Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
dated as of June 25, 2003
by and among
THE ▇▇▇▇▇-▇▇▇▇▇▇▇ STORES CORP.,
▇▇▇▇▇▇ HOLDINGS, INC.
and
▇▇▇▇▇▇ SUB, INC.
TABLE OF CONTENTS
ARTICLE I................................................................... 1
1.01 The Merger.......................................................... 1
1.02 Closing............................................................. 2
1.03 Effective Time...................................................... 2
1.04 Articles of Incorporation and Code of Regulations of the Surviving
Corporation......................................................... 2
1.05 Directors and Officers of the Surviving Corporation................. 2
1.06 Effects of the Merger............................................... 2
1.07 Further Assurances.................................................. 2
ARTICLE II.................................................................. 3
2.01 Conversion of Capital Shares........................................ 3
2.02 Exchange of Certificates............................................ 5
ARTICLE III................................................................. 7
3.01 Organization and Qualification...................................... 7
3.02 Capitalization...................................................... 7
3.03 Authority Relative to this Agreement................................ 8
3.04 Non-Contravention; Approvals and Consents........................... 9
3.05 SEC Reports and Financial Statements................................ 10
3.06 Absence of Certain Changes or Events................................ 11
3.07 Absence of Undisclosed Liabilities.................................. 11
3.08 Legal Proceedings................................................... 11
3.09 Information Supplied................................................ 11
3.10 Permits; Compliance with Laws and Orders............................ 12
3.11 Compliance with Agreements; Certain Agreements...................... 12
3.12 Taxes............................................................... 13
3.13 Employee Benefit Plans; ERISA....................................... 16
3.14 Labor Matters....................................................... 18
3.15 Environmental Matters............................................... 19
3.16 Company Real Property............................................... 20
3.17 Intellectual Property Rights........................................ 21
3.18 Insurance........................................................... 21
3.19 Affiliate Transactions.............................................. 21
3.20 Vote Required....................................................... 22
3.21 Opinion of Financial Advisor........................................ 22
3.22 Company Rights Agreement............................................ 22
3.23 Anti-takeover Statutes Not Applicable............................... 22
ARTICLE IV.................................................................. 22
4.01 Organization and Qualification...................................... 22
4.02 Authority Relative to this Agreement................................ 23
4.03 Non-Contravention; Approvals and Consents........................... 23
4.04 Information Supplied................................................ 24
4.05 Legal Proceedings................................................... 24
4.06 Capitalization of Sub............................................... 24
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ARTICLE V................................................................... 25
5.01 Covenants of the Company............................................ 25
5.02 No Solicitations.................................................... 27
5.03 Financing-Related Cooperation....................................... 29
5.04 SEC Reports......................................................... 30
ARTICLE VI.................................................................. 30
6.01 Access to Information; Confidentiality.............................. 30
6.02 Preparation of Proxy Statement; Schedule 13E........................ 31
6.03 Approval of Shareholders............................................ 31
6.04 Regulatory and Other Approvals...................................... 32
6.05 Employee Matters.................................................... 32
6.06 Indemnification; Directors' and Officers' Insurance................. 33
6.07 Expenses............................................................ 33
6.08 Sub................................................................. 33
6.09 Brokers or Finders.................................................. 34
6.10 Takeover Statutes................................................... 34
6.11 Conveyance Taxes.................................................... 34
6.12 Notice and Cure..................................................... 34
6.13 Fulfillment of Conditions........................................... 34
6.14 Environmental Matters............................................... 35
6.15 Delisting........................................................... 35
ARTICLE VII................................................................. 35
7.01 Conditions to Each Party's Obligation to Effect the Merger.......... 35
7.02 Conditions to Obligation of Parent and Sub to Effect the Merger..... 36
7.03 Conditions to Obligation of the Company to Effect the Merger........ 37
ARTICLE VIII................................................................ 37
8.01 Termination......................................................... 37
8.02 Effect of Termination............................................... 38
8.03 Amendment........................................................... 40
8.04 Waiver.............................................................. 40
ARTICLE IX.................................................................. 40
9.01 Survival of Representations, Warranties, Covenants and Agreements... 40
9.02 Notices............................................................. 41
9.03 Entire Agreement; Incorporation of Exhibits......................... 42
9.04 Public Announcements................................................ 42
9.05 No Third Party Beneficiary.......................................... 42
9.06 No Assignment; Binding Effect....................................... 42
9.07 Headings............................................................ 42
9.08 Invalid Provisions.................................................. 42
9.09 Governing Law....................................................... 43
9.10 Enforcement of Agreement............................................ 43
9.11 Certain Definitions................................................. 43
9.12 Counterparts........................................................ 44
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INDEX OF DEFINED TERMS
PAGE NO.
--------
Affiliate................................................................... 42
Agreement................................................................... 1
Alternative Proposal........................................................ 29
Antitrust Division.......................................................... 31
Beneficially................................................................ 43
Business Day................................................................ 43
Certificate of Merger....................................................... 2
Certificates................................................................ 5
Closing..................................................................... 2
Closing Date................................................................ 2
Code........................................................................ 7
Commitment Letters.......................................................... 25
Company..................................................................... 1
Company Common Shares....................................................... 3
Company Credit Facility..................................................... 21
Company Disclosure Letter................................................... 7
Company Employee Benefit Plan............................................... 17
Company Financial Statements................................................ 10
Company Option Plan......................................................... 4
Company Options............................................................. 4
Company Permits............................................................. 12
Company Preferred Shares.................................................... 8
Company Real Property....................................................... 21
Company Rights Agreement.................................................... 8
Company SEC Reports......................................................... 10
Company Shareholders' Approval.............................................. 31
Company Shareholders' Meeting............................................... 31
Company Store Leases........................................................ 21
Company Warrants............................................................ 5
Confidentiality Agreement................................................... 30
Constituent Corporations.................................................... 2
Contracts................................................................... 9
Control..................................................................... 42
Disinterested Directors..................................................... 28
Dissenting Share............................................................ 3
Effective Time.............................................................. 2
Employee Benefit Plan....................................................... 17
ERISA....................................................................... 17
ERISA Affiliate............................................................. 17
Exchange Act................................................................ 10
Expense Reimbursement....................................................... 39
Financing................................................................... 36
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FTC......................................................................... 31
Governmental or Regulatory Authority........................................ 9
Group....................................................................... 43
HSR Act..................................................................... 10
Intellectual Property....................................................... 22
Knowledge................................................................... 43
Laws........................................................................ 9
Lien........................................................................ 8
Material.................................................................... 43
Material Adverse Effect..................................................... 43
Materially Adverse.......................................................... 43
Merger...................................................................... 1
Merger Price................................................................ 3
Multiemployer Plan.......................................................... 18
New SEC Reports............................................................. 29
OGCL........................................................................ 1
Option Amount............................................................... 4
Options..................................................................... 8
Orders...................................................................... 9
Parent...................................................................... 1
Parent Disclosure Letter.................................................... 23
Payment Agent............................................................... 5
Payment Fund................................................................ 5
PBGC........................................................................ 18
Permitted Encumbrances...................................................... 21
Person...................................................................... 43
Plan........................................................................ 17
Proxy Statement............................................................. 12
Reportable Event............................................................ 18
Representatives............................................................. 43
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.......................................................... 10
SEC......................................................................... 10
Secretary of State.......................................................... 2
Securities Act.............................................................. 10
Sub......................................................................... 1
Sub Common Shares........................................................... 3
Subsidiary.................................................................. 43
Superior Proposal........................................................... 29
Surviving Corporation....................................................... 2
Surviving Corporation Common Shares......................................... 3
Tax......................................................................... 13
Tax Return.................................................................. 14
Taxes....................................................................... 13
Termination Fee............................................................. 3
Warrant Amount.............................................................. 5
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June
25, 2003, is made and entered into by and among The ▇▇▇▇▇-▇▇▇▇▇▇▇ Stores
CORP., an Ohio corporation (the "Company"), ▇▇▇▇▇▇ Holdings, Inc., a Delaware
corporation ("Parent"), and ▇▇▇▇▇▇ Sub, Inc., an Ohio corporation ("Sub").
WHEREAS, the Board of Directors of the Company has determined that it is
advisable and in the best interest of the Company and its shareholders to
consummate and has recommended approval by the shareholders of the Company of
the business combination transaction provided for herein in which Sub would
merge with and into the Company and the Company would become a wholly owned
subsidiary of Parent (the "Merger");
WHEREAS, the Boards of Directors of Parent and Sub have each determined
that it is advisable and in the best interests of their respective companies and
shareholders to consummate, and have approved, the Merger;
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, certain executives of the Company will enter into letter
agreements with Parent (the "Management Letters") pursuant to which such persons
will agree to execute, immediately prior to the Effective Time, certain
agreements which will provide for, among other things, the transfer of Company
Common Shares held by such executives for equity in Parent and the assumption by
Parent of certain unexercised options to purchase Company Common Shares held by
such executives, whereby such executives shall be entitled to acquire, by virtue
of the Merger, common stock of Parent upon exercise of such assumed options;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, Sub shall be merged with and into the Company
in accordance with the General Corporation Law of the State of Ohio (the
"OGCL"). At the Effective Time, the separate existence of Sub shall cease and
the Company shall continue as the surviving corporation in the Merger (the
"Surviving Corporation") and a wholly owned subsidiary of Parent. Sub and the
Company are sometimes referred to herein as the "Constituent
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Corporations." As a result of the Merger, the outstanding shares of capital
stock and the treasury shares of the Constituent Corporations shall be converted
or cancelled in the manner provided in Article II.
1.02 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.01, and subject to the satisfaction or waiver (where applicable) of the
conditions set forth in Article VII, the closing of the Merger (the "Closing")
will take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇.▇., ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., local time, on the seventh calendar day
following satisfaction of the conditions set forth in Article VII (other than
those conditions that, by their nature, are to be satisfied at the Closing, but
subject to the fulfillment or waiver of those conditions) (or, if such day is
not a business day, on the next succeeding business day), unless another date,
time or place is agreed to by the parties hereto (the "Closing Date"). At the
Closing there shall be delivered to Parent, Sub and the Company the certificates
and other documents and instruments required to be delivered under Article VII.
1.03 Effective Time. At the Closing, a certificate of merger (the
"Certificate of Merger") shall be duly prepared and executed by the Constituent
Corporations and thereafter delivered to the Secretary of State of the State of
Ohio (the "Secretary of State") for filing, as provided in Section 1701.81 of
the OGCL, on the Closing Date. The Merger shall become effective at the time of
the filing of the Certificate of Merger with the Secretary of State (the date
and time of such filing being referred to herein as the "Effective Time").
1.04 Articles of Incorporation and Code of Regulations of the Surviving
Corporation. At the Effective Time, (i) the articles of incorporation of Sub as
in effect immediately prior to the Effective Time shall be amended so that the
name of Sub shall be changed to The ▇▇▇▇▇-▇▇▇▇▇▇▇ Stores Corp. and, as so
amended, such articles of incorporation shall be the articles of incorporation
of the Surviving Corporation until thereafter amended as provided by law and
such articles of incorporation, and (ii) the code of regulations of Sub as in
effect immediately prior to the Effective Time shall be the code of regulations
of the Surviving Corporation until thereafter amended as provided by law, the
articles of incorporation of the Surviving Corporation and such code of
regulations.
1.05 Directors and Officers of the Surviving Corporation. The directors
and officers of Sub immediately prior to the Effective Time shall, from and
after the Effective Time, be the directors and officers, respectively, of the
Surviving Corporation until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's articles of incorporation and code
of regulations.
1.06 Effects of the Merger. Subject to the foregoing, the effects of
the Merger shall be as provided in the applicable provisions of the OGCL.
1.07 Further Assurances. Each party hereto will, either prior to or after
the Effective Time, execute such further documents, instruments, deeds, bills of
sale, assignments and assurances and take such further actions as may reasonably
be requested by one or more of the others to consummate the Merger, to vest the
Surviving Corporation with full title to all assets,
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properties, privileges, rights, approvals, immunities and franchises of either
of the Constituent Corporations or to effect the other purposes of this
Agreement.
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof:
(a) Conversion of Sub Common Shares. Each issued and outstanding common
share, without par value, of Sub ("Sub Common Shares") shall be converted into
and become one fully paid and non-assessable common share, without par value, of
the Surviving Corporation ("Surviving Corporation Common Shares"). Each
certificate representing outstanding Sub Common Shares shall as the Effective
Time represent an equal number of Surviving Corporation Common Shares.
(b) Cancellation of Treasury Shares and Shares Owned by Parent and
Subsidiaries. All common shares, without par value, of the Company ("Company
Common Shares") that are owned by the Company as treasury shares and any Company
Common Shares owned by Parent, Sub or any other wholly-owned Subsidiary of
Parent shall be cancelled and retired and shall cease to exist and no stock of
Parent or other consideration shall be delivered in exchange therefor.
(c) Conversion Ratio for Company Common Shares.
(i) Each issued and outstanding Company Common Share (other than
shares to be cancelled in accordance with Section 2.01(b) and other than
Dissenting Shares (as defined in Section 2.01(d))) shall be converted into
the right to receive $6.00 in cash, without any interest thereon (the
"Merger Price"), subject to appropriate adjustment for any stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange with respect to the Company Common Shares occurring before the
Effective Time.
(ii) All Company Common Shares converted in accordance with
paragraph (i) of this Section 2.01(c) shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and
each holder of a certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to receive the
Merger Price per share, upon the surrender of such certificate in
accordance with Section 2.02, without any interest thereon, subject to any
applicable withholding tax.
(d) Dissenting Shares.
(i) Notwithstanding anything in this Agreement to the contrary, each
outstanding Company Common Share that is held of record by a holder who
has properly exercised dissenters' rights with respect thereto under
Section 1701.85 of the OGCL (a "Dissenting Share"), shall not be converted
into or represent the right to receive the Merger Price pursuant to
Section 2.01(c), but the holder thereof shall be entitled to
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receive such payment of the fair cash value of such Company Common Share
from the Surviving Corporation as shall be determined pursuant to Section
1701.85 of the OGCL; provided, however, that if any such holder shall have
failed to perfect or shall withdraw or lose such holder's rights under
Section 1701.85 of the OGCL, each such holder's Company Common Shares
shall thereupon be deemed to have been converted as of the Effective Time
into the right to receive the Merger Price, without any interest thereon,
pursuant to Section 2.01(c).
(ii) The Company shall give Parent (x) prompt notice of any written
demands for payment of the fair cash value of shares, withdrawals of such
demands and any other instruments delivered pursuant to Section 1701.85 of
the OGCL and (y) the opportunity to jointly participate with the Company
in all negotiations and proceedings with respect to demands for payment
under Section 1701.85 the OGCL. The Company will not voluntarily make any
payment with respect to any demands delivered to the Company pursuant to
Section 1701.85 of the OGCL and will not, except with the prior written
consent of Parent, settle or offer to settle any such demands.
(e) Company Stock Option Plan.
(i) Subject to paragraph (ii) below and to the terms of the
Management Letters, immediately prior to the Effective Time, each
outstanding option to acquire Company Common Shares ("Company Options")
granted under The ▇▇▇▇▇-▇▇▇▇▇▇▇ Stores Corp. Equity and Performance
Incentive Plan (the "Company Option Plan"), whether or not then
exercisable, shall be cancelled by the Company, and in consideration of
such cancellation, the holder thereof shall be entitled to receive from
the Company at the Effective Time an amount in respect thereof equal to
the product of (A) the excess, if any, of the Merger Price per share over
the per share exercise price thereof and (B) the number of Company Common
Shares subject thereto (the "Option Amount") (such payment to be net of
applicable withholding taxes). Prior to the Effective Time, the Company
shall deposit in a bank account an amount of cash equal to the Option
Amount for each Company Option then outstanding (subject to any applicable
withholding tax), together with instructions that such cash be promptly
distributed following the Effective Time to the holders of such Company
Options in accordance with this Section 2.01(e). From and after the
Effective Time, other than as expressly set forth in this Section 2.01(e),
no holder of an Option shall have any other rights in respect thereof
other than to receive payment, if any, for his or her Options as set forth
in this Section 2.01(e).
(ii) Except as provided herein or as otherwise agreed by the
parties, the Company shall take all actions prior to or as of the Closing
Date to the effect that the Company Option Plan and any other plan,
program or arrangement with any current or former employee, officer,
director or consultant providing for the issuance or grant of any interest
in respect of the capital stock of the Company shall terminate as of the
Effective Time. The Company shall exercise reasonable best efforts to
ensure that following the Effective Time no current or former employee,
officer, director or consultant shall have any option to acquire any
Company Common Shares or any other equity interest in the Company under
the Company Option Plan or any other plan, program or arrangement
maintained by the Company.
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(iii) Prior to the Effective Time, the Board of Directors of the
Company (or, if appropriate, any committee administering the Company
Option Plan) shall adopt such resolutions or take such actions as are
necessary to carry out the terms of Section 2.01(e)(i), subject, if
necessary, to obtaining consents of the holders of Company Options to the
cancellation thereof in exchange for the consideration set forth in
Section 2.01(e)(i).
2.02 Exchange of Certificates.
(a) Payment Agent. At the Closing, Parent shall deposit with a bank or
trust company designated before the Closing Date by Parent and reasonably
acceptable to the Company (the "Payment Agent"), a cash amount equal to the
aggregate Merger Price to which holders of Company Common Shares shall be
entitled upon consummation of the Merger, to be held for the benefit of and
distributed to such holders in accordance with this Section 2.02. The Payment
Agent shall agree to hold such funds (such funds, together with earnings
thereon, being referred to herein as the "Payment Fund") for delivery as
contemplated by this Section 2.02 and upon such additional terms as may be
agreed upon by the Payment Agent, the Company and Parent. If for any reason
(including losses) the Payment Fund is inadequate to pay the cash amounts to
which holders of Company Common Shares shall be entitled, Parent and the
Surviving Corporation shall in any event remain liable, and shall make available
to the Payment Agent additional funds, for the payment thereof. All earnings in
the Payment Fund in excess of the aggregate Merger Price are the property of
Parent and shall be disbursed to Parent promptly upon termination of the Payment
Fund. The Payment Fund shall not be used for any purpose except as expressly
provided in this Agreement.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Payment Agent to mail
to each holder of record of a certificate or certificates which immediately
prior to the Effective Time represented outstanding Company Common Shares (the
"Certificates") whose shares are converted pursuant to Section 2.01(c) into the
right to receive the Merger Price (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Payment
Agent and shall be in such form and have such other provisions as the Surviving
Corporation may reasonably specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for the Merger Price. Upon
surrender of a Certificate for cancellation to the Payment Agent, together with
such letter of transmittal duly executed and completed in accordance with its
terms, the holder of such Certificate shall be entitled to receive in exchange
therefor a check representing the Merger Price per Company Common Share
represented thereby, subject to any applicable withholding tax, which such
holder has the right to receive pursuant to the provisions of this Article II,
and the Certificate so surrendered shall forthwith be cancelled. In no event
shall the holder of any Certificate be entitled to receive interest on any funds
to be received in the Merger, including any interest accrued in respect of the
Payment Fund. In the event of a transfer of ownership of Company Common Shares
which is not registered in the transfer records of the Company, the Merger Price
may be issued to a transferee if the Certificate representing such Company
Common Shares is presented to the Payment Agent accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.02(b), each Certificate shall be
5
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Price per Company Common Share
represented thereby as contemplated by this Article II, together with the
dividends, if any, which may have been declared by the Company on the Company
Common Shares in accordance with the terms of this Agreement and which remain
unpaid at the Effective Time. Parent and the Surviving Corporation shall pay all
fees and expenses of the Payment Agent in connection with the distribution of
the Merger Price.
(c) Lost Certificates. If any Certificate has been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such Person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Paying Agent
shall issue in exchange for such lost, stolen or destroyed Certificate, the
Merger Consideration due to such Person as provided in Section 2.02(b).
(d) No Further Ownership Rights in Company Common Shares. All cash paid
upon the surrender for exchange of Certificates in accordance with the terms
hereof shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Company Common Shares represented thereby, subject, however,
to the Surviving Corporation's obligation to pay any dividends which may have
been declared by the Company on such shares of Company Common Shares in
accordance with the terms of this Agreement and which remained unpaid at the
Effective Time. Unless otherwise required by Section 1701.85 of the OGCL, from
and after the Effective Time, the share transfer books of the Company shall be
closed and there shall be no further registration of transfers on the share
transfer books of the Surviving Corporation of the Company Common Shares which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates (other than Certificates representing Dissenting
Shares) are presented to the Surviving Corporation for any reason, they shall be
cancelled and exchanged as provided in this Section 2.02.
(e) Termination of Payment Fund. Any portion of the Payment Fund which
remains undistributed to the shareholders of the Company for six (6) months
after the Effective Time shall be delivered to the Surviving Corporation, upon
demand, and any shareholders of the Company who have not theretofore complied
with this Article II shall thereafter look only to the Surviving Corporation
(subject to abandoned property, escheat and other similar laws) as general
creditors for payment of their claim for the Merger Price per Company Common
Share. Neither Parent nor the Surviving Corporation shall be liable to any
holder of Company Common Shares for cash representing the Merger Price delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
(f) Withholding Rights. Parent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of Company Common Shares such amounts as Parent is required to deduct and
withhold with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code"), or any applicable provision of state,
local or foreign tax law. To the extent that amounts are so withheld by Parent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Company Common Shares in respect of which
such deduction and withholding was made by Parent.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as of the date of
this Agreement as follows:
3.01 Organization and Qualification. Each of the Company and its
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has full
corporate power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its assets and properties. Each of the
Company and its Subsidiaries is duly qualified, licensed or admitted to do
business and is in good standing in each jurisdiction in which the ownership,
use or leasing of its assets and properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary, except for
such failures to be so qualified, licensed or admitted and in good standing
which, individually or in the aggregate, would not reasonably be expected to
have a material adverse effect on the Company and its Subsidiaries taken as a
whole. Section 3.01 of the letter dated the date hereof and delivered to Parent
and Sub by the Company concurrently with the execution and delivery of this
Agreement (the "Company Disclosure Letter") sets forth (i) the name and
jurisdiction of incorporation of each Subsidiary of the Company, (ii) the
authorized capital shares of each such Subsidiary, (iii) the number of issued
and outstanding capital shares of each such Subsidiary, and (iv) the record
owners of all such shares. Except for interests in the Subsidiaries of the
Company as set forth in Section 3.01 of the Company Disclosure Letter, the
Company does not directly or indirectly own any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for, any equity
or similar interest in, any corporation, partnership, limited liability company,
joint venture or other business association or entity. The Company has
previously delivered or made available to Parent complete and correct copies of
the certificates or articles of incorporation and code of regulations or bylaws
(or other comparable charter documents) of the Company and its Subsidiaries.
3.02 Capitalization.
(a) The authorized capital shares of the Company consists solely of
25,000,000 Company Common Shares and 5,000,000 preferred shares, without par
value ("Company Preferred Shares"). As of June 12, 2003, 11,581,445 Company
Common Shares were issued and outstanding and no shares were held in the
treasury of the Company. As of June 12, 2003, the Company had authorized for
issuance 2,750,000 Company Common Shares pursuant to the Company Option Plan,
and awards relating to 1,746,297 Company Common Shares have been issued of which
the number of awards relating to Company Common Shares with an exercise price
less than the Merger Price is set forth in Section 3.02 of the Company
Disclosure Letter. As of the date hereof, no Company Preferred Shares are issued
and outstanding. All of the issued and outstanding Company Common Shares are,
and all shares reserved for issuance pursuant to the Company Option Plan will be
upon issuance in accordance with the terms specified in the Company Option Plan
and the agreements pursuant to which they are issuable, duly authorized, validly
issued, fully paid and non-assessable. Except pursuant to this Agreement and the
Rights Agreement, dated as of November 30, 1997 and as amended as of November
11, 1998, by and between the Company and Norwest Bank Minnesota, N.A., as rights
7
agent (the "Company Rights Agreement"), and except as set forth in Section 3.02
of the Company Disclosure Letter, there are no outstanding subscriptions,
options, warrants, rights (including "phantom" stock rights), preemptive rights
or other contracts, commitments, understandings or arrangements, including any
right of conversion or exchange under any outstanding security, instrument or
agreement (together, "Options"), obligating the Company or any of its
Subsidiaries to issue or sell any capital shares of the Company or to grant,
extend or enter into any Option with respect thereto.
(b) Except as set forth in Section 3.02 of the Company Disclosure Letter,
all of the outstanding capital shares of each Subsidiary of the Company are duly
authorized, validly issued, fully paid and non-assessable and are owned,
beneficially and of record, by the Company or a Subsidiary wholly-owned,
directly or indirectly, by the Company, free and clear of any liens, claims,
mortgages, encumbrances, pledges, security interests, equities and charges of
any kind (each a "Lien"). Except as set forth in Section 3.02 of the Company
Disclosure Letter, there are no (i) outstanding Options obligating the Company
or any of its Subsidiaries to issue or sell any capital shares of any Subsidiary
of the Company or agreements to grant, extend or enter into any such Option or
(ii) voting trusts, proxies or other commitments, understandings, restrictions
or arrangements in favor of any Person other than the Company or a Subsidiary
wholly-owned, directly or indirectly, by the Company with respect to the voting
of or the right to participate in dividends or other earnings on any capital
shares of any Subsidiary of the Company.
(c) Except as set forth in Section 3.02 of the Company Disclosure Letter,
there are no outstanding contractual obligations of the Company or any
Subsidiary of the Company to repurchase, redeem or otherwise acquire any Company
Common Shares or any capital shares of any Subsidiary of the Company or to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any Subsidiary of the Company or any other
Person.
3.03 Authority Relative to this Agreement. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to
obtaining the Company Shareholders' Approval, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of the Company; the Board of
Directors of the Company has recommended adoption of this Agreement by the
shareholders of the Company; and no other corporate proceedings on the part of
the Company or its shareholders are necessary to authorize the execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby, other than obtaining the
Company Shareholders' Approval. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
8
3.04 Non-Contravention; Approvals and Consents.
(a) Except as set forth in Section 3.04 of the Company Disclosure Letter,
the execution and delivery of this Agreement by the Company do not, and the
performance by the Company of its obligations hereunder and the consummation of
the transactions contemplated hereby will not, conflict with, result in a
violation or breach of, constitute (with or without notice or lapse of time or
both) a default under, result in or give to any Person any right of payment or
reimbursement, termination, cancellation, modification or acceleration of, loss
of a material benefit under or result in the creation or imposition of any Lien
upon any of the assets or properties of the Company or any of its Subsidiaries
under, any of the terms, conditions or provisions of (i) the certificates or
articles of incorporation or code of regulations or bylaws (or other comparable
charter documents) of the Company or any of its Subsidiaries, or (ii) subject to
the obtaining of the Company Shareholders' Approval and the taking of the
actions described in paragraph (b) of this Section 3.04, (x) any statute, law,
rule, regulation or ordinance (together, "Laws"), or any judgment, decree,
order, writ, permit or license (together, "Orders"), of any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision (a "Governmental or Regulatory Authority")
applicable to the Company or any of its Subsidiaries or any of their respective
assets or properties, or (y) any note, bond, mortgage, security agreement,
indenture, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind (together, "Contracts") 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 or properties is bound,
excluding from the foregoing clauses (x) and (y) conflicts, violations,
breaches, defaults, rights of payment or reimbursement, terminations,
cancellations, modifications, accelerations and creations and impositions of
Liens which, individually or in the aggregate, would not reasonably be expected
to have a material adverse effect on the Company and its Subsidiaries taken as a
whole or on the ability of the Company to consummate the transactions
contemplated by this Agreement (but not excluding any conflicts, violations,
breaches, defaults, rights of payment or reimbursement, terminations,
cancellations, modifications, accelerations and creations or impositions of
Liens under the Company Store Leases other than those which can not reasonably
be expected to have a material adverse impact on one or more Company Store
Lease).
(b) Except (i) for the filing of a pre-merger notification report by the
Company under, and any other actions required under, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act"), (ii) for the filing of the Proxy Statement with the
Securities and Exchange Commission (the "SEC") pursuant to the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"Exchange Act"), (iii) for the filing of the Certificate of Merger and other
appropriate merger documents required by the OGCL with the Secretary of State
and appropriate documents with the relevant authorities of other states in which
the Constituent Corporations are qualified to do business, and (iv) as set forth
in Section 3.04 of the Company Disclosure Letter, no consent, approval or action
of, filing with or notice to any Governmental or Regulatory Authority or other
public or private third party is necessary or required under any of the terms,
conditions or provisions of any Law or Order of any Governmental or Regulatory
Authority or any Contract 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 or properties is bound for the execution and delivery
9
of this Agreement by the Company, the performance by the Company of its
obligations hereunder or the consummation by the Company of the transactions
contemplated hereby, excluding from the foregoing (iv) such consents, approvals,
actions, filings and notices which the failure to make or obtain, as the case
may be, individually or in the aggregate, would not reasonably be expected to
have a material adverse effect on the Company and its Subsidiaries taken as a
whole or on the ability of the Company to consummate the transactions
contemplated by this Agreement (but not excluding any consents, approvals,
actions, filings or notices under the Company Store Leases).
3.05 SEC Reports and Financial Statements.
(a) As of their respective dates, each form, report, schedule,
registration statement, definitive proxy statement and other document (together
with all amendments thereof and supplements thereto) filed by the Company or any
of its Subsidiaries with the SEC since February 4, 2000 (as such documents have
since the time of their filing been amended or supplemented, the "Company SEC
Reports"), which are all of the documents (other than preliminary material) that
the Company and its Subsidiaries were required to file with the SEC since such
date: (i) complied as to form in all material respects with the requirements of
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act"), or the Exchange Act, as the case may be, and if
applicable, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules and regulations
promulgated thereunder (the "▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act") and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in the
Company SEC Reports (the "Company Financial Statements") complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC, including without limitation, the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act applicable thereto, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes thereto
and except with respect to unaudited statements as permitted by Form 10-Q of the
SEC) and fairly present (subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end audit adjustments) the consolidated
financial position of the Company and its consolidated Subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
cash flows for the respective periods then ended. Except as set forth in Section
3.05 of the Company Disclosure Letter, each Subsidiary of the Company is treated
as a consolidated Subsidiary of the Company in the Company Financial Statements
for all periods covered thereby.
(b) The Company maintains disclosure controls and procedures required by
Rule 13a-15 or 15d-15 under the Exchange Act; such controls and procedures are
effective to ensure that all material information concerning the Company and its
Subsidiaries is made known on a timely basis to the individuals responsible for
the preparation of the Company's filings with the SEC and other public
disclosure documents.
10
(c) As used in this Section 3.05, the term "file" shall be broadly
construed to include any manner in which a document or information is furnished,
supplied or otherwise made available to the SEC.
3.06 Absence of Certain Changes or Events. Except as set forth in the
Company SEC Reports filed prior to the date of this Agreement or as set forth in
Section 3.06 of the Company Disclosure Letter, since February 2, 2003 (a) there
has not been any change, event or development which, individually or in the
aggregate, would reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole and (b) the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary
course consistent with past practice.
3.07 Absence of Undisclosed Liabilities. Except for matters reflected or
reserved against in the most recent balance sheet included in the Company
Financial Statements or as set forth in Section 3.07 of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries had at such date, or has
incurred since that date, any liabilities (whether absolute, accrued,
contingent, fixed or otherwise, or whether due or to become due) of any nature,
except liabilities (i) which were incurred in the ordinary course of business
consistent with past practice, (ii) which have been disclosed in Section 3.07 of
the Company Disclosure Letter, or (iii) which, individually or in the aggregate,
would not reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
3.08 Legal Proceedings. Except as specifically identified in the Company
SEC Reports filed prior to the date of this Agreement or as set forth in Section
3.08 of the Company Disclosure Letter, (i) there are no actions, suits,
arbitrations or proceedings pending or, to the knowledge of the Company,
threatened against, relating to or affecting, nor to the knowledge of the
Company are there any Governmental or Regulatory Authority investigations or
audits pending or threatened against, relating to or affecting, the Company or
any of its Subsidiaries or any of their respective assets and properties which,
individually or in the aggregate, would reasonably be expected to have a
material adverse effect on the Company and its Subsidiaries taken as a whole or
on the ability of the Company to consummate the transactions contemplated by
this Agreement, and (ii) neither the Company nor any of its Subsidiaries is
subject to any order of any Governmental or Regulatory Authority which,
individually or in the aggregate, would reasonably be expected to have a
material adverse effect on the Company and its Subsidiaries taken as a whole or
on the ability of the Company to consummate the transactions contemplated by
this Agreement.
3.09 Information Supplied. None of (a) the proxy statement relating to the
Company Shareholders' Meeting, as amended or supplemented from time to time (as
so amended and supplemented, the "Proxy Statement"), and any other documents to
be filed by the Company with the SEC or any other Governmental or Regulatory
Authority in connection with the Merger and the other transactions contemplated
hereby or (b) information supplied by the Company in writing for inclusion in
the Schedule 13E-3 will, on the date of its filing or, in the case of the Proxy
Statement, at the date it is mailed to shareholders of the Company and at the
time of the Company Shareholders' Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading or necessary to
11
correct any statement in any earlier communication with respect to any
solicitation of proxies for the Company Shareholders' Meeting which shall have
become false or misleading, except that no representation is made by the Company
with respect to information supplied in writing by or on behalf of Parent or Sub
expressly for inclusion therein and information incorporated by reference
therein from documents filed by Parent or any of its Subsidiaries with the SEC.
The Proxy Statement filed by the Company with the SEC under the Exchange Act
relating to the Company Shareholders' Meeting will comply as to form in all
material respects with the Exchange Act.
3.10 Permits; Compliance with Laws and Orders. The Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental and Regulatory Authorities necessary for the
lawful conduct of their respective businesses (the "Company Permits"), except
for failures to hold such permits, licenses, variances, exemptions, orders and
approvals which, individually or in the aggregate, would not reasonably be
expected to have a material adverse effect on the Company and its Subsidiaries
taken as a whole. The Company, its Subsidiaries, the Owned Real Property and the
Company Store Leases are in compliance with the terms of the Company Permits,
except for failures so to comply which, individually or in the aggregate, would
not reasonably be expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, the Company and its
Subsidiaries are not in violation of or default under any Law or Order of any
Governmental or Regulatory Authority, except for such violations or defaults
which, individually or in the aggregate, would not reasonably be expected to
have a material adverse effect on the Company and its Subsidiaries taken as a
whole.
3.11 Compliance with Agreements; Certain Agreements.
(a) Neither the Company nor any of its Subsidiaries nor, to the knowledge
of the Company, any other party thereto is in breach or violation of, or in
default in the performance or observance of any term or provision of, and no
event has occurred which, with notice or lapse of time or both, would reasonably
be expected to result in a default under, (i) the certificates or articles of
incorporation or code of regulations or bylaws (or other comparable charter
documents) of the Company or any of its Subsidiaries or (ii) any Contract 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 or properties is
bound, except with respect to (ii) for breaches, violations and defaults which,
individually or in the aggregate, would not reasonably be expected to have a
material adverse effect on the Company and its Subsidiaries taken as a whole.
All such Contracts are in full force and effect, except to the extent they have
previously expired in accordance with their terms, or except where such
invalidity or unenforceability would not reasonably be expected to have a
material adverse effect on the Company and its Subsidiaries, taken as a whole.
(b) Except as set forth in Section 3.11 of the Company Disclosure Letter
or in the Company SEC Reports filed prior to the date of this Agreement or as
provided for in this Agreement, neither the Company nor any of its Subsidiaries
is a party to any oral or written (i) consulting agreement providing for annual
payments by the Company or any of its Subsidiaries in excess of $50,000, (ii)
union or collective bargaining agreement, (iii) agreement
12
with any executive officer or other key employee of the Company or any of its
Subsidiaries the benefits of which are contingent or vest, or the terms of which
are materially altered, upon the occurrence of a transaction involving the
Company or any of its Subsidiaries of the nature contemplated by this Agreement,
(iv) agreement with respect to any executive officer or other key employee of
the Company or any of its Subsidiaries providing any term of employment or
compensation guarantee, (v) agreement or plan, including any stock option, stock
appreciation right, restricted stock or stock purchase plan, any of the benefits
of which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement, (vi) agreement
that would restrict the Company's or any Subsidiary's ability to compete in any
business in any location, (vii) agreements concerning a partnership or joint
venture, (viii) loan agreements, promissory notes, security agreements, deeds of
trust and other agreements relating to indebtedness for borrowed money or
deferred purchase price of property (other than trade payables arising in the
ordinary course of business), (ix) any agreement relating to business
acquisitions or dispositions not yet consummated, including any separate Tax or
indemnification agreements, and (x) any other agreement that would be required
to be filed as an exhibit to an Annual Report on Form 10-K of the Company if the
Company were to file such a report on the date of this Agreement (assuming for
this purpose that the fiscal year covered thereby ended on the date of this
Agreement).
3.12 Taxes. For purposes of this Agreement, "Taxes" (including, with
correlative meaning, the word "Tax") shall include any and all federal, state,
county, local, foreign or other taxes, charges, imposts, rates, fees, levies or
other assessments imposed by any Governmental or Regulatory Authority,
including, without limitation, all net income, alternative minimum, gross
income, sales and use, ad valorem, transfer, gains, profits, excise, franchise,
real and personal property, gross receipt, capital stock, production, business
and occupation, disability, employment, payroll, license, estimated, stamp,
custom duties, severance, withholding or other taxes, fees, assessments or other
similar charges of any kind whatsoever, together with any interest and penalties
(civil or criminal) on or additions to any such taxes. "Tax Returns" (including,
with correlative meaning, "Tax Return") shall mean federal, state, local and
foreign returns, estimates, information statements, designations, forms,
schedules, reports and documents of every nature whatsoever required to be filed
with any Governmental or Regulatory Authority relating to Taxes. Except as set
forth in Section 3.12 of the Company Disclosure Letter:
(a) Each of the Company and its Subsidiaries has filed all material Tax
Returns required to be filed by it, or requests for extensions to file such Tax
Returns have been timely filed or granted and have not expired, and all such Tax
Returns are complete and accurate in all material respects;
(b) The Company and each of its Subsidiaries has timely paid (or, in the
case of a Subsidiary, the Company has timely paid on its behalf) all Taxes shown
as due on such Tax Returns;
(c) The Company and each of its Subsidiaries has withheld and timely paid
to the applicable Governmental or Regulatory Authority with respect to its
employees all federal and state income Taxes, Taxes pursuant to the Federal
Insurance Contribution Act, Taxes pursuant to
13
the Federal Unemployment Tax Act and other Taxes required to be withheld, except
to the extent that failures to withhold and pay would not be reasonably expected
to have a material adverse effect on the Company and its Subsidiaries taken as a
whole;
(d) Neither the Company nor any of its Subsidiaries has been delinquent in
the payment of any material Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against the Company or any of its
Subsidiaries;
(e) Neither the Company nor any of its Subsidiaries has any liability for
any material unpaid Taxes which has not adequately been accrued for, or reserved
on, the most recent financial statements contained in the Company SEC Reports,
other than any liability for unpaid Taxes that may have accrued since the date
of the Company SEC Reports in connection with the operation of the business of
the Company and its Subsidiaries in the ordinary course, and except for
inadequately accrued or reserved Taxes which, individually or in the aggregate,
would not reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole;
(f) No deficiencies for any Taxes have been proposed, asserted or assessed
against the Company or any of its Subsidiaries that are not adequately reserved
for, except for inadequately reserved deficiencies which, individually or in the
aggregate, would not reasonably be expected to have a material adverse effect on
the Company and its Subsidiaries taken as a whole;
(g) No requests for waivers of the time to assess any Taxes against
the Company or any of its Subsidiaries have been granted or are pending;
(h) No audits or other proceedings by any Governmental or Regulatory
Authority are presently pending or, to the knowledge of the Company, threatened
with regard to any Taxes or Tax Returns of the Company or any of its
Subsidiaries;
(i) Each power of attorney currently in force that has been granted by the
Company or any of its Subsidiaries concerning any Tax matter is set forth in
Section 3.12(f) of the Company Disclosure Letter;
(j) The Company has made available to Parent complete and accurate copies
of (i) all material Tax Returns for all years for which the applicable statute
of limitations has not expired, and any amendments thereto, filed by or on
behalf of the Company or any of its Subsidiaries, (ii) all audit reports or
written proposed adjustments (whether formal or informal) received from any
Governmental or Regulatory Authority relating to any Tax Return filed by or on
behalf of the Company or any of its Subsidiaries and (iii) any Tax ruling or
request for a Tax ruling applicable to the Company or any of its Subsidiaries
and closing agreements entered into by the Company or any of its Subsidiaries;
(k) Neither the Company nor any of its Subsidiaries (i) is a party to, is
bound by, or has any obligation under, any agreement relating to the allocation
or sharing of Taxes or has any material liability for the Taxes of any Person
other than the Company or its Subsidiaries, as a transferee, or successor or
otherwise (including, without limitation, any liability under Treasury
Regulations Section 1.1502-6 or any similar provision of state, local or foreign
law), (ii) has
14
made any, or is obligated to make any, material payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
material payments that under Code Section 280G will not be deductible, (iii) has
ever been a member of an affiliated group of corporations (within the meaning of
Code Section 1504(a)) filing consolidated federal Tax Returns (or any other
consolidated, combined or unitary income Tax Return), other than the affiliated
group of which the Company is the common parent, (iv) has made an election under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company or by any of its subsidiaries; or (v) have been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the past five years;
(l) Each of the Company and its Subsidiaries has disclosed on its federal
income Tax Returns each position taken therein that could give rise to a
substantial understatement of United States federal income Tax within the
meaning of Code Section 6662;
(m) There are no material Liens for Taxes upon the assets of the Company
or of any of its Subsidiaries, other than Liens for current Taxes not yet due
and payable and Liens for Taxes that are being contested in good faith by
appropriate proceedings;
(n) There is no contract, agreement, plan or arrangement to which the
Company or any of its Subsidiaries is a party as of the date of this Agreement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company or any of its Subsidiaries that,
individually or in the aggregate, would reasonably be expected to give rise to
the payment of any amount as a result of the Merger that would not be deductible
pursuant to Section 404 or 162(m) of the Code;
(o) Neither the Company nor any Affiliate has participated in any
reportable or listed transaction as defined under Treasury Regulations Section
1.6011-4. If the Company or any Affiliate has participated in a reportable or
listed transaction, such entity has properly disclosed such transaction in
accordance with applicable Treasury Regulations;
(p) Section 3.12 of the Company Disclosure Letter sets forth the states in
which the Company and its Subsidiaries currently file income Tax Returns or
corporate franchise Tax Returns. No claim has ever been made by a Governmental
or Regulatory Authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that the Company or such Subsidiary is or
may be subject to taxation by such jurisdiction;
(q) None of the assets of the Company or of any of its Subsidiaries are
tax exempt use property within the meaning of Section 168(h) of the Code; and
(r) Neither the Company nor any of its Subsidiaries has constituted a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (1) in the
two years prior to the date of this Agreement or (2) in a distribution which
could otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) that includes the Merger.
15
3.13 Employee Benefit Plans; ERISA.
(a) Except as set forth in Section 3.13 of the Company Disclosure Letter
or as would not reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole, (i) all Company Employee Benefit
Plans (as defined below) are and have been maintained in compliance with all
applicable requirements of Law, including without limitation ERISA (as defined
below) and the Code, and (ii) neither the Company nor any of its Subsidiaries
has any liabilities or obligations with respect to any such Company Employee
Benefit Plans, whether accrued, contingent or otherwise, nor to the knowledge of
the Company are any such liabilities or obligations expected to be incurred
other than contribution obligations and payment of benefits arising in the
normal course under any Company Employee Benefit Plan. Section 3.13(a)(1) of the
Company Disclosure Letter lists all Company Employee Benefit Plans and all ERISA
Affiliates. Except as set forth in Section 3.13(a)(2) of the Company Disclosure
Letter, the execution of, and performance of the transactions contemplated in,
this Agreement by the Company will not constitute an event under any Company
Employee Benefit Plan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any current or former employee or beneficiary thereof. The only severance
agreements or severance policies applicable to the Company or any of its
Subsidiaries are the agreements and policies set forth in Section 3.13(a)(3) of
the Company Disclosure Letter. Each Company Employee Benefit Plan and related
trust intended to be qualified under Section 401(a) or 501(c)(9) of the Code is
so qualified, has received a favorable determination letter from the IRS, and
nothing has occurred that could adversely affect such determination.
(b) As used herein:
(i) "Company Employee Benefit Plan" means any Plan entered into,
established, maintained, sponsored, contributed to or required to be
contributed to by the Company or any of its Subsidiaries or any ERISA
Affiliate for the benefit of the current or former employees or directors
of the Company or any of its Subsidiaries or any ERISA Affiliate and
existing on the date of this Agreement or at any time subsequent thereto
and on or prior to the Effective Time and, in the case of a Plan which is
subject to Part 3 of Title I of the Employee Retirement Income Security
Act of 1974, as amended, and the rules and regulations thereunder
("ERISA"), Section 412 of the Code or Title IV of ERISA, at any time
during the five-year period immediately preceding the date of this
Agreement.
(ii) "Plan" means any employment, bonus, incentive compensation,
deferred compensation, long term incentive, pension, profit sharing,
retirement, stock purchase, stock option, stock ownership, stock
appreciation rights, phantom stock, leave of absence, layoff, vacation,
day or dependent care, legal services, cafeteria, life, health, medical,
accident, disability, workers' compensation or other insurance, severance,
separation, termination, change of control or other benefit plan,
agreement, practice, policy, program, scheme or other arrangement, whether
written or oral, including, but not limited to any "employee benefit plan"
within the meaning of Section 3(3) of ERISA.
16
(iii) "ERISA Affiliate" means any Person, who on or before the
Effective Time, is under common control with the Company within the
meaning of Section 414 of the Code.
(c) Complete and correct copies of the following documents have been made
available to Parent: (i) all Company Employee Benefit Plans and any related
trust agreements or insurance contracts, (ii) the most current summary plan
descriptions of each Company Employee Benefit Plan subject to the requirement to
give a summary plan description under ERISA, (iii) the most recent Form 5500 and
schedules thereto for each Company Employee Benefit Plan subject to such
reporting, (iv) the most recent determination of the Internal Revenue Service
with respect to the qualified status of each Company Employee Benefit Plan or
related trust that is intended to qualify under Section 401(a) or 501(c)(9) of
the Code, (v) the most recent accountings with respect to each Company Employee
Benefit Plan funded through a trust and (vi) the most recent actuarial report of
the actuary of each Company Employee Benefit Plan with respect to which
actuarial valuations are conducted.
(d) Except as set forth in Section 3.13(d) of the Company Disclosure
Letter, neither the Company nor any Subsidiary nor any ERISA Affiliate maintains
or is obligated to provide benefits under any life, medical or health Plan
(other than as an incidental benefit under a Plan qualified under Section 401(a)
of the Code) which provides benefits to retirees or other terminated employees
other than benefit continuation rights under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
(e) Except as set forth in Section 3.13(e) of the Company Disclosure
Letter, each Company Employee Benefit Plan covers only employees who are
employed by the Company or a Subsidiary (or former employees or beneficiaries
with respect to service with the Company or a Subsidiary) or directors of the
Company. The transactions contemplated by this Agreement will require no
spin-off of assets and liabilities or other division or transfer of rights with
respect to any such plan.
(f) Neither the Company, any Subsidiary of the Company, any ERISA
Affiliate nor any other corporation or organization controlled by or under
common control with any of the foregoing within the meaning of Section 4001 of
ERISA has at any time contributed to any "multiemployer plan," as that term is
defined in Section 4001 of ERISA or to any "multiple employer plan" as described
in Section 413(c) of the Code.
(g) No event has occurred, and there exists no condition or set of
circumstances in connection with any Company Employee Benefit Plan or any Plan
sponsored by an ERISA Affiliate, under which the Company or any Subsidiary,
directly or indirectly (through any indemnification agreement or otherwise),
would reasonably be expected to be subject to any risk of material liability on
the Company and its Subsidiaries under Section 409 of ERISA, Section 502(i) of
ERISA, Title IV of ERISA or Section 4975 of the Code.
(h) No transaction contemplated by this Agreement will result in liability
to the Pension Benefit Guaranty Corporation ("PBGC") under Section 302(c)(11),
4062, 4063, 4064 or 4069 of ERISA, or otherwise, with respect to the Company or
any of its Subsidiaries or any corporation or organization controlled by or
under common control with any of the foregoing
17
within the meaning of Section 4001 of ERISA, and, to the knowledge of the
Company, no event or condition exists or has existed which would reasonably be
expected to result in any material liability to the PBGC with respect to the
Company, any of its Subsidiaries or any other of such entities. Except as set
forth in Section 3.13(h) of the Company Disclosure Schedule, no "reportable
event" within the meaning of Section 4043 of ERISA has occurred with respect to
any Company Employee Benefit Plan that is a defined benefit plan under Section
3(35) of ERISA. With respect to each plan that is subject to Section 301 et seq.
of ERISA or Section 412 of the Code, the Company and its Subsidiaries are not
liable for any accumulated funding deficiency as that term is defined in Section
412 of the Code and the benefit obligations of all such plans as most currently
determined by the plan's actuary on a plan-termination basis do not exceed the
assets of such plans as of the date of this Agreement by more than $4,500,000.
(i) Except as disclosed in Section 3.13(i) of the Company Disclosure
Letter, no condition, agreement or Plan provision limits the right of the
Company or its affiliates to amend, cut back or terminate any Plan (except to
the extent such limitation arises under ERISA) without further liability to the
Company or its Subsidiaries.
(j) Except as set forth in Section 3.13(i) of the Company Disclosure
Letter, no employer securities, employer real property or other employer
property is included in the assets of any Company Employee Benefit Plan.
(k) The Company has not violated Section 306 or 402 of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
3.14 Labor Matters. Except as set forth in Section 3.14 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement with any labor union, confederation or
association and there are no discussions, negotiations, demands or proposals
that are pending or, to the knowledge of the Company, threatened, or have been
conducted or made with or by any labor union, confederation or association
regarding organizational activities since February 4, 2000. Except as disclosed
in the Company SEC Reports filed prior to the date of this Agreement or as set
forth in Section 3.14 of the Company Disclosure Letter, there are no material
controversies pending or, to the knowledge of the Company, threatened between
the Company or any of its Subsidiaries and any representatives of its employees
and, to the knowledge of the Company, there are no material organizational
efforts presently being made involving any of the now unorganized employees of
the Company or any of its Subsidiaries. Since February 4, 2000, there has been
no work stoppage, strike, material dispute or other concerted action by
employees of the Company or any of its Subsidiaries. During that period, the
Company and its Subsidiaries have complied in all material respects with all
applicable Laws relating to the employment of labor, including, without
limitation those relating to wages, hours and collective bargaining. There is no
pending, or to the knowledge of the Company, threatened action, complaint,
arbitration, proceeding or investigation against the Company or any of its
Subsidiaries by or before (or, in the case of any threatened matter, that could
be brought before ) any court, governmental agency, administrative agency,
board, commission or arbitrator brought by or on behalf of any prospective,
current or former employees of the Company or any of its Subsidiaries which
would reasonably be expected to have a material adverse effect on the Company
and its Subsidiaries, taken as a whole. Except as set forth in Section 3.14 of
the Company Disclosure Letter, neither the Company nor any of its Subsidiaries
has closed any retail store, distribution center or other
18
facility, or effectuated any layoffs of employees or implemented any early
retirement, separation or similar program in connection with any retail store
closing since January 1, 2002, nor has the Company or any of its Subsidiaries
planned or announced any such action or program for the future.
3.15 Environmental Matters.
(a) Each of the Company and its Subsidiaries is and has been in
compliance, in all material respects, with all applicable Environmental, Health,
and Safety Requirements.
(b) Without limiting the generality of the foregoing, each of the Company
and its Subsidiaries has obtained and is in compliance with, in each case in all
material respects, all permits, licenses and other authorizations that are
required pursuant to Environmental, Health, and Safety Requirements in
connection with the use or operations on any real property or with respect to
the business of each of the Company and its Subsidiaries except for such
permits, licenses or other authorizations the failure of which to obtain would
not reasonably be expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole.
(c) Neither the Company or its Subsidiaries has received any written or
oral notice, report or other information regarding any actual or alleged
material violation of Environmental, Health, and Safety Requirements, or any
material liabilities or potential liabilities to any governmental authorities or
third parties under any Environmental, Health, and Safety Requirements. None of
the Company or its Subsidiaries is subject to any order, decree, injunction or
lien by any governmental authority or any claim, indemnity or other agreement
with any third party relating to liability under any Environmental, Health, and
Safety Requirements.
(d) The properties currently owned, leased or operated by the Company and
its Subsidiaries (including soils, groundwater, surface water, buildings or
other structures) are not contaminated with any Hazardous Material in such a
manner or concentration that the Company would be required under any
Environmental, Health and Safety Requirements to remedy the existence of such
Hazardous Material. The properties formerly owned, leased or operated by the
Company or any of its Subsidiaries were not contaminated with Hazardous Material
during the period of ownership or operation by the Company or any of its
Subsidiaries in such a manner or concentration that the Company would be
required under any Environmental, Health and Safety Requirements to remedy the
existence of such Hazardous Material. Neither the Company nor any of its
Subsidiaries are or, to the knowledge of the Company, are alleged to be, subject
to liability for any Release of Hazardous Material on the property of any third
party.
(e) Except as set forth on Section 3.15 of the Company Disclosure Letter,
none of the following exists at any real property or facility owned or operated
by the Company or its Subsidiaries: (1) underground storage tanks, (2)
asbestos-containing material, (3) materials or equipment containing
polychlorinated biphenyls, or (4) lead-based paint, mold, fungi, bacteria or
other biological material or organisms for which remediation, abatement or
removal is necessary for the health, safety or welfare of persons in or about
the real property or for which remediation is required under applicable Laws.
19
(f) None of Company or its Subsidiaries has treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled, or Released any
Hazardous Materials in a manner that has given or would give rise to liabilities
under applicable Environmental, Health, and Safety Requirements, including but
not limited to any material liability for response costs, corrective action
costs, personal injury, property damage, natural resources damage or attorney or
consultant fees under Environmental, Health, and Safety Requirements.
(g) For purposes of this Section 3.15, the following terms shall have the
following meanings:
(i) "Environmental, Health, and Safety Requirements" means all
federal, state, local and foreign statutes, laws (including principles or
common law), regulations, ordinances, licenses, permits, approvals or
restrictions concerning public health and safety, worker health and
safety, natural resources and pollution or protection of the environment,
including without limitation, all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any Hazardous Material, as such
requirements are enacted and in effect on or prior to the Effective Time.
(ii) "Hazardous Material" means all pollutants, contaminants,
hazardous substances, hazardous waste, toxic substances solid or special
waste, and materials, petroleum and petroleum constituents, PCBs,
asbestos, radon radioactive materials and any other compound, element,
material or substance in any form whatsoever regulated or restricted by or
under Environmental Health and Safety Requirements.
(iii) "Release" means the spilling, leaking, disposing, discharging,
emitting, depositing, ejecting, leaching, escaping or any other release or
threatened release, however defined, whether intentional or unintentional,
of any Hazardous Material.
3.16 Company Real Property.
(a) Section 3.16 of the Company Disclosure Schedule identifies each parcel
of real property owned or leased by the Company or one of its Subsidiaries (the
"Company Real Property"). The Company and its Subsidiaries have good and
marketable fee simple title to each property identified as owned by it free and
clear of all Liens other than (i) Liens that do not, individually or in the
aggregate, materially impair the conduct by the Company of its business thereon
or materially detract from the value thereof, (ii) Liens for Taxes accrued but
not yet payable, and (iii) Liens that secure obligations of the Company under
the Amended and Restated Credit Agreement, dated as of July 9, 2002, by and
among the Company, Citibank, N.A., as issuer, Citicorp USA, Inc., as agent,
Swing Loan Bank and the other lenders named therein (the "Company Credit
Facility") (each of (i), (ii) and (iii) being "Permitted Encumbrances"). The
Company holds a valid leasehold interest under a lease or sublease covering each
property identified as leased by it free and clear of all Liens other than
Permitted Encumbrances.
(b) The Company has made available to Parent a complete, correct and
current copy of the store leases and distribution center lease relating to each
property identified as leased by it
20
(the "Company Store Leases"), including any modifications and supplements.
Except as set forth in Section 3.16 of the Company Disclosure Schedule (i) all
of the Company Store Leases are in full force and effect, (ii) the Company and,
to the knowledge of Company, all other parties to the Company Store Leases have,
in all material respects, duly and timely performed their obligations and are
not in default under the Company Store Leases, (iii) the Company has not given
or received any notice of a material default under any of the Company Store
Leases, (iv) no event has occurred or condition exists that, with the giving of
notice, the passage of time, or both, would constitute a material default by the
Company or, to the knowledge of the Company, any other party under any of the
Company Store Leases, and (v) to the knowledge of the Company, none of the
Company Store Leases is subject to any impending cancellation.
(c) The use of the Company Real Property by the Company and its
Subsidiaries in their businesses as presently and ordinarily conducted conforms
with applicable zoning laws, regulations and permits, except where the failure
to conform would not reasonably be expected to have a material adverse effect on
the Company and its Subsidiaries taken as a whole. Neither the Company nor any
of its Subsidiaries is obligated under or bound by any agreement, option, right
of first refusal, purchase contract or other contractual right to sell, lease or
dispose of any Owned Real Property or any portions thereof.
3.17 Intellectual Property Rights. The Company and its Subsidiaries have
all right, title and interest in, or a valid and binding license to use, all
Intellectual Property (as defined below) free and clear of all liens, security
interests or other encumbrances which is material to the conduct of the
businesses of the Company and its Subsidiaries taken as a whole. Except as set
forth in Section 3.16 of the Company Disclosure Letter, neither the Company nor
any Subsidiary of the Company is in default (or with the giving of notice or
lapse of time or both, would be in default) under any license to use such
Intellectual Property, and, to the Company's knowledge, such Intellectual
Property is not being infringed by any third party and neither the Company nor
any Subsidiary of the Company is infringing any Intellectual Property of any
third party, except for such defaults and infringements which, individually or
in the aggregate, would not reasonably be expected to have a material adverse
effect on the Company and its Subsidiaries taken as a whole. No material claim
has been asserted and is pending by any Person challenging the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property. For purposes of this Agreement, "Intellectual Property" means patents
and patent rights, trademarks and trademark rights, trade names and trade name
rights, service marks and service ▇▇▇▇ rights, service names and service name
rights, copyrights and copyright rights, trade secrets, Internet domain names
and other proprietary intellectual property rights and all pending applications
for and registrations of any of the foregoing.
3.18 Insurance. Section 3.18 of the Company Disclosure Letter contains a
list of all material insurance policies which are owned by the Company and any
of its Subsidiaries and which name the Company or any of its Subsidiaries as an
insured, including without limitation, self-insurance programs and those which
pertain to the Company's assets, employees or operations. All such insurance
policies are in full force and effect and the Company has not received notice of
cancellation of any such insurance policies.
3.19 Affiliate Transactions. Except as set forth in the Company SEC
Reports, there are no contracts, commitments, agreements, arrangements or other
transactions between the
21
Company or any of its Subsidiaries, on the one hand, and any (i) present officer
or director of the Company or any of its Subsidiaries or any of their immediate
family members (including their spouses) or (ii) affiliate of any such officer,
director, family member or beneficial owner, on the other hand, required to
disclosed pursuant to Item 404 of Regulation S-K of the SEC.
3.20 Vote Required. The affirmative vote of the holders of record of at
least two-thirds of the outstanding Company Common Shares with respect to the
adoption of this Agreement is the only vote of the holders of any class or
series of the capital shares of the Company required to adopt this Agreement and
approve the Merger and the other transactions contemplated hereby.
3.21 Opinion of Financial Advisor. The Company has received the opinion of
RBC ▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc., a member company of RBC Capital Markets, ("RBC ▇▇▇▇
▇▇▇▇▇▇▇▇ Inc."), dated the date hereof, to the effect that, as of the date
hereof, the consideration to be received in the Merger by the shareholders of
the Company is fair from a financial point of view to the shareholders of the
Company.
3.22 Company Rights Agreement. Each right issued under the Company Rights
Agreement is represented by the certificate representing the associated Company
Common Shares and is not exercisable or transferable apart from the associated
Company Common Shares, and the Company has taken all necessary actions so that
the Company Rights Agreement will not be applicable to this Agreement, the
Merger and the other transactions contemplated hereby.
3.23 Anti-takeover Statutes Not Applicable. No "fair price," "merger
moratorium," "control share acquisition" or other similar anti-takeover statute
or regulation existing under, or adopted in connection with, the laws of the
State of Ohio will apply to this Agreement, the Merger or other transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as of the date of this
Agreement as follows:
4.01 Organization and Qualification. Each of Parent and Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has full corporate power and
authority to conduct its business as and to the extent now conducted and to own,
use and lease its assets and properties, except for such failures to be so
incorporated, existing and in good standing or to have such power and authority
which, individually or in the aggregate, would not reasonably be expected to
have a material adverse effect on Parent and its Subsidiaries taken as a whole.
Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities, has
conducted its operations only as contemplated hereby and has no material
liabilities. In Schedule 4.01 to the letter dated the date hereof and delivered
to Company by Parent and Sub concurrently with the execution and delivery of
this Agreement (the "Parent Disclosure Letter") there is included complete and
correct copies of the certificates or articles of
22
incorporation and code of regulations or bylaws (or other comparable charter
documents) of Parent and Sub.
4.02 Authority Relative to this Agreement. Each of Parent and Sub has the
requisite corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by each of
Parent and Sub and the consummation by each of Parent and Sub of the
transactions contemplated hereby have been duly and validly approved by their
respective Boards of Directors and by Parent in its capacity as the sole
shareholder of Sub, and no other corporate proceedings on the part of either of
Parent or Sub or their respective shareholders are necessary to authorize the
execution, delivery and performance of this Agreement by Parent and Sub and the
consummation by Parent and Sub of the Merger and the other transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Parent and Sub and constitutes a legal, valid and binding
obligation of each of Parent and Sub enforceable against each of Parent and Sub
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.03 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by each of Parent and Sub
do not, and the performance by each of Parent and Sub of its obligations
hereunder and the consummation of the transactions contemplated hereby will not,
conflict with, result in a violation or breach of, constitute (with or without
notice or lapse of time or both) a default under, result in or give to any
Person any right of payment or reimbursement, termination, cancellation,
modification or acceleration of, loss of a material benefit under or result in
the creation or imposition of any Lien upon any of the assets or properties of
Parent or any of its Subsidiaries under, any of the terms, conditions or
provisions of (i) the certificates or articles of incorporation or code of
regulations or bylaws (or other comparable charter documents) of Parent or any
of its Subsidiaries, or (ii) subject to the taking of the actions described in
paragraph (b) of this Section 4.03, (x) any Laws or Orders of any Governmental
or Regulatory Authority applicable to Parent or any of its Subsidiaries or any
of their respective assets or properties, or (y) any Contracts to which Parent
or any of its Subsidiaries is a party or by which Parent or any of its
Subsidiaries or any of their respective assets or properties is bound, excluding
from the foregoing clauses (x) and (y) conflicts, violations, breaches,
defaults, rights of payment or reimbursement, terminations, cancellations,
modifications, accelerations and creations and impositions of Liens which,
individually or in the aggregate, would not reasonably be expected to have a
material adverse effect on Parent and its Subsidiaries taken as a whole or the
ability of Parent and Sub to consummate the transactions contemplated by this
Agreement.
(b) Except (i) for the filing of a pre-merger notification report by
Parent and Sub under, and any other actions required under, the HSR Act and (ii)
for the filing of the Certificate of Merger and other appropriate merger
documents required by the OGCL with the Secretary of State and appropriate
documents with the relevant authorities of other states in which the Constituent
Corporations are qualified to do business, no consent, approval or action of,
filing
23
with or notice to any Governmental or Regulatory Authority or other public or
private third party is necessary or required under any of the terms, conditions
or provisions of any Law or Order of any Governmental or Regulatory Authority or
any Contract to which Parent or any of its Subsidiaries is a party or by which
Parent or any of its Subsidiaries or any of their respective assets or
properties is bound for the execution and delivery of this Agreement by each of
Parent and Sub, the performance by each of Parent and Sub of its obligations
hereunder or the consummation of the transactions contemplated hereby, other
than such consents, approvals, actions, filings and notices which the failure to
make or obtain, as the case may be, individually or in the aggregate, would not
be reasonably expected to have a material adverse effect on Parent and its
Subsidiaries taken as a whole or the ability of Parent and Sub to consummate the
transactions contemplated by this Agreement.
4.04 Information Supplied. Neither the information supplied or to be
supplied in writing by or on behalf of Parent or Sub for inclusion, in the Proxy
Statement or any other documents to be filed by Parent, Sub or the Company with
the SEC or any other Governmental or Regulatory Authority in connection with the
Merger and the other transactions contemplated hereby, including without
limitation the Schedule 13E-3 will, on the date of its filing or, in the case of
the Proxy Statement, at the date it is mailed to shareholders of the Company and
at the time of the Company Shareholders' Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
4.05 Legal Proceedings. There are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of Parent or Sub, threatened against,
relating to or affecting, nor to the knowledge of Parent or Sub are there any
Governmental or Regulatory Authority investigations or audits pending or
threatened against, relating to or affecting, Parent or any of its Subsidiaries
or any of their respective assets and properties which, individually or in the
aggregate, would reasonably be expected to have a material adverse effect on
Parent and its Subsidiaries taken as a whole or the ability of Parent and Sub to
consummate the transactions contemplated by this Agreement, and neither Parent
nor any of its Subsidiaries is subject to any order of any Governmental or
Regulatory Authority which, individually or in the aggregate, would reasonably
be expected to have a material adverse effect on Parent and its Subsidiaries
taken as a whole or the ability of Parent and Sub to consummate the transactions
contemplated by this Agreement.
4.06 Capitalization of Sub. The authorized capital stock of Sub consists
of 1,000 common shares, without par value, all of which shares are validly
issued and outstanding, fully paid and nonassessable and are owned by Parent
free and clear of any and all Liens. On the date hereof Sub has, and at all
times through the Effective Time, Sub will continue to have, no obligations or
liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
whether due or to become due) of any nature except for nominal liabilities
associated with Sub's organization and liabilities arising under or in
connection with this Agreement.
4.07 Financing. Parent has, or has received binding (subject to the terms
and conditions thereof) written commitments from financially responsible
financial institutions to obtain, the funds necessary to consummate the Merger
and pay the Merger Price as provided in Section 2.01, and to pay related fees
and expenses (collectively, the "Commitment Letters"), and
24
will make such funds available to Sub immediately prior to the Closing. Parent
has provided the Company with true and complete copies of all commitments and
agreements from third parties to provide such financing to Parent or Sub. Parent
shall keep the Company informed with respect to material activity concerning the
status of such financing, and shall give the Company prompt notice of any
material adverse change with respect to such financing.
ARTICLE V
COVENANTS OF THE COMPANY
5.01 Covenants of the Company. At all times from and after the date hereof
until the Effective Time, the Company covenants and agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement, or to the extent that Parent shall otherwise consent in writing):
(a) The Company and each of its Subsidiaries shall conduct their
respective businesses only in, and neither the Company nor any such Subsidiary
shall take any action except in, the ordinary course consistent with past
practice.
(b) Without limiting the generality of paragraph (a) of this Section 5.01,
(i) the Company and its Subsidiaries shall use commercially reasonable efforts
to preserve intact in all material respects their present business organizations
and reputation, to keep available the services of their key officers and
employees, to maintain their assets and properties in good working order and
condition, ordinary wear and tear excepted, to maintain insurance on their
tangible assets and businesses in such amounts and against such risks and losses
as are currently in effect, to preserve their relationships with customers and
suppliers and others having significant business dealings with them and to
comply in all material respects with all Laws and Orders of all Governmental or
Regulatory Authorities applicable to them, and (ii) the Company shall not, nor
shall it permit any of its Subsidiaries to:
(i) amend or propose to amend its certificate or articles of
incorporation or code of regulations or bylaws (or other comparable
charter documents);
(ii) (A) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital shares, except for the
declaration and payment of dividends by a wholly-owned Subsidiary solely
to its parent corporation, (B) split, combine, reclassify or take similar
action with respect to any of its capital shares or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or
in substitution for its capital shares, (C) adopt a plan of complete or
partial liquidation or resolutions providing for or authorizing such
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization, or (D) directly or indirectly
redeem, repurchase or otherwise acquire any capital shares or any Option
with respect thereto, except for repurchases in connection with the
Company Option Plan that result from a participant's use of Company Common
Shares to exercise options or pay withholding taxes in connection with
such exercise;
(iii) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any of its
25
capital shares or any securities convertible into or exercisable for any
of its capital shares or any Option, warrants or rights with respect
thereto, other than (A) the issuance of Company Common Shares or share
appreciation or similar rights, as the case may be, pursuant to Options
outstanding on the date of this Agreement and in accordance with their
present terms, (B) the issuance by a wholly-owned Subsidiary of its
capital shares to its parent corporation, or (C) the issuance of Company
Rights pursuant to the Company Rights Agreement in accordance with the
terms thereof, or modify or amend any right of any holder of outstanding
capital shares or Options with respect thereto except as contemplated by
this Agreement;
(iv) except for transactions provided for in or contemplated by the
Company's 2003 Budget approved by the Board and furnished to Parent (the
"Company Budget"), a copy of which is attached to the Company Disclosure
Letter, acquire (by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of,
or by any other manner) any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets other than inventory and
other assets to be sold or used in the ordinary course of business
consistent with past practice;
(v) sell, lease, sell and leaseback, pledge, grant any security
interest in or otherwise dispose of or encumber any of its assets or
properties, other than (i) sales of inventory in the ordinary course of
business consistent with past practice, (ii) to the extent provided for in
the Company Budget or disclosed in the Company Disclosure Letter, and
(iii) sales of assets, in the aggregate between the date hereof and
Closing, of up to $250,000;
(vi) except to the extent required by applicable Law or Order make
any tax election or settle or compromise any material income tax liability
with any Governmental or Regulatory Authority;
(vii) except as set forth in Section 5.01(b)(vii) of the Company
Disclosure Letter or to the extent provided for in or contemplated by the
Company Budget (i) incur any indebtedness for borrowed money, except
pursuant to the Company Credit Facility in the ordinary course of business
or (ii) enter into any new credit facility;
(viii) except for the vesting of all unvested Options as
contemplated by Section 2.01(e), enter into, adopt, amend in any material
respect (except as may be required by applicable Law) or terminate any
Company Employee Benefit Plan or other agreement, arrangement, plan or
policy between the Company or one of its Subsidiaries and one or more of
its directors, officers or employees, pay any benefit not required by any
plan or arrangement in effect as of the date hereof, increase in any
manner the compensation or fringe benefits of any officer or director of
the Company or its Subsidiaries or, except for normal increases in the
ordinary course of business consistent with past practice, increase in any
manner the compensation or fringe benefits of any non-officer employee;
(ix) enter into any Contract or amend or modify any existing
Contract, or engage in any new transaction outside the ordinary course of
business consistent with
26
past practice or not on an arm's length basis, with any Affiliate of the
Company or any of its Subsidiaries;
(x) make any capital expenditures or commitments for capital
expenditures for the opening of any new stores or the expansion or
remodeling of any existing stores or any other material capital projects,
except as set forth in Section 5.01(b)(J) of the Company Disclosure
Letter;
(xi) settle or compromise any litigation (whether or not commenced
prior to the date of this Agreement), other than settlements involving
payments that are not in excess of $100,000 in the aggregate over amounts
fully recoverable from insurance;
(xii) make any change in the lines of business in which it
participates or is engaged; or
(xiii) enter into any Contract, commitment or arrangement to
do or engage in any of the foregoing.
(c) The Company shall confer on a regular basis with Parent with respect
to its business and operations and other matters relevant to the Merger, and
shall promptly advise Parent of any change or event, including, without
limitation, any complaint, investigation or hearing by any Governmental or
Regulatory Authority (or communication indicating the same may be contemplated)
or the institution or threat of litigation, known to the Company, which would
reasonably be expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole or on the ability of the Company to consummate the
transactions contemplated hereby.
5.02 No Solicitations.
(a) Prior to the Effective Time, the Company agrees (a) that neither it
nor any of its Subsidiaries shall, and it shall cause their respective
Representatives not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its shareholders) with
respect to an Alternative Proposal, or engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions with,
any Person or group relating to an Alternative Proposal (excluding the
transactions contemplated by this Agreement) or grant any waiver or release
under any confidentiality, standstill or similar agreement with respect to any
class of equity securities of the Company or any Subsidiary; and (b) that it
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties with respect to any of the
foregoing, and it will take the necessary steps to inform such parties of its
obligations under this Section 5.02; provided, however, that nothing contained
in this Section 5.02 shall prohibit the Board of Directors of the Company from
(i) furnishing information to (but only pursuant to a confidentiality agreement
in customary form and having terms and conditions no less favorable to the
Company than the Confidentiality Agreement; provided, however, that any such
confidentiality agreement shall not restrict the parties thereto from making an
Alternative Proposal) or entering into discussions or negotiations with any
Person or group that makes an unsolicited bona fide Alternative Proposal, if a
majority of the
27
Board of Directors of the Company, without including directors who may be
considered Affiliates (as defined in Rule 405 under the Securities Act) of any
person making an Alternative Proposal ("Disinterested Directors"), determines in
good faith (after receipt of advice from reputable outside legal counsel
experienced in such matters (including without limitation ▇▇▇▇▇▇▇▇ ▇▇▇▇) that
there is a reasonable basis to conclude that the failure to take any action that
would otherwise be prohibited by any such restriction would result in a breach
of the Board of Directors' fiduciary duties under applicable Law) that the
Alternative Proposal is or presents a reasonable likelihood of resulting in a
Superior Proposal and was not solicited by it after the date hereof and did not
otherwise result from a breach of this Section 5.02; and (ii) to the extent
required, taking and disclosing to the Company's shareholders a position
contemplated by Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act with
regard to an Alternative Proposal, or making any other disclosure to the
Company's shareholders if, in the good faith judgment of a majority of the
Disinterested Directors, after being advised by reputable outside counsel
experienced in such matters (including without limitation, ▇▇▇▇▇▇▇▇ ▇▇▇▇), there
is a reasonable basis to conclude that disclosure is required under applicable
Law. The Company will promptly notify Parent after receipt of a proposal
relating to any Alternative Proposal or any request for information relating to
the Company or for access to the properties, books or records of the Company by
any Person that has made a proposal relating to an Alternative Proposal or any
Person who the Company believes in its reasonable judgment may be considering
making, or has made, a proposal relating to an Alternative Proposal, or any
request for nonpublic information from any Person, and will keep Parent fully
informed on a current basis (and in any event within 24 hours after receipt of
an indication, request or a proposal relating to an Alternative Proposal, or any
revision of such proposal) of the status and details of any such Alternative
Proposal, indication or request. The Company will not enter into any agreement
or arrangement (other than a confidentiality agreement as described above), or
make any recommendation (except as contemplated by Section 5.021(a)(ii) above),
with respect to an Alternative Proposal that is or presents a reasonable
likelihood of resulting in a Superior Proposal for three business days after
delivery of such a notice to Parent indicating the Company's intention to enter
into such an agreement or arrangement, or to make such a recommendation, with
respect to such Alternative Proposal, which notice shall include all material
terms of such proposal, and the Company will negotiate exclusively in good faith
with Parent for such three-business day period to make such adjustments in the
terms and conditions of this Agreement as would enable the Company to proceed
with the transactions contemplated herein on such adjusted terms; provided,
however, that any such proposed adjustments shall be at the discretion of the
parties hereto at the time and that no more than one three-day negotiation
period shall apply to any particular Alternative Proposal, it being understood
that any material change to an Alternative Proposal will give rise to a new
three-day negotiation period under this Section 5.02, unless the Company shall
have notified Parent in writing that the Company does not intend to enter into
any agreement or arrangement (other than a confidentiality agreement as
described above), or make a recommendation, with respect to such Alternative
Proposal as modified by such material change. Nothing in this Section 5.02 shall
permit the Company to terminate this Agreement except as provided in Article
VIII.
(b) Neither the Company nor the Board of Directors of the Company nor any
committee thereof shall withdraw or modify, or propose to withdraw or modify, in
any manner adverse to Parent, the approval or recommendation of this Agreement
or the Merger, or, except as contemplated by Section 5.02(a)(ii) above, propose
publicly to approve or recommend an
28
Alternative Proposal unless a majority of the Disinterested Directors
determines, in its good faith judgment (after receipt of advice from reputable
outside legal counsel experienced in such matters, including without limitation
▇▇▇▇▇▇▇▇ ▇▇▇▇) that there is a reasonable basis to conclude that the failure to
take such action would result in a breach of the Board of Directors' fiduciary
duties under applicable Law and the Company has otherwise complied with its
obligations under this Section 5.02.
(c) For purposes of this Agreement, "Alternative Proposal" means any
merger, consolidation or other business combination including the Company or any
of its Subsidiaries or any acquisition or similar transaction (including,
without limitation, a tender or exchange offer) involving the purchase of (i)
all or any significant portion of the assets of the Company and its Subsidiaries
taken as a whole, (ii) 20% or more of the outstanding Company Common Shares, or
(iii) any of the outstanding capital shares of any Subsidiary of the Company.
For purposes of this Agreement, "Superior Proposal" means any bona fide written
Alternative Proposal (with the percentages included in the definition of
Alternative Proposal replaced with 50% for purposes of this definition) that a
majority of the Disinterested Directors determines, in its good faith judgment
(after consultation with the Company's legal and financial advisors and taking
into account all the terms and conditions of the Alternative Proposal and this
Agreement deemed relevant by such Disinterested Directors): (i) that contains
terms that provide greater value to the Company's shareholders than the Merger
(and any revised proposal made by Parent); (ii) that is reasonably likely to be
completed, taking into account all legal, financial, regulatory and other
aspects of the Alternative Proposal; and (iii) for which financing, to the
extent required, is, as of the date of the determination by the Disinterested
Directors, committed at least to the same extent as Parent's financing is
committed as of the date hereof.
5.03 Financing-Related Cooperation. The Company agrees to provide, and
will cause its Subsidiaries and its and their respective directors, officers,
employees and advisors to provide, all cooperation reasonably necessary in
connection with the arrangement of any financing to be consummated in respect of
the transactions contemplated by this Agreement, including participation in
meetings, due diligence sessions, the execution and delivery of any commitment
letters, underwriting or placement agreements, pledge and security documents,
other definitive financing documents or other requested certificates or
documents as may be reasonably required by Parent and taking such other actions
as are reasonably required to by taken by the Company; provided that all such
agreements, letters, and instruments executed by the Company are unilaterally
revocable by the Company as to the Company prior to the Effective Time without
notice or penalty of any kind and do not obligate the Company to pay any fees or
expenses to such financing sources prior to the Effective Time; provided further
that Parent shall use commercially reasonable efforts to ensure that the
disclosures made by Parent in response to representations and warranties
contained in any financing agreements executed by Parent in respect of the
transactions contemplated by this Agreement are not materially inconsistent with
the corresponding disclosures contained in the Company Disclosure Letter with
respect to the same or similar matters; and provided further, that Parent shall
use reasonable efforts not to materially interfere with the duties of such
officers, employees and advisors such that the Company's business and results of
operations would be materially adversely affected thereby. In addition, in
conjunction with the obtaining of any such financing, the Company agrees, at the
reasonable request of Parent, to call for prepayment or redemption, or to
prepay, redeem and/or renegotiate, as the case may be, any then existing
indebtedness of the Company and its
29
Subsidiaries; provided that no call for redemption or prepayment shall be
irrevocably made until contemporaneously with or after the Effective Time.
5.04 SEC Reports. The Company shall cause the forms, reports, schedules,
statements and other documents required to be filed with the SEC by the Company
between the date of this Agreement and the Effective Time (the "New SEC
Reports") to be prepared in all material respects in accordance with provisions
set forth in Section 3.05(a) hereof.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Access to Information; Confidentiality. The Company shall, and shall
cause each of its Subsidiaries to, throughout the period from the date hereof to
the Effective Time, (i) provide Parent and its Representatives with full access,
upon reasonable prior notice and during normal business hours, to all officers,
employees, agents and accountants of the Company and its Subsidiaries and their
respective assets, properties, books and records, but only to the extent that
such access does not unreasonably interfere with the business and operations of
the Company and its Subsidiaries, and (ii) furnish promptly to Parent (x) a copy
of each report, statement, schedule and other document filed or received by the
Company or any of its Subsidiaries pursuant to the requirements of federal or
state securities laws and each material report, statement, schedule and other
document filed with any other Governmental or Regulatory Authority, and (y) all
other information and data (including, without limitation, copies of Contracts,
Company Employee Benefit Plans and other books and records) concerning the
business and operations of the Company and its Subsidiaries as Parent or any of
such other Persons shall reasonably request. No investigation pursuant to this
Section 6.01 or otherwise shall affect any representation or warranty contained
in this Agreement or any condition to the obligations of the parties hereto. Any
such information or material obtained pursuant to this Section 6.01 shall be
governed by the terms of the Confidentiality Agreement, dated as of March 24,
2003, with the Company, which Parent and Sub hereby adopt as binding on each of
them as if each of them were a party to the such agreement (the "Confidentiality
Agreement"). Notwithstanding anything to the contrary contained herein or in the
Confidentiality Agreement, the obligations of confidentiality contained herein
or in the Confidentiality Agreement shall not apply, and any party hereto or its
employees, representatives and other agents may disclose to any and all persons,
without limitation of any kind, (a) the "tax treatment" and "tax structure" of
the "transactions" contemplated by this Agreement (as these terms are defined in
Treasury Regulations Section 1.6011-4(b) and (c)) and (b) all materials of any
kind (including opinions or other tax analyses) that are provided to it relating
to such tax treatment or tax structure; provided, however, that such disclosure
may not be made (to persons other than tax advisors) (i) until the earlier of
(A) the date of the public announcement of the discussions relating to such
transactions, (B) the date of the public announcement of such transactions or
(C) the date of the execution of this Agreement and (ii) to the extent required
to be kept confidential to comply with any applicable federal or state
securities Laws.
30
6.02 Preparation of Proxy Statement; Schedule 13E.
(a) The Company shall prepare and file with the SEC the Proxy Statement as
soon as reasonably practicable after the date hereof, and shall use its
reasonable best efforts to have the Proxy Statement cleared by the SEC. If at
any time prior to the Effective Time any event shall occur that should be set
forth in an amendment of or a supplement to the Proxy Statement, the Company
shall prepare and file with the SEC such amendment or supplement as soon
thereafter as is reasonably practicable. Parent, Sub and the Company shall
cooperate with each other in the preparation of the Proxy Statement, and the
Company shall notify Parent of the receipt of any comments of the SEC with
respect to the Proxy Statement and of any requests by the SEC for any amendment
or supplement thereto or for additional information, and shall provide to Parent
promptly copies of all correspondence between the Company or any Representative
of the Company and the SEC with respect to the Proxy Statement. The Company
shall give Parent and its counsel the opportunity to review the Proxy Statement
and all responses to requests for additional information by and replies to
comments of the SEC before their being filed with, or sent to, the SEC. Each of
the Company, Parent and Sub agrees to use its reasonable best efforts, after
consultation with the other parties hereto, to respond promptly to all such
comments of and requests by the SEC and to cause the Proxy Statement to be
mailed to the holders of Company Common Shares entitled to vote at the Company
Shareholders' Meeting at the earliest practicable time.
(b) Concurrently with the filing of the Proxy Statement, the parties and
their respective affiliates (to the extent required by law) shall prepare and
file with the SEC a Rule 13E-3 Transaction Statement on Schedule 13E-3 (together
with all supplements and amendments thereto, the "Schedule 13E-3") with respect
to the transactions contemplated by this Agreement. Each party shall promptly
furnish to the other parties all information concerning such party as may
reasonably be requested in connection with the preparation of the Schedule
13E-3. The parties shall promptly supplement, update and correct any information
provided by them for use in the Schedule 13E-3 if and to the extent that it is
or shall have become incomplete, false or misleading. In any such event, Parent
and the Company shall take all steps necessary to cause the Schedule 13E-3 as so
supplemented, updated or corrected to be filed with the SEC and to be
disseminated to the holders of Company Common Shares, in each case, as and to
the extent required by applicable federal securities laws. Each party and its
counsel shall be given an opportunity to review and comment with respect thereto
prior to its being filed with or delivered to the SEC. Each party agrees to
provide the other parties and their counsel with any comments that the Company
or its counsel may receive from the staff of the SEC promptly after receipt
thereof.
6.03 Approval of Shareholders. The Company shall, through its Board of
Directors, duly call, give notice of, convene and hold a meeting of its
shareholders (the "Company Shareholders' Meeting") for the purpose of voting on
the adoption of this Agreement and obtaining approval of adoption of this
Agreement by the holders of at least two-thirds of the Company Common Shares
entitled to vote thereon (the "Company Shareholders' Approval") as soon as
reasonably practicable after the date hereof. Except as permitted by Section
5.02, the Company shall, through its Board of Directors, include in the Proxy
Statement the recommendation of the Board of Directors of the Company that the
shareholders of the Company adopt this Agreement and shall use its reasonable
best efforts to obtain such adoption.
31
6.04 Regulatory and Other Approvals. Subject to the terms and conditions
of this Agreement and without limiting the provisions of Sections 6.02 and 6.03,
each of the Company and Parent will use reasonable best efforts to, as promptly
as practicable, (a) obtain all consents, approvals or actions of, make all
filings with and give all notices to Governmental or Regulatory Authorities or
any other public or private third parties required of Parent, the Company or any
of their Subsidiaries to consummate the Merger and the other transactions
contemplated hereby, and (b) provide such other information and communications
to such Governmental or Regulatory Authorities or other public or private third
parties as the other party or such Governmental or Regulatory Authorities or
other public or private third parties may reasonably request in connection
therewith. In addition to and not in limitation of the foregoing, each of the
parties will (x) take promptly all actions necessary to make the filings
required of Parent and the Company or their Affiliates under the HSR Act, (y)
comply at the earliest practicable date with any request for additional
information received by such party or its Affiliates from the Federal Trade
Commission (the "FTC") or the Antitrust Division of the Department of Justice
(the "Antitrust Division") pursuant to the HSR Act, and (z) cooperate with the
other party in connection with such party's filings under the HSR Act and in
connection with resolving any investigation or other inquiry concerning the
Merger or the other transactions contemplated by this Agreement commenced by any
of the FTC, the Antitrust Division or any state or state attorney general.
Notwithstanding the foregoing, the Company shall not, without Parent's prior
written consent, commit to any divestiture transaction, and Parent shall not be
required to divest or hold separate or otherwise take or commit to take any
action that limits its freedom of action with respect to, or its ability to
retain the Company, any of its Subsidiaries or any of the material businesses or
assets of the Company or its Subsidiaries.
6.05 Employee Matters.
(a) Except for employees covered by any collective bargaining contract,
and except as otherwise expressly provided in this Agreement, during the period
commencing at the Effective Time and ending December 31, 2003, Parent will (i)
cause the Company Employee Benefit Plans (other than the Company Option Plan and
other Plans providing equity or equity-based awards) in effect on the date of
this Agreement to remain in effect; provided, however, this covenant shall not
prohibit changes in benefit plans in the ordinary course of business or as may
be required by applicable Laws or (ii) to the extent that such Company Employee
Benefit Plans are not so continued, cause the Company to maintain until such
date benefit plans which are substantially comparable, in the aggregate, to the
Company Employee Benefit Plans (other than the Company Option Plan and other
Plans providing equity or equity-based awards) in effect on the date of this
Agreement.
(b) The Plans in which the Company's employees participate following the
Effective Time will (i) credit, for vesting and eligibility purposes only, all
service performed for the Company prior to the Effective Time, but not for
benefit accrual (including eligibility for any subsidized early retirement
pension amount), (ii) waive any pre-existing condition exclusions (other than
pre-existing conditions that, as of the Effective Time, have not been satisfied
under any Company Employee Benefit Plan) and (iii) provide that any covered
expenses incurred on or before the Effective Time during the plan year of the
applicable Company Employee Benefit Plan will be taken into account for purposes
of satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions after the Effective Time.
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6.06 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time until the sixth anniversary of the
Effective Time, Parent shall indemnify, advance expenses to, and hold harmless
the present and former officers and directors of the Company and its
Subsidiaries, in each case to the fullest extent permitted by law, in respect of
acts or omissions occurring prior to or after the Effective Time. From and after
the Effective Time, Parent shall cause the articles of incorporation and code of
regulations of the Surviving Corporation to contain provisions substantially
similar in terms of the rights granted in the provisions with respect to
indemnification and insurance set forth in the Company's articles of
incorporation and code of regulations in effect on the date hereof, which
provisions shall not be amended in any manner prior to the sixth anniversary of
the Effective Time that would adversely affect the rights thereunder of the
Company's employees, agents, directors or officers for acts or omissions
occurring on or prior to the Effective Time, except if such amendment is
required by applicable Law. Any determination required to be made with respect
to whether an officer's or director's conduct complies with the standards set
forth in the Company's articles of incorporation or code of regulations shall be
made by independent counsel selected by Parent and reasonably acceptable to such
officer or director. Parent shall pay such counsel's fees and expenses so long
as such officer or director does not challenge any such determination by such
independent counsel. With respect to acts or omissions occurring on or prior to
the Effective Time, Parent and the Surviving Corporation shall, until the sixth
anniversary of the Effective Time and for so long thereafter as any claim for
insurance coverage asserted on or prior to such date has not been fully
adjudicated, cause to be maintained in effect, at no cost to the beneficiaries
thereof, to the extent available, the policies of directors' and officers'
liability insurance maintained by the Company and its Subsidiaries as of the
date hereof to the extent that such insurance coverage can be maintained at an
annual cost to the Surviving Corporation of not greater than 200% of the annual
premium for the Company's current insurance policies and, if such insurance
coverage cannot be so purchased or maintained at such cost, providing as much of
such insurance as can be so purchased or maintained at such cost.
(b) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any Person, then, and in each such case, proper provisions shall be made so
that the successors and assigns of the Surviving Corporation shall assume its
obligations set forth in this Section 6.06.
6.07 Expenses. Except as set forth in Section 8.02, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses. Parent shall pay the filing fee in connection
with the filings required under the HSR Act.
6.08 Sub. Prior to the Effective Time, Sub shall not conduct any business
or make any investments other than as specifically contemplated by this
Agreement and will not have any assets (other than a de minimis amount of cash
paid to Sub for the issuance of its stock to Parent) or any material
liabilities. Parent will take all action necessary to cause Sub to perform its
obligations under this Agreement and to consummate the Merger on the terms and
conditions set forth in this Agreement.
33
6.09 Brokers or Finders. Each of Parent and the Company represents, as to
itself and its Subsidiaries and Affiliates, that no agent, broker, investment
banker, financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement except RBC ▇▇▇▇
▇▇▇▇▇▇▇▇ Inc., whose fees and expenses will be paid by the Company in accordance
with the Company's agreement with such firm (a complete and correct copy of
which has been delivered by the Company to Parent), and each of Parent and the
Company shall indemnify and hold the other harmless from and against any and all
claims, liabilities or obligations with respect to any other such fee or
commission or expenses related thereto asserted by any Person on the basis of
any act or statement alleged to have been made by such party or its Affiliate.
6.10 Takeover Statutes. If any "fair price," "merger moratorium," "control
share acquisition" or other form of anti-takeover statute or regulation shall
become applicable to the transactions contemplated hereby, the Company and the
members of the Board of Directors of the Company shall, to the extent permitted
by law, grant such approvals and take such actions as are reasonably necessary
so that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act, to the extent
permitted by Law, to eliminate or minimize the effects of such statute or
regulation on the transactions contemplated hereby and thereby.
6.11 Conveyance Taxes. The Company and Parent shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time.
6.12 Notice and Cure. Each of Parent and the Company will notify the other
of, and will use commercially reasonable efforts to cure before the Closing, any
event, transaction or circumstance, as soon as practicable after it becomes
known to such party, that causes or will cause any covenant or agreement of
Parent or the Company under this Agreement to be breached or that renders or
will render untrue any representation or warranty of Parent or the Company
contained in this Agreement. Each of Parent and the Company also will notify the
other in writing of, and will use commercially reasonable efforts to cure before
the Closing, any violation or breach, as soon as practicable after it becomes
known to such party, of any representation, warranty, covenant or agreement made
by Parent or the Company in this Agreement. No notice given pursuant to this
Section 6.12 shall have any effect on the representations, warranties, covenants
or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein.
6.13 Fulfillment of Conditions. Subject to the terms and conditions of
this Agreement, each of Parent and the Company will take or cause to be taken
commercially reasonable steps necessary or desirable to satisfy each condition
to the other's obligations contained in this Agreement and to consummate and
make effective the transactions contemplated by this Agreement, and neither
Parent nor the Company will, nor will it permit any of its Subsidiaries to, take
or fail to take any action that could be reasonably expected to result in the
non-fulfillment of any such condition.
34
6.14 Environmental Matters. The Company shall make available to Parent and
Sub all investigations, reports, assessments and other materials in its
possession relating to the compliance of the Real Property with applicable
federal and state laws relating to the protection of the environment or the
existence of any obligations or liabilities arising thereunder. The Company
shall cooperate with Parent and Sub in making any environmental investigations
of the Real Property that parent or Sub deems appropriate; provided that (i)
Parent and Sub shall obtain the Company's written consent prior to entering any
Real Property and prior to conducting any assessment or testing with respect
thereto and (ii) the Company shall have entered into an agreement reasonably
satisfactory to it with each contractor of Parent or Sub who will perform such
testing.
6.15 Delisting. Each of the parties agrees to cooperate with each other in
taking, or causing to be taken, all actions necessary to delist the Company
Common Shares from Nasdaq and terminate registration under the Exchange Act,
provided that such delisting and termination shall not be effective until after
the Effective Time.
ARTICLE VII
CONDITIONS
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
fulfillment, at or prior to the Closing, of each of the following conditions:
(a) Shareholder Approval. This Agreement shall have been adopted by
the requisite vote of the shareholders of the Company under the OGCL and the
Company's articles of incorporation.
(b) HSR Act. Any waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated.
(c) No Injunctions or Restraints. No Governmental or Regulatory Authority
having proper jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law or Order (whether temporary, preliminary or permanent) which is
then in effect and has the effect of making illegal or otherwise restricting,
preventing or prohibiting consummation of the Merger or the other transactions
contemplated by this Agreement.
(d) Governmental and Regulatory and Other Consents and Approvals. Other
than the filing of the Certificate of Merger provided for by Section 1.03, all
consents, approvals and actions of, filings with and notices to any Governmental
or Regulatory Authority or any other public or private third parties required of
Parent, the Company or any of their Subsidiaries to consummate the Merger and
the other matters contemplated hereby, the failure of which to be obtained or
taken would reasonably be expected to have a material adverse effect on Parent
and its Subsidiaries or the Surviving Corporation and its Subsidiaries, in each
case taken as a whole, or on the ability of Parent or the Company to consummate
the transactions contemplated hereby shall have been obtained, all in form and
substance reasonably satisfactory to Parent and the Company.
35
7.02 Conditions to Obligation of Parent and Sub to Effect the Merger. The
obligation of Parent and Sub to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by Parent and
Sub in their sole discretion):
(a) Representations and Warranties. The representations and warranties
made by the Company in this Agreement shall be true and correct in all material
respects, in each case as of the Closing Date as though made on and as of the
Closing Date or, in the case of representations and warranties made as of a
specified date earlier than the Closing Date, on and as of such earlier date,
except as affected by the transactions contemplated by this Agreement, and the
Company shall have delivered to Parent a certificate, dated the Closing Date and
executed in the name and on behalf of the Company by an officer of the Company
to such effect.
(b) Performance of Obligations. The Company shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by the Company at
or prior to the Closing, and the Company shall have delivered to Parent a
certificate, dated the Closing Date and executed in the name and on behalf of
the Company by an officer of the Company to such effect.
(c) Company Rights Agreement. On or prior to the Closing Date, the Company
Rights shall not have become exercisable or transferable apart from the
associated Company Common Shares and the Company shall have taken all necessary
actions so that the Company Rights Agreement will not be applicable to this
Agreement, the Merger and the other transactions contemplated hereby.
(d) Dissenting Shares. The aggregate number of Dissenting Shares
shall not exceed 7% of the total number of Company Common Shares outstanding
on the Closing Date.
(e) Company Actions. All actions required to be taken by the Company
pursuant to this Agreement in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably satisfactory in
form and substance to Parent, and Parent shall have received copies of all such
documents and other evidences as Parent may reasonably request in order to
establish the taking of all such actions.
(f) Financing. Parent and Sub shall have received the proceeds of the
financing contemplated by the Commitment Letters on the terms and conditions set
forth therein or such other terms as are reasonably satisfactory to Parent, in
the amounts necessary to consummate the Merger and pay all related fees and
expenses.
(g) No Injunctions or Restraints. No judgment, order, decree, statute,
law, ordinance, rule or regulation entered, enacted, promulgated, enforced or
issued by any court or other Governmental Authority of competent jurisdiction or
other legal restraint or prohibition shall be in effect (i) imposing or seeking
to impose material limitations on the ability of Parent to acquire or hold or to
exercise full rights of ownership of any securities of the Company; (ii)
imposing or seeking to impose material limitations on the ability of Parent or
its Affiliates to combine and operate the business and assets of the Company;
(iii) imposing or seeking to impose other material sanctions, damages, or
liabilities directly arising out of the Merger on Parent or any of
36
its officers or directors; or (iv) requiring or seeking to require divestiture
by Parent of any significant portion of the business, assets or property of the
Company or of Parent.
7.03 Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by the Company
in its sole discretion):
(a) Representations and Warranties. The representations and warranties
made by Parent and Sub in this Agreement shall be true and correct in all
material respects, in each case as of the Closing Date as though made on and as
of the Closing Date or, in the case of representations and warranties made as of
a specified date earlier than the Closing Date, on and as of such earlier date,
except as affected by the transactions contemplated by this Agreement, and
Parent and Sub shall each have delivered to the Company a certificate, dated the
Closing Date and executed in the name and on behalf of Parent by an officer of
Parent and in the name and on behalf of Sub by an officer of Sub to such effect.
(b) Performance of Obligations. Parent and Sub shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by Parent or Sub
at or prior to the Closing, and Parent and Sub shall each have delivered to the
Company a certificate, dated the Closing Date and executed in the name and on
behalf of Parent by an officer of Parent and in the name and on behalf of Sub by
an officer of Sub to such effect.
(c) Parent and Sub Actions. All actions required to be taken by Parent and
Sub pursuant to this Agreement in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Company, and the Company shall have received copies of
all such documents and other evidences as the Company may reasonably request in
order to establish the taking of all such actions.
(d) Solvency Opinion. If a solvency opinion is delivered to the
lenders pursuant to the terms of the Commitment Letters, the Company shall
have received a copy of such opinion.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Effective Time,
whether prior to or after the Company Shareholders' Approval:
(a) By mutual written agreement of the parties hereto duly authorized by
action taken by or on behalf of their respective Boards of Directors;
(b) By either the Company or Parent upon written notification to the
non-terminating party by the terminating party:
37
(i) at any time after October 31, 2003 if the Merger shall not have
been consummated on or prior to such date and such failure to consummate
the Merger is not caused by a breach of this Agreement by the terminating
party;
(ii) if the Company Shareholders' Approval shall not be obtained by
reason of the failure to obtain the requisite vote upon a vote held at a
meeting of such shareholders, or any adjournment thereof, called therefor;
(iii) if there has been a material breach of any representation,
warranty, covenant or agreement on the part of the non-terminating party
set forth in this Agreement, which breach is not curable or, if curable,
has not been cured within thirty (30) days following receipt by the
non-terminating party of notice of such breach from the terminating party;
or
(iv) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued a Law or Order
making illegal or otherwise restricting, preventing or prohibiting the
Merger and any such Order shall have become final and non-appealable;
(c) By the Company if the Board of Directors of the Company shall receive
an unsolicited bona fide Alternative Proposal and the Board of Directors
determines in good faith (after receiving advice from reputable outside legal
counsel experienced in such matters (including without limitation, Thomson
▇▇▇▇)) that the Alternative Proposal is or presents a reasonable likelihood of
resulting in a Superior Proposal and was not solicited by it after the date
hereof and did not otherwise result from a breach of Section 5.02; provided that
the Company's ability to terminate this Agreement pursuant to this paragraph (c)
is conditioned upon the payment by the Company to Parent of any amounts owed by
it pursuant to Section 8.02(d); or
(d) By Parent if the Board of Directors of the Company shall have
withdrawn or modified or qualified in a manner adverse to Parent its approval or
recommendation of this Agreement or the Merger or shall have approved,
recommended or entered into any agreement with respect to any other Alternative
Proposal or failed to reconfirm its recommendation of this Agreement and the
Merger within ten (10) business days following a reasonable written request for
such reconfirmation by Parent.
8.02 Effect of Termination.
(a) If this Agreement is validly terminated by either the Company or
Parent pursuant to Section 8.01, this Agreement will forthwith become null and
void and there will be no liability or obligation on the part of either the
Company or Parent (or any of their respective Representatives or Affiliates),
except (i) that the provisions of 6.07 and 6.09 and this Section 8.02 will
continue to apply following any such termination, (ii) that nothing contained
herein shall relieve any party hereto from liability for willful breach of its
representations, warranties, covenants or agreements contained in this Agreement
and (iii) as provided in paragraph (b) below.
(b) In the event that this Agreement is terminated:
38
(i) by either Parent or the Company pursuant to Section 8.01(b)(i)
and an Alternative Proposal is publicly disclosed or publicly proposed to
the Company or its shareholders at any time after the date hereof and
prior to the Company Shareholders' Meeting;
(ii) by either Parent or the Company pursuant to Section
8.01(b)(ii); or
(iii) by Parent pursuant to Section 8.01(b)(iii) (other than with
respect to a breach of Sections 5.02 or 6.03),
then the Company shall pay to Parent by wire transfer of same day funds within
two (2) business days of the date of such termination an amount of up to One
Million Dollars ($1,000,000) to reimburse Parent and Sub for all reasonable
documented out-of-pocket expenses and fees incurred by them in connection with
this Agreement and the transactions contemplated hereby (including without
limitation, fees and expenses payable to all banks, investment banking firms and
other financial institutions and Persons and their respective agents and counsel
for acting as Parent's financial advisor with respect to, or arranging or
committing to provide or providing any financing for, the Merger) (collectively,
the "Expense Reimbursement"). If, with respect to the event described in clause
(i) above, concurrently or within 12 months of the date of termination pursuant
to such clause (i), the Company does not, in the case of an Alternative Proposal
in the form of a tender offer, recommend against acceptance of the tender offer,
or enters into a definitive agreement or arrangement with respect to, an
Alternative Proposal, then the Company shall pay to Parent, by wire transfer of
same day funds within two (2) business days of such occurrence, a termination
fee of (Two Million Dollars) ($2,000,000) (the "Termination Fee"). If, with
respect to the events described in clauses (ii) and (iii), above, an Alternative
Proposal has been publicly disclosed or publicly proposed to the Company or its
shareholders at any time after the date hereof and prior to the Company
Shareholders' Meeting (with respect to clause (ii)) or prior to the date of
termination (with respect to clause (iii)), and concurrently or within 12 months
of the date of termination as provided in such clauses (ii) and (iii),
respectively, the Company does not, in the case of an Alternative Proposal in
the form of a tender offer, recommend against acceptance of the tender offer, or
enters into a definitive agreement or arrangement with respect to, an
Alternative Proposal, then the Company shall pay to Parent, by wire transfer of
same day funds within two (2) business days of such occurrence, the Termination
Fee.
(c) In the event that this Agreement is terminated by Parent pursuant to
Section 8.01(b)(iii) due to a breach by the Company of Sections 5.02 or 6.03,
then the Company shall pay to Parent, by wire transfer of same day funds within
two (2) business days of the date of such termination, the Expense Reimbursement
and, if concurrently or within 12 months of the date of such termination, the
Company announces or enters into an Alternative Proposal, the Termination Fee.
(d) In the event that this Agreement is terminated
(i) by the Company pursuant to Section 8.01(c); or
(ii) by Parent pursuant to Section 8.01(d),
39
then the Company shall pay to Parent, by wire transfer of same day funds within
two (2) business days of the date of such termination, the Expense Reimbursement
and the Termination Fee.
(e) In the event of a termination of this Agreement pursuant to which a
payment or payments are made in full compliance with Section 8.02(b), 8.02(c) or
8.02(d), the receipt of such payment shall serve as liquidated damages with
respect to any breach of this Agreement by the party who has made such payment
giving rise to such termination, and the receipt of any such payment shall be
the sole and exclusive remedy (at law or in equity) with respect to any such
breach. In the event any action, suit, proceeding or claim is commenced or
asserted by a party against another party and/or any director or officer of such
other party relating, directly or indirectly, to this Agreement, it is expressly
agreed that no party shall be entitled to obtain any punitive, exemplary,
treble, or consequential damages of any type under any circumstances in
connection with such action, suit, proceeding or claim, regardless of whether
such damages may be available under law, the parties hereby waiving their
rights, if any, to recover any such damages in connection with any such action,
suit, proceeding or claim.
(f) The Company acknowledges that the agreements contained in Sections
8.02(b),8.02(c) and 8.02(d) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent and
Sub would not enter into this Agreement.
8.03 Amendment. This Agreement may be amended, supplemented or modified by
action taken by or on behalf of the respective Boards of Directors of the
parties hereto at any time prior to the Effective Time, whether prior to or
after the Company Shareholders' Approval shall have been obtained, but after
such adoption and approval only to the extent permitted by applicable Law. No
such amendment, supplement or modification shall be effective unless set forth
in a written instrument duly executed by or on behalf of each party hereto.
8.04 Waiver. At any time prior to the Effective Time any party hereto, by
action taken by or on behalf of its Board of Directors, may to the extent
permitted by applicable Law (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of the other parties hereto
contained herein or in any document delivered pursuant hereto, or (iii) waive
compliance with any of the covenants, agreements or conditions of the other
parties hereto contained herein. No such extension or waiver shall be effective
unless set forth in a written instrument duly executed by or on behalf of the
party extending the time of performance or waiving any such inaccuracy or
non-compliance. No waiver by any party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed as a
waiver of the same or any other term or condition of this Agreement on any
future occasion.
ARTICLE IX
GENERAL PROVISIONS
9.01 Survival of Representations, Warranties, Covenants and Agreements.
The representations, warranties, covenants and agreements contained in this
Agreement shall not
40
survive the Merger but shall terminate at the Effective Time; provided, however,
that this Section 9.01 shall not limit any covenant or agreement of the parties
hereto, which by its terms contemplates performance after the Effective Time or
the termination of this Agreement.
9.02 Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given (i) when delivered if personally
delivered by hand (with written confirmation of receipt), (ii) when received if
sent by a nationally recognized overnight courier service (receipt requested),
(iii) five business days after being mailed, if sent by first class mail, return
receipt requested, or (iv) when receipt is acknowledged by an affirmative act of
the party receiving notice, if sent by facsimile, telecopy or other electronic
transmission device (provided that such an acknowledgement does not include an
acknowledgment generated automatically by a facsimile or telecopy machine or
other electronic transmission device). Notices, demands and communications to
the parties will, unless another address is specified in writing, be sent to the
address indicated below:
If to Parent or Sub, to:
▇▇▇▇▇▇ Holdings, Inc.
c/o Goldner ▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Inc.
5250 ▇▇▇▇▇ Fargo Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & Whitney LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
If to the Company, to:
The ▇▇▇▇▇-▇▇▇▇▇▇▇ Stores Corp.
▇▇▇▇ ▇▇-▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (937) 296-
Attn: Chief Executive Officer
41
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
9.03 Entire Agreement; Incorporation of Exhibits.
(a) This Agreement supersedes all prior discussions and agreements among
the parties hereto with respect to the subject matter hereof and contains,
together with the Confidentiality Agreement, the sole and entire agreement among
the parties hereto with respect to the subject matter hereof.
(b) The Company Disclosure Letter and any exhibit or schedule attached to
this Agreement and referred to herein are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein.
9.04 Public Announcements. Except as otherwise required by Law or the
rules of any applicable securities exchange or national market system, so long
as this Agreement is in effect, Parent and the Company will not, and will not
permit any of their respective Representatives to, issue or cause the
publication of any press release or make any other public announcement with
respect to the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld. Parent and
the Company will cooperate with each other in the development and distribution
of all press releases and other public announcements with respect to this
Agreement and the transactions contemplated hereby, and will furnish the other
with drafts of any such releases and announcements as far in advance as
practicable.
9.05 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and except as provided in Section
6.06 (which is intended to be for the benefit of the Persons entitled to
therein, and may be enforced by any of such Persons), it is not the intention of
the parties to confer third-party beneficiary rights upon any other Person.
9.06 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto without the
prior written consent of the other parties hereto and any attempt to do so will
be void. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns.
9.07 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define, modify or limit the provisions
hereof.
9.08 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law or Order, and
if the rights or
42
obligations of any party hereto under this Agreement will not be materially and
adversely affected thereby, (i) such provision will be fully severable, (ii)
this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, and (iii) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom.
9.09 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio applicable to a contract executed
and performed in such State, notwithstanding any conflict of law provisions to
the contrary.
9.10 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specified terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of competent jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
9.11 Certain Definitions. As used in this Agreement:
(a) the term "Affiliate," as applied to any Person, shall mean any other
Person directly or indirectly controlling, controlled by, or under common
control with, that Person; for purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise;
(b) a Person will be deemed to "beneficially" own securities if such
Person would be the beneficial owner of such securities under Rule 13d-3 under
the Exchange Act, including securities which such Person has the right to
acquire (whether such right is exercisable immediately or only after the passage
of time);
(c) the term "business day" means a day other than Saturday, Sunday or any
day on which banks located in the State of Ohio are authorized or obligated to
close;
(d) any reference to any event, change or effect being "material" or
"materially adverse" or having a "material adverse effect" on or with respect to
an entity (or group of entities taken as a whole) means such event, change or
effect is material or materially adverse, as the case may be, to the business,
properties, assets, liabilities, prospects, condition (financial or otherwise)
or results of operations of such entity (or of such group of entities taken as a
whole);
(e) the term "knowledge" or any similar formulation of "knowledge" shall
mean, with respect to the Company, the actual knowledge of each of the Company's
directors and the actual knowledge, after due inquiry, of each of the Company's
executive officers.
43
(f) the term "Person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act);
(g) the "Representatives" of any entity means such entity's directors,
officers, employees, legal, investment banking and financial advisors,
accountants and any other agents and representatives; and
(h) the term "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which more than fifty percent (50%) of either the equity interests in, or the
voting control of, such corporation or other organization is, directly or
indirectly through Subsidiaries or otherwise, beneficially owned by such party.
9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[signature page follows on the next page]
44
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed by its officer thereunto duly authorized as of the date first above
written.
THE ▇▇▇▇▇-▇▇▇▇▇▇▇ STORES CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman of the Board
▇▇▇▇▇▇ HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
▇▇▇▇▇▇ SUB, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
45