement.
8.7 EMPLOYEE MATTERS.
(a) From the Effective Time through June 30, 2002 (the
"BENEFITS CONTINUATION PERIOD"), the Surviving Corporation shall provide each
person who, as of the Effective Time, is an employee of the Company or any
subsidiary of the Company (a "COMPANY EMPLOYEE") with salary and employee
benefits that are comparable in the aggregate to those provided to such Company
Employee immediately prior to the Effective Time, PROVIDED, HOWEVER, subject to
applicable law, contractual restrictions and the last sentence of this SECTION
8.7(A), that the Surviving Corporation shall have the right to amend any Company
Employee Plans, including without limitation, any retiree welfare benefit plans
or pension benefit plans, in effect as of the Effective Time (provided that
employee benefits remain comparable as described above). Prior to the Closing
Date the Company may amend the Paragon Trade Brands, Inc. Severance Plan with
the approval of Parent. During the Benefits Continuation Period, Parent shall
cause the Surviving Corporation to maintain severance plans, policies and
programs for the benefit of each Company Employee that are at least as favorable
as the plans, policies and programs applicable to such employees immediately
prior to the Effective Time, without amendment or modification adverse to any
such employee. Notwithstanding anything in this Agreement to the contrary, for
one year following the Effective Time, Parent shall, or shall cause the
Surviving Corporation, to maintain the Paragon Trade Brands, Inc. Severance Plan
as in existence immediately prior to the Closing Date without amendment or
modification adverse to any participant therein.
(b) After the Benefits Continuation Period Parent shall,
or shall cause the Surviving Corporation to provide the Company Employees with
employee benefits that are comparable in the aggregate to those provided to
similarly situated employees of Parent. For the avoidance of doubt, it is
understood that the Surviving Corporation shall have no obligation to provide
Company Employees with post-termination welfare or pension benefits, except to
the extent required by applicable law or contractual agreement.
(c) With respect to the benefits provided pursuant to
this SECTION 8.7, Parent shall take all necessary actions, or shall cause the
Surviving Corporation to take all necessary actions, to provide that (i) service
accrued by Company Employees during employment with the Company and its
subsidiaries (including any predecessor entity) prior to the Effective Time
shall be recognized for all purposes, except for benefit accruals with respect
to defined benefit pension plans, (ii) any and all pre-existing condition
limitations (to the extent such limitations did not apply to a pre-existing
condition under the applicable Company Employee Plan) and eligibility waiting
periods under any group health plan shall be waived with respect to such Company
Employees and their eligible dependents, and (iii) Company Employees shall be
given credit for amounts paid under a Company Employee Plan during the
applicable period for purposes of applying deductibles, co-payments and
out-of-pocket
- 43 -
maximums as though such amounts had been paid in accordance with the terms and
conditions of the employee welfare plans in which any Company Employee becomes
entitled to participate.
(d) From and after the Effective Time, Parent shall, or
shall cause the Surviving Corporation to, honor in accordance with their terms
all benefits and obligations under the Company Employee Plans and consulting
agreements, including without limitation each employment, retirement, severance
and change in control agreement, plan or arrangement, each as in effect on the
date of this Agreement (or as amended as contemplated hereby or with the prior
written consent of Parent); PROVIDED, HOWEVER, that it is the understanding of
the parties hereto that the aforementioned agreements, plans and arrangements do
not provide duplicative benefits and that other than the last sentence of
SECTION 8.7(A) or as otherwise provided herein, nothing herein shall prevent the
Surviving Corporation or any other subsidiary of Guarantor from amending or
modifying any employee benefit plan, program or arrangement in any respect in
accordance with its terms or, subject to the terms of the Company Employee Plans
(as so amended or modified, if applicable), terminating or modifying the terms
and conditions of employment or other service of any particular employee or any
other person, except in any such case as precluded by law or the terms of a
Company Employee Plan.
(e) It is expressly agreed that the provisions of this
SECTION 8.7 are not intended to be for the benefit of or otherwise enforceable
by any third party, including, without limitation, any Company Employees.
(f) The Company represents and warrants as of the date
hereof that it has amended its 401(k) savings plan and any other Company
Employee Plan which permits participants to elect to invest in stock of the
Company, where necessary, to preclude any additional purchases of stock of the
Company and the Company has communicated this amendment to the participants in
such plans. Furthermore, between the date of such amendment and the Effective
Time, the Company shall not have amended or amend its 401(k) savings plan or any
other Company Employee Plan in any way that would make any representation
contained in the immediately preceding sentence false if made as of any time
between the date thereof and the Effective Time.
(g) If the Closing shall occur prior to March 1, 2002,
and the fiscal 2001 bonuses earned under the Company's Performance Incentive
Plan as in effect immediately prior to the Effective Time (the "BONUS PLAN")
have not been paid at the time of the Closing, then following the Closing Date,
but no later than March 1, 2002, Parent shall pay, or cause the Surviving
Corporation to pay, to Company Employees their fiscal 2001 bonuses earned under
the Bonus Plan (the date of such payment is referred to herein as the "2001
BONUS PAYMENT DATE"). Further, with respect to any Company Employee whose
employment is terminated following the end of the 2001 fiscal year and prior to
the 2001 Bonus Payment Date, Parent shall pay, or shall cause the Surviving
Corporation to pay, to such Company Employee, if the bonus has not already been
paid, on or before the 2001 Bonus Payment Date a bonus for the 2001 fiscal year
equal to the bonus that such Company Employee would have received under the
Bonus Plan if not for such termination of employment. Notwithstanding the above,
the Company shall pay to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ on or prior to December 31, 2001 an
amount in cash equal to $900,000, in satisfaction of ▇▇. ▇▇▇▇▇▇▇'▇ bonus under
the Bonus Plan for fiscal year 2001.
- 44 -
8.8 WARRANTS. Following the Effective Time, and within the period
specified by the Warrant Agreement, Parent and Merger Sub shall cause the
Surviving Corporation to (i) call all of the outstanding Warrants issued under
the Warrant Agreement in accordance with the terms of Article 3 of the Warrant
Agreement, and (ii) pay the Call Price (calculated as set forth in the Warrant
Agreement and using the Per Share Price as the Current Market Price (as defined
in the Warrant Agreement)) to the holders of such outstanding Warrants as
required under the terms of the Warrant Agreement. This SECTION 8.8 is intended
to benefit, and may be enforced by, the holders of Warrants issued under the
Warrant Agreement event though such holders are not party to this Agreement.
8.9 CERTAIN EMPLOYEES. The Company shall use commercially
reasonable efforts to assist Parent in negotiating an arrangement reasonably
acceptable to Parent regarding the transfer of employees presently working in
the Company's manufacturing facility in Tijuana, Mexico to Paragon-Mabesa
International, S.A. de C.V. ("PMI") subsequent to the Company's acquisition of
the entire equity interest in PMI.
8.10 SAP SETTLEMENT AGREEMENTS. The Company shall use commercially
reasonable efforts to obtain any consents or approval required or convenient in
respect of the SAP Settlement Agreements or any other contract between the
Company (or any of its subsidiaries) and The Procter & ▇▇▇▇▇▇ Company or between
the Company (or any of its subsidiaries) and ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Corporation or
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Worldwide; PROVIDED, HOWEVER, that, notwithstanding any provision
in this Agreement to the contrary, the failure to obtain any such consent or
approval (despite the exercise of such efforts as are required hereby) shall not
constitute, or be deemed to constitute, a breach of any representation,
warranty, covenant or agreement set forth in this Agreement or the failure to
satisfy any condition contained in ARTICLE 9 of this Agreement.
ARTICLE 9
CONDITIONS
9.1 CONDITIONS TO CLOSING OF SALE TRANSACTION OBLIGATIONS. The
respective obligations of each party to consummate the Sale Transaction shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) No Legal Requirements shall have been enacted,
entered, promulgated or enforced by any court or Governmental Entity that
prohibits or prevents the consummation of the Sale Transaction or the Merger;
(b) Any waiting period applicable to the consummation of
the Sale Transaction and the Merger under the HSR Act shall have expired or been
terminated and all clearances and approvals required to be obtained in respect
of the Contemplated Transactions under any Non-U.S. Monopoly Laws shall have
been obtained, or any applicable waiting period under any such laws shall have
expired or been terminated, except where the failure to have obtained any such
clearances or approvals with respect to any Non-U.S. Monopoly Laws would
- 45 -
not reasonably be expected to have a Material Adverse Effect on the Company,
Guarantor or Guarantor's absorbent personal care product business; and
(c) There shall not have been instituted, pending or
threatened any action or proceeding (or any investigation or other inquiry that
is reasonably likely to result in such an action or proceeding) by any
Governmental Entity or before any Governmental Entity or court of competent
jurisdiction, United States or non-United States, that is reasonably to be
expected to result in an order, (i) preventing consummation of the Merger, (ii)
prohibiting or limiting Parent from exercising all material rights and
privileges pertaining to (A) its ownership of the Surviving Corporation or (B)
the ownership or operation by Guarantor or any of its subsidiaries of all or a
material portion, in the aggregate, of the business or assets of the Surviving
Corporation and its subsidiaries, (iii) compelling Guarantor or any of its
subsidiaries (including the Surviving Corporation and its subsidiaries) to
dispose of, hold separate or license assets which are material, in the
aggregate, to Guarantor's absorbent personal care product business or, in the
case of the Surviving Corporation and its subsidiaries, to the Company, or (iv)
imposing any liability on the Company as a result of the Contemplated
Transactions or the transactions contemplated by this Agreement, which if borne
by the Company would reasonably be expected to have a Material Adverse Effect.
9.2 CONDITIONS TO OBLIGATION OF PARENT AND MERGER SUB. The
obligation of Parent and Merger Sub to consummate the Sale Transaction shall be
subject to the fulfillment at the Closing Date of the following additional
conditions, any one or more of which may be waived by Parent and Merger Sub:
(a) The Company shall have performed in all material
respects the covenants and obligations required to be performed by it under this
Agreement on or prior to the Closing Date;
(b) Each of the representations and warranties of the
Company contained in this Agreement shall be true and correct on and as of the
Closing Date as if made on and as of such date (other than representations and
warranties expressly stated to relate to a specific date, in which case the
failure of such representations and warranties to be true and correct in all
material respects as of such earlier date);
For purposes of SECTION 9.2(B):
(x) all representations and warranties shall be
interpreted without giving effect to the words "materially" or
"material" or to any qualification based on such terms or based on the
defined term "Material Adverse Effect";
(y) any representations and warranties (other than those
contained in SECTIONS 5.3(A), 5.4, AND 5.25) shall be deemed untrue
where the failure of such representations and warranties to be true and
correct would reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect; and
(z) any representations and warranties contained in
SECTIONS 5.3(A), 5.4, AND 5.25 shall be deemed untrue if such
representation and warranty shall fail to be true and correct in all
material respects;
- 46 -
(c) The Company shall have delivered to Parent and Merger
Sub a certificate, in form and substance reasonably satisfactory to Parent and
Merger Sub, signed by an executive officer thereof, dated the Closing Date,
certifying as to the matters set forth in SECTIONS 9.2(A) AND 9.2(B);
(d) The Company shall have delivered to Parent and Merger
Sub a certificate, in form and substance reasonably satisfactory to Parent,
signed by an executive officer of the Company, dated the Closing Date,
certifying that full and complete copies of the following are attached thereto:
minutes of the Board of Directors of the Company (or unanimous written consents
in lieu thereof) authorizing and approving this Agreement and the Contemplated
Transactions, copies of the Certificate of Incorporation and By-laws of the
Company as in effect on the date thereof, and such other documents or
instruments as Parent may reasonably request in writing not less than two days
prior to the Closing Date to carry out the intent and purpose of this Agreement;
(e) Each Seller shall have performed in all material
respects the covenants and obligations required to be performed by it under this
Agreement on or prior to the Closing Date;
(f) The representations and warranties of each Seller
contained in ARTICLE 4 of this Agreement shall be true and correct in all
material respects on and as of the Closing Date as if made on and as of such
date except for representations and warranties expressly stated to relate to a
specific date, in which case such representations and warranties shall be true
and correct in all material respects as of such earlier date, and except that
the representations and warranties contained in SECTION 4.2(A) shall be true in
all respects;
(g) Each Seller shall have delivered to Merger Sub and
each other Seller a certificate, signed by an executive officer of such Seller,
in form and substance reasonably satisfactory to Merger Sub, dated the Closing
Date, certifying as to the matters set forth in SECTIONS 9.2(E) AND 9.2(F);
(h) Each Seller other than OTTPPB shall have delivered to
Parent and Merger Sub a certificate, in form and substance reasonably
satisfactory to Parent, signed by an executive officer of such Seller, dated the
Closing Date, certifying that full and complete copies of the following are
attached thereto: minutes of the Board of Directors or analogous governing body
of such Seller (or unanimous written consents in lieu thereof) authorizing and
approving this Agreement and the Contemplated Transactions, copies of the
certificate of incorporation and by-laws or analogous organizational documents
of such Seller as in effect on the date thereof, and such other documents or
instruments as Parent may reasonably request in writing not less than two days
prior to the Closing Date to carry out the intent and purpose of this Agreement;
(i) Immediately prior to the Closing, the Seller Shares
shall constitute in excess of 90% of the outstanding shares of Common Stock;
(j) Parent shall have received a certificate of the
Company, in the form and manner prescribed by Treasury Regulations Section
1.897-2(h) and 1.1445-2(c)(3), that
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the shares of Common Stock of the Company owned by OTTPPB are not U.S. real
property interests within the meaning of such regulations; and
(k) Provisions shall have been made on terms and
conditions reasonably satisfactory to Parent such that each of the following,
relating to the Company's interests in the Joint Ventures, shall be satisfied:
(i) At or prior to the Closing, the Company
shall have acquired the entire equity interest in PMI and shall have
disposed of its interest in Grupo P.I. ▇▇▇▇, ▇.▇. de C.V. ("MABESA"),
the Mabesa Documents shall have been terminated and the Company shall
have no further liability or obligation under the Mabesa Documents,
except as provided herein or in Schedule 9.2(k);
(ii) At or prior to the Closing, the Company
shall have disposed of its entire interest in Stronger Corporation S.A.
("STRONGER"), the Stronger Shareholder Agreement shall have been
terminated and the Company shall have no further liability or
obligation, or shall be indemnified from all further liability and
obligation, arising under the Stronger Documents, except as provided
herein or in Schedule 9.2(k);
(iii) At or prior to the Closing, the Company
shall have disposed of its entire interest in Goodbaby Paragon Hygienic
Products Co. Ltd. ("GOODBABY"), the Goodbaby Documents shall have been
amended so as not to include the Company as a party and the Company
shall have no further liability or obligation arising under the
Goodbaby Documents, except as provided herein or in Schedule 9.2(k);
(iv) Following the Closing, the Company shall be
subject to no restriction on its business arising out of the Mabesa
Documents or the Stronger Documents, except that for a period of one
(1) year from the closing under the Agreement, the Company, PTB
International, Inc. ("PTBI") and their affiliates may be precluded from
producing baby diapers or training pants in any facility currently
owned or operated by the Company in the United States or in the
facility owned by PMI in Tijuana, Mexico for sale in (or export and
sale to) Mexico or the Caribbean (including Puerto Rico), Central
America and South America subject to the exceptions set forth in
Schedule 9.2(k)(iv);
(v) Following the Closing, the Company shall be
subject to no restriction on its business arising out of the Goodbaby
Documents, except that the Company and its affiliates may be precluded
from selling baby diapers or training pants in the Peoples Republic of
China originating from any facility owned by the Company on the date of
this Agreement for a period of up to one year from the Closing Date;
(vi) The Operating Agreement, dated as of March
14, 1997, between PMI and ▇▇▇▇▇▇ del Norte, S.A. de C.V. ("▇▇▇▇▇▇")
providing for the operation of the Company's manufacturing facility in
Tijuana, Mexico shall
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continue in force and effect following the Closing in accordance with
its existing terms, other than for such commercially reasonable changes
as shall be approved by Parent (including pursuant to SECTION 8.9),
notwithstanding the Company's acquisition of the entire equity interest
in PMI; and
(vii) The Lease Agreement, dated as of March 14,
1997, between PMI and ▇▇▇▇▇▇, providing for the lease to ▇▇▇▇▇▇ of a
portion of the Company's manufacturing facility in Tijuana, Mexico
shall continue in force and effect following the Closing in accordance
with its existing terms, other than for such commercially reasonable
changes as shall be approved by Parent, notwithstanding the Company's
acquisition of the entire equity interest in PMI.
9.3 CONDITIONS TO OBLIGATIONS OF SELLERS. The obligation of
Sellers to consummate the Sale Transaction shall be subject to the fulfillment
at the Closing Date of the following additional conditions, any one or more of
which may be waived by Sellers (acting unanimously):
(a) Parent and Merger Sub shall have performed in all
material respects the covenants and obligations required to be performed by them
under this Agreement on or prior to the Closing Date;
(b) The representations and warranties of Parent and
Merger Sub contained in this Agreement shall be true and correct in all material
respects on and as of the Effective Time as if made on and as of such date
except for representations and warranties expressly stated to relate to a
specific date, in which case such representations and warranties shall be true
and correct in all material respects as of such earlier date, and except that
the representations and warranties contained in SECTION 6.6 shall be true in all
respects;
(c) Each of Parent and Merger Sub shall have delivered to
Sellers and to the Company a certificate, in form and substance reasonably
satisfactory to Sellers, signed by an executive officer thereof, dated the
Closing Date, certifying as to the matters set forth in SECTIONS 9.3(A) AND
9.3(B);
(d) Each of Parent and Merger Sub shall have delivered to
each of the Sellers and to the Company a certificate, in form and substance
reasonably satisfactory to the Company, signed by an executive officer thereof,
dated the Closing Date, certifying that full and complete copies of the
following are attached thereto: minutes of the Board of Directors and, if
applicable, stockholders thereof (or unanimous written consents of the Board of
Directors and stockholders in lieu thereof) authorizing and approving this
Agreement and the Contemplated Transactions, copies of the Certificate of
Incorporation and By-laws thereof as in effect on the date thereof, and such
other documents or instruments as the Company may reasonably request in writing
not less than two days prior to the Closing Date to carry out the intent and
purpose of this Agreement; and
(e) Merger Sub shall have duly provided to Sellers and
the Company a copy of the Certificate of Ownership and Merger to be filed by
Merger Sub with the Secretary of State of Delaware at the Effective Time (the
"DEFINITIVE CERTIFICATE OF MERGER"), which
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Definitive Certificate of Merger may be undated, but otherwise complete and
final in all respects, and such Definitive Certificate of Merger shall be in
form and substance consistent with the terms of this Agreement and reasonably
satisfactory to Sellers and the Company.
9.4 CONDITIONS TO CONSUMMATION OF THE MERGER. The obligations of
Parent and Merger Sub to consummate the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions:
(a) The Sale Transaction shall have been consummated; and
(b) Subsequent to the Closing Date, but prior to the
Effective Time, no Legal Requirements shall have been enacted, entered,
promulgated or enforced by any court or Governmental Entity that prohibits or
prevents the consummation of the Merger.
ARTICLE 10
TERMINATION
10.1 TERMINATION. This Agreement may be terminated and the
Contemplated Transactions may be abandoned at any time prior to the Closing
Date:
(a) By the mutual written consent of all parties hereto;
(b) By Parent, Merger Sub, Sellers or the Company:
(i) if a court of competent jurisdiction or
other Governmental Entity of the United States shall have issued an
Order or taken any other action permanently restraining, enjoining or
otherwise prohibiting the consummation of the Sale Transaction or the
Merger and such Order or other action shall have become final and
nonappealable; or
(ii) if the Closing Date shall not have occurred
on or before July 1, 2002 (the "TERMINAL DATE"); PROVIDED, HOWEVER,
that the right to terminate this Agreement under this SECTION
10.1(B)(II) shall not be available to any party whose failure to
fulfill materially any covenant or obligation under this Agreement has
been the cause of, or resulted in, the failure of the Closing to occur
on or before such date;
(c) By Parent or Merger Sub, if the Board of Directors of
the Company or the Company shall (x) (i) withdraw, modify or change its approval
of this Agreement or the Merger in a manner adverse to Parent or Merger Sub,
(ii) approve or recommend to the shareholders of the Company an Acquisition
Proposal or Alternative Transaction or (iii) approve or recommend that the
shareholders of the Company tender their shares in any tender or exchange offer
that is an Alternative Transaction; or (y) take any position or make any
disclosures to the Company's shareholders which has the effect of any of the
foregoing except to the extent provided for in SECTION 7.4(F);
- 50 -
(d) By Parent or Merger Sub, if any representation or
warranty of the Company or any Seller (collectively, the "SELLING PARTIES") set
forth in this Agreement shall be untrue such that the conditions set forth in
SECTION 9.2(B) OR 9.2(F) would not be satisfied, or by the Company, if any
representation or warranty of Parent and Merger Sub set forth in this Agreement
shall be untrue such that the conditions set forth in SECTION 9.3(B) would not
be satisfied (in either case, a "TERMINATING MISREPRESENTATION"); PROVIDED THAT
if such Terminating Misrepresentation is curable prior to the Terminal Date by
the Selling Parties or Parent and Merger Sub, as the case may be, through the
exercise of their reasonable best efforts neither Parent and Merger Sub nor the
Company, respectively, may terminate this Agreement under this SECTION 10.1(D)
prior to the Terminal Date except upon not less than five (5) Business Days'
prior notice and thereafter for so long as the Selling Parties or Parent and
Merger Sub, as the case may be, continue to exercise such reasonable best
efforts; or
(e) By Parent and Merger Sub upon a breach of any
covenant or agreement on the part of any Selling Party set forth in this
Agreement such that the conditions set forth in SECTION 9.2(A) OR 9.2(E) would
not be satisfied, or by the Company upon a breach of any covenant or agreement
on the part of Parent and Merger Sub set forth in this Agreement such that the
conditions set forth in SECTION 9.3(A) would not be satisfied (a "TERMINATING
BREACH"); PROVIDED THAT, except for any breach of the Company's obligations
under SECTIONS 7.4 or any breach of any Seller's obligations under SECTIONS
7.1(D) OR 7.1(E), if such Terminating Breach is curable prior to the Terminal
Date, by the Selling Parties or Parent and Merger Sub, as the case may be,
through the exercise of their reasonable best efforts, neither Parent and Merger
Sub nor the Company, respectively, may terminate this Agreement under this
SECTION 10.1(E) prior to the Terminal Date except upon not less than five (5)
Business Days' prior notice and thereafter for so long as the Selling Parties or
Parent and Merger Sub, as the case may be, continues to exercise such reasonable
best efforts.
10.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to SECTION 10.1, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto or any of its
affiliates, directors, officers, partners, members or stockholders.
Notwithstanding the foregoing, nothing herein shall relieve any party from
liability for any willful breach hereof or willful misrepresentation herein.
ARTICLE 11
MISCELLANEOUS
11.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the meanings ascribed to them in this SECTION 11.1:
(a) "AFFILIATE," with respect to any person, shall mean
any person directly or indirectly controlling, controlled by or under common
control with such person.
(b) "BUSINESS DAY" means any day other than a Saturday or
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law to be closed.
- 51 -
(c) "CONTROL" (including the terms "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise.
(d) "GOODBABY DOCUMENTS" shall mean the following
documents: (i) the Transfer of Technology and Licensing Contract dated December
31, 1997 between the Company and Goodbaby Paragon Hygienic Products Co. Ltd.,
and (ii) the Joint Venture Contract dated December 20, 1997 among Goodbaby Group
Co., the Company and First Shanghai Hygienic Products Limited for the
establishment of Goodbaby Paragon Hygienic Products Co. Ltd.
(e) "JOINT VENTURES" shall mean Mabesa, Paragon-Mabesa
International, Inc., Stronger Corporation S.A., and Goodbaby Paragon Hygienic
Products Co. Ltd. (and their respective subsidiaries).
(f) "KNOWLEDGE" means, with respect to any matter in
question, that the executive officers, or the responsible employee having
primary or substantial oversight responsibility for the matter (the "RESPONSIBLE
EMPLOYEES"), of the Company, Acquiror or Guarantor, as the case may be, have or
at any time had actual knowledge of such matter. The Responsible Employees of
the Company for the matters that are the subject of certain Sections of this
Agreement are as set forth on Schedule 11.1(f).
(g) "LIENS" means any liens, claims, charges, pledges,
encumbrances or security interests.
(h) "MABESA DOCUMENTS" shall mean the following
documents: (i) the Framework Agreement dated January 31, 2001 by and among ▇▇.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇"), the Company, PTBI, and certain other parties;
(ii) the Option Purchase Agreement dated March 15, 2001 by and among Marin, PTBI
and the Company; (iii) the Investment Agreement dated January 26, 1996 by and
among Marin, Mabesa, the Company and PTBI; (iv) the Technology License Agreement
dated January 26, 1996 by and between Mabesa and the Company; (v) the Put and
Call Option Agreement for Grupo ▇▇▇▇ Shares dated January 26, 1996 between
Marin, Pragon Trade Brands, Inc., PTBI and Mabesa; and (vi) the Joint Venture
Agreement, dated January 26, 1996, by and among Marin, the Company and PTBI.
(i) "MATERIAL ADVERSE EFFECT" means any change, effect,
development or circumstance that (i) is materially adverse to the business,
assets (including intangible assets), financial condition or results of
operations of the Company and its subsidiaries taken as a whole, excluding any
change, effect, development or circumstance to the extent related to (A) the
United States or global economy or capital markets generally, (B) general
changes in conditions in the industries in which the Company conducts business
or (C) this Agreement, the announcement hereof and the Contemplated
Transactions; or (ii) materially adversely affects the ability of the Company or
any Seller timely to perform the obligations under this Agreement or consummate
the Contemplated Transactions.
- 52 -
(j) "PERSON" shall mean and include an individual, a
partnership, a joint venture, a limited liability company, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.
(k) "STRONGER DOCUMENTS" shall mean the following
documents: (i) the Framework Agreement dated January 31, 2001 by and among
Marin, the Company, PTBI, and certain other parties; (ii) the Shareholder
Agreement dated as of August 26, 1997 by and between PTBI and Euro American 2000
Trust as to Stronger (the "STRONGER SHAREHOLDER AGREEMENT"); (iii) the Stock
Purchase Agreement dated August 26, 1997 by and among Mr. Mario ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and Financeria Inversora Dresdner S.A. and Cerro
Moteado and Stronger Corporation S.A. and PTBI and Euro American 2000 Trust; and
(iv) the Shareholders Agreement of Serenity S.A. dated August 26, 1997.
(l) "SUBSIDIARY," with respect to any person, shall mean
any corporation, partnership, joint venture, limited liability company or other
legal entity of which such person (either alone or through or together with any
other subsidiaries) owns, directly or indirectly, 50% or more of the stock or
other equity interests the holders of which are generally entitled to vote for
the election of the board of directors or analogous governing body of such
corporation or other legal entity.
When reference is made in this Agreement to the Company, Parent or
Guarantor, such reference shall include their respective subsidiaries, as and to
the extent the context so requires, whether or not explicitly stated in this
Agreement.
In this Agreement (i) words denoting the singular include the plural
and vice versa, (ii) "it" or "its" or words denoting any gender include all
genders, (iii) the word "including" shall mean "including without limitation"
and (iv) any reference herein to a Section, Article or Schedule refers to a
Section or Article of or a Schedule to this Agreement, unless otherwise stated.
11.2 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by a written agreement
signed by each of the parties hereto at any time prior to the Effective Time
with respect to any of the terms contained herein.
11.3 WAIVER OF COMPLIANCE; CONSENTS. Any failure of Parent or
Merger Sub, on the one hand, or the Company or Sellers, on the other hand, to
comply with any obligation, covenant, agreement or condition herein may be
waived by Parent and Merger Sub (in the case of a failure by the Company or a
Seller) or the Company and Sellers (in the case of a failure by Parent or Merger
Sub), only by a written instrument signed by the parties granting such waiver,
but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this SECTION 11.3.
- 53 -
11.4 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given when delivered in
person, by telecopier (with a confirmed receipt thereof) or on the next Business
Day when sent by overnight courier service, to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Merger Sub, to:
Tyco Healthcare Retail Group, Inc.
c/o Tyco International (US) Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Tyco International (US) Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
Paragon Trade Brands, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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(c) if to PTB Acquisition, to:
PTB Acquisition Company, LLC
c/o Wellspring Capital Management, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(d) if to CIP, to:
Co-Investment Partners, L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(e) if to OTTPPB, to:
Ontario Teachers Pension Plan Board
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
- 55 -
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(f) if to Citicorp, to:
Citicorp North America, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
11.5 PAYMENTS. All payments made pursuant to this Agreement shall
be in cash in the lawful currency of the United States of America, by wire
transfer of immediately available funds.
11.6 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties;
PROVIDED, HOWEVER, that the rights of Parent or Merger Sub may be transferred,
in whole or in part, to any wholly owned subsidiary of Guarantor.
11.7 EXPENSES. If this Agreement and the Contemplated Transactions
are consummated, all fees, costs and expenses incurred by the Company (including
the fees and expenses of SSB and all legal fees and expenses) shall be paid by
the Surviving Corporation. If this Agreement is not consummated, Parent and
Merger Sub, on the one hand, and Sellers and the Company, on the other hand,
shall bear their respective fees, costs and expenses. Notwithstanding the
foregoing, Parent and Merger Sub shall, whether or not the Merger is
consummated, pay any filing fees required to be paid in connection with the HSR
Act.
11.8 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS;
SURVIVAL. (a) The representations, warranties and agreements of each party
hereto shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any other party hereto, any person
controlling any such party or any of their officers or directors, whether prior
to or after the execution of this Agreement.
(a) The representations, warranties and agreements in
this Agreement shall terminate at the Effective Time or upon the termination of
this Agreement pursuant to SECTION 10.1, except that the agreements set forth in
ARTICLE 3 and SECTION 8.4 and any other
- 56 -
agreement in this Agreement which contemplates performance after the Effective
Time shall survive the Effective Time indefinitely and those set forth in
SECTION 10.2 and this ARTICLE 11 shall survive termination indefinitely. If the
Closing shall occur, the representations and warranties of the Sellers contained
in SECTION 4.2 shall survive the Closing indefinitely. The Confidentiality
Agreement shall survive termination of this Agreement in accordance with its
terms.
11.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK, APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE.
11.10 JURISDICTION. Each of the parties hereto submits to the
exclusive jurisdiction of the courts of the State of New York and the federal
courts of the United States located in the City of New York, Borough of
Manhattan with respect to any claim or cause of action arising out of this
Agreement or the transactions contemplated hereby.
11.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.12 INTERPRETATION. The Article and Section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
11.13 ENTIRE AGREEMENT. This Agreement and the Guarantor's Guarantee
constitute the entire agreement and supersede all prior agreements and
understandings (other than the Confidentiality Agreement), both written and
oral, among the parties, or between any of them, with respect to the subject
matter hereof and thereof.
11.14 NO THIRD PARTY BENEFICIARIES. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation, other
than SECTION 8.4 (which is intended to be for the benefit of the Indemnified
Parties and Covered Persons and may be enforced by such Indemnified Parties and
Covered Persons) and Section 8.8 (which is for the benefit of the holders of the
Warrants and may be enforced by such holders), and other than the right of the
stockholders of the Company to receive the Merger Consideration as provided in
ARTICLE 3 if, but only if, this Agreement has not been terminated in accordance
with its terms and the conditions to the Merger shall be satisfied and not
otherwise.
11.15 WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB, THE COMPANY
AND THE SELLERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OF THE CONTEMPLATED TRANSACTIONS.
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11.16 PERFORMANCE OF OBLIGATIONS. Unless otherwise previously
performed, Parent shall cause each of Merger Sub and the Surviving Corporation
to perform all of its obligations set forth in this Agreement and the Guarantor
to perform all of its obligations under the Guarantee.
[SIGNATURE PAGE FOLLOWS IMMEDIATELY]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective duly authorized officers or representatives as of the date
first above written.
TYCO HEALTHCARE RETAIL GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
TYCO HEALTHCARE ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
PARAGON TRADE BRANDS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
PTB ACQUISITION COMPANY, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Treasurer
CO-INVESTMENT PARTNERS, L.P.
By: CIP Partners, LLC, its general partner
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Member
ONTARIO TEACHERS PENSION PLAN BOARD
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice Presidnet
CITICORP NORTH AMERICA, INC.
By: /s/ Shapleigh ▇. ▇▇▇▇▇
---------------------------------------
Name: Shapleigh ▇. ▇▇▇▇▇
Title: Managing Director
- 59 -
GUARANTEE
Tyco International Ltd. ("GUARANTOR") irrevocably guarantees each and
every representation, warranty, covenant, agreement and other obligation of
Parent and Merger Sub, and/or any of its permitted assigns, and the full and
timely performance of their respective obligations under the provisions of the
foregoing Agreement by and among Tyco Healthcare Retail Group, Inc., Tyco
Healthcare Acquisition Corp., Paragon Trade Brands, Inc., PTB Acquisition
Company, LLC, Co-Investment Partners, L.P., Ontario Teachers Pension Plan Board
and Citicorp North America, Inc. This is a guarantee of payment and performance,
and not of collection, and Guarantor acknowledges and agrees that this guarantee
is full and unconditional, and no release or extinguishment of Parent's and
Merger Sub's obligations or liabilities (other than in accordance with the terms
of the Agreement), whether by decree in any bankruptcy proceeding or otherwise,
shall affect the continuing validity and enforceability of this guarantee, as
well as any provision requiring or contemplating performance by Guarantor.
Guarantor hereby waives, for the benefit of the Company, (i) any right
to require the Company as a condition of payment or performance by Guarantor, to
proceed against Parent or Merger Sub or to pursue any other remedy whatsoever
and (ii) to the fullest extent permitted by law, any defenses or benefits that
may be derived from or afforded by law which limit the liability of or exonerate
guarantors or sureties, except to the extent that any such defense is available
to Parent or Merger Sub.
Without limiting in any way the foregoing guarantee, Guarantor
covenants and agrees to take all actions to enable Parent and Merger Sub to
adhere to each provision of the Agreement which requires an act or omission on
the part of Guarantor or any of its subsidiaries to enable such party to comply
with its obligations under the Agreement.
The provisions of Article 11 of the Agreement are incorporated herein,
MUTATIS MUTANDIS, except that notices and other communications hereunder to
Guarantor shall be delivered to Tyco International Ltd., The Zurich Centre,
Second Floor, 90 ▇▇▇▇▇ Bay Road, Pembroke HM 08, Bermuda, Attn: Chief Corporate
Counsel and Chief Financial Officer, Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇, Confirm No.
(▇▇▇) ▇▇▇-▇▇▇▇ (with a copy as provided therefor in Section 11.4(a) of the
Agreement).
All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Agreement.
We understand that the Company is relying on this guarantee in entering
into the Agreement and may enforce this guarantee as if Guarantor were a party
thereto.
TYCO INTERNATIONAL LTD.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President and Chief
Financial Officer