Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
WWT, INC.
(THE "BUYER"),
WILSONS ACQUISITION CORPORATION
(THE "BUYER SUBSIDIARY"),
BENTLEY'S LUGGAGE CORP.
(THE "COMPANY"),
THE SHAREHOLDERS
OF
BENTLEY'S LUGGAGE CORP.
AND
▇▇▇▇ CAPITAL, INC.
(THE "SHAREHOLDER REPRESENTATIVE")
DATED AS OF APRIL 6, 2001
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TABLE OF CONTENTS
1. Defined Terms..............................................................................1
1.01 Accounting and Other Definitional Matters............................................1
1.02 Certain Definitions..................................................................2
2. The Merger.................................................................................9
2.01 Merger...............................................................................9
2.02 Effective Time of the Merger.........................................................9
2.03 Articles of Incorporation and By-Laws of the Surviving Corporation...................9
2.04 Board of Directors and Officers of the Surviving Corporation.........................9
2.05 Consideration.......................................................................10
2.06 Payment of Consideration............................................................10
2.07 Conversion of Securities............................................................10
2.08 Dissenters' Rights..................................................................11
2.09 Payment of Cash for Company Securities and Other Rights.............................12
2.10 No Further Rights or Transfers......................................................12
3. Post-Closing Working Capital Adjustment...................................................13
3.01 Preliminary Working Capital.........................................................13
3.02 Buyer's Objections; Independent Auditor.............................................13
3.03 Closing Working Capital.............................................................13
3.04 Working Capital Adjustment..........................................................14
4. Escrow....................................................................................14
5. Closing Date..............................................................................14
6. Deliveries by the Company and the Shareholders............................................14
7. Deliveries by Buyer and Buyer Subsidiary..................................................15
8. Representations and Warranties of the Company and the Shareholders........................15
8.01 Representations and Warranties Relating to the Company..............................15
(a) Organization, Qualification, etc....................................................15
(b) Capitalization of the Company.......................................................16
(c) Subsidiaries........................................................................16
(d) Authority...........................................................................17
(e) Due Execution.......................................................................17
(f) No Conflict.........................................................................17
(g) Real Property.......................................................................17
(h) Personal Property...................................................................18
(i) Intellectual Property...............................................................18
(j) Legal Proceedings...................................................................19
(k) Notices.............................................................................19
(l) Environmental Matters...............................................................20
(m) Contracts...........................................................................20
(n) Compliance with Laws................................................................22
(o) Title; Sufficiency of Assets........................................................22
(p) Brokers; Finders....................................................................22
(q) Employee and Labor Relations........................................................23
(r) Employee Benefits...................................................................24
(s) Taxes...............................................................................25
(t) Warranty............................................................................27
(u) Financial Statements; Undisclosed Liabilities.......................................27
(v) Insurance...........................................................................27
(w) No Changes..........................................................................27
(x) Transactions with Affiliates........................................................28
(y) Banking Matters, etc................................................................28
(z) Recapitalization Agreement..........................................................28
(aa) Disclaimer of Other Representations and Warranties..................................29
8.02 Representations and Warranties Regarding the Shareholders...........................29
(a) Ownership...........................................................................29
(b) Title...............................................................................29
(c) No Conflicts........................................................................29
(d) Authorization; Execution and Delivery; Individual...................................29
(e) Authorization; Execution and Delivery; Entity.......................................30
(f) Claims and Proceedings..............................................................30
(g) Approval of Merger..................................................................31
(h) Disclaimer of Other Representations and Warranties..................................31
9. Representations and Warranties of Buyer and Buyer Subsidiary..............................31
9.01 Representations and Warranties......................................................31
(a) Organization and Qualification......................................................31
(b) Authority of Buyer and Buyer Subsidiary.............................................31
(c) Due Execution by Buyer and Buyer Subsidiary.........................................31
(d) No Conflict.........................................................................32
(e) Proceedings.........................................................................32
(f) Brokers; Finders....................................................................32
(g) Sufficient Funds....................................................................32
10. Conditions Precedent to Buyer's and Buyer Subsidiary's Obligations Hereunder..............32
10.01 Conditions Precedent................................................................32
(a) Representations and Warranties......................................................32
(b) No Adverse Change...................................................................33
(c) Observance and Performance..........................................................33
(d) Officer's Certificate...............................................................33
(e) Closing Documents...................................................................33
(f) Removal of Liens....................................................................33
(g) Legal Opinion.......................................................................33
(h) Corporate Documents.................................................................33
(i) Legal Proceedings...................................................................33
(j) Stock Options.......................................................................34
(k) Discharge of Indebtedness...........................................................34
(l) Escrow Agreement....................................................................34
(m) Transactions with Affiliates........................................................34
(n) Store Cash..........................................................................34
(o) Audited Financial Statements........................................................34
(p) Appraisal Rights....................................................................34
(q) Termination of Stockholder Agreement................................................34
(r) Shareholders' Transaction Expenses..................................................34
10.02 Waiver..............................................................................34
11. Conditions Precedent to the Obligations of the Company and the Shareholders Hereunder.....35
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11.01 Conditions Precedent................................................................35
(a) Representations and Warranties......................................................35
(b) Observance and Performance..........................................................35
(c) Officer's Certificate...............................................................35
(d) Closing Documents...................................................................35
(e) Legal Opinion.......................................................................35
(f) Corporate Documents.................................................................35
(g) Legal Proceedings...................................................................35
(h) Escrow Agreement....................................................................35
11.02 Waiver..............................................................................36
12. Survival of Representations and Warranties................................................36
13. Indemnification...........................................................................36
13.01 Tax Indemnification of Buyer by the Shareholders....................................36
13.02 Other Indemnification of Buyer by the Shareholders..................................37
13.03 Limitations on Indemnification by Shareholders......................................37
13.04 Indemnification of the Shareholders by Buyer........................................39
13.05 Limitation on Indemnification by Buyer..............................................39
13.06 Obligations of Shareholder Indemnitees and Buyer to Senior Lenders..................40
13.07 Investigation Not a Defense.........................................................40
13.08 Procedures for Third-Party Claims (Other than Under Section 13.01(a))...............40
13.09 General Provisions..................................................................41
14. Shareholder Representative................................................................42
15. Covenants of the Company and the Shareholders.............................................42
15.01 Access; Conduct of Business Prior to Closing........................................42
15.02 Public Statements...................................................................44
15.03 Non-Solicitation....................................................................44
15.04 Updating of Information.............................................................44
15.05 Stock Options.......................................................................45
15.06 Discharge of Indebtedness...........................................................45
15.07 Affiliate Transactions..............................................................45
15.08 Further Actions.....................................................................45
16. Covenants of Buyer........................................................................45
16.01 Confidentiality.....................................................................45
16.02 Public Statements...................................................................45
16.03 Further Actions.....................................................................46
16.04 Company Employees...................................................................46
17. Termination...............................................................................46
18. Notices...................................................................................47
19. Expenses..................................................................................48
20. Entire Agreement..........................................................................49
21. Severability..............................................................................49
22. Governing Law; Jurisdiction...............................................................49
22.01 Governing Law.......................................................................49
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22.02 Enforcement.........................................................................49
23. Waiver of Compliance; Consents............................................................49
24. Remedies Cumulative.......................................................................50
25. Waiver of Jury Trial......................................................................50
26. Headings..................................................................................50
27. Amendments................................................................................50
28. Successors and Assigns; No Third Party Beneficiaries......................................50
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SCHEDULES AND EXHIBITS
Schedules
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Schedule 2.01 Ownership of Shares
Schedule 8.01(a) Foreign Qualifications
Schedule 8.01(b) Capitalization
Schedule 8.01(c) Subsidiaries
Schedule 8.01(f) Conflicts
Schedule 8.01(g) Real Property
Schedule 8.01(h) Personal Property
Schedule 8.01(i) Intellectual Property
Schedule 8.01(j) Legal Proceedings
Schedule 8.01(l) Environmental
Schedule 8.01(m) Contracts
Schedule 8.01(n) Permits
Schedule 8.01(o) Liens
Schedule 8.01(q) Labor Relations
Schedule 8.01(r) Company's Employee Plans
Schedule 8.01(s) Taxes
Schedule 8.01(t) Warranties
Schedule 8.01(v) Insurance
Schedule 8.01(w) Changes
Schedule 8.01(x) Transactions with Affiliates
Schedule 8.01(y) Banking Matters
Schedule 15.01(c) Capital Expenditures for New Stores
Exhibits
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Exhibit A Form of Escrow Agreement
Exhibit B Form of Opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
Exhibit C Form of Opinion of Faegre & ▇▇▇▇▇▇ LLP
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") made and entered
into as of the 6th day of April, 2001, by and among WWT, INC., a Delaware
corporation (the "Buyer"), WILSONS ACQUISITION CORPORATION, a Florida
corporation (the "Buyer Subsidiary"), BENTLEY'S LUGGAGE CORP., a Florida
corporation (the "Company"), each of the Persons listed on the signature pages
hereto under the caption "SHAREHOLDERS" (collectively, the "Shareholders" and
individually, a "Shareholder"), the owners of all of the issued and outstanding
capital stock of the Company and, solely for the purpose of accepting the
appointment as Shareholder Representative hereunder, ▇▇▇▇ CAPITAL, INC., a
Delaware corporation (the "Shareholder Representative"). The Buyer, the Buyer
Subsidiary, the Company and the Shareholders are referred to collectively herein
as the "Parties".
RECITALS
WHEREAS, the Boards of Directors of Buyer, Buyer Subsidiary and the
Company have approved this Agreement and the merger of Buyer Subsidiary with and
into the Company (the "Merger") in accordance with this Agreement and the
applicable provisions of the Florida Business Corporation Act ("FBCA"). In
addition, this Agreement and the Merger have been approved by Buyer, as the sole
stockholder of Buyer Subsidiary, and by the Shareholders, who constitute all of
the record and beneficial owners of all of the outstanding capital stock of the
Company, pursuant to the requirements of the FBCA.
WHEREAS, subject to and on the terms and conditions contained herein,
the Company, the Shareholders, the Buyer and the Buyer Subsidiary desire to
effect the Merger and the other transactions contemplated hereby.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements hereinafter set forth, and of other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged by each of the
Parties, the Parties do hereby agree as follows:
1. DEFINED TERMS
1.01. Accounting and Other Definitional Matters. For all purposes of
this Agreement, except as otherwise expressly provided,
(a) The terms defined in this Section 1 have the meanings
assigned to them in this Section 1 and include the plural as well as
the singular,
(b) all accounting terms not otherwise defined in this
Agreement have the meanings assigned under GAAP,
(c) all references in this Agreement to designated "Sections"
and other subdivisions are to the designated Sections and other
subdivisions of the body of this Agreement,
(d) references to any Law or statute shall be deemed to
include reference to any related amendments and regulations,
(e) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms, and
(f) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to a
particular Section or other subdivision.
1.02 Certain Definitions.
"ADA" means the Americans with Disabilities Act of 1990, as amended.
"Affiliate" means, as to any Person, (a) any Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person, and (b) with respect to the Company, any Shareholder and the spouse,
siblings, ascendants or descendants of such Shareholder, and any Person directly
or indirectly controlled by such Shareholder (or by one or more of the
Shareholders, collectively). For purposes of this definition, "control" means
the possession of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise; provided, however, that no Senior Lender shall be
considered to "control" any Party for purposes of this definition.
"Agreement" has the meaning provided therefor in the first paragraph of
this instrument.
"Articles of Merger" has the meaning provided therefor in Section 2.02
of this Agreement.
"Bank Liens" means any Liens related to the Company's Indebtedness
under the Senior Credit Agreement.
"Buyer" has the meaning provided therefor in the first paragraph of
this Agreement.
"Buyer Documents" has the meaning provided therefor in Section 9.01(a)
of this Agreement.
"Buyer Indemnitee" has the meaning provided therefor in Section
13.01(a) of this Agreement.
"Buyer Objections" has the meaning provided therefor in Section 3.02.
"Buyer Subsidiary" has the meaning provided therefor in the first
paragraph of this Agreement.
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"Class A Common" means the Company's shares of Class A Common Stock,
par value $.01 per share.
"Class B Common" means the Company's shares of Class B Common Stock,
par value $.01 per share.
"Class L Common" means the Company's shares of Class L Common Stock,
par value $.01 per share.
"Closing" has the meaning provided therefor in Section 5 of this
Agreement.
"Closing Date" has the meaning provided therefor in Section 5 of this
Agreement.
"Closing Working Capital" shall have the meaning provided therefor in
Section 3.03.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Common Equity Amount" shall have the meaning provided therefor in
Section 2.06(a) of this Agreement.
"Company" has the meaning provided therefor in the first paragraph of
this Agreement.
"Company Documents" has the meaning provided therefor in Section
8.01(a) of this Agreement.
"Company Property" means all Real Property and all real property
previously owned, leased, occupied, or otherwise operated by the Company or its
Subsidiaries.
"Company Stock" has the meaning provided therefor in Section 8.01(b) of
this Agreement.
"Company Tax Group" means (i) any "affiliated group" (as defined in
Section 1504(a) of the Code without regard to the limitations contained in
Section 1504(b) of the Code) that, at any time on or before the Closing Date,
includes or has included the Company or (ii) any other group of corporations
which, at any time on or before the Closing Date, files or has filed Tax Returns
on a combined, consolidated or unitary basis with the Company.
"Consideration" has the meaning provided therefor in Section 2.05 of
this Agreement.
"Contract" means any contract, agreement, purchase order, indenture,
note, bond, loan, instrument, lease, conditional sale contract, mortgage,
license, franchise, insurance policy, commitment or other arrangement or
agreement, whether written or oral.
"Dissenting Shares" shall have the meaning provided therefor in Section
2.08 of this Agreement.
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"Effective Time" has the meaning provided therefor in Section 2.02 of
this Agreement.
"Employee Plan" means any written or unwritten plan, program,
arrangement, agreement or commitment which is an employment, consulting or
deferred compensation agreement, or an executive compensation, incentive bonus
or other bonus, employee pension, profit-sharing, savings, retirement, stock
option, stock purchase, stock appreciation rights, severance pay, life, health,
disability or accident insurance plan, or other employee benefit plan, program,
arrangement, agreement or commitment, including any "employee benefit plan" as
defined in Section 3(3) of ERISA. An Employee Plan includes any of the above
that covers any current or former employee of the Company or any of its
Subsidiaries, or with respect to which there is any obligation to contribute or
any liability on the part of the Company or any of its Subsidiaries.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Escrow Agent" has the meaning provided therefor in Section 4 of this
Agreement.
"Escrow Agreement" has the meaning provided therefor in Section 4 of
this Agreement.
"Escrow Funds" has the meaning provided for in Section 4 of this
Agreement.
"Financial Statements" has the meaning provided therefor in Section
8.01(u) of this Agreement.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the date hereof and set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination consistently applied.
"Governmental Authority" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state or local, or any agency or instrumentality thereof, or any court or
arbitrator (public or private).
"Hazardous Materials" means any hazardous, toxic, radioactive,
biohazardous or dangerous waste, substance or material defined as such in (or
for purposes of) any Hazardous Materials Law, including without limitation
petroleum products, asbestos and asbestos-containing products and materials, and
polychlorinated biphenyls, but excluding normal quantities of products and
substances which are customarily used in, or are incidental to the operation of
an office, warehouse or retail store (including, by way of example only,
janitorial and cleaning supplies, pesticides and chemical insect traps, and
photocopier and laser printer toner), and which are used and kept in material
compliance with applicable Hazardous Materials Laws.
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"Hazardous Materials Law" means any of the Comprehensive Environmental
Response, Compensation, and Liability Act, any so-called "Superfund" or
"Superlien" law, or any federal, state or local statute, law, ordinance, code,
rule, regulation, order or decree (to the extent the foregoing have the force
and effect of law) regulating, relating to, or imposing liability or standards
of conduct concerning, any hazardous, toxic, radioactive, biohazardous or
dangerous waste, substance or materials, as the foregoing are enacted and in
effect on or prior to the date hereof.
"Indebtedness" means (a) all indebtedness of the Company and its
Subsidiaries to lending institutions and all other indebtedness for borrowed
money created, incurred or accrued by the Company and its Subsidiaries or
guaranteed by the Company and its Subsidiaries or for which the Company and its
Subsidiaries are otherwise liable or responsible (including an agreement to
assume the indebtedness of others), (b) all indebtedness of the Company and its
Subsidiaries under capital leases, (c) all amounts owing by the Company and its
Subsidiaries under purchase money mortgages, indentures, deeds of trust or other
purchase money liens or conditional sale or other title retention agreements,
(d) all indebtedness secured by any mortgage, indenture or deed of trust upon
any of the assets of the Company and its Subsidiaries even though the Company
and its Subsidiaries may not have assumed or become liable for the payment of
such indebtedness, and (e) all obligations of the Company and its Subsidiaries
with respect to interest rate swaps, currency swaps and similar obligations,
including in each instance all principal, interest, prepayment penalties, fees,
costs and expenses, but "Indebtedness" shall in no event include trade debt
incurred in the ordinary course of business.
"Indemnifying Party" has the meaning provided therefor in Section 13.08
of this Agreement.
"Indemnitee" has the meaning provided therefor in Section 13.08 of this
Agreement.
"Independent Auditor" has the meaning provided therefor in Section 3.02
of this Agreement.
"Intellectual Property" means all copyrights, patents (including all
reissues, divisions, continuations and extensions thereof), patent applications,
trademarks, Internet domain names, Internet protocol addresses, trade names,
logos, industrial designs, trade styles, service marks, brands, product and
service names and other source identifiers used in commerce, whether in
connection with products or services, trade secrets and know-how, whether
registered or unregistered, and all pending applications, licenses and good will
for any of the foregoing.
"Inventory" means all inventory and supplies, including without
limitation all raw materials, finished goods, office and distribution supplies
and all other materials and supplies on hand, whether located at any of the
warehouses of the Company or its Subsidiaries, distribution centers, Stores or
otherwise.
"Knowledge" or "Knowledge of the Company" means the knowledge of ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
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▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇ following a review of all appropriate books and
records of the Company and its Subsidiaries.
"Latest Balance Sheet" has the meaning provided therefor in Section
8.01(u) of this Agreement.
"Law" means any federal, state, local or foreign law (including common
law), statute, code, ordinance, rule, regulation or any Order, all as in effect
on the date hereof.
"Legal Proceeding" means any judicial, administrative or arbitral
action, litigation, suit, proceeding (public or private), or governmental
proceeding or investigation.
"Lien" means any lien, pledge, mortgage, deed of trust, security
interest, claim on title, lease, charge, option, right of first refusal,
easement or other real estate declaration, covenant, condition, restriction or
servitude, transfer restriction under any stockholder or similar agreement or
encumbrance.
"Losses" means injuries, damages, payments, assessments, liabilities,
costs, penalties and expenses.
"Material Adverse Change" means any material adverse change in the
business, properties, results of operations, or financial condition of the
Company and its Subsidiaries or their respective businesses, taken as a whole;
provided that none of the following shall constitute a Material Adverse Change:
(i) any effect due to a disruption of the Company's or its Subsidiaries'
businesses as a result of the announcement of the execution of this Agreement
(including any action taken as a result of such announcement by any landlord
with respect to a Store Lease) or changes caused by the taking of any action
required or specifically permitted under this Agreement; (ii) general changes in
economic conditions or any changes affecting the industry in which the Company
or its Subsidiaries operate; (iii) changes in United States or global financial
markets or conditions; or (iv) any change in any Law or in GAAP or the
interpretation thereof.
"Material Adverse Effect", "Materially Adversely Affect" or related
terms means an effect that results in or causes, or has a reasonable likelihood
of resulting in or causing, a Material Adverse Change.
"Material Contract" has the meaning provided therefor in Section
8.01(m) of this Agreement.
"Merger" has the meaning provided therefor in the first Recital of this
Agreement.
"Order" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award.
"Per Share Common Equity Amount" shall have the meaning provided
therefor in Section 2.07(a) of this Agreement.
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"Permit" means any approval, authorization, consent, franchise,
license, permit or certificate by any Governmental Authority or any other
Person.
"Permitted Liens" means (a) statutory Liens for current taxes,
assessments or other governmental charges not yet delinquent or the amount or
validity of which is being contested in good faith by appropriate proceedings,
provided an appropriate reserve or security deposit is established by the
Company or its Subsidiaries therefor; (b) mechanics', carriers', workers',
repairers' and similar Liens arising or incurred in the ordinary course of
business for work or materials for which payment is not yet due and that are not
material to the business, operations or financial condition of the property so
encumbered; (c) zoning, entitlement and other land use and environmental
regulations by Governmental Authorities, provided that such regulations have not
been violated in any material respect; and (d) such other imperfections in
title, charges, easements, restrictions and encumbrances which do not secure any
Indebtedness and which do not materially detract from the value of or materially
interfere with the present use of any parcel of Real Property or other asset
subject thereto or affected thereby (including, without limitation, items 5, 6,
8 (but only with respect to the lien of taxes for the year 2001 and subsequent
years), 9, 10, 11, 12 and 13 set forth on Schedule B of the Title Insurance
Policy).
"Person" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Authority or other entity.
"Preliminary Working Capital" has the meaning provided therefor in
Section 3.01.
"Real Property" means all real property in which the Company or its
Subsidiaries have an interest, whether as fee owner, lessee or otherwise.
"Receivables" means all trade receivables, notes receivable, rights
with respect to returned checks and receivables from loans and advances to
employees of the Company or its Subsidiaries outstanding at the close of
business on the Closing Date, including within the Receivables, but not limited
to, all customer accounts receivable and all rights of the Company and its
Subsidiaries to earned but unpaid rebates from its suppliers.
"Representatives" shall mean, with respect to any Person, such Person's
officers, employees, counsel, representatives, accountants and auditors.
"Schedule" means a disclosure schedule provided by the Company and the
Shareholders to Buyer pursuant to this Agreement.
"Senior Credit Agreement" means that certain Credit Agreement dated as
of July 14, 1998, as amended, among the Company, the lenders listed from time to
time on Annex I thereto, and Bankers Trust Company, as Agent.
"Senior Lenders" means Bankers Trust Company, as Agent and Lender, and
Summit Bank (now known as Fleet National Bank), as Lender, under the Senior
Credit Agreement.
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"Senior Lenders' Agent" means Bankers Trust Company.
"Shareholder Documents" has the meaning provided therefor in Section
8.02(c).
"Shareholder Representative" has the meaning provided therefor in the
first paragraph of this Agreement.
"Shareholder Indemnitee" has the meaning provided therefor in Section
13.04 of this Agreement.
"Shareholders" has the meaning provided therefor in the first paragraph
of this Agreement.
"Shareholders' Transaction Expenses" means (i) fees and expenses
incurred by the Shareholders, the Company, and their respective Affiliates
(including without limitation fees and expenses of legal counsel, accountants
and other consultants and the fees and expenses of the financial advisors named
in Section 8.01(p)) in connection with the negotiation and execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement and (ii) all severance and consulting payments remaining to be paid to
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, all of which shall be payable at the Closing in accordance
with Section 2.06 below.
"Special Claims" has the meaning provided therefor in Section 13.03 of
this Agreement.
"Store" means a retail store that is open for business and being
operated by the Company or its Subsidiaries.
"Store Leases" has the meaning provided therefor in Section 8.01(g) of
this Agreement.
"Stockholder Agreement" means that certain Stockholders Agreement by
and among the Company, ▇▇▇▇ Capital Fund VI, L.P., BCIP Trust Associates II,
BCIP Trust Associates II-B, BCIP Associates II, BCIP Associates II-B, BCIP
Associates II-C, ▇▇▇▇▇▇▇▇ Street Partners II, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ dated as of July 14, 1998.
"Subsidiary" means, when used with reference to any Person, any other
Person of which a majority of the outstanding voting securities are owned
directly or indirectly by such Person.
"Surviving Corporation" has the meaning provided therefor in Section
2.01 of this Agreement.
"Surviving Corporation Common Stock" shall have the meaning provided
therefor in Section 2.07(e) of this Agreement.
"Tax" or "Taxes" means all federal, state, local or foreign income,
gross receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, employment, withholding, transfer, payroll, goods
and services, value-added or minimum tax, or any other tax, custom, duty,
governmental fee, or other like assessment or charge of any kind
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whatsoever, together with any interest or any penalty, addition to tax or
additional amount imposed by any Governmental Authority.
"Tax Loss" has the meaning provided therefor in Section 13.01(a) of
this Agreement.
"Tax Return" means any return, report or similar statement required to
be filed with respect to any Taxes (including any attached schedules),
including, without limitation, any information return, claim or refund, amended
return and declaration of estimated tax.
"Title Insurance Policy" shall mean that certain Owner's Policy of
Title Insurance, issued by First American Title Insurance Company on August 5,
1998, effective as of July 16, 1998, as Policy No. FA-35 171511.
"Working Capital" has the meaning provided therefore in Section 3.01 of
this Agreement.
2. THE MERGER
2.01 Merger. At the Effective Time and in accordance with the terms of
this Agreement and the FBCA, Buyer Subsidiary shall be merged with and into the
Company, the separate corporate existence of Buyer Subsidiary shall thereupon
cease, and the Company shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation"). At the
Effective Time, the Merger shall have the other effects provided in the
applicable provisions of the FBCA.
2.02 Effective Time of the Merger. Concurrently with the Closing, the
Parties shall file articles of merger (the "Articles of Merger"), executed in
accordance with the applicable provisions of the FBCA, and shall make all other
filings or recordings required under the FBCA. The Merger shall become effective
upon the filing of the Articles of Merger with the Florida Secretary of State in
accordance with the FBCA or such later time as may be specified in the Articles
of Merger. The term "Effective Time" shall mean the date and time when the
Merger becomes effective.
2.03 Articles of Incorporation and By-Laws of the Surviving
Corporation. The Articles of Incorporation of the Buyer Subsidiary in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
of the Surviving Corporation, provided that the name of the Surviving
Corporation set forth in Article First shall be changed to "Bentley's Luggage
Corp.," until further amended in accordance with the laws of the State of
Florida and such Articles of Incorporation. The By-laws of Buyer Subsidiary in
effect immediately prior to the Effective Time shall be the By-laws of the
Surviving Corporation, until further amended in accordance with the laws of the
State of Florida, the Articles of Incorporation of the Surviving Corporation and
such By-laws.
2.04 Board of Directors and Officers of the Surviving Corporation. The
directors of Buyer Subsidiary immediately prior to the Effective Time shall be
the directors of the Surviving Corporation, each of such directors to hold
office, subject to the applicable provisions of the Articles of Incorporation
and By-Laws of the Surviving Corporation, until the expiration of the
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term for which such director was elected and until his or her successor is
elected and has qualified or as otherwise provided in the Articles of
Incorporation or By-Laws of the Surviving Corporation. The officers of Buyer
Subsidiary immediately prior to the Effective Time shall be the officers of the
Surviving Corporation until their respective successors are chosen and have
qualified or as otherwise provided in the By-Laws of the Surviving Corporation.
2.05 Consideration. The aggregate consideration to be paid by the Buyer
to consummate the Merger (the "Consideration") shall be equal to (a) $34,000,000
(comprised of the payments made to the applicable persons as set forth in
Section 2.06 below), minus, (b) the amount, if any, by which Closing Working
Capital is less than $10,215,000.
2.06 Payment of Consideration. On the Closing Date, Buyer shall (or
shall cause the Buyer Subsidiary to) pay the Consideration as follows:
(a) pay to the Shareholder Representative by wire transfer of
immediately available funds to an account designated by the Shareholder
Representative an aggregate amount of One Hundred Dollars ($100.00)
(the "Common Equity Amount");
(b) pay to the Senior Lenders by wire transfer of immediately
available funds to an account or accounts designated by the Senior
Lenders an amount equal to (i) $31,249,900 less (ii) the Shareholders'
Transaction Expenses, as set forth in a written statement provided by
the Shareholder Representative and the Senior Lenders' Agent to the
Buyer prior to Closing in an aggregate amount not to exceed $2,000,000;
(c) pay the Shareholders' Transaction Expenses in an aggregate
amount not to exceed $2,000,000 by wire transfer of immediately
available funds in the amounts set forth in the written instructions
provided by the Shareholder Representative to the Buyer; and
(d) in accordance with Section 4, deposit $2,750,000 with the
Escrow Agent pursuant to the Escrow Agreement.
Except for the payment to the Shareholder Representative referred to in Section
2.06(a), neither the Shareholder Representative nor any holder of Company Stock
shall be entitled to receive any portion of the Consideration.
2.07 Conversion of Securities. Subject to Section 2.10, at the
Effective Time, by virtue of the Merger and without any action on the part of
the Buyer or the Surviving Corporation, or the holders of any of the following
securities:
(a) Each share of Class L Common and Class B Common issued and
outstanding immediately prior to the Effective Time (other than
Dissenting Shares and shares of Class L Common and Class B Common held
of record by Buyer or Buyer Subsidiary or by the Company or any
Subsidiary of the Company immediately prior to the Effective Time),
shall be converted into and represent the right to receive an amount of
cash equal to (A) the Common Equity
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Amount divided by (B) the aggregate number of shares of Class L Common
and Class B Common issued and outstanding as of the Effective Time (the
"Per Share Common Equity Amount").
(b) Each share of Class A Common issued and outstanding
immediately prior to the Effective Time shall be cancelled and cease to
exist, and no payment shall be made with respect to such shares.
(c) Each share of Class L Common and Class B Common held of
record by Buyer or Buyer Subsidiary or by the Company and any
Subsidiary of the Company shall be cancelled and cease to exist, and no
payment shall be made with respect to such shares.
(d) Each Dissenting Share shall be converted into the right to
receive an amount equal to the fair value thereof determined in
accordance with Sections 607.1301, 1302 and 1320 of the FBCA.
(e) Each share of common stock of Buyer Subsidiary issued and
outstanding as of the Effective Time shall automatically be converted
into and exchanged for one fully paid and nonassessable share of common
stock of the Surviving Corporation ("Surviving Corporation Common
Stock"), which shall constitute the only issued and outstanding shares
of capital stock of the Surviving Corporation as of the Effective Time.
From and after the Effective Time, each outstanding certificate
previously representing shares of common stock of Buyer Subsidiary
shall be deemed for all purposes to evidence ownership and to represent
the same number of shares of Surviving Corporation Common Stock.
2.08 Dissenters' Rights. Notwithstanding any provision of this
Agreement to the contrary, Company Stock that is outstanding immediately prior
to the Effective Time and which is held by stockholders who shall have perfected
such stockholders' dissenter's rights to receive payment in accordance with
Section 607.1320 of the FBCA (collectively, the "Dissenting Shares") shall not
be converted into or represent the right to receive the Per Share Common Equity
Amount. To the extent required under Section 607.1320 of the FBCA, such
stockholders shall be entitled to receive payment of the fair value of such
Dissenting Shares held by them in accordance with the provisions of Section
607.1320 of the FBCA, except that all Dissenting Shares held by stockholders who
shall have failed to perfect their dissenter's rights under Section 607.1320 of
the FCBA or who effectively shall have withdrawn or lost their dissenter's
rights under such law shall thereupon be deemed to have been converted into and
to have become exchangeable for, as of the Effective Time, the right to receive
the Per Share Common Equity Amount, without any interest thereon. The Company
shall give prompt notice to Buyer of each demand received by the Company under
Section 607.1320 of the FCBA, and Buyer shall have the right to participate in
negotiations and proceedings regarding each such demand. The Company shall not,
except with the prior written consent of Buyer, settle or make any payment
regarding any such demand. Each Person holding of record or beneficially owning
Dissenting Shares who becomes entitled under Section 607.1320 of the FBCA and
this Section 2.08 to payment of the fair value of such Dissenting Shares (and
any other payments required by Section 607.1320 of the FBCA) shall receive
payment therefor from the Surviving Corporation
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as provided in Section 607.1320 after surrender to the Company by such holder of
the certificate or certificates representing such Dissenting Shares.
2.09 Payment of Cash for Company Securities and Other Rights.
(a) At and after the Effective Time, each holder of a
certificate or certificates representing shares of Class L Common or
Class B Common converted at the Effective Time which are not Dissenting
Shares may surrender such certificate or certificates to the Company,
to effect the conversion of such certificate or certificates on such
holder's behalf. Until so surrendered and converted, each outstanding
certificate which, prior to the Effective Time, represented such shares
of Class L Common or Class B Common which are not Dissenting Shares
shall be deemed to represent and evidence only the right to receive the
Per Share Common Equity Amount to be paid therefor as set forth in this
Section 2.09 and, until such surrender and conversion, no cash shall be
paid to the holder of such outstanding certificate in respect thereof.
After surrender to the Company of any certificate which, prior to the
Effective Time, shall have represented shares of Class L Common or
Class B Common and delivery of any documents required by Section
2.09(b) hereof, the Shareholder Representative shall distribute to the
Person in whose name the certificate shall have been registered, by
wire transfer of immediately available funds, an amount equal to the
product of (x) the Per Share Common Equity Amount multiplied by (y) the
number of shares of Class L Common or Class B Common represented by the
certificate.
(b) If payment of cash is to be made to a Person other than
the Person in whose name the certificate surrendered in exchange
therefor is registered, it shall be a condition to such payment that
the certificate so surrendered shall be properly endorsed and otherwise
in proper form for transfer, and that the Person requesting such
payment shall pay to the Company any transfer and other taxes required
by reason of such payment in any name other than that of the registered
holder of the certificate surrendered or shall have established to the
satisfaction of the Company that such tax either has been paid or is
not payable.
(c) No interest shall accrue or be payable with respect to any
amounts which a holder of shares of Class L Common or Class B Common
shall be so entitled to receive. The Shareholder Representative shall
be authorized to pay the cash attributable to any certificate
previously issued which has been lost or destroyed, upon receipt of
satisfactory evidence of ownership of the shares of Class L Common or
Class B Common represented thereby and of appropriate indemnification
of the Company.
2.10 No Further Rights or Transfers. At the Effective Time, all shares
of Company Stock issued and outstanding immediately prior to the Effective Time
shall be canceled and cease to exist, and each holder of a certificate or
certificates that represented shares of Company Stock issued and outstanding
immediately prior to the Effective Time shall cease to have any rights as a
stockholder with respect to the shares of Company Stock represented by such
certificate or certificates, except for the right to surrender such certificate
or certificates in exchange for the payment provided pursuant to Section 2.07(a)
hereof or to preserve and perfect such holder's right to receive payment for
such holder's shares pursuant to Section 607.1320 of the FBCA and Section 2.08
hereof if such holder has validly exercised and not withdrawn or lost such
right, and
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no transfer of shares of Company Stock issued and outstanding immediately prior
to the Effective Time shall be made on the stock transfer books of the Surviving
Corporation.
3. POST-CLOSING WORKING CAPITAL ADJUSTMENT
3.01 Preliminary Working Capital. Within 60 days after the Closing
Date, the Shareholder Representative shall deliver to the Buyer and the Senior
Lenders' Agent a balance sheet for the Company as of the Closing Date, which
shall reflect the Company's Working Capital as of the Closing Date ("Preliminary
Working Capital"). The Shareholder Representative and its accountants shall
provide the Buyer and its accountants updates regarding the status of the
preparation of the balance sheet at least weekly and permit the Buyer and its
accountants to review any issues with Shareholder Representative and its
accountants. For purposes of this Agreement, "Working Capital" shall mean all
cash, cash equivalents, short term investments, accounts receivable (excluding
any accounts receivable aged more than 90 days), inventory, prepaid expenses and
other current assets (excluding any current or deferred Tax accounts), less
accounts payable and accrued expenses (other than accrued interest and the
current portion of any Indebtedness to be repaid on the Closing Date pursuant to
Section 15.06), all determined in accordance with GAAP and the Company's past
practices (to the extent not contrary to GAAP).
3.02 Buyer's Objections; Independent Auditor. The Shareholder
Representative and its agents will make available to the Buyer and its agents
all records and work papers used in preparing the Preliminary Working Capital
and such other information as the Buyer and its agents may reasonably request.
If the Buyer has any good faith objection to the determination of the
Preliminary Working Capital, the Buyer must deliver to the Shareholder
Representative and the Senior Lenders' Agent within 45 days after delivery of
the balance sheet referred to in Section 3.01 above, a written statement
describing such objections thereto in reasonable detail ("Buyer Objections"). If
Buyer fails to deliver such written statement within such 45 day period, the
Shareholder Representative's calculation of Preliminary Working Capital will be
final, binding and non-appealable upon each of the Parties hereto. The
Shareholder Representative and the Senior Lenders' Agent, on the one hand, and
Buyer, on the other hand, shall negotiate in good faith to resolve any such
objections, but if they do not reach a resolution within 10 days after delivery
of the Buyer's Objections, the Shareholder Representative and the Senior
Lenders' Agent, on the one hand, and Buyer, on the other hand, shall submit any
such unresolved disputes to a mutually agreeable independent auditor (the
"Independent Auditor") for resolution, whose costs shall be paid solely out of
the Escrow Funds. If the Shareholder Representative and the Senior Lenders'
Agent, on the one hand, and Buyer, on the other hand, are unable to agree upon
an Independent Auditor, the Independent Auditor shall be selected by lot from
among the "Big Five" public accounting firms, excluding the Company's and the
Buyer's regularly retained public accounting firms.
3.03 Closing Working Capital. The Shareholder Representative and the
Senior Lenders' Agent, on the one hand, and Buyer, on the other hand, shall
instruct the Independent Auditor to resolve all disagreements over the
calculation of the Preliminary Working Capital no later than 30 days after
submission of the disputes to the Independent Auditor, whose
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determination thereof shall be final, binding and non-appealable upon the
parties hereto. The Shareholder Representative and the Senior Lenders' Agent, on
the one hand, and Buyer, on the other hand, and their respective agents shall
cooperate with the Independent Auditor during its engagement, and the
Independent Auditor may utilize all records and work papers which the
Independent Auditor shall determine necessary or appropriate. The final
determination of Working Capital as of the Closing Date is referred to herein as
the "Closing Working Capital".
3.04 Working Capital Adjustment. If the Closing Working Capital is less
than $10,215,000, the Buyer shall be entitled to reimbursement of such shortfall
out of the Escrow Funds pursuant to the Escrow Agreement. Buyer's sole recourse
for such shortfall shall be to be reimbursed from the Escrow Funds as more fully
set forth in the Escrow Agreement and there shall be no further recourse against
any Person for such shortfall to the extent the Escrow Funds are insufficient to
fund such shortfall. Any amounts payable pursuant to this Section 3.04 shall be
paid in immediately available funds, within five (5) days after the Closing
Working Capital is finally determined pursuant to this Section 3.
4. ESCROW
At Closing, Buyer shall deposit Two Million Seven Hundred Fifty
Thousand Dollars ($2,750,000) (maintained and reduced as provided in the Escrow
Agreement, the "Escrow Funds") with First Union National Bank (the "Escrow
Agent") under an Escrow Agreement in substantially the form attached hereto as
Exhibit A, but such Escrow Agreement shall include such additional changes as
shall be requested by the Escrow Agent with respect to the Escrow Agent's
obligations, liabilities and responsibilities and shall be approved by the
Shareholders and Buyer (the "Escrow Agreement"). The Escrow Funds shall remain
deposited with the Escrow Agent and shall be subject to and payable in
accordance with the terms of the Escrow Agreement and this Agreement.
5. CLOSING DATE
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Faegre & ▇▇▇▇▇▇ LLP in
Minneapolis, Minnesota at 10:00 a.m. on April 13, 2001, or on such other date or
at such other time or other place on such date as the parties may agree upon in
writing at least one (1) business day prior to such date (the "Closing Date").
6. DELIVERIES BY THE COMPANY AND THE SHAREHOLDERS
Subject to the conditions contained in this Agreement, the Company and
the Shareholders agree to execute and/or deliver to Buyer at the Closing the
following documents:
(a) the Escrow Agreement, duly executed by the Shareholder
Representative and the Senior Lenders' Agent;
(b) the opinion of counsel referred to in Section 10.01(g)
hereof;
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(c) the certificate referred to in Section 10.01(d) hereof;
(d) the stock certificates evidencing the Company Stock; and
(e) any other certificates and documents reasonably requested
by Buyer and its counsel.
7. DELIVERIES BY BUYER AND BUYER SUBSIDIARY
Subject to the conditions contained in this Agreement:
(a) Buyer and Buyer Subsidiary agree to execute and/or deliver
to the Company and the Shareholders at the Closing the following
documents:
(i) the Escrow Agreement, duly executed by the Buyer;
(ii) the certificate referred to in Section 11.01(c)
hereof;
(iii) the opinion of counsel referred to in Section
11.01(e) hereof; and
(iv) any other certificates and documents reasonably
requested by the Shareholders and their counsel; and
(b) Buyer agrees to pay the Consideration at the Closing in
accordance with Section 2.06 and 2.09 hereof.
8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
8.01 Representations and Warranties Relating to the Company. The
Company hereby represents and warrants to Buyer and Buyer Subsidiary that the
statements contained in this Section 8.01 are correct and complete as of the
date of this Agreement, except as set forth in the Schedules delivered by the
Company to Buyer on the date hereof and as supplemented in accordance with the
provisions of this Agreement.
(a) Organization, Qualification, etc. The Company is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Florida. The Company is duly qualified or
licensed to do business as a foreign corporation in each jurisdiction
where the operation of its business or ownership of its assets makes
such qualification or licensing necessary, except where the failure to
be so qualified or licensed would not have a Material Adverse Effect.
Each jurisdiction in which the Company is qualified to do business is
listed in Schedule 8.01(a). The Company has the corporate power and
authority to own its properties, to carry on its business as now being
conducted by it, and to execute, deliver and perform this Agreement and
each other agreement, document, instrument or certificate contemplated
by this Agreement or to be executed by the Company in connection with
the consummation of the transactions contemplated hereby and thereby
(all such other agreements, documents, instruments or certificates
being collectively referred to as the "Company Documents").
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(b) Capitalization of the Company. The entire authorized
capital stock of the Company consists of 2,000,000 shares of Class L
Common, 25,000,000 shares of Class A Common and 200,000 shares of Class
B Common (collectively, "Company Stock"), of which 1,000,000 shares of
Class L Common and 9,000,000 shares of Class A Common are issued and
outstanding. Schedule 8.01(b) accurately sets forth the name and number
of shares of capital stock held by each of the Shareholders. All of the
shares of Company Stock issued and outstanding have been duly and
validly authorized and issued and are fully paid and nonassessable.
Upon giving effect to the amounts to be paid hereunder to the holders
of Class B Common and Class L Common at the Effective Time, such
holders will not have received the entire amount of the "Unpaid Yield",
as defined in the Articles of Incorporation of the Company. Except as
set forth on Schedule 8.01(b), there are no outstanding subscriptions,
contracts, conversion privileges, options, warrants, calls or other
rights obligating the Company or any of its Subsidiaries to issue, sell
or otherwise dispose of, or to purchase, redeem or otherwise acquire,
any shares of capital stock of the Company. All options listed on
Schedule 8.01(b) which are unexercised at the Effective Time will be
cancelled at the Effective Time as a result of the Merger without the
payment of any consideration by the Company. There are no outstanding
stock appreciation, phantom stock, profit participation or similar
rights with respect to the Company. Except for the Stockholder
Agreement or as set forth in Schedule 8.01(b), there is no outstanding
agreement, restriction or encumbrance to which the Company or any of
its Subsidiaries is a party or by which any of them is bound (such as a
right of first refusal, right of first offer, option, voting trust,
proxy, power of attorney or the like) with respect to the acquisition,
disposition or voting of the shares of Company Stock issued and
outstanding.
(c) Subsidiaries. Schedule 8.01(c) sets forth for each
Subsidiary of the Company (i) its name and jurisdiction of
incorporation, (ii) the number of shares of authorized capital stock of
each class of its capital stock, (iii) the number of issued and
outstanding shares of each class of its capital stock, and (iv) the
number of shares of its capital stock held in treasury. All of the
issued and outstanding shares of capital stock of each Subsidiary of
the Company have been duly authorized and are validly issued, fully
paid, and nonassessable. The Company owns all of the outstanding shares
of each Subsidiary of the Company, free and clear of any agreements,
liens or encumbrances or other restrictions other than the Bank Liens
and restrictions imposed by federal and state securities laws. There
are no outstanding subscriptions, contracts, conversion privileges,
options, warrants, calls or other rights obligating the Company or any
Subsidiary to issue, sell or otherwise dispose of, or to purchase,
redeem or otherwise acquire, any shares of capital stock of any of the
Company's Subsidiaries. There are no outstanding stock appreciation,
phantom stock, profit participation or similar rights with respect to
any Subsidiary of the Company. There is no outstanding agreement,
restriction or encumbrance, other than the Senior Credit Agreement and
the Bank Liens, to which the Company or any of its Subsidiaries are a
party or by which any of them are bound (such as a right of first
refusal, right of first offer, option, voting trust, proxy, power of
attorney or the like) with respect to the acquisition, disposition or
voting of the shares of capital stock of any of the Company's
Subsidiaries. None of the Company and its Subsidiaries controls,
directly or indirectly, or has any direct or indirect equity
participation in any corporation, partnership, trust or other business
association which is not a Subsidiary of the Company.
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(d) Authority. The execution, delivery and performance by the
Company of this Agreement and the Company Documents, and the
transactions contemplated herein and therein, have been duly and
effectively authorized by all necessary and required corporate action
of the Company. The Shareholders have approved the execution, delivery
and performance of this Agreement and the consummation of the Merger
and the other transactions contemplated hereby, in accordance with and
as required by Law, including without limitation, the FBCA, and the
Company's charter and by-laws.
(e) Due Execution. This Agreement has been duly executed and
delivered by the Company and is the valid and binding obligation of the
Company enforceable against it in accordance with its terms, except as
such enforceability may be limited by (i) applicable insolvency,
bankruptcy, reorganization, moratorium or other similar laws affecting
creditors' rights generally and (ii) applicable equitable principles
(whether considered in a proceeding at law or in equity). Upon due
execution and delivery by the Company at the Closing of the Company
Documents, each such agreement or instrument will constitute the valid
and binding obligation of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may be
limited by (i) applicable insolvency, bankruptcy, reorganization,
moratorium or other similar laws affecting creditors' rights generally
and (ii) applicable equitable principles (whether considered in a
proceeding at law or in equity).
(f) No Conflict. Except as provided in Schedule 8.01(f) and
except to the extent provided in any Store Lease (as to which the
Company makes no separate representation or warranty), the execution,
delivery and performance by the Company of this Agreement and the
Company Documents, do not and will not violate, conflict with, result
in a breach or termination of, or constitute a default under (or an
event which with due notice or lapse of time, or both, would constitute
a breach of or default under), or require a notice or consent under, or
result in the creation of any Lien under, or result in any penalty or
additional payment obligations or the acceleration of any obligations
under, (i) the charter or bylaws, as amended to date, of the Company or
any of its Subsidiaries, (ii) any note, agreement, contract, license,
instrument, mortgage, deed of trust, lease or other obligation to which
the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any of their respective assets is
bound, (iii) any Permit or any Order of any Governmental Authority or
other authority applicable to the Company or any of its Subsidiaries or
any of their respective assets, or (iv) any Law or rule or regulation
of any authority applicable to the Company or any of its Subsidiaries
or any of their respective assets, except in the case of any of clauses
(ii), (iii) or (iv) where any such consequences would not have a
Material Adverse Effect.
(g) Real Property. Schedule 8.01(g) contains a list of all
Real Property owned by the Company and its Subsidiaries and leases
pursuant to which the Company and its Subsidiaries lease Real Property
(such leases being referred to as "Store Leases"). Except as set forth
in Schedule 8.01(g), there are no current or pending special
assessments against any parcel of Real Property. None of the Company or
any of its Subsidiaries have granted to any Person any right of first
refusal, right of first opportunity, option or similar rights to
purchase the Company's or its Subsidiaries' leasehold or fee estate in
any parcel of Real Property. To the Knowledge of the Company, none of
the Company or any of its Subsidiaries have received notice from any
-17-
insurance company that it will require alteration of the Real Property
for continuance of a policy insuring the Real Property or the
maintenance of rates with respect thereto nor have they entered into
any, and to the Knowledge of the Company, there is no, development
agreement or other obligation that limits the Company's or its
Subsidiaries' ability to protest taxes, fixes minimum taxes or requires
continued business operations. Except with respect to Hazardous
Material Laws, as to which separate representations and warranties are
made in Section 8.01(l), to the Knowledge of the Company, the Real
Property of the Company and its Subsidiaries is in compliance with all
applicable federal, state and local Laws, and all applicable insurance
requirements, including, but not limited to, Laws pertaining to zoning
matters, except, in each case and in the aggregate, where the failure
of the Real Property to be in compliance would not have a Material
Adverse Effect. Except as set forth in Schedule 8.01(g), the buildings
and improvements constituting a part of the owned Real Property do not
rely on any facilities (other than the facilities of the public utility
and community water and sewer companies) not located on the land to
fulfill any zoning or building code. There are no pending or, to the
Knowledge of the Company, threatened actions or proceedings regarding
condemnation or other eminent domain actions or proceedings with
respect to any parcel of Real Property, or any part or parts thereof.
Except for the Real Property listed on Schedule 8.01(g) and public
roads, no real property is regularly used by the Company or any of its
Subsidiaries in the operation of the their respective businesses.
(h) Personal Property. The Company owns, subject to any
Permitted Liens and Liens listed on Schedule 8.01(o) all of the
personal property shown in the Latest Balance Sheet (except for assets
sold after the date of the Latest Balance Sheet in the ordinary course
of business consistent with past practice). Schedule 8.01(h) hereto
correctly lists and describes all leases pursuant to which the Company
or any of its Subsidiaries leases any personal property used in their
respective businesses where the lease involves expenditures by the
Company or any of its Subsidiaries in excess of $25,000 per annum.
(i) Intellectual Property.
(i) Schedule 8.01(i) sets forth a complete and
correct list of: (i) patented, registered, or applied for
Intellectual Property owned by the Company or any of its
Subsidiaries; (ii) all trade names and material unregistered
trademarks, owned or licensed for use by the Company or any of
its Subsidiaries; (iii) all material licenses or other
material agreements to which the Company or any of its
Subsidiaries is a party, either as licensee or licensor, for
Intellectual Property.
(ii) Except as set forth on Schedule 8.01(i), (A) the
Company and its Subsidiaries own all right, title, and
interest, freely transferable and free of any licenses, claims
or restrictions of others other than Permitted Liens and Liens
listed on Schedule 8.01(o), in and to, or otherwise have the
right to use, the Intellectual Property necessary for the
operation of the business of the Company and its Subsidiaries
as currently conducted; (B) neither the Company, nor any of
its Subsidiaries, has received any written notice of
invalidity, infringement, or misappropriation from any third
party with respect to any such Intellectual Property; (C) to
the Knowledge of the Company, neither the
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Company, nor any of its Subsidiaries, has interfered with,
infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property of any third parties;
(D) to the Knowledge of the Company, no third party has
materially interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Intellectual Property
of the Company or any of its Subsidiaries; (E) all patented,
registered, or applied for Intellectual Property has been
properly maintained and renewed in accordance with all
applicable legal requirements, and are currently in force; and
(F) no licensing fees, royalties or payments are due and
payable by the Company or any of its Subsidiaries for any
Intellectual Property. No licenses or other similar rights
have been granted by the Company or any of its Subsidiaries,
and neither the Company, nor any of its Subsidiaries, has an
obligation to grant any licenses or other similar rights, with
respect to any Intellectual Property.
(iii) The transactions contemplated by this Agreement
will have no Material Adverse Effect on the Company's or any
of its Subsidiaries' right, title, and interest in and to any
of their Intellectual Property. Except as set forth in
Schedule 8.01(i), the Company and its Subsidiaries have taken
all commercially reasonable actions to maintain and protect
their Intellectual Property. All independent contractors who
are currently participating in the creation or development of
any portion of the Intellectual Property have executed an
agreement with the Company or one of its Subsidiaries
assigning all right, title and interest in such portion of the
Intellectual Property to the Company or one of its
Subsidiaries. Except for such actions as would not have a
Material Adverse Effect, neither the Company, nor any of its
Subsidiaries, has caused any of the Intellectual Property to
enter the public domain, or has taken any action which has in
any way affected their ownership (subject to Permitted Liens
and the Liens listed on Schedule 8.01(o)) of any portion of
the Intellectual Property.
(j) Legal Proceedings. Except as disclosed on Schedule
8.01(j), there is no Legal Proceeding pending or, to the Knowledge of
the Company, threatened against the Company or any of its Subsidiaries,
or any of the assets of the Company and its Subsidiaries (and, to the
Knowledge of the Company, no material claim has been asserted against
the Company or any of its Subsidiaries, or any of the assets of the
Company and its Subsidiaries). None of the Company, its Subsidiaries,
or any of their assets are subject to any judicial or administrative
Order with respect to the use, occupancy or right to operate the
business of the Company or any of its Subsidiaries or the consummation
of the Merger or which would have a Material Adverse Effect.
(k) Notices. To the Knowledge of the Company, no written
notices have been issued and served upon the Company or any of its
Subsidiaries or the Shareholders by any Governmental Authority having
jurisdiction over the Company or any of its Subsidiaries or any of
their assets ordering them to make any alterations or repairs to any of
their assets alleged by such Governmental Authority to be required by
any Law, or to correct any condition of such assets alleged by such
Governmental Authority not to comply with any Law, which have not been
made or corrected.
-19-
(l) Environmental Matters. Except as disclosed on Schedule
8.01(l):
(i) The Real Property is in compliance with all
Hazardous Materials Laws in all material respects.
(ii) The Company and its Subsidiaries have not
generated, handled, released, threatened to release,
transported, stored, used or disposed of any Hazardous
Materials, at any time, at, on, in, under, to or from any of
the Real Property in such amounts as to give rise to any
remedial obligation under Hazardous Materials Laws.
(iii) To the Knowledge of the Company, neither the
Company nor any of its Subsidiaries has received any written
notice, that any other Person has generated, handled,
released, threatened to release, transported, stored, used or
disposed of any Hazardous Materials, at any time, at, on, in,
under, to or from any of the Real Property.
(iv) To the Knowledge of the Company, neither the
Company nor any of its Subsidiaries has received any written
notice, of any violation of any Hazardous Materials Law by the
Company or any of its Subsidiaries.
(m) Contracts. Except for the leases listed on Schedule
8.01(g) or Schedule 8.01(h), the licenses and other Contracts listed on
Schedule 8.01(i) and the other Contracts listed on Schedule 8.01(m)
attached hereto (such leases and all such other Contracts,
collectively, the "Material Contracts"), neither the Company nor any of
its Subsidiaries is a party to or bound by, and none of their assets
are bound by or subject to, any written or oral:
(i) agreement for the sale of any assets other than
Inventory in the ordinary course of business consistent with
past practice;
(ii) non-competition or other agreement restricting
the conduct of the business of the Company or any of its
Subsidiaries;
(iii) agreement which contains any provisions
requiring the Company or any of its Subsidiaries to indemnify
or act as guarantor for any other person or entity or to
reimburse any maker of a letter of credit or banker's
acceptance, or any endorsement by the Company or any of its
Subsidiaries of any promissory note or ▇▇▇▇ of exchange, other
than endorsements for collection made in the ordinary course
of business;
(iv) agreement, note, debenture, mortgage, indenture,
deed of trust, security agreement, capitalized lease or other
instrument evidencing or securing Indebtedness or any
sale-leaseback arrangement pertaining to any real property or
equipment used in the business of the Company or any of its
Subsidiaries;
(v) partnership or joint venture agreement or similar
agreement;
-20-
(vi) agreement, other than with respect to the sale
of Inventory in the ordinary course of business consistent
with past practice, granting any person or entity any lease,
sublease, license or other interest, legal or equitable, in
any of the assets of the Company or any of its Subsidiaries;
(vii) agreement with any Affiliate of the Company or
any of its Subsidiaries;
(viii) franchise, distributorship or sales agency
agreement;
(ix) agreement with any supplier for the purchase or
sale of raw materials, supplies or products (excluding any
purchase order entered into in the ordinary course of business
on an order-by-order basis, unless the terms of delivery
thereunder are three months or more or the amount thereof
exceeds $200,000), or with any distributor, broker or agent;
(x) agreement for the sale of products with any
customer (excluding any purchase order entered into in the
ordinary course of business on an order-by-order basis, unless
the terms of delivery thereunder are three months or more or
the amount thereof exceeds $50,000);
(xi) leases of real property by the Company or any of
its Subsidiaries or any lease of tangible personal property by
the Company or any of its Subsidiaries if the lease of
tangible personal property involves expenditures by the
Company or any of its Subsidiaries in excess of $25,000 per
year;
(xii) agreement for capital expenditures in excess of
$10,000 in the aggregate for all such agreements;
(xiii) contract for advertising, marketing or
promotional services in excess of $25,000 in the aggregate;
(xiv) material agreement (either as licensor or
licensee or in any similar capacity) to pay or receive any
royalty or license fee or any other material agreement (as
licensor or licensee or in any similar capacity) to license
any Intellectual Property;
(xv) employment (exclusive of employment at will
without written agreement) or consulting agreement; or
(xvi) any other Contract not capable of being fully
performed or not terminable without penalty in excess of
$50,000 within a period of 90 days.
A copy of each Material Contract, true, correct and complete in all
material respects, has been delivered to Buyer or made available to
Buyer. Except as set forth on Schedule 8.01(g), 8.01(h), 8.01(i) or
8.01(m), no Material Contract is oral. Each Material Contract is valid,
binding and in full force and effect (subject, as to enforcement of
remedies, to bankruptcy, reorganization, insolvency, moratorium and
other similar laws relating to or affecting creditors' rights generally
-21-
and to general equitable principles). Neither the Company nor any of
its Subsidiaries has received any prepayments under any Material
Contract; and, except as set forth on Schedule 8.01(g), 8.01(h),
8.01(i) or 8.01(m), there are no material defaults under, or events
which with due notice or lapse of time, or both, would constitute
material defaults under, any Material Contract by the Company or any of
its Subsidiaries or, to the Knowledge of the Company, any other party
thereto. Except as set forth on Schedule 8.01(g), 8.01(h), 8.01(i) or
8.01(m), no previous or current party to any Material Contract has
given notice to the Company, or any of its Subsidiaries, of or made a
claim against the Company or any of its Subsidiaries with respect to
any material breach or default thereunder which has not been cured.
Except as set forth on Schedule 8.01(g), 8.01(h), 8.01(i) and 8.01(m),
neither the Company nor any of its Subsidiaries has received any notice
from any party to any Material Contract that such party currently
intends to terminate or to refuse to renew any such Material Contract
or currently intends to exercise any right or option to increase the
annual rent or other amounts payable thereunder. Except as set forth on
Schedule 8.01(g), 8.01(h), 8.01(i) and 8.01(m), neither the Company nor
any of its Subsidiaries have waived or assigned any of their rights
under any of the Material Contracts.
(n) Compliance with Laws. Schedule 8.01(n) correctly describes
all material Permits granted to or obtained by the Company or any of
its Subsidiaries in connection with the use or occupancy of any parcel
of Real Property or the operation of the business of the Company or any
of its Subsidiaries. Except as set forth on Schedule 8.01(n), no
Permits are required by Law or otherwise necessary for the proper
operation of the business of the Company or any of its Subsidiaries in
the manner in which they have been operated by the Seller or to permit
the lawful use and occupancy of any parcel of Real Property or the
lawful use of any other assets of the Company or any of its
Subsidiaries in the manner in which they have been used by the Company
or its Subsidiaries except, in each case and in the aggregate, for such
Permits the absence of which would not have a Material Adverse Effect.
All of such Permits are in full force and effect, and to the Knowledge
of the Company, no action to terminate any such Permit is pending or
threatened by any governmental official, agency, instrumentality or
other authority or other party. Except with respect to environmental
matters and Real Property, as to which separate representations and
warranties are made in Section 8.01(l) and 8.01(g), respectively,
neither the Company nor any of its Subsidiaries is in violation of any
Law concerning the business of the Company or any of its Subsidiaries
which individually or in the aggregate could have a Material Adverse
Effect.
(o) Title; Sufficiency of Assets. Except as set forth on
Schedule 8.01(o), all of the assets owned by the Company and its
Subsidiaries are free and clear of all Liens other than Permitted
Liens. The assets owned and leased by the Company and its Subsidiaries
on the Closing Date comprise all of the material assets, properties and
rights of every type and description, real, personal and mixed,
tangible and intangible, necessary to, or used by the Company and its
Subsidiaries in, the operation of their respective businesses as
currently conducted.
(p) Brokers; Finders. Except as set forth in the succeeding
sentence, neither the Company nor any of its Subsidiaries are under any
commitment or obligation to any broker or agent whereby a finder's,
brokerage or middleman's commission is payable or whereby any
-22-
claim therefor may be validly made with respect to the transactions
contemplated by this Agreement. The Company has retained ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, Incorporated as its agent for the consummation of the Merger and
is solely responsible for any fees and expenses payable to such agent
(which fees and expenses shall constitute Shareholder Transaction
Expenses).
(q) Employee and Labor Relations.
(i) Neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or contract
with any labor union. There are no labor unions or other
organizations representing, purporting to represent or, to the
Knowledge of the Company, attempting to represent, any
employee of the Company or any of its Subsidiaries. To the
Knowledge of the Company, there are no organizing activities
involving the Company or any of its Subsidiaries pending or
threatened by any labor organization or group of employees of
the Company or any of its Subsidiaries.
(ii) There are no (A) strikes, work stoppages,
slowdowns, lockouts or arbitrations or (B) material grievances
or other material labor disputes pending or, to the Knowledge
of the Company, threatened against or involving the Company or
any of its Subsidiaries.
(iii) Except as set forth on Schedule 8.01(q) hereto,
there are no complaints, charges or claims against the Company
or any of its Subsidiaries pending or, to the Knowledge of the
Company, threatened to be brought or filed with any
Governmental Authority based on, arising out of, in connection
with or otherwise relating to the employment by the Company or
any of its Subsidiaries of any individual, including any claim
relating to employment discrimination, the ADA, equal pay,
employee safety and health, wages and hours or workers'
compensation.
(iv) Hours worked by and payments made to employees
of the Company and its Subsidiaries have not been in violation
of the federal Fair Labor Standards Act or any other Law
dealing with such matters except for violations that would not
in the aggregate have a Material Adverse Effect.
(v) The Company and its Subsidiaries are in
compliance with all Laws and Orders relating to the employment
of their employees, including all such Laws and Orders
relating to wages, hours, collective bargaining, employment
discrimination, immigration, disability, civil rights, safety
and health, workers' compensation, pay equity, the ADA and the
collection and payment of withholding and/or social security
Taxes and similar Taxes, other than non-compliance that would
not in the aggregate have a Material Adverse Effect.
(vi) Except as set forth on Schedule 8.01(q), neither
the Company nor any of its Subsidiaries is a contractor or
subcontractor with obligations under any federal, state or
local government contracts.
-23-
(r) Employee Benefits.
(i) Each Employee Plan is identified on Schedule
8.01(r).
(ii) True, correct and complete copies of the
following have been delivered to Buyer with respect to each
Employee Plan (to the extent applicable): (A) any plan
documents and related trust documents, and all amendments and
proposed amendments thereto, (B) the three most recent Forms
5500 and schedules thereto, (C) the most recent Internal
Revenue Service determination letter, (D) the most recent
summary plan description and any subsequent summaries of any
material modification, (E) written descriptions of all
non-written Employee Plans, (F) any fiduciary liability policy
or policy rider maintained by the Company or any Subsidiary
with respect to any Employee Plan, and (G) any report of any
compliance audit with respect to any Employee Plan.
(iii) Neither the Company nor any ERISA Affiliate
maintains or has an obligation to contribute to (or within the
past six years has maintained or has had an obligation to
contribute to) any of the following (A) any "multiemployer
plan" as defined in Section 3(37) of ERISA, (B) any defined
benefit plan as defined in Section 3(35) of ERISA, or (C) any
voluntary employees beneficiary association as defined in
Section 501(c)(9) of the Internal Revenue Code. For purposes
of this subsection (s), an "ERISA Affiliate" is any business
entity that is required to be aggregated and treated as one
employer with the Company under Section 414(b), (c), (m) or
(o) of the Code.
(iv) Except as disclosed in Schedule 8.01(r), each
Employee Plan complies in form and operation in all materials
respects with all applicable laws, including ERISA and the
Code, and no event has occurred that could subject the Company
or any Subsidiary to any material liability under ERISA, the
Code or any other applicable law with respect to any Employee
Plan (including any liability under any indemnification
running to any third party from the Company or a Subsidiary).
(v) Except as disclosed in Schedule 8.01(r), all
contributions, premiums and payments due from the Company or
its Subsidiaries to date have been timely paid and all amounts
properly accrued to date or as of the Closing Date as
liabilities of the Company or its Subsidiaries (directly or
indirectly) which have not been paid have been and will be
properly recorded on the books of the Company.
(vi) No Employee Plan is under audit or is the
subject of any investigation by any governmental agency, nor,
to the Knowledge of the Company, is any such audit or
investigation threatened. No Legal Proceedings (other than
routine claims for benefits) are pending or, to the Knowledge
of the Company, threatened with respect to any Employee Plan.
No filing is pending with respect to any Employee Plan under
any voluntary compliance program of the Internal Revenue
Service, the Department of Labor or any other governmental
agency.
(vii) The transactions contemplated by this Agreement
will not result in the payment or series of payments by the
Company or its Subsidiaries to any person of an
-24-
"excess parachute payment" within the meaning of Section 280G
of the Code, or any other payment which is not deductible for
federal income tax purposes under the Code.
(viii) Except as set forth in Schedule 8.01(r), the
consummation of the transactions contemplated by this
Agreement (alone or together with any other event which,
standing alone, would not by itself trigger such entitlement
or acceleration) will not (A) entitle any person to any
benefit under any Employee Plan, or (B) accelerate the time of
payment or vesting, or increase the amount, of any
compensation or benefit due to any person under an Employee
Plan.
(ix) Except as set forth on Schedule 8.01(r), neither
the Company nor any of its Subsidiaries has any liability with
respect to any obligation to provide benefits, including death
or medical benefits (whether or not insured), with respect to
any person beyond his or her retirement or other termination
of service other than (A) coverage mandated by Part 6 of Title
I of ERISA or Section 4980B of the Code (or any similar law),
(B) retirement or death benefits under any employee pension
plan, (C) disability benefits under any employee welfare plan
that have been fully provided for by insurance or otherwise,
(D) deferred compensation benefits accrued as liabilities on
the books of the Company or its Subsidiaries, or (E) benefits
in the nature of severance pay under written plans.
(x) Except as set forth on Schedule 8.01(r), no
Employee Plan covers or provides benefits to or with respect
to any individual who is not a current employee of the Company
or its Subsidiaries, a dependent of such an employee, or an
individual who is covered solely by virtue of being a former
employee of the Company or its Subsidiaries or a current or
former dependent of such a former employee.
(xi) Except as set forth on Schedule 8.01(r), no
insurance contract or other funding instrument for any
Employee Plan imposes any surrender charge or any other
liability upon termination of such contract or instrument.
(s) Taxes. Except as set forth on Schedule 8.01(s) hereto:
(i) The Company and each member of the Company Tax
Group has timely filed or caused to be timely filed all Tax
Returns which were required to have been filed by or with
respect to it, or its assets, properties, or operations (in
each case with the appropriate taxing authority), and has
timely paid or caused to be timely paid all Taxes and all
payments of estimated Taxes which have become due pursuant to
such Tax Returns or pursuant to any assessment which has
become payable;
(ii) All such Tax Returns are complete and accurate
in all material respects and disclose all Taxes required to be
paid by the Company and each member of the Company Tax Group;
-25-
(iii) None of such Tax Returns currently is being
examined by the relevant taxing authority, nor have any such
Tax Returns been examined by the relevant taxing authority;
(iv) There is no action, suit, investigation, audit,
claim or assessment pending, or, to the Knowledge of the
Company, proposed or threatened with respect to Taxes of the
Company or any member of the Company Tax Group and, to the
Knowledge of the Company, no basis exists therefor;
(v) Neither the Company nor any member of the Company
Tax Group has waived or been requested to waive any statute of
limitations in respect of Taxes;
(vi) No transaction contemplated by this Agreement is
subject to withholding under Section 1445 of the Code and no
transfer Taxes, real estate transfer Taxes or other similar
Taxes will be imposed on the acquisition or other transactions
contemplated by this Agreement;
(vii) As a result of any of the transactions
contemplated hereby or by any Company Document or Shareholder
Document, neither the Company nor Buyer (nor any Affiliate of
any of them) will be obligated to make a payment to an
individual that would be a "parachute payment" to a
"disqualified individual", as those terms are defined in
Section 280G of the Code;
(viii) None of the assets of the Company or its
Subsidiaries other than leased personal or real property
constitutes property that the Company or Buyer or any of their
Affiliates will be required to treat as owned by another
Person for federal income Tax purposes or is "tax-exempt use
property" within the meaning of Section 168 of the Code;
(ix) All Taxes which the Company or any member of the
Company Tax Group are required by law to withhold or to
collect for payment have been or will be duly withheld and
collected and have been or will be paid when due;
(x) The unpaid Taxes of the Company and its
Subsidiaries (A) did not, as of the date hereof, exceed the
reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the
Latest Balance Sheet (rather than in any notes thereto) and
(B) will not exceed that reserve as adjusted through the
Closing Date in accordance with the past custom and practice
of the Company and its Subsidiaries in filing the Tax Returns;
and
(xi) The Company will have net operating loss carry
forwards of at least $7,000,000 as of the Closing Date, none
of which will expire before 2020 or are subject to the
limitations of Section 382 of the Code, the consolidated
return regulations or otherwise prior to consummation of the
Merger. The completion of the Merger will result in an
ownership change pursuant to Section 382 of the Code, and as
such, any net operating losses generated prior to the Closing
Date will be subject to limitations under Section 382 of the
Code.
-26-
(t) Warranty. Except as set forth in Schedule 8.01(t), neither
the Company nor any of its Subsidiaries has any obligations under
written or oral product warranties made in connection with the sale of
any product.
(u) Financial Statements; Undisclosed Liabilities. The Company
has delivered to Buyer true and correct copies of unaudited
consolidated balance sheets of the Company and its Subsidiaries at
February 3, 2001 (the "Latest Balance Sheet"), and unaudited
consolidated statements of income, cash flow and stockholders' equity
of the Company and its Subsidiaries as of and for the twelve fiscal
months ended on such date prepared by the Company (all such balance
sheets and statements, collectively, the "Financial Statements").
Each such Financial Statement was prepared in accordance with
the books and records of the Company and presents fairly in all
material respects the financial condition of the Company and its
Subsidiaries as of its date and the results of operations of the
Company and its Subsidiaries for the period then ended, in conformity
with GAAP consistently applied. Other than as and to the extent
disclosed or reserved against in the Latest Balance Sheet, to the
Knowledge of the Company, the Company and its Subsidiaries have no
liabilities or obligations of any nature whatsoever (whether accrued,
absolute, contingent, known, unknown, asserted, unasserted or
otherwise, and whether due or to become due), except (i) liabilities
and obligations incurred in the ordinary course of operating the
Company's business since the date of such Latest Balance Sheet, (ii)
liabilities and obligations which would not be required to be disclosed
on a balance sheet prepared in accordance with GAAP, (iii) liabilities
and obligations that are not in default and are set forth in, or
arising under, the leases and other Contracts listed on Schedules
8.01(g), 8.01(h), 8.01(i) and 8.01(m) attached hereto or which are not
required to be listed therein to avoid a misrepresentation under this
Agreement and (iv) liabilities and obligations disclosed in the
Company's disclosure schedules provided herewith.
(v) Insurance. Set forth on Schedule 8.01(v) attached hereto
and made a part hereof is a schedule of all property and casualty
insurance and general and product liability insurance polices
maintained by the Company and its Subsidiaries. All required premiums
have been paid with respect to such policies which are due and payable
prior to the date hereof.
(w) No Changes. Except as contemplated or permitted hereby, or
as set out in Schedule 8.01(w), since February 3, 2001 there has not
been:
(i) any entry by the Company or its Subsidiaries into
any commitment or transaction other than in the ordinary
course of business, including (A) the incurrence of, or
commitment to incur, any capital expenditures in excess of
$50,000 in the aggregate, (B) the incurrence of any
Indebtedness or Liens, (C) any repayment of any principal of
any Indebtedness outstanding under the Senior Credit
Agreement, or (D) the sale, lease or other disposition of, or
entry into any agreement to sell, lease or otherwise dispose
of, any of the assets of the Company or its Subsidiaries,
except for sales of Inventory in the ordinary course of
business;
(ii) any change by the Company or its Subsidiaries in
accounting methods or principles;
-27-
(iii) any material change in practices of the Company
or its Subsidiaries with respect to the manner and timing of
payment of any payments under Store Leases;
(iv) any declaration, making or payment of any
distribution of assets of the Company or its Subsidiaries to
any Affiliate of the Company;
(v) any sums or other assets of the Company or its
Subsidiaries paid to or withdrawn by any of the Company's or
its Subsidiaries' present or former employees, except for
ordinary compensation, annual bonuses consistent with past
practice and fees and ordinary expense reimbursement and
similar payments;
(vi) any substantial increase in the total number of
the employees of the Company and its Subsidiaries, any
increase in compensation or benefits of any such employees
(other than pursuant to customary salary and employee benefit
administration in the ordinary course of business in
accordance with past practice), or any retroactive increase in
compensation or benefits of any such employees; or
(vii) to the Knowledge of the Company, any other
Material Adverse Change.
(x) Transactions with Affiliates. Except as set forth on
Schedule 8.01(x), no Affiliate of the Company owns or has any interest
in any property, asset or right which is used in the operation of the
business of the Company or any of its Subsidiaries. Except as
contemplated by the terms of this Agreement (including any other
agreements contemplated hereby), and except as set forth on Schedule
8.01(x) hereto (i) neither the Shareholders nor any of their respective
Affiliates will at any time after Closing for any reason, directly or
indirectly, be or become entitled to receive any payment or transfer of
money or other property of any kind from the Company or its
Subsidiaries or Buyer, and (ii) none of the Company, its Subsidiaries
or Buyer will at any time after Closing for any reason, directly or
indirectly, be or become subject to any obligation to any Affiliates of
the Company (other than a wholly-owned Subsidiary of the Company).
Schedule 8.01(x) hereto also sets forth a listing and brief description
of any agreement, arrangement or relationship between any Affiliate of
the Company or any of its Subsidiaries, on the one hand, and any
supplier of the Company or any of its Subsidiaries or any Affiliate
thereof, principal or employee of any such supplier of which the
Company has Knowledge, on the other hand.
(y) Banking Matters, etc. Set forth in Schedule 8.01(y) hereto
is a true and correct copy of the name of each bank in which the
Company or any of its Subsidiaries has an account or safe deposit box.
Except as set forth in Schedule 8.01(y) hereto, no persons hold powers
of attorney from the Company or any of its Subsidiaries.
(z) Recapitalization Agreement. As of the Closing, the Company
will have no liabilities or obligations of any nature whatsoever
(whether accrued, absolute, contingent, known, unknown, asserted,
unasserted or otherwise) under the Recapitalization Agreement among the
Company, the Shareholders, and certain former shareholders of the
Company dated June 5, 1998.
-28-
(aa) Disclaimer of Other Representations and Warranties.
Except as expressly set forth in this Section 8.01, the Company makes
no representation or warranty, express or implied, at law or in equity
regarding the Company, and any such other representations or warranties
are hereby expressly disclaimed. Notwithstanding anything in this
Agreement to the contrary, the Company makes no representation or
warranty to Buyer or Buyer Subsidiary with respect to (a) any
projections, estimates or budgets heretofore delivered to or made
available to Buyer or its counsel, accountants or advisors of future
revenues, expenses or expenditures or future results of operations, or
(b) except as expressly covered by a representation and warranty
contained in this Section 8.01, any other information or documents
(financial or otherwise) made available to Buyer or its counsel,
accountants or advisors with respect to the Company or its
Subsidiaries.
8.02 Representations and Warranties Regarding the Shareholders. Each of
the Shareholders represents and warrants to Buyer and Buyer Subsidiary,
severally and not jointly, with respect only to itself or himself and to the
shares of Company Stock owned by it or him, that the statements contained in
this Section 8.02 are correct and complete as of the date of this Agreement.
(a) Ownership. Such Shareholder has good title to the total
number of shares of Company Stock as set forth in Schedule 8.01(b) to
this Agreement as owned by him of record, and, except as set forth in
such Schedule, is the sole beneficial and record owner thereof.
(b) Title. Such shares of Company Stock are owned free and
clear of any agreements, liens or encumbrances or other restrictions
other than restrictions imposed by federal and state securities laws,
the Stockholder Agreement, and in the case of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, the
Executive Stock Agreement dated July 14, 1998 among ▇▇▇▇▇▇▇▇▇, the
Company and certain of the Shareholders.
(c) No Conflicts. No authorization, approval or consent of any
governmental authority or other person or entity is required in
connection with the execution, delivery and performance by such
Shareholder of this Agreement or any other agreement, document,
instrument, or certificate contemplated by this Agreement or to be
executed by such Shareholder in connection with the transactions
contemplated hereby and thereby (all such other agreements, documents,
instruments, or certificates being collectively referred to as the
"Shareholder Documents") or the consummation by such Shareholder of the
transactions contemplated hereby or thereby.
(d) Authorization; Execution and Delivery; Individual. In the
case of a Shareholder who is an individual:
(i) such Shareholder has the power and authority to
execute, deliver and perform this Agreement and each other
Shareholder Document to which such Shareholder is a party and
to consummate the transactions contemplated hereby and
thereby;
(ii) this Agreement and each other Shareholder
Document to which such Shareholder is a party has been duly
executed and delivered by such Shareholder and constitutes the
legal, valid and binding obligation of such Shareholder
enforceable against
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him in accordance with their respective terms, except as such
enforceability may be limited by (i) applicable insolvency,
bankruptcy, reorganization, moratorium or other similar laws
affecting creditors' rights generally and (ii) applicable
equitable principles (whether considered in a proceeding at
law or in equity); and
(iii) the execution, delivery and performance by such
Shareholder of this Agreement and each other Shareholder
Document to which such Shareholder is a party and the
consummation by such Shareholder of the transactions
contemplated hereby and thereby will not result in a breach or
violation by such Shareholder of, or constitute a default by
such Shareholder under, any applicable law, administrative
regulation, or any judgment, decree, order, writ, injunction
or governmental permit or any license, lease, indenture,
instrument or other agreement to which such Shareholder is a
party or by which such Shareholder is bound.
(e) Authorization; Execution and Delivery; Entity. In the case
of a Shareholder who is not an individual:
(i) such Shareholder is a corporation, partnership,
trust or other legal entity duly organized, validly existing
and in good standing under the laws of its jurisdiction of
creation, and has the requisite power and authority to own its
properties and to carry on its business in all material
respects as is now being conducted;
(ii) this Agreement and each other Shareholder
Document to which such Shareholder is a party has been duly
authorized by all necessary action on behalf of such
Shareholder, and has been duly executed and delivered by
authorized persons on behalf of such Shareholder;
(iii) this Agreement and each other Shareholder
Document to which such Shareholder is a party is a valid and
binding agreement of such Shareholder enforceable in
accordance with its terms, except as such enforceability may
be limited by (i) applicable insolvency, bankruptcy,
reorganization, moratorium or other similar laws affecting
creditors' rights generally and (ii) applicable equitable
principles (whether considered in a proceeding at law or in
equity); and
(iv) the execution, delivery and performance by such
Shareholder of this Agreement and each other Shareholder
Document to which such Shareholder is a party and the
consummation by such Shareholder of the transactions
contemplated hereby and thereby will not result in a breach or
violation by such Shareholder of, or constitute a default by
such Shareholder under, any applicable law, administrative
regulation, or any judgment, decree, order, writ, injunction
or governmental permit or any license, lease, indenture,
instrument or other agreement to which such Shareholder is a
party or by which such Shareholder is bound, and will not
violate the charter or other organizational documents of such
Shareholder.
(f) Claims and Proceedings. There is no legal action,
arbitration, proceeding or investigation pending or, to the knowledge
of such Shareholder, threatened against or affecting
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such Shareholder, which, if adversely decided to such Shareholder,
would prevent the consummation of the Merger.
(g) Approval of Merger. Such Shareholder has approved, and
will after the date hereof take any further steps necessary to approve
the Merger.
(h) Disclaimer of Other Representations and Warranties. Except
as expressly set forth in this Section 8.02, no Shareholder makes any
representation or warranty, express or implied, at law or in equity
regarding such Shareholder or the shares of Company Stock and any such
other representations or warranties are hereby expressly disclaimed.
Notwithstanding anything in this Agreement to the contrary, the
Shareholders make no representation or warranty to Buyer or Buyer
Subsidiary with respect to (a) any projections, estimates or budgets
heretofore delivered to or made available to Buyer or its counsel,
accountants or advisors of future revenues, expenses or expenditures or
future results of operations with respect to the Company or its
Subsidiaries, or (b) except as expressly covered by a representation
and warranty contained in this Section 8.02, any other information or
documents (financial or otherwise) made available to Buyer or its
counsel, accountants or advisors with respect to the Company or its
Subsidiaries.
9. REPRESENTATIONS AND WARRANTIES OF BUYER AND BUYER SUBSIDIARY
9.01 Representations and Warranties. Each of Buyer and Buyer Subsidiary
hereby represents and warrants to the Company and the Shareholders that:
(a) Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware and Buyer Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Florida. Buyer owns all of the issued and outstanding stock of
Buyer Subsidiary. Each of Buyer and Buyer Subsidiary has the power and
authority to own its properties, to carry on its business as now being
conducted by it, and to execute, deliver and perform this Agreement and
each other agreement, document, instrument or certificate contemplated
by this Agreement or to be executed by Buyer or Buyer Subsidiary in
connection with the consummation of the transactions contemplated
hereby and thereby (all such other agreements, documents, instruments
or certificates being collectively referred to as the "Buyer
Documents").
(b) Authority of Buyer and Buyer Subsidiary. The execution,
delivery and performance by Buyer and Buyer Subsidiary of this
Agreement and the Buyer Documents and the transactions contemplated
herein and therein, have been duly and effectively authorized by all
necessary and required corporate action of Buyer and Buyer Subsidiary.
(c) Due Execution by Buyer and Buyer Subsidiary. This
Agreement has been duly executed and delivered by Buyer and Buyer
Subsidiary and is the valid and binding obligation of Buyer and Buyer
Subsidiary enforceable against them in accordance with its terms,
except as such enforceability may be limited by (i) applicable
insolvency, bankruptcy, reorganization, moratorium other similar laws
affecting creditors' rights generally and (ii) applicable equitable
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principles (whether considered in a proceeding at law or in equity).
Upon due execution and delivery by Buyer and Buyer Subsidiary at the
Closing of the Buyer Documents, each such document will constitute the
valid and binding obligation of Buyer and/or Buyer Subsidiary, as the
case may be enforceable against them in accordance with its terms,
except as such enforceability may be limited by (i) applicable
insolvency, bankruptcy, reorganization, moratorium or other similar
laws affecting creditors' rights generally and (ii) applicable
equitable principles (whether considered in a proceeding at law or in
equity).
(d) No Conflict. The execution, delivery and performance by
Buyer and Buyer Subsidiary of this Agreement and the Buyer Documents,
do not and will not violate, conflict with, result in a breach of, or
constitute a default under (or an event which with due notice or lapse
of time, or both, would constitute a breach of or default under), or
require a consent under, (i) the articles of incorporation or bylaws as
amended to date, of Buyer and Buyer Subsidiary, (ii) any material note,
agreement, contract, license, instrument, mortgage, deed of trust,
lease or other obligation to which Buyer or Buyer Subsidiary is a party
or by which Buyer or Buyer Subsidiary is bound, (iii) any Order of any
governmental official, agency, instrumentality or other authority
applicable to Buyer or Buyer Subsidiary, or (iv) any Law or any rule or
regulation of any authority applicable to Buyer or Buyer Subsidiary.
(e) Proceedings. There are no Legal Proceedings pending or, to
the knowledge of Buyer or Buyer Subsidiary, threatened against Buyer or
Buyer Subsidiary which, if decided adversely to Buyer or Buyer
Subsidiary, would prevent the consummation of the Merger on the Closing
Date.
(f) Brokers; Finders. Neither Buyer nor Buyer Subsidiary is
under any commitment or obligation to any broker or agent whereby a
finder's, brokerage or other middleman's commission is payable or
whereby any claim therefor may be validly made with respect to the
transactions contemplated by this Agreement.
(g) Sufficient Funds. Buyer or Buyer Subsidiary has funds
sufficient for the payments set forth in Section 2 above which are to
be made by Buyer or Buyer Subsidiary.
10. CONDITIONS PRECEDENT TO BUYER'S AND BUYER SUBSIDIARY'S OBLIGATIONS
HEREUNDER
10.01 Conditions Precedent. The obligation of Buyer and Buyer
Subsidiary to consummate the transactions contemplated by this Agreement shall
be subject to and conditioned upon the satisfaction at or before Closing of each
of the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Sections 8.01 and 8.02 hereof shall be true and
correct in all material respects at and as of the Closing as though
then made and as though the Closing Date were substituted for the date
of this Agreement, except (i) for changes specifically permitted or
contemplated by this Agreement, (ii) to the extent that any such
representations and warranties were made as of a specified date, and as
to such representations and warranties the same shall continue on the
Closing Date to have been true and correct in all material respects as
of the specified date, and (iii) to the extent that any such
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representations and warranties were supplemented in accordance with the
terms of this Agreement. For purposes of the conditions precedent set
forth in this Section 10.01, any notice or other action taken after the
announcement of the execution of this Agreement from or by the landlord
under any Store Lease on account of any claim or allegation (whether or
not valid) that the consummation of the transactions contemplated by
this Agreement would constitute a default under such Store Lease shall
not be deemed to be material and shall not form the basis for the
non-satisfaction of any such condition precedent.
(b) No Adverse Change. Since the date of this Agreement, there
shall not have occurred a Material Adverse Change.
(c) Observance and Performance. All covenants and agreements
required by this Agreement to be observed or performed by the Company
or the Shareholders on or prior to the Closing Date shall have been
complied with and performed in all material respects.
(d) Officer's Certificate. The Company and the Shareholders
(in the case of the Shareholders, only with respect to their own
representations and warranties in Section 8.02, and not as to any other
matter) shall have delivered to Buyer and Buyer Subsidiary a
certificate executed by the Shareholders and a responsible officer of
the Company, dated the Closing Date, to the effects set forth in
Sections 10.01(a), (b) and (c) above.
(e) Closing Documents. The Shareholders shall have delivered
on the Closing Date to Buyer all of the documents and instruments which
are required to be delivered by them on the Closing Date.
(f) Removal of Liens. The Company shall have obtained and
shall have delivered to Buyer on or prior to the Closing Date evidence
satisfactory to Buyer that all Liens on the Company Stock or any
property of the Company and its Subsidiaries, other than Permitted
Liens and Liens (other than Bank Liens which shall be terminated
effective as of payment of the amounts set forth in Section 2.06)
listed on Schedule 8.01(o), have been terminated and released.
(g) Legal Opinion. Buyer shall have received an opinion of
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the Company and the Shareholders, in the
form attached hereto as Exhibit B.
(h) Corporate Documents. The Company shall have delivered to
Buyer copies of all necessary corporate resolutions of the Company
authorizing the execution, delivery and performance by the Company of
this Agreement, the Company Documents and the transactions contemplated
hereby and thereby, certified to be true, correct and complete,
unchanged and in full force and effect on the Closing Date by the
Secretary of the Company.
(i) Legal Proceedings. No Order of any court or administrative
agency of competent jurisdiction shall be in effect as of the Closing
Date, and no Legal Proceedings shall be threatened or pending as of the
Closing Date, which would restrain or prohibit the consummation of the
transactions contemplated by this Agreement, and no Legal Proceedings
shall be threatened or pending which, if determined adversely to the
Company would, in the reasonable judgment of Buyer, cause a Material
Adverse Change.
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(j) Stock Options. All unexercised stock options shall have
been cancelled or arrangements shall have been made for such stock
options to be cancelled upon consummation of the Merger in accordance
with Section 15.05.
(k) Discharge of Indebtedness. Provision shall have been made
for the Company's Indebtedness under the Senior Credit Agreement to the
Senior Lenders to be repaid in full or otherwise forgiven in accordance
with Section 15.06 and Buyer shall have received releases from such
Senior Lenders and such additional documentation (including, without
limitation, UCC termination statements) in connection therewith as
Buyer shall reasonably request.
(l) Escrow Agreement. The Shareholder Representative, Senior
Lenders' Agent and the Escrow Agent shall have executed and delivered
to Buyer the Escrow Agreement.
(m) Transactions with Affiliates. All agreements with
Affiliates shall have been terminated and all receivables and payables
with Affiliates shall have been paid pursuant to Section 15.07.
(n) Store Cash. On the Closing Date, each Store shall have at
least $300.00 cash on hand.
(o) Audited Financial Statements. Price Waterhouse Coopers LLP
("PWC") shall have issued an unqualified audit opinion on the financial
statements of the Company and its Subsidiaries for the fiscal year
ended January 31, 2000 in the form previously delivered to the Buyer by
the Company (reflecting certain adjustments to financial statements
previously prepared by PWC). PWC shall have completed an audit of the
financial statements of the Company and its Subsidiaries for the fiscal
year ended February 3, 2001 and issued an unqualified audit opinion
thereon.
(p) Appraisal Rights. No Shareholder shall have asserted
appraisal rights under the FBCA for their shares of Company Stock.
(q) Termination of Stockholder Agreement. The Stockholder
Agreement shall have been terminated.
(r) Shareholders' Transaction Expenses. The Shareholders shall
have made arrangements to pay on the Closing Date all Shareholders'
Transaction Expenses in excess of $2,000,000.
10.02 Waiver. Buyer and Buyer Subsidiary may waive any or all of the
conditions precedent to their obligation hereunder set forth in this Section 10.
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11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS HEREUNDER
11.01 Conditions Precedent. The obligation of the Company and the
Shareholders to consummate the transactions contemplated by this Agreement shall
be subject to and conditioned upon satisfaction at or before the Closing of each
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Buyer and Buyer Subsidiary set forth in Section 9
hereof shall be true and correct in all material respects and as of the
Closing as though then made and as though the Closing Date were
substituted for the date of this Agreement, except (i) for changes
specifically permitted or contemplated by this Agreement, (ii) to the
extent that any such representations and warranties were made as of a
specified date, and as to such representations and warranties the same
shall continue on the Closing Date to have been true and correct in all
material respects as of the specified date, and (iii) to the extent
that any such representations and warranties were supplemented in
accordance with the terms of this Agreement.
(b) Observance and Performance. All covenants and agreements
required by this Agreement to be observed or performed by the Buyer or
the Buyer Subsidiary on or prior to the Closing Date shall have been
complied with and performed.
(c) Officer's Certificate. The Buyer and the Buyer Subsidiary
shall have delivered to the Shareholders a certificate executed by a
responsible officer of the Buyer and the Buyer Subsidiary, dated the
Closing Date, to the effects set forth in Sections 11.01(a), and (b)
above.
(d) Closing Documents. The Buyer and the Buyer Subsidiary
shall have delivered on the Closing Date to the Shareholders all of the
documents and instruments which are required to be delivered by them on
the Closing Date.
(e) Legal Opinion. The Shareholders shall have received an
opinion of Faegre & ▇▇▇▇▇▇ LLP, counsel to the Buyer, in the form
attached hereto as Exhibit C.
(f) Corporate Documents. Buyer and Buyer Subsidiary shall have
delivered to the Company copies of all necessary corporate resolutions
authorizing the execution, delivery and performance of this Agreement,
the Buyer Documents and the transactions contemplated hereby and
certified to be true, correct, complete, unchanged and in full force
and effect on the Closing Date by the Secretary of the Buyer and Buyer
Subsidiary.
(g) Legal Proceedings. No Order of any court or administrative
agency of competent jurisdiction shall be in effect as of the Closing
Date, and no Legal Proceedings shall be threatened or pending as of the
Closing Date, which would restrict or prohibit the consummation of the
transactions contemplated by this Agreement.
(h) Escrow Agreement. Buyer and the Escrow Agent shall have
executed and delivered to the Shareholders the Escrow Agreement.
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11.02 Waiver. The Shareholders and the Company may waive any or all of
the conditions precedent to the obligation of the Shareholders and the Company
hereunder set forth in this Section 11.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties contained herein shall survive the execution
and delivery hereof and the Closing hereunder and, except as otherwise
specifically provided in this Agreement, shall thereafter terminate and expire
eighteen (18) months from the Closing Date; provided, however, that the
foregoing time limitations shall not apply in respect of any representation or
warranty contained in (i) Section 8.01 (b), (c), (d), (e) or (z), Section
8.02(a), (b), (d), or (e), or 9.01(a), (b) or (c), all of which shall survive
without limitation as to time, and (ii) Section 8.01(s), which shall survive for
a period of thirty-six (36) months after the Closing Date.
13. INDEMNIFICATION
13.01 Tax Indemnification of Buyer by the Shareholders.
(a) Subject to the limitations and qualifications set forth in
this Section 13, the Shareholders, jointly and severally, agree to
indemnify and hold harmless Buyer and its Affiliates (including, after
the Closing, the Company and its Subsidiaries) and their respective
shareholders, directors, officers, employees and agents thereof
(collectively, the "Buyer Indemnitees" and individually a "Buyer
Indemnitee") against and with respect to: (i) Taxes of the Company or
its Subsidiaries for periods on or before the Closing Date unless such
Taxes have been paid or were included in the reserve for Tax liability
as adjusted through the Closing Date as provided in Section 8.01(s)(x),
(ii) Taxes of any other corporation which has been a member of the
Company Tax Group as a result of Treasury regulation ss. 1502-6(a) or
comparable provisions of state, local or foreign law or Taxes which the
Company has assumed or succeeded to, (iii) Tax of the Company or its
Subsidiaries resulting from a breach of the representations in Section
8.01(s), and (iv) actual out-of-pocket costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses), losses,
damages, assessments, settlements or judgments arising out of the
imposition or assessment of any Tax described in the foregoing clauses
(i), (ii), (iii) or (iv) (each of the foregoing being referred to
herein as a "Tax Loss").
(b) Buyer agrees to give prompt notice to the Shareholder
Representative and the Senior Lenders' Agent of any Tax Loss or the
assertion of any claim, or the commencement of any suit, action or
proceeding in respect of which indemnity may be sought hereunder which
Buyer deems to be within the coverage of this Section 13.01 (specifying
with reasonable particularity of the basis therefor) and will give the
Shareholder Representative and the Senior Lenders' Agent such
information with respect thereto as the Shareholder Representative may
reasonably request. Buyer shall have full control over the defense of
any such suit, action or proceeding (including any Tax audit); provided
that Shareholder Representative and the Senior Lenders' Agent may upon
notice to Buyer and at their own expense participate in such defense.
Buyer shall not, without the consent of the Shareholder Representative
and the Senior Lenders'
-36-
Agent, which is not to be unreasonably withheld or delayed, agree to
any settlement with respect to any Tax if such settlement is within the
coverage of this Section 13.01. Whether or not the Shareholder
Representative or the Senior Lenders' Agent choose to participate with
the defense of any claim, all of the parties hereto shall cooperate in
the defense or prosecution thereof.
13.02 Other Indemnification of Buyer by the Shareholders. Subject to
the limitations and qualifications set forth in this Section 13, except as
relates to Tax Losses for which the sole indemnification is provided in Section
13.01, the Shareholders agree to indemnify and hold harmless the Buyer
Indemnitees against and with respect to:
(a) Any and all Losses directly or indirectly resulting or
arising from any misrepresentation or breach of warranty on the part of
the Company or the Shareholders under this Agreement or the certificate
delivered pursuant to Section 10.01(d);
(b) Any and all Losses directly or indirectly resulting or
arising from any non-fulfillment of any covenant or agreement on the
part of Shareholders under this Agreement;
(c) Any and all Losses directly or indirectly resulting or
arising from any non-fulfillment of any covenant or agreement on the
part of the Company under this Agreement, but excluding, in each case,
any covenants or agreements to be fulfilled by the Company following
the Merger;
(d) Any and all Indebtedness or other obligations under the
Senior Credit Agreement or Losses relating to Bank Liens required to be
discharged in connection with the Closing; and
(e) Any and all demands, claims, actions, suits, proceedings,
assessments, judgments and reasonable legal and other expenses incident
to the foregoing, to the extent the Shareholders have indemnification
obligations for the foregoing.
The indemnification obligations of the Shareholders hereunder relate to
indemnification for all Losses of a Buyer Indemnitee, regardless of whether such
Loss arises from a third-party claim against such Buyer Indemnitee or otherwise.
13.03 Limitations on Indemnification by Shareholders. Notwithstanding
anything to the contrary provided elsewhere in this Agreement:
(a) Except with respect to indemnification obligations
relating to a breach by a Shareholder of its or his respective
representations under Section 8.02 or a breach by a Shareholder of its
or his covenants under Section 15.02, 15.03 or 15.08, the obligations
of the Shareholders under this Agreement to indemnify the Buyer
Indemnitees shall be joint and several. Anything in this Agreement to
the contrary notwithstanding, the obligations of the Shareholders to
indemnify the Buyer Indemnitees for a breach by a Shareholder of its or
his respective representations under Section 8.02 or a breach by a
Shareholder of its or his covenants under Section 15.02, 15.03 or 15.08
shall be separate and several, and, subject to the right of the Buyer
Indemnitees to make claims on the Escrow Fund, no Shareholder shall
have any liability
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to the Buyer Indemnitees for any breaches by any other Shareholder of
its or his respective representations under Section 8.02 or obligations
under Section 15.02, 15.03 or 15.08;
(b) Except as provided in Section 17 and except with respect
to Special Claims (claims for which may be brought at any time, except
in the case of Special Claims arising out of a breach of a
representation or warranty, claims for which may be brought for so long
as such representation or warranty survives under Section 12), the
obligations of the Shareholders under this Agreement to indemnify Buyer
Indemnitees (i) under Section 13.02 shall be of no force with respect
to claims as to which a Buyer Indemnitee has not given the Shareholder
Representative written notice prior to the expiration of eighteen (18)
months from and after the Closing Date, and (ii) under Section 13.01
shall be of no force with respect to claims as to which a Buyer
Indemnitee has not given the Shareholder Representative written notice
prior to the expiration of thirty-six (36) months from and after the
Closing Date;
(c) The Shareholders shall not have any obligation to
indemnify the Buyer Indemnitees pursuant to Section 13.02 from and
against any Losses (other than amounts payable with respect to Special
Claims, as to which no deductible shall apply) until the aggregate
amount of Losses actually incurred by the Buyer Indemnitees with
respect to such claims shall exceed on a cumulative basis an amount
equal to $300,000 (the "Basket"), in which event the Shareholders'
obligation to indemnify the Buyer Indemnitees shall be limited to the
amount in excess of the Basket;
(d) The Buyer Indemnitees shall not be deemed to have suffered
a Loss to the extent that such Loss has otherwise been accounted for or
reflected in, the determination of the Closing Working Capital;
provided that the limitation in this Section 13.03(d) shall not apply
to Losses arising from (i) claims based upon the failure of the
Shareholders to pay expenses under Section 19, (ii) claims under
Section 13.02(d), (iii) claims arising out of the breach of the
representations and warranties in Section 8.01(w)(i)(C) or 8.01(w)(iv)
or (iv) claims based on a breach of the covenants contained in Section
15.01(b)(iii) (solely as it relates to the matters set forth in
Sections 8.01(w)(i)(C) and 8.01(w)(iv)) or Section 15.01(b)(vii);
(e) Any payment by the Shareholders of any Loss of a Buyer
Indemnitee shall be deemed to be a reduction in the Consideration paid
by the Buyer and the Buyer Subsidiary in connection with the Merger up
to the amount of the Escrow Funds held under the Escrow Agreement;
(f) Notwithstanding anything to the contrary provided
elsewhere in this Agreement, after the Closing the Buyer Indemnitees'
sole and exclusive recourse and remedy for any claim (other than
Special Claims) against the Shareholders, for Losses arising out of,
resulting from or related to the Merger and the other transactions
contemplated by this Agreement, including, without limitation, any
claim for indemnification under this Agreement, shall be to make a
claim against the Escrow Funds held under the Escrow Agreement (to the
extent such Escrow Funds have not already been distributed in
accordance with the terms of the Escrow Agreement), and, except with
respect to Special Claims, after the Closing no Shareholder shall have
any personal
-38-
liability for such claims or Losses to the extent amounts held under
the Escrow Agreement are insufficient to satisfy any such claims or
Losses of the Buyer Indemnitees; provided that nothing in this Section
13.03(f) shall (i) be construed to limit the rights and benefits of, or
the remedies available to, any Party to this Agreement in respect of
the Escrow Agreement, or (ii) prevent any Party from seeking equitable
relief in accordance with Section 22.02.
As used in this Section 13.03, the term "Special Claims" means (A)
claims based upon a breach of any representation or warranty of the Company
contained in Section 8.01 (b), (c), (d), (e), (p) or (z) or any representation
or warranty of any Shareholder contained in Section 8.02(a), (b), (d) or (e),
(B) claims based upon the failure of Shareholders to pay any expenses under
Section 19, (C) claims under Section 13.02(d), and (D) claims based upon actual
fraud by the Company or any Shareholder.
Notwithstanding anything to the contrary provided elsewhere in this
Agreement, Buyer, Buyer Subsidiary, the Shareholders, the Buyer Indemnitees,
and/or such parties' Affiliates or Subsidiaries shall have no recourse to the
Senior Lenders for any claims arising hereunder, including, without limitation,
Special Claims.
13.04 Indemnification of the Shareholders by Buyer. Buyer hereby agrees
to indemnify and hold harmless the Shareholders and all shareholders, directors,
officers, employees and agents of the Shareholders (if any) (collectively, the
"Shareholder Indemnitees" and individually, a "Shareholder Indemnitee") against
and with respect to:
(a) Any and all Losses directly or indirectly resulting or
arising from any misrepresentation or breach of warranty on the part of
Buyer or Buyer Subsidiary under this Agreement or the certificate
delivered pursuant at Section 11.01(c);
(b) Any and all Losses directly or indirectly resulting or
arising from any non-fulfillment of any covenant or agreement on the
part of Buyer or Buyer Subsidiary under this Agreement, or on the part
of the Company with regard to covenants or agreements to be performed
or fulfilled after the Merger; and
(c) Any and all demands, claims, actions, suits, proceedings,
assessments, judgments, costs and reasonable legal and other expenses
incident to the foregoing.
The indemnification obligations of Buyer hereunder relate to
indemnification for all Losses to a Shareholder Indemnitee, regardless of
whether such Loss arises from a third-party claim against such Shareholder
Indemnitee or otherwise.
13.05 Limitation on Indemnification by Buyer. Except as provided in
Section 17, notwithstanding anything to the contrary provided elsewhere in this
Agreement, the obligations of Buyer to indemnify the Shareholder Indemnitees
shall be of no force or effect with respect to claims under Section 13.04 as to
which a Shareholder Indemnitee has not given Buyer written notice prior to
eighteen (18) months from and after the Closing Date unless such claims are
based on actual fraud by Buyer or Buyer Subsidiary or a breach of any
representation or warranty of Buyer or Buyer Subsidiary contained in Section
9.01(a), (b) or (c).
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13.06 Obligations of Shareholder Indemnitees and Buyer to Senior
Lenders. To the extent a Shareholder Indemnitee provides Buyer with written
notice pursuant to Section 13.05 of any claims pursuant to Section 13.04, it
shall also provide a copy of such notice to the Senior Lenders' Agent. If Buyer
is required to make any payment to a Shareholder Indemnitee as a result of the
indemnification obligations of Buyer hereunder with respect to any Losses of a
Shareholder Indemnitee, regardless of whether such Loss arises from a
third-party claim against such Shareholder Indemnitee or otherwise, (i) such
Shareholder Indemnitee shall provide notice of the requirement to make such
payment to the Senior Lenders' Agent and (ii) Buyer shall pay the required
amount, and the Shareholder Indemnitee hereby consents to such payment, to the
Senior Lenders' Agent, on behalf of the Senior Lenders, as directed by the
Senior Lenders' Agent. Upon making such payment to the Senior Lenders' Agent,
the Buyer shall not have any further obligation in respect of such Loss to the
Buyer Indemnitee or the Senior Lenders.
13.07 Investigation Not a Defense. No investigation by Buyer or its
Representatives prior to, pursuant to or after the date of this Agreement shall
diminish or obviate any of the representations, warranties, covenants or
agreements of the Shareholders contained in this Agreement, any Shareholder
Document or any document delivered by the Shareholders or any of them hereunder.
13.08 Procedures for Third-Party Claims (Other than Under Section
13.01(a)). If a third-party claim is made against a Shareholder Indemnitee or a
Buyer Indemnitee, and if such indemnitee believes that such claim could give
rise to a right of indemnification, then such Shareholder Indemnitee or Buyer
Indemnitee (an "Indemnitee") shall give written notice to the party obligated to
provide indemnification hereunder (an "Indemnifying Party") of such claim, which
notice shall provide a reasonable description of the details of such claim, as
soon as reasonably practicable after such Indemnitee has received notice thereof
(provided that failure to give timely notice shall not limit the indemnification
obligations of the Indemnifying Party hereunder except to the extent that the
delay in giving, or failure to give, such notice has actually and materially
prejudiced the ability of the Indemnifying Party to defend against the claim).
The Indemnifying Party shall defend such claim, at the Indemnifying Party's own
expense and with counsel selected by the Indemnifying Party and reasonably
satisfactory to such Indemnitee, provided that an Indemnitee shall at all times
also have the right to fully participate in the defense at its own expense (and
may retain its own counsel at the expense of the Indemnifying Party if it shall
determine that representation of it and the Indemnifying Party by the same
counsel would present a conflict). If the Indemnifying Party shall fail to
affirmatively assume the defense of such claim at least ten (10) business days
prior to the date as of which the initial response to such claim is due, or if
the Indemnifying Party shall not diligently pursue such a defense, such
Indemnitee shall have the right, but not the obligation, to undertake the
defense of, and to compromise or settle (exercising reasonable business
judgment), the claim on behalf, for the account, and at the risk and expense
(including without limitation the payment of the reasonable attorneys' fees of
such Indemnitee regardless of whether the Indemnitee prevails against the third
party claim), of the Indemnifying Party. If the Indemnifying Party assumes the
defense of such claim, the obligation of the Indemnifying Party hereunder as to
such claim shall include taking all steps necessary in the defense or settlement
of such claim.
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The Indemnifying Party shall not consent to the entry of any judgment
or settle or compromise any third-party demands, claims, actions, suits or
proceedings for which an Indemnitee has sought indemnification from the
Indemnifying Party unless it shall have given such Indemnitee not less than
fifteen (15) days prior written notice of the proposed consent, settlement or
compromise, and afforded such Indemnitee an opportunity to consult with the
Indemnifying Party regarding the proposed consent, settlement or compromise, and
shall not consent to the entry of any judgment or enter into any settlement or
compromise without the approval of such Indemnitee. An Indemnitee shall not
unreasonably withhold or delay its approval of a proposed consent, settlement or
compromise; in determining whether to give its approval, an Indemnitee may
consider whether the proposed consent, settlement or compromise includes as an
unconditional term thereof the giving by the claimant to such Indemnitee of a
release from all liability in respect of such claim except the liability
satisfied by the Indemnifying Party.
13.09 General Provisions.
(a) The Indemnifying Party's indemnification obligation to the
Indemnitee in respect of Losses for which indemnification is provided
under this Agreement shall be reduced by any insurance proceeds and
other amounts actually received by or on behalf of the Indemnitee from
third parties (net of costs and expenses (including reasonable legal
fees and expenses) incurred by such Indemnitee in connection with
seeking to collect and collecting such amounts), in respect to such
Losses (such amounts are referred to herein as "Indemnity Reduction
Amounts"). No insurer or other third party who would otherwise be
obligated to pay any claim shall solely by virtue of the
indemnification provisions hereof be relieved of the responsibility
with respect to such claim or have any subrogation rights with respect
to such claim. The Parties agree that the indemnification provisions
hereof shall not confirm any benefit upon an insurer or any other third
party which such insurer or other third party would not be entitled to
receive in the absence of the indemnification provisions hereof. Each
Indemnitee will use its reasonable efforts to pursue promptly any
claims or rights it may have against all third parties which would
reduce the amount of Losses.
(b) The Indemnifying Party's indemnification obligation to the
Indemnitee in respect of Losses for which indemnification is provided
under this Agreement shall be reduced to take account of the present
value of any net Tax benefit realized by the Indemnitee arising from
the incurrence or payment of any such loss, liability, claim, damage or
expense. In computing the amount of any such Tax cost or Tax benefit,
the Indemnitee shall be deemed to use all other items of income, gain,
loss, deduction or credit before using any item arising from the
incurrence or payment of any indemnified loss, liability, claim, damage
or expense of any indemnity payment pursuant to this Section 13.
(c) Notwithstanding anything to the contrary, Losses shall not
include punitive damages except to the extent such damages are asserted
or recovered by a third-party against a Party.
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(d) No Shareholder shall have any additional liability
hereunder by reason of the fact that such Shareholder's name is
included in the definition of Knowledge of the Company.
14. SHAREHOLDER REPRESENTATIVE The Shareholder Representative is hereby
designated by each of the Shareholders to serve as the representative of the
Shareholders with respect to the matters expressly set forth in this Agreement
to be performed by the Shareholder Representative. Each of the Shareholders, by
execution of this Agreement, hereby irrevocably appoints the Shareholder
Representative as the agent, proxy and attorney-in-fact for such Shareholder for
all purposes of this Agreement, including, without limitation, full power and
authority and discretion on such Shareholder's behalf (i) to consummate the
transactions contemplated herein, (ii) to pay such Shareholder's expenses
(whether incurred on or after the date hereof) incurred in connection with the
negotiation and performance of this Agreement and all related agreements, (iii)
to disburse any funds received hereunder to such Shareholder and each other
Shareholder, (iv) to execute and deliver any certificates representing the
shares of Company Stock and execution of such further instruments of assignment
as Buyer shall request, (v) to execute and deliver on behalf of the Shareholders
any amendment or waiver hereto, (vi) to take all other actions to be taken by or
on behalf of such Shareholder in connection herewith, (vii) to negotiate,
settle, compromise and otherwise handle all claims for indemnification made by
or against the Shareholders pursuant to Section 13 hereof, (viii) to execute and
deliver the Escrow Agreement and to take all such further actions with respect
thereto as the Shareholder Representative shall deem appropriate and (ix) to do
each and every act and exercise any and all rights which such Shareholder or
Shareholders collectively are permitted or required to do or exercise under this
Agreement; provided, however, that notwithstanding any of the foregoing powers,
the Shareholder Representative shall not have the power to modify or impair any
of the rights of the Senior Lenders hereunder without the express written
consent of the Senior Lenders' Agent. Each of the Shareholders agree that such
agency and proxy are coupled with an interest, are therefore irrevocable without
the consent of the Shareholder Representative and shall survive the death,
incapacity or bankruptcy of any Shareholder. Neither the Shareholder
Representative nor any agent employed by him shall incur any liability to any
Shareholder relating to the performance of his duties hereunder except for
actions or omissions constituting fraud, bad faith or willful misconduct.
15. COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
15.01 Access; Conduct of Business Prior to Closing. In addition to any
other covenants of the Company or the Shareholders in this Agreement, the
Company covenants and agrees that from and after the date of this Agreement to
the Closing:
(a) The Company and its Subsidiaries shall make available (at
reasonable times and upon reasonable notice (and accompanied by
representatives of the Company)) for inspection by Buyer and its
Representatives, corporate records, books of accounts, Contracts and
all other documents reasonably requested by Buyer, and shall permit
Buyer and its Representatives reasonable access to the properties of
the Company and its Subsidiaries in order to permit Buyer
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and such Representatives to make reasonable inspection and examination
of the business, operations and affairs of the Company and its
Subsidiaries and to facilitate the transactions contemplated by this
Agreement and related transition matters. The Company and its
Subsidiaries shall further cause their Representatives to be available
upon reasonable notice to answer questions of Buyer and its
Representatives concerning the business, operations and affairs of the
Company and its Subsidiaries, and to make available all relevant books
and records in connection with such inspection and examination. Without
limiting the generality of the foregoing, the Company shall cause PWC
to allow Buyer's accountants to observe the audit of the February 3,
2001 financial statements required by Section 10.01(o) hereof.
(b) Except as otherwise provided in this Agreement, the
Company will not, and will not permit any of its Subsidiaries to,
without the prior written consent of Buyer (which consent shall not be
unreasonably withheld or delayed):
(i) enter into or amend any lease of Real Property;
or enter into or amend any other agreement (other than in the
ordinary course of business) materially affecting or in any
way pertaining to the assets or business of the Company or its
Subsidiaries;
(ii) sell, transfer, dispose of, encumber or abandon
any material assets or enter into any agreement to do any of
the foregoing, provided that the Company or any of its
Subsidiaries may sell Inventory in the ordinary course
consistent with past practice;
(iii) take any action of the nature described in
Section 8.01(w);
(iv) enter into any merger or consolidation with any
Person, or engage in any new business or invest in, or make a
loan, advance or capital contribution to, any Person;
(v) settle any pending litigation or obtain any
releases of threatened actions or proceedings other than the
threatened litigation described on Schedule 8.01(j);
(vi) delay or accelerate payment of any amounts
payable under any Store Lease beyond or in advance of their
due dates or the dates when such amounts would have been paid
in the ordinary course of business consistent with past
practice;
(vii) declare, set aside, make or pay any dividend or
other distribution in respect of the capital stock of the
Company or any of its Subsidiaries; or
(viii) issue, repurchase or redeem or commit to
issue, repurchase or redeem, any shares of the Company's
capital stock, any options or other rights to acquire such
stock or any securities convertible into or exchangeable for
such stock, except as may be required by Section 15.05 hereto.
(c) The Company shall make all capital expenditures set forth
in Schedule 15.01(c) in connection with the completion of the Stores
set forth in such Schedule.
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(d) Without limiting the generality of the foregoing, the
Company and its Subsidiaries shall in all other respects, operate their
respective businesses in the usual and ordinary course, use
commercially reasonable effects to preserve the goodwill of suppliers,
customers, employees and others having relations with the Company and
its Subsidiaries, and not to commit or otherwise agree to take any
action prohibited hereby.
(e) The Company and its Subsidiaries shall: (i) file all Tax
returns, elections or information statements with respect to any
liabilities for Taxes or other matters relating to Taxes, which
pursuant to applicable Law must be filed prior to the Closing Date;
(ii) promptly upon filing provide copies of any such Tax returns,
elections or information statements to Buyer; (iii) make any such Tax
elections or other discretionary positions with respect to Taxes taken
by or affecting the Company or any Subsidiary only upon prior
consultation with and consent of Buyer; and (iv) not amend any Tax
return or file any carry back claims.
15.02 Public Statements. Before the Company or the Shareholders shall
release any information concerning this Agreement or the transactions
contemplated hereby and which is intended for or may result in public
dissemination thereof, the Shareholders shall so advise and cooperate with Buyer
and shall not allow the Company or its Subsidiaries to release such information
without the consent of Buyer (which consent may be withheld in Buyer's sole
discretion).
15.03 Non-Solicitation. The Company and each Shareholder covenants that
from the date hereof through the Closing Date or, if applicable, the date this
Agreement is terminated pursuant to Section 17 below, it will not permit any of
its Representatives or Affiliates to (a) make, solicit, assist, initiate,
facilitate or encourage any inquiries, proposals, offers or bids from any other
party relating to the Company, its assets or its business or, in the case of
such Shareholder, any equity interest in the Company, or (b) participate in any
discussions or negotiations regarding, or furnish or cause to be furnished to
any Person any non-public information relating to, the Company, its assets or
its business or, in the case of the Shareholders, any equity interest in the
Company, other than in the ordinary course of business consistent with past
practice. The Company and each Shareholder covenants that from the date hereof
through the Closing Date, it will not, directly or indirectly, enter into or
authorize, or permit any of its Representatives or Affiliates to enter into, any
agreement or arrangement in principle with any third party for the acquisition
of any of the Company's assets or, in the case of such Shareholder, any equity
interest in the Company.
15.04 Updating of Information. The Company shall promptly deliver to
Buyer any information concerning any event subsequent to the date of this
Agreement which is necessary to supplement the information contained in or made
a part of the representations and warranties contained herein, including the
Schedules hereto, or delivered by the Company pursuant to any of the covenants
contained herein, in order that the information contained herein or so delivered
be complete and accurate in all materials respects from and after the date
hereof, it being understood and agreed that, except as set forth in this Section
15.04, the delivery of such information shall not in any manner constitute a
waiver by Buyer of any of the conditions precedent to the Closing hereunder,
including, without limitation, the conditions contained in
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Section 10.01(b) hereof. Buyer shall have five (5) business days to inspect such
supplemental or amended schedules and, to the extent such amended or
supplemental schedules disclose information that is materially adverse to the
Company, to determine in its discretion whether to accept such schedules or
elect to terminate this Agreement. If Buyer does not elect to terminate this
Agreement, the supplemental or amended information provided pursuant to this
Section 15.04 will be deemed to have amended the related Schedule(s) and to have
qualified the representations and warranties contained in Section 8.01.
15.05 Stock Options. The Company agrees to cause any outstanding stock
options or similar rights to purchase capital stock of the Company or any of its
Subsidiaries to be cancelled concurrently with the consummation of the Merger
without the payment of any consideration by the Company.
15.06 Discharge of Indebtedness. The Company shall cause the Senior
Lenders to discharge in full (or otherwise obtain forgiveness of) all principle,
interest, fees, prepayment premiums, costs and expenses on Indebtedness to the
Senior Lenders under the Senior Credit Agreement in exchange for the payment of
the amounts set forth in Section 2.06 and shall cause all Bank Liens and all
other Liens, other than Permitted Liens and Liens (other than Bank Liens) listed
on Schedule 8.01(o), to be removed from the Company, its Subsidiaries, or their
assets effective as of the payment of the amounts set forth in Section 2.06.
15.07 Affiliate Transactions. The Company shall cause all agreements
between the Company or any of its Subsidiaries, on the one hand, and any
Affiliate of the Company, on the other hand (other than the Amended and Restated
Employment Agreement dated February 1, 2000 between the Company and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇), to be terminated prior to Closing and shall cause all intercompany
receivables and payables (whether or not then due) between the Company or any of
its Subsidiaries, on the one hand, and any Affiliate of the Company, on the
other hand, to be paid in full prior to Closing.
15.08 Further Actions. The Shareholders and the Company and its
Subsidiaries to agree to execute and deliver such instruments and take such
other actions as may reasonably be required to (a) carry out the intent of this
Agreement and (b) consummate the transactions contemplated hereby. This Section
15.08 is not intended to limit the rights of the Company and the Shareholders
under Section 11.01 not to consummate the transactions contemplated by this
Agreement in the event the conditions contained therein are not satisfied.
16. COVENANTS OF BUYER
16.01 Confidentiality. Buyer hereby reaffirms the terms and conditions
of that certain Confidentiality Agreement between the Company and Wilsons The
Leather Experts, Inc. dated as of January 25, 2001 and agrees to adhere to its
terms and conditions at all times after the date hereof.
16.02 Public Statements. Prior to the Closing Date, before Buyer shall
release any information concerning this Agreement or the transactions
contemplated hereby and which is
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intended for public dissemination thereof, Buyer shall so advise and cooperate
with the Shareholders and shall not release such information without the consent
of the Shareholders (which consent shall not be unreasonably withheld), unless
(a) such information is otherwise publicly available other than by reason of a
breach of this Section 16.02 or (b) the release thereof is required by any Law,
rule (including any rule of any securities exchange on which securities of Buyer
or any of its Affiliates are traded), regulation, policy or Order to which Buyer
is bound or subject, in which event Buyer will provide reasonable prior notice
to the Shareholder Representative and an opportunity to review and comment on
the release.
16.03 Further Actions. Buyer agrees to execute and deliver such
instruments and take such other actions as may reasonably be required to (a)
carry out the intent of this Agreement and (b) consummate the transactions
contemplated hereby. This Section 16.03 is not intended to limit the rights of
Buyer and the Buyer Subsidiary under Section 10.01 not to consummate the
transactions contemplated by this Agreement in the event the conditions
contained therein are not satisfied.
16.04 Company Employees. The compensation and benefits provided to
employees of the Company (including with respect to severance) shall, during the
one-year period beginning on the Closing Date, be substantially similar in the
aggregate to the compensation and benefits that were being provided to such
employees immediately prior to the Closing Date. However, this shall not prevent
changes from being made during this period with respect to the investment
options available to employees under any 401(k) plan currently maintained by the
Company. An employee's service with the Company prior to the Closing Date shall
be recognized for eligibility and vesting purposes (but not for benefit accrual
purposes other than for the determination of the number of vacation days) under
the compensation and benefit plans in which he or she participates after the
Closing Date.
17. TERMINATION
This Agreement may be terminated by:
(a) the written agreement of Buyer, the Buyer
Subsidiary, the Shareholders and the Company (with the consent
of the Senior Lenders' Agent);
(b) Buyer if (i) there shall occur a Material Adverse
Change or (ii) any of the conditions set forth in Section
10.01 hereof becomes incapable of fulfillment (other than as a
result of a breach by Buyer of this Agreement) and is not
waived by Buyer;
(c) the Company and the Shareholders (with the
consent of the Senior Lenders' Agent) if any of the conditions
set forth in Section 11.01 hereof becomes incapable of
fulfillment (other than as a result of a breach by the Company
or the Shareholders of this Agreement) and is not waived by
the Company or the Shareholders;
(d) Buyer in accordance with Section 15.04; or
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(e) Buyer or the Company and the Shareholders if the
Closing has not occurred on or prior to April 20, 2001.
Upon any termination of this Agreement pursuant to the foregoing
provisions of this Section 17, no party hereto shall thereafter have any further
liability or obligation hereunder except for the obligations under Section 16.01
which shall continue through and until the date that is two (2) years subsequent
to the date hereof; provided, however, that no such termination shall relieve
any party hereto of any liability for any breach of this Agreement prior to the
date of such termination.
18. NOTICES
Any notice required or permitted to be given by any of the parties
hereto shall be in writing and shall be deemed to have been given when
personally served, or delivered by overnight messenger service, or three (3)
days after the same shall have been deposited in the United States Mail, by
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Shareholders
or the Company:
Prior to Closing Date: Bentley's Luggage Corp.
c/o Bain Capital Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇
with copies to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.C.
▇▇▇▇▇ ▇. Breach
If to the Shareholders:
After Closing Date: c/o Bain Capital Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇
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with copies to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.C.
▇▇▇▇▇ ▇. Breach
If to Buyer
or Buyer Subsidiary: WWT, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Director of Business Development
with copies to: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Faegre & ▇▇▇▇▇▇ LLP
2200 ▇▇▇▇▇ Fargo Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to the Senior Lenders or
the Senior Lenders' Agent: Deutsche Bank AG
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇
With a copy to: J. ▇▇▇▇ ▇▇▇▇▇▇▇
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
(Illinois)
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other address or addresses as may be designated by the parties hereto
in accordance with this Section 18.
19. EXPENSES
Whether or not the transactions contemplated in this Agreement are
consummated on the Closing Date, the Buyer shall pay its own costs and expenses
incident to the preparation and execution of this Agreement and the consummation
of the transactions contemplated by this Agreement (including without limitation
fees and expenses of legal counsel, accountants and other consultants) and the
Shareholders (or the Company if the Closing shall not occur) shall pay all costs
and expenses incurred by the Company and the Shareholders incident to the
preparation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement (including without limitation fees
and expenses of legal counsel, accountants and other consultants, fees and
expenses of the financial advisors named in Section 8.01(p), and any
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other Shareholders' Transaction Expenses), except Shareholders' Transaction
Expenses to the extent paid pursuant to Section 2.06 hereof.
20. ENTIRE AGREEMENT
This Agreement, including the Schedules and Exhibits attached hereto
and made a part hereof, contain a complete expression of the agreements between
the parties with respect to the obligations and rights of the parties set forth
in this Agreement and supersedes all prior written or oral agreements between
the parties with respect to the transactions contemplated hereby. There are no
other agreements, promises, representations or inducements made by the parties
with respect to the subject matter hereof, except as set forth in this Agreement
and in the documents contemplated hereby.
21. SEVERABILITY
If any provision of this Agreement or the application of any such
provision to any person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof.
22. GOVERNING LAW; JURISDICTION
22.01 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Florida applicable to
agreements made and to be performed entirely within such state, without regard
to the conflicts of law principles of such state.
22.02 Enforcement. The parties hereto agree that irreparable damage
would occur if any provision of this Agreement were not performed in accordance
with its terms or were otherwise breached. Each party shall be entitled to seek
injunctive relief to prevent any breach of this Agreement and to enforce this
Agreement specifically in any court of competent jurisdiction, in addition to
any other remedy to which such party is entitled at law or in equity.
23. WAIVER OF COMPLIANCE; CONSENTS
Except as otherwise provided in this Agreement, any failure of any of
the parties to comply with any obligation, covenant, agreement or condition
herein may be waived by the party entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 23.
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24. REMEDIES CUMULATIVE
Except as otherwise provided herein, the rights and remedies provided
herein shall be cumulative and the assertion by a party of a right or remedy
hereunder shall not preclude the assertion by such party of any other rights or
remedies against another party provided herein.
25. WAIVER OF JURY TRIAL
In the event that any dispute shall arise between Buyer and the
Shareholders and litigation ensues, WITH RESPECT TO ANY LITIGATION ARISING OUT
OF THIS AGREEMENT, THE PARTIES EXPRESSLY WAIVE ANY RIGHT THEY MAY HAVE TO A JURY
TRIAL AND AGREE THAT ANY SUCH LITIGATION SHALL BE TRIED BY A JUDGE WITHOUT A
JURY.
26. HEADINGS
The use of headings is for convenience of reference only and shall not
affect the meaning or interpretation of this Agreement or the Schedules or any
Exhibits annexed hereto.
27. AMENDMENTS
This Agreement may be amended, changed or modified only by an
agreement, in writing, signed by the Parties, with the written consent of the
Senior Lenders' Agent.
28. SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto (and, to the extent expressly set forth herein, the Senior
Lenders) and their respective successors and permitted assigns, provided,
however, that none of the Parties hereto shall assign this Agreement, in whole
or in part, without the prior written consent of the others, except that the
Shareholders may assign any of their respective rights, but not their
obligations, under this Agreement to the Senior Lenders without the consent of
any other Party. This Agreement shall be for the sole benefit of the Parties
hereto (and, to the extent expressly set forth herein, the Senior Lenders) and
their respective successors and permitted assigns, and nothing herein expressed
or implied shall give or be construed to give to any person or entity, other
than the Parties hereto (and, to the extent expressly set forth herein, the
Senior Lenders) and such successors and permitted assigns, any legal or
equitable rights under this Agreement.
[SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Agreement to be executed and delivered as of the day and year
first above written.
THE COMPANY:
------------
BENTLEY'S LUGGAGE CORP.
BY: /s/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------------------
ITS: CEO
--------------------------------------
BUYER:
------
WWT, INC.
BY: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
ITS: Senior Vice President and CFO
--------------------------------------
BUYER SUBSIDIARY:
WILSONS ACQUISITION CORPORATION
BY: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
ITS: Vice President and CFO
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SHAREHOLDERS:
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▇▇▇▇ CAPITAL FUND VI, L.P.
BY: ▇▇▇▇ CAPITAL PARTNERS VI, L.P.
ITS: GENERAL PARTNER
BY: ▇▇▇▇ CAPITAL INVESTORS VI, INC.
ITS: GENERAL PARTNER
BY: /s/ ▇▇▇ ▇▇▇▇▇▇▇
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A MANAGING DIRECTOR
-51-
BCIP TRUST ASSOCIATES II
BY: /s/ ▇▇▇ ▇▇▇▇▇▇▇
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A GENERAL PARTNER
BCIP TRUST ASSOCIATES II-B
BY: /s/ ▇▇▇ ▇▇▇▇▇▇▇
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A GENERAL PARTNER
BCIP ASSOCIATES II
BY: /s/ ▇▇▇ ▇▇▇▇▇▇▇
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A GENERAL PARTNER
BCIP ASSOCIATES II-B
BY: /s/ ▇▇▇ ▇▇▇▇▇▇▇
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A GENERAL PARTNER
BCIP ASSOCIATES II-C
BY: /s/ ▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
A GENERAL PARTNER
▇▇▇▇▇▇▇▇ STREET PARTNERS II
BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
A GENERAL PARTNER
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-52-
SHAREHOLDER REPRESENTATIVE:
---------------------------
▇▇▇▇ CAPITAL, INC.
BY: /s/ ▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
ITS: Managing Director
----------------------------------------
-53-
EXHIBIT A
---------
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT (this "Agreement") made and entered into as of
April __, 2001, by and between WWT, INC., a Delaware corporation ("Wilsons"),
▇▇▇▇ CAPITAL, INC., a Delaware corporation, as representative (the "Shareholder
Representative") of the former holders (the "Shareholders") of the issued and
outstanding capital stock of Bentley's Luggage Corp. (the "Company"), Bankers
Trust Company, as agent (the "Agent") on behalf of the Senior Lenders, and First
Union National Bank, a national banking association, as escrow agent (the
"Escrow Agent").
WHEREAS, Wilsons Acquisition Corporation, a Delaware corporation
("Buyer Subsidiary"), Wilsons, the Company, the Shareholders and the Shareholder
Representative entered into an Agreement and Plan of Merger, dated as of April
6, 2001, (the "Merger Agreement"), pursuant to which Buyer Subsidiary merged
with and into the Company;
WHEREAS, the Merger Agreement contains certain adjustment provisions
and certain indemnification provisions for the benefit of Buyer Subsidiary and
Wilsons; and
WHEREAS, as security for the performance of the Shareholders'
obligations under such adjustment provisions and such indemnification
provisions, the Merger Agreement provides for the execution and delivery of this
Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Terms. Capitalized terms used herein but not otherwise defined shall
have the meanings given to such terms in the Merger Agreement. The Escrow Agent
is not a party to and has not received a copy of the Merger Agreement.
2. Delivery of Funds. Pursuant to Section 2.06(d) of the Merger
Agreement, simultaneously with execution and delivery of this Agreement, on the
Closing Date, Wilsons has deposited an aggregate of $2,750,000 (the "Escrow
Amount") with the Escrow Agent. The Escrow Agent shall use the Escrow Amount to
create a fund (the "Escrow Fund") which will be subject to the terms and
conditions of this Agreement. The Escrow Agent hereby acknowledges receipt of
the Escrow Amount.
3. Escrow Fund Income.
(a) Investments. The Escrow Agent shall invest the Escrow Fund
in any of the following investments as directed in writing by the Agent
from time to time: (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof; (ii) certificates of deposit and Eurodollar
time deposits and overnight bank deposits with any domestic commercial
bank having combined capital and surplus in excess of $175,000,000;
(iii) repurchase obligations with a term of not more than seven days
for underlying securities of the
A-1
type described in clauses (i) and (ii) above entered into with any
financial institution meeting the qualifications specified in clause
(ii) above; and (iv) money market mutual funds which invest solely in
United States Treasury securities which are direct obligations of the
United States of America or repurchase agreements that are fully
collateralized by direct obligations of the United States of America or
any money market fund that is AAA rated by Standard & Poor's. All
investments made by the Escrow Agent prior to the First Distribution
Date shall be in a taxable money market account of the Escrow Agent
until such time as the First Distribution Date and any investments made
on or after such First Distribution Date shall mature on or prior to
the eighteen-month anniversary of the date of this Agreement. To the
extent that any portion of the Escrow Fund is withheld for Pending
Claims (as defined below) pursuant to Section 5(b) below, the Escrow
Agent shall invest such funds in a taxable money market account of the
Escrow Agent until such time as such funds are required to be
distributed hereunder. For purposes of this Agreement, the "First
Distribution Date" shall be the date of the distribution to Wilsons
and/or the Senior Lenders pursuant to the last sentence of Section 4(a)
below. Notwithstanding any of the foregoing, no portion of the Escrow
Fund may be held in an investment which cannot be sold, redeemed or
otherwise liquidated at the holder's option in thirty (30) days or less
without loss of interest or discount. All amounts and investments
(other than bearer instruments) held in the Escrow Fund shall be
registered and held in the name of the Escrow Agent as Escrow Agent
hereunder.
(b) Absence of Direction from the Agent. In the absence of any
instructions from the Agent as to investment of the Escrow Fund, the
Escrow Amount shall be invested in the ▇▇▇▇▇▇▇ ▇▇▇▇▇ Financial Square
Government Fund.
(c) Treatment of Interest. Any interest received by the Escrow
Agent shall accrue to the Escrow Fund and remain in the Escrow Fund and
shall be distributed pursuant to Section 5 below. The parties hereto
agree that all payments made out of the Escrow Fund shall first be made
out of the original Escrow Amount deposited in the Escrow Fund and,
after such Escrow Amount has been distributed in full, then out of the
interest accrued in the Escrow Account. Any party receiving payment of
a portion of such interest shall be responsible for all tax obligations
relating to such paid interest.
4. Claims.
A-2
(a) Notice of Claim for Working Capital Adjustment. Upon a
final determination of the Closing Working Capital in accordance with
Section 3 of the Merger Agreement, Wilsons, the Shareholder
Representative and the Agent shall jointly deliver to the Escrow Agent
written notice (the "Working Capital Adjustment Notice") setting forth
the amount (the "Working Capital Shortfall"), if any, by which the
final Closing Working Capital is less than $10,215,000, the amount of
fees and expenses payable to any Independent Auditor pursuant to
Section 3.02 of the Merger Agreement (the "Audit Fees"), and the amount
of any payments to be made to Wilsons and/or the Agent on behalf of the
Senior Lenders pursuant to the calculations set forth below. The amount
of the Audit Fees shall be paid to the Independent Auditor out of the
Escrow Fund before any amount is payable to Wilsons and/or the Senior
Lenders pursuant to this Section 4(a). The amount of any Working
Capital Shortfall, up to the aggregate amount of the Escrow Fund
remaining after payment of the Audit Fees, shall be payable to Wilsons
out of the Escrow Fund. Within two (2) days after receipt by the Escrow
Agent of the Working Capital Adjustment Notice, the Escrow Agent shall
pay the Audit Fees, if any, and pay, as directed in writing in the
Working Capital Adjustment Notice, either (i) if the Closing Working
Capital is less than $10,215,000 (x) pay to Wilsons the amount of the
Working Capital Shortfall in cash (up to the aggregate amount of the
Escrow Fund remaining after payment of the Audit Fees) and (y) pay to
the Agent on behalf of the Senior Lenders in cash any amounts held in
the Escrow Fund in excess of $2,000,000 (calculated after payment of
the Working Capital Shortfall and the Audit Fees), or (ii) if the
Closing Working Capital is equal to or greater than $10,215,000, pay to
the Agent on behalf of the Senior Lenders in cash any amounts held in
the Escrow Fund in excess of $2,000,000 (after payment of the Audit
Fees), in accordance with Section 4(c) below.
(b) Notice of Claims for Indemnification. Upon a determination
by Wilsons that Wilsons has a claim for indemnification under Section
13 of the Merger Agreement (each, an "Indemnity Claim"), Wilsons shall
deliver to the Escrow Agent and the Agent a copy of the notice (each, a
"Claim Notice") delivered to the Shareholder Representative pursuant to
the Merger Agreement. Escrow Agent shall forward a copy of such Claim
Notice to the Shareholder Representative and the Agent (provided that
the foregoing shall not relieve Wilson's of its notice obligations
under the Merger Agreement). With respect to each Indemnity Claim, the
Escrow Agent shall pay the following amounts to Wilsons from the Escrow
Fund in cash in accordance with Section 4(c) below:
(i) the amount of such Indemnity Claim if thirty (30)
days shall have expired since Wilsons delivered the Claim
Notice to the Escrow Agent and the Escrow Agent shall not have
received written notice within such time from the Shareholder
Representative or the Agent that the amount of the claim is
being contested;
(ii) the amount of such Indemnity Claim (or portion
thereof) that is directed to be so paid in any written notice
received by the Escrow Agent from Wilsons, the Shareholder
Representative and the Agent, in which case disbursement shall
be made in accordance with such direction; and
(iii) the amount of (A) any arbitration award in
favor of Wilsons reflected in a final determination or (B) a
final and unappealable order of a court of competent
jurisdiction
A-3
entering a judgment in favor of Wilsons, a certified copy of
which award or order, as the case may be, the Escrow Agent
shall have received, in any proceeding for indemnity under the
Merger Agreement, which may include any amounts claimed by
Wilsons which have not previously been paid to Wilsons
pursuant to Sections 4(b)(i) or 4(b)(ii).
(c) Payment. All claims against the Escrow Amount shall be
paid promptly out of cash in the Escrow Fund to the extent thereof. To
the extent that cash in the Escrow Fund is insufficient to pay a claim
in the amount and on the date determined in accordance with Section
4(a) or Section 4(b) above, but other non-cash assets are held in the
Escrow Fund, the Escrow Agent shall so notify Wilsons, the Shareholder
Representative and the Agent, and the Agent shall have seven (7) days
from the time the Escrow Agent delivers notice thereof to instruct the
Escrow Agent as to which non-cash assets of the Escrow Fund, if any,
are to be sold or liquidated for the purpose of paying the claim. If
such instructions are not given by the Agent within such period, such
instructions shall be given by Wilsons.
5. Distribution and Termination of the Escrow Fund.
(a) Escrow Fund Distribution. On the eighteen-month (18)
anniversary of the date of this Agreement, the Escrow Agent shall
distribute any portion of the Escrow Fund in excess of $1,500,000 to
the Agent on behalf of the Senior Lenders and on the third anniversary
of the date of this Agreement, the Escrow Agent shall distribute the
remainder of the Escrow Fund (along with accrued interest thereon) to
the Agent on behalf of the Senior Lenders, provided that if any
Indemnity Claim (of which the Escrow Agent has received a duly
delivered Claim Notice on or before such date) remains pending on such
dates (each such pending claim hereinafter referred to as a "Pending
Claim"), the Escrow Agent shall withhold in the Escrow Fund from the
amount to be otherwise distributed an amount equal to such Pending
Claim(s), which withheld amount will be paid in accordance with Section
5(b) below.
(b) Withheld Assets. Assets withheld pursuant to Section 5(a)
above for individual Pending Claims shall be retained by the Escrow
Agent in the Escrow Fund and paid to Wilsons from the Escrow Fund in
cash in accordance with Section 4(c) above as follows:
(i) the amount of such Pending Claim if thirty (30)
days shall have expired since Wilsons delivered to the Escrow
Agent, the Shareholder Representative and the Agent a copy of
the Claim Notice with respect to such Pending Claim and the
Escrow Agent shall not have received written notice within
such time from the Shareholder Representative that the amount
of the Pending Claim is being contested;
(ii) the Escrow Agent receives written direction from
Wilsons, the Shareholder Representative and the Agent
directing the Escrow Agent to disburse the assets withheld for
the Pending Claim, in which case disbursement shall be made in
accordance with such direction; and
A-4
(iii) the Escrow Agent receives a certified copy of
an arbitration award reflected in a final determination or a
final and unappealable order of a court of competent
jurisdiction, in which case disbursement of the assets
withheld for the Pending Claim shall be made in the amount or
amounts, if any, of the award or awards set forth in such
final determination or order in favor of Wilsons in any
proceeding for indemnity under the Merger Agreement.
(c) Disposition of Pending Claims. At each such time as any
Pending Claim is disposed of and no longer pending, the Escrow Agent
shall distribute to the Agent on behalf of the Senior Lenders the
balance of the assets withheld in respect of such Pending Claim
disposed of and no longer pending. A Pending Claim shall be considered
disposed of and no longer pending when (i) an event described in
Section 5(b)(ii) of this Agreement has occurred (unless there are
amounts still under claim or dispute in respect of a Pending Claim
after giving effect to the amounts paid, in which case the Escrow Agent
shall continue to retain in the Escrow Fund the amounts still under
claim or dispute) or (ii) the Escrow Agent has received a certified
copy of a final determination of an arbitration award or a final and
unappealable order of a court of competent jurisdiction in any
proceeding for indemnity under the Merger Agreement in respect of such
Pending Claim and the Escrow Agent has distributed to Wilsons any
amount required pursuant to Section 5(b)(iii) of this Agreement.
(d) Termination. When the entire Escrow Fund has been
distributed in accordance with Section 4 and/or this Section 5, this
Escrow Agreement shall terminate.
6. Miscellaneous.
(a) Escrow Agent Obligations. The obligations and duties of
the Escrow Agent are confined to those specifically enumerated in this
Agreement. The Escrow Agent shall not be subject to, nor be under any
obligation to ascertain or construe the terms and conditions of the
Merger Agreement or any other instrument, whether or not now or
hereafter deposited with or delivered to the Escrow Agent or referred
to in this Agreement, nor shall the Escrow Agent be obligated to
inquire as to the form, execution, sufficiency, or validity of any such
instrument as to the identity, authority, or rights of the person or
persons executing or delivering the same.
(b) Escrow Agent Liability. The Escrow Agent and its partners,
officers and employees shall not be personally liable for any act which
it may do or omit to do hereunder in good faith or for any mistake of
fact or law for any action it may take or refrain from taking in
connection herewith unless caused by or arising out of its own gross
negligence or willful misconduct. The Escrow Agent shall not be held
liable for any losses that may occur as the result of the investment or
reinvestment of the Escrow Fund in accordance with Section 3 above.
(c) Conflicts. If, at any time, there shall exist any conflict
between Wilsons, Shareholder Representative, and Agent with respect to
the holding or disposition of any portion of the funds in the Escrow
Fund or any other obligations of the Escrow Agent hereunder, or if at
any time the Escrow Agent is unable to determine, to the Escrow Agent's
sole satisfaction, the proper disposition
A-5
of the Escrow Fund or the Escrow Agent's proper actions with respect to
its obligations hereunder, then the Escrow Agent may, in its sole
discretion, take either or both of the following actions:
(i) suspend the performance of any of its obligations
under this Escrow Agreement until such dispute or uncertainty
shall be resolved to the sole satisfaction of the Escrow
Agent; provided however, that the Escrow Agent shall continue
to invest the Escrow Fund in accordance with Section 3 hereof;
and/or
(ii) petition (by means of an interpleader action or
any other appropriate method) any court of competent
jurisdiction in ▇▇▇▇▇ County, Florida, for instructions with
respect to such conflict or uncertainty, and pay into such
court all funds held by it in the Escrow Fund for holding and
disposition in accordance with the instructions of such court.
The Escrow Agent shall have no liability to parties hereto or
any other person with respect to any such suspension of performance or
disbursement into court, specifically including any liability or
claimed liability that may arise, or be alleged to have arisen, out of
or as a result of any delay in the disbursement of funds held in the
Escrow Fund or any delay in or with respect to any other action
required or requested of the Escrow Agent.
Should the Escrow Agent petition the court as provided in
subsection ii of this section, then as between themselves and the
Escrow Agent, Wilsons and the Agent on behalf of the Senior Lenders,
jointly and severally, hereby bind and obligate themselves, their
successors, and assigns to indemnify the Escrow Agent with respect to
its reasonable attorneys fees and reasonable out-of-pocket costs and
any and all other disbursements, expenses, losses, costs and damages of
the Escrow Agent in connection with or resulting from such litigation.
The obligations of the parties under the immediate preceding sentence
shall survive any termination of this Escrow Agreement and the
resignation or removal of the Escrow Agent.
(d) Indemnification of Escrow Agent. Subject to the provisions
of Section 6(b) above, Wilsons and the Agent, on behalf of the Senior
Lenders, will jointly and severally indemnify and hold the Escrow Agent
harmless from and against all costs, damages, judgments, attorneys'
fees, expenses, obligations, and liabilities of every kind and nature
which the Escrow Agent may incur, sustain, or be required to pay in
connection with or arising out of this Agreement, and to pay to the
Escrow Agent on demand the amount of all such consents, damages,
judgments, attorneys' fees, expenses, obligations, and liabilities,
except such liability and expense as may result from the gross
negligence or willful misconduct of the Escrow Agent.
If the Escrow Agent is entitled to receive, pursuant to this
Section 6(d), any amount in indemnification, then, as between Wilsons,
on the one hand, and the Agent on behalf of the Senior Lenders, on the
other hand, each shall be responsible for one-half thereof and shall be
entitled to contribution from the other or others for any excess paid
to the Escrow Agent. In the event any such indemnification expense
shall arise by reason of acts or omissions of Wilsons or the Agent in
violation of any of their respective obligations under this Agreement,
then the party or parties which is or are in such violation shall be
liable for payment of the amount of such part of the indemnification
expense arising from such acts or omissions.
A-6
Notwithstanding anything to the contrary set forth in this
Agreement, the obligations of Wilsons and the Agent (on behalf of the
Senior Lenders) to indemnify the Escrow Agent shall be limited to the
extent of the interest of such party in the Escrow Funds.
(e) Legal Counsel. The Escrow Agent may consult with, and
obtain advice from, legal counsel in the event of any questions as to
any of the provisions hereof or its duties hereunder, and it shall
incur no liability and shall be fully protected in acting in good faith
in accordance with the opinion and instructions of such counsel, except
to the extent that the Escrow Agent's actions or inactions constitute
gross negligence or willful misconduct. The reasonable cost of such
services shall be added to and be a part of the Escrow Agent's fee
hereunder.
(f) Escrow Agent's Conduct; Fees. In performing its duties
hereunder, the Escrow Agent may rely on statements or documents
furnished to it by an officer of Wilsons or by the Shareholder
Representative or the Agent, or any other evidence deemed by the Escrow
Agent to be reliable. The Escrow Agent shall be entitled to the payment
of compensation for its services hereunder, which shall be set forth in
Schedule A hereto, and which shall be paid one-half by Wilsons and
one-half by the Agent, on behalf of the Senior Lenders. The Escrow
Agent hereby acknowledges sufficiency of such consideration.
(g) Successors. This Escrow Agreement shall be binding on and
inure to the benefit of Wilsons, the Shareholder Representative, the
Agent, the Escrow Agent and their respective successors and assigns.
(h) Representatives and Notices. All notices, requests,
demands, claims, and other communications hereunder will be in writing.
Any notice, request, demand, claim, or other communication hereunder
shall be deemed duly given if (and then one (1) business day after) it
is sent by reputable overnight courier service, and addressed to the
intended recipient as set forth below:
To the Shareholder Representative:
---------------------------------
▇▇▇▇ Capital, Inc.
Two ▇▇▇▇▇▇ Place
Boston, Massachusetts 02116
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇
A-7
with a copy to:
--------------
(which copy shall not constitute notice to the Shareholder
Representative)
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.C.
▇▇▇▇▇ ▇. Breach
To Wilsons:
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WWT, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Director of Business Development
with a copy to:
--------------
(which copy shall not constitute notice to Wilsons)
Faegre & ▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
To the Agent:
------------
Deutsche Bank AG
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
--------------
J. ▇▇▇▇ ▇▇▇▇▇▇▇
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ (Illinois)
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To the Escrow Agent:
-------------------
A-8
First Union National Bank
Corporate Trust Group
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Any party hereto may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set
forth above using any other means, including delivery in person, by
certified or registered mail (with return receipt requested) or
facsimile transmission, but no such notice, request, demand, claim, or
other communication shall be deemed to have been duly given unless and
until it actually is received by the intended recipient. Any party
hereto may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by
giving the other party hereto notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Delaware
without giving effect to any choice or conflict of law provision or
rule (whether of the State of Delaware or any other jurisdiction) that
would cause the application to this Agreement of the laws of any
jurisdiction other than the State of Delaware.
(j) Amendments. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed
by the Escrow Agent, Wilsons, the Shareholder Representative, on behalf
of the Shareholders, and the Agent on behalf of the Senior Lenders.
(k) Reports from the Escrow Agent. The Escrow Agent shall
furnish to Wilsons, the Shareholder Representative and the Agent on a
monthly basis a report listing each transaction made by the Escrow
Agent with respect to this Agreement.
(l) Distributions. All payments and distributions to Wilsons
or the Agent on behalf of the Senior Lenders shall be by wire transfer
to the following accounts:
To the Agent:
------------
Bank: Bankers Trust
City: New York, NY
ABA Number: ▇▇▇-▇▇▇-▇▇▇
For further Credit to: Commercial Loan Division
A/C# ▇▇-▇▇▇-▇▇▇
Ref: Bentley's Luggage
Reference:
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
A-9
To Wilsons:
----------
Bank: ▇▇▇▇▇▇ Trust and Savings Bank
City: Chicago, IL
ABA Number: ▇▇▇▇▇▇▇▇▇
Credit: Wilsons Leather Holdings Inc.
Account number: ▇▇▇▇▇▇▇
(m) Withdrawal of Escrow Agent. The Escrow Agent may, at any
time and for any reason upon the giving of ten (10) days prior notice
and without liability for interest or damages, withdraw as Escrow Agent
hereunder, in which case Wilsons, the Shareholder Representative and
the Agent will promptly select a successor Escrow Agent. If the Escrow
Agent shall withdraw as Escrow Agent, Wilsons, the Shareholder
Representative and the Agent shall jointly appoint a successor.
(n) Waiver by Escrow Agent. The Escrow Agent hereby waives any
rights of setoff and any rights to assert banker's liens against the
Escrow Funds or any distribution therefrom that it may possess (whether
currently or in the future) against Wilsons, the Shareholder
Representative, the Agent, the Senior Lenders and any of such parties
successors and assigns, except to the extent that the Escrow Agent's
exercise of any such rights relates to the obligations of such parties
pursuant to this Agreement.
* * * * *
A-10
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of
the date first written above.
WILSONS:
WWT, INC.
By:
----------------------------------
Its:
--------------------------------
SHAREHOLDER REPRESENTATIVE:
▇▇▇▇ CAPITAL, INC.
By:
----------------------------------
A Managing Director
AGENT:
BANKERS TRUST COMPANY
By:
---------------------------------
Its:
---------------------------------
By:
---------------------------------
Its:
---------------------------------
ESCROW AGENT:
By:
---------------------------------
Its:
---------------------------------
A-11
EXHIBIT B
---------
April __, 2001
WWT, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Director of Business Development
We are issuing this opinion letter in our capacity as special legal
counsel to Bentley's Luggage Corporation, a Florida corporation, (the "Company")
and to ▇▇▇▇ Capital Fund VI, L.P., BCIP Trust Associates II, BCIP Trust
Associates II-B, BCIP Associates II, BCIP Associates II-B, BCIP Associates II-C
and ▇▇▇▇▇▇▇▇ Street Partners II (collectively, the "▇▇▇▇ Stockholders") in
response to the requirement in Section 10.01(g) of the Agreement and Plan of
Merger (the "Agreement") dated as of April 6, by and among WWT, Inc. (herein
called "you"), Wilsons Acquisition Corporation, each of the Persons listed on
the signature pages thereto under the caption "Shareholders" and ▇▇▇▇ Capital,
Inc., a Delaware corporation (the "Shareholder Representative"). The term
"Transaction Agreements" whenever it is used in this letter means the Agreement
and the Escrow Agreement dated as of April ___, 2001, by and between you,
Shareholder Representative, Bankers Trust Company and First Union National Bank
(the "Escrow Agreement").
Subject to the assumptions, qualifications, exclusions and other
limitations which are identified in this letter and in the schedules attached to
this letter, we advise you that:
1. The Company is a corporation existing and in good standing under the
laws of the State of Florida.
2. The Company has the corporate power and authority to enter into and
perform its obligations under the Agreement.
3. The Company's Board of Directors and stockholders have adopted by
requisite vote the resolutions necessary to authorize the
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Company's execution, delivery and performance of the Transaction
Agreements to which it is a party. The Company and the ▇▇▇▇
Stockholders have duly executed and delivered each of the Transaction
Agreements to which they are a party. Each of the Transaction
Agreements to which the Company or any of the ▇▇▇▇ Stockholders is a
party is a valid and binding obligation of such entity and is
enforceable against such entity in accordance with its terms.
4. The execution, delivery and performance by the Company of the Agreement
and the Escrow Agreement, will not violate its Certificate of
Incorporation or Bylaws.
In preparing this letter, we have relied without any independent
verification upon the assumptions recited in Schedule B to this letter and upon:
(i) information contained in certificates obtained from governmental
authorities; (ii) factual information represented to be true in the Agreement
and the other Transaction Agreements; (iii) factual information provided to us
in the Support Certificate signed by the Company and attached hereto; and (iv)
factual information we have obtained from such other sources as we have deemed
reasonable. We have assumed without investigation that there has been no
relevant change or development between the dates as of which the information
cited in the preceding sentence was given and the date of this letter and that
the information upon which we have relied is accurate and does not omit
disclosures necessary to prevent such information from being misleading. For
purposes of each opinion in paragraph 1, we have relied exclusively upon a
certificate issued by a governmental authority in each relevant jurisdiction,
and such opinion is not intended to provide any conclusion or assurance beyond
that conveyed by that certificate.
While we have not conducted any independent investigation to determine
facts upon which our opinions are based or to obtain information about which
this letter advises you, we confirm that we do not have any actual knowledge
which has caused us to conclude that our reliance and assumptions cited in the
preceding paragraph are unwarranted or that any information supplied in this
letter is wrong. The term "actual knowledge" whenever it is used in this letter
with respect to our firm means conscious awareness at the time this letter is
delivered on the date it bears by the
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following ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ lawyers who have had significant involvement with
negotiation or preparation of the Agreement (herein called "our Designated
Transaction Lawyers"): ▇▇▇▇▇ ▇. Breach, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇.
Our advice on every legal issue addressed in this letter is based
exclusively on the internal law of Illinois or the federal law of the United
States except that the opinions in paragraphs 1 through 4 are also based on the
Florida Business Corporation Act. We advise you that we are not Florida lawyers
and our knowledge of the Florida Business Corporation Act for purposes of this
opinion is limited to a reading by one of our Designated Transaction Lawyers of
a copy of that statute as reproduced in the Aspen Law & Business Corporation
Statutes volume 3, last updated January 2, 2001; we did not review or attempt to
identify Florida case law or any other Florida law which might be relevant for
purposes of our opinions. The Transaction Agreements provide that they are to be
governed by the law of Florida and issues addressed by this letter may be
governed in whole or in part by other laws, but we express no opinion as to
whether any relevant difference exists between the laws upon which our opinions
are based and the laws of Florida or any other laws which may actually govern.
Our opinions are subject to all qualifications in Schedule A and do not cover or
otherwise address any law or legal issue which is identified in the attached
Schedule C or any provision in the Agreement or any of the other Transaction
Agreements of any type identified in Schedule D. Provisions in the Transaction
Agreements which are not excluded by Schedule D or any other part of this letter
or its attachments are called the "Relevant Agreement Terms."
Our advice on each legal issue addressed in this letter represents our
opinion as to how that issue would be resolved were it to be considered by the
highest court of the jurisdiction upon whose law our opinion on that issue is
based. The manner in which any particular issue would be treated in any actual
court case would depend in part on facts and circumstances particular to the
case, and this letter is not intended to guarantee the outcome of any legal
dispute which may arise in the future. It is possible that some Relevant
Agreement Terms may not prove enforceable for reasons other than those cited in
this letter should an actual enforcement action be brought, but (subject to all
the exceptions, qualifications, exclusions and other limitations contained in
this letter) such unenforceability would not in our opinion prevent you from
realizing the principal benefits purported to be provided by the Relevant
Agreement Terms.
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This letter speaks as of the time of its delivery on the date it bears.
We do not assume any obligation to provide you with any subsequent opinion or
advice by reason of any fact about which our Designated Transaction Lawyers did
not have actual knowledge at that time, by reason of any change subsequent to
that time in any law covered by any of our opinions, or for any other reason.
The attached schedules are an integral part of this letter, and any term defined
in this letter or any schedule has that defined meaning wherever it is used in
this letter or in any schedule to this letter.
You may rely upon this letter only for the purpose served by the
provision in the Agreement cited in the initial paragraph of this letter in
response to which it has been delivered. Without our written consent: (i) no
person other than you may rely on this letter for any purpose; (ii) this letter
may not be cited or quoted in any financial statement, prospectus, private
placement memorandum or other similar document; (iii) this letter may not be
cited or quoted in any other document or communication which might encourage
reliance upon this letter by any person or for any purpose excluded by the
restrictions in this paragraph; and (iv) copies of this letter may not be
furnished to anyone for purposes of encouraging such reliance.
Sincerely,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
B-4
SCHEDULE A
GENERAL QUALIFICATIONS
All of our opinions ("our opinions") in the letter to which this
Schedule is attached ("our letter") are subject to each of the qualifications
set forth in this Schedule.
1. Bankruptcy and Insolvency Exception. Each of our opinions is subject to
the effect of bankruptcy, insolvency, reorganization, receivership,
moratorium and other similar laws. This exception includes:
1. the Federal Bankruptcy Code and thus comprehends, among
others, matters of turn-over, automatic stay, avoiding powers,
fraudulent transfer, preference, discharge, conversion of a
non-recourse obligation into a recourse claim, limitations on
ipso facto and anti-assignment clauses and the coverage of
pre-petition security agreements applicable to property
acquired after a petition is filed;
2. all other Federal and state bankruptcy, insolvency,
reorganization, receivership, moratorium, arrangement and
assignment for the benefit of creditors laws that affect the
rights of creditors generally or that have reference to or
affect only creditors of specific types of debtors;
3. state fraudulent transfer and conveyance laws; and
4. judicially developed doctrines in this area, such as
substantive consolidation of entities and equitable
subordination.
2. Equitable Principles Limitation. Each of our opinions is subject to the
effect of general principles of equity, whether applied by a court of
law or equity. This limitation includes principles:
1. governing the availability of specific performance, injunctive
relief or other equitable remedies, which generally place the
award of such remedies, subject to certain guidelines, in the
discretion of the court to which application for such relief
is made;
2. affording equitable defenses (e.g., waiver, laches and
estoppel) against a party seeking enforcement;
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3. requiring good faith and fair dealing in the performance and
enforcement of a contract by the party seeking its
enforcement;
4. requiring reasonableness in the performance and enforcement of
an agreement by the party seeking enforcement of the contract;
5. requiring consideration of the materiality of (i) a breach and
(ii) the consequences of the breach to the party seeking
enforcement;
6. requiring consideration of the impracticability or
impossibility of performance at the time of attempted
enforcement; and
7. affording defenses based upon the unconscionability of the
enforcing party's conduct after the parties have entered into
the contract.
3. Other Common Qualifications. Each of our opinions is subject to the
effect of rules of law that:
1. limit or affect the enforcement of provisions of a contract
that purport to waive, or to require waiver of, the
obligations of good faith, fair dealing, diligence and
reasonableness;
2. provide that forum selection clauses in contracts are not
necessarily binding on the court(s) in the forum selected;
3. limit the availability of a remedy under certain circumstances
where another remedy has been elected;
4. provide a time limitation after which a remedy may not be
enforced;
5. limit the right of a creditor to use force or cause a breach
of the peace in enforcing rights;
6. relate to the sale or disposition of collateral or the
requirements of a commercially reasonable sale;
7. limit the enforceability of provisions releasing, excul-
B-6
pating or exempting a party from, or requiring indemnification
of a party for, liability for its own action or inaction, to
the extent the action or inaction involves negligence,
recklessness, willful misconduct, unlawful conduct, violation
of public policy or litigation against another party
determined adversely to such party;
8. may, where less than all of a contract may be unenforceable,
limit the enforceability of the balance of the contract to
circumstances in which the unenforceable portion is not an
essential part of the agreed exchange;
9. govern and afford judicial discretion regarding the
determination of damages and entitlement to attorneys' fees
and other costs;
10. may permit a party that has materially failed to render or
offer performance required by the contract to cure that
failure unless (i) permitting a cure would unreasonably hinder
the aggrieved party from making substitute arrangements for
performance, or (ii) it was important in the circumstances to
the aggrieved party that performance occur by the date stated
in the contract.
11. may render guarantees unenforceable under circumstances where
your actions, failures to act or waivers, amendments or
replacement of the Transaction Agreements so radically change
the essential nature of the terms and conditions of the
guaranteed obligations and the related transactions that, in
effect, a new relationship has arisen between you and Company
or Guarantors which is substantially and materially different
from that presently contemplated by the Transaction
Agreements.
4. Referenced Provision Qualification. In addition, our opinions, insofar
as they relate to the validity, binding effect or enforceability of a
provision in any of the Transaction Agreements requiring the Company to
perform its obligations under, or to cause any other person to perform
its obligations under, any provision (a "Referenced Provision") of such
Transaction Agreement or of any of the other Transaction Agreements or
stating that any action will be taken as provided in or in accordance
with any provision (also a "Referenced Provision") of any other
Transaction Agreement, are subject to the same qualifications as the
corresponding opinion in this letter relating to the validity, binding
effect and enforceability of such Referenced Provision. Requirements in
the Transaction Agreements that provisions therein may only be waived
or amended in writing may not be enforceable to the extent that an oral
agreement or an implied agreement by trade practice or course of
conduct has been created modifying any such provision.
B-7
SCHEDULE B
ASSUMPTIONS
For purposes of our letter, we have relied, without investigation, upon
each of the following assumptions:
5. The Company (i) has the requisite title and rights to any property
involved in the transactions effected under the Transaction Agreements
(herein called the "Transactions").
6. You are existing and in good standing in your jurisdiction of
organization.
7. The Transaction Agreements constitute valid and binding obligations of
yours and are enforceable against you in accordance with their terms
(subject to qualifications, exclusions and other limitations similar to
those applicable to our letter).
8. You have satisfied those legal requirements that are applicable to you
to the extent necessary to entitle you to enforce the Transaction
Agreements against the Company.
9. Each document submitted to us for review is accurate and complete, each
such document that is an original is authentic, each such document that
is a copy conforms to an authentic original, and all signatures (other
than those of or on behalf of the Company) on each such document are
genuine.
10. There has not been any mutual mistake of fact or misunderstanding,
fraud, duress or undue influence.
11. The conduct of the parties to the Transaction Agreements has complied
with any requirement of good faith, fair dealing and conscionability.
12. You have acted in good faith and without notice of any defense against
the enforcement of any rights created by, or adverse claim to any
property or security interest transferred or created as part of, the
Transactions.
13. There are no agreements or understandings among the parties, written or
oral, and there is no usage of trade or course or prior dealing among
the parties that would, in either case, define, supplement or qualify
the terms of the Agreement or
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any of the other Transaction Agreements.
14. The constitutionality or validity of a relevant statute, rule,
regulation or agency action is not in issue.
15. All parties to the Transactions will act in accordance with, and will
refrain from taking any action that is forbidden by, the terms and
conditions of the Transaction Agreements.
16. All agreements other than the Transaction Agreements (if any) with
respect to which we have provided advice in our letter or reviewed in
connection with our letter would be enforced as written.
17. The Company will not in the future take any discretionary action
(including a decision not to act) permitted under the Transaction
Agreements that would result in a violation of law or constitute a
breach or default under any other agreements or court orders to which
the Company may be subject.
18. The Company has obtained (and will in the future obtain) all permits
and governmental approvals required, and has taken (and will in the
future take) all actions required, relevant to the consummation of the
Transactions or performance of the Transaction Agreements.
19. All information required to be disclosed in connection with any consent
or approval by the Company's Board of Directors or stockholders (or
equivalent governing group) and all other information required to be
disclosed in connection with any issue relevant to our opinions has in
fact been fully and fairly disclosed to all persons to whom it is
required to be disclosed.
20. The Company's certificate of incorporation (or equivalent governing
instrument), all amendments to that certificate, all resolutions
adopted establishing classes or series of stock under that certificate,
the Company's bylaws and all amendments to its bylaws have been adopted
in accordance with all applicable legal requirements.
21. Each person who has taken any action relevant to any of our opinions in
the capacity of director or officer was duly elected to that director
or officer position and held that position when such action was taken.
B-9
SCHEDULE C
EXCLUDED LAW AND LEGAL ISSUES
None of the opinions or advice contained in our letter covers or
otherwise addresses any of the following laws, regulations or other governmental
requirements or legal issues:
22. Federal securities laws and regulations (including the Investment
Company Act of 1940 and all other laws and regulations administered by
the United States Securities and Exchange Commission), state "Blue Sky"
laws and regulations, and laws and regulations relating to commodity
(and other) futures and indices and other similar instruments;
23. Federal Reserve Board margin regulations;
24. pension and employee benefit laws and regulations (e.g., ERISA);
25. Federal and state antitrust and unfair competition laws and
regulations;
26. Federal and state laws and regulations concerning filing and notice
requirements other than requirements applicable to charter-related
documents such as a certificate of merger;
27. compliance with fiduciary duty requirements;
28. the statutes and ordinances, the administrative decisions and the rules
and regulations of counties, towns, municipalities and special
political subdivisions (whether created or enabled through legislative
action at the Federal, state or regional level -- e.g., water agencies,
joint power districts, turnpike and tollroad authorities, rapid transit
districts or authorities, and port authorities) and judicial decisions
to the extent that they deal with any of the foregoing;
29. the characterization of a transaction as one involving the creation of
a lien on real property or a security interest in personal property,
the characterization of a contract as one in a form sufficient to
create a lien or a security interest, the creation, attachment,
perfection, priority or enforcement of a lien on real property or a
security interest in personal
B-10
property or matters involving ownership or title to any real or
personal property;
30. fraudulent transfer and fraudulent conveyance laws;
31. Federal and state environmental laws and regulations;
32. Federal and state land use and subdivision laws and regulations;
33. Federal and state tax laws and regulations;
34. Federal patent, trademark and copyright, state trademark, and other
Federal and state intellectual property laws and regulations;
35. Federal and state racketeering laws and regulations (e.g., RICO);
36. Federal and state health and safety laws and regulations (e.g., OSHA);
37. Federal and state labor laws and regulations;
38. Federal and state laws, regulations and policies concerning (i)
national and local emergency, (ii) possible judicial deference to acts
of sovereign states, and (iii) criminal and civil forfeiture laws;
39. other Federal and state statutes of general application to the extent
they provide for criminal prosecution (e.g., mail fraud and wire fraud
statutes);
40. any laws, regulations, directives and executive orders that prohibit or
limit the enforceability of obligations based on attributes of the
party seeking enforcement (e.g., the Trading with the Enemy Act and the
International Emergency Economic Powers Act); and
41. the effect of any law, regulation or order which hereafter becomes
effective.
We have not undertaken any research for purposes of determining whether
the Company or any of the Transactions which may occur in connection with the
Agreement or any of the other Transaction Agreements is subject to any law or
other governmental
B-11
requirement other than to those laws and requirements which in our experience
would generally be recognized as applicable in the absence of research by
lawyers in Illinois, and none of our opinions covers any such law or other
requirement unless (i) one of our Designated Transaction Lawyers had actual
knowledge of its applicability at the time our letter was delivered on the date
it bears and (ii) it is not excluded from coverage by other provisions in our
letter or in any Schedule to our letter.
B-12
SCHEDULE D
EXCLUDED PROVISIONS
None of the opinions in the letter to which this Schedule is attached
covers or otherwise addresses any of the following types of provisions which may
be contained in the Transaction Agreements:
42. Choice-of-law provisions.
43. Covenants not to compete, including without limitation covenants not to
interfere with business or employee relations, covenants not to solicit
customers, and covenants not to solicit or hire employees.
44. Indemnification for negligence, willful misconduct or other wrongdoing
or strict product liability or any indemnification for liabilities
arising under securities laws.
45. Provisions mandating contribution towards judgments or settlements
among various parties.
46. Waivers of (i) legal or equitable defenses, (ii) rights to damages,
(iii ) rights to counter claim or set off, (iv) statutes of
limitations, (v) rights to notice, (vi) the benefits of statutory,
regulatory, or constitutional rights, unless and to the extent the
statute, regulation, or constitution explicitly allows waiver, (vii)
broadly or vaguely stated rights, and (viii) other benefits to the
extent they cannot be waived under applicable law.
47. Provisions providing for forfeitures or the recovery of amounts deemed
to constitute penalties, or for liquidated damages, acceleration of
future amounts due (other than principal) without appropriate discount
to present value, late charges, prepayment charges, interest upon
interest, and increased interest rates upon default.
48. Time-is-of-the-essence clauses.
49. Provisions which provide a time limitation after which a remedy may not
be enforced.
50. Confession of judgment clauses.
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51. Agreements to submit to the jurisdiction of any particular court or
other governmental authority (either as to personal jurisdiction and
subject matter jurisdiction); provisions restricting access to courts;
waiver of the right to jury trial; waiver of service of process
requirements which would otherwise be applicable; and provisions
otherwise purporting to affect the jurisdiction and venue of courts.
52. Provisions that attempt to change or waive rules of evidence or fix the
method or quantum of proof to be applied in litigation or similar
proceedings.
53. Provisions appointing one party as an attorney-in-fact for an adverse
party or providing that the decision of any particular person will be
conclusive or binding on others.
54. Provisions purporting to limit rights of third parties who have not
consented thereto or purporting to grant rights to third parties.
55. Provisions which purport to award attorneys' fees solely to one party.
56. Arbitration agreements.
57. Provisions purporting to create a trust or constructive trust without
compliance with applicable trust law.
58. Provisions relating to (i) insurance coverage requirements and (ii) the
application of insurance proceeds and condemnation awards.
59. Provisions that provide for the appointment of a receiver.
60. Provisions or agreements regarding proxies, shareholders agreements,
shareholder voting rights, voting trusts, and the like.
61. Confidentiality agreements.
62. Provisions in any of the Transaction Agreements requiring the Company
to perform its obligations under, or to cause any other person to
perform its obligations under, or stating that any action will be taken
as provided in or in accordance with, any agreement or other document
that is not a Transaction Agreement.
63. Provisions, if any, which are contrary to the public policy of any
jurisdiction.
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SUPPORT CERTIFICATE
Bentley's Luggage Corp. (herein called the "Company") hereby certifies and
agrees that:
64. Introduction. ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ has acted as legal counsel to the
Company in connection with the negotiation and preparation of the
Agreement and Plan of Merger dated as of April 6, 2001 by and among
WWT, Inc., Wilsons Acquisition Corporation, Bentley's Luggage Corp.,
each of the Persons listed on the signature pages thereto under the
caption "Shareholders" and ▇▇▇▇ Capital, Inc. (the " Agreement").
Section 10.01(g) of the Agreement provides that as a condition to
closing ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ deliver an opinion letter to WWT, Inc. (the
"Opinion Recipient"). The term "▇▇▇▇▇▇▇▇ Opinion" whenever it is used
in this certificate means the opinion letter which ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
will actually deliver at the closing in response to that closing
condition. Each term which is defined or given a special meaning in the
▇▇▇▇▇▇▇▇ Opinion has the same meaning whenever it is used in this
certificate.
65. Purpose. The Company has provided this certificate in order to provide
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ with factual information needed by ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ in
order to issue the ▇▇▇▇▇▇▇▇ Opinion. The Company has made inquires and
investigations reasonably calculated to assure that the information
provided in this certificate is accurate and complete, including (i)
inquiries of appropriate personnel responsible for legal matters,
financial matters and compliance with governmental requirements and
(ii) identification and review of relevant documents. The Company
understands that ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ will not check, audit or otherwise
attempt to verify the information in this certificate. The Company
intends and agrees that ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ and the Opinion Recipient may
rely upon this certificate and all information provided in this
certificate.
66. Charter. The copy of the Company's Certificate of Incorporation (herein
called the Company's "Charter") in the version certified by the
responsible governmental office in the Company's state of incorporation
and delivered to the Opinion Recipient in connection with the closing
is accurate and complete and represents the terms of the Company's
Charter as constituted at all times since the date of the latest
amendment thereto indicated in that certificate.
67. Bylaws. The copy of the Company's Bylaws in the version
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attached to the certificate issued by the Company's Secretary to the
Opinion Recipient at the closing is accurate and complete and
represents the terms of the Company's Bylaws as constituted at all
times since prior to the adoption of the initial resolution authorizing
the transactions specified in the Transaction Agreements.
68. Good Standing. The Company's practice is to make on a timely basis all
filings and tax payments it was required to make under the statute
under which it is organized and under the statutes under which it has
qualified to do business in other states. The Company has not received
any notice from any governmental authority that any such filing or tax
payment which the Company has not made is delinquent or due or that the
Company is not in good standing in its state of incorporation or in any
state in which it has qualified as a foreign corporation. The Company
has no reason to believe that it is not in existence or good standing
in its state of incorporation, that it has ceased to be qualified to do
business or in good standing in any state in which it was previously
qualified, or that it has not qualified in any state in which such
qualification is required.
69. Authorizing Resolutions.
1. Attached hereto as Exhibit A is a complete and accurate copy
of resolutions adopted by the Company's Board of Directors on
April 4, 2001 and attached hereto as Exhibit B is a complete
and accurate copy of resolutions adopted by the Company's
stockholders on April 4, 2001. All of the Company's directors
voted in favor of such resolution. Such resolutions have not
been amended or rescinded and remain in full force and effect
on the date hereof.
2. At the time the Board adopted the resolutions cited in the
preceding paragraph, no vacancies existed on the Board and
each director then on the Board was elected or appointed to
the Board in accordance with the requirements in the Charter
and the Bylaws. Such resolutions were adopted in such manner
as is necessary to satisfy the requirements in the Company's
Bylaws.
3. Neither the Board of Directors nor the shareholders have
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adopted any other resolutions which (i) restrict the Company's
authority to enter into any the Transaction Agreements or to
engage in any actions to be taken under or by reason of the
Transaction Agreements or (ii) restrict the Board's authority
to approve any such action or activity or (iii) otherwise
relate to the Company's execution or delivery of any of the
Transaction Agreements or any activity to be taken under or by
reason of the Transaction Agreements.
70. Authorized Officers. Each individual who has executed any of the
Transaction Agreements or other document delivered at closing on behalf
of the Company was validly appointed to the officership position or
other position with the Company indicated in connection with such
execution and held that office at the time of such person's execution
and delivery of the relevant Transaction Agreement(s) and/or other
documents(s).
71. No Required Governmental Approvals. The Company does not engage in any
banking, insurance, common carrier, broadcasting, utility or other
regulated activities to a degree which require it to obtain approval
from any governmental authority as a condition to executing or
delivering any of the Transaction Agreements or to performing any of
its obligations under the Transaction Agreements. The Company is not
aware of any filing required to be made or any governmental permit or
authorization required to be obtained in connection with the execution
or delivery of any of the Transaction Agreements or the performance of
any of the Company's obligations under those Agreements which has not
been made or obtained on or prior to the date hereof.
72. No Known Breach. The Company is not aware of any contract or other
oblation which would be breached by the Company's execution or delivery
of any of the Transaction Agreements or any activity to be taken under
or by reason of the Transaction Agreements.
73. No Omissions. The Company does not know of any other fact or
development which indicates that any advice given in the ▇▇▇▇▇▇▇▇
Opinion is inaccurate or misleading.
B-17
Dated: April 13, 2001
BENTLEY'S LUGGAGE, CORP.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
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EXHIBIT C
---------
FORM OF OPINION OF FAEGRE & ▇▇▇▇▇▇ LLP
April ___, 2001
▇▇▇▇ Capital, Inc.,
as Shareholder Representive
Two ▇▇▇▇▇▇ Place
Boston, Massachusetts 02116
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇
Re: Agreement and Plan of Merger by and among WWT, Inc., Wilsons
Acquisition Corporation, Bentley's Luggage Corp., the
Shareholders of Bentley's Luggage Corp. and ▇▇▇▇ Capital, Inc.
Ladies and Gentlemen:
We have acted as counsel for (a) WWT, Inc., a Delaware corporation (the
"Buyer"), and (b) Wilsons Acquisition Corporation, a Florida corporation (the
"Buyer Subsidiary") in connection with the transactions evidenced by the
following documents:
(a) that certain Agreement and Plan of Merger dated as of April ___,
2001 (the "Merger Agreement") by and among Buyer, Buyer Subsidiary, Bentley's
Luggage Corp., a Florida corporation (the "Company"), each of the Persons listed
on the signature pages thereto under the caption "Shareholders" and ▇▇▇▇
Capital, Inc., a Delaware corporation (the "Shareholder Representative"); and
(b) that certain Escrow Agreement dated as of April ___, 2001, by and
between Buyer, Shareholder Representative and Bankers Trust Company (the "Escrow
Agreement", together with the Merger Agreement, the "Merger Documents").
This opinion is being delivered to you pursuant to Section 11.01(e) of
the Merger Agreement. Capitalized terms not otherwise defined herein shall have
the meanings given to such terms in the Merger Agreement.
In connection with this opinion we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the Merger Documents.
We have also examined such certificates, documents and records, and
have made such examination of law, as we have deemed necessary to render the
opinions expressed below.
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as Shareholder Representive
April __, 2001
Page 2
Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that:
1. The Buyer is a corporation validly existing and in good
standing under the laws of the State of Delaware and has the full power
and authority to enter into, execute and deliver the Merger Documents,
to perform and observe fully its obligations thereunder and to perform
the transactions contemplated thereby.
2. The Buyer Subsidiary is a corporation validly existing and
in good standing under the laws of the State of Florida and has the
full power and authority to enter into, execute and deliver the Merger
Documents, to perform and observe fully its obligations thereunder and
to perform the transactions contemplated thereby.
3. The execution, delivery and performance of the Merger
Documents and the consummation of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of the
Buyer and the Buyer Subsidiary. The Merger Documents have been duly and
validly executed and delivered by the Buyer and Buyer Subsidiary, as
applicable, and constitute legal, valid and binding obligations of the
Buyer and the Buyer Subsidiary, enforceable against the Buyer and the
Buyer Subsidiary in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, moratorium, fraudulent transfer or
conveyance or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity (regardless of
whether enforcement is sought by proceedings in equity or at law).
4. The execution, delivery and performance by the Buyer and
the Buyer Subidiary of the Merger Documents do not and will not
conflict with, constitute an event of default under, or result in a
breach of or a violation of the provisions of the articles of
incorporation or bylaws of the Buyer or the Buyer Subsidiary.
The opinions set forth above are subject to the following
qualifications and exceptions:
(a) We have relied solely upon certificates of public
officials as to the opinions set forth in paragraphs 1 and 2,
as to certain relevant facts, upon representations made by the
Buyer and the Buyer Subsidiary in the Merger Documents, the
assumptions set forth in paragraph (d) below as to the matters
referred therein, and upon certificates of officers of the
Buyer and the Buyer Subsidiary, reasonably believed by us to
be appropriate sources of information, as to the accuracy of
factual matters, in each case without independent verification
thereof or other investigation; provided our Primary Lawyers
have no Actual Knowledge concerning the factual matters upon
which reliance is placed which would render such reliance
unreasonable. For the purposes hereof, the term "Primary
Lawyers" means lawyers in this firm who have given substantive
legal attention
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▇▇▇▇ Capital, Inc.,
as Shareholder Representive
April __, 2001
Page 3
to representation of the Buyer and the Buyer Subsidiary in
connection with this matter, and the term "Actual Knowledge"
means the conscious awareness by such Primary Lawyers of facts
or other information without any other investigation.
(b) We express no opinion with respect to the laws of
any jurisdiction other than the laws of the State of Minnesota
and the federal laws of the United States (the "Opining
Jurisdictions").
(c) We express no opinion as to whether, or the
extent to which, the laws of any particular jurisdiction apply
to the subject matter hereof, including, without limitation,
the enforceability of the governing law provisions contained
in the Merger Documents. Because the governing law provisions
of the Merger Documents relate to the law of a jurisdiction as
to which we express no opinion, the opinions set forth in
paragraph 3 are given as if the laws of the State of Minnesota
govern the Merger Documents.
(d) We have relied, without investigation, upon the
following assumptions: (i) natural persons who are involved on
behalf of the Buyer and the Buyer Subsidiary have sufficient
legal capacity to enter into and perform the transaction or to
carry out their role in it; (ii) the Buyer and/or the Buyer
Subsidiary hold the requisite title and rights to any property
involved in the transaction; (iii) each party to the Merger
Documents (other than the Buyer and the Buyer Subsidiary) has
satisfied those legal requirements that are applicable to it
to the extent necessary to make such agreements enforceable
against it; (iv) each party to the Merger Documents (other
than the Buyer and the Buyer Subsidiary) has complied with all
legal requirements pertaining to its status as such status
relates to its rights to enforce such agreements against the
Buyer or the Buyer Subsidiary, as the case may be; (v) each
document submitted to us for review is accurate and complete,
each such document that is an original is authentic, each such
document that is a copy conforms to an authentic original, and
all signatures on each such document are genuine; (vi) there
has not been any mutual mistake of fact or misunderstanding,
fraud, duress or undue influence; (vii) the conduct of the
parties to the Merger Documents has complied with any
requirement of good faith, fair dealing and conscionability;
(viii) you and any agent acting for you in connection with the
Merger Documents have acted in good faith and without notice
of any defense against the enforcement of any rights created
by or adverse claim to any property or security interest
transferred or created as part of, the Merger Documents; (ix)
there are no agreements or understandings among the parties,
written or oral, and there is no usage of trade or course of
prior dealing among the parties that would, in either case,
define, supplement or qualify the terms of the Merger
Documents; (x) all statutes, judicial and administrative
decisions, and rules and regulations of governmental agencies,
constituting the law of the Opining Jurisdictions, are
generally available (i.e., in terms of access and distribution
following publication or other release) to lawyers practicing
in the Opining Jurisdiction, and are in a format that makes
legal research
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▇▇▇▇ Capital, Inc.,
as Shareholder Representive
April __, 2001
Page 4
reasonably feasible; (xi) the constitutionality or validity of
a relevant statute, rule, regulation or agency action is not
in issue unless a reported decision in the Opining
Jurisdictions has specifically addressed but not resolved, or
has established, its unconstitutionality or invalidity; (xii)
documents reviewed by us (other than the Merger Documents)
would be enforced as written; (xiii) the Buyer and the Buyer
Subsidiary will not in the future take any discretionary
action (including a decision not to act) permitted under the
Merger Documents that would result in a violation of law or
constitute a breach or default under any other agreement or
court order; (xiv) the Buyer and the Buyer Subsidiary will
obtain all permits and governmental approvals required in the
future, and take all actions similarly required, relevant to
subsequent consummation of the transaction or performance of
the Merger Documents; and (xv) all parties to the transaction
will act in accordance with, and will refrain from taking any
action that is forbidden by, the terms and conditions of the
Merger Documents.
(e) The opinions herein expressed are limited to the
specific issues addressed and to laws existing on the date
hereof. By rendering our opinion, we do not undertake to
advise you with respect to any other matter or of any change
in such laws or in the interpretation hereof which may occur
after the date hereof.
(f) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, a member of our firm, is the
Secretary of Wilsons The Leather Experts Inc., a Minnesota
corporation and ultimate parent of the Buyer and the Buyer
Subsidiary.
(g) Without limiting any other qualifications set
forth herein, the opinions expressed in paragraph 3 are
subject to the effect of generally applicable laws that (i)
provide for the enforcement of oral waivers or modifications
where a material change of position in reliance thereon has
occurred or provide that a course of performance may operate
as a waiver, (ii) limit the enforcement of provisions of a
contract that purport to require waiver of the obligations of
good faith, fair dealing, diligence and reasonableness, (iii)
provide that forum selection clauses in contracts are not
necessarily binding on courts, (iv) limit the availability of
a remedy under certain circumstances where another remedy has
been elected, (v) limit the enforceability of provisions
releasing, exculpating or exempting a party from, or requiring
indemnification of a party for, liability for its own action
or inaction, to the extent the action or inaction involves
gross negligence, recklessness, willful misconduct or unlawful
conduct, (vi) may, where less than all of a contract may be
unenforceable, limit the enforceability of the balance of the
contract to circumstances in which the unenforceable portion
is not an essential part of the agreed exchange, (vii) govern
and afford judicial discretion regarding the determination of
damages and entitlement to attorneys' fees and other costs,
(viii) may permit a party who has materially failed to render
or offer performance required by a contract to cure that
failure unless either permitting a cure would unreasonably
hinder the aggrieved party from making substitute arrangements
for
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▇▇▇▇ Capital, Inc.,
as Shareholder Representive
April __, 2001
Page 5
performance or it is important under the circumstances to the
aggrieved party that performance occur by the date stated in
the contract, (ix) may limit the enforceability of provisions
restricting competition, the solicitation of customers or
employees, the use or disclosure of information or other
activities in restraint of trade, (x) may require mitigation
of damages, (xi) limit the right of a creditor to use force or
cause a breach of the peace in enforcing rights, (xii) relate
to the sale or disposition of collateral or the requirements
of a commercially reasonable sale, (xiii) may, in the absence
of a waiver or consent, discharge a guarantor to the extent
that either action by a creditor impairs the value of
collateral securing the guaranteed debt to the detriment of
the guarantor or the guaranteed debt is materially modified,
or (xiv) may limit the enforceability of provisions imposing
increased interest rates or late payment charges upon
delinquency in payment or default or providing for liquidated
damages or for premiums upon acceleration.
(h) We express no opinion as to the enforceability of
provisions of the Merger Documents to the extent they contain
waivers by the Buyer or the Buyer Subsidiary of any
constitutional rights or remedies, or of any statutory rights
(including rights to notice) or the remedies that may not be
waived under the applicable statute.
(i) The opinions expressed do not address any of the
following legal issues: (1) Federal securities laws and
regulations administered by the Securities and Exchange
Commission, state "Blue Sky" laws and regulations, and laws
and regulations relating to commodity (and other) futures and
indices and other similar instruments; (2) Federal Reserve
Board margin regulations; (3) pension and employee benefit
laws and regulations (e.g., ERISA); (4) Federal and state
antitrust and unfair competition laws and regulations; (5)
Federal and state laws and regulations concerning filing and
notice requirements (e.g., ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ and Exon-▇▇▇▇▇▇),
other than requirements applicable to charter-related
documents such as a certificate of merger; (6) compliance with
fiduciary duty requirements; (7) the statutes and ordinances,
administrative decisions and the rules and regulations of
counties, towns, municipalities and special political
subdivisions (whether created or enabled through legislative
action at the Federal, state or regional level) and judicial
decisions to the extent that they deal with the foregoing; (8)
the characterization of a transaction as one involving the
creation of a lien on real property or a security interest in
personal property, the characterization of a contract as one
in a form sufficient to create a lien or a security interest,
and the creation, attachment, perfection, priority or
enforcement of a lien on real property or a security interest
in personal property; (9) fraudulent transfer and fraudulent
conveyance laws; (10) Federal and state environmental laws and
regulations; (11) Federal and state land use and subdivision
laws and regulations; (12) Federal and state tax laws and
regulations; (13) Federal patent, copyright and trademark,
state trademark, and other Federal and state intellectual
property laws and regulations; (14) Federal and state
racketeering laws and regulations (e.g., RICO); (15) Federal
and state health and safety laws and regulations (e.g., OSHA);
(16) Federal and state labor laws and regulations; (17)
Federal and state laws, regulations and policies
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as Shareholder Representive
April __, 2001
Page 6
concerning (i) national and local emergency, (ii) possible
judicial deference to acts of sovereign states, and (iii)
criminal and civil forfeiture laws; and (18) other Federal and
state statutes of general application to the extent they
provide for criminal prosecution (e.g., mail fraud and wire
fraud statutes).
This opinion is delivered to you upon the instructions of our client,
and pursuant to the terms of the Merger Agreement, and is intended for your use
and may be relied upon by you, the Shareholders and your counsel ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇. The opinions set forth herein may not be relied upon by, and copies of
such opinion may not be delivered to, any other person without the prior written
consent of the undersigned.
Very truly yours,
FAEGRE & ▇▇▇▇▇▇ LLP
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