EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BETWEEN
STAGE STORES, INC.
AND
▇.▇. ▇▇▇▇▇▇▇ COMPANY
March 5, 1997
TABLE OF CONTENTS
PAGE
Section 1. DEFINITIONS......................................................1
Section 2. BASIC TRANSACTION................................................7
(a) MERGER ALTERNATIVES........................................7
(b) THE CLOSING................................................7
(c) ACTIONS AT THE CLOSING.....................................7
(d) EFFECT OF MERGER...........................................8
(e) PROCEDURE FOR PAYMENT......................................9
(f) CLOSING OF TRANSFER RECORDS...............................10
(g) DISSENTING HOLDERS OF CRA SHARES..........................10
Section 3. REPRESENTATIONS AND WARRANTIES OF CRA...........................11
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER..........11
(b) CAPITALIZATION OF CRA AND ITS SUBSIDIARIES................11
(c) AUTHORIZATION OF TRANSACTION..............................12
(d) NONCONTRAVENTION..........................................12
(e) FILINGS WITH THE SEC......................................13
(f) FINANCIAL STATEMENTS......................................13
(g) ABSENCE OF CERTAIN DEVELOPMENTS...........................13
(h) LITIGATION................................................15
(i) UNDISCLOSED LIABILITIES...................................16
(j) TAXES.....................................................16
(k) ENVIRONMENTAL MATTERS.....................................18
(l) EMPLOYEE MATTERS..........................................18
(m) LABOR MATTERS.............................................19
(n) EMPLOYEE BENEFIT PLANS....................................19
(o) PROPRIETARY RIGHTS........................................21
(p) CONTRACTS.................................................22
(q) BOOKS AND RECORDS.........................................23
(r) INSURANCE.................................................23
(s) REAL PROPERTY.............................................23
(t) TRANSACTIONS WITH AFFILIATES..............................26
(u) ACCOUNTS RECEIVABLE.......................................26
(v) INVENTORY.................................................26
(w) SUFFICIENCY OF ASSETS.....................................26
(x) BOARD RECOMMENDATION......................................26
(y) BROKERS' FEES.............................................27
(z) DISCLOSURE................................................27
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PAGE
(aa) TAX-FREE REORGANIZATION REQUIREMENTS......................27
Section 4. REPRESENTATIONS AND WARRANTIES OF SSI AND MERGER SUB............27
(a) ORGANIZATION..............................................27
(b) CAPITALIZATION............................................28
(c) AUTHORIZATION OF TRANSACTION..............................28
(d) NONCONTRAVENTION..........................................28
(e) FILINGS WITH THE SEC......................................28
(f) FINANCIAL STATEMENTS......................................28
(g) DISCLOSURE................................................29
(h) INVESTMENT COMPANY........................................29
(i) ABSENCE OF CERTAIN DEVELOPMENTS...........................29
(j) LITIGATION................................................29
(k) TAXES.....................................................29
(l) ENVIRONMENTAL.............................................30
(m) EMPLOYEE BENEFITS PLAN....................................30
(n) BOOKS AND RECORDS.........................................30
(o) INSURANCE.................................................30
(p) BROKER'S FEE..............................................30
Section 5. COVENANTS.......................................................30
(a) GENERAL...................................................30
(b) NOTICES AND CONSENTS......................................31
(c) REGULATORY MATTERS AND APPROVALS..........................31
(d) AGREED UPON PROCEDURE LETTER/COMFORT LETTER...............32
(e) LISTING OF SSI SHARES.....................................33
(f) CRA OPERATION OF BUSINESS.................................33
(g) FULL ACCESS...............................................34
(h) NOTICE OF DEVELOPMENTS....................................34
(i) ACQUISITION PROPOSALS.....................................35
(j) AFFILIATE AGREEMENTS......................................35
(k) CLOSING DOCUMENTS.........................................35
(l) DIRECTORS AND OFFICER'S INSURANCE.........................35
(m) SEVERANCE AGREEMENTS......................................35
(n) OPTION CANCELLATION AGREEMENTS............................36
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PAGE
Section 6. CONDITIONS TO CLOSING...........................................36
(a) CONDITIONS TO OBLIGATIONS OF SSI AND MERGER SUB...........36
(b) CONDITIONS TO OBLIGATIONS OF CRA..........................38
Section 7. TERMINATION AND ITS CONSEQUENCES................................39
(a) TERMINATION OF AGREEMENT..................................39
(b) CONSEQUENCES OF CERTAIN TERMINATIONS......................40
Section 8. MISCELLANEOUS...................................................41
(a) SURVIVAL..................................................41
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS...................41
(c) NO THIRD PARTY BENEFICIARIES..............................41
(d) ENTIRE AGREEMENT..........................................41
(e) SUCCESSION AND ASSIGNMENT.................................41
(f) COUNTERPARTS..............................................41
(g) HEADINGS..................................................41
(h) NOTICES...................................................41
(i) GOVERNING LAW.............................................42
(j) AMENDMENTS AND WAIVERS....................................42
(k) SEVERABILITY..............................................43
(l) EXPENSES..................................................43
(m) CONSTRUCTION..............................................43
(n) INCORPORATION OF EXHIBITS AND SCHEDULES...................43
(o) WAIVER OF JURY TRIAL......................................43
(p) TIME IS OF THE ESSENCE; COMPUTATION OF TIME...............43
(q) SPECIFIC PERFORMANCE......................................43
Disclosure Schedule - Exceptions to Representations and Warranties
Exhibit A - Form of Termination Option Agreement
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is entered into as of March 5,
1997, by and between Stage Stores, Inc., a Delaware corporation ("SSI"), and
▇.▇. ▇▇▇▇▇▇▇ Company, an Oklahoma corporation ("CRA"). SSI and CRA are referred
to collectively herein as the "PARTIES."
RECITALS
The respective boards of directors of SSI and CRA have determined
that it would be consistent with and in furtherance of the long-term business
strategy of SSI and CRA, and that it would be fair to and in the best interests
of CRA and its stockholders, to engage in a transaction whereby CRA and the
Merger Sub (as defined below) will merge on the terms described herein (the
"MERGER").
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
Section 1. DEFINITIONS.
"AFFECTED PROPERTY" has the meaning ascribed to such term in ss.
3(k).
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"BASE PRICE" per CRA Share means $8.00 PLUS 1(cent) for every
5(cent) by which the SSI Average Closing Price exceeds $20.00.
"BENEFIT PLAN" has the meaning ascribed to such term in ss. 3(n).
"BOARD MEETING" has the meaning set forth in ss.3(x) below.
"CERTIFICATE OF MERGER" has the meaning set forth in ss.2(c) below.
"CLOSING" has the meaning set forth in ss.2(b) below.
"CLOSING DATE" has the meaning set forth in ss.2(b) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMBINED DISCLOSURE DOCUMENT" means the disclosure document
combining the Prospectus and the Definitive CRA Proxy Materials.
"COMPANY SECURITIES" has the meaning set forth in ss.3(b)(i) below.
"CONTRACT" means any loan or credit agreement, note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit, authorization,
license, contract, instrument, Benefit Plan or practice or other agreement,
obligation, instrument or commitment of any nature whether written or oral.
"CRA ACQUISITION PROPOSAL" shall mean any proposal (other than any
proposal by SSI or the Merger Sub with respect to the Merger) regarding (i) any
merger, consolidation, share exchange, business combination or other similar
transaction or series of related transactions involving CRA or any Subsidiary of
CRA; (ii) any sale, lease, exchange, transfer or other disposition of the assets
of CRA or any of its Subsidiaries; and (iii) any offer to purchase, tender
offer, exchange offer or any similar transaction or series of related
transactions made by any Person involving the outstanding shares of any class of
capital stock of CRA or the filing of any Statement on Schedule 14D-1 with the
SEC in connection therewith.
"CRA INFORMATION" has the meaning set forth in ss.3(z) below.
"CRA MATERIAL ADVERSE EFFECT" means any material adverse change in
the business, financial condition, operations, results of operations, or future
prospects of CRA and its Subsidiaries taken as a whole including, without
limitation, any change which will, or can reasonably be expected to, cause a
loss or losses to SSI which, individually or in the aggregate, exceed
$1,000,000.
"CRA OPTIONS" has the meaning set forth in ss.2(d)(vi) below.
"CRA SHARE" means a share of CRA common stock, par value $.01 per
share.
"CRA STOCKHOLDER" means any Person who or which holds any CRA
Shares.
"CRA STOCKHOLDER VOTE" has the meaning set forth in ss.5(c)(ii)
below.
"DEFINITIVE CRA PROXY MATERIALS" means the definitive proxy
materials relating to the CRA Stockholder Vote.
"DISCLOSURE SCHEDULE" has the meaning set forth in ss.3 and ss.4
below.
"EFFECTIVE TIME" has the meaning set forth in ss.2(d)(i) below.
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, license, permit, authorization, approval,
consent, court order, judgment, decree, injunction, code, requirement or
agreement with any governmental authority, and all common law (x) relating to
pollution (or the cleanup thereof or the filing of information with respect
thereto), human health or the protection of air, surface water, ground water,
drinking water supply, land (including land surface or subsurface), plant and
animal life or any other natural resource, or
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(y) concerning exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production or
disposal of Regulated Substances, in each case as amended and as now or
hereafter in effect. The term Environmental Law includes, without limitation,
(i) the Comprehensive Environmental Response Compensation and Liability Act of
1980, the Water Pollution Control Act, the Clean Air Act, the Clean Water Act,
the Solid Waste Disposal Act (including the Resource Conservation and Recovery
Act of 1976 and the Hazardous and Solid Waste Amendments of 1984), the Toxic
Substances Control Act, the Insecticide, Fungicide and Rodenticide Act, the
Occupational Safety and Health Act of 1970, each as amended and as now or
hereafter in effect, and (ii) any common law or equitable doctrine (including,
without limitation, injunctive relief and tort doctrines such as negligence,
nuisance, trespass and strict liability) that may impose liability or
obligations for injuries or damages due to or threatened as a result of the
presence of, exposure to, or ingestion of, any Regulated Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" means any person who, together with CRA, is
treated as a single employer under Sections 414(b), 414(c), 414(m) or 414(o) of
the Code.
"EXCHANGE AGENT" means ▇▇▇▇▇ ▇▇▇▇▇▇ Shareholder Services, L.L.C.
"EXECUTIVE SEVERANCE AGREEMENTS" means the Executive Severance
Compensation Agreements, dated as of April 1, 1995, between CRA and each of ▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. North, as
amended.
"FINANCIAL STATEMENTS" has the meaning set forth in ss.3(f) below.
"GAAP" means at any time, the United States generally accepted
accounting principles as in effect at that time.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended.
"IMPROVEMENTS" has the meaning set forth in ss.3(s)(iii) below.
"IRS" means the Internal Revenue Service.
"LEASED REAL PROPERTY" has the meaning set forth in ss.3(s)(ii)
below.
"LEASES" has the meaning set forth in ss.3(s)(ii) below.
"MERGED CORPORATION" means any corporation whose separate corporate
existence is extinguished as a result of the Merger.
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"MERGER CONSIDERATION" has the meaning set forth in ss.2(d)(v)
below.
"MERGER SUB" means either SRI or a Delaware corporation wholly-owned
by SSI and formed solely for the purpose of consummating the Merger.
"NASDAQ" has the meaning set forth in the definition of "SSI AVERAGE
CLOSING PRICE" below.
"OPTION CANCELLATION AGREEMENT" has the meaning set forth in ss.5(n)
below.
"OPTION PLAN" means CRA's 1992 Amended and Restated Stock Option
Plan dated January 10, 1997, and certain contracts dated June 10, 1996 with
certain parties pursuant to such plan as in effect on the date hereof.
"OKLAHOMA ACT" means the Oklahoma General Corporation Act, as
amended.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice, including, without limitation, the
quantity and frequency of transactions, retail store leases, inventory
transactions, payroll expenses and marketing costs, considering, however, the
circumstances that CRA will not survive the consummation of the Merger
contemplated hereby.
"OWNED REAL PROPERTY" has the meaning set forth in ss.3(s)(i) below.
"PARTY" or "PARTIES" has the meaning set forth in the preface.
"PBGC" has the meaning set forth in ss.3(n)(vi) below.
"PERMITTED ENCUMBRANCES" has the meaning set forth in ss.3(s)(i)
below.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PROSPECTUS" means the final prospectus relating to the registration
of SSI Shares under the Securities Act.
"PROPRIETARY RIGHTS" has the meaning set forth in ss. 3(o) below.
"PUBLIC REPORTS" has the meaning set forth in ss.3(f) below.
"REAL PROPERTY" has the meaning set forth in ss.3(s)(ii) below.
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"REAL PROPERTY LAWS" has the meaning set forth in ss.3(s)(v) below.
"REAL PROPERTY PERMITS" has the meaning set forth in ss.3(s)(iv)
below.
"REGISTRATION STATEMENT" has the meaning set forth in ss.5(c)(i)
below.
"REGULATED SUBSTANCES" means pollutants, contaminants, hazardous or
toxic substances, compounds or related materials or chemicals, hazardous
materials, hazardous waste, flammable materials, explosives, radon, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum and petroleum products (including, but not limited to,
waste petroleum and petroleum products).
"REQUISITE CRA STOCKHOLDER APPROVAL" has the meaning set forth in
ss.3(c) below.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, equity or other encumbrance, other than (a)
mechanic's, materialmen's, and similar liens, (b) liens for taxes not yet due
and payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (c) purchase money liens and liens securing rental
payments under capital lease arrangements, and (d) other liens arising in the
Ordinary Course of Business and not incurred in connection with the borrowing of
money.
"SEVERANCE PAY PLAN" means the ▇.▇. ▇▇▇▇▇▇▇ Company Severance Pay
Plan, dated as of August 3, 1992, as amended.
"SRI" means Specialty Retailers, Inc., a Texas corporation and
wholly-owned subsidiary of SSI.
"SSI AVERAGE CLOSING PRICE" means the average closing price
expressed in dollars per SSI Share quoted on the NASDAQ National Market System
("NASDAQ") for the ten trading days selected by lot by CRA and SSI out of the
twenty most recent consecutive trading days prior to and including the fifth
trading day preceding the Closing Date. For purposes hereof, selection by lot
shall mean that all of the twenty most recent trading days are each identified
on separate pieces of paper, placed in a receptacle, and each of the Parties
draws a number in alternating manner, beginning with CRA, until the ten trading
days are selected.
"SSI FINANCIAL STATEMENTS" has the meaning set froth in ss.4(f)
below.
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"SSI INFORMATION" has the meaning set froth in ss.4(g) below.
"SSI MATERIAL ADVERSE EFFECT" means any change in or effect on the
business of SSI or any of its Subsidiaries that, individually or in the
aggregate, is or will be materially adverse to the business, operations
(including the income statement), properties (including intangible properties),
condition (financial or otherwise), assets, liabilities or regulatory status of
SSI and its Subsidiaries taken as a whole.
"SSI PUBLIC REPORTS" has the meaning set forth in ss.4(f) below.
"SSI SHARE" means a share of SSI common stock, $.01 par value per
share.
"SSI STOCK PERCENTAGE" has the meaning set forth in ss.2(a) below.
"SUBSEQUENT SSI EXCHANGE ACT REPORTS" has the meaning set forth in
ss.5(c)(i).
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"SURVIVING CORPORATION" has the meaning set forth in ss.2(a) below.
"SURVIVOR'S ACT" means the corporation law or other law governing
mergers in the state of incorporation of the Surviving Corporation.
"TAX" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, real property gains, registration, value added, excise, natural
resources, severance, stamp, occupation, windfall profits, environmental (under
Section 59A of the Code), customs, duties, real property, personal property,
capital stock, social security (or similar), unemployment, disability, payroll,
license, employee or other withholding, or other tax, of any kind whatsoever,
including any interest, penalties or additions to tax or similar items in
respect of the foregoing (whether disputed or not).
"TAX RETURN" means any return, report, declaration, claim for
refund, information return or other document (including any related or
supporting schedule, statement or information) filed or required to be filed in
connection with the determination, assessment or collection of any Tax of any
party or the administration of any laws, regulations or administrative
requirements relating to any Tax (including any amendment thereof).
"TERMINATION OPTION AGREEMENT" means the option granted by CRA to
SSI on the date hereof, a copy of which is attached as EXHIBIT A.
"TEXAS ACT" means the Texas Business Corporation Act, as amended.
6
"TRIGGERING EVENT" means any of the following events: (i) the board
of directors of CRA shall have failed to recommend, shall have withdrawn or
shall have modified, in a manner adverse to either SSI or Merger Sub, its
recommendation or approval of this Agreement for any reason other than as
provided in ss. 7(a); (ii) the board of directors of CRA shall have approved,
endorsed or recommended any CRA Acquisition Proposal; (iii) CRA shall have
entered into any Contract to consummate any CRA Acquisition Proposal; (iv) this
Agreement shall not have received the Requisite CRA Stockholder Approval and at
the time of such event an offer or proposal to affect a CRA Acquisition Proposal
shall have been made; (v) the representations and warranties set forth in ss.3
hereunder shall cease to be true and correct at and as of the Closing Date and
such failure shall result in a CRA Material Adverse Effect; or (vi) CRA shall
not have performed and complied with all of its covenants hereunder through the
Closing and such failure shall result in a CRA Material Adverse Effect.
Section 2. BASIC TRANSACTION.
(a) MERGER ALTERNATIVES. On and subject to the terms and conditions
of this Agreement, the Merger will take place at the Effective Time. The
structure of the Merger will either be a forward merger with the Merger Sub
surviving or a reverse merger with CRA surviving, as may be determined by SSI on
the basis of what percentage ("SSI STOCK PERCENTAGE") of the total merger
consideration paid, plus amounts paid to the holders of CRA Options and the
Dissenting Shares pursuant to ss.ss.2(d)(vi) and (g) below is represented by SSI
Stock. If the SSI Stock Percentage is less than 80% and greater than 50% the
Merger Sub shall continue after the Merger with all its rights, privileges,
powers and franchises unaffected by the Merger and the separate corporate
existence of CRA shall cease. If the SSI Stock Percentage is greater than or
equal to 80% or less than or equal to 50%, CRA shall continue after the Merger
with all its rights, privileges, powers and franchises unaffected by the Merger
and the separate corporate existence of the Merger Sub shall cease. From and
after the Effective Time, whichever entity survives the Merger in accordance
with the preceding sentences shall be referred to herein as the "SURVIVING
CORPORATION" and whichever entity ceases to exist shall be referred to as the
"MERGED CORPORATION." Immediately following the Merger, if the Surviving
Corporation is not SRI, the Surviving Corporation may be merged into SRI with
SRI being the surviving corporation of that merger. The Parties will take all
steps necessary to cause the Merger to comply with applicable requirements of
local law regarding corporate mergers.
(b) THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇ in New York, New York, commencing at 10:00 a.m. local time on the second
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at or after the Closing itself) or such other date as the Parties may mutually
determine (the "CLOSING DATE").
(c) ACTIONS AT THE CLOSING. At the Closing, (i) CRA and the CRA
Stockholders will deliver to Merger Sub and SSI the various certificates,
instruments, and documents referred to in ss.6(a) below, (ii) Merger Sub and SSI
will deliver to CRA the various certificates, instruments,
7
and documents referred to in ss.6(b) below, (iii) the Parties will file with the
Secretary of State of the state of incorporation of the Surviving Corporation a
certificate of merger in due and proper form (the "CERTIFICATE OF MERGER"), and
(iv) SSI will deliver to the Exchange Agent in the manner provided below in this
ss.2 the certificate evidencing SSI Shares issued in the Merger.
(d) EFFECT OF MERGER.
(i) GENERAL. The Merger shall become effective at the time
(the "EFFECTIVE TIME") the Parties file the Certificate of Merger
with the Secretary of State of the state of incorporation of the
Surviving Corporation. The Merger shall have the effect set forth in
the Survivor's Act. The Surviving Corporation may, at any time after
the Effective Time, take any action (including executing and
delivering any document) in the name and on behalf of the Merged
Corporation in order to fully carry out and effectuate the Merger.
(ii) CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the entity which becomes the Surviving Corporation
as in effect at and as of immediately prior to the Effective Time
will remain unchanged by the Merger and be the Certificate of
Incorporation of the Surviving Corporation.
(iii) BY-LAWS. The By-laws of the entity which becomes the
Surviving Corporation as in effect at and as of immediately prior to
the Effective Time will remain unchanged by the Merger and be the
By-laws of the Surviving Corporation.
(iv) DIRECTORS AND OFFICERS. The directors and officers of the
Merger Sub in office at and as of immediately prior to the Effective
Time will be the directors and officers of the Surviving
Corporation.
(v) CONVERSION OF CRA SHARES. At and as of the Effective
Time, as long as the SSI Average Closing Price is at least $15.00
per share, each CRA Share then outstanding shall by virtue of the
Merger be converted into the right to receive the following
(collectively the "MERGER CONSIDERATION"): (A) that number of SSI
Shares which, if valued at the SSI Average Closing Price have a
value equal to X multiplied by the Base Price; and (B) an amount of
cash equal to the Base Price multiplied by the remainder of one
MINUS X, where:
X = 1 - ((20 - Y) x .15) and
Y = the lesser of 20 or the SSI Average Closing Price;
PROVIDED, HOWEVER, that if the SSI Average Closing Price is less
than $15.00 and SSI elects to waive the condition set forth in
ss.6(a)(xv) and permit the Closing, the Merger Consideration shall
consist of (a) .1333 SSI Shares and (b) an amount in cash equal to
$8.00 minus the product of .1333 and the SSI Average Closing Price.
If any
8
fractional interest of an SSI Share would, except for this sentence,
be deliverable in connection with this ss.2, SSI, in lieu of
delivering such fractional shares, may pay an amount in cash equal
to the value thereof. No CRA Share that is exchanged in connection
with the transactions contemplated by this Agreement shall be deemed
to be outstanding or to have any rights other than those set forth
above in this ss.2(d)(v) after the Effective Time.
(vi) CRA OPTIONS. CRA shall take such action as may be
necessary or appropriate in order that, at the Effective Time, all
options outstanding (including those covered by Option Cancellation
Agreements) under the Option Plan that are unexercised, whether or
not then exercisable (the "CRA OPTIONS"), shall be automatically
cancelled by virtue of the Merger and the holders of the CRA Options
shall be entitled to receive in cash the remainder of (A) the Base
Price which would be payable with respect to the CRA Shares the
subject of such CRA Option LESS (B) the exercise price and any other
amounts payable by the holder with respect to such CRA Option.
Further, except as otherwise agreed to by the Parties, (i) the
Option Plan shall terminate as of the Effective Time and any rights
to receive Options or any other interest in respect of the capital
stock of CRA or any of its Subsidiaries thereunder shall be
terminated as of the Effective Time, and (ii) CRA shall take all
action necessary to ensure that following the Effective Time no
participant in the Option Plan or other plans, programs or
arrangements shall have any right thereunder to acquire or
participate in changes in value of equity securities of CRA, the
Surviving Corporation, the Merger Sub or any of their respective
Subsidiaries and to terminate all such plans effective as of the
Effective Time.
(vii) The adjustment provided herein with respect to any
options which are "incentive stock options" (as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "CODE"))
shall be and is intended to be effected in a manner which is
consistent with Section 424(a) of the Code.
(e) PROCEDURE FOR PAYMENT.
(i) Immediately after the Effective Time, (A) SSI will
furnish to the Exchange Agent a stock certificate (issued in the
name of the Exchange Agent or its nominee) representing that number
of SSI Shares equal to the product of (I) that number of SSI Shares
referred to in ss. 2(d)(v)(A) above multiplied by (II) the number of
outstanding CRA Shares, (B) SSI will cause the Exchange Agent to
mail a letter of transmittal for the holder to use in surrendering
the certificates which represented his or its CRA Shares in exchange
for a certificate representing the number of SSI Shares to which
that holder is entitled; PROVIDED, that certificates surrendered for
exchange by any Person constituting an "affiliate" of CRA for
purposes of Rule 144(c) under the Securities Act shall not be
exchanged for certificates representing SSI Shares until SSI shall
have received from such Person any documents referred
9
to in ss.6(a) below, if any, requiring delivery or execution by such
Person, and (C) SSI shall pay an amount equal to the cash portion of
the Merger Consideration per CRA Share times the number of
outstanding CRA Shares into an account designated by the Exchange
Agent.
(ii) SSI will not pay any dividend or make any distribution on
SSI Shares (with a record date at or after the Effective Time) to
any record holder of outstanding CRA Shares until the holder
surrenders for exchange that holder's certificates which represented
CRA Shares. SSI instead will pay the dividend or make the
distribution to the Exchange Agent in trust for the benefit of the
holder pending surrender and exchange. SSI may cause the Exchange
Agent to invest any cash the Exchange Agent receives from SSI as a
dividend or distribution in one or more permitted investments
determined by SSI; PROVIDED, HOWEVER, that the terms and conditions
of the investments shall be such as to permit the Exchange Agent to
make prompt payments of cash to the holders of outstanding CRA
Shares as necessary. SSI may cause the Exchange Agent to pay over to
SSI any net earnings with respect to the investments, and SSI will
replace promptly any cash which the Exchange Agent loses through
investments. In no event, however, will any holder of outstanding
CRA Shares be entitled to any interest or earnings on the dividend
or distribution pending surrender for exchange of his or its
certificates which represent CRA Shares.
(iii) SSI may cause the Exchange Agent to return any SSI Shares
and dividends and distributions thereon remaining unclaimed 90 days
after the Effective Time, and thereafter each remaining record
holder of outstanding CRA Shares shall be entitled to look to SSI
(subject to abandoned property, escheat, and other similar laws) as
a general creditor thereof with respect to SSI Shares and dividends
and distributions thereon to which that record holder is entitled
upon surrendering its certificates.
(iv) SSI and CRA shall share equally all charges and expenses
of the Exchange Agent.
(f) CLOSING OF TRANSFER RECORDS. After the close of business on the
Closing Date, no transfers of CRA Shares outstanding prior to the Effective Time
shall be made on the stock transfer books of the Surviving Corporation.
(g) DISSENTING HOLDERS OF CRA SHARES. Notwithstanding any provision
of this Agreement to the contrary, CRA Shares that are outstanding immediately
prior to the Effective Time and that are held by stockholders who have not voted
in favor of the Merger or consented thereto in writing and who have demanded
properly in writing appraisal for such CRA Shares in accordance with Section
1091 of the Oklahoma Act (collectively, the "DISSENTING SHARES") shall not be
converted into or represent the right to receive the Merger Consideration. Such
stockholders shall be entitled to receive payment of the appraised value of such
shares of stock held by them in accordance with
10
the provisions of such Section 1091, except that all Dissenting Shares held by
stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such Dissenting Shares under such
Section 1091 shall thereupon be deemed to be authorized and unissued shares of
the Surviving Corporation pursuant to Section 1091(L) of the Oklahoma Act.
Section 3. REPRESENTATIONS AND WARRANTIES OF CRA. CRA represents and
warrants to the Merger Sub and SSI that the statements contained in this ss.3
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
ss.3), except as set forth in the disclosure schedule delivered concurrently
with this Agreement (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule of CRA
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this ss.3.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each of CRA
and its Subsidiaries is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation. Each of CRA
and its Subsidiaries is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required. Each of CRA and its Subsidiaries has full corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it.
(b) CAPITALIZATION OF CRA AND ITS SUBSIDIARIES.
(i) CRA's authorized capital stock consists solely of
50,000,000 authorized shares of common stock, of which 9,035,645
shares are presently issued and outstanding, which shares are held
of record by the persons set forth on Schedule 3(b) in the amounts
set forth opposite such Person's name. No shares of CRA's capital
stock are held as treasury shares. 1,082,500 shares of common stock
are reserved for issuance upon the exercise of outstanding CRA
Options at a weighted average exercise price of $3.67 per CRA share.
Except as set forth above or in Schedule 3(b), CRA does not have (i)
any shares of common stock or preferred stock reserved for issuance,
or (ii) any outstanding or authorized option, warrant, right, call
or commitment relating to its capital stock or any outstanding
securities or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire from it, any
shares of its capital stock (collectively, "COMPANY SECURITIES").
There are no (i) outstanding obligations of CRA or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities or (ii) authorized or outstanding stock appreciation,
phantom stock, profit participation or similar rights with respect
to CRA or any of its Subsidiaries. Except as set forth in Schedule
3(b), there are no preemptive or other subscription rights with
respect to any shares of CRA's capital stock and all of the issued
and outstanding shares of capital stock of CRA have been duly
authorized, validly issued, are fully paid and are nonassessable.
There are no voting trusts, proxies or any other agreements or
understandings with respect to the voting of the capital stock of
CRA
11
or any of its Subsidiaries (other than not more than 79,053 CRA
shares subject to voting trusts).
(ii) All Subsidiaries of CRA are listed on Schedule 3(b).
Except as otherwise disclosed in Schedule 3(b), neither CRA nor any
Subsidiary owns any shares of stock of any corporation or any equity
interest in a partnership, joint venture or other business entity,
and neither CRA nor any of its Subsidiaries controls any other
corporation, partnership, joint venture or other business entity by
means of ownership, management contract or otherwise. Except for
directors' qualifying shares listed on Schedule 3(b), if any, all of
the outstanding capital stock of, or other ownership interests in,
each Subsidiary of CRA is owned beneficially and of record by CRA,
directly or indirectly, is validly issued, fully paid and
nonassessable and free and clear of any preemptive rights,
restrictions on transfer, Taxes or Security Interests or any other
limitation or restriction except as provided under the Securities
Act or state securities laws. There are no authorized or outstanding
securities of CRA or any of its Subsidiaries convertible into or
exchangeable for, no options, warrants, or other rights to acquire
from CRA or any of its Subsidiaries, and no other contract,
understanding or arrangement (whether or not contingent) granting to
any person the right to subscribe for, or providing for the issuance
or sale of, any capital stock or other ownership interest in, or any
other securities of, any such Subsidiary. There are no outstanding
obligations of CRA or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or
other ownership interests in any such Subsidiary.
(c) AUTHORIZATION OF TRANSACTION. CRA has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder; PROVIDED, HOWEVER, that CRA cannot consummate the Merger unless and
until it receives the Requisite CRA Stockholder Approval. This Agreement has
been duly authorized by the board of directors of CRA, has been duly executed
and delivered on behalf of CRA, and constitutes the valid and legally binding
obligation of CRA, enforceable and in effect in accordance with its terms and
conditions. The only vote of the CRA Stockholders required to consummate the
Merger is the affirmative vote of two-thirds of the holders of the outstanding
CRA Shares pursuant to the bylaws of CRA and Sections 1081 and 1082 of the
Oklahoma Act (the "REQUISITE CRA STOCKHOLDER APPROVAL").
(d) NONCONTRAVENTION. Neither the execution or delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of CRA or its Subsidiaries is subject
or any provision of the charter or bylaws of any of CRA or its Subsidiaries or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party a put right or repurchase obligation or
the right to accelerate, terminate, modify or cancel, or require any notice,
under any agreement, contract, lease, license, instrument, or other arrangement
to which any of CRA or its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result
12
in the imposition of any Security Interest upon any of its assets including any
Proprietary Rights), except for any such matters which are set forth on Schedule
3(d). Other than in connection with the provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act,
the Texas Act, the Oklahoma Act, the Securities Exchange Act, the Securities
Act, the state securities laws and the laws of any foreign jurisdiction, none of
CRA or its Subsidiaries needs to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement.
(e) FILINGS WITH THE SEC. CRA has made all filings with the SEC that
it has been required to make under the Securities Act and the Securities
Exchange Act (including any exhibits and amendments thereto). Each such filing
complied with the Securities Act and the Securities Exchange Act in all material
respects when filed. No such filing, when filed, contained any untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
(f) FINANCIAL STATEMENTS. CRA has filed an Annual Report on Form
10-K for the fiscal year ended February 3, 1996 and a Quarterly Report on Form
10-Q for the fiscal quarters ended May 4, 1996, August 3, 1996 and November 2,
1996 (together the "PUBLIC REPORTS"). The financial statements included in or
incorporated by reference into the Public Reports have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of CRA and its
Subsidiaries as of the indicated dates and the results of operations of CRA and
its subsidiaries for the indicated periods, are consistent with the books and
records of CRA and its Subsidiaries, and comply with the material provisions of
Regulations S-K and S-X of the Securities Act. Attached as Schedule 3(f) are the
unaudited consolidated balance sheet, income statement and cash-flow statement
of CRA and its Subsidiaries as of and for the fiscal quarter and fiscal year
ended February 1, 1997 (together with the Public Reports and including the
related notes and schedules, the "FINANCIAL STATEMENTS") which have been
prepared in accordance with GAAP on a basis consistent with the Public Reports,
except for footnote disclosures, applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of CRA and its
Subsidiaries as of the indicated dates and the results of operations of CRA and
its Subsidiaries for the indicated periods, and are consistent with the books
and records of CRA and its Subsidiaries. The financial statements to be
delivered pursuant to ss.5(f)(viii) will be derived from the accounting books
and records of CRA, will provide adequate disclosure of material changes to the
accounts or business of CRA and its Subsidiaries and will be prepared in
accordance with GAAP and otherwise on the same basis as the Financial
Statements, except that the monthly financial statements delivered pursuant to
ss. 5(f)(viii) may be subject to normal year-end adjustments.
(g) ABSENCE OF CERTAIN DEVELOPMENTS. Except as expressly disclosed
in Schedule 3(g), since February 1, 1997 there has not been any material adverse
change to the financial condition, business, properties, results of operations
or prospects of CRA and its Subsidiaries. Except as disclosed in the Financial
Statements or as set forth in Schedule 3(g), and except for this Agreement and
the transactions contemplated hereby, since February 1, 1997, each of CRA and
its Subsidiaries has been operated in the Ordinary Course of Business. Without
limiting the generality
13
of the foregoing, except as set forth on Schedule 3(g) or as expressly
contemplated by this Agreement, since February 1, 1997 none of CRA nor any of
its Subsidiaries has:
(i) experienced any changes in any relationship with its
suppliers, customers, distributors, brokers, lessors or others,
other than changes in the Ordinary Course of Business;
(ii) sold, leased, transferred, or assigned any of assets,
tangible or intangible, other than for fair consideration in the
Ordinary Course of Business;
(iii) entered into any agreement, contract, lease, or license
(or series of related agreements, contracts, leases or licenses)
involving more than $50,000.00 individually to which it is a party
or by which it is bound nor modified the terms of any such existing
contract or agreement (except for usual and ordinary purchase orders
executed for merchandise held for resale in the Ordinary Course of
Business and leases of certain real property as expressly disclosed
in Schedule 3(s)(i) or (ii));
(iv) engaged in any activity which has resulted in any
acceleration or delay of the collection of its accounts or notes
receivables or any delay in the payment of its accounts payables, in
each case other than in the Ordinary Course of Business;
(v) (nor has any other party) accelerated, terminated,
modified or cancelled any permit or agreement, contract, lease or
license other than in the Ordinary Course of Business or involving
more than $50,000.00 individually to which it is a party or by which
it is bound;
(vi) suffered any damage, destruction or loss, whether or not
covered by insurance, affecting any material property or assets
owned or used by it;
(vii) adopted, modified, amended or terminated any bonus,
profit-sharing, incentive, severance, or other similar plan
(including any Benefit Plan), contract, or commitment for the
benefit of any of its directors, officers, or employees, or
otherwise made any change in the employment terms (including any
increase in the base compensation) for any of its officers and
employees described in ss.3(l);
(viii) made any capital expenditure or any other investment (or
series of related investments) in excess of $50,000.00 other than
leasehold improvements and fixtures in retail stores made in the
Ordinary Course of Business;
(ix) entered into any capital lease involving more than
$50,000.00 individually, issued any note, bond, or other debt
security or created, incurred, assumed, modified or guaranteed any
indebtedness or other liability;
14
(x) imposed or suffered to exist any Security Interest on any
of its assets outside the Ordinary Course of Business or on any of
the CRA Shares; or transferred, leased, licensed, or sold, any
assets other than in the Ordinary Course of Business;
(xi) cancelled, compromised, waived, or released any right or
claim (or series of related material rights and claims) in excess of
$50,000.00 in the aggregate;
(xii) made or authorized any change in its charter or by-laws;
(xiii) issued, sold, or otherwise disposed of any of its capital
stock, or granted, modified or amended any options, warrants, stock
appreciation rights, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of its
capital stock or participate in any change in the value thereof;
(xiv) made or been subject to change in its accounting
practices, procedures or methods or in its cash management
practices;
(xv) entered into or become party to any agreement,
arrangement or transaction with any of its Affiliates or any of
their respective directors, officers, employees or stockholders,
including, without limitation, any (i) loan or advance funds, or
made any other payments, to any of its directors, officers,
employees, stockholders or Affiliates or (ii) creation or discharge
of any intercompany account;
(xvi) paid or declared any dividend or other distribution in
cash or kind with respect to their respective capital stock or
redeemed, repurchased or otherwise acquired any such stock;
(xvii) experienced any adverse changes with respect to the
Proprietary Rights;
(xviii) experienced any material changes in the amount or scope
of coverage of insurance now carried by them; or
(xix) committed to do any of the foregoing.
(h) LITIGATION. Except as set forth in Schedule 3(h), there are no
judgments, decrees, lawsuits, actions, proceedings, claims, complaints,
injunctions, orders or investigations by or before any governmental authority
pending or threatened against CRA or its Subsidiaries (i) relating to CRA, any
Subsidiary, their respective businesses, the Proprietary Rights, or any product
alleged to have been manufactured or sold by CRA or any of its Subsidiaries, or
(ii) seeking to enjoin the transactions contemplated hereby. To CRA's knowledge,
there are no existing facts or circumstances which give any reason to believe
that any such action, suit, proceeding, hearing or investigation may be brought
or threatened against CRA or any of its Subsidiaries.
15
(i) UNDISCLOSED LIABILITIES. Other than those reflected in the
Financial Statements (including the notes thereto) or disclosed in Schedule
3(i), there are no material liabilities of CRA or its Subsidiaries of any kind
or nature whatsoever, whether known or unknown, absolute, accrued, contingent or
otherwise, or whether due or to become due, other than liabilities incurred in
the Ordinary Course of Business since February 1, 1997.
(j) TAXES.
(i) Copies of all Tax Returns now subject or potentially
subject to IRS audit are attached to Schedule 3(j). Except as set
forth on Schedule 3(j), each of CRA and its Subsidiaries has duly
and timely filed all Tax Returns required to be filed by it, all
such Tax Returns have been prepared in compliance with all
applicable laws and regulations and are true, correct and complete
in all respects. Except as set forth in Schedule 3(j), all Taxes
owed by each of CRA and its Subsidiaries, whether or not shown on
any Tax Return, have been timely paid. CRA and its Subsidiaries have
maintained adequate provision for Taxes payable by CRA and its
Subsidiaries as of February 1, 1997, and such provision and funds
(as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practices of each of CRA and its
Subsidiaries in filing its Tax Returns) will be adequate for Taxes
payable by CRA and its Subsidiaries as of the Closing Date. There
are no Security Interests on any of the assets of CRA or any of its
Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax. CRA has made available to the Merger Sub
correct and complete copies of (A) its federal income Tax returns
for the last five (5) taxable years and the corresponding balance
sheets of CRA as of the end of such years and (B) other Tax Returns
as requested by the Merger Sub.
(ii) Except as set forth on Schedule 3(j):
(A) each taxable period of CRA and each of its Subsidiaries
either (A) has been audited by the relevant taxing authority or (B)
has closed, so that no further assessment or collection of Tax may
occur and such taxable period is not subject to review by any
relevant taxing authority;
(B) neither CRA nor any of its Subsidiaries is the subject of
a Tax audit or examination, has consented to extend the time, or is
the beneficiary or any extension of time, in which any Tax may be
assessed or collected by any taxing authority;
(C) neither CRA nor any of its Subsidiaries has received, or
expects to receive, from any taxing authority any written notice of
proposed adjustment, deficiency, underpayment of Taxes or any other
such notice which has not been
16
satisfied by payment or been withdrawn, and no claims have been
asserted relating to such Taxes against CRA or any such Subsidiary;
(D) CRA and each of its Subsidiaries has withheld and paid
all required Taxes in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other
similar third party;
(E) neither CRA nor any of its Subsidiaries has filed a
consent to the application of Section 341(f) of the Code;
(F) neither CRA nor any of its Subsidiaries will be required,
as a result of (A) a change in accounting method for a Tax period
beginning on or before the Closing Date, to include any adjustment
under Section 481(c) of the Code (or any corresponding provision of
state, local or foreign Tax law) in taxable income for any Tax
period beginning on or after the Closing Date, or (B) any "closing
agreement," as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign Tax law), to
include any item or income in or exclude any item of deduction from
any Tax period beginning on or after the Closing Date;
(G) each of CRA and its Subsidiaries has disclosed on its
income Tax Returns all positions taken therein that could give rise
to an accuracy-related penalty under Section 6662 of the Code (or
any corresponding provision of Tax law);
(H) neither CRA nor any of its Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Section 280G or
Section 162(m) of the Code;
(I) within the last five years, no claim has been made by a
taxing authority in a jurisdiction where any of CRA or its
Subsidiaries does not pay Taxes or file Tax Returns that such entity
is or may be subject to Taxes assessed by such jurisdiction;
(J) neither CRA nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii);
(K) neither CRA nor any of its Subsidiaries is a party to any
Tax allocation or sharing agreement; and
(L) since August 3, 1992, neither CRA nor any of its
Subsidiaries (A) has been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the
common parent of which was CRA) or (B) has any liability
17
for the Taxes of any Person (other than CRA and its Subsidiaries)
under Treas. Reg. ss.1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract,
or otherwise.
(iii) Schedule 3(j) sets forth as of February 4, 1996, the
amount and expiration date of any net operating loss, net capital
loss, unused foreign tax credit, and other unused credit of CRA and
its Subsidiaries.
(k) ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3(k), (i)
CRA and its Subsidiaries have complied and are in compliance with all applicable
Environmental Laws, (ii) without limiting the generality of the foregoing, CRA
and its Subsidiaries have obtained and complied with, and are in compliance
with, all permits, licenses and other authorizations that may be required
pursuant to Environmental Laws for the occupation of their respective facilities
and the operation of their respective business, and a list of all such permits,
licenses and other authorizations is set forth on Schedule 3(k), (iii) the real
property currently owned or operated by CRA or any of its Subsidiaries
(including, without limitation, soil, groundwater or surface water on or under
the properties and buildings thereon) (the "AFFECTED PROPERTY") does not contain
any Regulated Substance, (iv) neither CRA nor any of its Subsidiaries has
received any written or oral notice that CRA or any of its Subsidiaries may be
liable under or in violation of the Comprehensive Environmental Response,
Compensation and Control Act, 42 U.S.C. ss. 9601, ET SEQ. or any other
Environmental Laws in connection with any operations of, or waste disposal by,
CRA or any of its Subsidiaries, (v) neither CRA nor any of its Subsidiaries has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including without limitation
any Regulated Substance, or owned or operated any property or facility (and no
such property or facility is contaminated by any such substance) in a manner
that has given or could give rise to liabilities, or investigatory, corrective
or remedial obligations of CRA or any of its Subsidiaries under Environmental
Laws, including without limitation, any liability or obligation for response
costs, corrective action costs, personal injury, property damage, natural
resources damages or attorneys' fees, pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended, or the
Solid Waste Disposal Act, as amended, or any other Environmental Laws, (vi) CRA,
its Subsidiaries and the Affected Property are not presently subject to a suit
or judgment arising under any Environmental Law, and (vii) all documents filed
by or on behalf of CRA or any of its Subsidiaries with any governmental
authority pursuant to any Environmental Law in connection with the transactions
contemplated hereby were true, correct and complete in all material respects and
did not omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
(l) EMPLOYEE MATTERS. Schedule 3(l) contains a true and complete
list of (i) the employees currently employed by CRA and its Subsidiaries who
received annual compensation in 1996 (or who could receive annual compensation
in 1997) of $85,000.00 or more, indicating the title of and a description of any
agreements concerning such employees and the rate of all current compensation
payable by CRA or its Subsidiaries to each such employee and (ii) the directors
of each of CRA and its Subsidiaries.
18
(m) LABOR MATTERS. Except as set forth on Schedule 3(m), (i) neither
CRA nor any of its Subsidiaries has entered into any collective bargaining
agreements with respect to the employees, (ii) there are no written personnel
policies applicable to the employees generally, other than employee manuals,
true and complete copies of which have previously been provided to Merger Sub,
(iii) there is no labor strike, dispute, slowdown or work stoppage or lockout
pending or to CRA's best knowledge after due investigation, threatened against
or affecting CRA or any of its Subsidiaries and during the past two years there
has been no such action, (iv) to CRA's knowledge after due investigation, no
union organization campaign is in progress with respect to any of the employees,
and no question concerning representation exists respecting such employees, (v)
there is no unfair labor practice, charge or complaint pending or threatened
against CRA or any Subsidiary of it, and (vi) CRA has not entered into any
agreement, arrangement or understanding restricting its ability to terminate the
employment of any or all of its employees at any time, for any lawful or no
reason, without penalty or liability. Neither CRA nor any Subsidiary of it has
engaged in any plant closing or employee layoff activities within the last two
(2) years that would violate or in any way implicate the Worker Adjustment
Retraining and Notification ("WARN") Act of 1988, as amended, or any similar
state or local plant closing or mass layoff statute, rule or regulation.
(n) EMPLOYEE BENEFIT PLANS.
(i) Schedule 3(n) lists all bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, restricted stock and stock
option plans, all employment or severance contracts, health and
medical insurance plans, life insurance and disability insurance
plans and other employee benefit plans, policy contracts, agreements
or arrangements, whether written or oral, which cover employees or
former employees of CRA and its Subsidiaries or with respect to
which CRA or any of its Subsidiaries has any actual or potential
liability, including, but not limited to, "employee benefit plans"
within the meaning of Section 3(3) of ERISA (the "BENEFIT PLANS").
Except as set forth on Schedule 3(n), no Benefit Plan is or was
collectively bargained for or has terms requiring assumption by the
Merger Sub or the Surviving Corporation. No Benefit Plan is a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA),
neither CRA nor any of its ERISA Affiliates has incurred any
withdrawal liability with respect to any multiemployer plan or any
liability in connection with the termination or reorganization of
any multiemployer plan and no Benefit Plan provides health or other
welfare benefits to former employees other than in compliance with
Section 4980B of the Code or similar State law ("COBRA").
(ii) To the extent applicable, each Benefit Plan (and its
related trust) is maintained and administered in compliance in all
material respects with the applicable provisions of ERISA, the Code
and any other laws (including compliance with all reporting and
disclosure obligations) and, if intended to be tax qualified,
Sections 401(a) and 501(a) of the Code. Each Benefit Plan which is
intended to be qualified under Section 401(a) of the Code has
received a favorable determination
19
letter that it is so qualified (which favorable determination letter
covers changes mandated by the Tax Reform Act of 1986 and subsequent
related regulations) and none of CRA or its Subsidiaries is aware of
any facts of circumstances which could adversely affect any of such
favorable determination letters.
(iii) No liability under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by CRA or any ERISA Affiliate
with respect to any ongoing, frozen or terminated "single-employer
plan", within the meaning of Section 4001(a)(15) of ERISA, currently
or formerly maintained or contributed to by any of them. Except as
disclosed on Schedule 3(n), the fair market value of the assets of
each single-employer plan equals or exceeds the accrued benefit
liabilities thereunder. With respect to each Benefit Plan which is
an employee pension benefit plan (as defined in Section 3(2) of
ERISA), all required contributions which are due for all periods
ending prior to or as of the Closing Date have been made, all such
contributions which are not due as of the Closing Date have been
properly accrued, and none of CRA or any ERISA Affiliate has
incurred any accumulated funding deficiency (as defined in Section
302(a)(2) of ERISA). With respect to each other Benefit Plan, all
contributions, premiums or other payments which are due have been
made or, if not due as of the Closing Date, have been properly
accrued. With respect to each Benefit Plan which is a Section 401(k)
plan, CRA and each of its Subsidiaries contribute all employee
pre-tax contributions to the appropriate trust as soon as possible
after the end of each payroll period.
(iv) CRA and each of its Subsidiaries has complied with the
requirements of COBRA.
(v) None of CRA, any Subsidiary of it or to CRA's knowledge,
any other Person has engaged in any transaction with respect to any
Benefit Plan which could subject CRA or any of its Subsidiaries to
any Tax or penalty (civil or otherwise) imposed by ERISA, the Code
or other applicable law. No actions, suits, investigations or claims
with respect to the Benefit Plans (other than routine claims for
benefits) are pending or threatened and none of CRA or any of its
Subsidiaries has any knowledge of any facts which could give rise to
or be reasonably expected to give rise to any such actions, suits or
claims.
(vi) No liability to the Pension Benefit Guaranty Corporation
(the "PBGC") (except for routine payment of premiums) has been or is
expected to be incurred with respect to any Benefit Plan that is
subject to Title IV of ERISA, no reportable event within the meaning
of Section 4043 of ERISA has occurred with respect to any such
Benefit Plan and the PBGC has not commenced or threatened the
termination of any Benefit Plan. None of the assets of CRA or any of
its Subsidiaries is the subject of any Security Interest arising
under Section 302(f) of ERISA or Section 412(n) of the Code, neither
CRA nor any of its Subsidiaries has been
20
required to post any security under Section 307 of ERISA or Section
401(a)(29) of the Code, and neither CRA nor any of its Subsidiaries
has any knowledge of any facts which could reasonably be expected to
give rise to such Security Interest or such posting of security.
(vii) Except as disclosed above, neither CRA nor any ERISA
Affiliate has any actual or potential liability with respect to any
employee pension or welfare benefit plan which is maintained or
sponsored by CRA or any ERISA Affiliate.
(viii) With respect to each Benefit Plan, CRA has provided to
Merger Sub true, complete and correct copies, to the extent
applicable, of (i) all documents pursuant to which such Benefit
Plans are maintained, funded and administered, (ii) the most recent
annual report (Form 5500 series) filed with the IRS report, (iv) the
most recent financial statement, (v) all governmental rulings,
determinations and opinions (and any pending requests).
(o) PROPRIETARY RIGHTS. Except as set forth in Schedule 3(o), CRA
and its Subsidiaries own and possess all right, title and interest in, free and
clear of all Security Interests except as provided in Schedule 3(p), or have a
valid, enforceable and effective written license to use, all patents, patent
applications, trademarks, service marks, trademark and service ▇▇▇▇
registrations and applications therefor, and all goodwill associated therewith,
copyrights, copyright registrations, copyrights applications, mask works, trade
names, corporate names, trade dress, technology, inventions, computer software,
data and documentation (including electronic media), product drawings, trade
secrets, know-how, customer lists, processes, and all other intellectual
property and proprietary information or rights used in or necessary for the
operation of the business of CRA and its Subsidiaries as presently conducted and
presently proposed to be conducted (collectively, its "PROPRIETARY RIGHTS").
Schedule 3(o) contains a complete and accurate list of (i) all patented and
registered Proprietary Rights; (ii) all pending patent applications and
applications for the registration of other Proprietary Rights; (iii) all trade
and corporate names owned or used by CRA or any of its Subsidiaries; (iv) all
computer software (other than mass-marketed software) owned or used by CRA or
any Subsidiary; and (v) all licenses or other agreements to or from third
parties regarding any of the Proprietary Rights. Except as set forth in Schedule
3(o), there is not pending or threatened against CRA or any of its Subsidiaries
any claim by any third party contesting the validity, enforceability, use or
ownership of any Proprietary Right, and, to the knowledge of CRA or any of its
Subsidiaries, there are no grounds for any such claim. Except as set forth in
Schedule 3(o), neither CRA nor any of its Subsidiaries has received any notice
of, nor is aware of any facts which indicate a likelihood of, any infringement
or misappropriation by, or conflict with, any third party with respect to any of
the Proprietary Rights, nor are they aware of any infringement, misappropriation
or conflict which will occur as a result of continued operation of the business
of CRA and its Subsidiaries as currently conducted or as currently proposed to
be conducted. All Proprietary Rights owned or used by CRA and its Subsidiaries
prior to the Closing Date will be owned or available for use on identical terms
and conditions immediately after the Closing Date. CRA and its Subsidiaries have
no knowledge of any Proprietary Rights that any competitor or other
21
Person has developed which reasonably could be expected to supersede or make
obsolete any product or process used by, or otherwise result in any Material
Adverse Change in the business of, CRA or any Subsidiary of it.
(p) CONTRACTS. Schedule 3(p) describes all Contracts (except for
usual and ordinary purchase orders executed for merchandise held for resale in
the Ordinary Course of Business), to which CRA or any of its Subsidiaries is a
party or is otherwise bound, of the type described below:
(i) all agreements or commitments for the purchase by CRA of
machinery, equipment or other personal property other than those
that are for amounts not to exceed $50,000.00;
(ii) all capitalized leases, pledges, conditional sale or
title retention agreements involving the payment of more than
$50,000.00;
(iii) all employment agreements and commitments, all consulting
or severance agreements or arrangements and all other agreements
between CRA or any of its Subsidiaries and any Affiliate of CRA or
such Subsidiary or any officer, director or employee of CRA or such
Subsidiary;
(iv) all agreements relating to the consignment or lease of
personal property (whether CRA or any of its Subsidiaries is lessee,
sublessee, lessor or sublessor), other than such agreements that
provide for annual payments of less than $50,000.00;
(v) all license, royalty or other agreements relating to the
Proprietary Rights;
(vi) all agreements containing commitments of suretyship,
guarantee or indemnification (except for (a) warranties for products
sold provided by CRA or any of its Subsidiaries in the Ordinary
Course of Business and (b) agreements having a contract value, in
the aggregate of $50,000.00 or less);
(vii) all agreements prohibiting CRA or any of its Subsidiaries
from freely engaging in the business presently conducted by CRA and
its Subsidiaries in any geographic area;
(viii) any agreement other than those covered by clauses (i)
through (vii) above involving payment or receipt of more than
$50,000.00 in the aggregate in any calendar year; and
22
(ix) any agreement other than those covered by clauses (i)
through (viii) involving non-competition agreements or nondisclosure
covenants intended to protect the Proprietary Rights of CRA and its
Subsidiaries.
Neither CRA nor any of its Subsidiaries has received written notice from the
other parties to any such Contracts that it intends to terminate or materially
alter the provisions of such Contracts either as a result of transactions
contemplated hereby or otherwise, except as disclosed in Schedule 3(p), and
neither CRA nor any of its Subsidiaries has given notice to any other party to
any such Contract that it intends to terminate or materially alter the
provisions of any such Contract except as disclosed in Schedule 3(p). Except as
set forth in Schedule 3(p), neither CRA nor any of its Subsidiaries has received
notice that it is in, nor has either CRA or any of its Subsidiaries given notice
of, any default or claimed, purported or alleged default, and neither CRA nor
any of its Subsidiaries is aware of any facts that, with notice or lapse of
time, or both, would constitute a default (or give rise to a termination right)
on the part of any party in the performance of any obligation to be performed
under any of the Contracts. True and complete copies of all written Contracts,
including any amendments thereto, have been delivered to the Merger Sub and such
documents constitute the legal, valid and binding obligation of CRA or any of
its Subsidiaries that are a party thereto and each other party purportedly
obligated thereunder. Except as specifically set forth in Schedule 3(p), neither
CRA nor any of its Subsidiaries is a party to any contract, agreement or
understanding which contains a "change in control," "potential change in
control" or similar provision.
(q) BOOKS AND RECORDS. The stock records of CRA fairly and
accurately reflect in all material respects the record ownership of all of the
outstanding shares of CRA's capital stock. The other books and records of CRA
and its Subsidiaries, including financial records and books of account, are
complete and accurate in all material respects and have been maintained in
accordance with sound business practices.
(r) INSURANCE. Schedule 3(r) contains an accurate and complete
description of all policies of fire, liability, workmen's compensation and other
forms of insurance owned or held by CRA and its Subsidiaries.
(s) REAL PROPERTY.
(i) OWNED PROPERTIES. Schedule 3(s)(i) sets forth a list of
all owned U.S. real property and owned foreign real property
(collectively, the "OWNED REAL PROPERTY") used by each of CRA and
its Subsidiaries in the operation of their respective businesses.
With respect to each such parcel of Owned Real Property: (i) except
as set forth in Schedule 3(s)(i) or Schedule 3(p), such parcel is
free and clear of all encumbrances, except Permitted Encumbrances;
(ii) there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any person the right of use
or occupancy of any portion of such parcel; and (iii) there are no
outstanding actions or rights of first refusal to purchase such
parcel, or any portion thereof or interest therein. For purposes of
this Section 3(s), "PERMITTED
23
ENCUMBRANCES" shall mean (a) statutory liens for current taxes or
other governmental charges with respect to the Owned Real Property
not yet due and payable or the amount or validity of which is being
contested in good faith by appropriate proceedings by CRA or any of
its Subsidiaries, as the case may be, and for which appropriate
reserves have been established in accordance with GAAP; (b)
mechanics and similar statutory liens arising or incurred in the
ordinary course of business for amounts which are not delinquent and
which would not have a material adverse effect on each of CRA or any
of its Subsidiaries; (c) zoning, entitlement, building and other
land use regulations imposed by governmental agencies having
jurisdiction over the Real Property which are not violated by the
current use and operation of the Real Property; and (d) covenants,
conditions, restrictions, easements and other similar matters of
record affecting title to the Real Property which do not materially
impair the occupancy or use of the Real Property for the purposes
for which it is currently used.
(ii) LEASED PROPERTIES. Schedule 3(s)(ii) sets forth a list of
all of the leased and subleased parcels of real property subject to
leases and subleases, as amended, (the "LEASES") in favor of CRA or
its Subsidiaries which evidence leasehold or subleasehold interests
of CRA or its Subsidiaries in such properties (the "LEASED REAL
PROPERTY"; the "OWNED REAL PROPERTY" and the "LEASED REAL PROPERTY"
collectively the "REAL PROPERTY") and designates those Leases which
require consent of a lessor or sublessor in connection with the
transactions contemplated by this Agreement. CRA has made available
to SSI its lease files maintained in its normal course of business
which contain copies or originals of all Leases and other material
information pertaining to the Leased Real Property. With respect to
each of the Leases: (i) the Lease is valid, enforceable and in full
force and effect; (ii) the Lease will continue to be valid,
enforceable and in full force and effect on identical terms
following the Closing, except for any lessor or sublessor consents
which may be required in connection with the transactions
contemplated by this Agreement; (iii) neither CRA nor any Subsidiary
thereof, nor any other party to the Lease, is in breach or default,
and no event has occurred which, with notice or lapse of time, would
constitute such a breach or default or permits termination,
modification or acceleration under the Lease, except for any lessor
or sublessor consents which may be required in connection with the
transactions contemplated by this Agreement; (iv) no party to the
Lease has repudiated any part thereof; (v) the Lease has not been
further modified in any material respect; (vi) neither CRA nor any
of its Subsidiaries has assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the Lease, except as
disclosed in other Schedules to this Agreement; (vii) there exists
no writ, injunction, decree, order or judgment outstanding, nor any
litigation, pending or threatened, relating to the Lease, except as
disclosed in other Schedules to this Agreement; and (ix) CRA and its
Subsidiaries are in substantial compliance with all applicable laws
and regulations pertaining to the use and occupancy of the Lease.
24
(iii) CONDITION AND OPERATION OF IMPROVEMENTS. All buildings
and all components of all buildings, structures and other
improvements included within the Owned Real Property (the
"IMPROVEMENTS"), including, without limitation, the roofs and
structural elements thereof and the heating, ventilation, air
conditioning, air pollution emission capture and abatement,
plumbing, electrical, mechanical, sewer, waste water and paving and
parking equipment systems and facilities included therein, are in
good condition and repair and adequate to operate such facilities as
currently used. There are no facts or conditions affecting any of
the Improvements which would, individually or in the aggregate,
interfere in any significant respect with the use, occupancy or
operation thereof as currently used, occupied or operated or
intended to be used, occupied or operated. There are no structural
deficiencies or latent defects affecting any Improvements located
upon the Owned Real Property. All water, gas, electrical, steam,
compressed air, telecommunication, sanitary and storm sewage lines
and systems and other similar systems serving the Owned Real
Property are installed and operating and are sufficient to enable
the Owned Real Property to continue to be used and operated in the
manner currently being used and operated, and any so-called hook-up
fees or other associated charges have been fully paid. Each
Improvement has direct access to a public street adjoining the Owned
Real Property. No Improvement or portion thereof is dependent for
its access, operation or utility on any land, building or other
improvement not included in the Owned Real Property.
(iv) PERMITS. All certificates of occupancy, permits,
licenses, franchises, approvals and authorizations (collectively,
the "REAL PROPERTY PERMITS") of all governmental authorities having
jurisdiction over the Real Property, required or appropriate to the
current operation of the Owned Real Property, have been issued to
CRA or its Subsidiaries and are in full force and effect. Neither
CRA nor any of its Subsidiaries has received or been informed by a
third party of the receipt by it of any notice from any governmental
authority having jurisdiction over the Owned Real Property
threatening a suspension, revocation, modification or cancellation
of any Real Property Permit and, to the best knowledge of CRA and
its Subsidiaries, there is no basis for the issuance of any such
notice or the taking of any such action.
(v) COMPLIANCE WITH LAWS. The Owned Real Property is in full
compliance with all applicable building, zoning, subdivision and
other land use and similar laws affecting the Owned Real Property
(collectively, the "REAL PROPERTY LAWS"), and neither CRA nor any of
its Subsidiaries has received any notice of violation or claimed
violation of any Real Property Law. There is no pending or, to the
best knowledge of each of CRA and its Subsidiaries, any anticipated
change in any Real Property Law that will have or result in a
significant adverse effect upon the ownership, alteration, use,
occupancy or operation of the Owned Real Property or any portion
thereof. No current use by the CRA or any of its Subsidiaries of the
Owned Real Property is dependent on a nonconforming use or other
approval from a
25
governmental authority, the absence of which would significantly
limit the use of any such Owned Real Property.
(t) TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
3(t), none of CRA's officers, directors, or any of their respective Affiliates
is involved in any business arrangement or relationship with CRA or its
Subsidiaries (whether written or oral) involving more than $100,000 in any year
in the aggregate, and none of CRA's officers, directors, or any of their
respective Affiliates owns any property or right, tangible or intangible, which
is used by CRA or its Subsidiaries involving more than $100,000 in any year in
the aggregate.
(u) ACCOUNTS RECEIVABLE. Except as listed on Schedule 3(u) hereto,
all accounts and notes receivable of CRA and its Subsidiaries reflected on CRA
Financial Statements, and all accounts and notes receivable arising subsequent
to the date of CRA Financial Statements, in each case, have arisen in the
Ordinary Course of Business, and the reserves for doubtful accounts set forth on
CRA Financial Statements have been established in accordance with past custom
and practice and are substantially adequate in light of the previous
collectibility experience with respect to accounts receivables generated by CRA
and its Subsidiaries.
(v) INVENTORY. The inventory stock of CRA and its Subsidiaries held
on account of CRA to the extent reflected on the Financial Statements is or was,
prior to the sale thereof, in good and merchantable condition, and suitable and
usable or salable in the Ordinary Course of Business for the purposes for which
intended and has been accounted for using the retail method of accounting in
accordance with GAAP.
(w) SUFFICIENCY OF ASSETS. The assets currently owned by CRA or any
of its Subsidiaries, or leased by CRA or any such Subsidiary pursuant to any
lease agreement entered into in the Ordinary Course of Business or otherwise
disclosed to the Merger Sub, constitute all of the assets necessary to conduct
the business of CRA and its Subsidiaries in the Ordinary Course of Business as
at February 1, 1997 and at the date hereof.
(x) BOARD RECOMMENDATION. The board of directors of CRA, at a
meeting duly called and held on March 4, 1997 (the "BOARD MEETING"), has by
unanimous vote of those directors present (other than the interested director
who shall have abstained from voting) (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, taken together, are fair
to and in the best interests of the stockholders of CRA, (ii) adopted
resolutions to recommend that the holders of the CRA Shares approve this
Agreement and the transactions contemplated, herein, including the Merger, and
(iii) adopted resolutions providing that the Options shall be treated, and the
Option Plan shall terminate, in accordance with in ss.2(d)(vi).
(y) BROKERS' FEES. None of CRA and its Subsidiaries has any
liability or obligation to pay any fees or commissions to any broker, finder, or
similar agent (other than a fee to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ consisting of
an amount in cash equal to (i) 13/8% multiplied by the addition of (a) the
Merger Consideration and (b) the aggregate cash payments to CRA option
26
holders pursuant to ss.2(d)(vi) and (ii) $204,875 and a fairness opinion fee of
$150,000 to ▇▇▇▇▇▇▇▇ Inc.) with respect to the transactions contemplated by this
Agreement.
(z) DISCLOSURE. The CRA Information contained in (i) the Prospectus
and the Registration Statement will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading, and (ii) the
Definitive CRA Proxy Materials will not contain any statement which, at the time
and in light of the circumstances under which it is made, is false or misleading
with respect to any material fact or which omits to state any material fact
necessary in order to make the statements therein not false or misleading. As
used herein, "CRA INFORMATION" means all information with respect to CRA or any
of its Subsidiaries provided for use in the Prospectus, the Registration
Statement or the Definitive CRA Proxy Materials, as the case may be. The
Definitive CRA Proxy Materials, insofar as they relate to CRA, including any
amendments thereto, will comply as to form and otherwise in all material
respects, with the applicable requirements of the Securities Act, the Securities
Exchange Act and the rules and regulations thereunder.
(aa) TAX-FREE REORGANIZATION REQUIREMENTS. (i) CRA is not aware of
any plan or intention by any shareholder, to sell, exchange or otherwise dispose
of any SSI Shares that will be received pursuant to this Agreement; (ii) the
Merger Sub will acquire at least 90 percent of the fair market value of the net
assets, and at least 70 percent of the fair market value of the gross assets,
held by CRA immediately prior to the Merger. For purposes of this
representation, amounts paid by CRA in respect of Dissenting Shares, CRA assets
used to pay CRA's expenses of the Merger, and all redemptions and distributions
made by CRA in contemplation of the Merger will be included as assets of CRA
held immediately prior to the Merger; (iii) CRA liabilities assumed by the
Surviving Corporation and liabilities to which the CRA assets are subject were
incurred by CRA in the ordinary course of its business; and (iv) CRA is not an
"investment company" as defined in Section 368(a)(3)(F)(iii) of the Code.
Section 4. REPRESENTATIONS AND WARRANTIES OF SSI AND MERGER SUB. SSI
repre sents and warrants to CRA (and will cause the Merger Sub to represent and
warrant) that the statements contained in this ss.4 are correct and complete as
of the date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this ss.4), except as set forth in the
Disclosure Schedule of SSI. The Disclosure Schedule of SSI will be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this ss.4.
(a) ORGANIZATION. Each of SSI and the Merger Sub is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) CAPITALIZATION. The authorized capital stock of SSI consists of
(i) 75,000,000 shares of common stock, $.01 par value per share, of which
22,033,303 shares are issued and outstanding, (ii) 3,000,000 shares of Class B
common stock, par value $.01 per share of which
27
1,250,584 are issued and outstanding and (iii) 2,500 shares of preferred stock,
$1.00 par value per share, none of which are issued and outstanding. All of the
SSI Shares to be issued in the Merger have been duly authorized and, upon
consummation of the Merger, will be validly issued, fully paid and
nonassessable. Notwithstanding the foregoing, CRA acknowledges that, after the
date hereof and prior to the Effective Time, SSI may issue additional SSI
Shares.
(c) AUTHORIZATION OF TRANSACTION. SSI has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized by the board of directors of
SSI, has been duly executed and delivered on behalf of SSI, and constitutes the
valid and legally binding obligation of SSI, enforceable and in effect in
accordance with its terms and conditions.
(d) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which either of SSI or the Merger Sub is
subject or any provision of the charter or bylaws of either of SSI or the Merger
Sub or (ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party a put right or repurchase
obligation or the right to accelerate, terminate, modify or cancel, or require
any notice under, any material agreement, contract, lease, license, instrument,
or other material arrangement to which either of SSI or the Merger Sub is a
party or by which it is bound or to which any of its material assets is subject,
except for any such matters which, both individually and in the aggregate, would
not have a SSI Material Adverse Effect or restrict either SSI's or the Merger
Sub's ability to consummate the transactions contemplated hereby. Other than in
connection with the provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, the Texas Act, the
Oklahoma Act, the Securities Exchange Act, the Securities Act, the state
securities laws and the laws of any foreign jurisdiction, neither SSI nor the
Merger Sub needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(e) FILINGS WITH THE SEC. SSI has made all filings with the SEC that
it has been required to make within the past three years under the Securities
Act and the Securities Exchange Act (including any exhibits and amendments
thereto). Each such filing complied with the Securities Act and the Securities
Exchange Act in all material respects when filed. No such filing, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(f) FINANCIAL STATEMENTS. SSI has filed an Annual Report on Form
10-K for the fiscal year ended February 3, 1996 and a Quarterly Report on Form
10-Q for the fiscal quarters ended May 4, 1996, August 3, 1996 and November 2,
1996 (together the "SSI PUBLIC REPORTS"). The financial statements included in
or incorporated by reference into the SSI Public Reports have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered
28
thereby, present fairly the financial condition of SSI and its Subsidiaries as
of the indicated dates and the results of operations of SSI and its subsidiaries
for the indicated periods, are consistent with the books and records of SSI and
its Subsidiaries, and comply with the material provisions of Regulations S-K and
S-X of the Securities Act. Attached as Schedule 4(f) are the unaudited
consolidated balance sheet, income statement and cash-flow statement of SSI and
its Subsidiaries as of and for the fiscal year ended February 1, 1997 (together
with the SSI Public Reports and including the related notes and schedules, the
"SSI FINANCIAL STATEMENTS") which have been prepared in accordance with GAAP on
a basis consistent with the SSI Public Reports, except for footnote disclosures,
applied on a consistent basis throughout the periods covered thereby, present
fairly the financial condition of SSI and its Subsidiaries as of the indicated
dates and the results of operations of SSI and its Subsidiaries for the
indicated periods, and are consistent with the books and records of SSI and its
Subsidiaries.
(g) DISCLOSURE. The SSI Information contained in the Definitive CRA
Proxy Materials and the Registration Statement will not, on the date the
Registration Statement becomes effective, and the SSI Subsequent Exchange Act
Reports will not, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading. As used herein, "SSI INFORMATION"
means all information with respect to SSI or any of its Subsidiaries provided
for use in the Prospectus, Definitive CRA Proxy or the Registration Statement.
(h) INVESTMENT COMPANY. Neither SSI nor the Merger Sub is an
"investment company" as defined in Section 368(a)(3)(F)(iii) of the Code.
(i) ABSENCE OF CERTAIN DEVELOPMENTS. Except as expressly disclosed
in SSI's Filings with the SEC or in the Subsequent SSI Exchange Act Reports,
there has not been any SSI Material Adverse Effect.
(j) LITIGATION. Except as disclosed in SSI's filings with the SEC or
the Subsequent SSI Exchange Act Reports, there are no judgments, decrees,
lawsuits, actions, proceedings, claims, complaints, injunctions, orders or
investigations by or before any governmental authority pending or threatened
against SSI or its Subsidiaries (i) which could reasonably be expected to have
an SSI Material Adverse Effect, or (ii) seeking to enjoin the transactions
contemplated hereby. To SSI's knowledge, there are no existing facts or
circumstances which give any reason to believe that any such action, suit,
proceeding, hearing or investigation may be brought or threatened against SSI or
any of its Subsidiaries.
(k) TAXES. Except for such failures or omissions which could not
reasonably be expected to result in an SSI Material Adverse Effect:
(i) each of SSI and its Subsidiaries has duly and timely
filed all Tax Returns required to be filed by it, all such Tax
Returns have been prepared in
29
compliance with all applicable laws and regulations and are true,
correct and complete in all respects;
(ii) all Taxes owed by each of SSI and its Subsidiaries,
whether or not shown on any Tax Return, have been timely paid; and
(iii) SSI and its Subsidiaries have maintained adequate
provision for Taxes payable by SSI and its Subsidiaries.
(l) ENVIRONMENTAL. Except for such failures or violations which
could not reasonably be expected to result in an SSI Material Adverse Effect,
SSI and its Subsidiaries have complied and are in compliance with all applicable
Environmental Laws.
(m) EMPLOYEE BENEFITS PLAN. Except as disclosed in SSI's filings
with the SEC or in a Subsequent SSI Exchange Act Report, SSI has no material
liability for any unfunded or underfunded Benefit Plans or any material
withdrawal liability with respect to any multiemployer plan or any liability in
connection with the termination or reorganization of any multiemployer plan
which liability could reasonably be expected to have an SSI Material Adverse
Effect.
(n) BOOKS AND RECORDS. The stock records of SSI fairly and
accurately reflect in all material respects the record ownership of all of the
outstanding shares of SSI's capital stock. The other books and records of SSI
and its Subsidiaries, including financial records and books of account, are
complete and accurate in all material respects and have been maintained in
accordance with sound business practices.
(o) INSURANCE. SSI and each of its Subsidiaries is insured with
financially responsible insurers in such amounts and against such risks and
losses as are customary for companies conducting the business as conducted by
SSI and its Subsidiaries. Neither SSI nor any of its Subsidiaries has received
notice of cancellation or termination with respect to any material insurance
policy of SSI or its Subsidiaries.
(p) BROKER'S FEE. None of SSI and its Subsidiaries has any liability
or obligation to pay any fees or commissions to any broker, finder, or similar
agent with respect to the transactions contemplated by this Agreement other than
to Credit Suisse First Boston Corporation or in connection with the financing of
such transactions.
Section 5. COVENANTS. The Parties agree as follows with respect to
the period from and after the execution of this Agreement.
(a) GENERAL. Each of the Parties will use all commercially
reasonable best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not
30
waiver, of the closing conditions set forth in ss.6 below) and to assist SSI and
SRI in any efforts to renegotiate the terms of any of CRA's existing financing
or other material contracts.
(b) NOTICES AND CONSENTS. CRA will give any notices (and will cause
each of its Subsidiaries to give any notices) to any governmental authority or
third parties, and will use all commercially reasonable best efforts to obtain
(and will cause each of its Subsidiaries to use all commercially reasonable best
efforts to obtain) any governmental authority or third party consents, necessary
to the consummation of the transactions contemplated hereby, including any
consents, waivers, amendment or other action required with respect to the
Contracts and other matters listed on Schedules 3(d), 3(p) and 3(s) above. All
costs incurred in connection with such notices and consents shall be borne by
CRA.
(c) REGULATORY MATTERS AND APPROVALS. Each of the Parties will (and
CRA will cause each of its Subsidiaries to) give any notices to, make any
filings with, and use all commercially reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in ss.3(d) and ss.4(d) above. Without
limiting the generality of the foregoing:
(i) SECURITIES ACT, SECURITIES EXCHANGE ACT, AND STATE
SECURITIES LAWS. CRA will prepare and file with the SEC on or before
March 31, 1997 or as soon as practicable thereafter preliminary
proxy materials under the Securities Exchange Act relating to the
CRA Stockholder Vote. SSI and the Merger Sub will prepare and file
with the SEC a registration statement under the Securities Act
relating to the offering and issuance of the SSI Shares to be issued
in connection with the Merger (the "REGISTRATION STATEMENT"). The
filing Party in each instance will use all commercially reasonable
best efforts to respond to the comments of the SEC thereon and will
make any further filings (including amendments and supplements) in
connection therewith that may be necessary, proper, or advisable.
Each of SSI and SRI will provide CRA, and CRA will provide each of
SSI and SRI, with information and assistance necessary or desirable
in connection with the preparation of the foregoing filings and any
SEC filings or any offering memorandum or similar document by SSI or
SRI in connection with the financing of the transactions
contemplated hereby or any other required filing with the SEC that
the filing Party reasonably may request (including, in the case of
any financings by SSI or SRI, the preparation and delivery of
financial statements or related disclosure, including but not
limited to, pro forma financial data complying with the requirements
of Regulation S-X of the Securities Act). Each of SSI and the Merger
Sub will take all actions that may be necessary, proper, or
advisable under state securities laws in connection with the
offering and issuance of the SSI Shares. In addition to the
foregoing, SSI shall continue to file periodic reports with the SEC
under the Securities Exchange Act between the date of this Agreement
and the Effective Time (the "SUBSEQUENT SSI EXCHANGE ACT REPORTS")
and, in the event of an SSI Material Adverse Effect, such event will
be adequately
31
summarized in the Registration Statement or the Subsequent SSI
Exchange Act Reports.
(ii) CRA STOCKHOLDER VOTE. CRA will call a special meeting of
its stockholders (the "CRA STOCKHOLDER VOTE") as soon as reasonably
practicable in order that the stockholders may consider and vote
upon the adoption of this Agreement and the approval of the Merger
in accordance with the Survivor's Act. CRA will mail the Combined
Disclosure Document to its stockholders as soon as reasonably
practicable. The Combined Disclosure Document will contain the
affirmative recommendations of the board of directors of CRA in
favor of the adoption of this Agreement and the approval of the
Merger Sub. Notwithstanding the foregoing, nothing in this
ss.5(c)(ii) shall be construed to require any director of CRA to
take any actions or permit any events described above to the extent
that the board of directors of CRA shall conclude in good faith,
based upon the written advice of legal counsel to the board or such
director, that such action is prohibited in order for the director
to act in a manner that is consistent with his fiduciary obligations
under applicable laws.
(iii) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT AND OTHER FILINGS. CRA will file
any Notification and Report Forms or other form or report and
related material that the Parties may be required to file with the
Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act or with
any other governmental entity under the laws of any foreign
jurisdiction, will use all commercially reasonable best efforts to
obtain (and CRA will cause each of its Subsidiaries to use all
commercially reasonable best efforts to obtain) an early termination
of any applicable waiting period, and will make any further filings
pursuant thereto that may be necessary, proper, or advisable.
(d) AGREED UPON PROCEDURE LETTER/COMFORT LETTER. In connection with
the information regarding CRA or its Subsidiaries or the transactions
contemplated by this Agreement provided by CRA or its Subsidiaries specifically
for inclusion in, or incorporation by reference into, the Prospectus, the
Registration Statement or any SEC filings by SSI or SRI in connection with the
financing of the transactions contemplated hereby, CRA shall use all
commercially reasonable efforts to cause to be delivered to the board of
directors of SSI and SRI a letter of the relevant type from Deloitte & Touche
LLP, dated the date on which such Registration Statement (or such other SSI
filings) shall become effective and addressed to (i) the board of directors of
SSI, SRI or CRA and (ii) an underwriter(s) as required by SSI, in form and
substance reasonably satisfactory to SSI and customary in scope and substance
for letters delivered by independent public accountants in connection with
registrations or offerings of the relevant type. In connection with the
information regarding SSI or SRI or the transactions contemplated by this
Agreement provided by SSI or SRI specifically for inclusion in, or incorporation
by reference into, the Prospectus, the Registration Statement and the Definitive
CRA Proxy Materials, SSI shall use all commercially reasonable efforts to cause
to be delivered to the board of directors of CRA a letter of the relevant type
from
32
Price Waterhouse LLP, dated the date on which the Registration Statement shall
become effective and addressed to the board of directors of CRA, in form and
substance reasonably satisfactory to CRA and customary in scope and substance
for letters delivered by independent public accountants in connection with
registrations of the relevant type.
(e) LISTING OF SSI SHARES. SSI will cause the SSI Shares that will
be issued in the Merger to be approved for listing on the NASDAQ National Market
System, subject to official notice of issuance, prior to the Effective Time.
(f) CRA OPERATION OF BUSINESS. Prior to the Closing, except as
otherwise expressly provided herein, CRA shall, and shall cause each of its
Subsidiaries to:
(i) except as contemplated by this Agreement, operate only in
the Ordinary Course of Business;
(ii) use its reasonable best efforts to keep in full force and
effect its corporate existence and all material rights, franchises,
Proprietary Rights and goodwill relating or obtaining to its
business;
(iii) use its reasonable best efforts to retain its employees
and preserve its present relationships with customers, suppliers,
contractors, distributors and such employees, and continue to
compensate such employees consistent with past practices;
(iv) maintain the Proprietary Rights so as not to affect
adversely any registration or application for registration thereof
or the validity or enforcement thereof, maintain its other assets in
customary repair, order and condition and maintain insurance
reasonably comparable to that in effect on the date of this
Agreement; and in the event of any casualty, loss or damage to any
of such assets repair or replace such assets with assets of
comparable quality and value;
(v) use its reasonable best efforts to obtain all
authorizations, consents, waivers, approvals or other actions
necessary or desirable to consummate the transactions contemplated
hereby (including, without limitation, paying any expenses in
connection therewith) and to cause the other conditions to SSI's and
the Merger Sub's obligation to close to be satisfied;
(vi) perform in all material respects all of its obligations
under all notes, bonds, mortgages, indentures, licenses, contracts,
agreements or other instrument or obligation to which CRA or any of
its Subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound and not enter into,
assume or amend any such contract or commitment other than in the
Ordinary Course of Business;
33
(vii) prepare and file all Tax Returns and other Tax reports,
filings and amendments thereto required to be filed by it, on a
timely basis; provided, that CRA will not file or amend any income
Tax returns without the prior written consent of SSI; and
(viii) deliver to SSI and SRI (A) on or prior to March 30, 1997,
the audited consolidated balance sheet, income statement and
cash-flow statement of CRA and its Subsidiaries as of and for the
fiscal year ended February 1, 1997, in a form suitable for filing in
an Annual Report on Form 10-K, together with an independent
auditor's report in respect thereof and details explaining any
adjustments or significant differences between such audited
statements and those attached as Schedule 3(f); and (B) within 15
days of each month end from the date hereof through the Closing Date
its consolidated unaudited balance sheets, income statements and
cash flow statements as of and for the immediately preceding month.
Further, prior to the Closing, without the prior written consent of the Merger
Sub or as otherwise expressly provided herein, CRA will not, and will cause each
of its Subsidiaries not to enter into any contract, agreement or commitment or
take any other action (other than in the Ordinary Course of Business and except
for any contracts or agreements related to any retail store location currently
being negotiated by CRA or as expressly disclosed in Schedule 3(s)(i) or (ii))
which, if entered into or taken prior to the date of this Agreement, would cause
any representation or warranty of CRA to be untrue in any respect or be required
to be disclosed on the Disclosure Schedule (including, without limitation,
Schedule 3(g)); or take or omit to be taken any action, or permit its Affiliates
to take or to omit to take any action, which would have a material adverse
effect on the business, financial condition or prospects of CRA or its
Subsidiaries.
(g) FULL ACCESS. CRA will (and will cause each of its Subsidiaries
to) permit representatives of each of SSI, SRI and any of their respective
financing sources to have full access at all reasonable times, and in a manner
so as not to interfere with the normal business operations of CRA and its
Subsidiaries, to all premises, properties, personnel, books, records (including
tax records), contracts, and documents of or pertaining to each of CRA and its
Subsidiaries. Subject to the signing of a confidentiality agreement satisfactory
in form and substance to SSI, SSI will (and will cause each of its Subsidiaries
to) permit representatives of CRA to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
SSI and its Subsidiaries, to all premises, properties, personnel, books, records
(including tax records), contracts, and documents of or pertaining to each of
SSI and its Subsidiaries. No investigation by SRI heretofore or hereafter made
shall modify or otherwise affect any representations and warranties of CRA,
which shall survive any such investigation, or the conditions to the obligation
of Merger Sub or SSI to consummate the transactions contemplated hereby.
(h) NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the others of any material adverse development causing a breach of any
of its own representations and warranties in ss.3 and ss.4 above. No disclosure
by any Party pursuant to this ss.5(h), however, shall be
34
deemed to amend or supplement their respective Disclosure Schedules or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(i) ACQUISITION PROPOSALS. CRA shall not, and it shall not authorize
or permit any of its Subsidiaries, officers, directors or employees or any
advisors or agents retained by CRA or its Subsidiaries, directly or indirectly,
to (i) solicit, initiate or knowingly encourage or induce the making of any CRA
Acquisition Proposal, (ii) negotiate with any third party with respect to any
CRA Acquisition Proposal, (iii) endorse or recommend the CRA Acquisition
Proposal of any third party or (iv) enter into any Contract with any third party
with the intent to effect any CRA Acquisition Proposal. Notwithstanding the
foregoing, nothing in this ss.5(i) shall be construed to prohibit CRA or its
board of directors from taking any actions or permitting any events described
above (other than any action described in clause (i) above) to the extent that
the board of directors of CRA shall conclude in good faith, based upon the
written advice of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, P.C., that such action is
required in order for the board of directors to act in a manner that is
consistent with its fiduciary obligations under applicable law. CRA shall
promptly advise SSI orally and in writing of the receipt of any CRA Acquisition
Proposal or similar inquiry, the basic CRA Acquisition Proposal terms and the
identity of the proposed acquiror.
(j) AFFILIATE AGREEMENTS. Each of the Parties will use every
reasonable effort to ensure that each Person who would be deemed to be an
"affiliate" for purposes of Rule 144(c) under the Securities Act of SSI or of
CRA executes a written confirmation that such affiliate agrees to appropriate
restrictions on its ability to transfer SSI Shares in order to comply with Rule
145 under the Securities Act.
(k) CLOSING DOCUMENTS. CRA shall, prior to or on the Closing Date,
execute and deliver, or cause to be executed and delivered to the Merger Sub,
the documents or instruments described in Section 6(a), the Merger Sub shall,
prior to or on the Closing Date, execute and deliver, or cause to be executed
and delivered, to CRA, the documents or instruments described in Section 6(b).
(l) DIRECTORS AND OFFICER'S INSURANCE. To the extent commercially
available on terms no less favorable to SSI than the proposal submitted to SSI
prior to the date hereof, SSI shall provide each individual who served as a
director or officer of CRA at any time prior to the Effective Time with
liability insurance for a period customary for policies of this nature after the
Effective Time on terms no less favorable in coverage and amount than any
applicable insurance in effect immediately prior to the Effective Time.
(m) SEVERANCE AGREEMENTS. CRA shall, prior to or on the Closing
Date, amend the Severance Pay Plan, or enter into appropriate agreements, to
provide that any Person who has entered into an Executive Severance Agreement
shall be excluded from, and shall not be entitled to, without limitation, any
payments or benefits under the Severance Pay Plan.
35
(n) OPTION CANCELLATION AGREEMENTS. CRA shall, on or before March
31, 1997, deliver to SSI executed option cancellation agreements from the
holders of the CRA Options pursuant to which each such holder agrees not to
exercise his or her CRA Options prior to the Effective Time in exchange for the
right to receive the cash payment contemplated by ss.2(d)(vi) hereof (the
"OPTION CANCELLATION AGREEMENTS").
Section 6. CONDITIONS TO CLOSING.
(a) CONDITIONS TO OBLIGATIONS OF SSI AND MERGER SUB. The obligations
of SSI and the Merger Sub to consummate the transactions to be performed by them
in connection with the Closing are subject to satisfaction of the following
conditions. The following conditions can only be waived in writing:
(i) the representations and warranties set forth in ss.3
above shall be true and correct at and as of the Closing Date;
(ii) CRA shall have performed and complied with all of its
covenants hereunder through the Closing;
(iii) the Requisite CRA Stockholder Approval shall have been
obtained;
(iv) CRA and its Subsidiaries shall have procured all of the
consents, waivers, amendments or other actions specified in ss.5(b)
above, including, without limitation, any required consents,
waivers, amendments or other actions with respect to the Contracts
and other matters listed on Schedules 3(d), 3(p) and 3(s);
(v) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator (other than an action, suit or proceeding in
which both (A) no governmental authority is or is threatened to be a
party and (B) there is no reasonable possibility of an outcome that
would have a CRA Material Adverse Effect or an SSI Material Adverse
Effect wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (w) prevent consummation of any of the
transactions contemplated by this Agreement, (x) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation, (y) affect adversely the right of the
Surviving Corporation to own the former assets, to operate the
former businesses, and to control the former Subsidiaries of CRA, or
(z) affect adversely the right of any of the former Subsidiaries of
CRA to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(vi) there shall have been no CRA Material Adverse Effect;
36
(vii) CRA shall have delivered to SSI and the Merger Sub a
certificate to the effect that each of the conditions specified
above in ss.6(a)(i)-(vi) is satisfied in all respects;
(viii) the Registration Statement shall have become effective
under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued
and no proceeding for that purpose shall have been initiated by the
SEC;
(ix) CRA shall have delivered to the Merger Sub evidence
satisfactory to the Merger Sub of the cancellation of all
outstanding options, warrants and other equity interests;
(x) the SSI Shares that will be issued in the Merger shall
have been approved for listing on NASDAQ, subject to official notice
of issuance;
(xi) all applicable waiting periods (and any extensions
thereof) under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and under the laws of any
foreign jurisdiction shall have expired or otherwise been terminated
and the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies
referred to in ss.3(d) and ss.4(d) above;
(xii) each of SSI and the Merger Sub shall have received from
counsel to CRA opinions as to corporate and tax matters (including
that the Merger will qualify as a reorganization under Section
368(a)(2)(D) of the Code) dated as of the Closing Date and addressed
to, and in form and substance reasonably satisfactory to, each of
SSI and the Merger Sub;
(xiii) CRA shall have terminated, to the extent requested by
SSI, any and all existing stockholders agreements, and any and all
similar agreements or arrangements, to which CRA is a party;
(xiv) no Triggering Event shall have occurred;
(xv) the SSI Average Closing Price shall not be less than
$15.00;
(xvi) no more than 7.5% of the outstanding CRA Shares
constitute Dissenting Shares;
(xvii) SSI and SRI shall have received the cash proceeds of
financing necessary for SSI and SRI to consummate the Merger as
contemplated herein, pay all costs and expenses associated therewith
and provide for the ongoing working capital
37
needs of the Surviving Corporation at commercially reasonable rates
and otherwise on terms satisfactory to SRI; and
(xviii) all actions to be taken by CRA in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
affect the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to SSI and Merger Sub.
(b) CONDITIONS TO OBLIGATIONS OF CRA. The obligation of CRA to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions. The following conditions
can only be waived in writing.
(i) the representations and warranties set forth in ss.4
above shall be true and correct at and as of the Closing Date;
(ii) each of SSI and the Merger Sub shall have performed and
complied with all of its covenants hereunder through the Closing;
(iii) the Registration Statement shall have become effective
under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued
and no proceeding for that purpose shall have been initiated by the
SEC;
(iv) the SSI Shares that will be issued in the Merger Sub
shall have been approved for listing on the NASDAQ National Market
System, subject to official notice of issuance;
(v) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator (other than an action, suit or proceeding in
which both (A) no governmental authority is or is threatened to be a
party and (B) there is no reasonable possibility of an outcome that
would have a material adverse effect on CRA or SSI wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (w) prevent consummation of any of the transactions
contemplated by this Agreement, (x) cause any of the transactions
contemplated by this Agreement to be rescinded following
consummation, (y) affect adversely the right of the Surviving
Corporation to own the former assets, to operate the former
businesses, and to control the former Subsidiaries of CRA, or (z)
affect adversely the right of any of the former Subsidiaries of CRA
to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(vi) There shall have been no SSI Material Adverse Effect.
38
(vii) each of SSI and the Merger Sub shall have delivered to
CRA a certificate to the effect that each of the conditions
specified above in ss.6(b)(i)-(vi) is satisfied in all respects;
(viii) the Requisite CRA Stockholder Approval shall have been
obtained;
(ix) all applicable waiting periods (and any extensions
thereof) under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and under the laws of any
foreign jurisdiction shall have expired or otherwise been terminated
and the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies
referred to in ss.3(d) and ss.4(d) above;
(x) CRA shall have received from counsel to SSI and the
Merger Sub opinions as to corporate and tax matters (including that
the Merger will qualify as a reorganization under Section
368(a)(2)(D) of the Code) dated as of the Closing Date and addressed
to, and in form and substance reasonably satisfactory to, CRA; and
(xi) all actions to be taken by each of SSI and the Merger Sub
in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instrument, and other
documents required to affect the transactions contemplated hereby
shall be reasonably satisfactory in form and substance to CRA.
Section 7. TERMINATION AND ITS CONSEQUENCES.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement by mutual written consent at any time prior to the Effective Time. In
addition, any Party may terminate this Agreement with the prior authorization of
its board of directors (whether before or after stockholder approval) as
provided below:
(i) Any Party may terminate this Agreement by giving written
notice to the other Party at any time prior to the Effective Time,
if the Closing has not occurred on or before July 15, 1997, by
reason of the failure of any condition precedent under ss.ss.6(a) or
6(b) hereof (excluding subparagraphs (i) and (ii) of each such
subsection). Whereupon all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any
other Party except as provided in ss.7(b).
(ii) Any Party may terminate this Agreement by giving written
notice to the other Party at any time prior to the Effective Time,
if the Closing has not occurred on or before July 15, 1997, by
reason of the other Party's breach of any material representation,
warranty or covenant contained in this Agreement, of which the
nonbreaching Party has notified the breaching Party of the breach,
and the breach has continued without cure for a period of 10 days
after the notice of breach or such
39
lesser period as remains between the date of the notice and July 15,
1997. If any Party terminates this Agreement pursuant to this
ss.7(a)(ii), all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to the other
Party, except for any liability of any Party then in breach,
including any liability as provided in ss. 7(b).
(b) CONSEQUENCES OF CERTAIN TERMINATIONS.
(i) In consideration of the time and expense (including
foregoing other opportunities) that SSI and SRI have invested in the
transactions contemplated hereby, if this Agreement is terminated by
either SSI or the Merger Sub due to the occurrence of a Triggering
Event, then CRA shall pay to SSI upon such termination, in
immediately available funds, a fee of $3,500,000 (plus all expenses
and charges incurred by SSI, SRI and the Merger Sub in connection
with this Agreement).
(ii) If the Requisite CRA Stockholder Approval is not obtained
at the CRA Stockholder Vote but no Triggering Event has occurred and
no CRA Acquisition Proposal has been made, then CRA shall reimburse
SSI for all expenses and charges incurred by SSI, SRI or the Merger
Sub in connection with this Agreement.
(iii) If this Agreement is terminated by SSI because of the
failure to satisfy the conditions set forth in (A) ss.6(a)(xv) or
(B) ss.6(a)(xvii) other than as a result of CRA Material Adverse
Effect, then SSI shall pay to CRA upon such termination, in
immediately available funds, a fee of $3,500,000 (plus all expenses
and charges incurred by CRA in connection with this Agreement).
(iv) Concurrently with the execution of this Agreement, SSI
and CRA have entered into the Termination Option Agreement which
will become immediately exercisable in accordance with its terms (A)
if any of the events described in subsection (ii) or (iii) of the
definition of Triggering Event occur, (B) the board of directors of
CRA shall approve, endorse or recommend any CRA Acquisition Proposal
within six months of the termination of this Agreement or (C) any
Person or Group (as defined in Section 13(d)(3) of the Securities
Exchange Act) within six months of the termination of this Agreement
acquires beneficial ownership of more than 50% of the outstanding
common stock of CRA.
(v) If this Agreement is terminated by CRA because the board
of directors of SSI shall have withdrawn its approval of this
Agreement for any reason, other than as provided in ss. 7(a), then
SSI shall reimburse CRA for all expenses and charges incurred by CRA
in connection with this Agreement.
40
(vi) The Parties hereto acknowledge that the agreements made
in this ss.7(b) are integral to this Agreement and without such
agreements the Parties would not enter into this Agreement.
Section 8. MISCELLANEOUS.
(a) SURVIVAL. None of the representations, warranties, and covenants
of the Parties (other than the provisions in ss.7 above) will survive the
Effective Time.
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Other than required by
this Agreement, no Party shall issue any press release or make any public
announcement (including SEC filings) prior to the Effective Time and relating to
the subject matter of this Agreement without the prior written approval of the
other Parties; PROVIDED, HOWEVER, that any Party may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case the
disclosing Party will use all commercially reasonable best efforts to advise the
other Parties prior to making the disclosure).
(c) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(d) ENTIRE AGREEMENT. This Agreement (including the Disclosure
Schedules and the documents referred to herein) constitutes the entire agreement
between the Parties and supersedes any prior understandings, agreements, or
representations by or between the Parties, written or oral, to the extent they
related in any way to the subject matter hereof, except that the Confidentiality
and Standstill Agreement dated September 25, 1996 between SRI and CRA shall
survive the execution and the termination of this Agreement.
(e) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified
41
mail, return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
IF TO CRA: COPY TO:
▇.▇. ▇▇▇▇▇▇▇ Company ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Attention: N. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO SSI OR THE MERGER SUB: COPY TO:
Stage Stores, Inc. ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(I) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT
TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF
ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.
(j) AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; PROVIDED, HOWEVER,
that any amendment effected subsequent to stockholder approval will be subject
to the restrictions contained in the Texas Act and the Oklahoma Act. No
amendment or other modification of any provision of this Agreement and no waiver
of any provision hereof or any right or benefit hereunder shall be valid unless
the same shall be in writing and signed by each of the Parties. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
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(k) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) EXPENSES. Except as set forth in ss.7, each of the Parties will
bear its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
(n) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(o) WAIVER OF JURY TRIAL. The Parties hereby waive any right they
may have to trial by jury in respect of any litigation based on, arising out of,
under or in connection with this agreement or any course of conduct, course of
dealing, verbal or written statement or action of any party hereto.
(p) TIME IS OF THE ESSENCE; COMPUTATION OF TIME. Time is of the
essence for each and every provision of this Agreement. Whenever the last day
for the exercise of any privilege or the discharge of any duty hereunder shall
fall upon a Saturday, Sunday, or any date on which banks in New York, New York
are authorized to be closed, the party having such privilege or duty may
exercise such privilege or discharge such duty on the next succeeding day which
is a regular business day.
(q) SPECIFIC PERFORMANCE. Each of the Parties acknowledges that the
rights created hereby are unique and recognizes and affirms that in the event of
a breach of this Agreement irreparable harm would be caused, money damages may
be inadequate and an aggrieved party may have no adequate remedy at law.
Accordingly, each of the parties agrees that the other party shall have the
right, in addition to any other rights and remedies existing in its favor at law
or in equity, to enforce its rights and the obligations of the other party
hereunder not only by an action or actions for damages but also by an action or
actions for specific performance, injunctive and/or other equitable relief
(without posting of bond or other security).
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
STAGE STORES, INC.
By:________________________
Name:
Title:
▇.▇. ▇▇▇▇▇▇▇ COMPANY
By:________________________
Name:
Title:
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