AGREEMENT AND PLAN OF MERGER Dated as of September 10, 2007 among REDCATS USA, INC., BOULEVARD MERGER SUB, INC. and UNITED RETAIL GROUP, INC.
EXECUTION
COPY
AGREEMENT
AND PLAN OF MERGER
Dated
as of September 10, 2007
among
REDCATS
USA, INC.,
BOULEVARD
MERGER SUB, INC.
and
UNITED
RETAIL GROUP, INC.
TABLE
OF CONTENTS
|
ARTICLE
I
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||
|
THE
OFFER
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||
|
Section
1.1
|
The
Offer
|
2
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|
Section
1.2
|
Company
Action
|
4
|
|
Section
1.3
|
Board
of Directors
|
6
|
|
ARTICLE
II
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||
|
THE
MERGER
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||
|
Section
2.1
|
The
Merger
|
7
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|
Section
2.2
|
Closing
|
7
|
|
Section
2.3
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Effective
Time
|
8
|
|
Section
2.4
|
Effects
of the Merger
|
8
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|
Section
2.5
|
Certificate
of Incorporation and By-laws of the Surviving Corporation
|
8
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|
Section
2.6
|
Directors
and Officers of the Surviving Corporation
|
8
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|
Section
2.7
|
Effect
on Capital Stock
|
8
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|
Section
2.8
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Exchange
of Certificates
|
9
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|
Section
2.9
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Appraisal
Rights
|
11
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|
Section
2.10
|
Company
Stock Options
|
12
|
|
Section
2.11
|
Adjustments
|
12
|
|
Section
2.12
|
Company
Stock Appreciation Rights
|
12
|
|
Section
2.13
|
Company
Restricted Shares
|
13
|
|
Section
2.14
|
Further
Assurances
|
13
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|
ARTICLE
III
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||
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
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||
|
Section
3.1
|
Organization,
Standing and Corporate Power
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13
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|
Section
3.2
|
Corporate
Authority; Enforceability; Voting Requirements
|
14
|
|
Section
3.3
|
Noncontravention
|
15
|
|
Section
3.4
|
Governmental
Approvals
|
15
|
|
Section
3.5
|
Subsidiaries
|
15
|
i
|
Section
3.6
|
Capitalization
|
16
|
|
Section
3.7
|
Company
SEC Documents
|
17
|
|
Section
3.8
|
Absence
of Certain Changes
|
19
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|
Section
3.9
|
Undisclosed
Liabilities
|
20
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|
Section
3.10
|
Legal
Proceedings
|
20
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|
Section
3.11
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Compliance
With Laws; Permits
|
20
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|
Section
3.12
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Tax
Matters
|
21
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|
Section
3.13
|
Employee
Benefits
|
22
|
|
Section
3.14
|
Labor
Matters
|
24
|
|
Section
3.15
|
Environmental
Matters
|
25
|
|
Section
3.16
|
Material
Contracts
|
25
|
|
Section
3.17
|
Properties
|
27
|
|
Section
3.18
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Intellectual
Property
|
28
|
|
Section
3.19
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Privacy
Policy; Customer Solicitation
|
29
|
|
Section
3.20
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Suppliers
|
29
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|
Section
3.21
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Insurance
|
30
|
|
Section
3.22
|
Anti-Takeover
Laws
|
30
|
|
Section
3.23
|
Company
Rights Plan
|
30
|
|
Section
3.24
|
Opinion
of Financial Advisor
|
31
|
|
Section
3.25
|
Brokers
and Other Advisors
|
31
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|
ARTICLE
IV
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|
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
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|
Section
4.1
|
Organization;
Standing
|
31
|
|
Section
4.2
|
Corporate
Authority
|
31
|
|
Section
4.3
|
Noncontravention
|
32
|
|
Section
4.4
|
Governmental
Approvals
|
32
|
|
Section
4.5
|
Status
of Parent; Ownership and Operations of Merger Sub
|
32
|
|
Section
4.6
|
Compliance
With Laws
|
32
|
|
Section
4.7
|
Legal
Proceedings
|
32
|
|
Section
4.8
|
Sufficient
Funds
|
33
|
|
Section
4.9
|
Company
Stock
|
33
|
|
Section
4.10
|
Brokers
and Other Advisors
|
33
|
ii
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ARTICLE
V
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||
|
ADDITIONAL
COVENANTS AND AGREEMENTS
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||
|
Section
5.1
|
Conduct
of Business
|
33
|
|
Section
5.2
|
Stockholders
Meeting; Merger Without Meeting of Company Stockholders
|
37
|
|
Section
5.3
|
No
Solicitation
|
38
|
|
Section
5.4
|
Reasonable
Best Efforts
|
41
|
|
Section
5.5
|
Public
Announcements
|
43
|
|
Section
5.6
|
Access
to Information; Confidentiality
|
43
|
|
Section
5.7
|
Indemnification
and Insurance
|
44
|
|
Section
5.8
|
[Intentionally
Omitted]
|
45
|
|
Section
5.9
|
Fees
and Expenses
|
45
|
|
Section
5.10
|
Employee
Matters
|
45
|
|
Section
5.11
|
Updated
Information
|
47
|
|
Section
5.12
|
Section
16 Matters
|
47
|
|
Section
5.13
|
Takeover
Laws.
|
47
|
|
Section
5.14
|
Company
Rights Plan.
|
47
|
|
ARTICLE
VI
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||
|
CONDITIONS
PRECEDENT TO THE MERGER
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||
|
Section
6.1
|
Conditions
to Each Party's Obligation to Effect the Merger
|
47
|
|
ARTICLE
VII
|
||
|
TERMINATION
|
||
|
Section
7.1
|
Termination
|
48
|
|
Section
7.2
|
Effect
of Termination
|
49
|
|
Section
7.3
|
Termination
Fees
|
50
|
|
ARTICLE
VIII
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|
MISCELLANEOUS
|
||
|
Section
8.1
|
No
Survival of Representations and Warranties
|
51
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|
Section
8.2
|
Amendment
or Supplement
|
51
|
iii
|
Section
8.3
|
Extension
of Time, Waiver, Etc.
|
51
|
|
Section
8.4
|
Assignment
|
51
|
|
Section
8.5
|
Counterparts
|
52
|
|
Section
8.6
|
Entire
Agreement; No Third-Party Beneficiaries
|
52
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|
Section
8.7
|
Governing
Law; Jurisdiction; Waiver of Jury Trial
|
52
|
|
Section
8.8
|
Specific
Enforcement
|
53
|
|
Section
8.9
|
Notices
|
53
|
|
Section
8.10
|
Severability
|
54
|
|
Section
8.11
|
Definitions
|
55
|
|
Section
8.12
|
Interpretation.
|
61
|
Annex
A Conditions
of the Offer
Annex
B Amendments
to Employment Agreements
Annex
C Share
Tender Agreement
iv
AGREEMENT
AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER, dated as of September 10, 2007 (this
"Agreement"), is among Redcats USA, Inc., a Delaware corporation
("Parent"), Boulevard Merger Sub, Inc., a newly formed Delaware
corporation and a wholly owned Subsidiary of Parent ("Merger Sub"), and
United Retail Group, Inc., a Delaware corporation (the
"Company"). Certain capitalized terms used in this Agreement
are as defined in Section 8.11.
WHEREAS,
it is proposed that, on the terms and subject to the conditions set forth in
this Agreement, Merger Sub shall commence a cash tender offer (such tender
offer, as it may be extended, amended and supplemented from time to time as
permitted by this Agreement, the "Offer") to purchase all of the issued
and outstanding shares of common stock, par value $0.001 per share, of the
Company (the "Company Common Stock"), together with the associated
Company Rights, at a price per share equal to $13.70, net to the sellers in
cash
(such amount or any greater amount per share paid pursuant to the Offer, the
"Offer Price");
WHEREAS,
it is proposed that, on the terms and subject to the conditions set forth in
this Agreement, following the consummation of the Offer, Merger Sub shall merge
with and into the Company with the Company surviving as a wholly owned
subsidiary of Parent (the "Merger"), pursuant to which each outstanding
share of Company Common Stock shall be converted into the right to receive
the
Offer Price, except for (i) shares of Company Common Stock to be canceled
pursuant to Section 2.7(b) and (ii) Dissenting Shares;
WHEREAS,
the respective Boards of Directors of the Company, Parent and Merger Sub deem
it
advisable and in the best interests of their respective stockholders that the
parties consummate the transactions contemplated by this Agreement, including
the Offer and the Merger, upon the terms and subject to the conditions set
forth
in this Agreement;
WHEREAS,
the respective Boards of Directors of the Company, Parent (on its own behalf
and
as the sole direct or indirect stockholder of Merger Sub), and Merger Sub have
approved this Agreement and resolved that the transactions contemplated by
this
Agreement are advisable and in the best interests of their respective
stockholders, including the consummation of the Offer and the Merger, upon
the
terms and subject to the conditions set forth in this Agreement and in
accordance with the relevant provisions of the General Corporation Law of the
State of Delaware (the "DGCL");
WHEREAS,
the Board of Directors of the Company resolved to recommend that the holders
of
Company Common Stock (the "Company Stockholders") accept the Offer,
tender their shares of Company Common Stock in the Offer, and, to the extent
required by applicable Law, approve the Merger and adopt this Agreement and
the
transactions contemplated by this Agreement (including the Offer and the
Merger), in each case, upon the terms and subject to the conditions set forth
in
this Agreement;
WHEREAS,
concurrently with the execution of this Agreement, the Company has entered
into
employment agreement amendments with certain executive officers of the Company,
to be in effect as of the Acceptance Time (the "Employment Agreements"),
a copy of which Employment Agreements are attached as Annex B to this Agreement;
and
WHEREAS,
concurrently with the execution of this Agreement, Parent, the Company and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ have entered into a share tender agreement, dated as of the
date of this Agreement (the "Tender Agreement"), pursuant to which ▇▇.
▇▇▇▇▇▇▇▇ agrees to tender his shares of Company Common Stock in the Offer,
a
copy of which Tender Agreement is attached as Annex C to this
Agreement.
NOW,
THEREFORE, in consideration of the representations, warranties, covenants and
agreements contained in this Agreement, the receipt and adequacy of which are
acknowledged, and intending to be legally bound, Parent, Merger Sub and the
Company agree as follows:
ARTICLE
I
THE
OFFER
Section
1.1 The Offer.
(a) Provided
that this Agreement shall not have been terminated in accordance with Article
VII and none of the events or conditions set forth in Annex A (other than clause
(e) of Annex A) shall have occurred and be existing and shall not have been
waived in writing by Parent or Merger Sub (the conditions set forth in Annex
A,
the "Tender Offer Conditions"), Merger Sub shall, and Parent shall cause
Merger Sub to, commence (within the meaning of Rule 14d-2 under the U.S.
Securities Exchange Act of 1934, as amended (together with its rules and
regulations, the "Exchange Act")) the Offer, as promptly as reasonably
practicable after the date of this Agreement and in any event within 15 Business
Days after the date of this Agreement. Without the prior written
consent of the Company, Merger Sub shall not (i) decrease the Offer Price or
change the form of consideration payable in the Offer, (ii) decrease the number
of shares of Company Common Stock sought to be purchased in the Offer, (iii)
impose conditions to the Offer in addition to the Tender Offer
Conditions or amend any condition in a manner that is adverse to the
holders of Company Common Stock, (iv) waive or amend the Minimum Condition
(v) extend the Expiration Date (as defined below) except as required or
permitted by this Section 1.1, or (vi) make any other change to the terms of
the
Offer in a manner that is materially adverse to the holders of Company Common
Stock; provided that Merger Sub expressly reserves the right to
increase the Offer Price and to waive any of the Tender Offer Conditions other
than the Minimum Condition. The Company agrees that no shares of
Company Common Stock held by the Company or any of its Subsidiaries will be
tendered in the Offer except for Company Common Stock held in respect of the
Company's Supplemental Retirement Savings Plan.
(b) Merger
Sub shall file with the U.S. Securities and Exchange Commission (the
"SEC") a Tender Offer Statement on Schedule TO with respect to the Offer
on the date that the Offer is commenced, which Tender Offer Statement shall
include an offer to purchase, form of transmittal letter and form of notice
of
guaranteed delivery (together with any supplements or amendments thereto,
collectively, the "Offer Documents") and, subject to the Company's
compliance with Section 1.2(c), cause the Offer Documents to be disseminated
to
the Company Stockholders in accordance with the applicable requirements of
the
Exchange Act. The Offer Documents shall comply in all material respects with
the
Exchange Act and, on the
2
date
first filed with the SEC and on the date first published, sent or given to
the
Company Stockholders and on the Acceptance Date, shall not contain any untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary in order to make the statements therein, in light
of
the circumstances under which they were made, not misleading, except that no
covenant, agreement, representation or warranty is made by Parent or Merger
Sub
with respect to information supplied by the Company for inclusion or
incorporation by reference in the Offer Documents. The Company,
Parent and Merger Sub each agree promptly to correct any information provided
by
it for use in the Offer Documents if and to the extent that it shall have become
false or misleading in any material respect, and Parent further agrees to take
all steps necessary to cause the Offer Documents as so corrected to be filed
with the SEC and disseminated to the Company Stockholders to the extent required
by applicable Law. The Company shall promptly furnish to Parent and
Merger Sub all information concerning the Company that is required or reasonably
requested by Parent or Merger Sub in connection with the obligations relating
to
the Offer Documents contained in this Section 1.1(b). The Company and
its counsel shall be given a reasonable opportunity to review and comment on
the
Schedule TO and the Offer Documents each time sufficiently in advance of any
such document being filed with the SEC, and Parent and Merger Sub shall give
reasonable and good faith consideration to any comments made by the Company
and
its counsel. Parent and Merger Sub shall provide the Company and its
counsel with (i) any comments or other communications, whether written or oral,
that Parent, Merger Sub or their counsel may receive from time to time from
the
SEC or its staff with respect to the Schedule TO or Offer Documents
promptly after receipt of those comments or other communications and (ii) a
reasonable opportunity to participate in the response of Parent and Merger
Sub
to those comments and to provide comments on that response (to which reasonable
and good-faith consideration shall be given), including by participating with
Parent and Merger Sub or their counsel in any discussions or meetings with
the
SEC.
(c) Subject
to the terms and conditions set forth in the Offer Documents, the Offer shall
remain open until midnight, New York City time, at the end of the twentieth
(20th) Business Day after the date that the Offer is commenced (the
"Expiration Date"), unless the period of time for which the Offer is open
shall have been extended pursuant to, and in accordance with, this Section
1.1(c) or as may be required by applicable Law, in which event the term
"Expiration Date" shall mean the latest time and date as the Offer, as so
extended may expire. If any of the conditions of the Offer are not satisfied
or
waived on any Expiration Date, Merger Sub shall extend the Offer from time
to
time for one or more periods of time up to 10 Business Days (or such longer
period as the Company may agree in writing) per extension until such conditions
of the Offer have been satisfied or waived; provided that
Merger Sub shall not be required to extend the Offer after 150
days following the date that the Offer is commenced. Merger Sub
shall extend the Offer for any period required by any rule, regulation,
interpretation or position of the SEC or its staff applicable to the Offer.
Merger Sub shall not extend the Offer if all of the conditions of the
Offer are satisfied or waived and it is permitted under applicable Law to accept
for payment and pay for tendered shares. If all of the Tender Offer
Conditions are satisfied but the number of shares of Company Common Stock that
have been validly tendered and not withdrawn in the Offer and accepted for
payment, together with any shares of Company Common Stock then owned by Parent,
is less than 90% of the outstanding shares of Company Common Stock, Merger
Sub
may, without the consent of the Company, commence a subsequent offering
period (as provided in Rule 14d-11 under the Exchange Act) for three (3) to
twenty (20) Business Days to acquire outstanding shares of Company Common
Stock.
3
(d) Subject
to the terms and conditions set forth in this Agreement and to satisfaction
or
waiver of the Tender Offer Conditions, Merger Sub shall, and Parent shall cause
it to, as soon as practicable after the Expiration Date, accept for payment
and
pay for all shares of Company Common Stock that have been validly tendered
and
not withdrawn pursuant to the Offer. If Merger Sub shall commence a
subsequent offering period in connection with the Offer, Merger Sub shall
accept for payment and pay for all additional shares of Company Common Stock
validly tendered during such subsequent offering period.
(e) Merger
Sub shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to the Offer (or in connection with any subsequent offering
period) any such amounts as are required to be deducted and withheld with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code"), or under any provision of state, local or
foreign tax Law.
Section
1.2 Company
Action.
(a) The
Company approves of and consents to the Offer, and represents and warrants
that
the Board of Directors of the Company, at a meeting duly called and held, has,
subject to the terms and conditions set forth in this Agreement, unanimously
(i)
approved this Agreement, and deemed this Agreement, the Offer, the Merger and
the transactions contemplated by this Agreement advisable, fair to and in the
best interests of the Company Stockholders; (ii) approved this Agreement and
the
transactions contemplated by this Agreement, including the Offer and the Merger,
in all respects, and such approval constitutes approval of the Offer, the
Merger, this Agreement and the transactions contemplated by this Agreement
and
the Tender Agreements for purposes of Section 203 of the DGCL and the Company's
Rights Plan; and (iii) resolved to recommend that the Company Stockholders
accept the Offer, tender their shares of Company Common Stock in the Offer,
and,
to the extent required by applicable Law, approve the Merger and adopt this
Agreement (the "Company Recommendation"). The Company consents
to the inclusion of such approval and the Company Recommendation in the Offer
Documents, subject to Section 5.3(b).
(b) The
Company agrees to file with the SEC, as soon as reasonably practicable on the
day that the Offer is commenced, a Solicitation/Recommendation Statement on
Schedule 14D-9 pertaining to the Offer (together with any amendments or
supplements thereto, the "Schedule 14D-9") that, subject to Section
5.3(b), contains the Company Recommendation and to promptly mail the Schedule
14D-9 to the Company Stockholders together with the Offer Documents and cause
the Offer Documents and the Schedule 14D-9 to be disseminated to the Company
Stockholders in accordance with the applicable requirements of the Exchange
Act. The Schedule 14D-9 shall comply in all material respects with
the Exchange Act and, on the date filed with the SEC and on the date first
published or sent or given to the Company Stockholders and on the Acceptance
Date, shall not contain any untrue statement of a material fact or omit to
state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except that no covenant, agreement, representation or
warranty is made by the Company with respect to the information supplied by
Parent or Merger Sub for inclusion or incorporation by reference in the Schedule
14D-9. The Company, Parent and Merger Sub each agree promptly to correct
any information provided by it for use in the Schedule 14D-9 if and
to
4
the
extent that it shall have become false or misleading in any material respect,
and the Company further agrees to take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and disseminated to the Company
Stockholders to the extent required by applicable Law. Parent and
Merger Sub shall promptly furnish to the Company all information concerning
Parent and Merger Sub that is required or reasonably requested by Company in
connection with the obligations relating to the Schedule 14D-9 contained in
this
Section 1.2(b). Parent, Merger Sub and their counsel shall be given a
reasonable opportunity to review and comment on the Schedule 14D-9 each time
sufficiently in advance of its filing with the SEC, and the Company shall give
reasonable and good faith consideration to any comments made by Parent, Merger
Sub or their counsel. The Company shall provide Parent and its
counsel with (i) any comments or other communications, whether written or oral,
that the Company or its counsel may receive from time to time from the SEC
or
its staff with respect to the Schedule 14D-9 promptly after receipt of
those comments or other communications and (ii) a reasonable opportunity to
participate in the response of the Company to those comments and to provide
comments on that response (to which reasonable and good-faith consideration
shall be given), including by participating with the Company or its counsel
in
any discussions or meetings with the SEC.
(c) In
connection with the Offer, the Company promptly will furnish (or cause its
transfer agent to furnish) Parent and Merger Sub with mailing labels, security
position listings and any available listing or computer files containing the
names and addresses of the Company Stockholders, each as of a recent date,
and
shall furnish Merger Sub with such additional information and assistance
(including updated lists of the Company Stockholders, mailing labels and lists
of securities positions) as Merger Sub or its agents may reasonably request
in
communicating the Offer (and the Offer Documents, including all amendments
and
supplements to the Offer Documents) to the record and beneficial holders of
shares of Company Common Stock. Except as required by applicable Law,
and except as necessary to communicate the Offer, the Merger or the transactions
contemplated by this Agreement to the Company Stockholders, Parent and Merger
Sub (and their respective representatives) shall hold in confidence the
information contained in any such labels, listings and files, shall use such
information solely in connection with the Offer and the Merger, and,
if this Agreement is terminated or the Offer is otherwise terminated, shall
promptly deliver or cause to be delivered to the Company or destroy all copies
of such information, labels, listings and files then in their possession or
in
the possession of their agents or representatives.
(d) The
Company grants to Parent and Merger Sub an irrevocable option (the "Merger
Option") to purchase up to that number of newly issued shares of Company
Common Stock (the "Merger Option Shares") equal to the number of shares
of Company Common Stock that, when added to the number of shares of Company
Common Stock owned by Parent and Merger Sub immediately following consummation
of the Offer, shall constitute one share more than 90% of the shares of Company
Common Stock then outstanding on a fully diluted basis (after giving effect
to
the issuance of the Merger Option Shares) for consideration per Merger Option
Share equal to the Offer Price.
(e) The
Merger Option shall be exercisable only after the purchase of and payment for
shares of Company Common Stock pursuant to the Offer by Parent or Merger Sub
as
a result of which Parent and Merger Sub own beneficially at least
80% of the outstanding shares of Company Common
Stock. The Merger Option shall not be exercisable if the
number
5
of
shares of Company Common Stock subject thereto exceeds the number of authorized
shares of Company Common Stock available for issuance.
(f) In
the event that Parent or Merger Sub wish to exercise the Merger Option, Merger
Sub shall give the Company one (1) Business Day's prior written notice
specifying the number of shares of Company Common Stock that are owned by Parent
and Merger Sub immediately following consummation of the Offer and specifying
a
place and a time for the closing of the purchase. The Company shall,
as soon as practicable following receipt of such notice, deliver written notice
to Merger Sub specifying the number of Merger Option Shares. At the
closing of the purchase of the Merger Option Shares, Parent or Merger Sub shall
pay to the Company an amount equal to the product of (i) the number of shares
of
Company Common Stock purchased pursuant to the Merger Option, multiplied by
(ii)
the Offer Price, which amount shall be paid in cash (by wire transfer or
cashier's check) or, at the election of Parent or Merger Sub, by delivery of
a
promissory note having full recourse to Parent.
Section
1.3 Board of
Directors.
(a) Subject
to compliance with applicable Law, promptly upon the acceptance for payment
of
shares of Company Common Stock by Parent or Merger Sub or any of their
affiliates pursuant to and in accordance with the terms of the Offer (the
"Acceptance Time") and from time to time thereafter, and subject
to Section 1.3(c), Merger Sub shall be entitled to designate up to such number
of directors, rounded to the nearest whole number constituting at least a
majority of the directors, on the Board of Directors of the Company as will
give
Merger Sub representation on the Board of Directors of the Company equal to
the
product of the number of directors on the Board of Directors of the Company
(giving effect to any increase in the number of directors pursuant to this
Section 1.3) and the percentage that the number of shares of Company Common
Stock beneficially owned by Parent or its Affiliates bears to the total number
of shares of Company Common Stock then outstanding, and the Company shall use
reasonable best efforts to, upon Parent's request, promptly, at Parent's
election, either increase the size of the Board of Directors of the Company
or
seeking and accepting the resignation of such number of directors as is
necessary to enable Parent's designees to be elected to the Board of Directors
of the Company and to cause Parent's designees to be so elected. At
such times, subject to Section 1.3(c), the Company will cause individuals
designated by Parent to constitute such number of members of each committee
of
the Board of Directors of the Company, rounded up to the next whole number,
that
represents the same percentage as such individuals represent on the Board of
Directors of the Company, other than any committee of the Board of Directors
of
the Company established to take action under this Agreement which committee
shall be composed only of Independent Directors (as defined in Section
1.3(c)).
(b) The
Company' obligation to appoint designees to the Board of Directors of the
Company shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
under the Exchange Act. The Company shall promptly take all action
required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 under
the
Exchange Act in order to fulfill its obligations under this Section
1.3, and shall include in the Schedule 14D-9 such information with respect
to
the Company and its officers and directors as is required pursuant to such
Section 14(f) of the Exchange Act and Rule 14f-1 under the Exchange Act in
order
to fulfill its obligations under this Section 1.3 and the U.S. federal
securities Laws. Parent shall provide to the Company,
6
and
shall be solely responsible for, the information and consents with respect
to
Parent and its designees, officers, directors and affiliates required by Section
14(f) of the Exchange Act and Rule 14f-1 under the Exchange Act.
(c) In
the event that Parent's designees are elected or designated to the Board of
Directors of the Company, then, until the Effective Time, the Company shall
cause the Board of Directors of the Company to have at least two (2) directors
who are (i) directors on the date of this Agreement and
(ii) independent directors for purposes of the continued listing
requirements of the Nasdaq Global Market ("NASDAQ") (such directors,
the "Independent Directors"); provided, however, that, if
any Independent Director is unable to serve due to death or disability or any
other reason (including as a result of removal for cause pursuant to the last
sentence of this Section 1.3(c)), the remaining Independent Directors shall
be
entitled to elect or designate another individual (or individuals) who serve(s)
as a director (or directors) on the date of this Agreement (provided that
no such individual is an employee of the Company or its subsidiaries) to fill
the vacancy, and such director (or directors) shall be deemed to be an
Independent Director (or Independent Directors) for purposes of this
Agreement. If no Independent Director remains prior to the Effective
Time, a majority of the members of the Board of Directors of the Company at
the
time of the execution of this Agreement shall be entitled to designate two
(2)
persons to fill such vacancies; provided that such individuals shall not
be employees or officers of the Company, Parent or Merger Sub and shall be
reasonably satisfactory to Parent, and such persons shall be deemed Independent
Directors for purposes of this Agreement. Following the Acceptance
Time and prior to the Effective Time, Parent and Merger Sub shall not cause
any
amendment or termination of this Agreement, any extension by the Company of
the
time for the performance of any of the obligations or other acts of Merger
Sub
or Parent or waiver of any of the Company's rights under this Agreement or
other
action adversely affecting the rights of the Company Stockholders (other than
Parent or Merger Sub), to be effected without the affirmative vote of a majority
of the Independent Directors. Following the Acceptance Time and prior
to the Effective Time, neither Parent nor Merger Sub shall take any action
to
remove any Independent Director unless the removal shall be for
cause.
ARTICLE
II
THE
MERGER
Section
2.1 The
Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL, at the Effective Time, Merger
Sub shall be merged with and into the Company, and the separate corporate
existence of Merger Sub shall thereupon cease, and the Company shall be the
surviving corporation in the Merger (the "Surviving
Corporation").
Section
2.2 Closing. Subject
to the provisions of Article VI, the closing of the Merger (the
"Closing") shall take place at 10:00 a.m. (New York City time) as soon as
reasonably practicable but in any event within two (2) Business Days after
satisfaction or waiver of the conditions set forth in Article VI (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of those conditions at such time), at
the
offices of Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇
7
10019,
unless another time, date or place is agreed to in writing by the parties
hereto. The date on which the Closing actually occurs hereinafter is
referred to as the "Closing Date."
Section
2.3 Effective
Time. Subject to the provisions of this Agreement, as soon as
practicable on the Closing Date, the parties shall file with the Secretary
of
State of the State of Delaware a certificate of merger executed in accordance
with, and in such form as is required by, the DGCL (the "Certificate of
Merger"). The Merger shall become effective upon the filing of the
Certificate of Merger or at such later time on the date of filing as is
specified in the Certificate of Merger, or, if on a date that is later than
the
date of filing the Certificate of Merger, at such time as is agreed to by Parent
and the Company (with the concurrence of the Independent Directors) and stated
in the Certificate of Merger (the time at which the Merger becomes effective
is
referred to as the "Effective Time").
Section
2.4 Effects of the
Merger. The Merger shall have the effects set forth in this
Agreement and in Section 251 of the DGCL. Without limiting the
generality of the foregoing, at the Effective Time, all the properties, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest
in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
Section
2.5 Certificate of
Incorporation and By-laws of the Surviving Corporation. Unless
otherwise agreed by Parent and the Company, the certificate of incorporation
and
by-laws of the Company, as in effect immediately prior to the Effective Time,
shall be the certificate of incorporation and by-laws of the Surviving
Corporation until thereafter amended as provided therein or by applicable Law
and subject to Section 5.7 hereof.
Section
2.6 Directors and Officers of
the Surviving Corporation.
(a) Each
of the parties hereto shall take all necessary action to cause the directors
of
Merger Sub immediately prior to the Effective Time to be the directors of the
Surviving Corporation immediately following the Effective Time, until their
respective successors are duly elected or appointed and qualified or their
earlier death, resignation or removal in accordance with the certificate of
incorporation and by-laws of the Surviving Corporation.
(b) The
officers of the Company named in Section 2.6(b) of the Company Disclosure
Schedule shall be the officers of the Surviving Corporation until their
respective successors are duly appointed and qualified, their earlier death,
or
their resignation or removal in accordance with the certificate of
incorporation and by-laws of the Surviving Corporation.
Section
2.7 Effect on Capital
Stock. At the Effective Time, by virtue of the Merger and without
any action on the part of Parent, Merger Sub, the Company or the holders of
any
shares of Company Common Stock or any shares of capital stock of Merger
Sub:
(a) Capital
Stock of Merger Sub. Each share of capital stock, par value $0.01
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly issued, fully
paid
and nonassessable share of
8
common
stock, par value $0.001 per share, of the Surviving Corporation and shall
constitute the only outstanding shares of the Surviving
Corporation. From and after the Effective Time, all certificates, if
any, representing shares of capital stock of Merger Sub shall be deemed for
all
purposes to represent the number of shares of common stock of the Surviving
Corporation into which they were converted in accordance with the immediately
preceding sentence.
(b) Cancellation
of Treasury Stock and Parent-Owned Stock. Any shares of Company
Common Stock that are owned by the Company as treasury stock, and any shares
of
Company Common Stock owned by Parent or Merger Sub, shall be automatically
canceled and shall cease to exist and no consideration shall be delivered in
exchange therefor.
(c) Conversion
of Company Common Stock. Each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 2.7(b) and Dissenting
Shares), including any shares held by the trustee for the Company's Retirement
Savings Plan and Supplemental Retirement Savings Plan (the "Retirement
Plans") which shall be considered issued and outstanding, shall be converted
into the right to receive an amount of cash, without interest, equal to the
Offer Price (the "Merger Consideration"). As of the Effective
Time, all such shares of Company Common Stock shall no longer be outstanding
and
shall automatically be canceled and shall cease to exist, and each holder of
a
certificate (or evidence of shares in book-entry form) which immediately prior
to the Effective Time represented any such shares of Company Common Stock (each,
a "Certificate") shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration to be paid in consideration
therefor upon surrender of such Certificate in accordance with Section 2.8(b),
without interest.
Section
2.8 Exchange of
Certificates.
(a) Paying
Agent. Not less than three (3) Business Days prior to the
Effective Time, Parent shall designate a United States bank or trust company
reasonably acceptable to the Company to act as agent for the benefit of the
holders of shares of Company Common Stock in connection with the Merger (the
"Paying Agent") to receive, on terms reasonably acceptable to the
Company, for the benefit of holders of shares of Company Common Stock, the
aggregate Merger Consideration to which holders of shares of Company Common
Stock shall become entitled pursuant to Section 2.7(c). The Paying
Agent shall also act as the agent for the Company Stockholders for the purpose
of holding the Certificates and shall obtain no rights or interests in the
shares represented by such Certificates. Parent shall deposit the
aggregate Merger Consideration with the Paying Agent by wire transfer of
immediately available funds at or prior to the Effective Time. Such
aggregate Merger Consideration deposited with the Paying Agent shall, pending
its disbursement to such holders, be invested by the Paying Agent in: (i)
direct obligations of the United States of America, (ii) obligations for which
the full faith and credit of the United States of America is pledged to provide
for the payment of principal and interest or (iii) money market funds investing
solely in a combination of the foregoing. Parent shall promptly
replace any funds deposited with the Paying Agent that are lost through any
investment.
(b) Payment
Procedures. Promptly after the Effective Time (but in no event
more than five (5) Business Days thereafter), Parent or the Surviving
Corporation shall
9
cause
the Paying Agent to mail to each holder of record of a Certificate whose shares
of the Company Common Stock were converted into the right to receive the Merger
Consideration (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Paying Agent, and
which shall be in such form and shall have such other customary provisions
(including customary provisions with respect to delivery of an "agent's message"
with respect to shares held in book-entry form) as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for payment of the Merger
Consideration. Upon surrender of a Certificate for cancellation to
the Paying Agent, together with such letter of transmittal, duly completed
and
validly executed in accordance with the instructions (and such other customary
documents as may reasonably be required by the Paying Agent), the holder of
such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration, without interest, for each share of Company Common Stock formerly
represented by such Certificate, and the Certificate so surrendered shall
forthwith be canceled. If payment of the Merger Consideration is to
be made to a Person other than the Person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that (x) the
Certificate so surrendered shall be properly endorsed or shall otherwise be
in
proper form for transfer and (y) the Person requesting such payment shall have
paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a Person other than the registered holder of such
Certificate surrendered or shall have established to the reasonable satisfaction
of the Surviving Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.8,
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive the Merger Consideration as contemplated
by
this Article II, without interest.
(c) Transfer
Books; No Further Ownership Rights in Company Stock. The Merger
Consideration paid in respect of shares of Company Common Stock upon the
surrender for exchange of Certificates in accordance with the terms of this
Article II shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock previously represented by
such
Certificates, and at the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of Company Common Stock that were outstanding immediately prior to the Effective
Time. From and after the Effective Time, the holders of Certificates
that evidenced ownership of shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Common Stock, except as otherwise
provided for in this Agreement or by applicable Law. Subject to the
last sentence of Section 2.8(e), if, at any time after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article II.
(d) Lost,
Stolen or Destroyed Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact
by
the Person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such Person of a bond, in such reasonable
amount as Parent may direct, as indemnity against any claim that may be made
against it with respect to such Certificate, the Paying Agent will pay, in
exchange for such lost, stolen or destroyed Certificate, the applicable Merger
Consideration to be
10
paid
in respect of the shares of Company Common Stock formerly represented by such
Certificate, as contemplated by this Article II.
(e) Termination
of Fund. At any time following six months after the Closing Date,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds (including any interest received with respect thereto)
that had been made available to the Paying Agent and which have not been
disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look only to Parent or the Surviving Corporation (subject to
abandoned property, escheat or other similar Laws) as general creditors thereof
with respect to the payment of any Merger Consideration that may be payable
upon
surrender of any Certificates held by such holders, as determined pursuant
to
this Agreement, without any interest paid. Any amounts remaining
unclaimed by such holders at such time at which such amounts would otherwise
escheat to or become property of any Governmental Authority shall become,
to the extent permitted by applicable Law, the property of Parent, free and
clear of all claims or interest of any Person previously entitled.
(f) Withholding
Taxes. Parent, Merger Sub, the Surviving Corporation and the
Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable to a holder of shares of Company Common Stock, Options,
SARs or Restricted Shares pursuant to this Agreement such amounts as may be
required to be deducted and withheld with respect to the making of such payment
under the Code, or under any provision of state, local or foreign tax
Law. To the extent amounts are so withheld and paid over to the
appropriate taxing authority, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the Person in respect of
which
such deduction and withholding was made.
Section
2.9 Appraisal
Rights. Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time and which are held by a stockholder
who
did not vote in favor of the Merger (or consent to the Merger in writing) and
who is entitled to demand and properly demands appraisal of such shares pursuant
to, and who complies in all respects with, the provisions of Section 262 of
the
DGCL (a "Dissenting Stockholder"), shall not be converted into or be
exchangeable for the right to receive the Merger Consideration (the
"Dissenting Shares"), but instead such holder shall be entitled to
payment of the fair value of such shares in accordance with the provisions
of
Section 262 of the DGCL (and at the Effective Time, such Dissenting Shares
shall
no longer be outstanding and shall automatically be canceled and shall cease
to
exist, and such holder shall cease to have any rights with respect thereto,
except the right to receive the fair value of such Dissenting Shares in
accordance with the provisions of Section 262 of the DGCL), unless and until
such holder shall have failed to perfect or shall have effectively withdrawn
or
lost rights to appraisal under the DGCL or it is determined that such holder
does not have appraisal rights. If any Dissenting Stockholder shall
have failed to perfect or otherwise shall have effectively withdrawn, waived
or
lost such right or it is determined that such holder does not have appraisal
rights, such holder's shares of Company Common Stock shall thereupon be treated
as if they had been converted into and become exchangeable for the right to
receive, as of the Effective Time, the Merger Consideration for each such share
of Company Common Stock, in accordance with Section 2.7, payable without any
interest thereon. The Company shall give Parent (i) prompt notice of
any demands for appraisal of any shares of Company Common Stock, attempted
withdrawals of such demands and any other instruments served pursuant to
the
11
DGCL
and received by the Company relating to stockholders' rights of appraisal,
and
(ii) the opportunity to participate in all negotiations and proceedings with
respect to demands for appraisal under the DGCL, except as required by
applicable Law. Prior to the Effective Time, the Company shall not, without
the
prior written consent of Parent or as otherwise required by an order, decree,
ruling or injunction of a court of competent jurisdiction, make any payment
with
respect to, or settle or compromise or offer to settle or compromise, any such
demand, or agree to do any of the foregoing.
Section
2.10 Company Stock
Options. At the Effective Time, all options (other than
Out-of-the-Money Options), whether vested or unvested, outstanding and
unexercised immediately prior to the Effective Time that represent the right
to
acquire shares of Company Common Stock (each, an "Option") granted under
any plan or contract listed on Section 2.10 of the Company Disclosure Schedule
(a "Company Stock Plan") shall, without any further action by the Company
or the Surviving Corporation, cease to exist and shall be converted into the
right to receive, in full satisfaction of such Option, a cash amount equal
to
the Option Consideration (if any) for each share of Company Common Stock then
subject to the Option. Notwithstanding the foregoing, Parent and the
Company shall be entitled to deduct and withhold from the Option Consideration
otherwise payable such amounts as may be required to be deducted and withheld
with respect to the making of such payment under the Code, or any provision
of
state, local or foreign tax Law. For purposes of this Agreement,
"Option Consideration" means, with respect to any share of Company Common
Stock issuable under a particular Option, an amount equal to the excess, if
any,
of (i) the Merger Consideration per share of Company Common Stock over (ii)
the
exercise price payable in respect of such share of Company Common Stock issuable
under such Option. Cash payments to be made to holders of Options
pursuant to this Section 2.10 shall be made to the extent practicable through
the Company's payroll processing system on the Closing Date, or if not
practicable checks for such payment shall be drawn by the Surviving Corporation
in immediately available funds and sent by overnight courier to the holders
promptly after the Effective Time (but in no event more than one Business Day
thereafter). In the event that the exercise price per share of any
Option equals or exceeds the Merger Consideration per share of Company Common
Stock (any such Option, an "Out-of-the-Money Option"), then such
Out-of-the-Money Option shall be cancelled and of no further force and
effect. The Board of Directors of the Company (or, if appropriate,
any committee thereof administering the Company Stock Plans) shall adopt such
resolutions or take such other actions as may be required to effect the
foregoing.
Section
2.11 Adjustments. Notwithstanding
any provision of this Article II to the contrary, if between the date of this
Agreement and the Effective Time the outstanding shares of Company Common Stock
shall have been changed into a different number of shares or a different class
by reason of the occurrence or record date of any stock dividend, subdivision,
reclassification, recapitalization, stock split (including a reverse stock
split), combination, exchange of shares or similar transaction, the Merger
Consideration shall be equitably adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, stock split (including a
reverse stock split), combination, exchange of shares or similar
transaction.
Section
2.12 Company Stock Appreciation
Rights. At the Effective Time, all stock appreciation rights
outstanding immediately prior to the Effective Time granted under any plan
listed on Section 2.12 of the Company Disclosure Schedule (the "SARs")
shall be settled in
12
cash
(the "SARs Consideration"). Cash payments to be made to
holders of SARs pursuant to this Section 2.12 shall be made to the extent
practicable through the Company's payroll processing system on the Closing
Date,
or if not practicable checks for such payment shall be drawn by the Surviving
Corporation in immediately available funds and sent by overnight courier to
the
holders promptly after the Effective Time (but in no event more than one
Business Day thereafter).
Section
2.13 Company Restricted
Shares. Immediately prior to the Effective Time, all shares of
restricted and unvested Company Common Stock ("Restricted Shares")
granted under any of the Company Stock Plans or otherwise, which are outstanding
and subject to restriction as of the Effective Time, shall, without any further
action on the part of the holders of such Restricted Shares, vest and the
restrictions thereon shall lapse and such shares shall be outstanding Company
Common Shares and shall be converted into the right to receive the Merger
Consideration in accordance with Section 2.7(c) of this Agreement.
Section
2.14 Further Assurances. At
and after the Effective Time, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of the Company or Merger Sub, as the case may be, any documents or
instruments, and to take any other actions and do any other things, in the
name
and on behalf of the Company or Merger Sub, reasonably necessary to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any
and
all right, title and interest in, to and under any of the rights, properties
or
assets of the Company acquired or to be acquired by the Surviving Corporation
as
a result of, or in connection with, the Merger and to otherwise accomplish
the
purpose and intent of this Agreement and the transactions contemplated by this
Agreement.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except
as disclosed in the disclosure schedule delivered by the Company to Parent
(the
"Company Disclosure Schedule") simultaneously with the execution of this
Agreement (it being acknowledged and agreed by the parties that (i) disclosure
in any section or subsection of such Company Disclosure Schedule shall be deemed
to be disclosed for all sections or subsections of this Agreement only to the
extent that the applicability of such disclosure to such section or subsection
is readily apparent from such disclosure, and (ii) the mere inclusion of an
item
in such Company Disclosure Schedule as an exception to a representation or
warranty shall not be deemed to constitute an admission by the Company, or
otherwise imply, that such item represents a material exception or material
fact, event or circumstance or that such item has had or would reasonably be
expected to have a Material Adverse Effect or would have been material if
included in the Company SEC Documents filed prior to the date of this Agreement
(or incorporated by reference therein)), the Company represents and warrants
to
Parent and Merger Sub as follows:
Section
3.1 Organization, Standing and
Corporate Power.
(a) Each
of the Company and its Subsidiaries is duly organized, validly existing and
in
good standing (or equivalent status) under the Laws of the state of
its
13
incorporation,
formation or organization, as the case may be, and has all requisite corporate
or company power and corporate or company authority necessary to own, lease
and
operate all of its properties and assets and to carry on its business as it
is
now being conducted, except for such failures to be duly organized, validly
existing or in good standing or to have corporate power or corporate authority
that, individually or in the aggregate, could not reasonably be expected to
have
a Material Adverse Effect. The Company and, except as set forth in
Section 3.1(a) of the Company Disclosure Schedule, each of its Subsidiaries
is
duly licensed or qualified to do business and is in good standing (or equivalent
status) in each jurisdiction in which the nature of the business conducted.
by
it or the character or location of the properties and assets owned or leased
by
it makes such licensing or qualification necessary, except where the failure
to
be so licensed, qualified or in good standing (or equivalent status) could
not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect.
(b) The
Company has made available to Parent complete and correct copies of the
certificate of incorporation and by-laws of the Company and the organizational
documents of each of its Subsidiaries, in each case, as amended to the date
of
this Agreement (the "Company Charter Documents"). Neither the
Company nor any of its material Subsidiaries is in violation of any of the
provisions of its organizational documents.
Section
3.2 Corporate Authority;
Enforceability; Voting Requirements.
(a) The
Company has all necessary corporate power and authority to execute and deliver
this Agreement and, subject to obtaining the Company Stockholder Approval if
required by applicable Law to consummate the Merger, to perform its obligations
hereunder and to consummate the Transactions. The execution, delivery
and performance by the Company of this Agreement, and the consummation by it
of
the Transactions, have been duly authorized and approved by all necessary
corporate action on the part of the Company (including by its Board of
Directors), and except for the Company Stockholder Approval, if required by
applicable Law to consummate the Merger, no other corporate action or
proceedings on the part of the Company is necessary to authorize the execution,
delivery and performance by the Company of this Agreement and the consummation
by it of the Transactions. This Agreement has been duly executed and
delivered by the Company and, assuming due authorization, execution and delivery
of this Agreement by the other parties hereto, constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
(b) The
Company's Board of Directors, at a meeting duly called and held, has unanimously
(i) approved and declared advisable this Agreement and declared this Agreement
and the Transactions, including the Offer and the Merger, advisable, fair to
and
in the best interest of the Company and the Company Stockholders and (ii)
resolved, subject to Section5.3(b), to recommend that the Company Stockholders
accept the Offer, tender their shares of the Company Common Stock in the Offer,
and, to the extent required by applicable Law, approve the Merger and adopt
this
Agreement.
(c) If
required by applicable Law to approve the Merger, the affirmative vote (in
person or by proxy) of the holders of a majority of the outstanding shares
of
Company Common Stock at the Company Stockholders Meeting, or any adjournment
or
postponement of
14
the
Company Stockholders Meeting, in favor of the adoption of this Agreement (the
"Company Stockholder Approval") is the only vote or approval of the
holders of any class or series of capital stock of the Company or any of its
Subsidiaries which is necessary to adopt this Agreement and approve the
Transactions.
Section
3.3 Noncontravention. Except
as disclosed in Section 3.3 of the Company Disclosure Schedule, neither the
execution and delivery of this Agreement by the Company nor the consummation
by
the Company of the Transactions, nor compliance by the Company with any of
the
provisions of this Agreement, will (i) conflict with or result in any violation
or breach of (with or without notice or lapse of time, or both) under
the Company Charter Documents, assuming that the authorizations, consents and
approvals referred to in Section 3.4 and the Company Stockholder Approval are
obtained and the filings referred to in Section 3.4 are made, (ii) violate
any
material Law, judgment, writ or injunction of any Governmental Authority
applicable to the Company or any of its Subsidiaries, or (iii) conflict with
or
result in any violation or breach of, or default (with or without notice or
lapse of time, or both) under or give rise to a right of, or result in,
termination, modification, cancellation, recapture or acceleration of any
obligation or to the loss of a benefit, or result in the creation of any Lien
in
or upon or with respect to, any of the properties or other assets of the Company
or any of its Subsidiaries, under any of the terms, conditions or provisions
of
any loan or credit agreement, debenture, note, bond, mortgage, indenture, deed
of trust, contract or other agreement (each, a "Contract") to which the
Company or any of its Subsidiaries is a party, except in the case of clause
(iii) for (x) such violations or defaults as could not reasonably be expected
to, individually or in the aggregate, (A) have a Material Adverse Effect or
(B)
prevent or materially delay or materially impede the consummation or the ability
to consummate the Transactions and (y) the provisions of certain store leases
with respect to assignment and change of control of the tenant.
Section
3.4 Governmental
Approvals. Except for (i) filings required under, and compliance
with other applicable requirements of, (x) the Exchange Act, (y) state
securities or "blue sky" laws and (z) the rules and regulations of the NASDAQ,
(ii) the filing of the Certificate of Merger with the Secretary of State of
the
State of Delaware pursuant to the DGCL, and (iii) filings required under, and
compliance with other applicable requirements of, the HSR Act, no consents
or
approvals of, or filings, declarations or registrations with, any Governmental
Authority are necessary for the execution and delivery of this Agreement by
the
Company and the consummation by the Company of the Transactions, other than
such
other consents, approvals, filings, declarations or registrations that, if
not
obtained, made or given, could not reasonably be expected to have a Material
Adverse Effect or prevent or materially delay the consummation of the
Transactions.
Section
3.5 Subsidiaries. Section
3.5 of the Company Disclosure Schedule lists each Subsidiary of the Company
(including (i) its name and form of organization; (ii) the number and type
of outstanding equity securities and a list of the holders of such securities;
and (iii) the jurisdiction of organization). Except for the
Subsidiaries of the Company or as listed on Section 3.5 of the Company
Disclosure Schedule, the Company does not own, directly or indirectly, any
capital stock of, or other voting securities or equity or similar interests
in,
or investment in or have any obligation to invest in, any corporation,
partnership, joint venture, association, limited liability company or other
entity or Person.
15
Section
3.6 Capitalization.
(a) The
authorized capital stock of the Company consists of 30,000,000 shares of Company
Common Stock, par value $0.001 per share, and 1,000,000 shares of preferred
stock, par value $0.001 per share (the "Company Preferred
Stock").
(b) At
the close of business on September 6, 2007, (i) 13,980,559 shares of
Company Common Stock were issued and outstanding, including
175,000 Restricted Shares and 513,724 shares held by the trustee under the
Company's Retirement Savings Plan and Supplemental Retirement Savings Plan,
(ii)
no shares of Company Preferred Stock were issued and outstanding, (iii)
1,428,641 shares of Company Common Stock were held by the Company in its
treasury and (iv) 1,273,000 shares of Company Common Stock were reserved for
issuance under the Company Stock Plans (of which 990,500 shares of Company
Common Stock were subject to outstanding Options, 233,500 shares of Company
Common Stock were subject to outstanding SARs to be settled in stock and 49,000
shares of Company Common Stock were authorized but unissued under a Company
Stock Plan), and (vii) 150,000 shares of Company Preferred Stock have been
designated as Series A Junior Participating Preferred Stock and have been
reserved for issuance upon the exercise of the rights distributed to the holders
of Company Common Stock pursuant to the Company Rights Plan. All
outstanding shares of the capital stock of the Company have been duly authorized
and validly issued and are fully paid, nonassessable and free of preemptive
rights. Except as set forth above, as of the date of this Agreement:
(A) there are no outstanding options, stock appreciation rights or other rights
of any kind which obligate the Company or any of its Subsidiaries to issue
or
deliver any shares of capital stock, voting securities or other equity interests
of the Company or any securities or obligations convertible into or exchangeable
into or exercisable for any shares of capital stock, voting securities or other
equity interests of the Company (collectively, "Company Securities"); (B)
there are no outstanding obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any Company Securities; and (C)
there
are no other options, calls, warrants or other rights, agreements, arrangements
or commitments of any character relating to the issued or unissued capital
stock
of the Company to which the Company or any of its Subsidiaries is a
party. No Subsidiary of the Company owns any shares of Company Common
Stock.
(c) Each
of the outstanding shares of capital stock, voting securities or other equity
interests of each Subsidiary of the Company is duly authorized, validly issued,
fully paid, nonassessable and free of any preemptive rights; all such
securities have been issued in compliance with applicable Law; and all such
securities are owned by the Company or another wholly-owned Subsidiary of the
Company and are owned free and clear of all Liens except Permitted
Liens. There are no (i) outstanding options or other rights of any
kind which obligate the Company or any of its Subsidiaries to issue or deliver
any shares of capital stock, voting securities or other equity interests of
any
such Subsidiary or any securities or obligations convertible into or
exchangeable into or exercisable for any shares of capital stock, voting
securities or other equity interest of a Subsidiary of the Company, (ii)
outstanding obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any securities or obligations convertible into
or
exchangeable into or exercisable for any shares of capital stock, voting
securities or other equity interests of a Subsidiary of the Company; or (iii)
other options, calls, warrants or other rights, agreements, arrangements or
commitments of any character
16
relating
to the issued or unissued capital stock of any Company Subsidiary to which
the
Company or any of its Subsidiaries is a party.
(d) Section
3.6(d) of the Company Disclosure Schedule sets forth as of September 1,
2007, the aggregate amounts of (i) the outstanding indebtedness for
borrowed money of the Company and its Subsidiaries, on a consolidated basis,
and
(ii) the outstanding guarantees by the Company and its Subsidiaries, on a
consolidated basis, of indebtedness for borrowed money of any other
Person.
(e) Except
as set forth in Section 3.6(e) of the Company Disclosure Schedule, all
outstanding Options are evidenced by stock option agreements or other award
agreements in the forms previously provided to Parent. The per share
exercise price of each Option is equal to or greater than the fair market value
of the underlying Company Common Stock determined as prescribed by the
applicable Company Stock Plan on the effective date of the corporate action
effectuating the grant of such Option. From and after August 4, 2007,
neither the Company nor any of its Subsidiaries has issued any shares of Company
Common Stock or any securities convertible into or exercisable for any shares
of
Company Common Stock, other than the issuance of Company Common Stock upon
the
exercise of Options or SARs outstanding as of August 4, 2007 in accordance
with
their terms as of such date.
Section
3.7 Company SEC
Documents.
(a) The
Company has filed all required reports, statements, schedules, forms and
other documents with the SEC since January 31, 2005 (such documents
collectively, and in each case including all exhibits and schedules thereto
and
documents incorporated by reference therein, together with any documents filed
during such period by the Company with the SEC on a voluntary basis on Current
Reports on Form 8-K, the "Company SEC Documents"). As
of their respective filing dates or the filing dates of amendments prior to
the
date of this Agreement, the Company SEC Documents complied in all material
respects with applicable Law, including the U.S. Securities Act of 1933, as
amended (including its rules and regulations, "Securities Act"), the
Exchange Act and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (including its rules and
regulations, "SOX"), and none of the Company SEC Documents as of such
respective dates or the respective filing dates of amendments contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in
light of the circumstances under which they were made, not
misleading.
(b) As
of the dates on which they were filed or amended prior to the date of this
Agreement in the Company SEC Documents, the annual consolidated
financial statements of the Company and the financial statements of the
Company for any quarter of the current fiscal year (in each case, together
with
the notes thereto), were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in
the
notes thereto) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates of such financial statements and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case
of
the financial statements for any quarter of the current fiscal year, to normal
year-end audit adjustments). None of the Subsidiaries of the Company are, or
have at any
17
time
since January 31, 2005 been, subject to the reporting requirements of Section
13(a) or 15(d) of the Exchange Act.
(c) Each
of the principal executive officer of the Company and the principal financial
officer of the Company (or each former principal executive officer of the
Company and each former principal financial officer of the Company, as
applicable) has made all certifications required by Rule 13a-14 or 15d-14 under
the Exchange Act and Sections 302 and 906 of SOX with respect to the Company
SEC
Documents, and the statements contained in such certifications were complete
and
correct on the date such certifications were made. For purposes of
this Agreement, "principal executive officer" and "principal financial officer"
shall have the meanings given to such terms in SOX. Neither the
Company nor any of its Subsidiaries has outstanding (nor has arranged or
modified since the enactment of SOX) any "extensions of credit" (within the
meaning of Section 402 of SOX ) to directors or executive officers (as defined
in Rule 3b-7 under the Exchange Act) of the Company or any of its
Subsidiaries.
(d) The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iii) the recorded accountability for assets is compared
with
the existing assets at reasonable intervals and appropriate action is taken
with
respect to any differences.
(e) The
Company's "disclosure controls and procedures" (as defined in Rules 13a-15(e)
and 15d-15(e) of the Exchange Act) are reasonably designed to ensure that
information required to be disclosed by the Company in the Company's periodic
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the required time periods and that all such
information is accumulated and communicated to the Company's management as
appropriate to allow timely decisions regarding required disclosure and to
make
the certifications required pursuant to Section 302 and 906 of
SOX. The Company has disclosed, based on its most recent evaluation
of such disclosure controls and procedures prior to the date of this Agreement,
to the Company's auditors and the audit committee of the Board of Directors
of
the Company (i) any significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting (as defined
in
Rule 13a-15(f) of the Exchange Act) that are reasonably likely to adversely
affect in any material respect the Company's ability to record, process,
summarize and report financial data and (ii) any fraud, whether or not material,
that involves management or other employees who have a significant role in
the
Company's internal controls over financial reporting.
(f) Except
as set forth in Section 3.7(f) of the Company Disclosure Schedule, since January
31, 2005 through the date of this Agreement, (i) neither the Company nor any
of
its Subsidiaries, nor any director or executive officer of the Company or any
of
its Subsidiaries has, and, to the Knowledge of the Company, no other officer,
employee or accountant of the Company or any of its Subsidiaries has, received
any material complaint, allegation, assertion or claim, in writing (or, to
the
Knowledge of the Company, orally) regarding the accounting or auditing
practices, procedures, methodologies or methods of the Company or any of its
Subsidiaries or their respective internal accounting controls, including any
material complaint, allegation, assertion or claim that the Company or any
of
its Subsidiaries has engaged
18
in
questionable accounting or auditing practices, and (ii) no attorney representing
the Company or any of its Subsidiaries, whether or not employed by the Company
or any of its Subsidiaries, has reported evidence of a material violation of
securities Laws, breach of fiduciary duty or similar violation by the Company
or
any of its officers, directors, employees or agents to the Board of Directors
of
the Company or any committee thereof or to any director or officer of the
Company.
Section
3.8 Absence of Certain
Changes. Except as set forth in Section 3.8 of the Company
Disclosure Schedule or in the Company SEC Documents:
(a) from
May 5, 2007 until the date of this Agreement, each of the Company and its
Subsidiaries has, in all material respects, conducted its business in the
ordinary course consistent with past practice and there has not
occurred:
(i) any
acquisition, sale or transfer of any material asset of the Company or any of
its
Subsidiaries other than in the ordinary course of business (including opening
and closing of stores in the ordinary course of business);
(ii) any
declaration, setting aside, or payment of a dividend or other distribution
(whether in cash, stock or property) with respect to any capital stock of the
Company or any of its Subsidiaries other than dividends or distributions by
a
direct or indirect wholly owned Subsidiary of the Company to its stockholders,
or any direct or indirect redemption, purchase or other acquisition by the
Company or any of its Subsidiaries of any of its shares of capital stock or
any other securities of the Company or any of its Subsidiaries or any options,
warrants, calls or rights to acquire such shares or other securities, other
than
in connection with the exercise of Options and SARs in accordance with their
respective terms;
(iii) any
change in the Company's accounting methods, principles or practices materially
affecting the Company's or any of its Subsidiaries' assets, liabilities or
businesses, except insofar as may have been required by a change in
GAAP;
(iv) (1)
any granting by the Company or any of its Subsidiaries to any current or former
director, officer or employee of the Company or any of its Subsidiaries, of
any
increase in compensation, bonus or fringe or other benefits, except in the
ordinary course of business consistent with past practice or as was required
under any Company Plan or (2) any granting by the Company or any of its
Subsidiaries to any Company personnel of (x) any increase in severance or
termination pay or (y) any right to receive any severance or termination
pay;
(v) any
material damage, destruction or loss, whether or not covered by insurance,
or
19
(vi) any
other action taken or committed to be taken by the Company or any of its
Subsidiaries that, if taken after the date of this Agreement, would require
the
consent of Parent under clauses (iii), (v) (other than for capital
expenditures), (vi), (vii), (viii), (ix), (x) or (xi) of Section
5.1(a).
(b) since
August 4, 2007, there has not occurred a Material Adverse Effect.
Section
3.9 Undisclosed
Liabilities. Except as disclosed in Section 3.9 of the Company
Disclosure Schedule, since May 5, 2007, neither the Company nor any of its
Subsidiaries has incurred any liabilities of any nature, whether accrued,
contingent or otherwise (the "Liabilities"), other than Liabilities (a)
incurred in the ordinary course of business consistent with past practice,
(b)
that have been discharged or paid in full in the ordinary course of business,
(c) reflected in or reserved against on the most recent financial statements
of
the Company prepared in accordance with GAAP and included in the Company SEC
Documents filed with the SEC prior to the date of this Agreement, (d) that
could
not reasonably be expected to have a Material Adverse Effect or (e) that is
contemplated to be incurred under, or that results from, this
Agreement.
Section
3.10 Legal
Proceedings. Except as disclosed in Section 3.10 of the Company
Disclosure Schedule, as of the date of this Agreement, there is no proceeding,
hearing, arbitration, mediation, inquiry, investigation, claim, suit or action
(in each case, whether civil, criminal, administrative or otherwise)
("Actions") pending or, to the Knowledge of the Company, threatened
against the Company or any of its Subsidiaries or any of the executive officers
or directors of the Company in their capacity as such, nor is the Company,
any
of its Subsidiaries, or any of their respective properties or assets subject
to
any injunction, order, judgment, settlement, award, ruling or decree, imposed
upon the Company or any of its Subsidiaries in each case, by or before any
Governmental Authority except, in each case, for those that, individually or
in
the aggregate, (A) would not reasonably be expected to have a Material Adverse
Effect or (B) would not reasonably be expected to prevent, materially delay
or
materially impede the ability of the Company to consummate the
Transactions. Since January 31, 2006, there has not been any material
product liability, manufacturing or design defect, warranty, field repair or
other material product-related claims by any third party (whether based on
contract or tort and whether relating to personal injury, including death,
property damage or economic loss) arising from (A) services rendered by the
Company or any of its Subsidiaries or (B) the sale, distribution or
manufacturing of products by the Company or any of its
Subsidiaries.
Section
3.11 Compliance With Laws;
Permits.
(a) Except
as disclosed in Section 3.11 of the Company Disclosure Schedule, since January
29, 2005, the Company and its Subsidiaries have been in compliance with all
laws, statutes, ordinances, codes, rules, regulations, decrees and orders of
Governmental Authorities (collectively, "Laws") applicable to the Company
or any of its Subsidiaries, except for such non-compliance as would not
reasonably be expected to be material to the Company and its Subsidiaries,
taken
as a whole.
20
(b) Except
as disclosed in Section 3.11(b) of the Company Disclosure Schedule, the Company
and each of its Subsidiaries hold all licenses, franchises, permits,
certificates, consents, orders, approvals and authorizations from Governmental
Authorities necessary for the lawful conduct of their respective businesses
(collectively, "Permits"), except where the failure to hold the same
could not reasonably be expected to have Material Adverse Effect, and there
is
no Action pending, or to the Knowledge of the Company threatened, regarding
any
of the Permits that would have or reasonably be expected to have a Material
Adverse Effect. The Company and its Subsidiaries are in compliance
with the terms of all Permits, except for such non-compliance as could not
reasonably be expected to have a Material Adverse Effect.
(c) To
the Knowledge of the Company (including for this purpose the members of the
Audit Committee of the Board of Directors of the Company), there are no formal
or informal governmental inquiries or investigations or internal investigations
or whistle-blower complaints pending or threatened, in each case regarding
accounting or disclosure practices of the Company or any of its Subsidiaries,
compliance by the Company or any of its Subsidiaries with any Law or any
malfeasance by any officer of the Company or any of its Subsidiaries, other
than
ordinary course inquiries, investigations or complaints not material to the
Company and its Subsidiaries, taken as a whole.
Section
3.12 Tax Matters.
(a) Except
as disclosed in Section 3.12 of the Company Disclosure Schedule and for those
matters that could not reasonably be expected to have a Material Adverse Effect:
(i) each of the Company and its Subsidiaries has timely filed, or has
caused to be timely filed on its behalf (taking into account any extension
of
time within which to file), all Tax Returns (as hereinafter defined) required
to
be filed, and all such filed Tax Returns are true, correct and complete; (ii)
each of the Company and its Subsidiaries has timely paid, or has had paid on
its
behalf, all Taxes due and owing; (iii) the Company has made adequate provision,
in accordance with GAAP, in the consolidated financial statements included
in
the Company SEC Documents filed prior to the date of this
Agreement for the payment of all Taxes for which the Company or any of its
Subsidiaries may be liable for the periods covered thereby; (iv) no deficiency
with respect to Taxes has been asserted or assessed in writing against the
Company or any of its Subsidiaries, which has not been fully paid or adequately
reserved (in accordance with GAAP) in the Company SEC Documents filed prior
to
the date of this Agreement; (v) no audits or other administrative or court
proceedings are pending with any Governmental Authority with respect to Taxes
of
the Company or any of its Subsidiaries, and no written notice thereof has been
received, (vi) there are no agreements in effect to extend the period of
limitations for assessment or collection of any Tax for which the Company or
any
of its Subsidiaries may be liable; (vii) the Company and each of its
Subsidiaries has withheld from all payments to employees, independent
contractors, creditors, shareholders and any other persons (and timely paid
to
the appropriate Governmental Authority) all amounts required to be withheld
with
respect to such payments in compliance with all applicable Laws; and (viii)
there are no Liens for Taxes upon the assets of the Company or any of its
Subsidiaries, other than Liens for Taxes not yet due and payable.
21
(b) Neither
the Company nor any of its Subsidiaries: (i) joins or has joined
during the past eight years prior to the date of this Agreement in the filing
of
any affiliated, consolidated, combined or unitary federal, state, local or
foreign income Tax Return other than the federal income Tax Return for the
consolidated group of which the Company is the common parent, (ii) has incurred
any liability during the past eight years prior to the date of this
Agreement for Taxes of any Person (other than the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign Law), as a transferee or successor,
by contract or otherwise, (iii) is a party to or bound by any Tax sharing
agreement or Tax indemnity agreement, arrangement or practice (other than solely
among the Company and its Subsidiaries), (iv) has participated in a “listed
transaction” (as defined in Treasury Regulation Section 1.6011-4), or (v)
has constituted either a "distributing corporation" or a "controlled
corporation" in a distribution of stock qualifying or intended to qualify for
tax-free treatment under Section 355 of the Code in the two (2) years prior
to
the date of this Agreement.
Section
3.13 Employee Benefits.
(a) Section
3.13(a) of the Company Disclosure Schedule contains a true and complete list
of
each deferred compensation, incentive compensation, stock purchase, stock option
and other equity compensation plan, fund or program; each severance or
termination pay, medical, surgical, hospitalization, life insurance and other
"welfare" plan, fund or program (within the meaning of section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"));
each profit-sharing, stock bonus or other "pension" plan, fund or program
(within the meaning of section 3(2) of ERISA); each bonus, employment,
termination or severance agreement; and each other material employee benefit
plan, fund, program or agreement or arrangement, in each case, that is
sponsored, maintained or contributed to or required to be contributed to by
the
Company or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with the Company would be deemed a "single
employer" within the meaning of section 4001(b) of ERISA, or to which the
Company or an ERISA Affiliate is party, for the benefit of any director,
employee or consultant or former employee or consultant of the Company or any
Subsidiary (the "Company Plans").
(b) With
respect to each Company Plan, the Company has delivered (or made available
prior
to the date of this Agreement in the online data room created in connection
with
the Transactions) to Parent true and complete copies of the Company Plan and
any
amendments thereto (or if the Company Plan is not a written Company Plan, a
description of the Company Plan), any related trust or other funding vehicle,
the most recent annual financial report, if any, the most recent Form 5500,
any
reports or summaries required under ERISA or the Code and the most recent
determination letter received from the Internal Revenue Service with respect
to
each Company Plan intended to qualify under Section 401 of the
Code. Each Company Plan intended to be "qualified" within the meaning
of section 401(a) of the Code has been determined by the Internal Revenue
Service to be so qualified and the trusts maintained thereunder have been
determined by the Internal Revenue Service to be exempt from taxation under
section 501(a) of the Code; provided, however, that such Company
Plans and the trusts maintained thereunder may have been amended after such
determinations were made.
22
(c) Except
as disclosed in Section 3.13(c) of the Company Disclosure Schedule, no Company
Plan is a "Multiemployer Plan," as such term is defined in Section 3(37) of
ERISA, nor is any Company Plan subject to Section 302 or Title IV of ERISA
or
Section 412 of the Code. With respect to each Company Plan that is a
Multiemployer Plan, except as set forth in Section 3.13(c) of the Company
Disclosure Schedule: (i) if the Company or any of its ERISA
Affiliates were to experience a withdrawal or partial withdrawal from such
plan,
no Withdrawal Liability would be incurred, except as would not reasonably be
expected to have a Material Adverse Effect; and (ii) none of the Company nor
any
of their respective ERISA Affiliates has received any notification, nor has
any
reason to believe, that any such plan is in reorganization, has been terminated,
is insolvent, or may reasonably be expected to be in reorganization, to be
insolvent, or to be terminated. No liability under Title IV or Section 302
of
ERISA has been incurred by the Company or any ERISA Affiliate that has not
been
satisfied in full, and no condition exists that presents a material risk to
the
Company or any ERISA Affiliate of incurring any such liability, other than
liability for premiums due the Pension Benefit Guaranty Corporation (which
premiums have been paid when due) and other than liabilities that, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect. No Company Plan provides, or has any liability to provide,
life insurance or medical insurance following termination of employment to
any
employee or former employee of the Company, except as may be required by Section
4980 of the Code, other than pursuant to the Employment
Agreements.
(d) Neither
the Company or any Subsidiary, any Company Plan, any trust created thereunder,
nor any trustee or administrator of the foregoing, has engaged in a transaction
in connection with which the Company or any Subsidiary, any Company Plan, any
such trust, or any trustee or administrator of the foregoing, or any party
dealing with any Company Plan or any such trust could be subject to either
a
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code, other than penalties
or
taxes that, individually or in the aggregate, would not reasonably be expected
to be material.
(e) Each
Company Plan has been operated and administered in accordance with its terms
and
applicable Law, including but not limited to ERISA and the Code, except for
instances of noncompliance that, individually or in the aggregate, would not
reasonably be expected to be material.
(f) Except
as disclosed in Section 3.13(f) of the Company Disclosure Schedule or the
Company SEC Documents, no Company Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for
employees or former employees of the Company or any Subsidiary for periods
extending beyond their retirement or other termination of service, other than
(i) coverage mandated by applicable Law, (ii) death benefits under any "pension
plan," or (iii) benefits the full cost of which is borne by the current or
former employee (or his beneficiary).
(g) Except
as disclosed in Section 3.13(g) of the Company Disclosure Schedule, neither
the
Offer, the execution or delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement will, either alone or in conjunction
with any other event, (i) entitle any current or former director or employee
of
the Company or any
23
Subsidiary
to severance pay, unemployment compensation or any other payment, except as
expressly provided in this Agreement, (ii) materially increase the amount or
value of any benefit or compensation otherwise payable or required to be
provided to any such director or employee, (iii) accelerate the time of payment
or vesting, or increase the amount of compensation due any such director or
employee or (iv) result in any amount failing to be deductible by reason of
Section 280G of the Code, other than pursuant to the terms of the Company Plan
listed on Section 3.13(g) of the Company Disclosure Schedule. Except
as disclosed in Section 3.13(g) of the Company Disclosure Schedule, no Company
Plan provides for a "gross-up" or similar payment in respect of any Taxes that
may become payable under Section 409A or Section 4999 of the Code.
(h) Except
as disclosed in Section 3.13(h) of the Company Disclosure Schedule, there are
no
pending, or to the Knowledge of the Company, threatened or anticipated claims
by
or on behalf of any Company Plan, by any employee or beneficiary covered under
any Company Plan, or otherwise involving any Company Plan (other than routine
claims for benefits).
(i) Except
as disclosed in Section 3.13(i) of the Company Disclosure Schedule, each Company
Plan that is a "nonqualified deferred compensation plan" within the meaning
of
Section 409A(d)(1) of the Code (a "Nonqualified Deferred Compensation
Plan") and any award thereunder, in each case that is subject to Section
409A of the Code, has been operated in compliance in all material respects
with
Section 409A of the Code since January 1, 2005, based upon a good faith,
reasonable interpretation of (A) Section 409A of the Code and (B) (x) the
proposed regulations issued thereunder, (y) the final regulations issued
thereunder or (z) Internal Revenue Service Notice 2005-1 (clauses (A) and (B),
together, the "409A Authorities").
(j) The
Company acknowledges that certain payments have been made or are to be made
and
certain benefits have been granted or are to be granted according to employment
compensation, severance and other Company Plans (collectively, the
"Arrangements") to certain holders of Company Common Shares and other
securities of the Company (the "Covered Securityholders"). The
Company represents and warrants that the Company intends that all such amounts
payable under the Arrangements (i) were or are to be paid or granted as
compensation for past services performed, future services to be performed,
or
future services to be refrained from performing, by the Covered Securityholders
(and matters incidental thereto) and (ii) are not calculated based on the number
of shares tendered or to be tendered into the Offer by the applicable Covered
Securityholder. The Company represents and warrants that the
Compensation Committee of the Board of Directors of the Company, consisting
solely of independent directors, has approved the resolutions substantially
in
the form set forth in Section 3.13(j) of the Company Disclosure
Schedule.
(k) Except
as disclosed in Section 3.13(k) of the Company Disclosure Schedule, there are
no
incentive compensation awards outstanding under the 2006 Equity-Based
Compensation And Performance Incentive Plan.
Section
3.14 Labor Matters. Except
as disclosed in Section 3.14 of the Company Disclosure Schedule, neither the
Company nor any Subsidiary is a party to any collective bargaining agreements
or
any other labor-related agreements with any labor union,
24
labor
organization or works council ("Collective Bargaining
Agreements"). To the Knowledge of the Company, there are no
representation proceedings or petitions seeking a representation proceeding
presently pending before the National Labor Relations Board or any other labor
relations tribunal. Except as disclosed in Section 3.14 of the
Company Disclosure Schedule and except for instances that could not reasonably
be expected to, individually or in the aggregate, result in a Material Adverse
Effect: (a) there is no pending or, to the Knowledge of the Company, threatened
labor strike, slowdown or stoppage against or affecting the Company or any
Subsidiary of the Company and (b) neither the Company nor any Subsidiary has
received notice of (i) any unfair labor practice charge or complaint pending
before the National Labor Relations Board or any other Governmental Authority
against it, (ii) any charge or complaint against it pending before the Equal
Employment Opportunity Commission or any other Governmental Authority
responsible for the prevention of unlawful employment practices, or (iii) any
complaint or lawsuit against the Company or any Subsidiary concerning employees
or former employees of the Company or any Subsidiary alleging employment
discrimination or violations of occupational safety and health requirements
pending before a court of competent jurisdiction.
Section
3.15 Environmental
Matters. Except as disclosed in Section 3.15 of the Company
Disclosure Schedule and except as could not reasonably be expected to have
a
Material Adverse Effect, (a) no written notice, notification, demand, request
for information, citation, summons, complaint or order has been received by,
and
no action, claim, suit, proceeding or review or investigation is pending or,
to
the Knowledge of the Company, threatened by any Person against, the Company
or
any of its Subsidiaries with respect to any matters relating to or arising
out
of any Environmental Law; (b) the Company and its Subsidiaries are in
compliance with all Environmental Laws, including possessing all Permits
required for their operations under applicable Environmental Laws; (c) the
Company and its Subsidiaries do not have any Environmental Liabilities;
(d) during the period of ownership or operation by the Company or any of
its Subsidiaries of any of its currently or formerly owned, leased or operated
properties or facilities, there have been no Releases of Hazardous Materials
in,
on, under, from or affecting any properties or facilities that would subject
the
Company or any of its Subsidiaries to any liability under any Environmental
Law
or require any expenditure by the Company or any of its Subsidiaries thereunder;
(e) none of the Company or its Subsidiaries has Released Hazardous Materials
at
any other location which would subject the Company or any of its Subsidiaries
to
any liability under Environmental Law or require any expenditure by the Company
or any of its Subsidiaries thereunder; (f) neither the Company nor any of its
Subsidiaries is subject to any indemnity obligation or other Contract with
any
person relating to obligations or liabilities under Environmental Laws; and
(g)
to the Knowledge of the Company, there are no facts, circumstances or conditions
that would reasonably be expected to form the basis for any liability affecting
the Company or any of its Subsidiaries relating to or arising under
Environmental Laws.
Section
3.16 Material Contracts.
(a) Except
for this Agreement, or as set forth in Section 3.16 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to or bound by any contract, arrangement, commitment or understanding, whether
written or oral:
25
(i) with
respect to the employment of any directors, executive officers or other senior
officers of the Company;
(ii) that
is a "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC);
(iii) containing
change-of-control provisions relating to the Company or any of its
Subsidiaries (other than individual store Leases not material to the
Company or its Subsidiaries, taken as a whole);
(iv) that
is a joint-venture or a partnership agreement;
(v) relating
to the borrowing of money (including any guarantee thereto) or that is a
mortgage, security agreement, capital lease or similar agreements that creates
a
Lien on any material asset of the Company or any of its Subsidiaries, in each
case involving annual payments of $100,000 each;
(vi) that
limits or purports to limit in any material respect the ability of the Company
or any of its Affiliates (or which following the consummation of the
Transactions could limit the ability of the Surviving Corporation), (A) to
compete in any line of business, or in any geographic area or with any person
(other than, in any of the foregoing cases, as set forth in store
Leases), (B) to hire any individuals or group of individuals, or (C)
the right of the Company or any of its Subsidiaries to sell to or purchase
from
any other person or entity;
(vii) that
is a distributorship, non-employee commission or marketing agent, representative
or franchise agreement providing for the marketing or the sale of the products
or services of the Company or any of its Subsidiaries;
(viii) that
is a service contract, equipment lease or arrangement (other than purchase
orders entered into in the ordinary course of business consistent with past
practice) with respect to the receipt of goods and services involving payments
by the Company or any of its Subsidiaries of more than $150,000 each per
year; or
(ix) that
is a license or sublicense of any item of Intellectual Property or other
intangible asset (whether as a licensor or a licensee) that is material to
the
Company and its Subsidiaries, taken as a whole, other than off-the-shelf
software.
All
contracts, arrangements, commitments or understandings of the type described
in
this Section 3.16(a) shall be collectively referred to as the "Material
Contracts".
(b) Each
of the Material Contracts constitutes the valid and legally binding
obligation of the Company or its Subsidiaries, enforceable in accordance with
its terms, and is valid and in full force and effect, except for such failures
to be in full force and valid that
26
could
not reasonably be expected to have a Material Adverse Effect. The
Company is not in default under any Material Contract and, to the Company's
Knowledge, no other party to any Material Contract is in breach of, or in
default under, any Material Contracts, except in each case, for those breaches
and defaults which, individually or in the aggregate, could not reasonably
be
expected to have a Material Adverse Effect.
Section
3.17 Properties.
(a) The
only real property owned by the Company and its Subsidiaries (collectively,
the
"Owned Real Property") is the national distribution center located in
Troy, Ohio. Except as set forth in Section 3.17(a) of the Company
Disclosure Schedule, with respect to the Owned Real Property, (i) neither the
Company nor any of its Subsidiaries has leased or otherwise granted to any
Person (other than pursuant to this Agreement) any right to occupy or possess
or
otherwise encumber any portion of the Owned Real Property; (ii) there are no
outstanding options or rights of first refusal or similar rights to purchase
or
acquire any rights or interests in such property or any portion thereof;
(iii) neither the Company nor any of its Subsidiaries has received written
notice of any condemnation proceeding or proposed action or agreement for taking
in lieu of condemnation (nor to their Knowledge, is any such proceeding, action
or agreement pending or threatened) with respect to any portion of the Owned
Real Property; (iv) all buildings, improvements and fixtures and equipment
located within, on or under the Owned Real Property and used in the business
of
the Company (1) are in reasonably good condition and repair in all material
respects and sufficient for the operation of the business of the Company,
subject to reasonable wear and tear; and (2) are in material compliance
with zoning and other applicable land use regulations for their current uses
and
are not non-conforming uses; and (v) such property has sufficient access to
public streets, utilities, structural support and parking all wholly located
within the boundaries of such Owned Real Property (subject to normal utility
and
services easements) to fulfill any zoning, building code or other governmental
requirements related thereto and to permit the continued use of the Owned Real
Property in the business of the Company as presently conducted (including any
plans for expansion, if any).
(b) Section
3.17(b) of the Company Disclosure Schedule contains a true, complete and
accurate list, as of the date of this Agreement, of all real property leased,
subleased, licensed or otherwise occupied (whether as a tenant, subtenant or
pursuant to other occupancy arrangements) by the Company or any of its
Subsidiaries (collectively, including the improvements thereon, the "Leased
Real Property").
(c) As
of the date of this Agreement, and except as set forth in Section 3.17(c) of
the
Company Disclosure Schedule, the Company and/or its Subsidiaries have good
and
marketable fee simple title to the Owned Real Property and, except as would
not
reasonably be expected to be material to the Company and its Subsidiaries,
taken
as a whole, valid leasehold estates in all Leased Real Property, in each
case, free and clear of all Liens.
(d) As
of the date of this Agreement, except as would not reasonably be expected to
be
material to the Company and its Subsidiaries, taken as a whole, or as set
forth on Section 3.17(d) of the Company Disclosure Schedules, (i) each Real
Property Lease is in full force and effect and constitutes the valid and legally
binding obligation of the Company or its
27
Subsidiaries,
enforceable in accordance with its terms; and (ii) neither the Company
nor any of its Subsidiaries have received any written communication from, or
given any written communication to, any lender, alleging that the Company or
any
of its Subsidiaries or such other party, as the case may be, is in default
(or
that an event has occurred or circumstances exist that may (with notice, a
lapse
of time or both) constitute or result in such a default). With
respect to all Leased Real Property, all buildings, improvements and
fixtures and equipment located thereon and used in the business of the
Company (x) are in reasonably good condition and repair (except where the
failure to be in such good condition and repair would not be material to the
Company and its Subsidiaries, taken as a whole) and are sufficient for the
operation of the business of the Company; and (y) are in material compliance
with zoning and other applicable land use regulations for their current
uses.
(e) Except
as would not reasonably be expected to be material to the Company and its
Subsidiaries, taken as a whole, or as set forth in Section 3.17(e) of the
Company Disclosure Schedule. there is no default under any Real Property Lease
either by the Company or its Subsidiaries party thereto or, to the Knowledge
of
the Company, by any other party thereto.
Section
3.18 Intellectual
Property.
(a) Except
as set forth in Section 3.18(a) of the Company Disclosure Schedule, the Company
or any of its Subsidiaries own, license or otherwise have rights to use all
U.S. (i) trademarks, service marks, trade names, logos, designs, Internet
domain names, together with goodwill, registrations and applications related
to
the foregoing, (ii) patents and pending patent applications, (iii) copyrights
and all registrations and applications to register the same, (iv) customer
lists, and (v) software and licenses of any of the foregoing ("Intellectual
Property") necessary for the operation of the businesses of the Company or
any of its Subsidiaries, as currently conducted, free and clear from all
Liens.
(b) Section
3.18(b) of the Company Disclosure Schedule sets forth, for the Intellectual
Property owned by the Company, a complete and accurate list of all material
(i)
(x) patents and patent applications; (y) trademark registrations (including
Internet domain name registrations); and (z) copyright registrations and
applications and (ii) active trademark applications filed with the U.S. Patent
and Trademark Office or equivalent foreign office. To the Knowledge
of the Company, the foregoing registrations are in effect and
subsisting.
(c) Except
as set forth in Section 3.18(c) of the Company Disclosure Schedule or as would
not, individually or in the aggregate, reasonably be expected to be material
to
the Company and its Subsidiaries:
(i) no
Actions or orders are pending or, to the Knowledge of the Company, threatened,
and the Company has not received within the past two (2) years any overt threats
or written notices (including cease and desist letters or requests for a
license) against the Company or its Subsidiaries with regard to the ownership,
use, validity or enforceability of any Intellectual Property owned by the
Company and its Subsidiaries in the operation of their businesses as currently
conducted;
28
(ii) to
the Knowledge of Company, the operation of the Company and its Subsidiaries'
businesses as currently conducted does not infringe, misappropriate or violate
("Infringe") the Intellectual Property of any third party and no third
party is Infringing any Intellectual Property of the Company and its
Subsidiaries used in the operation of their businesses as currently conducted
and, no such claims are pending or threatened against any Person by the
Company;
(iii) the
Company takes commercially reasonable actions and measures to protect the
Intellectual Property and the rights of the Company and its Subsidiaries in
confidential information, proprietary designs and trade secrets of the Company
and its Subsidiaries that are used in the operation of their businesses as
currently conducted;
(iv) the
Company and its Subsidiaries take all commercially reasonable actions to require
all persons who are commissioned by the Company or its Subsidiaries to create
or
develop proprietary Intellectual Property for the Company or its Subsidiaries
to
assign all of their rights therein to the Company, to the extent it is legally
possible to do so; and
(v) to
the Knowledge of the Company, there is no jurisdiction in the United States
in
which the Company or its Subsidiaries has opened one or more stores, but where
the Avenue ▇▇▇▇ has been contested or where the Avenue ▇▇▇▇ is not available
for
use in such store, nor is there any jurisdiction in the United States in which
the Company or its Subsidiaries decided not to open a store because the Avenue
▇▇▇▇ was contested or where the Avenue ▇▇▇▇ was not available for use in such
store.
Section
3.19 Privacy Policy; Customer
Solicitation.
(a) The
Company has a privacy policy (a "Privacy Policy") regarding the
collection and use of personally identifiable information (the "PII") or
does not collect PII. Except as set forth on Section 3.19 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
has
collected, transmitted or used any PII in an unlawful manner and is not in
violation in any material respect of its Privacy Policy. The Company
has posted its Privacy Policy on the ▇▇▇▇▇▇.▇▇▇ website. The Company
and its Subsidiaries have reasonably adequate security measures in place to
protect the PII that they receive from illegal or unauthorized use by their
personnel or third parties.
(b) The
Company has established a policy (a "Mailing Policy") relating to email
or other electronic or non-electronic solicitation of, or communication
with, potential customers or prospects that is in compliance in all
material respects with the requirements of all Applicable Laws, including,
as
applicable, the Controlling the Assault of Non-Solicited Pornography and
Marketing Act of 2003.
Section
3.20 Suppliers. Section
3.20 of the Company Disclosure Schedule sets forth a true, complete and accurate
list of the ten (10) largest (in terms of dollar amount) suppliers of the
Company and its Subsidiaries, on a combined basis, for the year ended
February
29
3,
2007. To the Knowledge of the Company, except as set forth in Section
3.20 of the Company Disclosure Schedule, no person listed in Section 3.20 of
the
Company Disclosure Schedule within the last twelve (12) months prior to the
date
of this Agreement has threatened in writing to cancel or otherwise terminate
the
relationship of such person with the Company or its Subsidiaries.
Section
3.21 Insurance. Copies of
all binders of material insurance policies maintained by the Company and its
Subsidiaries, including fire and casualty, general liability, product liability,
business interruption, directors and officers and other professional liability
policies, have been made delivered (or made available prior to the date of
this
Agreement in the online data room created in connection with the Transactions)
to Parent. All such insurance policies are in full force and
effect. Except as would not be material to the Company and its
Subsidiaries, taken as a whole, neither the Company nor any of its Subsidiaries
is in breach or default, and neither the Company nor any of its Subsidiaries
has
taken any action or failed to take any action which (including with respect
to
the transactions contemplated by this Agreement), with notice or lapse of time
or both, would constitute such a breach or default, or permit a termination
or
modification of any of the insurance policies of the Company and its
Subsidiaries.
Section
3.22 Anti-Takeover Laws.
(a) Prior
to the execution of this Agreement, the Board of Directors of the Company has
taken all action necessary to exempt under or make not subject to the provisions
of Section 203 of the DGCL or any provision of the Company Charter Documents
that would require any corporate approval other than that otherwise required
by
the DGCL: (i) the execution of this Agreement and the Tender
Agreement, (ii) the Offer, (iii) the Merger and (iv) the transactions
contemplated by this Agreement and the Tender Agreement.
(b) Prior
to the execution of this Agreement, the Board of Directors of the Company has
taken all action necessary to exempt under or make not subject to the provisions
of any other state takeover law or state law that purports to limit or restrict
business combinations or the ability to acquire or vote shares: (i)
the execution of this Agreement and the Tender Agreement, (ii) the Offer, (iii)
the Merger and (iv) the transactions contemplated by this Agreement and the
Tender Agreement.
Section
3.23 Company Rights
Plan. The Company has taken all actions necessary (subject only
to execution by the Rights Agent, as defined in the Company Rights Plan, which
the Company shall cause to take place as soon as reasonably practicable on
the
date of this Agreement) to (a) render the Company Rights Plan inapplicable
to
this Agreement and the Transactions, (b) ensure that (i) none of Parent,
Merger Sub or any other Subsidiary of Parent is an Acquiring Person (as such
term is defined in the Company Rights Plan) pursuant to the Company Rights
Plan
solely as a result of this Agreement or the Transactions and (ii) a
"Distribution Date" or a "Stock Acquisition Date" (as such terms are defined
in
the Company Rights Plan) does not occur and (iii) the rights (the "Company
Rights") to purchase the Series A Junior Participating Preferred Stock of
the Company issued under the Company Rights Plan do no become exercisable,
in
the case of clauses (i), (ii) and (iii), solely by reason of the execution
of
this Agreement and/or the Tender Agreement or the consummation of the Offer,
the
Merger or any of the Transactions or the transactions contemplated by the Tender
Agreements and
30
(c) provide
that the Expiration Date (as defined in the Company Rights Plan) shall occur
immediately prior to the Effective Time.
Section
3.24 Opinion of Financial
Advisor. The Board of Directors of the Company has received the
opinion of Bear, ▇▇▇▇▇▇▇ & Co. Inc., dated the date of this Agreement, to
the effect that, as of such date, each of the Offer Price and the Merger
Consideration to be received, respectively, in the Offer and the Merger by
holders of the Company Common Stock, is fair from a financial point of view
to
holders of such shares. A copy of such opinion has been, or will promptly be,
delivered to Parent. Such opinion has not been withdrawn or revoked or otherwise
modified in any material respect, and the Company has received the consent
of
Bear, ▇▇▇▇▇▇▇ & Co. Inc. to include such opinion in the Schedule 14D-9 and,
if any, the information statement or proxy statement relating to the Company
Stockholders Meeting (as amended or supplemented from time to time, the
"Proxy Statement").
Section
3.25 Brokers and Other
Advisors. Except for Bear, ▇▇▇▇▇▇▇ & Co. Inc., the fees and
expenses of which will be paid by the Company, no broker, investment banker,
financial advisor or other Person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission, or the reimbursement
of
expenses, in connection with any of the Transactions based upon arrangements
made by or on behalf of the Company or any of its Subsidiaries.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Parent
and Merger Sub jointly and severally represent and warrant to the Company as
follows:
Section
4.1 Organization;
Standing. Parent is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware and Merger
Sub is a corporation duly organized, validly existing and in good standing
under
the Laws of the State of Delaware, except for such failures to be duly
organized, validly existing or in good standing that, individually or in the
aggregate, would not reasonably be expected to have a Parent Material Adverse
Effect.
Section
4.2 Corporate
Authority. Each of Parent and Merger Sub has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
their respective obligations hereunder and to consummate the
Transactions. The execution, delivery and performance by Parent and
Merger Sub of this Agreement, and the consummation by Parent and Merger Sub
of
the Transactions, have been duly authorized and approved by their respective
Boards of Directors and adopted by Parent as the sole stockholder of Merger
Sub,
and no other corporate action on the part of Parent and Merger Sub is necessary
to authorize the execution, delivery and performance by Parent and Merger Sub
of
this Agreement and the consummation by them of the Transactions. This
Agreement has been duly executed and delivered by Parent and Merger Sub and,
assuming due authorization, execution and delivery of this Agreement by the
Company, constitutes a legal, valid and binding obligation of each of Parent
and
Merger Sub, enforceable against each of them in accordance with its
terms.
31
Section
4.3 Noncontravention. Neither
the execution and delivery of this Agreement by Parent and Merger Sub, nor
the
consummation by Parent or Merger Sub of the Transactions, nor compliance by
Parent or Merger Sub with any of the provisions of this Agreement, will (i)
conflict with or result in any violation or breach of (with or without notice
or
lapse of time, or both) the certificate of incorporation or by-laws (or similar
documents) of Parent or Merger Sub, assuming that the authorizations, consents
and approvals referred to in Section 4.4 are obtained and the filings referred
to in Section 4.4 are made, (ii) violate any material Law, judgment, writ or
injunction of any Governmental Authority applicable to Parent or any of its
Subsidiaries, or (iii) conflict with or result in any violation or breach of,
or
default (with or without notice or lapse of time, or both) under or give rise
to
a right of, or result in, termination, modification, cancellation, recapture
or
acceleration of any obligation or to the loss of a benefit, or result in the
creation of any Lien in or upon or with respect to, any of the properties or
other assets of Parent or Merger Sub, under any of the terms, conditions, or
provisions of any Contract to which Parent, Merger Sub or any of their
respective Subsidiaries is a party, except in the case of clause (iii) for
such
violations or defaults as could not reasonably be expected to, individually
or
in the aggregate, (A) have a Parent Material Adverse Effect or (B) prevent
or
materially delay or materially impede the consummation or the ability to
consummate the Transactions.
Section
4.4 Governmental
Approvals. Except for (i) filings required under, and compliance
with other applicable requirements of, the Exchange Act, state securities or
"blue sky" laws and the rules and regulations of the NASDAQ, (ii) the filing
of
the Certificate of Merger with the Secretary of State of the State of Delaware
pursuant to the DGCL, and (iii) filings required under, and compliance with
other applicable requirements of, the HSR Act, no consents or approvals of,
or
filings, declarations or registrations with, any Governmental Authority are
necessary for the execution, delivery and performance of this Agreement by
Parent and Merger Sub or the consummation by Parent and Merger Sub of the
Transactions, other than such other consents, approvals, filings, declarations
or registrations that, if not obtained, made or given, could not reasonably
be
expected to impair in any material respect the ability of Parent or Merger
Sub
to perform its obligations hereunder or prevent or materially delay consummation
of the Transactions.
Section
4.5 Status of Parent;
Ownership and Operations of Merger Sub. Parent is the holding
company of the U.S. catalog business of PPR S.A. Parent owns
beneficially and of record all of the outstanding capital stock of Merger
Sub. Merger Sub was formed solely for the purpose of engaging in the
Transactions, has engaged in no other business activities, has not incurred
any
material obligations or liabilities except pursuant to this Agreement and has
conducted its operations only as contemplated by this Agreement.
Section
4.6 Compliance With
Laws. Since its formation, Merger Sub has been in compliance with
all Laws applicable to Merger Sub, and since January 29, 2005, Parent has been
in compliance with all Laws applicable to Parent, except for such non-compliance
as could not reasonably be expected to have a Parent Material Adverse
Effect.
Section
4.7 Legal
Proceedings. There is no pending or, to the Knowledge of Parent,
threatened, legal or administrative proceeding, claim, suit or action against
Parent or any of its Subsidiaries (including Merger Sub), nor is there any
injunction, order, judgment, ruling or
32
decree
imposed upon Parent or any of its Subsidiaries (including Merger Sub) in each
case, by or before any Governmental Authority, that would reasonably be expected
to have a Parent Material Adverse Effect.
Section
4.8 Sufficient
Funds. Parent's and Merger Sub's obligations hereunder are not
subject to any conditions regarding Parent's, Merger Sub's or any other person's
ability to obtain financing for the Offer, the consummation of the Merger and
the other transactions contemplated by this Agreement. Parent and
Merger Sub have, and will have as of the Acceptance Time and the Closing
sufficient cash available, directly or through one or more Affiliates, to pay
all amounts to be paid by Parent and Merger Sub in connection with this
Agreement and the Transactions, including Parent's and Merger Sub's costs and
expenses, the aggregate Offer Price, the aggregate Merger Consideration, the
aggregate Option Consideration and the aggregate SARs Consideration on the
terms
and conditions contained in this Agreement, and there is no restriction on
the
use of such cash or cash equivalents for such purpose. Parent and Merger Sub
acknowledge and agree that Parent's and Merger Sub's obligations hereunder
are
not conditioned in any manner whatsoever upon Parent’s or Merger Sub’s obtaining
financing to fund the payment of the consideration to be paid in the Offer
and
the Merger, including in connection with the aggregate Offer Price, the
aggregate Merger Consideration, the aggregate Option Consideration and the
aggregate SARs Consideration.
Section
4.9 Company
Stock. Neither Parent nor Merger Sub is, nor at any time during
the last three years has it been, an "interested stockholder" of the Company
as
defined in Section 203 of the DGCL. Neither Parent nor Merger Sub nor
any of their respective Affiliates beneficially owns (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, or is the record holder of,
and
is not a party to any agreement, arrangement or understanding for the purpose
of
acquiring, holding, voting or disposing of, in each case, any shares of capital
stock of the Company, except for any such shares that may be owned by any
employee benefit or other plan administered by or on behalf of Parent or any
of
its Subsidiaries, to the extent the determination to acquire such shares was
not
directed by Parent or Merger Sub.
Section
4.10 Brokers and Other
Advisors. Except for ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Company, the fees and
expenses of which will be paid by Parent, no broker, investment banker,
financial advisor or other Person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission, or the reimbursement
of
expenses, in connection with the Transactions based upon arrangements made
by or
on behalf of Parent or any of its Subsidiaries.
ARTICLE
V
ADDITIONAL
COVENANTS AND AGREEMENTS
Section
5.1 Conduct of
Business.
(a) Except
as expressly contemplated by this Agreement or as required by applicable Law
or
as set forth in Section 5.1(a) of the Company Disclosure Schedule, during the
period from the date of this Agreement to the Effective Time, unless Parent
otherwise provides its prior written consent, the Company shall, and shall
cause its Subsidiaries to, conduct its operations in the ordinary course
consistent with past practice, and shall use reasonable best
33
efforts
to maintain and preserve its business organization and its material rights
and
franchises and to retain the services of its officers and key employees and
maintain relationships with customers, suppliers, lessees, licensees and other
third parties having significant business relationships with it, and to maintain
all of its operating assets in their current condition (normal wear and tear
excepted), to the end that their goodwill and ongoing business shall not be
impaired in any material respect (it being understood that any impairment of
such goodwill and ongoing business shall not be a breach of this sentence so
long as the Company and its Subsidiaries shall have complied with their
respective obligations to use reasonable best efforts as provided in this
sentence). Except as contemplated or permitted by this Agreement or
as required by applicable Law or as contemplated by Section 5.1(a) of the
Company Disclosure Schedule, during the period from the date of this Agreement
until the Effective Time, unless Parent otherwise provides its prior written
consent (which consent shall not be unreasonably withheld, conditioned or
delayed if the Expiration Date shall not have occurred within 60 days of the
commencement of the Offer), neither the Company nor its Subsidiaries
shall:
(i) (A)
issue, deliver, sell or grant, pledge or otherwise encumber or subject to any
Lien, any shares of its capital stock, any other voting securities, or any
other securities or rights convertible into, exchangeable or exercisable for,
or
evidencing the right to subscribe for any shares of its capital stock, or any
rights, warrants or options to purchase any shares of its capital stock, or
any
securities or rights convertible into, exchangeable or exercisable for, or
evidencing the right to subscribe for, any shares of its capital
stock; provided that the Company may issue shares of Company Common
Stock (and the related rights under the Company Rights Plan) upon the exercise
of Options and SARs that are outstanding on the date of this Agreement, in
accordance with their respective terms as of the date of this Agreement; (B)
redeem, purchase or otherwise acquire any of its outstanding shares of capital
stock, or any other securities thereof or any rights, warrants or options to
acquire any such shares or securities, except in connection with the exercise
of
Options and SARs that are outstanding on the date of this Agreement and in
accordance with their respective terms as of the date of this Agreement and
consistent with past practice; (C) declare, set aside for payment or pay any
dividend on, or make any other distribution (whether in cash, stock or other
form) in respect of, any shares of its capital stock; (D) adjust, split,
combine, subdivide or reclassify any shares of its capital stock or (E) enter
into any Contract, understanding or arrangement with respect to the sale,
voting, registration or repurchase of Company Common Stock or the capital stock
of any Subsidiary of the Company;
(ii) redeem,
repurchase, prepay, defease, cancel, incur, create, assume or otherwise acquire,
or modify in any material respect the terms of, any indebtedness for
borrowed money or assume, guarantee or endorse, or otherwise become responsible
for, any such indebtedness of another Person, issue or sell any debt securities
or calls, options, warrants or other rights to acquire any debt securities
of
the Company or any of its Subsidiaries or enter into any arrangement having
the
economic effect of any of the foregoing except for (A) borrowings made
pursuant to the Financing Agreement among the Company and certain of its
subsidiaries and The CIT Group/Business Credit, Inc., in
34
|
|
accordance
with its terms and consistent with past practice and (B) other amounts
not
in excess of $250,000 in the aggregate outstanding at any
time;
|
(iii) sell,
pledge, dispose of, transfer, lease, license, or otherwise encumber or subject
to any Lien (other than a Permitted Lien), any properties, rights or assets,
except sales, pledges, dispositions, transfers, leases, licenses or encumbrances
(A) in the ordinary course of business consistent with past practices (B)
required to be effected prior to the Effective Time pursuant to Contracts in
force on the date of this Agreement, (C) dispositions of inventory or assets
in
the ordinary course of business or which are obsolete or worthless or (D)
transfers among the Company and its wholly owned Subsidiaries;
(iv) make
any capital expenditures in excess of $250,000 individually or $750,000 in
the aggregate;
(v) directly
or indirectly acquire (A) by merging, consolidating with, purchasing a
material portion of the assets of, by making an investment in or capital
contribution to, or by any other manner, any Person or division, business or
equity interest of any Person or (B) any assets, rights, or properties except
(1) for capital expenditures (which shall be governed by clause (iv) above),
(2)
for purchases of inventory, components, raw materials or supplies or finished
products, services, or marketing campaigns in the ordinary course of business
consistent with past practice and (3) pursuant to Contracts in effect as of
the date of this Agreement;
(vi) (A)
increase in a material respect the compensation of any of its directors,
officers or employees, other than (1) as required pursuant to applicable Law
or
the terms of Collective Bargaining Agreements or Contracts in effect on the
date
of this Agreement and listed in the Company Disclosure Schedule, (2) increases
in salaries, wages, bonuses and benefits of employees (other than executive
officers) made in the ordinary course of business consistent with past
practice, and (3) increases in salaries, wages, bonuses and benefits of
executive officers in amounts set forth on Section 5.1(a)(vi)(A)(3) of the
Company Disclosure Schedule; (B) grant or provide any severance or termination
payments or benefits to any director, employee or consultant of the Company
or
any of its Subsidiaries, other than as required by the terms of any Benefit
Plan
as in effect on the date of this Agreement; (C) make any new equity awards
to
any director, employee or consultant of the Company or any of its Subsidiaries;
(D) take any action to accelerate the vesting or payment, or fund or in any
other way secure the payment, compensation or benefits under any Benefit Plan
to
the extent not required by the terms of such Benefit Plan as in effect on the
date of this Agreement or (E) enter into or amend any collective bargaining
agreements; provided, however, that nothing in this Section 5.1
shall prevent the Company or its Subsidiaries from hiring new employees as
non-officers or non-directors of the Company in the ordinary course of business
consistent with past practice so long as the amount of salaries, wages,
bonuses and benefits provided to such new employees shall be in the ordinary
course of business consistent with past practice;
35
(vii) make,
change or revoke any material Tax election, change any material method of Tax
accounting, enter into any closing agreement, settle or compromise any material
liability for Taxes, file any material amended Tax Return, or surrender any
claim for a material refund of Taxes;
(viii) make
any material changes in financial accounting methods, principles or practices
(or change an annual accounting period), except insofar as may be required
by a
change in GAAP or applicable Law;
(ix) make
any changes or modifications to any pricing policy or investment policy or
any
method of doing business except for changes to product prices in accordance
with
past practice;
(x) make
any change or modification to the Privacy Policy, except such changes or
modifications required by credit card issuers used by the Company and its
Subsidiaries;
(xi) (A)
amend the Company Charter Documents or other comparable charter or
organizational documents of any of the Company's Subsidiaries or (B) create
any new Subsidiaries;
(xii) enter
into, materially modify, terminate, or waive any material right under any
Contract that is or would be a Material Contract (except with respect to any
store Lease in the ordinary course of business), if it had been entered into
prior to the date of this Agreement;
(xiii) enter
into, materially modify, terminate, or waive any material right under any
Contract (other than (A) a Material Contract, which shall be governed by
clause (xii) above, and (B) a store Lease entered into in the ordinary
course of business) that has a term of two years or more and that involves
the
payment of $100,000 or more per year by or to the Company or any of its
Subsidiaries; or
(xiv) authorize
any of or commit, resolve, propose or agree to take any of the foregoing
actions.
(b) Parent
and Merger Sub agree that, during the period from the date of this Agreement
until the Effective Time, Parent and Merger Sub shall not, and shall not permit
any of their Subsidiaries to take, or agree or commit to take, any action that
could reasonably be expected to (i) impose any meaningful delay in the obtaining
of, or significantly increase the risk of not obtaining, any authorizations,
consents, orders, declarations or approvals of any Governmental Authority
necessary to consummate the Transactions or the expiration or termination of
any
applicable waiting period, (ii) significantly increase the risk of
any Governmental Authority entering an order or Restraint prohibiting or
impeding the consummation of the Transactions or (iii) otherwise would
reasonably be expected to cause a meaningful delay or impediment to the
consummation of the Transactions (each, a "Delay"). Without
limiting the generality of the foregoing, Parent and Merger Sub agree that,
during the period from the date of this Agreement until the Effective Time,
Parent and Merger Sub shall not,
36
and
shall not permit any of their Subsidiaries to, acquire or agree to acquire
by
merging or consolidating with, or by purchasing a substantial portion of the
assets of or equity in, or by any other manner, any Person or portion thereof,
or otherwise acquire or agree to acquire any assets or rights, if the entering
into of a definitive agreement relating to or the consummation of such
acquisition, merger or consolidation would reasonably be expected to result
in a
Delay.
Section
5.2 Stockholders
Meeting; Merger Without Meeting of Company Stockholders.
(a) If
required by applicable Law in order to consummate the Merger, the Company shall,
in accordance with applicable Law: (i) duly call, give notice of, convene and
hold a meeting of its stockholders for the purpose of adopting this Agreement
(the "Company Stockholders Meeting") as soon as practicable following the
Acceptance Time (or, if later, following the termination of the subsequent
offering period, if any) and (ii) include in the Proxy Statement the
recommendation of the Board of Directors that the stockholders of the Company
vote in favor of the adoption of this Agreement, and (iii) obtain the Company
Stockholder Approval.
(b) Notwithstanding
anything to the contrary contained in this Agreement, the Company shall not
be
required to hold the Company Stockholders Meeting if this Agreement is
terminated in accordance with Section 7.1.
(c) As
soon as reasonably practicable following the Acceptance Time (or, if later,
following the termination of the subsequent offering period, if any), the
Company shall, with the assistance and approval (not to be unreasonably
withheld, conditioned or delayed) of Parent, prepare and file with the SEC
the
Proxy Statement. Parent, Merger Sub and the Company will cooperate
and consult with each other in the preparation of the Proxy
Statement. Without limiting the generality of the foregoing, each of
Parent and Merger Sub will furnish to the Company the information relating
to it
required by the Exchange Act and its rules and regulations to be set forth
in
the Proxy Statement. The Company shall use its reasonable best
efforts to resolve all SEC comments with respect to the Proxy Statement as
promptly as reasonably practicable after receipt of such comments, and to cause
the Proxy Statement to be mailed to the Company Stockholders as soon as
practicable after the Proxy Statement is cleared by the SEC. Each of
Parent, Merger Sub and the Company agree to correct any information provided
by
it for use in the Proxy Statement which shall have become false or
misleading. The Company shall as soon as reasonably practicable (i)
notify Parent and Merger Sub of the receipt of any comments from the SEC with
respect to the Proxy Statement and any request by the SEC for any amendment
to
the Proxy Statement or for additional information and (ii) provide Parent with
copies of all written correspondence between the Company and its
Representatives, on the one hand, and the SEC, on the other hand, with respect
to the Proxy Statement.
(d) Notwithstanding
Section 5.2(a), 5.2(b) or 5.2(c), in the event that Parent or Merger Sub shall
acquire (including pursuant to the Merger Option), together with the shares
of Company Common Stock owned by Parent, Merger Sub and any other Subsidiary
of
Parent, at least 90% of the outstanding shares of Company Common Stock, the
parties agree to take all necessary and appropriate action to cause the Merger
to become effective as soon as
37
practicable
after the Acceptance Time in accordance with Section 253 of the DGCL without
a
meeting of the Company Stockholders.
(e) Parent
shall continue to hold all shares acquired in the Offer through the Merger
and
shall vote, or cause to be voted, all of the Company Common Stock acquired
in
the Offer or otherwise then owned by it, Merger Sub or any of Parent's other
Subsidiaries in favor of the approval and adoption of the Merger and this
Agreement.
Section
5.3 No
Solicitation.
(a) The
Company shall not, nor shall it authorize or permit any of its Subsidiaries,
any
of its or their respective directors, officers or employees or any investment
banker, financial advisor, attorney, accountant or other advisor, agent or
representative retained by the Company or any Subsidiary in connection with
the
Transactions (collectively, "Representatives") to, directly or indirectly
through another Person, except as otherwise provided below, (i) solicit,
initiate, or knowingly encourage or facilitate (including by way of furnishing
information), any inquiries or the making, submission or announcement of, any
proposal or offer that constitutes or is reasonably likely to lead to a Takeover
Proposal or (ii) other than informing persons of the provisions contained in
this Section 5.3, enter into, continue or participate in any discussions or
negotiations regarding any Takeover Proposal, or furnish any information
concerning the Company and its Subsidiaries to any Person in connection with
any
Takeover Proposal, or otherwise cooperate with or take any other action to
knowingly facilitate any effort or attempt to make or implement a Takeover
Proposal. Notwithstanding anything in this Section 5.3 to the
contrary, at any time prior to the Acceptance Time, the Company may, upon a
good
faith determination by the Company's Board of Directors (after receiving the
advice of its outside counsel) that failure to take such action would be
reasonably likely to result in a breach of the Company's Board of Directors'
fiduciary duties to the stockholders of the Company under applicable Law, and
after giving Parent prompt written notice of such determination, (A) in response
to an unsolicited bona fide written Takeover Proposal made after the
date of this Agreement that the Company's Board of Directors determines in
good
faith (after consultation with outside counsel and receiving the advice of
a
financial advisor of nationally recognized reputation) constitutes or may result
in a Superior Proposal, furnish information with respect to the Company and
its
Subsidiaries to the Person making such Takeover Proposal (and its
Representatives) pursuant to a confidentiality agreement containing terms and
conditions no more favorable to such Person than those contained in the
Confidentiality Agreement, dated June 25, 2007 (as it may be amended from time
to time, the "Confidentiality Agreement"), between Parent and the
Company, are to Parent, except that such confidentiality agreement between
the
Company and such Person shall not contain any provisions that would prevent
the
Company from complying with its obligations to provide the required disclosure
to Parent pursuant to this Section 5.3 and shall permit such Person to make
a
Takeover Proposal; provided that all such information (to the extent
that such written information that has not been previously provided or made
available to Parent) is provided or made available to Parent and (B) in response
to an unsolicited bona fide written Takeover Proposal made after the
date of this Agreement that the Company's Board of Directors determines in
good
faith (after consultation with outside counsel and receiving the advice of
a financial advisor of nationally recognized reputation) constitutes or is
reasonably likely to result in a Superior Proposal, participate in discussions
or negotiations with the Person making such Takeover Proposal (and its
Representatives) regarding such
38
Takeover
Proposal. Upon execution of this Agreement, the Company shall, and
shall cause its Subsidiaries and its and their respective Representatives to,
immediately cease and cause to be terminated all existing discussions or
negotiations with any Person previously conducted with respect to any Takeover
Proposal, and will request, to the extent permitted under the applicable
confidentiality agreement, the prompt return of any confidential information
previously furnished to such Persons that has not been previously returned
to
the Company. Any violation of the restrictions set forth in this
Section 5.3 by any Representative of the Company or its Subsidiaries shall
be
deemed to be a breach of this Section 5.3 by the Company.
(b) Except
as expressly permitted by this Section 5.3(b), the Board of Directors of the
Company shall not (i)(A) withdraw, modify or qualify, in a manner adverse to
Parent, the recommendation by such Board of Directors that stockholders of
the
Company accept the Offer, tender their shares of Company Common Stock in the
Offer and adopt this Agreement or (B) adopt, recommend or propose publicly
to
adopt or recommend, to the stockholders of the Company a Takeover Proposal
(any
action described in this clause (i) being referred to as a "Company Adverse
Recommendation Change") (it being understood and agreed that any "stop, look
and listen" communication by the Board of Directors to the stockholders of
the
Company pursuant to Rule 14d-9(f) of the Exchange Act shall not constitute
a
Company Adverse Recommendation Change) or (ii) authorize the Company or any
of
its Subsidiaries to enter into any letter of intent, memorandum of
understanding, agreement in principle or merger, acquisition or similar
agreement with respect to, or that is intended to or could reasonably be
expected to lead to any Takeover Proposal (other than a confidentiality
agreement referred to in Section 5.3(a)) (each, a "Company Acquisition
Agreement"). Notwithstanding the foregoing, at any time prior to
the Acceptance Time and subject to the proviso of this sentence: (x) the Board
of Directors of the Company may make a Company Adverse Recommendation Change,
upon a good faith determination by the Company's Board of Directors (after
receiving the advice of its outside counsel) that failure to take such action
would be reasonably likely to result in a breach of the Company's Board of
Directors' fiduciary duties to the stockholders of the Company under applicable
Law, and (y) if the Board of Directors of the Company receives a Takeover
Proposal that such Board of Directors reasonably determines (after
receiving the advice of its outside counsel and receiving the advice of a
financial advisor of nationally recognized reputation) constitutes a Superior
Proposal, and that was unsolicited after the date of this Agreement and did
not
otherwise result from a breach of this Section 5.3, the Company or its
Subsidiaries may enter into a Company Acquisition Agreement with respect to
such
Superior Proposal if the Company shall have complied with the provisions of
the
following sentence and, concurrently with entering into such Company Acquisition
Agreement, terminated this Agreement pursuant to Section 7.1(d)(ii) and paid
the
Termination Fee and Expense Payment pursuant to Section 7.3(a); provided,
however, that the Company shall not be entitled to exercise its right
to
make a Company Adverse Recommendation Change, terminate this Agreement pursuant
to Section 7.1(d)(ii) or enter into any Company Acquisition
Agreement unless: (1) the Company has provided to Parent five (5)
Business Days prior written notice (an "Alternative Transaction Notice"),
which Alternative Transaction Notice shall specify that the Board of Directors
of the Company is prepared to make a Company Adverse Recommendation Change,
terminate this Agreement pursuant to Section 7.1(d)(ii) and/or enter into any
Company Acquisition Agreement, as applicable, and, in the case of a Takeover
Proposal that the Board of Directors has determined constitutes a Superior
Proposal, shall attach the most current version of any written agreement
relating to such Takeover Proposal and contain a description of any other
material terms of such
39
Takeover
Proposal and advising Parent that the Board of Directors of the Company has
determined that such Takeover Proposal is a Superior Proposal and that the
Board
of Directors of the Company intends to enter into an agreement providing for
such Superior Proposal, (2) during such five (5) Business Day period, if
requested by Parent, the Company has engaged in good-faith negotiations with
Parent to amend this Agreement in such a manner that the Takeover Proposal
that
was determined to constitute a Superior Proposal no longer is a Superior
Proposal and (3) on midnight, New York time, at the end of the fifth
(5th) Business Day following the date of receipt of the Alternative Transaction
Notice (or, in the event that the Takeover Proposal has been materially revised
or modified, at the end of midnight, New York time, on the fifth (5th) Business
Day following the date of receipt of notice of such material revision or
modification, if later), such Takeover Proposal has not been withdrawn and
continues to constitute a Superior Proposal (taking into account all changes
to
the terms of this Agreement proposed by Parent). It is understood and
agreed that an Alternative Transaction Notice shall be required for a Company
Adverse Recommendation Change, regardless of whether it was made in response
to
or as a result of a Superior Proposal.
(c) In
addition to the obligations of the Company set forth in Sections 5.3(a) and
5.3(b), the Company shall promptly (and in any event within twenty-four (24)
hours of learning of the relevant information) advise Parent in writing of
any
Takeover Proposal and the material terms and conditions of any such Takeover
Proposal (including any changes thereto) and, unless such disclosure would
be
reasonably likely to result in a breach of the Company’s Board of Directors’
fiduciary duties to the stockholders of the Company under applicable Law, the
identity of the Person making any such Takeover Proposal. The Company
shall keep Parent fully informed of the status and material terms (including
any
change to the material terms of such Takeover Proposal) of any Takeover
Proposal, and shall provide Parent with copies of all Takeover Proposals (and
amendments or material modifications of such Takeover Proposals) and related
agreements, draft agreements exchanged by the parties and modifications
thereof.
(d) For purposes of this
Agreement:
"Takeover
Proposal" means any inquiry, proposal or offer from any Person (other than
Parent and its Subsidiaries) relating to any (A) direct or indirect acquisition
or purchase, in one transaction or a series of related transactions, of assets
of the Company and its Subsidiaries (including securities of Subsidiaries,
but
excluding sales of assets in the ordinary course of business consistent with
past practice) equal to 15% or more of the Company's consolidated assets or
to
which 15% or more of the Company's revenues, net income or earnings on a
consolidated basis are attributable, (B) acquisition of 15% or more of the
outstanding Company Common Stock, (C) tender offer or exchange offer that if
consummated would result in any Person beneficially owning 15% or more of the
outstanding Company Common Stock or any other class of equity securities of
the
Company or (D) merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution, joint venture or similar transaction
involving the Company or any of its Subsidiaries; in each case, other than
the
Transactions.
"Superior
Proposal" means a bona fide written Takeover Proposal obtained not
in breach of this Section 5.3 to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 75% of the
outstanding Company Common Stock
40
or
more than 75% of the assets of the Company and its Subsidiaries on a
consolidated basis, made by a third party, and which is otherwise on terms
and
conditions which the Board of Directors of the Company determines in its good
faith and reasonable judgment (after consultation with a financial advisor
of
national reputation and in light of all relevant circumstances, including all
the terms and conditions of such proposal and this Agreement) to be (A) more
favorable to the Company Stockholders from a financial point of view than the
Offer, the Merger and the other Transactions, (B) is reasonably likely to
be consummated on the terms so proposed, taking into account all relevant
financial, regulatory, legal and other aspects of such proposal, including
any
conditions; and (C) for which financing, to the extent required, is then
fully committed or which, in the good-faith judgment of the Board of Directors
of the Company (based on the advice of a financial advisor of national
reputation), is reasonably capable of being timely financed by such third
party.
(e) Nothing
in this Section 5.3 shall prohibit the Board of Directors of the Company from
taking and disclosing to the Company Stockholders a position contemplated by
Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of Regulation M-A promulgated under
the Exchange Act, or other applicable Law, if such Board of Directors
determines, after consultation with outside counsel, that failure to so disclose
such position could constitute a violation of applicable Law; provided
that in no event shall the Company or its Board or Directors or any committee
of
the Board of Directors take, or agree or resolve to take, any action prohibited
by Section 5.3(b).
Section
5.4 Reasonable Best
Efforts.
(a) Subject
to the terms and conditions of this Agreement, each of the parties hereto shall
cooperate with the other parties and use (and shall cause their respective
Subsidiaries to use) their respective reasonable best efforts to promptly (i)
take, or cause to be taken, all actions, and do, or cause to be done, all
things, necessary, proper or advisable to cause the conditions to Closing to
be
satisfied as promptly as practicable and to consummate and make effective,
in
the most expeditious manner practicable, the Transactions, including preparing
and filing promptly and fully all documentation to effect all necessary filings,
notices, petitions, statements, registrations, submissions of information,
applications and other documents (including any required or recommended filings
under applicable Antitrust Laws), and (ii) obtain all approvals, consents,
registrations, permits, authorizations and other confirmations from any
Governmental Authority necessary, proper or advisable to consummate the
Transactions. For purposes of this Agreement, "Antitrust Laws"
means the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇ Act, as amended, the HSR Act,
the
Federal Trade Commission Act, as amended, and all other applicable Laws issued
by any Governmental Authority that are designed or intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolization
or
restraint of trade or lessening of competition through merger or
acquisition.
(b) In
furtherance and not in limitation of the foregoing, (i) each party hereto agrees
to make an appropriate filing of a Notification and Report Form pursuant to
the
HSR Act with respect to the Transactions as promptly as practicable, and in
any
event within ten(10) Business Days of the date of this Agreement, and to supply
as promptly as practicable any additional information and documentary material
that may be requested pursuant to the HSR Act and use its reasonable best
efforts to take, or cause to be taken, all other actions consistent
with
41
this
Section 5.4 necessary to cause the expiration or termination of the applicable
waiting periods under the HSR Act as soon as practicable; and (ii) the Company
and Parent shall each use its reasonable best efforts to (x) take all action
necessary to ensure that no state takeover statute or similar Law is or becomes
applicable to any of the Transactions and (y) if any state takeover statute
or
similar Law becomes applicable to any of the Transactions, take all action
necessary to ensure that the Transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise minimize
the effect of such Law on the Transactions.
(c) Each
of the parties hereto shall use its reasonable best efforts to (i) cooperate
in
all respects with each other in connection with any filing or submission with
a
Governmental Authority in connection with the Transactions and in connection
with any investigation or other inquiry by or before a Governmental Authority
relating to the Transactions, including any proceeding initiated by a private
party, and (ii) promptly notify the other party of any written communication
to
that party from the Federal Trade Commission, the Antitrust Division of the
Department of Justice, any State Attorney General or any other Governmental
Authority and permit the other party to review in advance any proposed
communication to any of the foregoing, (iii) consult with the other party prior
to participating in any substantive meeting, telephone call or discussion with
any Governmental Authority in respect of any filings, investigation or inquiry
concerning this Agreement or the Merger and provide the other party the
opportunity to attend and participate in any such meeting, telephone call or
discussion, and (iv) furnish the other party with copies of all correspondence,
filings, and written communications (or a reasonably detailed summary of any
oral communications) between them and their respective representatives on the
one hand, and any Governmental Authority or members of their respective staffs
on the other hand, with respect to this Agreement and the Merger.
(d) In
furtherance and not in limitation of the covenants of the parties contained
in
this Section 5.4, each of the parties hereto shall use its reasonable best
efforts to resolve such objections, if any, as may be asserted by a Governmental
Authority or other Person with respect to the Transactions. Without
limiting any other provision of this Agreement, Parent and the Company shall
each use their reasonable best efforts to (i) avoid the entry of, or to have
vacated or terminated, any decree, order or judgment that would restrain,
prevent or delay the consummation of the Transactions, on or before the
Walk-Away Date, and (ii) avoid or eliminate each and every impediment under
any
Antitrust Law that may be asserted by any Governmental Authority with respect
to
the Transactions so as to enable the consummation of the Transactions to occur
as soon as reasonably possible (and in any event no later than the Walk-Away
Date), in each case, as may be required in order obtain any approvals from
any
Governmental Authority necessary to consummate the Transactions or to avoid
the
entry of, or to effect the dissolution of, any injunction, temporary restraining
order, or other order in any suit or proceeding, which would otherwise have
the
effect of preventing or materially delaying the consummation of the
Transactions; provided, however, that, notwithstanding anything to
the contrary in this Agreement, in connection with any filing or submission
required or action to be taken by either Parent or the Company to consummate
the
Transactions, in no event shall Parent or any of its Subsidiaries or Affiliates
be obligated to propose or agree to accept any undertaking or condition, to
enter into any consent decree, to make any divestiture or accept any operational
restriction, or take or commit to take any action (i) the effectiveness or
consummation of which is not conditional on the consummation of the Offer and
the Merger or (ii) that individually or in the
42
aggregate
is or would reasonably be expected to be materially adverse (with materiality,
for purposes of this provision, being measured in relation to the size of the
Company and its Subsidiaries taken as a whole) to (A) the Company and its
Subsidiaries, taken as a whole, or Parent and its Subsidiaries, taken as a
whole, either before or after giving effect to the Offer or the Merger, or
(B) Parent’s ownership or operation of any material portion of the business
or assets of the Company and its Subsidiaries, taken as a whole (a
"Materially Burdensome Condition"). The Company shall agree,
if requested by Parent in writing, to commit to take any of the forgoing actions
with respect to the assets or business of the Company in furtherance of this
Section 5.4; provided, however, that any such action may be
conditioned upon the consummation of the Merger and other Transactions
contemplated by this Agreement.
(e) To
the extent requested by Parent, the Company and its Subsidiaries shall use
all
reasonable efforts to cooperate with Parent in obtaining title insurance with
respect to the Owned Real Property, including execution and delivery of title
affidavits and other documents reasonably requested by Parent's title
insurer.
Section
5.5 Public
Announcements. The initial press release with respect to the
execution of this Agreement shall be a joint press release to be reasonably
agreed upon by Parent and the Company. Parent and the Company shall
consult with each other before issuing, and, to the extent practicable, give
each other the reasonable opportunity to review and comment upon, any press
release or other public statements with respect to the transactions contemplated
by this Agreement or the Tender Agreement, including the Offer and the Merger,
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by applicable Law, court
process or by obligations pursuant to any listing agreement with any national
securities exchange or national securities quotation system.
Section
5.6 Access to Information;
Confidentiality. Subject to applicable Laws relating to the
exchange of information, from the date of this Agreement until the Effective
Time, the Company shall afford to Parent and Parent's Representatives reasonable
access during normal business hours to the Company's properties, books, records
and personnel and the Company shall furnish promptly to Parent such other
information concerning its business and properties as Parent may from time
to
time reasonably request, provided, however, that the Company shall
not be required to provide access to any information or documents which would,
in the reasonable judgment of the Company, (i) breach any agreement of the
Company or any of its subsidiaries with any third-party, (ii) constitute a
waiver of the attorney-client or other privilege held by the Company, (iii)
otherwise violate any applicable Laws or (iv) which would result in a competitor
of the Company or any of its subsidiaries receiving material information which
is competitively sensitive; provided, further, however, that the
Company will use its reasonable best efforts to obtain any required consents
for
the disclosure of such information or documents and take such other action
(such
as the redaction of identifying or confidential information or entry into a
joint defense agreement or other arrangement to avoid loss of attorney client
privilege) with respect to such information or documents as is necessary to
permit disclosure to Parent and Parent's Representatives. Until the
Effective Time, the information provided will be subject to the terms of the
Confidentiality Agreement.
43
Section
5.7 Indemnification and
Insurance.
(a) Parent
shall cause (including by providing adequate funding to) the Surviving
Corporation to assume the obligations with respect to all rights to
indemnification and exculpation from liabilities, including advancement of
expenses, for acts or omissions occurring at or prior to the Effective Time
now
existing in favor of the current or former directors or officers of the Company
and its Subsidiaries (each, an "Indemnitee" and, collectively, the
"Indemnitees") as provided in the Company Charter Documents or any
written indemnification Contract between such directors or officers and the
Company (in each case, as in effect on the date hereof), without further action,
as of the Effective Time, and such obligations shall survive the Merger and
shall continue in full force and effect in accordance with their terms, along
with the indemnification obligations of the Surviving Corporation set forth
in
Section 5.7(a) of the Company Disclosure Schedule. Without limiting
the foregoing, Parent, for a period of at least six years after the Effective
Time, shall cause the certificate of incorporation and by-laws of the Surviving
Corporation (or any successor) to contain provisions no less favorable to the
Indemnitees with respect to limitation of liabilities of directors and officers
and indemnification than are set forth as of the date of this Agreement in
the
Company Charter Documents, which provisions shall not be amended, repealed
or
otherwise modified in a manner that would adversely affect the rights thereunder
of the Indemnitees. Parent shall cause (including by providing adequate
funding to) the Surviving Corporation to, honor all of its indemnification
obligations existing as of the Effective Time.
(b) For
the six-year period commencing immediately after the Effective Time, Parent
shall maintain in effect directors' and officers' liability insurance covering
acts or omissions occurring at or prior to the Effective Time with respect
to
those persons who are currently (and any additional persons who at or prior
to
the Effective Time become) covered by the Company's directors' and officers'
liability insurance policies on terms with respect to such coverage, and in
amount, not less favorable to such individuals than those of such policies
in
effect on the date of this Agreement (or Parent may substitute therefor
policies, issued by reputable insurers, of at least the same coverage with
respect to matters occurring prior to the Effective Time; provided that
any substitution or replacement of existing policies shall not result in any
gaps or lapses of coverage with respect to facts, events, acts or omissions
occurring at or prior to the Effective Time)); provided, however,
that, if the aggregate annual premiums for such insurance shall exceed 200%
of
the current aggregate annual premiums, then Parent shall provide or cause to
be
provided a policy for the applicable individuals with the best coverage as
shall
then be available at the sum of (i) an annual premium of 200% of the
current aggregate annual premiums plus (ii) the unearned portion of the
premium paid by the Company for the current year for such
insurance.
(c) The
provisions of this Section 5.7 are intended to be for the benefit of, and shall
be enforceable by, each Indemnitee, his or her heirs and his or her
representatives and, in addition to, and not in substitution for, and shall
not
impair any other rights to indemnification or contribution that any such Person
may have by contract, under the Company Charter Documents, or the comparable
organization documents of the Surviving Corporation or any of its
subsidiaries, under applicable Law, or otherwise. Parent shall ensure
that the Surviving Corporation complies with all of its obligations under this
Section 5.7.
44
Section
5.8 [Intentionally
Omitted].
Section
5.9 Fees and
Expenses. Except as provided in Section 7.3, all fees and
expenses incurred in connection with this Agreement and the Transactions shall
be paid by the party incurring such fees or expenses, whether or not the
Transactions are consummated; provided that the fees and expenses of
printing and mailing the Tender Offer Documents, all filing and other fees
paid
to the SEC in connection with the Offer and the Merger and all filing fees
associated with the HSR Act shall be borne equally by Parent and the
Company.
Section
5.10 Employee Matters.
(a) Subject
to Section 5.10(c), during the period of twelve (12) months immediately
following the Effective Time, Parent shall, or shall cause the Surviving
Corporation and its Subsidiaries to, provide those employed by the Company
and
its Subsidiaries at the Effective Time (the "Company Employees") with at
least the level of salary as in effect at the Effective Time; provided,
however, that employment shall be "at will", except as set forth in
the
Employment Agreements.
(b) For
the first six-month merchandising season commencing after the Effective Time,
Parent shall, or shall cause the Surviving Corporation and its Subsidiaries
to,
continue incentive compensation award programs in accordance with past practice
under the Company Plans listed on Section 5.10(b) of the Company Disclosure
Schedule. For the avoidance of doubt, if the Effective Time occurs
after the end of the six-month merchandising season ending February 2, 2008,
the
Company shall be entitled to continue the Company's currently existing incentive
compensation award programs in accordance with past practice through the end
of
the six-month merchandising season beginning February 3, 2008.
(c) Section
5.10(a) to the contrary notwithstanding, Parent shall, or shall cause the
Surviving Corporation and its Subsidiaries to, provide each Company Employee
who
incurs a termination of employment during the period of twelve (12) months
immediately following the Effective Time with severance payments and severance
benefits that are no less favorable than the severance payments and severance
benefits to which such employee would have been entitled with respect to such
termination immediately prior to the Effective Time as disclosed in Section
5.10(c) of the Company Disclosure Schedule.
(d) For
a period of twelve (12) months immediately following the Effective Time, Parent
shall, or shall cause the Surviving Corporation and its Subsidiaries to, provide
Company Employees with employee benefit and Retirement Plans, programs, and
arrangements (other than equity-based plans) that are no less favorable in
the
aggregate than the employee benefit and retirement savings plans, programs
and arrangements (other than equity-based plans) provided by the Company and
its
Subsidiaries to Company Employees immediately prior to the Effective Time;
provided, however, that employment shall be "at will"
except as set forth in the Employment Agreements. Without
limiting the generality of the foregoing, Parent shall, or shall cause the
Surviving Corporation and its Subsidiaries to, (i) waive any
preexisting condition limitations otherwise applicable to Company Employees
and their eligible dependents under any plan of Parent or its Subsidiaries
that
provides health benefits in which Company Employees may be eligible to
participate following the Closing Date, other than any limitations
45
that
were in effect with respect to such employees as of the Closing Date under
the
analogous Company Plan, (ii) honor any deductible, co-payment and out-of-pocket
maximums incurred by the Company Employees and their eligible dependents under
the health plans in which they participated immediately prior to the Closing
Date during the portion of the calendar year prior to the Closing Date in
satisfying any deductibles, co-payments or out-of-pocket maximums under health
plans of Parent and its Subsidiaries in which they are eligible to participate
after the Closing Date in the same plan year in which such deductibles,
co-payments or out-of-pocket maximums were incurred, (iii) honor the Company's
expense reimbursement policy, (iv) waive any waiting period limitation or
evidence of insurability or at work requirement that would otherwise be
applicable to a Company Employee and his or her eligible dependents on or after
the Closing Date, in each case to the extent such Company Employee or eligible
dependent had satisfied any similar limitation or requirement under an analogous
Company Plan prior to the Closing Date and (v) credit Company Employees with
the
amount of current year vacation time that shall have been accrued and
unpaid at the Effective Time. Following the Closing Date, Parent
shall, and shall cause the Surviving Corporation and its Subsidiaries to, honor
in accordance with their respective terms, all Company Plans. Parent
acknowledges that, except as set forth on Section 5.10(d) of the Company
Disclosure Schedule, the consummation of the Merger shall constitute a "Change
of Control" or "Change in Control" as applicable, for purposes of each Company
Plan listed on Section 5.10(d) of the Company Disclosure Schedule in which
that
concept is relevant.
(e) This
Section 5.10 shall be binding upon and inure solely to the benefit of each
of
the parties to this Agreement, and nothing in this Article V, express or
implied, is intended to confer upon any other Person any rights or remedies
of
any nature whatsoever under or by reason of this Section 5.10.
(f)
Nothing contained in this Agreement shall (i) constitute or be deemed to be
an
amendment to any Company Plan or any other compensation or benefit plan, program
or arrangement of the Company or any of its Subsidiaries; (ii) prevent the
amendment or termination of any Company Plan or interfere with the right or
obligation of Parent or its Affiliates to make such changes as are necessary
to
conform with applicable Law (including without limitation Section 409A of the
Code); or (c) limit the right of Buyer or any of its Affiliates to terminate
the
employment of any employee at any time.
(g)
If the Company or any of its Subsidiaries enters into, adopts, amends, modifies
or terminates any Arrangements to Covered Securityholders, the Company intends
that all such amounts payable under such Arrangements (i) shall be paid or
granted as compensation for past services performed, future services to be
performed, or future services to be refrained from performing, by the Covered
Securityholders (and matters incidental thereto) and (ii) shall not be
calculated based on the number of shares tendered or to be tendered into the
Offer by the applicable Covered Securityholder. If there has been any
adoption, approval, amendment or modification of any Arrangement, either prior
to or after the date of this Agreement, the Company agrees that, upon the
request of Parent, the Compensation Committee of the Board of Directors of
the
Company, consisting solely of independent directors, shall approve
resolutions approving such adoption, approval, amendment or modification as
an
employment compensation, severance or other employee
46
benefit
arrangements, in accordance with the requirements of Rule 14d-10(d)(2) under
the
Exchange Act and the instructions thereto.
Section
5.11 Updated
Information. Prior to the Closing, the Company shall give written
notice to Parent of the occurrence, or failure to occur, after the date of
this
Agreement, of any event which occurrence or failure has caused or would be
reasonably likely to cause any representation or warranty contained in this
Agreement or in any section of the Company Disclosure Schedule to be untrue
or
inaccurate in any material respect; provided that any such notice shall
not be deemed to have qualified or modified the representations and warranties
contained in Article III for the purposes of determining whether the conditions
specified in Annex A have been satisfied.
Section
5.12 Section 16
Matters. Prior to the Effective Time, the Company shall take all
such steps as may be required and permitted to cause the transactions
contemplated by this Agreement, including any dispositions of Company Common
Stock (including derivative securities with respect to such Company Common
Stock) by each individual who is or will be subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to the Company,
to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section
5.13 Takeover Laws. The
Company and its Board of Directors shall (a) use reasonable best efforts to
ensure that no state takeover Law or similar Law is or becomes applicable to
this Agreement, the Offer, the Merger or any of the other transactions
contemplated by this Agreement and (b) if any state takeover Law or similar
Law
becomes applicable to this Agreement, the Offer, the Merger or any of the other
transactions contemplated by this Agreement, use reasonable best efforts to
ensure that the Offer, the Merger and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
Law
on this Agreement, the Offer, the Merger and the other transactions contemplated
by this Agreement.
Section
5.14 Company Rights
Plan. The Board of Directors of the Company shall not, without
the prior written consent of Parent, amend, take any action with respect to,
or
make any determination under, the Company Rights Plan (including a redemption
of
the Company Rights) to facilitate a Takeover Proposal prior to the termination
of this Agreement; provided, however, that the foregoing shall not
prevent the Company from delaying the Distribution Date (as such term is defined
in the Company Rights Plan) as permitted by the Company Rights
Plan.
ARTICLE
VI
CONDITIONS
PRECEDENT TO THE MERGER
Section
6.1 Conditions to Each Party's
Obligation to Effect the Merger. The respective obligations of
each party hereto to effect the Merger shall be subject to the satisfaction
(or
waiver by Parent, Merger Sub and the Company, if permissible under applicable
Law) on or prior to the Closing Date of the following conditions:
47
(a) Company
Stockholder Approval. The Company Stockholder Approval shall have
been obtained, if and to the extent required under applicable Law;
(b) Purchase
of Company Common Stock. Parent or Merger Sub shall have accepted
for payment and paid for shares of Company Common Stock pursuant to the Offer
in
accordance with the terms of this Agreement; and
(c) No
Injunctions or Restraints. No Law, temporary restraining order,
preliminary or permanent injunction, judgment or ruling enacted, promulgated,
issued or entered by any Governmental Authority (collectively,
"Restraints") shall be in effect enjoining, restraining, preventing or
prohibiting consummation of the Merger or making the consummation of the Merger
illegal.
ARTICLE
VII
TERMINATION
Section
7.1 Termination. This
Agreement may be terminated and the Transactions abandoned at any time prior
to
the Effective Time, whether before or after receipt of the Company Stockholder
Approval:
(a) by
the mutual written consent of the Company and Parent duly authorized by each
of
their respective Boards of Directors;
(b) by
either of the Company or Parent:
(i) if
the Merger shall not have been consummated on or before June 30, 2008 (the
"Walk-Away Date"); provided, however, that the right to
terminate this Agreement under this Section 7.1(b)(i) shall not be available
to
a party if the failure of the Merger to have been consummated on or before
the
Walk-Away Date was primarily due to the failure of such party to perform any
of
its obligations under this Agreement;
(ii) if
a Restraint prohibiting the Merger shall have become final and nonappealable;
or
(iii) if
the Offer shall have expired or been terminated in accordance with the terms
of
this Agreement without Parent or Merger Sub having accepted for purchase any
shares of Company Common Stock pursuant to the Offer, other than due to a breach
of this Agreement by the terminating party; or
(c) by
Parent, prior to the Acceptance Time:
(i) if
the Company shall have breached or failed to perform any of its representations,
warranties, covenants or agreements set forth in this Agreement, which breach
or
failure to perform (A) would result in any of
48
the
events set forth in clause (c) or (d) of Annex A to occur and (B) is not cured,
or cannot be cured, by the Company within thirty (30) calendar days following
receipt of written notice of such breach or failure to perform from Parent
(or
if the Walk-Away Date is less than thirty (30) calendar days from the
notice by Parent, is not cured, or cannot be cured, by the Company by the
Walk-Away Date); or
(ii) if
(A) a Company Adverse Recommendation Change shall have occurred, or (B) the
Board of Directors of the Company fails publicly to reaffirm its adoption and
recommendation of this Agreement, the Offer, the Merger or the other
transactions contemplated by this Agreement within ten (10) Business Days
of receipt of a written request by Parent to provide such reaffirmation
following a Takeover Proposal; or
(d) by
the Company, prior to the Acceptance Time:
(i) if
Parent or Merger Sub shall have breached or failed to perform any of its
representations, warranties, covenants or agreements set forth in this
Agreement, which breach or failure to perform (A) would result in (1) any
representation or any representation or warranty of Parent and Merger Sub
contained in this Agreement not being true and correct (without giving effect
to
any qualifications or limitations as to materiality or Parent Material Adverse
Effect set forth therein) except, in the case of this clause (1), to the extent
that the facts or matters as to which such representation or warranty is not
so
true and correct, individually or in the aggregate, have not had and could
not
reasonably be expected to have a Parent Material Adverse Effect or (2) a
failure by Parent or Merger Sub to perform in all material respects its
agreements, covenants and obligations required to be performed by it under
this
Agreement at or prior to such time and (B) is not cured, or is incapable of
being cured, by Parent or Merger Sub within thirty (30) calendar days following
receipt of written notice of such breach or failure to perform from the Company
(or, if the Walk-Away Date is less than thirty (30) calendar days from the
notice by the Company, is not cured, or is incapable of being cured, by Parent
or Merger Sub by the Walk-Away Date); or
(ii) if
concurrently it enters into a definitive Company Acquisition Agreement providing
for a Superior Proposal, but only after complying with the provisions of Section
5.3(b), including paying to Parent the Termination Fee and Expense Payment
payable pursuant to Section 7.3 concurrently with such termination.
Section
7.2 Effect of
Termination. In the event of the termination of this Agreement as
provided in Section 7.1, written notice of such termination shall be given
to
the other party or parties, specifying the provision of this Agreement pursuant
to which such termination is made, and this Agreement shall forthwith become
null and void (other than Sections 5.9, 7.2 and 7.3, Article VIII, and the
Confidentiality Agreement in accordance with its terms, all of which shall
survive termination of this Agreement in accordance with its terms), and there
shall be no liability or other obligation on the part of Parent, Merger Sub
or
the Company or their respective Subsidiaries, or its or their respective
stockholders, controlling persons or
49
Representatives,
except (a) the Company may have liability as provided in Section 7.3, and (b)
nothing shall (i) relieve Parent, Merger Sub or the Company from liability
for
any willful and material breach by such party of its covenants under this
Agreement to be performed prior to the Closing Date or (ii) relieve Parent
or
Merger Sub from liability to the Company for any breach of Section
4.8.
Section
7.3 Termination
Fees.
(a)
In the event that this Agreement is terminated by Parent pursuant to Section
7.1(c)(ii) or the Company pursuant to Section 7.1(d)(ii), then the Company
shall
pay to Parent, no later than the second (2nd) Business Day following termination
in the case of Section 7.1(c)(ii) and concurrently with termination in the
case
of Section 7.1(d)(ii), by wire transfer of same-day funds (i) a termination
fee
of $5,850,000 (the "Termination Fee") and (ii) all reasonable
out-of-pocket expenses, actually documented and incurred or payable by or on
behalf of Parent or Merger Sub in connection with or in anticipation of the
Transactions (whether before or after the date of this Agreement), including
all
attorneys' fees, financial advisor's fees (including fees set forth in Section
4.10), accountants' fees and filing fees (the "Expense Payment");
provided that in no circumstance shall the Expense Payment exceed
$1 million in the aggregate.
(b) In
the event that (i) Parent or the Company shall terminate this Agreement pursuant
to Section 7.1(b)(iii), or Parent shall terminate this Agreement pursuant to
Section 7.1(c)(i) as a result of a breach of Section 5.3, and (ii) in each
case
prior to the time of such termination a bona fide
Takeover Proposal or an intention (whether or not conditional) to make a
Takeover Proposal has been publicly made or otherwise made known to the Board
of
Directors of the Company or its stockholders and not withdrawn at least five
(5)
Business Days prior to termination, then the Company shall pay to Parent, no
later than the second (2nd) Business
Day
following termination in the case of a termination by Parent and concurrently
with such termination in the case of a termination by the Company, by wire
transfer of same-day funds, one-half of the Termination Fee and the entire
Expense Payment, and (iii) if, within 12 months after the date of such
termination, a definitive agreement is entered into by the Company or any of
its
Affiliates with respect to any Takeover Proposal or any Takeover Proposal is
consummated, then the Company shall pay to Parent, on the date such
agreement is entered into or on the date that such Takeover Proposal is
consummated, whichever is earlier, by wire transfer of same-day funds, an
additional amount equal to one-half of the Termination
Fee; provided, however, that for the purpose of this Section
7.3(b), all references in the definition of Takeover Proposal to "15%" shall
instead be deemed to refer to "a majority".
(c) Each
of the Company and Parent acknowledges that the agreements contained in this
Section 7.3 are an integral part of the Transactions and that, without these
agreements, Parent could not enter into this Agreement. Accordingly,
in the event that the Company shall fail to pay the Termination Fee or Expense
Payment when due, the Company, shall reimburse Parent for all costs and expenses
incurred or accrued by it (including reasonable fees and expenses of counsel)
in
connection with the collection under and enforcement of this Section
7.3 with interest on the amount of the Termination Fee and/or Expense
Payment, as the case may be, from the date that such payment was required to
be
made until the date of actual
50
payment
at the prime rate of Citibank, N.A, in effect on the date that such payment
was
required to be made.
(d) The
parties agree that the payment of the Termination Fee and/or Expense Payments
shall be the sole and exclusive remedy available to Parent and Merger Sub with
respect to this Agreement and the Transactions in the event any payment of
the
Termination Fee and/or Expense Payments become due and payable under the terms
of this Agreement, and, upon payment of the applicable amount, the Company
shall
have no further liability to Parent and Merger Sub hereunder.
ARTICLE
VIII
MISCELLANEOUS
Section
8.1 No Survival of
Representations and Warranties. The representations, warranties
and agreements in this Agreement shall terminate at the Effective Time or,
except as otherwise provided in Section 7.2, upon the termination of this
Agreement pursuant to Section 7.1, as the case may be; provided that the
agreements set forth in Article II and Sections 5.7 and 5.10 and any other
agreement in this Agreement which contemplates performance after the Effective
Time shall survive the Effective Time in accordance with their terms and those
set forth in Sections 5.9, 7.2 and 7.3 and this Article VIII shall survive
termination indefinitely. The Confidentiality Agreement shall survive
termination of this Agreement in accordance with its terms.
Section
8.2 Amendment or
Supplement. At any time prior to the Effective Time, this
Agreement may be amended or supplemented in any and all respects, whether before
or after receipt of the Company Stockholder Approval, by written agreement
of
the parties; provided, however, that following adoption of this
Agreement by the stockholders of the Company, there shall be no amendment or
change to the provisions of this Agreement which by Law would require further
approval by the stockholders of the Company without such approval.
Section
8.3 Extension of Time, Waiver,
Etc. At any time prior to the Effective Time, any party may,
subject to applicable Law, (a) waive any inaccuracies in the representations
and
warranties of any other party hereto, (b) extend the time for the performance
of
any of the obligations or acts of any other party hereto or (c) to the extent
permitted by applicable Law, waive compliance by the other party with any of
the
agreements contained in this Agreement or, except as otherwise provided in
this
Agreement, waive any of such party's conditions. Notwithstanding the
foregoing, no failure or delay by the Company, Parent or Merger Sub in
exercising any right hereunder shall operate as a waiver of rights, nor shall
any single or partial exercise of such rights preclude any other or further
exercise of such rights or the exercise of any other right
hereunder. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
Section
8.4 Assignment. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned, in whole or in part, by any of the parties without the prior
written consent of the other parties; provided that Parent and Merger Sub
may
51
assign
any of or all of its rights, interests and obligations under this Agreement
to
Parent or to any direct or indirect wholly owned Subsidiary of Parent, but
no
such assignment shall relieve Parent or Merger Sub of any of its obligations
under this Agreement. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable
by,
the parties hereto and their respective successors and permitted
assigns. Any purported assignment not permitted under this Section
8.4 shall be null and void.
Section
8.5 Counterparts. This
Agreement may be executed in counterparts (including by facsimile) (each of
which shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement) and shall become effective when one
or
more counterparts have been signed by each of the parties and delivered to
the
other parties. Copies of executed counterparts transmitted by telecopy, telefax
or electronic transmission shall be considered original executed counterparts
for purposes of this Section 8.5 provided that receipt of copies of such
counterparts is confirmed.
Section
8.6 Entire Agreement; No
Third-Party Beneficiaries. This Agreement, including the Company
Disclosure Schedule, the annexes hereto (including the Employment Agreements
and
the Tender Agreements), the documents and instruments relating to the Merger
referred to in this Agreement and the Confidentiality Agreement (a) constitute
the entire agreement, and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
of
this Agreement and the Confidentiality Agreement and (b) except for the
provisions of Section 5.7, and the right of the Company, on behalf of the
Company's stockholders, Option holders and holders of SARs, to bring a claim
against Parent and Merger Sub in the event that they fail to comply with their
obligation pursuant to the terms of this Agreement to deliver the Offer Price,
the Merger Consideration, the Option Consideration and the SARs Consideration,
as applicable, on or after the Effective Time or the Acceptance Time, as
applicable, are not intended to confer upon any Person other than the parties
any rights, benefits or remedies. Except for the representations and
warranties contained in this Agreement (including the schedules and annexes
to
this Agreement), none of Parent, Merger Sub or the Company, nor any of their
respective Affiliates or representatives, makes or shall be deemed to make
any
representation or warranty (including regarding projections, forecasts or
prospects) to the other parties to this Agreement, express or implied, at law
or
in equity, on behalf of Parent, Merger Sub or the Company, respectively, or
any
Affiliate or Representative of Parent, Merger Sub or the Company.
Section
8.7 Governing Law;
Jurisdiction; Waiver of Jury Trial.
(a) THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF
THE STATE OF DELAWARE, APPLICABLE TO CONTRACTS EXECUTED IN AND TO BE PERFORMED
ENTIRELY WITHIN THAT STATE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN
UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.
(b) All
actions and proceedings arising out of or relating to this Agreement shall
be
heard and determined in the Chancery Court of the State of Delaware or, in
the
event that such court does not have subject matter jurisdiction over such action
or proceeding, any federal court sitting in the State of Delaware, and the
parties to this Agreement irrevocably
52
submit
to the exclusive jurisdiction of such courts (and, in the case of appeals,
appropriate appellate courts therefrom) in any such action or proceeding and
irrevocably waive the defense of an inconvenient forum to the maintenance of
any
such action or proceeding. The consents to jurisdiction set forth in
this paragraph shall not constitute general consents to service of process
in
the State of Delaware and shall have no effect for any purpose except as
provided in this paragraph and shall not be deemed to confer rights on any
Person other than the parties hereto. Each of the parties to this
Agreement consents to service being made through the notice procedures set
forth
in Section 8.9 and agrees that service of any process, summons, notice or
document by registered mail (return receipt requested and first-class postage
prepaid) to the respective addresses set forth in Section 8.9 shall be effective
service of process for any suit or proceeding in connection with this Agreement
or the transactions contemplated by this Agreement. The parties
hereto agree that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or
in any other manner provided by applicable Law.
(c) EACH
OF THE PARTIES TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT.
Section
8.8 Specific
Enforcement. Subject to Section 7.3, the parties agree that
irreparable damage may occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, the parties agree that, if for any
reason Parent, Merger Sub or the Company shall have failed to perform its
obligations under this Agreement, then the party seeking to enforce this
Agreement against such nonperforming party under this Agreement shall be
entitled to specific performance and injunctive and other equitable relief,
and
the parties further agree to waive any requirement for the securing or posting
of any bond in connection with the obtaining of any such injunctive or other
equitable relief, this being in addition to any other remedy to which they
are
entitled at Law or in equity.
Section
8.9 Notices. Except
for notices that are specifically required by the terms of this Agreement to
be
delivered orally, all notices, requests and other communications to any party
hereunder shall be in writing and shall be deemed given if delivered personally,
facsimiled (which is confirmed) or sent by overnight courier (providing proof
of
delivery) to the parties at the following addresses:
53
If
to Parent or Merger Sub, to:
Redcats
USA, Inc.
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇
Faintreny, Chief Executive Officer
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
with
a copy (which shall not constitute notice) to:
Wachtell,
Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇
▇. ▇▇▇▇, Esq.
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
If
to the Company, to:
United
Retail Group, Inc.
▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief
Administrative Officer
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
with
a copy (which shall not constitute notice) to:
Skadden,
Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇
▇. ▇▇▇▇▇▇▇, Esq. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
or
such other address or facsimile number as such party may hereafter specify
by
like notice to the other parties hereto. All such notices, requests
and other communications shall be deemed received on the date of receipt by
the
recipient if received prior to 5 P.M., local time, in the place of receipt
and
such day is a Business Day in the place of receipt. Otherwise, any
such notice, request or communication shall be deemed not to have been received
until the next succeeding Business Day in the place of receipt.
Section
8.10 Severability. If any
term or other provision of this Agreement is determined by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced by any rule
of Law or public policy, all other terms, provisions and conditions of this
Agreement shall nevertheless remain in full force and effect. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to
modify this Agreement so as to effect the original intent of the parties as
closely as possible to the fullest extent permitted by applicable Law in an
acceptable manner to the end that the Transactions are fulfilled to the extent
possible.
54
Section
8.11 Definitions.
(a) As
used in this Agreement, the following terms have the meanings ascribed thereto
below:
"409A
Authorities" has the meaning set forth in Section 3.13(i).
"Acceptance
Time" has the meaning set forth in Section 1.3(a).
"Actions"
has the meaning set forth in Section 3.10.
"Affiliate"
shall mean, as to any Person, any other Person that, directly or indirectly,
controls, or is controlled by, or is under common control with, such
Person. For this purpose, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of management or policies of a Person, whether through the ownership
of securities or partnership or other ownership interests, by contract or
otherwise.
"Agreement"
has the meaning set forth in the preamble.
"Alternative
Transaction Notice" has the meaning set forth in Section
5.3(b).
"Antitrust
Laws" has the meaning set forth in Section 5.4(a).
"Arrangements"
has the meaning set forth in Section 3.13(j).
"Business
Day" shall mean a day except a Saturday, a Sunday or other day on which the
SEC or banks in the City of New York are authorized or required by Law to be
closed.
"Certificate"
has the meaning set forth in Section 2.7(c).
"Certificate
of Merger" has the meaning set forth in Section 2.3.
"Closing"
has the meaning set forth in Section 2.2.
"Closing
Date" has the meaning set forth in Section 2.2.
"Code"
has the meaning set forth in Section 1.1(e).
"Collective
Bargaining Agreements" has the meaning set forth in Section
3.14.
"Company"
has the meaning set forth in the preamble.
"Company
Acquisition Agreement" has the meaning set forth in Section
5.3(b).
"Company
Adverse Recommendation Change" has the meaning set forth in Section
5.3(b).
"Company
Charter Documents" has the meaning set forth in Section 3.1(b).
55
"Company
Common Stock" has the meaning set forth in the recitals.
"Company
Disclosure Schedule" has the meaning set forth in Article III.
"Company
Employees" has the meaning set forth in Section 5.10(a).
"Company
Plans" has the meaning set forth in Section 3.13(a).
"Company
Preferred Stock" has the meaning set forth in Section 3.6(a).
"Company
Recommendation" has the meaning set forth in Section 1.2.
"Company
Rights Plan" means the Rights Agreement entered into between United Retail
Group, Inc. and Continental Stock Transfer & Trust Company dated as of
September 14, 1999.
"Company
Rights" has the meaning set forth in Section 3.23.
"Company
SEC Documents" has the meaning set forth in Section 3.7(a).
"Company
Securities" has the meaning set for in Section 3.6(b).
"Company
Stock Plan" has the meaning set forth in Section 2.10.
"Company
Stockholder Approval" has the meaning set forth in Section
3.2(c).
"Company
Stockholders" has the meaning set forth in the recitals.
"Company
Stockholders Meeting" has the meaning set forth in Section
5.2(a).
"Confidentiality
Agreement" has the meaning set forth in Section 5.3(a).
"Contract"
has the meaning set forth in Section 3.3.
"Covered
Securityholders" has the meaning set forth in Section 3.13(j).
"Delay"
has the meaning set forth in Section 5.1(b).
"DGCL"
has the meaning set forth in the recitals.
"Dissenting
Shares" has the meaning set forth in Section 2.9.
"Dissenting
Stockholders" has the meaning set forth in Section 2.9.
"Effective
Time" has the meaning set forth in Section 2.3.
"Employment
Agreements" has the meaning set forth in the recitals.
56
"Environmental
Laws" means federal, state, local and foreign statutes, Laws, judicial
decisions, regulations, ordinances, rules, judgments, orders, codes,
injunctions, permits and governmental agreements relating to Hazardous Materials
and the protection of the environment or human health as it relates to exposure
to Hazardous Materials.
"Environmental
Liabilities" with respect to any Person, means any and all liabilities of or
relating to such Person or any of its Subsidiaries (including any entity which
is, in whole or in part, a predecessor of such Person or any of such
Subsidiaries), whether vested or unvested, contingent or fixed, including
contractual, which (i) arise under applicable Environmental Laws or with respect
to Hazardous Materials and (ii) relate to actions occurring or conditions
existing on or prior to the Closing Date.
"ERISA"
has the meaning set forth in Section 3.13(a).
"ERISA
Affiliate" has the meaning set forth in Section 3.13(a).
"Exchange
Act" has the meaning set forth in Section 1.1(a).
"Expense
Payment" has the meaning set forth in Section 7.3(a).
"Expiration
Date" has the meaning set forth in Section 1.1(c).
"GAAP"
shall mean generally accepted accounting principles in the United States as
in
effect as of the date of this Agreement.
"Governmental
Authority" shall mean any government, court, regulatory or administrative
agency, commission or authority or other governmental instrumentality, federal,
state or local, domestic, foreign or multinational.
"Hazardous
Material" means all substances or materials regulated as hazardous, toxic,
explosive, dangerous, flammable or radioactive under any Environmental Law,
including (i) petroleum, petroleum products and by-products, asbestos and
asbestos-containing materials, urea formaldehyde foam insulation, medical or
infectious wastes, polychlorinated biphenyls, radon gas, radioactive substances,
chlorofluorocarbons and all other ozone-depleting substances, (ii) in
the United States, all substances defined as Hazardous Substances, Oils,
Pollutants or Contaminants in the National Oil and Hazardous Substances
Pollution Contingency Plan, 40 C.F.R. Section 300.5. and (iii) any other
chemical, material, substance, waste, pollutant, emission, discharge, release
or
contaminant that could result in liability under, or that is prohibited, limited
or regulated by or pursuant to, any Environmental Law.
"HSR
Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as
amended, and its rules and regulations.
"Indemnitee"
has the meaning set forth in Section 5.7(a).
"Indemnitees"
has the meaning set forth in Section 5.7(a).
"Independent
Directors" has the meaning set forth in Section 1.3(c).
57
"Infringe"
has the meaning set forth in Section 3.18(c).
"Intellectual
Property" has the meaning set forth in Section 3.18(a).
"Knowledge"
shall mean (i) in the case of the Company, the actual knowledge, after due
inquiry, of the individuals listed on Section 8.12 of the Company Disclosure
Schedule and (ii) in the case of Parent, the actual knowledge, after due
inquiry, of ▇▇▇▇ Faintreny and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"Laws"
has the meaning set forth in Section 3.11(a).
"Leased
Real Property" has the meaning set forth in Section 3.17(b).
"Liabilities"
has the meaning set forth in Section 3.9.
"Lien"
shall mean, with respect to any asset (including any security), any mortgage,
deed of trust, lien (statutory or other), pledge, charge, security interest,
restriction, option, easement, right-of-way, encroachment or other encumbrance
(and each document, agreement or instrument forming the basis of, creating
or
imposing any Lien, a "Lien Instrument") in respect of such asset.
"Mailing
Policy" has the meaning set forth in Section 3.19(b).
"Material
Adverse Effect" shall mean any change, effect, event, occurrence, state of
facts or development that individually or in the aggregate is or could
reasonably be expected to be materially adverse to (1) the business, results
of
operations or financial condition of the Company and its Subsidiaries taken
as a
whole or (2) the ability of the Company to perform its obligations under
this Agreement or to consummate the transactions contemplated by this Agreement
by the Walk-Away Date; provided, however, that, with respect to
clause (1) above, Material Adverse Effect shall not include any change, effect,
event, occurrence, state of facts or development, to the extent arising out
of
or resulting from (i) changes, after the date of this Agreement, in general
economic conditions in the United States, or political, social or economic
instability in countries in which the Company or its Subsidiaries source
production, or U.S. or global financial or securities markets, conditions or
interest rates, (ii) changes, after the date of this Agreement, in Law, customs,
duties or GAAP, (iii) changes, after the date of this Agreement, in the
retail clothing industry or the women's wear retail industry including, without
limitation, as a result of changes in consumer confidence levels and other
factors affecting consumerism, (iv) the announcement of this Agreement
(including the parties to this Agreement) or the Transactions, including any
impact of such announcement on relationships, contractual or otherwise, with
customers, suppliers, or employees, (v) acts of war, sabotage or terrorism,
or
any escalation or worsening of such acts, or any earthquakes, hurricanes,
tornados, and other wind storms, floods or other natural disasters, (vi) store
lease expirations, or (vii) any action taken by the Company or its Subsidiaries
which is expressly required by this Agreement or that has been expressly and
specifically consented to by Parent under the terms of this Agreement, except
in
each of cases (i), (ii), (iii), (iv) and (v), to the extent that such changes
affect the Company and its Subsidiaries in a disproportionate manner relative
to
other participants in the businesses and industries in which the Company and
its
Subsidiaries operate.
58
"Material
Contracts" has the meaning set forth in Section 3.16(a).
"Materially
Burdensome Condition" has the meaning set forth in Section
5.4(d).
"Merger"
has the meaning set forth in the recitals.
"Merger
Consideration" has the meaning set forth in Section 2.7(c).
"Merger
Option" has the meaning set forth in Section 1.2(d).
"Merger
Option Shares" has the meaning set forth in Section 1.2(d).
"Merger
Sub" has the meaning set forth in the preamble.
"Minimum
Condition" has the meaning set forth in Annex A.
"NASDAQ"
has the meaning set forth in Section 1.3(c).
"Nonqualified
Deferred Compensation Plan" has the meaning set forth in Section
3.13(i).
"Offer"
has the meaning set forth in the recitals.
"Offer
Documents" has the meaning set forth in Section 1.1(b).
"Offer
Price" has the meaning set forth in the recitals.
"Option"
has the meaning set forth in Section 2.10.
"Option
Consideration" has the meaning set forth in Section 2.10.
"Out-of-the-Money
Option" has the meaning set forth in Section 2.10.
"Owned
Real Property" has the meaning set forth in Section 3.17(a).
"Parent"
has the meaning set forth in the preamble.
"Parent
Material Adverse Effect" shall mean any change, effect, event,
occurrence, state of facts or development that individually or in the aggregate
is or would reasonably be expected to be materially adverse to the ability
of
Parent and Merger Sub to perform their obligations under this Agreement or
to
consummate the transactions contemplated by this Agreement by the Walk-Away
Date.
"Paying
Agent" has the meaning set forth in Section 2.8(a).
"Permits"
has the meaning set forth in Section 3.11(b).
"Permitted
Liens" means any (i) Liens for Taxes not yet due or payable or which are
being contested in good faith by appropriate proceedings, (ii) carriers',
warehousemen's,
59
mechanics',
materialmen's, repairmen's or other similar liens incurred in the ordinary
course of business, (iii) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation,
(iv)
easements, covenants, rights-of-way, restrictions and other similar encumbrances
affecting any Owned Real Property or Leased Real Property that do not materially
detract from the value of the property subject thereto, or restrict or interfere
with the development of the property or its continued use in the business of
the
Company (v) statutory landlords' liens and liens granted to landlords under
any
lease, (vi) purchase money security interests, (vii) intercompany liens by
and
among the Company and any of its Subsidiaries, and (viii) Liens that,
individually or in the aggregate, do not materially impair, and would not
reasonably be expected to materially impair, the value or the continued use
and
operation of the assets to which they relate.
"Person"
shall mean an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity, including a
Governmental Authority.
"PII"
has the meaning set forth in Section 3.19(a).
"Privacy
Policy" has the meaning set forth in Section 3.19(a).
"Proxy
Statement" has the meaning set forth in Section 3.24.
"Real
Property Lease" means all agreements in effect on the date of this Agreement
under which the Company or any Subsidiary is the landlord, sublandlord, tenant,
subtenant, or occupant.
"Release"
means any actual or threatened spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing or
arranging for disposal or migrating into or through the environment or any
natural or man-made structure.
"Representatives"
has the meaning set forth in Section 5.3(a).
"Restraints"
has the meaning set forth in Section 6.1(c).
"Restricted
Shares" has the meaning set forth in Section 2.13.
"Retirement
Plans" has the meaning set forth in Section 2.7(c).
"SARs"
has the meaning set forth in Section 2.12.
"SARs
Consideration" has the meaning set forth in Section 2.12.
"Schedule
14D-9" has the meaning set forth in Section 1.2(b).
"SEC"
has the meaning set forth in Section 1.1(b).
"Securities
Act" has the meaning set forth in Section 3.7(a).
"SOX"
has the meaning set forth in Section 3.7(a).
60
"Subsidiary"
when used with respect to any party, shall mean any corporation, limited
liability company, partnership, association, trust or other entity of which
securities or other ownership interests representing more than 50% of the equity
and more than 50% of the ordinary voting power (or, in the case of a
partnership, more than 50% of the general partnership interests) are, as of
such
date, owned by such party or one or more Subsidiaries of such party or by such
party and one or more Subsidiaries of such party.
"Superior
Proposal" has the meaning set forth in Section 5.3(d).
"Surviving
Corporation" has the meaning set forth in Section 2.1.
"Takeover
Proposal" has the meaning set forth in Section 5.3(d).
"Tax
Returns" shall mean any return, report, claim for refund, estimate,
information return or statement or other similar document filed or required
to
be filed with any Governmental Authority with respect to Taxes, including any
schedule or attachment thereto, and including any amendment
thereof.
"Taxes"
shall mean (i) all federal, state, local or foreign taxes, charges, fees,
imposts, levies or other assessments, including all net income, gross receipts,
capital, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and
estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever and (ii) all interest, penalties, fines, additions to tax or
additional amounts imposed by any Governmental Authority in connection with
any
item described in clause (i).
"Tender
Agreement" has the meaning set forth in the recitals.
"Tender
Offer Conditions" has the meaning set forth in Section 1.1(a).
"Termination
Fee" has the meaning set forth in Section 7.3(a).
"Transactions"
refers collectively to this Agreement and the transactions contemplated by
this
Agreement, including the Offer and the Merger.
"Walk-Away
Date" has the meaning set forth in Section 7.1(b)(i).
"Withdrawal
Liability" means liability to a Multiemployer Plan as a result of a complete
or partial withdrawal from such Multiemployer Plan, as those terms are defined
in Part I of Subtitle E of Title IV of ERISA.
Section
8.12 Interpretation.
(a) When
a reference is made in this Agreement to an Article, a Section, Annex or
Schedule, such reference shall be to an Article of, a Section of, or an Annex
or
Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include",
61
"includes"
or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The words
"hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement
as a
whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used
in any
document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such term. Any
statute defined or referred to in this Agreement or in any agreement or
instrument that is referred to in this Agreement means such statute as from
time
to time amended, modified or supplemented, including by succession of comparable
successor statutes and references to all attachments thereto and instruments
incorporated therein. References to a Person are also to its
permitted successors and assigns.
(b) The
Company acknowledges and agrees that, prior to the execution and delivery of
this Agreement on the date of this Agreement, the Company filed with the SEC
on
▇▇▇▇▇ its quarterly report on Form 10-Q for the fiscal quarter ended August
4,
2007 in the form provided by the Company to Parent concurrently with the
execution of this Agreement. The parties agree that, even though such
quarterly report may not appear publicly on ▇▇▇▇▇ until September 11, 2007,
such
quarterly report shall be treated as having been filed prior to the date of
this
Agreement for all purposes of this Agreement.
(c) The
parties hereto have participated jointly in the negotiation and drafting of
this
Agreement and, in the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as jointly drafted by the parties
hereto and no presumption or burden of proof shall arise favoring or disfavoring
any party by virtue of the authorship of any provision of this
Agreement.
[signature
page follows]
62
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the date first above written.
| REDCATS USA, INC. | |||
|
|
By:
|
/s/ Faintreny ▇▇▇▇ | |
| Name: Faintreny ▇▇▇▇ | |||
| Title: Chairman and CEO | |||
| BOULEVARD MERGER SUB, INC. | |||
|
|
By:
|
/s/ Faintreny ▇▇▇▇ | |
| Name: Faintreny ▇▇▇▇ | |||
| Title: | |||
| UNITED RETAIL GROUP, INC. | |||
|
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
| Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |||
| Title: Chairman, President and Chief Exectuive Officer | |||
ANNEX
A
CONDITIONS
OF THE OFFER
Notwithstanding
any other provisions of the Offer, neither Parent nor Merger Sub shall be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act, pay
for
any tendered shares of Company Common Stock, if (i) there shall not be validly
tendered and not properly withdrawn prior to the Expiration Date that number
of
shares of Company Common Stock that represents at least a majority of the total
number of outstanding shares of Company Common Stock on a fully diluted basis
(which assumes conversion or exercise of all derivative securities of the
Company, regardless of the conversion or exercise price, the vesting schedule
or
other terms and conditions thereof) on the Expiration Date (such number of
shares, the "Minimum Condition"), (ii) the waiting period (and any
extension thereof) applicable to the Offer or the Merger under the HSR Act
shall
not have terminated or expired prior to the Expiration Date, (iii) any
Materially Burdensome Condition shall have been imposed in connection with
obtaining any approvals or terminations described in clause (ii), or (iv) at
any
time on or after the date of the Agreement and prior to the Acceptance Time,
any
of the following events shall occur and continue to exist:
(a) Injunctions
or Restraints. There shall be any temporary, preliminary
or permanent Restraints in effect preventing the consummation of the Offer
or
the Merger or imposing a Materially Burdensome Condition.
(b) Governmental
Action. There shall be instituted or pending any Action by any
Governmental Entity seeking to restrain or prohibit the purchase of shares
of
Company Common Stock pursuant to the Offer or the consummation of the Offer
or
imposing a Materially Burdensome Condition.
(c) Representations
and Warranties. (i) Any representation or warranty of the Company
contained in Section 3.6(b) (other than clause (B) and (C) of the third sentence
of Section 3.6(b) and the last sentence of Section 3.6(b)) shall not be true
and
correct (except for any de minimis inaccuracy), (ii) any representation
or warranty contained in clause (B) and (C) of the third sentence of Section
3.6(b) or Section 3.6(c), 3.13(j), 3.22(a) or 3.23 shall not be true and
correct in all material respects, and (iii) any representation or warranty
of the Company contained in any other section of the Agreement shall not be
true
and correct (without giving effect to any qualifications or limitations as
to
materiality, or Material Adverse Effect set forth therein), in each of cases
(i), (ii) and (iii), as of the date of the Agreement and as of the date of
determination as though made on the date of determination (except to the extent
that such representation or warranty expressly relates to a specified date,
in
which case as of such specified date), except, in the case of this clause (iii),
where the failure of such representations and warranties to be true and correct
as of such dates, individually or in the aggregate, has not had and could not
reasonably be expected to have a Material Adverse Effect.
(d) Performance
of Obligations of the Company. The Company shall not have
performed in all material respects all agreements, covenants and obligations
required to be performed by it under the Agreement at or prior to the date
of
determination.
A-1
(e) Officer's
Certificate. The Company shall not have furnished Parent with a
certificate dated as of the Expiration Date signed on its behalf by its Chief
Executive Officer or Chief Financial Officer to the effect that the conditions
set forth in items (c) and (d) of this Annex A shall not have occurred and
continue to exist.
(f) Material
Adverse Effect. There shall have occurred any change, event,
effect or occurrence arising since August 4, 2007 that has had or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
(g) Consents
and Approvals. Other than filings pursuant to the HSR Act, any
consent, approval or authorization of any Governmental Entity required to
consummate the Offer or the Merger shall not have been obtained, unless the
failure to obtain such consent, approval or authorization has not had and could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
The
foregoing conditions are for the sole benefit of Parent and Merger Sub, may
be
asserted by Parent or Merger Sub, regardless of the circumstances giving rise
to
any such conditions, and, except for the Minimum Condition, may be waived by
Parent or Merger Sub in whole or in part at any time and from time to time,
subject to the terms of the Agreement. The failure by Parent or
Merger Sub at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and, each such right shall be deemed an
ongoing right which may be asserted at any time and from time to
time.
The
capitalized terms used in this Annex A shall have the meanings set forth in
the
Agreement to which it is annexed, except that the term "Agreement" shall be
deemed to refer to the agreement to which this Annex A is annexed.
A-2