EXHIBIT 2.4
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AGREEMENT AND PLAN OF MERGER
among
JUST FOR FEET, INC.,
JFF MERGER CORP.
and
SNEAKER STADIUM, INC.
Dated as of July 2, 1998
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TABLE OF CONTENTS
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Page
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ARTICLE 1 The Merger........................................................................ 1
1.1. The Merger........................................................................ 1
1.2. The Closing....................................................................... 1
1.3. Effective Time.................................................................... 2
ARTICLE 2 Certificate of Incorporation and By-laws of the Surviving
Corporation....................................................................... 2
2.1. Certificate of Incorporation...................................................... 2
2.2. By-laws........................................................................... 2
ARTICLE 3 Directors and Officers of the Surviving Corporation............................... 2
3.1. Directors......................................................................... 2
3.2. Officers.......................................................................... 2
ARTICLE 4 Effect of the Merger on Securities of Merger Sub and the
Company........................................................................... 3
4.1. Merger Sub Stock.................................................................. 3
4.2. Company Securities................................................................ 3
4.3. Payment of Merger Consideration................................................... 4
4.4. [RESERVED]........................................................................ 4
4.5. Dissenting Company Shareholders................................................... 4
ARTICLE 5 Representations and Warranties of the Company..................................... 5
5.1. Existence; Good Standing; Corporate Authority..................................... 5
5.2. Authorization, Validity and Effect of Agreements.................................. 6
5.3. Compliance with Laws.............................................................. 6
5.4. Capitalization.................................................................... 6
5.5. [RESERVED]........................................................................ 9
5.6. No Violation...................................................................... 9
5.7. Financial Statements; Undisclosed Liabilities..................................... 9
5.8. Litigation........................................................................ 10
5.9. Absence of Certain Changes........................................................ 10
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5.10. Taxes............................................................................. 10
5.11. Employee Benefit Plans............................................................ 12
5.12. Labor and Employment Matters...................................................... 14
5.13. Brokers and Finders............................................................... 16
5.14. Properties and Assets............................................................. 16
5.15. State Antitakeover Laws........................................................... 18
5.16. Inventories; Accounts Payable..................................................... 18
5.17. Material Contracts................................................................ 18
5.18. Intellectual Property; Technology................................................. 20
5.19. Calendar Function................................................................. 21
5.20. [RESERVED]........................................................................ 21
5.21. [RESERVED]........................................................................ 21
5.22. Insurance......................................................................... 21
5.23. Environmental Matters............................................................. 22
5.24. [RESERVED]........................................................................ 23
5.25. Affiliate Transactions............................................................ 23
5.26. Products; Product and Service Warranties.......................................... 24
5.27. [RESERVED]........................................................................ 24
5.28. [RESERVED]........................................................................ 24
5.29. Suppliers......................................................................... 24
5.30. [RESERVED]........................................................................ 24
5.31. [RESERVED]........................................................................ 24
5.32. Disclosure........................................................................ 24
ARTICLE 6 Representations and Warranties of the Purchaser
and Merger Sub.................................................................... 25
6.1. Existence; Good Standing.......................................................... 25
6.2. Authorization, Validity and Effect of Agreements.................................. 25
6.4. Litigation........................................................................ 26
6.5. No Violation...................................................................... 26
ARTICLE 7 Covenants......................................................................... 26
7.1. [RESERVED]........................................................................ 26
7.2. [RESERVED]........................................................................ 26
7.3. [RESERVED]........................................................................ 26
7.4. [RESERVED]........................................................................ 26
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7.5. [RESERVED].................................................................... 26
7.6. [RESERVED].................................................................... 27
7.7. [RESERVED].................................................................... 27
7.8. Insurance; Indemnity.......................................................... 27
7.9. Employees and Employee Benefit Plans.......................................... 27
7.10. [RESERVED].................................................................... 28
7.11. [RESERVED].................................................................... 28
7.12. [RESERVED].................................................................... 28
7.13. [RESERVED].................................................................... 28
ARTICLE 8 Conditions.................................................................... 28
8.1. Conditions to Each Party's Obligation to Effect the Merger.................... 28
8.2. Conditions to Obligations of the Purchaser.................................... 29
8.3. Conditions to Obligations of the Company...................................... 30
ARTICLE 9 Amendment; Waiver............................................................. 31
9.1. Amendment..................................................................... 31
ARTICLE 10 General Provisions............................................................ 31
10.1. Survival of Representations and Warranties.................................... 31
10.2. Notices....................................................................... 31
10.3. Assignment; Binding Effect; Third Party Beneficiaries......................... 32
10.4. Entire Agreement.............................................................. 33
10.5. Fees and Expenses............................................................. 33
10.6. Governing Law................................................................. 33
10.7. Headings...................................................................... 33
10.8. Interpretation; Certain Definitions........................................... 33
10.9. Investigations................................................................ 36
10.10. Severability.................................................................. 36
10.11. Waiver of Jury Trial.......................................................... 37
10.12. [RESERVED].................................................................... 37
10.13. Counterparts.................................................................. 37
DEFINITIONS................................................................................. 38
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Schedule I Contingent Payment Agreement
Schedule II Holders of Common Stock
Schedule III Holders of Series A Preferred Stock
Schedule IV Holders of Warrants & Options
Schedule V Brokers & Finders Fees
Schedule VI Releases
Schedule VII Articles of Incorporation of Merger Sub
Schedule VIII Opinion of Counsel (▇▇▇▇▇, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, LLP)
Schedule IX Opinion of Counsel (▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇)
Schedule X Form of Letter of Transmittal
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 2, 1998 (this "Agreement"),
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among JUST FOR FEET, INC., a Delaware corporation (the "Purchaser"), JFF MERGER
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CORP., a Delaware corporation and a wholly owned subsidiary of the Purchaser
("Merger Sub") and SNEAKER STADIUM, INC., a Delaware corporation (the
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"Company").
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RECITALS
WHEREAS, the Boards of Directors of the Purchaser, Merger Sub and the
Company each have determined that it is in the best interests of their
respective companies and stockholders for Merger Sub to be merged with and into
the Company pursuant to the Delaware General Corporation Law (the "DGCL") and
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upon the terms and subject to the conditions set forth herein.
WHEREAS, the stockholders of the Company and the Purchaser, as the sole
stockholder of Merger Sub, have adopted and approved this Agreement pursuant to
Sections 251 and 228 of the DGCL.
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection herewith.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement,
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at the Effective Time, Merger Sub shall be merged with and into the Company in
accordance with the DGCL and this Agreement, and the separate corporate
existence of Merger Sub shall thereupon cease (the "Merger"). The Company shall
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be the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation"). The Merger shall have the effects specified in
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the DGCL.
1.2. The Closing. The closing of the Merger (the "Closing") is taking
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place at the offices of Debevoise & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, concurrently with the execution and delivery of this Agreement. The date
on which the Closing occurs is hereinafter referred to as the "Closing Date."
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1.3. Effective Time. The parties hereto shall cause a Certificate of
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Merger meeting the requirements of Section 251(c) of the DGCL to be properly
executed and filed on the Closing Date in accordance with such Section and
Section 103 of the DGCL. The Merger shall become effective at the time of
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the DGCL or at such later time which the parties
hereto shall have agreed upon and designated in such filing as the effective
time of the Merger (the "Effective Time").
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ARTICLE 2
CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION
2.1. Certificate of Incorporation. The Certificate of Incorporation of
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Merger Sub in effect immediately prior to the Effective Time in the form
attached hereto as Schedule VII shall be adopted as the Certificate of
Incorporation of the Surviving Corporation, until duly amended in accordance
with applicable law, except that the name of Merger Sub as set forth in the
Certificate of Incorporation shall be changed to Sneaker Stadium, Inc.
2.2. By-laws. The By-laws of Merger Sub in effect immediately prior to
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the Effective Time shall be adopted as the By-laws of the Surviving Corporation,
until duly amended in accordance with applicable law, except that the name of
Merger Sub as set forth in the Certificate of Incorporation shall be changed to
Sneaker Stadium, Inc..
ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1. Directors. The directors of Merger Sub immediately prior to the
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Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time and shall hold office until their successors are duly appointed
or elected in accordance with applicable law and the By-Laws of the Surviving
Corporation.
3.2. Officers. The officers of Merger Sub immediately prior to the
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Effective Time shall be the officers of the Surviving Corporation as of the
Effective
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Time and shall hold office until their successors are duly appointed or elected
in accordance with applicable law and the By-Laws of the Surviving Corporation.
ARTICLE 4
EFFECT OF THE MERGER ON SECURITIES
OF MERGER SUB AND THE COMPANY
4.1. Merger Sub Stock. At the Effective Time, each share of common
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stock, $0.01 par value per share, of Merger Sub outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one validly issued,
fully paid and non-assessable share of common stock, $0.01 par value per share,
of the Surviving Corporation.
4.2. Company Securities.
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(a) At the Effective Time, each share of Common Stock, par value $0.01
per share, of the Company (the "Common Stock") and each share of Series A
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Preferred Stock issued and outstanding immediately prior to the Effective Time
(other than shares of Common Stock or Series A Preferred Stock owned by the
Purchaser or Merger Sub or held by the Company, all of which shall be canceled
as provided in Section 4.2(c), and other than shares of Dissenting Stock) shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive cash in the amount of $0.0001
per share, without interest thereon (the "Merger Consideration").
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(b) As a result of the Merger and without any action on the part of the
holders thereof, at the Effective Time, all shares of Common Stock and Series A
Preferred Stock (collectively, "Stock") shall cease to be outstanding and shall
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be automatically canceled and retired and shall cease to exist, and each holder
of shares of Stock (other than Merger Sub, the Purchaser and the Company) shall
thereafter cease to have any rights with respect to such shares of Stock, except
the right to receive, without interest, the Merger Consideration in accordance
with Section 4.3 upon the surrender of a certificate or certificates (a
"Certificate") representing such shares of Stock or, with respect to shares of
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Dissenting Stock, such rights as may be available under the DGCL.
(c) Each share of Stock issued and owned or held by the Purchaser, Merger
Sub or the Company immediately prior to the Effective Time shall, by virtue of
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the Merger, cease to be outstanding and shall be automatically canceled and
retired without payment of any consideration therefor.
(d) Each option to purchase shares of Common Stock under the Company's
Amended and Restated 1994 Stock Plan (the "Stock Option Plan") that, immediately
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prior to the Effective Time, is outstanding, whether or not then vested or
exercisable (each, an "Option" and, collectively, the "Options"), shall, in
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accordance with the terms of the Stock Option Plan, have been terminated.
4.3. Payment of Merger Consideration. The Surviving Corporation shall
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pay the Merger Consideration, net of any applicable transfer taxes, to each
holder of Stock (or his designee) who properly delivers a certificate
representing shares of Common Stock or Series A Preferred Stock along with a
properly filled out Letter of Transmittal. Such payment shall be made promptly
upon receipt of such certificate and Letter of Transmittal.
4.4. [RESERVED]
4.5. Dissenting Company Shareholders. Notwithstanding any provision of
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this Agreement to the contrary, if required by the DGCL but only to the extent
required thereby, shares of Common Stock or Series A Preferred Stock which are
issued and outstanding immediately prior to the Effective Time and which are
held of record by holders of such shares who have properly exercised dissenters'
rights with respect thereto (the "Dissenting Stock") in accordance with the DGCL
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will not be converted into the right to receive the Merger Consideration, and
holders of such shares of Dissenting Stock will be entitled to receive payment
of the "fair" value of such shares of Dissenting Stock determined in accordance
with the provisions of Section 262 of the DGCL unless and until such holders
fail to perfect or effectively withdraw or lose their rights to appraisal and
payment under the DGCL. If, after the Effective Time, any such holder fails to
perfect or effectively withdraws or loses such right, such shares of Dissenting
Stock will thereupon be treated as if they had been converted into, at the
Effective Time, the right to receive the Merger Consideration. Notwithstanding
anything to the contrary contained in this Section 4.5, if (a) the Merger is
rescinded or abandoned or (b) either the stockholders of the Company or the
Purchaser, as sole stockholder of Merger Sub, revokes the authority to effect
the Merger, then the right of any stockholder of the Company to be paid the fair
value of such stockholder's Dissenting Stock pursuant to the DGCL shall cease.
The Company will give the Purchaser prompt notice of any demands and withdrawals
of such demands received by the Company for appraisals of shares of Dissenting
Stock. The Company shall not, except with the prior written consent of the
Purchaser, make any
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payment with respect to any demands for appraisal or offer to make payment or
otherwise offer to settle or settle any such demands.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date hereof and as of the Effective Time, the Company hereby
represents and warrants to the Purchaser and Merger Sub as follows:
5.1. Existence; Good Standing; Corporate Authority. (a) The Company is
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a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, has all requisite corporate power to own, lease
and operate its properties and to carry on its business as now being conducted
and as proposed to be conducted, and is duly qualified or licensed to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure to be so qualified or licensed would, in the aggregate,
have or result in a material adverse effect on the prospects, business, assets
(including intangible assets), properties, liabilities, results of operations or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole (a "Material Adverse Effect"). Section 5.1(a) of the Disclosure Letter
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sets forth a complete and correct list of all jurisdictions in which the Company
is qualified or licensed to do business. The copies of the Company's
Certificate of Incorporation, as amended through the date hereof, and By-laws,
as amended through the date hereof, heretofore delivered to the Purchaser are
complete and correct copies of such instruments as currently in effect.
(b) Subsidiaries and Affiliates. Except for SNKR Holding Corp., a
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Delaware corporation and wholly owned subsidiary of the Company ("SNKR Holding
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Corp."), the Company does not directly or indirectly own any equity or similar
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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.
SNKR Holding Corp. is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, has all requisite
corporate power to own, lease and operate its properties and to carry on its
business as now being conducted and as proposed to be conducted, and is duly
qualified or licensed to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified or
licensed would, in the aggregate, have or result in a Material Adverse Effect.
The copies of SNKR Holding Corp.'s Certificate of
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Incorporation, as amended through the date hereof, heretofore delivered to the
Purchaser are complete and correct copies of such instruments as currently in
effect.
5.2. Authorization, Validity and Effect of Agreements. The Company has
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all requisite corporate power and authority to enter into this Agreement and the
Contingent Payment Agreement and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance of this Agreement
and the Contingent Payment Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action on the part of the Company, including without limitation, the
votes or consents of the requisite number of stockholders necessary to authorize
this Agreement or the Contingent Payment Agreement and to consummate the
transactions contemplated hereby or thereby. This Agreement and the Contingent
Payment Agreement have been duly and validly executed and delivered by the
Company and constitute valid and binding obligations of the Company, enforceable
in accordance with their respective terms.
5.3. Compliance with Laws. Except as set forth in Section 5.3 of the
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Disclosure Letter, the Company has complied with, is not in violation of, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for failures to comply or violations which would not in the aggregate have or
result in a Material Adverse Effect. Except as set forth in Section 5.3 of the
Disclosure Letter, no action, demand, requirement or investigation by any
Governmental Entity with respect to the Company or its Subsidiaries is pending
or, to the Knowledge of the Company, threatened, with respect to any of the
foregoing.
5.4. Capitalization. (a) Immediately prior to the Effective Time, the
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authorized capital stock of the Company consists of (i) 55,000,000 shares of
Common Stock, (ii) 5,162,750 shares of Non-Voting Common Stock, $.01 par value
(the "Non-Voting Common Stock") and (iii) 3,450,000 shares of Preferred Stock,
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$.01 par value, of which (A) 750,000 shares are designated Series A Perpetual
Preferred Stock (the "Series A Preferred Stock"), (B) 1,500,000 shares are
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designated Series B Perpetual Preferred Stock (the "Series B Preferred Stock")
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and (C) 700,000 shares are designated Series C Perpetual Preferred Stock (the
"Series C Preferred Stock" and together with the Series A Preferred Stock and
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the Series B Preferred Stock, the "Preferred Stock"). As of the date of this
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Agreement, (i) 17,101,752 shares of Common Stock are issued and outstanding, all
of which are validly issued, fully paid and non-assessable, with no personal
liability attaching to the ownership thereof; (ii) 5,162,750 shares of Common
Stock are reserved for future issuances upon conversion of the Non-Voting Common
6
Stock; (iii) 5,000,000 shares of Common Stock are reserved for future issuance
upon exercise of Options granted or to be granted under the Stock Option Plan;
(iv) 1,472,641 shares of Common Stock are reserved for future issuance upon
exercise of certain Warrants to Purchase Common Stock of the Company (the
"Common Stock Purchase Warrants"); (v) no shares of Non-Voting Common Stock are
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issued and outstanding; (vi) 5,162,750 shares of Non-Voting Common Stock are
reserved for future issuance upon exercise of certain Warrants to Purchase Non-
Voting Common Stock of the Company (the "Non-Voting Common Stock Purchase
--------------------------------
Warrants"); (vii) 402,948 shares of Series A Preferred Stock are issued and
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outstanding, all of which are validly issued, fully paid and non-assessable,
with no personal liability attaching to the ownership thereof; (viii) 12,371
shares of Series A Preferred Stock are reserved for future issuance upon
exercise of certain Warrants to Purchase Series A Preferred Stock of the Company
(the "Series A Preferred Stock Purchase Warrants" and along with the Common
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Stock Purchase Warrants and the Non-Voting Common Stock Purchase Warrants, the
"Warrants"); (ix) no shares of Series B Preferred Stock are issued and
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outstanding; (x) 1,500,000 shares of Series B Preferred Stock are reserved for
future issuance upon conversion of certain Subordinated Convertible Promissory
Notes of the Company dated as of September 10, 1997; (xi) no shares of Series C
Preferred Stock are issued and outstanding; and (xii) 700,000 shares of Series C
Preferred Stock are reserved for future issuance upon conversion of certain
Subordinated Secured Convertible Notes of the Company. Schedule II sets forth
the record owners (immediately prior to the Effective Time) of all outstanding
shares of Common Stock. Schedule III sets forth the record owners (immediately
prior to the Effective Time) of all outstanding shares of Series A Preferred
Stock. Schedule IV sets forth the holders of the Options and Warrants
(indicating the number of shares and type of capital stock of the Company
subject to such Options or Warrants).
(b) Except as set forth in Schedules II, III and IV hereto, there are no
equity securities of any class of the Company or any security exchangeable into
or exercisable for such equity securities, issued, reserved for issuance or
outstanding. After giving effect to the transactions contemplated hereby, there
will be no options, warrants, calls, rights, commitments or arrangements of any
character to which the Company or any of its Subsidiaries is a party, or by
which the Company or any of its Subsidiaries is bound, obligating the Company or
any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of the Company or any of
its Subsidiaries or obligating the Company or any of its Subsidiaries to grant,
extend or accelerate the vesting of or enter into any such option, warrant,
call, right, commitment or agreement. Except as set forth in Section 5.4(b)(ii)
of the Disclosure Letter, (i) neither the Company nor any of its Subsidiaries
is, and, to the Knowledge of the Company, no other person is, a party to any
voting trusts,
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proxies or other agreements or understandings with respect to shares of capital
stock of the Company or any of its Subsidiaries, and (ii) there are no
obligations, contingent or otherwise, of the Company or any of its Subsidiaries
to repurchase, redeem or other wise acquire any shares of capital stock of the
Company or any of its Subsidiaries or to provide funds to or make any investment
(in the form of a loan, capital contribution or otherwise) in any corporation or
other business entity.
(c) As of the Effective Time, the holders of Options, Warrants or
Subordinated Debt, as the case may be, will have no further rights or claims
against the Company or the Surviving Corporation pursuant to any agreements
relating to the grant, issuance or sale of such Options, Warrants or
Subordinated Debt except, in the case of holders of the Subordinated Debt,
pursuant to (i) the Contingent Payment Agreement, (ii) the Termination of Note
Purchase and Guaranty Agreement and Security Agreement, dated as of June 29,
1998, among the Company, the individuals listed on Exhibit A thereto, and Sanwa
Business Credit Corporation ("Sanwa"), (iii) the Amendment, Waiver and Consent
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Agreement dated as of June 29, 1998 by and among the Company and the individuals
and entities listed on Exhibits A and B thereto, Banque Nationale de Paris
("BNP"), as Agent, and Sanwa as Agent, and (iv) the Amendment and Termination
---
Agreement, dated as of June 29, 1998, among the Company, the individuals listed
on Exhibit A thereto, and Sanwa.
(d) The authorized capital stock of SNKR Holding Corp. consists of 3,000
shares of Common Stock, par value $.01 per share, of which 100 shares are issued
and outstanding (the "Subsidiary Shares"). The Company is the record owner of
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all outstanding Subsidiary Shares. All Subsidiary Shares are validly issued,
fully paid and nonassessable, with no personal liability attaching to the
ownership thereof. The issuance of all outstanding Subsidiary Shares did not
give rise to any preemptive rights on the part of any person or entity. Except
as described in this Section 5.4(d), there are no equity securities of any class
of SNKR Holding Corp. or any security exchangeable into or exercisable for such
equity securities, issued, reserved for issuance or outstanding. After giving
effect to the transactions contemplated hereby, there will be no options,
warrants, calls, rights, commitments or arrangements of any character to which
SNKR Holding Corp. is a party, or by which it is bound, obligating it to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of SNKR Holding Corp. or obligating SNKR Holding Corp. to grant,
extend or accelerate the vesting of or enter into any such option, warrant,
call, right, commitment or agreement. Except as set forth in Section 5.4(d) of
the Disclosure Letter, (i) SNKR Holding Corp. is not, and no other person is, a
party to any voting trusts, proxies or other agreements or understandings with
respect to shares of its capital stock, and (ii) there are no obligations,
contingent or otherwise, of SNKR Holding Corp. to
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repurchase, redeem or otherwise acquire any shares of its capital stock or to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any corporation or other business entity.
5.5. [RESERVED]
5.6. No Violation. The execution and delivery by the Company of this
------------
Agreement and the Contingent Payment Agreement do not, and the consummation of
the transactions contemplated hereby and thereby will not, (i) conflict with, or
result in any violation or breach of any provision of the Certificate of
Incorporation or the By-laws of the Company or its Subsidiaries, (ii) except as
set forth in Section 5.6 the Disclosure Letter, result in any violation or
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which it or its properties or assets may be bound,
or (iii) conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its Subsidiaries or its properties or assets, except in
the case of clauses (ii) and (iii) for any such violations, breaches, defaults,
terminations, cancellations, accelerations or conflicts which would not,
individually or in the aggregate, have a Material Adverse Effect.
5.7. Financial Statements; Undisclosed Liabilities. (a) The Company has
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delivered or made available to the Purchaser: (i) balance sheets of the Company
as at February 1, 1998 and February 2, 1997 and related statements of
operations, redeemable convertible preferred stock and shareholder's equity and
cash flows for each of the years ended February 1, 1998 and February 2, 1997,
audited (with respect to the 1997 financial statements only) by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP, independent public accountants whose audit reports thereon are included
therein (collectively, the "Audited Financial Statements"); and (ii) an
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unaudited balance sheet as at May 31, 1998 (the "Balance Sheet") and unaudited
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statements of operations for the period from February 2, 1998 through May 31,
1998 (collectively, the "Interim Financial Statements" and together with the
----------------------------
Audited Financial Statements, the "Financial Statements").
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(b) The Financial Statements (including, in the case of the Audited
Financial Statements, any related notes) were prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
throughout the periods involved and fairly present the financial position of the
Company as at the
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respective dates and the results of its operations and cash flows for the
periods indicated, except that the Interim Financial Statements do not contain
any footnotes and were or are subject to normal and recurring year-end
adjustments which will not be material in amount.
(c) Except as set forth in Section 5.7(c) of the Disclosure Letter, the
Company does not have any liabilities or obligations (whether accrued,
contingent, due or to become due or whether or not required to be reflected in
financial statements in accordance with generally accepted accounting principles
applied on a consistent basis) other than (i) liabilities reflected or reserved
against in the Financial Statements or (ii) normal or recurring liabilities
incurred since the date of the Balance Sheet in the ordinary course of business
consistent with past practices which have not had and would not reasonably be
expected to have a Material Adverse Effect.
5.8. Litigation. Except as set forth in Section 5.8 of the Disclosure
----------
Letter, there is no action, suit or proceeding, claim, inquiry, arbitration or
investigation pending or, to the Knowledge of the Company, threatened against
the Company which, if adversely determined, would have or result in a Material
Adverse Effect, nor has the Company received notice of any judgment, decree,
injunction, rule or order of any Governmental Entity outstanding against the
Company having, or which is reasonably likely to have, a Material Adverse
Effect. The Company is not in violation of any term of any judgment, decree,
injunction or order outstanding against it of which it has received notice.
5.9. Absence of Certain Changes. (a) Except as set forth in Section 5.9
--------------------------
of the Disclosure Letter, since the date of the Balance Sheet, the Company has
conducted its business only in the ordinary course and in a manner consistent
with past practices and, since such date, there has not been (a) any Material
Adverse Effect or (b) any declaration, setting aside or payment of any dividend
or other distribution with respect to the capital stock of the Company or its
Subsidiaries (other than wholly-owned Subsidiaries) or, except as required by
the Company's benefit plans, any repurchase, redemption or any other acquisition
by the Company or its Subsidiaries of any outstanding shares of capital stock or
other securities of, or other ownership interests in, the Company or its
Subsidiaries.
5.10. Taxes. (a) Except as set forth in Section 5.10(a) of the
-----
Disclosure Letter, (i) the Company and its Subsidiaries have filed all Tax
Returns required to be filed under U.S. federal, state, local or any foreign
laws with respect to Taxes on or before the due date for such Tax Returns
(giving effect to applicable extensions), and such Tax Returns are true, correct
and complete in all material respects; (ii) the
10
Company and its Subsidiaries have, within the time and in the manner prescribed
by law, paid all Taxes that are shown as due and payable on such Tax Returns;
(iii) the Company and its Subsidiaries have paid all other Taxes that are due
and payable or are claimed to be due and payable or the Company has made
adequate provision in accordance with generally accepted accounting principles
in its Financial Statements for any such Taxes that have not been paid; (iv) no
deficiency, claim or adjustment relating to Taxes has been proposed, asserted or
assessed in writing by any Governmental Entity against the Company or any of its
Subsidiaries; (v) neither the Company nor any of its Subsidiaries (A) has agreed
or is required to make any adjustment under Section 481(a) of the Internal
Revenue Code of 1986, as amended (hereinafter, "IRC") (or analogous provision of
---
state or local Income Tax law) by reason of a change in accounting method or (B)
has received a ruling from any taxing authority or entered into an agreement
with any taxing authority that will be binding on the Company or any of its
Subsidiaries after the Closing; (vi) other than with respect to the transactions
set forth in this Agreement, each of the Company and each of its Subsidiaries
has complied with all applicable laws, rules and regulations relating to the
payment, filing, reporting and withholding of Taxes and has, within the time and
in the manner prescribed by law, remitted to the proper Governmental Entity all
amounts required to be so withheld and remitted; (vii) no audits, other
administrative proceedings or court proceedings have been initiated or are
currently pending with respect to any Taxes or Tax Returns, and neither the
Company nor any of its Subsidiaries has received notice of any such audits or
proceedings; (viii) there are no outstanding written requests, agreements or
consents to extend, or waivers of, the statutory period of limitations
applicable to the assessment of any Taxes or deficiencies against the Company or
any of its Subsidiaries, and no power of attorney granted by the Company or any
of its Subsidiaries with respect to any matter relating to Taxes is currently in
force; (ix) neither the Company nor any of its Subsidiaries is party to any
agreement or arrangement providing for the allocation or sharing of Taxes or for
any indemnity in respect of Taxes; (x) neither the Company nor any of its
Subsidiaries has filed a consent pursuant to Section 341(f) of the IRC or agreed
to have Section 341(f)(2) of the IRC apply to any disposition of a subsection
341(f) asset (as such term is defined in Section 341(f)(4) of the IRC) owned by
the Company or its Subsidiaries; (xi) to the best of the Company's estimation,
the net operating loss and other carryovers available to the Company and its
Subsidiaries immediately prior to the Closing Date (without giving effect to any
of the transactions contemplated or referred to herein or in the Contingent
Payment Agreement) will be as set forth on Section 5.10(a) of the Disclosure
Letter; and (xii) neither the Company nor any of its Subsidiaries is or has ever
been a United States real property holding corporation within the meaning of
Section 897 of the IRC.
11
(b) No claim (other than a claim that has been finally settled) has ever
been made in writing by a taxing authority in a jurisdiction where the Company
or any of its Subsidiaries does not file Tax Returns or pay or collect Taxes in
respect of a particular type of Tax imposed by that jurisdiction that the
Company or its Subsidiaries is subject to an obligation to file Tax Returns or
pay or collect Taxes in respect of such Tax in that jurisdiction.
(c) The Company has (or by the Closing Date will have) delivered to the
Purchaser complete and accurate copies of all Tax Returns with respect to all
periods that have been filed or will be required to be filed on or before the
Closing Date.
(d) Except as set forth in Section 5.10(d) of the Disclosure Letter,
neither the Company nor any of its Subsidiaries is currently the beneficiary of
any extension of time within which to file any Tax Return.
(e) Except as set forth in Section 5.10(e) of the Disclosure Letter,
neither the Company nor any of its Subsidiaries (i) is or has been a member of
-
any group of companies filing a consolidated, combined or unitary Tax Return or
(ii) has any liability for the Taxes of any person (other than the Company or
--
its Subsidiaries) under section 1.1502-6 of the Treasury Regulations, or any
similar provision of state, local or foreign law, as a transferee, successor,
indemnitor or guarantor, by contract or otherwise.
(f) Except as set forth in Section 5.10(f) of the Disclosure Letter,
neither the Company nor any of its Subsidiaries has acquired (i) any trade or
-
business (whether through a taxable or nontaxable asset or stock acquisition),
or (ii) any asset by way of merger or liquidation. The Purchaser and the
--
Company agree that the consummation of the transactions provided for in this
Agreement shall not constitute a breach of this representation.
5.11. Employee Benefit Plans. (a) Section 5.11(a) of the Disclosure
----------------------
Letter contains a true and complete list of each bonus, deferred compensation,
incentive compensation, stock purchase, stock option or other equity-based
compensation, severance or termination pay, change in control, fringe benefit,
hospitalization or other medical, life or other insurance, supplemental
unemployment benefits, profit-sharing, pension, or retirement plan, program,
agreement or arrangement, and each other employee benefit plan, program,
agreement or arrangement, sponsored, maintained or contributed to or required to
be contributed to by the Company or by any trade or business ness, whether or
not incorporated (an "ERISA Affiliate"), that together with the Company is
---------------
treated as or would have been, at any time within the preceding six years,
12
deemed a "single employer" under Section 414 of the IRC, for the benefit of any
employee or terminated employee of the Company or any ERISA Affiliate (the
"Plans").
-----
(b) With respect to each Plan, the Company has heretofore delivered to
the Purchaser true and complete copies of each of the following documents:
(i) a copy thereof;
(ii) a copy of the most recent annual report and actuarial report,
if required under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the most recent report prepared with respect thereto in
-----
accordance with Statement of Financial Accounting Standards No. 87, Employer's
Accounting for Pensions;
(iii) a copy of the most recent Summary Plan Description required
under ERISA with respect thereto;
(iv) if the Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding agreement and the latest
financial statements thereof;
(v) the most recent determination letter received from the IRS
with respect to each Plan intended to qualify under section 401 of the IRC; and
(vi) all material communications received by the Company or any
ERISA Affiliate from or sent by the Company or any ERISA Affiliate to the IRS,
the Pension Benefit Guaranty Corporation or the Department of Labor (including a
written description of any material oral communication).
(c) No Plan is or was subject to Title IV of ERISA or section 412 of the
IRC.
(d) To the Knowledge of the Company, neither the Company nor any ERISA
Affiliate, nor any Plan, nor any trust created thereunder, nor any trustee or
administrator thereof has engaged in a transaction in connection with which the
Company or any ERISA Affiliate, any Plan, any such trust, or any trustee or
administrator thereof, or any party dealing with any Plan or any such trust
could be subject to either a material civil penalty assessed pursuant to section
409 or 502(i) of ERISA or a material tax imposed pursuant to section 4975 or
4976 of the IRC.
13
(e) No Plan is a "multiemployer pension plan," as defined in section
3(37) of ERISA, nor is any Plan a plan described in section 4063(a) of ERISA.
(f) Each Plan has been operated and administered in all material respects
in accordance with its terms and applicable law, including but not limited to
ERISA and the IRC.
(g) Each Plan intended to be "qualified" within the meaning of section
401(a) of the IRC has received a favorable determination letter from the IRS
and, to the Knowledge of the Company, no condition exists that would cause any
such Plan to be disqualified.
(h) No Plan provides benefits, including without limitation, death or
medical benefits (whether or not insured), with respect to current or former
employees of the Company or any ERISA Affiliate beyond their retirement or other
termination of service (other than (i) coverage mandated by applicable law or
(ii) death benefits or retirement benefits under any "employee pension plan," as
that term is defined in section 3(2) of ERISA).
(i) Except as set forth in Section 5.11(i) of the Disclosure Letter, the
consummation of the transactions contemplated by this Agreement will not (either
alone or upon the occurrence of any additional or subsequent events) (i) entitle
any current or former employee or officer of the Company or any ERISA Affiliate
to severance pay, unemployment compensation or any other payment (including
payments under any phantom interest agreements), except as expressly provided in
this Agreement or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer. No payment or
benefit which has been, or, as a result of the consummation of the transactions
contemplated by this Agreement (either alone or upon the occurrence of any
additional or subsequent events), will be required to be, made by the Company,
its Subsidiaries or to the Knowledge of the Company by the Purchaser or Merger
Sub in respect of any current or former employee of the Company or its
Subsidiaries has failed or will fail to be deductible by such entity pursuant to
section 280G of the IRC or has resulted or will result in the imposition of any
excise tax pursuant to section 280G or 4999 of the IRC.
(j) There are no pending, or, to the Knowledge of the Company, threatened
or anticipated claims by or on behalf of any Plan, by any employee or
beneficiary covered under any such Plan, or otherwise involving any such Plan
(other than routine claims for benefits).
14
5.12. Labor and Employment Matters. (a) Except to the extent set forth
----------------------------
in Section 5.12(a) of the Disclosure Letter, (i) there is no labor strike, lock-
out, dispute, slowdown, stoppage or lockout actually pending, threatened against
or affecting the business of the Company and there has not been any such action;
(ii) to the Knowledge of the Company, no labor organization claims to represent
the employees of the Company; (iii) the Company is not a party to or bound by
any collective bargaining or similar agreement with any labor organization, or
work rules or practices agreed to with any labor organization or employee
association applicable to the Company's employees; (iv) the Company does not
have any knowledge of any current union organizing activities among its
employees nor does any question concerning representation exist concerning such
employees; (v) there are no written personnel policies, rules or procedures
applicable to the Company's employees; (vi) the Company is, and has at all times
been, in material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages, hours of work
and occupational safety and health, and is not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other applicable
law, ordinance or regulation; (vii) the Company has not received notice of any
pending or threatened unfair labor practice charge or complaint against the
Company before the National Labor Relations Board or any similar state or
foreign agency; (viii) there is no grievance arising out of any collective
bargaining agreement or other grievance procedure; (ix) to the knowledge of the
Company, no charges are pending against the Company before the Equal Employment
Opportunity Commission or any other agency responsible for the prevention of
unlawful employment practices; (x) the Company has not received notice of the
intent of any federal, state, local or foreign agency responsible for the
enforcement of labor or employment laws to conduct an investigation nor that any
investigation is in progress; and (xi) the Company has not received notice of
any pending or threatened complaints, lawsuits or other proceedings in any forum
by or on behalf of any present or former employee, any applicant for employment
or classes of the foregoing alleging breach of any express or implied contract
or employment, any law or regulation governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment relationship. Except as set forth in Section 5.12(a) of the
Disclosure Letter, there are no employment contracts or severance agreements
with any employees of the Company.
(b) Since the enactment of the Worker Adjustment and Retraining
Notification Act ("WARN Act"), the Company has not effectuated (i) a "plant
--------
closing" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
the Company; or (ii) a "mass layoff" (as defined in the WARN Act) affecting any
site of employment or facility of the Company; nor has the Company been affected
by any transaction or en-
15
gaged in layoffs or employment terminations sufficient in number to trigger
application of any similar state or local law. Except as set forth in Section
5.12(b) of the Disclosure Letter, none of the Company's employees has suffered
an "employment loss" (as defined in the WARN Act) since six months prior to the
date of this Agreement.
5.13. Brokers and Finders. Except for ▇▇▇▇▇▇ ▇. ▇▇▇ Company, no broker,
-------------------
dealer or financial advisor is entitled to receive from the Company or its
Subsidiaries any broker's, finder's or investment banking fee in connection with
this Agreement or the transactions contemplated hereby. The amounts payable to
▇▇▇▇▇▇ ▇. ▇▇▇ Company in connection with this Agreement and the transactions
contemplated hereby shall not exceed an amount equal to the sum of (x) the
-
greater of (i) the aggregate fees payable by the Purchaser to Nationsbanc
▇▇▇▇▇▇▇▇▇▇ Securities LLC and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. (as set forth on Schedule V)
in connection with this Agreement and the transactions contemplated hereby and
(ii) $750,000, and (y) the related out-of-pocket expenses for which the Company
-
has agreed to reimburse ▇▇▇▇▇▇ ▇. ▇▇▇ Company; provided, that any such fee
--------
payable to ▇▇▇▇▇▇ ▇. ▇▇▇ Company shall be reduced by the amount by which (a)
such reimbursable expenses of ▇▇▇▇▇▇ ▇. ▇▇▇ Company paid at Closing, and all
other fees and expenses of the Company incurred in connection with this
Agreement and the transactions contemplated hereby (other than any severance
amounts payable to Company employees and restructuring or commitment fees paid
or payable to any banks or other creditors of the Purchaser) paid at Closing
exceeds (b) $500,000. On the Closing Date, the reimbursable expenses of ▇▇▇▇▇▇
▇. ▇▇▇ Company and all other fees and expenses of the Company incurred in
connection with this Agreement and the transactions contemplated hereby (other
than any severance amounts payable to Company employees and restructuring or
commitment fees paid or payable to any banks or other creditors of the
Purchaser) paid at Closing shall not exceed $1.25 million.
5.14. Properties and Assets. (a) The Company and its Subsidiaries own
---------------------
no real property. Section 5.14(a)(i) of the Disclosure Letter sets forth a
complete and correct list of all leases, subleases and assignments pursuant to
which SNKR Holding Corp. or the Company leases real property and all amendments,
guarantees and other documents related thereto (collectively, the "Real Property
-------------
Leases"; as used herein, the term "lease" shall be deemed to include, without
------
limitation, all Real Property Leases). True and correct copies of all Real
Property Leases have previously been delivered to the Purchaser. There is no
real or tangible personal property used in, necessary for or material to the
business of the Company or its Subsidiaries as currently conducted consistent
with prior practice, other than the Real Property and the personal property
listed in Section 5.14(a) of the Disclosure Letter. The Company or its
Subsidiaries has
16
good and marketable title to, or a valid leasehold interest in, all the
properties and assets which it purports to own or lease (real, personal and
mixed, tangible and intangible), including, without limitation, all the
properties and assets reflected in Section 5.14(a)(i) of the Disclosure Letter
or on the Balance Sheet (except for personal property sold since the date of the
Balance Sheet in the ordinary course of business and consistent with past
practices). Except as set forth in Section 5.14(a)(ii) of the Disclosure Letter,
to the Knowledge of the Company, all properties and assets reflected in Section
5.14(a)(i) of the Disclosure Letter or on the Balance Sheet (including the
leasehold interests of the Company or its Subsidiaries, as applicable, under the
Real Property Leases) are free and clear of all Liens, except for Permitted
Liens. Except as set forth in Section 5.14(a)(iii) of the Disclosure Letter, the
leasehold interests of the Company or its Subsidiaries, as applicable, are not
subordinate to any superior leases or mortgages except to the extent that Non-
Disturbance Agreements in favor of the Company or its Subsidiaries as
applicable, have been executed and delivered by the holders of each such
superior lease and mortgage. As used herein, "Non-Disturbance Agreement" shall
-------------------------
mean an agreement providing for the continued occupancy of the applicable
leasehold premises notwithstanding the termination of a superior lease, the
foreclosure of a mortgage or a similar occurrence, as applicable.
(b) Except as set forth in Section 5.14(b) of the Disclosure Letter, the
consummation of the transactions contemplated by this Agreement, do not and will
not constitute a breach or violation of, or default under, or require the
consent or waiver of any party to, any Real Property Lease, except for any such
required consent or waiver (a "Required Lease Consent") which has been
----------------------
previously delivered to the Company or to its Subsidiaries and which Required
Lease Consent does not require any adverse modification in the rights or
obligations of the Company or its Subsidiaries under any Real Property Lease.
Executed counterpart copies of all Required Lease Consents have previously been
delivered to the Purchaser.
(c) To the Knowledge of the Company, except as set forth in Section
5.14(c) of the Disclosure Letter, the premises demised to the Company or its
Subsidiaries by the Real Property Leases are (i) in good condition and repair
for their continued use by the Company in the conduct of the Company's business,
subject to ordinary wear and tear, are suitable for the purposes for which they
are used and are performing the functions for which they were intended, (ii) all
items of personal property having a book value of $10,000 or more or which are
otherwise material to the Company's business have performed at commercially
reasonable standards since the later of six months prior to the date hereof and
the time of their acquisition and to the extent required therefor are being used
by the Company or its Subsidiaries as of the date hereof in connection with its
business and operations, (iii) no repairs or other
17
expenditures are presently contemplated to be made on any structure,
improvement, machinery or equipment which would in the aggregate for all items
under this clause (iii) involve the expenditure of more than $100,000, and (iv)
to the Knowledge of the Company, no extraordinary or unusual capital
expenditures in excess of $100,000 in the aggregate will be required in
connection with the business and operations of the Company and its Subsidiaries
in the twelve months following the Closing Date to permit such business to be
conducted in substantially the same manner, at substantially the same levels and
offering for sale and selling substantially the same products and services as in
the past.
(d) To the Knowledge of the Company except as set forth in Section
5.14(d) of the Disclosure Letter, neither the Company nor its Subsidiaries is in
violation of any law, rule, regulation or ordinance with respect to the
condition, use or operation of any personal property owned by the Company or its
Subsidiaries or any premises leased pursuant to the Real Property Leases.
5.15. State Antitakeover Laws. To the Knowledge of the Company, no
-----------------------
"business combination," "moratorium," "control share" or other antitakeover
statute or regulation (a) prohibits or restricts the Company's ability to
perform its obligations under this Agreement or the Contingent Payment Agreement
or its ability to consummate the transactions contemplated hereby or thereby, or
(b) would have the effect of invalidating or voiding this Agreement, the
Contingent Payment Agreement or any material provision thereof.
5.16. Inventories; Accounts Payable. (a) All of the inventories of the
-----------------------------
Company are of a quality usable and salable in the ordinary course of business
and have been valued in accordance with generally accepted accounting principles
consistent with past practice. All inventories have been valued at the lower of
cost or market using a weighted average method that approximates first in, first
out, determined in the ordinary course of business consistent with past
practices, and include costs associated with certain purchases and merchandise
handling activities, but inventories do not include reserves for shrinkage and
obsolescence.
(b) Section 5.16(b) of the Disclosure Letter sets forth (i) all accounts
payable as of the date that is one day prior to the date hereof, and (ii) an
aging schedule (to the nearest month) of accounts payable outstanding as of the
date hereof. All accounts payable of the Company, whether reflected in the
Balance Sheet or otherwise, represent payments incurred in the ordinary course
of business.
18
5.17. Material Contracts. (a) Section 5.17(a) of the Disclosure
------------------
Schedule sets forth a complete and correct list of all credit agreements, notes,
mortgages, indentures, security agreements, pledges, guarantees of or agreements
to acquire any such debt obligation of others or similar documents relating to
indebtedness for borrowed money (including without limitation interest rate or
currency swaps, ▇▇▇▇▇▇ or straddles or similar transactions) to which the
Company or any of its Subsidiaries is a party or by which any of its assets are
bound, restricted or encumbered (copies of each of which have been delivered to
or have been made available to the Purchaser prior to the date of this
Agreement).
(b) Section 5.17(b) of the Disclosure Letter contains a complete and
correct list of all agreements, contracts, leases or other commitments in effect
to which the Company or any of its Subsidiaries is a party (copies of each of
which have been delivered to or have been made available to the Purchaser prior
to the date of this Agreement) and which involve an amount in excess of $25,000.
(c) Except as set forth in Section 5.17(c) of the Disclosure Letter:
(i) all such agreements, contracts, leases and commitments are in full
force and effect, and are valid, binding and enforceable in accordance with
their respective terms;
(ii) no purchase contracts or commitments of the Company or any of its
Subsidiaries continue for a period of more than 12 months or are in excess of
the normal, ordinary and usual requirements of the Company's business;
(iii) the Company and its Subsidiaries have no outstanding contracts with
officers, employees, agents, consultants, advisors, salespeople, sales
representatives, distributors or dealers that are not cancelable by it on notice
of not longer than 30 days and without liability, penalty or premium or that
provide for the payment of any bonus or commission based on sales or earnings;
(iv) the Company and its Subsidiaries have no employment, consulting,
severance or termination agreement, or any other agreement that contains any
severance or termination pay liabilities or obligations;
(v) the Company and its Subsidiaries are not and, to the Knowledge of
the Company, no other party is, in default under or in violation of, nor is
there any basis for any valid claim of default under or violation of, any
material agreement, Real
19
Property Lease, contract, lease or commitment to which the Company or any of its
Subsidiaries is a party or by which any of them is bound;
(vi) neither the Company nor any of its Subsidiaries has an officer,
director or employee to whom it is paying compensation at an annual rate,
excluding commissions, of more than $150,000;
(vii) none of the Company, any of its Subsidiaries or any officer thereof
is restricted by any agreement, contract or commitment from carrying on or
participating in (as an employee, owner or otherwise) any business anywhere in
the world;
(viii) neither the Company nor any of its Subsidiaries has any debt
obligation for borrowed money, including guarantees of or agreements to acquire
any such debt obligation of others;
(ix) neither the Company nor any of its Subsidiaries has any outstanding
loan to any person, other than travel advances to employees in the ordinary
course of business consistent with past practices;
(x) neither the Company nor any of its Subsidiaries has any power of
attorney outstanding or any obligations or liabilities (whether absolute,
accrued, contingent or otherwise), as guarantor, surety, co-signer, endorser,
co-maker, indemnitor or otherwise in respect of the obligation of any person,
corporation, partnership, joint venture, association, organization or other
entity; and
(xi) neither the Company nor any of its Subsidiaries has any agreement
by or among the existing stockholders of the Company relating to or affecting
the acquisition, disposition or voting of the Common Stock, Preferred Stock or
other capital stock of the Company or the capital stock of any of its
Subsidiaries.
5.18. Intellectual Property; Technology. (a) The Company and its
---------------------------------
Subsidiaries neither own nor license (as licensee or licensor) any patents,
patent applications or rights with respect thereto. Section 5.18(a)(i) of the
Disclosure Letter sets forth all federally registered, and pending federal
registrations of, trademarks, trade names and service marks (including the name
Sneaker Stadium) owned by the Company or its Subsidiaries, all of which, except
as set forth in Section 5.18(a)(ii) of the Disclosure Letter, are owned solely
and exclusively by the Company or its Subsidiaries, free and clear of any Liens.
Except as set forth on Section 5.18(a)(iii) of the Disclosure Letter, the
Company or its Subsidiaries (i) owns or has the right to use all trademarks,
trade names and copyrights used in or necessary to the business of the
20
Company and its Subsidiaries as currently conducted and as currently proposed to
be conducted and (ii) owns or has the full right to use all technology, know-
how, processes, other intellectual property rights and computer programs and
software used in or necessary to the business of the Company or its Subsidiaries
as currently conducted and as currently proposed to be conducted. The
intellectual property rights described in the foregoing sentences of this
Section 5.18(a) are collectively referred to as the "Intellectual Property."
---------------------
Section 5.18(a)(iv) of the Disclosure Letter contains a list of all
Intellectual Property and all applications made by the Company and its
Subsidiaries therefor, if any, excluding trademarks and service marks of third-
party vendors and copyrights of the Company or its Subsidiaries with respect to
advertising materials. The Company has delivered to the Purchaser complete and
correct copies of all licenses and other agreements relating to all Intellectual
Property.
(b) The consummation of the transactions contemplated hereby will not
alter or impair any of the Intellectual Property or the Company's or any of its
Subsidiaries' rights or interests therein. Except as set forth in Section
5.18(b)(i) of the Disclosure Letter, no claims have been asserted by any person
challenging the use by the Company or any of its Subsidiaries of any
Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement referred to in Section 5.18(a) above,
and the Company does not know of any valid basis for any such claim. Except as
set forth in Section 5.18(b)(ii) of the Disclosure Letter, the use of the
Intellectual Property by the Company or its Subsidiaries does not infringe on
the rights of any person.
(c) Except as set forth on Section 5.18(c) of the Disclosure Letter, (i)
there are no judgments, consents or orders of which the Company or any of its
Subsidiaries has received notice which restrict the Company's or any of its
Subsidiaries' rights to use any Intellectual Property, and (ii) no concurrent
use or other agreements to which the Company or any of its Subsidiaries is a
party of which it has received notice which restrict the Company's or any of its
Subsidiaries' rights to use any Intellectual Property.
5.19. Calendar Function. Except as disclosed in Section 5.19 of the
-----------------
Disclosure Letter, all software used in the Company's business that contains or
calls on a calendar function, including but not limited to any function that is
indexed to a computer processing unit clock, provides specific dates or
calculates spans of dates, is and will be able to record, store, process and
provide true and accurate dates and calculations for dates and spans of dates
including and following January 1, 2000, except for any inaccuracies that,
individually and in the aggregate, would not be Material Adverse Effect.
21
5.20. [RESERVED]
5.21. [RESERVED]
5.22. Insurance. Section 5.22 of the Disclosure Letter contains an
---------
accurate and complete list of all policies of fire, liability, workers'
compensation and other forms of insurance, including, but not limited to, all
group insurance programs in effect for employees of the Company and its
Subsidiaries, owned or held by the Company. All such policies are in full force
and effect, all premiums with respect thereto covering all periods up to and
including the Closing Date have been paid and no notice of cancellation or
termination has been received with respect to any such policy. Such policies
(i) are sufficient for compliance with all requirements of law; (ii) are
sufficient for compliance with all agreements to which the Company or any of its
Subsidiaries is a party; (iii) are valid, outstanding and enforceable policies;
(iv) provide insurance coverage for the assets and operations of the Company or
any of its Subsidiaries in scope and amount customary and reasonable for the
business in which it is engaged; (v) will remain in full force and effect
through the respective dates set forth in Section 5.22 of the Disclosure Letter
without the payment of additional premiums; and (vi) will not in any way be
affected by or terminate or lapse by reason of the transactions contemplated by
this Agreement. The Company and its Subsidiaries have complied in all material
respects with the terms and provisions of such policies. Neither the Company or
any of its Subsidiaries has been refused any insurance with respect to its
assets or operations, nor has its coverage been limited, by any insurance
carrier to which it has applied for any such insurance or with which it has
carried insurance.
5.23. Environmental Matters. Except as set forth in Section 5.23 of the
---------------------
Disclosure Letter, (a) except as would not be reasonably likely to result in a
Material Adverse Effect, the Company and its Subsidiaries are in compliance and
at all times have complied with all applicable Environmental Laws (as defined
below); the Company and its Subsidiaries have not received any communication,
whether from any Governmental Entity, citizens group, employee or otherwise,
that alleges that the Company or any of its Subsidiaries is not in such
compliance; and, to the Knowledge of the Company, there are no circumstances
that may prevent or interfere with such compliance in the future.
(b) There is no Environmental Claim (as defined below), pending or, to
the Knowledge of the Company, threatened against the Company or any of its
Subsidiaries.
(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents involving the release or alleged release,
emission, discharge or
22
disposal by the Company or any of its Subsidiaries of any Hazardous Materials,
that could form the basis of any Environmental Claim against the Company or any
of its Subsidiaries, except for such Environmental Claims as would not be
reasonably likely to have a Material Adverse Effect.
(d) Except as would not be reasonably likely to result in a Material
Adverse Effect, neither the Company nor its Subsidiaries, nor to the Knowledge
of the Company, any other Person (including any tenant or subtenant) has caused
or taken any action that will result in, and neither the Company nor its
Subsidiaries is subject to, any Environmental Claim relating to (x) the
-
environmental conditions on, under, or about the real property which is the
subject of the Real Property Leases or other properties or assets currently or
formerly owned, leased or operated by the Company or its Subsidiaries or any
predecessor thereto, including without limitation, the air, soil and groundwater
conditions at such locations.
"Environmental Claim" means any notice by any person or entity alleging
-------------------
potential liability arising out of, based on or resulting from (i) the
presence, or release into the environment, of any Hazardous Materials at any
location, whether or not owned by the Company or any of its Subsidiaries or
(ii) any violation, or alleged violation, by the Company or any of its
Subsidiaries of any Environmental Law.
"Environmental Laws" means all federal, state, local and foreign laws and
------------------
regulations relating to pollution or protection of human health or the
environment including laws and regulations relating to emissions, discharges,
releases or threatened releases of Hazardous Materials, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
"Hazardous Materials" means any substance or material that is classified
-------------------
or regulated as "hazardous" or "toxic" pursuant to any Environmental Law,
including, without limitation, asbestos, polychlorinated biphenyls, petroleum
products or by-products, and urea-formaldehyde insulation.
5.24. [RESERVED]
5.25. Affiliate Transactions. Section 5.25 of the Disclosure Letter
----------------------
contains a complete and correct list of all agreements, contracts, commitments
or arrangements (whether or not written) between the Company or its Subsidiaries
and any current or former stockholder, officer, director or employee (or former
directors or executive-
23
level employees) of the Company or its Subsidiaries (or any family member of any
of the foregoing) or any other Affiliate of the Company, currently in effect or
to be performed in the future (collectively, the "Affiliate Agreements") and the
--------------------
amounts owed by the Company and its Subsidiaries, or by the other party or
parties under each of the Affiliate Agreements as of the date hereof. Except as
set forth in Section 5.25(a) of the Disclosure Letter, to the Knowledge of the
Company, no stockholder of the Company, or any Company officer, director,
employee (or any family member of any of the foregoing) or any other Affiliate
of the Company owns, directly or indirectly, on an individual or joint basis,
greater than a 5% financial interest in, or serves as an officer, director or
employee of, any customer, competitor or supplier of the Company or its
Subsidiaries or any Person or entity which has a contract, agreement or other
arrangement (whether or not written) with the Company or its Subsidiaries.
5.26. Products; Product and Service Warranties. Section 5.26 of the
----------------------------------------
Disclosure Letter describes the rights of the Company and its Subsidiaries with
respect to defective merchandise received from vendors. The general customer
returns policy of the Company and its Subsidiaries is as set forth in Section
5.26 of the Disclosure Letter.
5.27. [RESERVED]
5.28. [RESERVED]
5.29. Suppliers. Section 5.29 of the Disclosure Letter sets forth for
---------
each of the fiscal years ended February 1, 1998 and February 2, 1997, and for
the period ended May 17, 1998 showing (a) the names and addresses of the 5
largest suppliers (and any other supplier of the Company and its Subsidiaries
which accounts for more than 10% of the Company's and its Subsidiaries'
purchases during each such period) of the Company and its Subsidiaries based on
the aggregate value of supplies, merchandise and other goods and services
ordered by the Company and its Subsidiaries from such suppliers during each such
period and (b) the approximate total purchases by the Company and its
Subsidiaries from each such vendor during each such period. Except as set forth
in Section 5.29 of the Disclosure Letter, since May 31, 1998, there has not been
any material adverse change in the business relationship of the Company and its
Subsidiaries with any vendor named in Section 5.29 of the Disclosure Letter.
5.30. [RESERVED]
5.31. [RESERVED]
24
5.32. Disclosure. Neither this Agreement (including the Disclosure
----------
Letter) nor any other agreement, document, certificate or written statement
furnished to the Purchaser or their counsel by or on behalf of the Company in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
Projections supplied to the Purchaser (the "Projections"), if any, are not
-----------
considered to be facts for the purpose of this Section. There is no fact within
the Knowledge of the Company which has not been disclosed by it herein
(including in the Disclosure Letter) or otherwise to the Purchaser in writing
which has had or in the future in its opinion may have, insofar as it can now
foresee, a Material Adverse Effect. Any Projections which have been delivered
by or on behalf of the Company to the Purchaser were based on the Company's
experience in the industry and on assumptions of fact and opinion as to future
events which the Company, at the date of delivery of the Projections, believed
to be reasonable, but which the Company cannot and does not guarantee the
attainment of in any manner.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND MERGER SUB
As of the date hereof and as of the Effective Time, the Purchaser and
Merger Sub hereby jointly and severally represent and warrant to the Company as
follows:
6.1. Existence; Good Standing. Each of the Purchaser and Merger Sub is a
------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation.
6.2. Authorization, Validity and Effect of Agreements. Each of the
------------------------------------------------
Purchaser and Merger Sub has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The Purchaser has the requisite corporate power and
authority to execute and deliver the Contingent Payment Agreement and to
consummate the transactions contemplated thereby. The execution and delivery of
this Agreement and the Contingent Payment Agreement and the consummation by the
Purchaser and Merger Sub of the transactions contemplated hereby and thereby
have been duly and validly authorized by the respective Boards of Directors of
the Purchaser and Merger Sub, as applicable, and by the stockholder of Merger
Sub, and no other corporate proceedings on the part of the Purchaser or Merger
Sub are necessary to authorize this Agreement and the Contingent Payment
Agreement or to consummate the transactions contemplated hereby and thereby.
This Agreement has been duly and validly executed and delivered by the
25
Purchaser and Merger Sub, and constitutes the valid and binding obligation of
the Purchaser and Merger Sub. The Contingent Payment Agreement has been duly
and validly executed and delivered by the Purchaser, and constitutes the valid
and binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms.
6.3. Brokers and Finders. Except for Nationsbanc ▇▇▇▇▇▇▇▇▇▇ Securities
-------------------
LLC and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., no broker, dealer or financial advisor is entitled
to receive from the Purchaser, Merger Sub or any of their Affiliates any
broker's, finder's or investment banking fee in connection with this Agreement
or the transactions contemplated hereby. The amounts payable to Nationsbanc
▇▇▇▇▇▇▇▇▇▇ Securities LLC and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. are set forth in Schedule V
hereto.
6.4. Litigation. There is no judgment, decree or order pending or, to
----------
the knowledge of the Purchaser, Merger Sub or any of their directors or
officers, threatened against the Purchaser or Merger Sub that would impair the
ability of the Purchaser or Merger Sub to perform its respective obligations
hereunder.
6.5. No Violation. Neither the execution and delivery of this Agreement
------------
or the Contingent Payment Agreement by the Purchaser and Merger Sub nor the
consummation by them of the transactions contemplated hereby and thereby do or
will (a) violate, conflict with or result in any breach of any provision of the
Articles of Incorporation or By-laws of Merger Sub or the Purchaser, (b) other
than the Requisite Approvals require any consent, approval or authorization of,
or declaration, filing or registration with, any Governmental Entity, the lack
of which individually or in the aggregate would materially adversely affect the
ability of the Purchaser or Merger Sub to consummate the transactions
contemplated hereby or (c) violate any Laws applicable to the Purchaser or
Merger Sub or any of their respective assets, except for violations which
individually or in the aggregate would not materially adversely affect the
ability of the Purchaser or Merger Sub to consummate the transactions
contemplated hereby or thereby.
ARTICLE 7
COVENANTS
7.1. [RESERVED]
7.2. [RESERVED]
26
7.3. [RESERVED]
7.4. [RESERVED]
7.5. [RESERVED]
7.6. [RESERVED]
7.7. [RESERVED]
7.8. Insurance; Indemnity.
--------------------
(a) For not less than three years after the Effective Time, the
Purchaser shall maintain in effect directors' and officers' liability insurance
covering the individuals who are currently covered by the Company's existing
directors' and officers' liability insurance, on terms and conditions no less
favorable to such directors and officers than those in effect on the date
hereof. The Company represents that the annual premium is currently
approximately $30,000.
(b) From and after the Effective Time, the Purchaser shall indemnify
and hold harmless, to the fullest extent permitted under applicable law, each
person who is, or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, an officer or director of the Company or any of its
Subsidiaries against all losses, claims, damages, liabilities, costs or expenses
(including attorneys' fees), judgments, fines, penalties and amounts paid in
settlement (collectively, "Losses") in connection with any Litigation arising
------
out of or pertaining to acts or omissions, or alleged acts or omissions, by them
in their capacities as such, which acts or omissions occurred prior to the
Effective Time. Without limiting the foregoing, the Company and after the
Effective Time the Purchaser shall periodically advance expenses as incurred
with respect to the foregoing to the fullest extent permitted under applicable
law provided that the person to whom the expenses are advanced provides an
undertaking to repay such advance if it is ultimately determined that such
person is not entitled to indemnification.
7.9. Employees and Employee Benefit Plans. For at least one year
------------------------------------
following the Effective Date, the Purchaser shall, or shall cause the Surviving
Corporation and its Subsidiaries to, make available to each person who is an
employee of the Company and its Subsidiaries at the Effective Time (the "Company
-------
Employees") employee benefit plans and programs (other than stock-based or
---------
equity plans and vacation benefits) which are either (a) the same as are made
-
available to the employees
27
of the Purchaser, on terms and conditions which are no less favorable to the
Company Employees than the terms and conditions generally applicable to the
employees of the Purchaser or (b) no less favorable to the Company Employees
-
than the employee benefit plans and programs of the Company and its Subsidiaries
as of the date hereof; provided that, the Purchaser retains the right to
terminate such employees and to change terms of the coverage provided by the
applicable plans in accordance with any change in an employee's status or as
required by applicable Law. From and after the Effective Time, for purposes of
determining eligibility, vesting and entitlement to vacation, severance and
other benefits for employees under any compensation, severance, welfare,
pension, benefit, savings or other plan of the Purchaser, the Surviving
Corporation or any of its Subsidiaries in which employees of the Company or any
of its Subsidiaries become eligible to participate, service with the Company or
any of its Subsidiaries shall be credited as if such service had been rendered
to the Purchaser, the Surviving Corporation or such Subsidiary. In no event
shall the severance benefits payable to any Company Employee whose employment
terminates prior to the first anniversary of the Effective Time be less than the
amount that would have been payable to such employee under the terms of the
severance policy or plan applicable to such Company Employee as of the date
hereof.
7.10. [RESERVED]
7.11. [RESERVED]
7.12. [RESERVED]
7.13. [RESERVED]
ARTICLE 8
CONDITIONS
8.1. Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction or waiver
at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. Stockholders holding a majority of the
--------------------
shares of Common Stock and Series A Preferred Stock outstanding as of the date
hereof voting separately as a class shall have approved and adopted this
Agreement. The Company
28
shall not have received notice from any holder of shares of Common Stock or
Series A Preferred Stock of its intention to exercise Appraisal Rights.
(b) Other Approvals. Other than the filing provided for by Section 1.3,
---------------
all Consents, including required Lease Consents, and filings with, or approvals
of, any Governmental Entity which are necessary for the consummation of the
Merger, other than consents and regulatory filings the failure to obtain or make
which would, individually and in the aggregate, be immaterial to the Surviving
Corporation and which would not materially impair the ability of the parties
hereto to perform their obligations hereunder, shall have been filed, occurred
or been obtained (all such consents, regulatory filings and the lapse of all
such waiting periods being referred to as the "Requisite Approvals"), and all
-------------------
such Requisite Approvals shall be in full force and effect.
(c) No Injunctions or Restraints; Illegality. No temporary restraining
----------------------------------------
order, preliminary or permanent injunction or other order or decree issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; provided, however,
-------- -------
that each of the parties shall have used its reasonable efforts to appeal as
promptly as possible any injunction or other order or restraint that may be
entered. There shall not be any action taken, or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the Merger, which
makes the consummation of the Merger illegal.
8.2. Conditions to Obligations of the Purchaser. The obligations of the
------------------------------------------
Purchaser and Merger Sub to effect the Merger are subject to the satisfaction of
the following conditions unless waived by the Purchaser and Merger Sub:
(a) FIRPTA Certificate. The Purchaser shall have received such
------------------
affidavits or certifications in form and substance reasonably satisfactory to
the Purchaser as are necessary to exempt the Merger from the provisions of
Section 1445 of the IRC.
(b) Opinion of Counsel. The Purchaser shall have received an opinion,
------------------
addressed to it and dated the Closing Date, from ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
LLP, special counsel for the Company, substantially in the form of Schedule VIII
hereto (or otherwise in a form reasonably satisfactory to the parties hereto).
(c) Certain Indebtedness. The Company's existing Revolving Credit
--------------------
Agreement, dated January 17, 1997, among the Company, Sanwa, First National Bank
of Boston and BNP and existing Credit Agreement, dated January 17, 1997, between
29
the Company and BNP shall have been refinanced or replaced with new credit
facilities with a combined aggregate outstanding principal amount not to exceed
$43 million and such other terms and conditions satisfactory to the Purchaser in
its sole discretion.
(d) Subordinated Indebtedness. The holders of the Subordinated
-------------------------
Indemnification Note, dated January 17, 1997, and the Subordinated Convertible
Promissory Notes, dated September 10, 1997 (the "Subordinated Debt"), shall have
-----------------
contributed all principal, interest and other amounts due or to become due
thereunder to the capital of the Company and executed and delivered documents
satisfactory in form and substance to the Purchaser and its counsel releasing
any rights or claims against the Company pursuant to the Subordinated Debt and
that certain Note Purchase and Guaranty Agreement dated May 20, 1998, or any
agreements relating thereto, except those arising under such release and
termination documents and the Contingent Payment Agreement.
(e) Certain Stockholder Approvals. The Company shall have provided
-----------------------------
evidence reasonably satisfactory to the Purchaser, including without limitation
an officer's certificate on behalf of the Company to the effect, that the
Company has obtained, where necessary to avoid the imposition of an excise tax
under section 280G or 4999 of the IRC or the denial of a deduction under section
280G of the IRC, proper written consent in accordance with the shareholder
approval requirements of section 280G of the IRC with respect to all Plans,
Contracts and any other contract, plan, policy, arrangement or agreement, which
alone or in conjunction with any other arrangement or payment, provides or may
provide payment which without such consent would or could constitute "parachute
payments" (within the meaning of section 280G of the IRC).
8.3. Conditions to Obligations of the Company. The obligations of the
----------------------------------------
Company to effect the Merger are subject to the satisfaction of the following
conditions unless waived by the Company:
(a) Contingent Payment Agreement. The Purchaser and each other party
----------------------------
(other than the Company) to the Contingent Payment Agreement shall have executed
and delivered the Contingent Payment Agreement.
(b) Certain Releases. Releases with respect to the guarantees listed on
----------------
Schedule VI, reasonably satisfactory in form and substance to the Company and
its counsel, shall have been executed and delivered by each beneficiary of each
such guaranty.
30
(c) Opinion of Counsel. The Company shall have received an opinion,
------------------
addressed to them and dated the Closing Date, of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
special counsel to the Purchaser, substantially in the form of Schedule IX (or
otherwise in a form reasonably satisfactory to the parties hereto).
ARTICLE 9
AMENDMENT; WAIVER
9.1. Amendment. To the extent permitted by applicable law, this
---------
Agreement may be amended by action taken by or on behalf of the Board of
Directors of the Company, Merger Sub and the Purchaser at any time, provided
--------
that (i) no amendment shall be made which decreases the Merger Consideration or
-
which adversely affects the rights of the Company's stockholders hereunder
without the approval of such stockholders and (ii) no amendment shall be made
--
which adversely affects the rights of an individual referred to in Section 7.8
or Section 7.9 without the prior written consent of such individual. This
Agreement may not be amended except by an instrument in writing signed on behalf
of all of the parties, subject to the immediately preceding proviso.
ARTICLE 10
GENERAL PROVISIONS
10.1. Survival of Representations and Warranties. The representations
------------------------------------------
and warranties of the Company shall not survive the Effective Time and no Person
shall have any liability whatsoever relating thereto (except to the extent
provided in Section 2.4 of the Contingent Payment Agreement), except that the
representations and warranties contained in Section 5.7(c) shall, solely for
purposes of the Contingent Payment Agreement, survive until the date that is
eighteen months following the date hereof and shall automatically terminate on
such date, except that if a claim with respect to an Indemnifiable Loss (as
defined in the Contingent Payment Agreement) is made prior to such date in
accordance with such Section 2.4 of the Contingent Payment Agreement, then
(notwithstanding that such date has occurred) such representations and
warranties contained in such Section 5.7(c) shall survive until, but only for
purposes of, the resolution of such claim in accordance with such Section 2.4 of
the Contingent Payment Agreement. The sole and exclusive remedy of any party
with respect to any breach or alleged breach of the representations and
warranties contained in Section 5.7(c) shall be as set forth in Section 2.4 of
the Contingent Payment Agreement.
31
10.2. Notices. Any notice required to be given hereunder shall be
-------
sufficient if in writing, and sent by facsimile transmission (with a
confirmatory copy sent by overnight courier), by courier service (with proof of
service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed as follows:
If to the Purchaser or Merger Sub: If to the Company:
Just for Feet, Inc. Sneaker Stadium, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
With a copy to: With a copy to:
Debevoise & ▇▇▇▇▇▇▇▇ Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ 31st Floor
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
and
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date received.
32
10.3. Assignment; Binding Effect; Third Party Beneficiaries. Neither
-----------------------------------------------------
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties, provided,
--------
that either the Purchaser or Merger Sub (or either of them) may assign its
rights hereunder to an Affiliate, but nothing shall relieve the assignor from
its obligations hereunder. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. Notwithstanding anything contained in
this Agreement to the contrary, except for the provisions of Section 7.8 and
Section 7.9, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
10.4. Entire Agreement. This Agreement, the Disclosure Letter, the
----------------
Schedules, the Exhibits, the Contingent Payment Agreement, the Confidentiality
Agreement and any other documents delivered by the parties in connection
herewith constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings
among the parties with respect thereto (except that the Confidentiality
Agreement shall not be so superseded).
10.5. Fees and Expenses. Except as contemplated by Section 5.13, all
-----------------
costs and expenses incurred in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses.
10.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL
-------------
RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF
THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW RULES OF SUCH STATE.
The Purchaser, Merger Sub and the Company hereby irrevocably submit to the
jurisdiction of the courts of the State of Delaware and the federal courts of
the United States of America located in the State of Delaware solely in respect
of the interpretation and enforcement of the provisions of this Agreement, and,
subject to Section 10.11, hereby waive and agree not to assert as a defense in
any action, suit or proceeding for the in terpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or any of such
document may not be enforced in or by said courts.
33
10.7. Headings. Headings of the Articles and Sections of this Agreement
--------
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
10.8. Interpretation; Certain Definitions. In this Agreement, unless
-----------------------------------
the context otherwise requires, words describing the singular number shall
include the plural and vice versa, and words denoting any gender shall include
all genders and words denoting natural persons shall include corporations and
partnerships and vice versa. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." As used in this Agreement, the words
"Subsidiary," "Affiliate" and "Associate" shall have the meanings ascribed
---------- --------- ---------
thereto in Rule 12b-2 under the Exchange Act. For purposes of this Agreement,
one party shall be considered "wholly owned" by another party if all of the
shares of its outstanding capital stock or issued share capital, other than
directors' qualifying shares, are beneficially owned by such other party. As
used in this Agreement, the words "to the Knowledge of the Company" shall mean
the knowledge of the directors and officers of the Company, after due inquiry.
The following terms shall have the following meanings ascribed to them:
"Confidentiality Agreement" means the Confidentiality Agreement
-------------------------
dated November 7, 1997 between the Purchaser and the Company.
"Consent" means any consent, approval, authorization, waiver,
-------
permit, grant, franchise, concession, agreement, license, certificate,
exemption, order, registration, declaration, filing, report or notice of,
with or to any Person.
"Contingent Payment Agreement" means the Contingent Payment
----------------------------
Agreement substantially in the form attached hereto as Schedule I.
"Disclosure Letter" means that certain writing delivered to the
-----------------
Purchaser by the Company and dated as of the date hereof.
"Government Entity" means any nation or political subdivision
-----------------
thereof, including any state, county or municipality; and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any of the foregoing, including, without
limitation, any legislature, elected official, authority, agency,
department, board, commission, court, tribunal or instrumentality.
34
"Income Tax" means any U.S. federal, state, provincial, local,
----------
foreign or other income, alternative, minimum, accumulated earnings,
personal holding company, franchise, capital stock, net worth, capital,
profits or windfall profits Tax and any other similar Tax, estimated Tax,
duty or other governmental charge or assessment or deficiencies thereof
(including all interest and penalties thereon and additions thereto
whether disputed or not).
"IRS" means the Internal Revenue Service.
---
"Laws" means all applicable provisions of all constitutions,
----
treaties, statutes, laws (including, but not limited to, the common law),
rules, regulations, ordinances, codes or orders of any Governmental Entity
and of all orders, decisions, injunctions, judgments, awards and decrees
or consents of or agreements with any Governmental Entity.
"Letter of Transmittal" means a letter of transmittal substantially
---------------------
in the form attached hereto as Schedule X.
"Lien" means any lien, charge, claim, pledge, security interest,
----
conditional sale agreement or other title retention agreement, lease,
mortgage, security agreement, right of first refusal, option, restriction,
tenancy, license, covenant, right of way, easement or other encumbrance
(including the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code or statute or law of any jurisdiction).
"Litigation" means any action, cause of action, claim, demand, suit,
----------
proceeding, citation, summons, subpoena, inquiry or investigation of any
nature, civil, criminal, regulatory or otherwise, in law or in equity,
pending or threatened, by or before any court, tribunal, arbitrator or
other Governmental Entity.
"Permits" means all franchises, approvals, permits authorizations,
-------
licenses, orders, registrations, certificates, variances, and other
similar permits or rights obtained from any Governmental Entity and all
pending applications therefor.
"Permitted Lien" means (a) Liens securing Taxes, assessments,
-------------- -
governmental charges or levies, all of which are not yet due and payable
or as to which adequate reserves have been established that are included
in the most recent consolidated financial statements included in the
Financial Statements
35
and that may thereafter be paid without penalty, (b) mechanics',
-
carriers', workmen's, repairmen's and other similar Liens incurred in the
ordinary course of business consistent with past practice, or (c) such
-
other liens which, individually and in the aggregate, do not and would not
materially detract from the value of any of the property or assets of the
Company or its Subsidiaries or materially interfere with the use thereof.
"Person" means an individual, a corporation, a partnership, a
------
limited liability company, an association, a firm, a Governmental Entity,
a trust or other entity or organization.
"Taxes" means any U.S. federal, state, provincial, local,
-----
foreign or other income, alternative, minimum, accumulated earnings,
personal holding company, franchise, capital stock, net worth, capital,
profits, windfall profits, gross receipts, value added, sales (including,
without limitation, bulk sales), use, goods and services, excise, customs
duties, transfer, conveyance, mortgage, registration, stamp, documentary,
recording, premium, severance, environmental (including, without
limitation, taxes under section 59A of the IRC), real property, personal
property, ad valorem, intangibles, rent, occupancy, license, occupational,
employment, unemployment insurance, social security, disability, workers'
compensation, payroll, health care, withholding, estimated or other
similar tax, levy, impost, fee, duty or other governmental charge or
assessment or deficiencies thereof (including, but not limited to, all
interest and penalties thereon and additions thereto, whether disputed or
not) imposed by any taxing authority or other Governmental Entity.
"Tax Return" means any return, report, declaration, form, claim
----------
for refund or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
10.9. Investigations. No action taken pursuant to this Agreement,
--------------
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained in this Agreement.
10.10. Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the
36
validity or enforceability of any of the terms or provisions of this Agreement
in any other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
10.11. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT
--------------------
ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR ANY AGREEMENT HEREBY IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY AGREEMENT HEREBY OR THE BREACH, TERMINATION OR VALIDITY
HEREOF OR THEREOF, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY
-
OF ANY OTHER PARTY HAS REPRESENTED TO SUCH PARTY, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
-
WAIVER, (C) IT MAKES THIS WAIVER VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO
- -
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.11.
-------------
10.12. [RESERVED]
10.13. Counterparts. This Agreement may be executed by the parties
------------
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all, of the parties
hereto.
37
DEFINITIONS
Defined Term Section Reference
------------ -----------------
"Affiliate" Section 10.8
---------
"Affiliate Agreement" Section 5.25
-------------------
"Agreement" First Paragraph
---------
"Associate" Section 10.8
---------
"Audited Financial Statements" Section 5.7(a)
----------------------------
"Balance Sheet" Section 5.7(a)
-------------
"BNP" Section 5.4(c)
---
"Board of Directors" Section 9.11
------------------
"Certificate" Section 4.2(b)
-----------
"Closing" Section 1.2
-------
"Closing Date" Section 1.2
------------
"Common Stock" Section 4.2(a)
------------
"Common Stock Purchase Warrants" Section 5.4(a)
------------------------------
"Company" First Paragraph
-------
"Company Employees" Section 7.9
-----------------
"Confidentiality Agreement" Section 10.8
-------------------------
"Consent" Section 10.8
-------
"Contingent Payment Agreement" Section 10.8
----------------------------
"DGCL" Section 1.1
----
"Directors" Section 3.1
---------
"Disclosure Letter" Section 10.8
-----------------
"Dissenting Stock" Section 4.5
----------------
"Effective Time" Section 1.3
--------------
"Environmental Claim" Section 5.23(e)
-------------------
"Environmental Laws" Section 5.23(e)
------------------
"ERISA" Section 5.11(a)
-----
"ERISA Affiliate" Section 5.11(a)
---------------
"Financial Statements" Section 5.7(a)
--------------------
"Governmental Entity" Section 10.8
-------------------
"Hazardous Materials" Section 5.23(e)
-------------------
38
"Income Tax" Section 10.8
----------
"Intellectual Property" Section 5.18(a)
---------------------
"Interim Financial Statements" Section 5.7(a)
----------------------------
"IRC" Section 5.10(a)
---
"IRS" Section 10.8
---
"Knowledge of the Company" Section 10.8
------------------------
"Laws" Section 10.8
----
"Lease" Section 5.14(a)
-----
"Letter of Transmittal" Section 10.8
---------------------
"Lien" Section 10.8
----
"Litigation" Section 10.8
----------
"Losses" Section 7.8(b)
------
"Material Adverse Effect" Section 5.1(a)
-----------------------
"Material Contracts" Section 5.17
------------------
"Merger" Section 1.1
------
"Merger Consideration" Section 4.2(a)
--------------------
"Merger Sub" First Paragraph
----------
"Non-Disturbance Agreement" Section 5.14(a)
-------------------------
"Non-Voting Common Stock" Section 5.4(a)
-----------------------
"Non-Voting Common Stock Purchase Section 5.4(b)
--------------------------------
Warrants"
--------
"Officers" Section 3.2
--------
"Option" or "Options" Section 4.2(d)
-------------------
"Permits" Section 10.8
-------
"Permitted Lien" Section 10.8
--------------
"Person" Section 10.8
------
"Plans" Section 5.11(a)
-----
"Preferred Stock" Section 5.4
---------------
"Products" Section 5.26(a)
--------
"Projections" Section 5.32
-----------
"Real Property Leases" Section 5.14(a)
--------------------
"Real Property" Section 5.14(a)
-------------
"Required Lease Consent" Section 5.14(b)
----------------------
"Requisite Approvals" Section 8.1(b)
-------------------
"Restraints" Section 8.1(c)
----------
39
"Purchaser" First Paragraph
---------
"Sanwa" Section 5.4(c)
-----
"Series A Preferred Stock" Section 5.4(a)
------------------------
"Series A Preferred Stock Purchase Warrants" Section 5.4(a)
------------------------------------------
"Series B Preferred Stock" Section 5.4(a)
------------------------
"Series C Preferred Stock" Section 5.4(a)
------------------------
"SNKR Holding Corp." Section 5.1(b)
------------------
"Stock Option Plans" Section 4.2(d)
------------------
"Stock" Section 4.2(b)
-----
"Stockholder" Section 4.3
-----------
"Subordinated Debt" Section 8.2(d)
-----------------
"Subsidiary Shares" Section 5.4(d)
-----------------
"Subsidiary" Section 10.8
----------
"Surviving Corporation" Section 1.1
---------------------
"Tax Return" Section 10.8
----------
"Tax" or "Taxes" Section 10.8
--------------
"WARN Act" Section 5.12(b)
--------
"Warrants" Section 5.4(a)
--------
"Working Capital Facility" Section 8.2(c)
------------------------
40
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
JUST FOR FEET, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President
JFF MERGER CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President
SNEAKER STADIUM, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President