AGREEMENT AND PLAN OF MERGER
by and among
VF CORPORATION
SEQUOIA ACQUISITION, INC.
and
THE NORTH FACE, INC.
dated
April 7, 2000
TABLE OF CONTENTS
Page
ARTICLE I THE OFFER AND MERGER................................................... 2
Section 1.1 The Offer................................................... 2
Section 1.2 Company Actions............................................. 3
Section 1.3 Directors................................................... 4
Section 1.4 The Merger.................................................. 5
Section 1.5 Effective Time.............................................. 6
Section 1.6 Closing..................................................... 6
Section 1.7 Directors and Officers of the Surviving Corporation......... 6
Section 1.8 Effects of the Merger....................................... 6
Section 1.9 Stockholders' Meeting....................................... 6
Section 1.10 Merger Without Meeting of Stockholders...................... 7
Section 1.11 Earliest Consummation....................................... 7
ARTICLE II CONVERSION OF SECURITIES.............................................. 7
Section 2.1 Conversion of Capital Stock................................. 7
Section 2.2 Dissenting Shares........................................... 8
Section 2.3 Surrender of Shares; Stock Transfer Books................... 8
Section 2.4 Company Stock Plans......................................... 10
Section 2.5 Adjustments................................................. 11
Section 2.6 Lost Certificates........................................... 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................ 11
Section 3.1 Corporate Existence and Power............................... 11
Section 3.2 Corporate Authorization..................................... 12
Section 3.3 Consents And Approvals; No Violations....................... 12
Section 3.4 Capitalization.............................................. 13
Section 3.5 Subsidiaries................................................ 14
Section 3.6 SEC Documents............................................... 14
Section 3.7 Financial Statements........................................ 15
Section 3.8 Absence Of Undisclosed Liabilities.......................... 15
Section 3.9 Information in Proxy Statement and Offer Documents.......... 15
Section 3.10 Absence of Certain Changes.................................. 16
Section 3.11 Taxes....................................................... 17
Section 3.12 Employee Matters............................................ 18
Section 3.13 Litigation; Compliance With Laws............................ 20
Section 3.14 Labor Matters............................................... 20
Section 3.15 Certain Contracts and Arrangements.......................... 21
Section 3.16 Environmental Matters....................................... 21
Section 3.17 Intellectual Property....................................... 22
Section 3.18 Opinion Of Financial Advisor................................ 23
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TABLE OF CONTENTS
(continued)
Page
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Section 3.19 Board Recommendation................................................ 23
Section 3.20 Rights Plan; Antitakover Statues.................................... 23
Section 3.21 Finders' Fees....................................................... 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER........................ 24
Section 4.1 Corporate Existence and Power....................................... 24
Section 4.2 Authorization....................................................... 24
Section 4.3 Consents And Approvals; No Violations............................... 25
Section 4.4 Information in Proxy Statement...................................... 26
Section 4.5 Share Ownership..................................................... 26
Section 4.6 Financing........................................................... 26
Section 4.7 Finders' Fees....................................................... 26
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER......................................... 26
Section 5.1 Acquisition Proposals............................................... 26
Section 5.2 Interim Operations of the Company................................... 27
Section 5.3 No Solicitation..................................................... 27
Section 5.4 Notices of Certain Events........................................... 28
ARTICLE VI ADDITIONAL AGREEMENTS......................................................... 29
Section 6.1 Proxy Statement..................................................... 29
Section 6.2 Meeting of Stockholders of the Company.............................. 29
Section 6.3 Additional Agreements............................................... 29
Section 6.4 Access; Confidentiality............................................. 29
Section 6.5 Consents and Approvals.............................................. 30
Section 6.6 Publicity........................................................... 30
Section 6.7 Directors' and Officers' Insurance and Indemnification.............. 30
Section 6.8 Purchaser Compliance................................................ 31
Section 6.9 Best Efforts........................................................ 31
Section 6.10 Employee Benefits................................................... 32
Section 6.11 Further Assurances.................................................. 32
ARTICLE VII CONDITIONS................................................................... 33
Section 7.1 Conditions to Each Party's Obligations to Effect the Merger......... 33
ARTICLE VIII TERMINATION................................................................. 33
Section 8.1 Termination......................................................... 33
Section 8.2 Effect of Termination............................................... 34
ARTICLE IX MISCELLANEOUS................................................................. 35
Section 9.1 Amendment and Modification.......................................... 35
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TABLE OF CONTENTS
(continued)
Section 9.2 Non-Survival of Representations and Warranties.................. 35
Section 9.3 Expenses........................................................ 35
Section 9.4 Notices......................................................... 36
Section 9.5 Interpretation.................................................. 37
Section 9.6 Counterparts.................................................... 37
Section 9.7 Entire Agreement; No Third Party Beneficiaries.................. 37
Section 9.8 Severability.................................................... 38
Section 9.9 Specific Performance............................................ 38
Section 9.10 Governing Law................................................... 38
Section 9.11 Jurisdiction.................................................... 38
Section 9.12 WAIVER OF JURY TRIAL............................................ 38
Section 9.13 Assignment...................................................... 38
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated April 7, 2000, by and
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among VF Corporation, a Pennsylvania corporation ("Parent"), Sequoia Acquisition
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Inc., a Delaware corporation and a wholly owned subsidiary of Parent
("Purchaser"), and The North Face, Inc., a Delaware corporation (together with
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its subsidiaries from time to time (except as the context may otherwise
require), (the "Company")).
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WHEREAS, the Board of Directors of each of Parent, Purchaser and the
Company has approved, and deems it advisable and in the best interests of its
respective stockholders to consummate, the acquisition of the Company by Parent
upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance thereof, it is proposed that Purchaser make a cash
tender offer (the "Offer") to acquire all shares (the "Shares") of the issued
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and outstanding common stock, par value $0.0025 per share, of the Company
(including the associated preferred share purchase rights issued pursuant to the
Rights Agreement (as defined in Section 3.20)), for $2.00 per share, net to the
seller in cash (such price, or any such higher price per Share as may be paid in
the Offer, being referred to herein as the "Offer Price" and the aggregate being
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referred to herein as the "Offer Consideration");
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WHEREAS, also in furtherance of such acquisition, the Board of Directors of
each of Parent, Purchaser and the Company have each approved the Merger (as
defined below) following the Offer in accordance with the General Corporation
Law of the State of Delaware (the "DGCL") and upon the terms and subject to the
----
conditions set forth herein, whereby each issued and outstanding Share not owned
directly or indirectly by Parent, Purchaser or the Company will be converted
into the right to receive an amount equal to the Offer Price in cash; and
WHEREAS, the Board of Directors of the Company (the "Company Board of
----------------
Directors") has determined that the consideration to be paid for each Share in
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the Offer and the Merger is fair to the holders of such Shares and has resolved
to recommend that the holders of such Shares accept the Offer and approve this
Agreement and each of the transactions contemplated hereby upon the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer.
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(a) Provided that this Agreement shall not have been terminated in
accordance with Article VIII hereof and none of the events set forth in Annex A
shall have occurred and be existing, as promptly as practicable (but in no event
later than the later of (i) ten business days after a public announcement of the
execution of this Agreement and (ii) the first business day following the filing
by the Company with the United States Securities and Exchange Commission (the
"SEC") of its Annual Report on Form 10-K for the Fiscal Year Ended December 31,
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1999 (the "1999 10-K")), Purchaser shall, and Parent shall cause Purchaser to,
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commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) the Offer at the Offer Price. Subject
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only to the conditions set forth in Annex A hereto, Purchaser shall, and Parent
shall cause Purchaser to, accept for payment and pay for all Shares validly
tendered and not withdrawn pursuant to the Offer prior to its expiration date.
The Offer shall be made by means of an offer to purchase (the "Offer to
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Purchase") subject to the conditions set forth in Annex A hereto. Purchaser
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expressly reserves the right to waive any conditions to the Offer and to make
any change in the terms or conditions to the Offer, provided that, except as
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provided in Section 1.1(d), Purchaser shall not, without the prior consent of
the Company, (i) decrease the Offer Price or change the form of consideration
payable in the Offer, (ii) decrease the number of Shares sought to be purchased
in the Offer, (iii) impose conditions to the Offer in addition to those set
forth in Annex A, (iv) amend any condition of the Offer set forth in Annex A, or
(v) amend or waive satisfaction of the Minimum Condition (as defined in Annex A
hereto). Purchaser shall on the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, accept for payment, and pay for, Shares
tendered as soon as it is legally permitted to do so under applicable law,
subject to Section 1.1(d) (the "Acceptance Date"). Parent shall provide or
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cause to be provided to Purchaser on a timely basis the funds necessary to
accept for payment, and pay for, any Shares that Purchaser becomes obligated to
accept for payment, and pay for, pursuant to the Offer.
(b) As soon as practicable on the date the Offer is commenced,
Parent and Purchaser shall file with the SEC a Statement on Schedule TO
(together with all amendments and supplements thereto and including the exhibits
thereto, the "Schedule TO") with respect to the Offer. The Schedule TO will
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contain (including as an exhibit) or incorporate by reference the Offer to
Purchase and a form of letter of transmittal and summary advertisement
(collectively, together with any amendments and supplements thereto, the "Offer
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Documents"). Parent and Purchaser agree that the Offer Documents will comply in
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all material respects with the provisions of applicable Federal securities laws
and shall not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
(c) Each of Parent and Purchaser will take all steps necessary to
cause the Offer Documents to be filed with the SEC as promptly as practicable
after the public announcement of the
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execution of this Agreement. Each of Parent and Purchaser will promptly correct
any information in the Offer Documents if and to the extent that it shall have
become false or misleading in any material respect, and Purchaser further will
take all steps necessary to cause the Schedule TO or the Offer Documents as so
corrected to be filed with the SEC and to be disseminated to holders of the
Shares, in each case as promptly as practicable. The Company and its counsel
shall be given the reasonable opportunity to review the Offer Documents,
including the initial Schedule TO (as well as all amendments or supplements
thereto), before any such document is filed with the SEC. In addition, Parent
and Purchaser will provide the Company and its counsel with any comments or
other communications, whether written or oral, Parent, Purchaser or their
counsel may receive from time to time from the SEC or its staff with respect to
the Offer Documents promptly after the receipt of such comments or other
communications.
(d) The Offer shall be made by means of an Offer to Purchase which
shall provide for an initial expiration date of twenty (20) business days from
the date of commencement (the "Initial Expiration Date"). Parent and Purchaser
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agree that Purchaser shall not terminate or withdraw the Offer or extend the
expiration date of the Offer unless at the expiration date of the Offer the
conditions to the Offer shall not have been satisfied or earlier waived;
provided that notwithstanding the foregoing, Purchaser may, without the consent
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of the Company, extend the Offer on one occasion following the time that all of
the conditions to the Offer have been satisfied as of the scheduled expiration
date of the Offer for a period not to exceed five (5) business days, if the
number of Shares tendered, together with any Shares beneficially owned by Parent
or Purchaser or any other subsidiary of Parent, is less than 90% of the Shares
outstanding on the scheduled expiration date of the Offer; provided, further,
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that if Purchaser elects to extend the Offer as set forth in the immediately
preceding proviso, the obligation of Purchaser, and of Parent to cause Purchaser
to, accept for payment, purchase and pay for all of the Shares tendered pursuant
to the Offer and not withdrawn shall be subject only to the Minimum Condition
and the conditions set forth in Sections (a), (b) and (g) of Annex A.
Section 1.2 Company Actions
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(a) The Company represents that the Company Board of Directors has
(i) unanimously determined that each of the Agreement, the Offer and the Merger
are fair to and in the best interests of the stockholders of the Company, (ii)
duly approved this Agreement and the transactions contemplated hereby, including
the Offer and the Merger (collectively, the "Transactions"), and such approval
------------
is sufficient to render Section 203 of the DGCL inapplicable to this Agreement,
and (iii) subject to the terms and conditions of this Agreement, resolved to
recommend that the stockholders of the Company accept the Offer and tender their
shares thereunder to Purchaser and approve and adopt this Agreement and the
Merger. The Company further represents that Deutsche Bank Securities Inc. ("DB")
--
has delivered to the Company's Board of Directors its written opinion that the
consideration to be paid in the Offer and the Merger is fair to the holders of
Shares from a financial point of view. The Company will promptly furnish Parent
with a list of its stockholders, mailing labels and any available listing or
computer file containing the names and addresses of all record holders of Shares
and lists of securities positions of Shares held in stock depositories, in each
case true and correct as of the most recent practicable date, and will
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provide to Parent such additional information (including updated lists of
stockholders, mailing labels and lists of securities positions) and such other
assistance as Parent may reasonably request in connection with the Offer.
(b) As soon as practicable on the date the Offer is commenced, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with all amendments or supplements thereto and
including the exhibits thereto, the "Schedule 14D-9") which shall, subject to
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Section 5.3 of this Agreement, contain the recommendation referred to in clause
(iii) of Section 1.2(a) hereof. The Schedule 14D-9 will comply in all material
respects with the provisions of applicable federal securities laws and, on the
date filed with the SEC and on the date first published or sent to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. The Company further agrees to take all steps
necessary to cause the Schedule 14D-9 to be filed with the SEC and to be
disseminated to holders of the Shares, in each case, as and to the extent
required by applicable federal securities laws. The Company shall mail, or cause
to be mailed, such Schedule 14D-9 to the stockholders of the Company at the same
time the Offer Documents are first mailed to the stockholders of the Company
together with such Offer Documents. The Company agrees promptly to correct any
information in the Schedule 14D-9 if and to the extent that it shall have become
false or misleading in any material respect and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed
with the SEC and to be disseminated to holders of the Shares, in each case, as
and to the extent required by applicable federal securities laws. Parent and its
counsel shall be given the opportunity to review and comment on the Schedule
14D-9 and any other material to be filed by the Company with the SEC in
connection with the Offer before it is filed with the SEC. In addition, the
Company agrees to provide Parent, Purchaser and their counsel with any comments,
whether written or oral, that the Company or its counsel may receive from time
to time from the SEC or its staff with respect to the Schedule 14D-9 promptly
after the receipt of such comments or other communications.
Section 1.3 Directors
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(a) Subject to compliance with applicable law, promptly upon the
purchase by Purchaser pursuant to the Offer of such number of Shares which
represents a majority of all outstanding Shares on a fully diluted basis, Parent
shall be entitled to designate the number of directors, rounded up to the next
whole number, on the Company Board of Directors as is equal to the product of
(i) the total number of directors on such Board (determined after giving effect
to the directors designated by Parent pursuant to this sentence) and (ii) the
percentage (expressed as a decimal) that the aggregate number of Shares
beneficially owned by Parent bears to the total number of Shares then
outstanding. In furtherance thereof, the Company shall, upon the request of
Parent promptly secure the resignations of such number of its incumbent
directors as is necessary to enable Parent's designees to be elected to the
Company Board of Directors and shall take all actions available to the Company
to cause Parent's designees to be so elected, subject to compliance with Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.
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(b) The Company shall promptly take all actions required pursuant
to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in
order to fulfill its obligations under Section 1.3(a) hereof, and shall include
in the Schedule 14D-9 mailed to stockholders promptly after the commencement of
the Offer (or an amendment thereof or an information statement pursuant to Rule
14f-1 if Purchaser has not theretofore designated directors) such information
with respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-1 in order to fulfill its obligations under Section
1.3(a). Parent or Purchaser shall supply the Company information with respect to
either of them and their nominees, officers, directors and affiliates required
by such Section 14(f) and Rule 14f-1.
(c) In the event that Parent's designees are elected to the
Company Board of Directors, subject to the other terms of this Agreement and
until the Effective Time, the Company Board of Directors shall have at least two
directors who are directors on the date hereof and neither of whom is an officer
of the Company nor a designee, stockholder, affiliate or associate (within the
meaning of the federal securities laws) of Parent (one or more of such
directors, the "Independent Directors"), provided that, in such event, if the
--------------------- -------- ----
number of Independent Directors shall be reduced below two for any reason
whatsoever, any remaining Independent Director shall be entitled to designate
persons to fill such vacancies who shall be deemed Independent Directors for
purposes of this Agreement or, if no Independent Director then remains, the
other directors shall designate one person to fill one of the vacancies who
shall not be a stockholder, affiliate or associate of Parent or Purchaser and
such person shall be deemed to be an Independent Director for purposes of this
Agreement. Notwithstanding anything in this Agreement to the contrary, in the
event that Parent's designees are elected to the Company Board of Directors,
after the acceptance for payment of Shares pursuant to the Offer and prior to
the Effective Time, the affirmative vote of a majority of the Independent
Directors shall be required to (a) amend or terminate this Agreement on behalf
of the Company, (b) exercise or waive any of the Company's rights, benefits or
remedies hereunder, (c) extend the time for performance of Purchaser's
obligations hereunder or (d) take any other action by the Company Board of
Directors under or in connection with this Agreement.
Section 1.4 The Merger. In accordance with the applicable provisions of
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this Agreement and the DGCL, at the Effective Time (as defined in Section 1.5),
the Company and Purchaser shall consummate a merger (the "Merger") pursuant to
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which (a) Purchaser shall be merged with and into the Company and the separate
corporate existence of Purchaser shall thereupon cease, (b) the Company shall be
the successor or surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation") and shall continue to be governed by
---------------------
the laws of the State of Delaware, and (c) the separate corporate existence of
the Company with all of its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger, except as set forth in this
Section 1.4. Pursuant to the Merger, (x) the Certificate of Incorporation of
the Company (the "Certificate of Incorporation") shall be amended in its
----------------------------
entirety to read as the Certificate of Incorporation of Purchaser in effect
immediately prior to the Effective Time, except that Article I thereof shall
read as follows: "The name of the Corporation is THE NORTH FACE, INC." and, as
so amended, shall be the certificate of incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Certificate of
Incorporation and (y) the Bylaws of Purchaser (the "Bylaws"), as in effect
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immediately prior to the Effective Time (as hereinafter defined), shall be
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the Bylaws of the Surviving Corporation until thereafter amended as provided by
law, such Certificate of Incorporation or such Bylaws.
Section 1.5 Effective Time. As soon as practicable after the satisfaction
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or waiver of the conditions set forth in Article VII hereof, Parent, Purchaser
and the Company shall cause to be executed and filed on the Closing Date (as
defined in Section 1.6) (or on such other date as Parent and the Company may
agree) with the Secretary of State of the State of Delaware (the "Secretary of
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State") in the manner required by the DGCL a certificate of merger, and the
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parties shall take such other and further actions as may be required by law to
make the merger effective. The time the Merger becomes effective in accordance
with applicable law is hereinafter referred to as the "Effective Time."
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Section 1.6 Closing. The closing of the Merger (the "Closing") shall take
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place at 10:00 a.m. on a date to be specified by the parties, which shall be no
later than the second business day after satisfaction or waiver of all of the
conditions set forth in Article VII hereof (the "Closing Date"), at the offices
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of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, unless another date or
place is agreed to in writing by the parties hereto.
Section 1.7 Directors and Officers of the Surviving Corporation. Subject
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to applicable law, the directors of Purchaser and the officers of the Company at
the Effective Time shall, from and after the Effective Time, be the directors
and officers of the Surviving Corporation until their successors shall have been
duly elected or appointed or qualified or until their earlier death, resignation
or removal in accordance with the Certificate of Incorporation and the Bylaws.
If, at the Effective Time, a vacancy shall exist on the Company Board of
Directors or in any office of the Surviving Corporation, such vacancy may
thereafter be filled in the manner provided by law.
Section 1.8 Effects of the Merger. At the Effective Time, the Merger
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shall have the effects set forth in the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, powers and franchises of the Company and Purchaser shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Purchaser shall become the debts, liabilities and duties of the
Surviving Corporation.
Section 1.9 Stockholders' Meeting. If required by the Certificate of
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Incorporation and/or applicable law in order to consummate the Merger, the
Company, acting through its Board of Directors, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Special Meeting") as promptly as practicable
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following the acceptance for payment and purchase of Shares by Purchaser
pursuant to the Offer for the purpose of considering and taking action upon the
approval of the Merger and the adoption of this Agreement; and otherwise comply
with all legal requirements applicable to such meeting. Subject to Section 5.3,
the Board of Directors of the Company shall recommend the approval and adoption
of the Merger, this Agreement and the transactions contemplated hereby to the
Company's stockholders;
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(ii) promptly prepare and file with the SEC a preliminary
proxy or information statement relating to the Merger and this Agreement and use
its best efforts (x) to obtain and furnish the information required to be
included by the SEC in the Proxy Statement (as hereinafter defined) and to
respond promptly to any comments made by the SEC with respect to the preliminary
proxy or information statement and cause a definitive proxy or information
statement, including any amendment or supplement thereto (the "Proxy Statement")
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and all other proxy materials to be mailed to its stockholders, and (y) to
obtain the necessary approvals of the Merger, Agreement and the transactions
contemplated hereby by its stockholders; and
(iii) subject to Section 5.3, include in the Proxy
Statement the recommendation of the Board of Directors that stockholders of the
Company vote in favor of the approval of the Merger and the adoption of this
Agreement.
(b) Parent will provide the Company with the information
concerning Parent and Purchaser required to be included in the Proxy Statement.
Parent shall vote, or cause to be voted, all of the Shares then owned by it and
Purchaser or any of its other subsidiaries and affiliates in favor of the
approval of the Merger and the approval and adoption of this Agreement
Section 1.10 Merger Without Meeting of Stockholders. Notwithstanding
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Section 1.9 hereof, in the event that Parent, Purchaser and any other
subsidiaries of Parent shall have acquired in the aggregate at least 90% of the
outstanding Shares pursuant to the Offer or otherwise, the parties hereto shall
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the acceptance for payment of and payment
for Shares by Purchaser pursuant to the Offer, without a meeting of stockholders
of the Company, in accordance with the DGCL.
Section 1.11 Earliest Consummation. Each party hereto shall use its best
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efforts to consummate the Merger as soon as practicable.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
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virtue of the Merger and without any action on the part of the holders of any
Shares or holders of any class or series of common stock, par value $1.00 per
share, of Purchaser ("Purchaser Common Stock"):
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(a) Each issued and outstanding share of Purchaser Common Stock
shall be converted into and become one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
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(b) All Shares held by the Company as treasury stock or owned by
Parent, Purchaser or any other subsidiary of Parent shall be cancelled and
retired, and shall cease to exist and no consideration shall be delivered in
exchange therefor.
(c) Each issued and outstanding Share immediately before the
Effective Time (other than any Shares to be cancelled pursuant to Section 2.1(b)
and any Dissenting Shares (as hereinafter defined)) shall be cancelled and
extinguished and be converted into the right to receive the Offer Price in cash,
payable to the holder thereof, without interest (the "Merger Consideration"),
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upon surrender of the certificate formerly representing such Share in the manner
provided in Section 2.3 hereof.
Section 2.2 Dissenting Shares. Notwithstanding Section 2.1 hereof, Shares
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outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such shares in accordance with the DGCL ("Dissenting
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Shares") shall not be converted into the right to receive the Merger
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Consideration as provided in Section 2.1, unless and until such holder fails to
perfect or withdraws or otherwise loses his right to appraisal and payment under
the DGCL. If, after the Effective Time, any such holder fails to perfect or
withdraws or loses his right to appraisal, then such Dissenting Shares shall
thereupon be treated as if they had been converted as of the Effective Time into
the right to receive the Merger Consideration, if any, to which such holder is
entitled, without interest or dividends thereon. The Company shall give Parent
prompt notice of any demands received by the Company for appraisal of Shares,
and Parent shall have the right to participate in all negotiations and
proceedings with respect to such demands. Except with the prior written consent
of Parent, the Company shall not make any payment with respect to, or settle or
offer to settle, any such demands.
Section 2.3 Surrender of Shares; Stock Transfer Books.
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(a) Before the consummation of the Merger, (i) Purchaser shall
designate a bank or trust company reasonably acceptable to the Company to act as
paying agent for the holders of Shares (the "Paying Agent") for the payment of
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the Merger Consideration, and (ii) Parent shall deposit or shall cause to be
deposited with the Paying Agent in a separate fund established for the benefit
of the holders of Shares, for payment in accordance with this Article II,
through the Paying Agent (the "Payment Fund"), immediately available funds in
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amounts necessary to make the payments pursuant to the Merger to holders of
Shares. The Paying Agent shall invest portions of the Payment Fund as Parent
directs in obligations of or guaranteed by the United States of America, in
commercial paper obligations receiving the highest investment grade rating from
both ▇▇▇▇▇'▇ Investors Services, Inc. and Standard & Poor's Corporation, or in
certificates of deposit, bank repurchase agreements or banker's acceptances of
commercial banks with capital exceeding $1,000,000,000 (collectively, "Permitted
---------
Investments"); provided, however, that the maturities of Permitted Investments
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shall be such as to permit the Paying Agent to make prompt payment to former
holders of Shares entitled thereto as contemplated by this Agreement. Parent
shall cause the Payment Fund to be promptly replenished to the extent of any
losses incurred as a result of Permitted Investments. If for any reason
(including losses) such funds are inadequate to pay the amounts to
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which holders of Shares shall be entitled under this Agreement, Parent shall in
any event be liable for payment thereof. Such funds deposited with the Paying
Agent pursuant to this Section 2.3 shall not be used for any purpose except as
expressly provided in this Agreement. From time to time at or after the
Effective Time, Parent shall take all lawful action necessary to make the
appropriate cash payments, if any, to holders of Dissenting Shares. Prior to the
Effective Time, Parent shall enter into appropriate commercial arrangements to
ensure effectuation of the immediately preceding sentence.
(b) As soon as reasonably practicable after the Effective Time,
the Paying Agent shall mail to each holder of record of a certificate or
certificates, which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates"), whose Shares were converted pursuant to
------------
Section 2.1 into the right to receive the Merger Consideration (i) a letter of
transmittal (which shall specify that delivery shall be effected and that the
risk of loss of and title to the Certificates shall pass, only upon delivery of
the Certificates to the Paying Agent and shall be in such form and have such
other provisions not inconsistent with this Agreement as Parent may specify) and
(ii) instructions for use in effecting the surrender of Certificates in exchange
for payment of the Merger Consideration (together, the "Transmittal Documents").
---------------------
Upon surrender of a Certificate for cancellation to the Paying Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
represented by such Certificate, and the Certificate so surrendered shall
forthwith be cancelled. If payment of the Merger Consideration is to be made to
a person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall otherwise be in proper form for
transfer and that the person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.3, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.3.
Upon the surrender of Certificates in accordance with the terms and instructions
contained in the Transmittal Documents, Purchaser shall cause the Paying Agent
to pay the holder of such Certificates in exchange therefor cash in an amount
equal to the Merger Consideration multiplied by the number of Shares represented
by such Certificate (other than Certificates representing Dissenting Shares and
Certificates representing Shares held by Purchaser).
(c) At the Effective Time, the stock transfer books of the Company
shall be closed and there shall not be any further registration of transfers of
shares of any shares of capital stock thereafter on the records of the Company.
From and after the Effective Time, the holders of certificates evidencing
ownership of the Shares outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such Shares, except as otherwise
provided for herein or by applicable law. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be cancelled
and exchanged for cash as provided in this Article II. No interest shall accrue
or be paid on any cash payable upon the surrender of a Certificate or
Certificates which immediately before the Effective Time represented outstanding
Shares.
-9-
(d) Promptly following the date which is six months after the
Effective Time, the Surviving Corporation shall be entitled to require the
Paying Agent to deliver to it any cash (including any interest received with
respect thereto), Certificates and other documents in its possession relating to
the transactions contemplated hereby, which had been made available to the
Paying Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates, without any interest thereon. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. Any amounts remaining unclaimed by holders of Shares two years
after the Effective Time (or such earlier date immediately prior to such time
when the amounts would otherwise escheat to or become property of any
governmental authority) shall become, to the extent permitted by applicable law,
the property of Parent free and clear of any claims or interest of any Person
previously entitled thereto.
(e) Any portion of the Merger Consideration made available to the
Paying Agent pursuant to Section 2.3(a) to pay for Shares for which appraisal
rights have been perfected shall be returned to Parent, upon demand.
(f) The Merger Consideration paid in the Merger shall be net to
the holder of Shares in cash, subject to reduction only for any applicable
Federal, state, local or foreign withholding taxes or, as set forth in Section
2.3(b), stock transfer taxes payable by such holder.
Section 2.4 Company Stock Plans.
-------------------
(a) Immediately after the Acceptance Date, each holder of a then
outstanding option under any employee stock option or compensation plan or
arrangement (the "Options"), whether or not then exercisable or fully vested,
and each holder of the warrants to purchase an aggregate of 202,597 Shares
issued to certain parties (collectively, the "Warrants"), shall, in settlement
--------
thereof, receive for each Share subject to such Option, or Warrant, an amount
(net of any applicable withholding tax) in cash equal to the difference between
the Offer Price and the per Share exercise price of such Option, or Warrant, to
the extent the Offer Price is greater than the per Share exercise price of such
Option or Warrant (such excess amount with respect to Options being hereinafter
referred to as the "Option Consideration," and such amount with respect to the
--------------------
Warrants being hereinafter referred to as the "Warrant Consideration");
---------------------
provided, however, that with respect to any person subject to Section 16(a) of
-------- -------
the Exchange Act, any such amount shall be paid as soon as practicable after the
first date payment can be made without liability to such person under Section
16(b) of the Exchange Act. Prior to the Acceptance Date, the Company shall use
its reasonable efforts to obtain all necessary consents or releases from holders
of Options and holders of Warrants, and take any such other action as may be
reasonably necessary to give effect to the transactions contemplated by this
Section 2.4 (except for such action that may require the approval of the
Company's stockholders) and to otherwise cause each Option, and each Warrant, to
be surrendered to the Company and cancelled at the Acceptance Date. The
surrender of an Option, or
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Warrant, to the Company shall be deemed a release of any and all rights the
holder had or may have had in such Option or Warrant, other than the right to
receive the Option Consideration or Warrant Consideration. Parent shall provide
the Company with sufficient funds to make the payments required by this Section
2.4.
(b) Notwithstanding anything in this Agreement to the contrary, a
vote of a majority of the Independent Directors shall be required to amend this
Section 2.4 in any manner adverse to the holders of Options or Warrants
described herein.
Section 2.5 Adjustments. If, during the period between the date of this
-----------
Agreement and the Effective Time, any change in the outstanding Shares shall
occur, including by reason of any reclassification, recapitalization, stock
split or combination, exchange or readjustment of Shares, or stock dividend
thereon with a record date during such period, but excluding the issuance of
Shares upon exercise of currently outstanding Options or Warrants in accordance
with their terms, the cash payable pursuant to the Offer, the Merger
Consideration and any other amounts payable pursuant to this Agreement shall be
appropriately adjusted.
Section 2.6 Lost Certificates. If any Certificate shall have been lost,
-----------------
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, the
Paying Agent will pay, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration to be paid in respect of the Shares
represented by such Certificate, as contemplated by this Article.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser, subject to
such exceptions as are specifically disclosed in writing in the disclosure
letter supplied by the Company to Parent, which disclosure shall provide an
exception to or otherwise qualify only the representations or warranties of
Company specifically referred to in such disclosure, and such other
representations and warranties to which such disclosure manifestly appears to be
applicable (the "Company Disclosure Schedule"), as follows:
---------------------------
Section 3.1 Corporate Existence and Power. The Company is a corporation
-----------------------------
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals (collectively, "Licenses")
--------
required to carry on its business as now conducted except for failures to have
any such License which would not, in the aggregate, have a Company Material
Adverse Effect (as defined below). The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where the
character of the property owned, leased or operated by it or the nature of its
activities makes such qualification necessary, except in such jurisdictions
where failures to be so qualified would not reasonably be expected to, in the
aggregate, have a Company
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Material Adverse Effect. As used herein, the term "Company Material Adverse
------------------------
Effect" means a material adverse effect on the financial condition, business,
------
assets or results of operations of the Company and its Subsidiaries (as defined
in Section 3.5 hereof), taken as a whole, provided, however, that in no event
-------- -------
shall any effect that results from (a) changes affecting the retail industry
generally, (b) changes affecting the United States economy generally, or (c) a
so-called "going concern" qualification in respect of the Company's financial
statements for the year ended December 31, 1999 or the absence of liquidity or
capital resources giving rise thereto or the adverse effect on the Company's
relations with customers, suppliers and others proximately resulting therefrom
constitute a Company Material Adverse Effect. The Company has heretofore made
available to Parent true and complete copies of the Certificate of Incorporation
and the Bylaws of the Company as currently in effect.
Section 3.2 Corporate Authorization. The Company has the requisite
-----------------------
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
and the performance of its obligations hereunder have been duly and validly
authorized, and this Agreement has been approved, by the Board of Directors of
the Company and no other corporate proceedings on the part of the Company, other
than with respect to the Merger, the approval and adoption of the Merger and
this Agreement by the Company's stockholders to the extent required by the
Certificate of Incorporation and by applicable law, are necessary to authorize
the execution, delivery and performance of this Agreement. This Agreement has
been duly executed and delivered by the Company and constitutes, assuming due
authorization, execution and delivery of this Agreement by Parent and Purchaser,
a valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
Section 3.3 Consents And Approvals; No Violations
-------------------------------------
(a) None of the execution and delivery of this Agreement, the
performance by the Company of its obligations hereunder or the consummation by
the Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any applicable law or any provision of the Certificate
of Incorporation or the Bylaws of the Company; (ii) require any consent or other
action by any Person under or result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration or obligation to
repurchase, repay, redeem or acquire or any similar right or obligation) under
any of the terms, conditions or provisions of any note, mortgage, letter of
credit, other evidence of indebtedness, guarantee, license, lease or agreement
or similar instrument or obligation to which the Company or any of its
Subsidiaries (as defined in Section 3.5 hereof) is a party or by which any of
them or any of their assets may be bound or (iii) assuming that the filings,
registrations, notifications, authorizations, consents and approvals referred to
in subsection (b) below have been obtained or made, as the case may be, violate
any applicable law or any order, injunction, decree, statute, rule or regulation
of any Governmental Entity to which the Company or any of its Subsidiaries (as
defined in Section 3.5 hereof) is subject, excluding from the foregoing clauses
(ii)
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and (iii) such requirements, defaults, breaches, rights or violations (A) that
would not, in the aggregate, reasonably be expected to have a Company Material
Adverse Effect and would not have a material adverse effect on the ability of
the Company to perform its obligations hereunder or (B) that become applicable
as a result of the business or activities in which Parent or Purchaser or any of
their respective affiliates is or proposes to be engaged or any acts or
omissions by, or facts specifically pertaining to, Parent or Purchaser.
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any government or any agency, court,
tribunal, commission, board, bureau, department, political subdivision or other
instrumentality of any government (including any regulatory or administrative
agency), whether federal, state, multinational (including, but not limited to,
the European Community), provincial, municipal, domestic or foreign (each, a
"Governmental Entity") is required in connection with the execution and delivery
-------------------
of this Agreement by the Company, the performance by the Company of its
obligations hereunder or the consummation by the Company of the transactions
contemplated hereby, except (i) the filing of an agreement of merger together
with an officer's certificate of the Company and Purchaser in accordance with
the DGCL; (ii) compliance with any applicable requirements of the ▇▇▇▇-▇▇▇▇▇-
▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder (the "HSR Act"), or any foreign laws regulating
-------
competition, antitrust, investment or exchange controls; (iii) compliance with
any applicable requirements of the Securities Act of 1933, as amended, and the
rules and regulations thereunder (the "Securities Act") and the Securities
--------------
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"Exchange Act"); (iv) compliance with any applicable requirements of state blue
------------
sky or takeover laws and (v) such other consents, approvals, orders,
authorizations, notifications, registrations, declarations and filings (A) the
failure of which to be obtained or made would not, in the aggregate, reasonably
be expected to have a Company Material Adverse Effect and would not have a
material adverse effect on the ability of the Company to perform its obligations
hereunder or (B) that become applicable as a result of the business or
activities in which Parent or Purchaser or any of their respective affiliates is
or proposes to be engaged or any acts or omissions by, or facts specifically
pertaining to, Parent or Purchaser.
Section 3.4 Capitalization. The authorized capital stock of the Company
--------------
consists of 50,000,000 shares of Common Stock. As of March 9, 2000, there were
12,751,896 shares of Common Stock issued and outstanding. All shares of capital
stock of the Company have been, and all Shares that may be issued pursuant to
the Option Plans (as defined below) will be, when issued in accordance with the
respective terms thereof, duly authorized and validly issued and are fully paid
and nonassessable and were not issued in violation of any preemptive rights. The
Company has no shares of its capital stock reserved for issuance, except for
shares reserved for issuance pursuant to Options issued under the Company's 1994
Stock Incentive Plan, 1995 Stock Incentive Plan, 1996 Stock Incentive Plan, 1996
Directors' Stock Option Plan and 1998 Nonstatutory Stock Option Plan (the
"Option Plans"), which Options as of the date of this Agreement cover the number
------------
of shares, and have the vesting dates and exercise prices, as set forth in
Section 3.4 of the Company Disclosure Schedule, 202,597 shares reserved for
issuance pursuant to outstanding Warrants and 87,706 shares reserved for
issuance pursuant to the Company's Employee Stock Purchase Program. Except as
set forth in Section 3.4 of the Company Disclosure Schedule, there are no pre-
emptive rights or
-13-
outstanding subscriptions, options, warrants, rights, convertible securities or
other agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of the Company or any of the
Company's Subsidiaries (as defined in Section 3.5). After the Effective Time,
the Surviving Corporation will have no obligation to issue, transfer or sell any
shares of the Company's capital stock or capital stock of the Surviving
Corporation (except as contemplated by Section 2.4 hereof). Except as set forth
in this Section 3.4 and for changes since March 9, 2000, resulting from the
exercise of employee stock options outstanding on such date and the issuance of
up to 87,706 shares pursuant to the Company's Employee Stock Purchase Program,
there are no outstanding (i) shares of capital stock or voting securities of the
Company, (ii) securities of the Company convertible into or exchangeable for
shares of capital stock or voting securities of the Company or (iii) options or
other rights to acquire from the Company, or other obligations of the Company to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company. There are no
outstanding obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any of the Company's capital stock. No Subsidiary of
the Company owns any capital stock or other voting securities of the Company.
Section 3.5 Subsidiaries.
------------
(a) Each Subsidiary of the Company (i) is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (ii) has all corporate powers and all Licenses
required to carry on its business as now conducted and (iii) is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary, except for failures
of this representation and warranty to be true which would not, in the
aggregate, have a Company Material Adverse Effect. For purposes of this
Agreement, "Subsidiary" means with respect to any Person, any corporation or
----------
other legal entity of which such Person owns, directly or indirectly, more than
50% of the outstanding stock or other equity interests, the holders of which are
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity. All Subsidiaries and their
respective jurisdictions of incorporation are identified in Section 3.5 of the
Company Disclosure Schedule.
(b) All of the outstanding capital stock of, or other voting
securities or ownership interests in, each Subsidiary of the Company, is owned
by the Company, directly or indirectly, free and clear of any lien, security
interest or other encumbrance (a "Lien") and free of any other limitation or
----
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other voting securities or ownership
interests), except for the security interest of the banks under the Company's
loan agreement referred to in Section 3.21 of the Company Disclosure Schedule
(the "Loan Agreement").
--------------
Section 3.6 SEC Documents. Except for the 1999 10-K, which has not yet
-------------
been filed, the Company has filed all required reports, proxy statements,
registration statements, forms and other documents with the SEC since December
31, 1997 (the "Company SEC Documents"). As of their respective dates, and
---------------------
giving effect to any amendments thereto or restatements thereof, (a) the
-14-
Company SEC Documents complied, and, at the time the 1999 10-K is filed, the
1999 10-K will comply, in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the applicable rules
and regulations of the SEC promulgated thereunder and (b) none of the Company
SEC Documents contained, and, at the time the 1999 10-K is filed, the 1999 10-K
will not contain, any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were (or,
in the case of the 1999 10-K, will be) made, not misleading.
Section 3.7 Financial Statements. The financial statements of the Company
--------------------
(including, in each case, any notes and schedules thereto) included in the
Company SEC Documents giving effect to any amendment thereto or restatements
thereof (a) were prepared from the books and records of the Company and its
Subsidiaries, (b) comply as to form in all material respects with all applicable
accounting requirements and the rules and regulations of the SEC with respect
thereto, (c) are in conformity with United States generally accepted accounting
principles ("GAAP"), applied on a consistent basis (except in the case of
----
unaudited statements, as permitted by Form 10-Q as filed with the SEC under the
Exchange Act) during the periods involved and (d) fairly present, in all
material respects, the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments which were
not and are not expected to be, individually or in the aggregate, material in
amount).
Section 3.8 Absence Of Undisclosed Liabilities. Except as set forth in
----------------------------------
the Company SEC Documents or in Sections 3.12, 3.13, 3.15 or 3.21 of the Company
Disclosure Schedule, and except for liabilities and obligations incurred in the
ordinary course of business consistent with past practices since the date of the
most recent consolidated balance sheet included in the Company SEC Documents,
except for those that could not, in the aggregate, reasonably be expected to
have a Company Material Adverse Effect, neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) and there is no existing condition,
situation, or set of circumstances that could reasonably be expected to result
in such a liability.
Section 3.9 Information in Proxy Statement and Offer Documents
--------------------------------------------------
(a) The Proxy Statement, if any (or any amendment thereof or
supplement thereto), at the date mailed to Company shareholders and at the time
of the meeting of the Company shareholders to be held in connection with the
Merger, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading, except that no representation is made by the Company with
respect to statements made therein based on information supplied in writing by
Parent or Purchaser expressly for inclusion in the Proxy Statement. The Proxy
Statement will comply in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
-15-
(b) The information with respect to the Company or any of its
Subsidiaries that the Company furnishes to Parent specifically for use in the
Offer Documents, at the time of the filing thereof, at the time of any
distribution or dissemination thereof and at the time of the consummation of the
Offer, will not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
Section 3.10 Absence of Certain Changes. Except as set forth in Section
--------------------------
3.10 of the Company Disclosure Schedule, since December 31, 1999, the Company
and its Subsidiaries have conducted their respective businesses only in the
ordinary and usual course consistent with past practices. Since December 31,
1999, there has not occurred (i) any event, change or effect (including the
incurrence of any liabilities of any nature, whether or not accrued, contingent
or otherwise) having, or which would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of the
Company or any of its Subsidiaries or any repurchase, redemption or other
acquisition by the Company or its Subsidiaries of any outstanding shares of
capital stock or other securities of, or other ownership interests in, the
Company or any of its Subsidiaries; (iii) any change in accounting principles or
methods, except insofar as may be required by a change in GAAP; (iv) any
amendment of any material term of any outstanding security of the Company or any
of its Subsidiaries; (v) any incurrence, assumption or guarantee by the Company
or any of its Subsidiaries of any indebtedness for borrowed money other than in
the ordinary course of business or in accordance with the Loan Agreement; (vi)
any creation or other incurrence by the Company or any of its Subsidiaries of
any Lien on any material asset other than in the ordinary course of business
consistent with past practices or in accordance with the Loan Agreement; (vii)
any making of any loan, advance or capital contributions to or investment in any
entity, other than loans, advances or capital contributions to or investments in
its wholly-owned Subsidiaries made in the ordinary course of business consistent
with past practices; (viii) any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the business or assets of the
Company or any of its Subsidiaries that has had or could reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect;
(ix) any transaction or commitment made, or any contract or agreement entered
into, by the Company or any of its Subsidiaries relating to its assets or
business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any of its Subsidiaries of any contract or
other right, in either case, material to the Company and its Subsidiaries,
taking as a whole, other than transactions and commitments in the ordinary
course of business consistent with past practices, those contemplated by the
Agreement and the amendment to the Loan Agreement referred to in Section 3.21 of
the Company Disclosure Schedule; (x) any (1) grant of any severance or
termination pay to (or amendment to any existing arrangement with) any director,
officer or employee of the Company or any of its Subsidiaries, (2) increase in
benefits payable under any existing severance or termination pay policies or
employment agreements, (3) entering into any employment, deferred compensation
or other similar agreement (or any amendment to any such existing agreement)
with any director, officer or employee of the Company or any of its
Subsidiaries, (4) establishment, adoption or amendment (except as required by
applicable law) of any collective bargaining, bonus, profit-sharing, thrift,
pension, retirement, deferred compensation,
-16-
compensation, stock option, restricted stock or other benefit plan or
arrangement covering any director, officer or employee of the Company or any of
its Subsidiaries, or (5) increase in compensation, bonus or other benefits
payable to any director, officer or employee of the Company or any of its
subsidiaries, other than in the ordinary course of business consistent with past
practices; or (xi) any labor dispute, other than routine individual grievances,
or any activity or proceeding by a labor union or representative thereof to
organize any employees of the Company or any of its Subsidiaries, which
employees were not subject to a collective bargaining agreement at December 31,
1999, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by
or with respect to such employees.
Section 3.11 Taxes.
-----
(a) Except as set forth in Section 3.11 of the Company Disclosure
Schedule, (1) all federal, state, local and foreign Tax Returns (as defined
below) required to be filed by or on behalf of the Company, each of its
Subsidiaries, and each affiliated, combined, consolidated or unitary group of
which the Company or any of its Subsidiaries is a member (a "Company Group")
have been timely filed, and all returns filed are complete and accurate except
to the extent any failure to file or any inaccuracies in filed returns would
not, individually or in the aggregate, have a Company Material Adverse Effect;
(2) all Taxes (as defined below) due and owing by the Company, any Subsidiary of
the Company or any Company Group have been paid, or adequately reserved for in
accordance with GAAP, (3) there is no presently pending or, to the knowledge of
the Company, contemplated or scheduled material claim, audit, examination,
deficiency, refund litigation, proposed adjustment or matter (each a "Tax
Issue") in controversy with respect to any Taxes due and owing by the Company,
any Subsidiary of the Company or any Company Group, nor has the Company or any
Subsidiary of the Company filed any waiver of the statute of limitations
applicable to the assessment or collection of any Tax; (4) all assessments for
Taxes due and owing by the Company, any Subsidiary of the Company or any Company
Group with respect to completed and settled examinations or concluded litigation
have been paid; (5) neither the Company nor any Subsidiary of the Company is a
party to any tax indemnity agreement, tax sharing agreement or other agreement
under which the Company or any Subsidiary of the Company could become liable to
another person as a result of the imposition of a Tax upon any person, or the
assessment or collection of such a Tax; and (6) the Company and each of its
Subsidiaries has complied in all material respects with all rules and
regulations relating to the withholding of Taxes.
(b) For purposes of this Agreement, (i) "Taxes" means all taxes,
-----
levies or other like assessments, charges or fees (including estimated taxes,
charges and fees), including, without limitation, income, corporation, advance
corporation, gross receipts, transfer, excise, property, sales, use, value-
added, license, payroll, withholding, social security and franchise or other
governmental taxes, duties or charges, imposed by the United States or any
state, county, local or foreign government or subdivision or agency thereof, and
such term shall include any interest, penalties or additions to tax attributable
to such taxes and (ii) "Tax Return" means any report, return, statement or other
----------
written information required to be supplied to a taxing authority in connection
with Taxes.
-17-
Section 3.12 Employee Matters.
----------------
(a) Except for any plan, fund, program, agreement or arrangement that
is subject to the laws of any jurisdiction outside the United States, Schedule
3.12(a) of the Company Disclosure Schedule contains a true and complete list of
each material deferred compensation, incentive compensation, and equity
compensation plan; material "welfare" plan, fund or program (within the meaning
of Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")); material "pension" plan, fund or program (within the meaning
-----
of Section 3(2) of ERISA); each material employment, termination or severance
agreement; and each other material employee benefit plan, fund, program,
agreement or arrangement, in each case, that is in writing and sponsored,
maintained or contributed to or required to be contributed to by the Company or
by any trade or business, whether or not incorporated (each, an "ERISA
-----
Affiliate"), that together with the Company would be deemed a "single employer"
---------
within the meaning of Section 4001(b) of ERISA, or to which the Company or an
ERISA Affiliate is party, whether written or oral, for the benefit of any
employee, consultant, director or former employee, consultant or director of the
Company or any Subsidiary of the Company. The plans, funds, programs,
agreements and arrangements listed on Schedule 3.12(a) of the Company Disclosure
Schedule are referred to herein collectively as the "Plans."
-----
(b) With respect to each Plan, the Company has heretofore delivered
or made available to Parent true and complete copies of the Plan and any
amendments thereto (or if the Plan is not a written Plan, a description
thereof), any related trust or other funding vehicle, the most recent reports or
summaries required under ERISA or the Code and the most recent determination
letter received from the Internal Revenue Service with respect to each Plan
intended to qualify under Section 401 of the Code.
(c) Neither the Company nor any ERISA Affiliate nor any predecessor
thereof sponsors, maintains or contributes to, or has in the past sponsored,
maintained or contributed to, any Plan subject to Title IV of ERISA.
(d) No Plan is a "multiemployer plan," as defined in Section 3(37) of
ERISA, nor is any Plan a plan described in Section 4063(a) of ERISA.
(e) Each Plan has been operated and administered in all material
respects in accordance with its terms and applicable law, including, but not
limited to, ERISA and the Code.
(f) Each Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service, or in the case of such a Plan for which a
favorable determination letter has not yet been received, the applicable
remedial amendment period under Section 401(b) of the Code has not expired and
each trust forming a part thereof is exempt from tax pursuant to Section 501(a)
of the Code.
(g) Except as set forth in Section 3.12(g) of the Company Disclosure
Schedule, no Plan provides medical, surgical, hospitalization, death or similar
benefits (whether or not insured) for employees or former employees of the
Company or any Subsidiary for periods extending beyond
-18-
their retirement or other termination of service, other than (i) coverage
mandated by applicable law, (ii) death benefits under any "pension plan," or
(iii) benefits the full cost of which is borne by the current or former employee
(or his or her beneficiary), dependant or other covered person.
(h) There are no pending, or to the knowledge of the Company,
threatened or anticipated, claims that would reasonably be expected to have a
Company Material Adverse Effect by or on behalf of any Plan, by any employee or
beneficiary covered under any such Plan, or otherwise involving any such Plan
(other than routine claims for benefits).
(i) Except as set forth in Section 3.12 of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not, either alone or in combination with another event, (i) entitle any
current or former employee or officer of the Company or any ERISA Affiliate to
severance pay, unemployment compensation or any other payment, except as
expressly provided in this Agreement, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee or
officer, other than payments, accelerations or increases (x) under employee
benefit plans that are subject to the laws of a jurisdiction outside of the
United States and are listed on Section 3.12(i) of the Company Disclosure
Schedule or (y) mandated by applicable law.
(j) No amounts payable under the Plans will fail to be deductible for
federal income tax purposes by virtue of Section 280G of the Code.
(k) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company relating to, or change in
employee participation or coverage under, a Plan which would increase materially
the expense of maintaining such Plan above the level of the expense incurred in
respect thereof for the fiscal year ended prior to the date hereof.
(l) To the knowledge of the Company, all employee benefit plans that
are subject to the laws of any jurisdiction outside the United States have been
maintained in substantial compliance with their terms and are in material
compliance with such applicable laws, including relevant Tax laws, and the
requirements of any trust deed under which they were established, except for
such exceptions to the foregoing which, in the aggregate, would not reasonably
be expected to have a Company Material Adverse Effect. Section 3.12(l) of the
Company Disclosure Schedule lists all material employee pension benefit plans
that are subject to the laws of any jurisdiction outside the United States
except for such plans that are governmental or statutory plans.
(m) Section 3.12(m) of the Company Disclosure Schedule lists each
agreement, arrangement, understanding or contract (a "Severance Contract") that
------------------
provides for severance, termination of employment, retention or other special
transaction bonus or similar benefit, or other similar benefits, to any employee
or former employee of the Company ("Severance Benefits") and identifies the
------------------
Severance Benefits thereunder (it being understood that the omission from
Schedule 3.12(m) of the Company Disclosure Schedule of Severance Contracts under
which the aggregate amount of Severance Benefits is less than $100,000 shall not
be deemed a misrepresentation). No Severance Contract listed in such Section
3.12(m) entitles any such employee or former employee to
-19-
receive any such benefit if the individual's employment is terminated for
"cause" or if the individual otherwise commits (by action or omission) an act
constituting "cause".
Section 3.13 Litigation; Compliance With Laws.
--------------------------------
(a) Except as set forth in the Company SEC Documents, in Section 3.13
of the Company Disclosure Schedule or as otherwise covered by insurance, there
is no action, suit, investigation or proceeding pending against, or to the
knowledge of the Company threatened against, the Company, any Subsidiary of the
Company, any present or former officer, director or employee of the Company or
any Subsidiary or any other person for whom the Company may be liable or any of
their respective properties before any court or arbitrator or any Governmental
Entity which would reasonably be expected to have a Company Material Adverse
Effect.
(b) The Company and its Subsidiaries are and, since January 1, 1998,
have been in compliance with, and to the knowledge of the Company are not under
investigation with respect to and have not been threatened to be charged with or
been given notice of any violation of, any applicable laws, ordinances, rules,
orders and regulations of any federal, state, local or foreign governmental
authority applicable to their respective businesses and operations, except for
such violations, if any, which, in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect. All governmental approvals,
permits and Licenses required to conduct the business of the Company and its
Subsidiaries have been obtained, are in full force and effect and are being
complied with except for such violations and failures to have Licenses in full
force and effect, if any, which, individually or in the aggregate, could not
reasonably be expected to have a Company Material Adverse Effect.
Section 3.14 Labor Matters.
-------------
(a) The Company and its Subsidiaries are in compliance with all
currently applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, and are not engaged in any
unfair labor practice, failure to comply with which or engagement in which, as
the case may be, would reasonably be expected to have a Company Material Adverse
Effect. The Company is in compliance with, and is performing in all material
respects all its obligations under, the Conciliation Agreement between the U.S.
department of Labor/ESA, Office of Federal Contract Compliance Programs and the
Company.
(b) As of the date of this Agreement (i) there is no labor strike,
dispute, slowdown, stoppage or lockout actually pending or, to the knowledge of
the Company, threatened against the Company; (ii) to the knowledge of the
Company, no union organizing campaign with respect to the Company's employees is
underway; (iii) there is no unfair labor practice charge or complaint against
the Company pending or, to the knowledge of the Company, threatened before the
National Labor Relations Board or any similar state or foreign agency; (iv)
there is no written grievance pending relating to any collective bargaining
agreement or other grievance procedure; (v) to the knowledge of the Company, no
charges with respect to or relating to the Company are pending before the Equal
Employment Opportunity Commission or any other agency responsible for the
prevention of unlawful employment practices; and (vi) there are no collective
bargaining
-20-
agreements with any union covering employees of the Company, except for such
exceptions to the foregoing clauses (i) through (v) which, individually or in
the aggregate, would not reasonably be expected to have a Company Material
Adverse Effect.
Section 3.15 Certain Contracts and Arrangements. Except as set forth in
----------------------------------
Section 3.15 of the Company Disclosure Schedule, each contract or agreement to
which the Company or any of its Subsidiaries is a party or by which any of them
is bound is in full force and effect, and neither the Company nor any of its
Subsidiaries, nor, to the knowledge of the Company, any other party thereto, is
in breach of, or default under, any such contract or agreement, and no event has
occurred that with notice or passage of time or both would constitute such a
breach or default thereunder by the Company or any of its Subsidiaries, or, to
the knowledge of the Company, any other party thereto, except for such failures
to be in full force and effect and such breaches and defaults which, in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect.
Section 3.16 Environmental Matters.
---------------------
(a) (i) "Environmental Claim" means any claim, action, cause of
-------------------
action, investigation or written notice by any person or entity alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (A) the presence or release of any Hazardous
Materials at any location, currently or formerly leased, owned or operated by
the Company or any of its Subsidiaries or (B) any matters relating to the
Company or any of its Subsidiaries and relating to or arising out of any
Environmental Law (as defined hereafter).
(ii) "Environmental Laws" means all federal, state, local
------------------
and foreign laws (including, without limitation, common law) and any
regulations, treaty, permit or governmental restriction, or any agreement with
any governmental authority, relating to pollution or protection of the
environment, including, without limitation, laws relating to releases or
threatened releases of pollutants, contaminants, wastes or chemicals or any
toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substances, wastes or materials or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, transport or handling of
pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials.
(iii) "Hazardous Materials" means all substances defined as
-------------------
hazardous materials, hazardous wastes, hazardous substances, oils, pollutants or
contaminants or other chemical substances in, or regulated as such under, any
Environmental Law.
(b) (i) The Company and its Subsidiaries are and have been in
compliance with all applicable Environmental Laws (which compliance includes,
but is not limited to, the possession by the Company and its Subsidiaries of all
permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof),
except where failures to be in compliance would not, in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. Neither the
Company nor any of its
-21-
Subsidiaries has received any written communication alleging that the Company or
any of its Subsidiaries is not in such compliance or may have liability under
any Environmental Law, except where failures to be in compliance or such
liability would not, in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(ii) There is no Environmental Claim pending or threatened
against the Company or any of its Subsidiaries that could result in any
environmental liability that would, in the aggregate, reasonably be expected to
result in a Company Material Adverse Effect.
(iii) There are no present or past actions, activities,
circumstances, conditions, events or incidents that could result in any
environmental liability that would, individually or in the aggregate, reasonably
be expected to result in a Company Material Adverse Effect.
(c) There has been no environmental investigation, study, audit,
test, review or other analysis conducted of which the company or any Subsidiary
has knowledge in relation to the current or prior business of the Company or any
Subsidiary or any property or facility currently or formerly owned, leased or
operated by the Company or any Subsidiary which has not been delivered to
Purchaser at least five days prior to the date hereof.
(d) Neither the Company nor any subsidiary owns, leases or operates
any real property, or conducts any operations, in New Jersey or Connecticut.
(e) For purposes of this Section 3.16, "Company" and "Subsidiary"
------- ----------
shall include any entity which is, in whole or in part, a predecessor of the
Company or any Subsidiary.
Section 3.17 Intellectual Property.
---------------------
(a) The Company and its Subsidiaries own or have the right to use all
material Intellectual Property (as defined hereafter) reasonably necessary for
the Company and its Subsidiaries to conduct their business as it is currently
conducted. Schedule 3.17(a) of the Company Disclosure Schedule contains a
complete and accurate list of all patent applications and issued patents; and
all registrations for trademarks, service marks and trade names, copyrights,
domain names and trade dress used or held for use by the Company or any of its
Subsidiaries in the conduct of their business specifying as to each such item,
as applicable: (i) the owner or owners of the item, (ii) the jurisdictions in
which the item is issued or registered or in which any application for issuance
or registration has been filed, (iii) the respective registration or application
number of the item and (iv) the date of application and registration of the
item. Section 3.17(b) of the Company Disclosure Schedule contains a complete and
accurate list of all material agreements to which the Company or any Subsidiary
is a party that provides for the license or sublicense of Intellectual Property.
(b) (i) All of the registrations relating to material Intellectual
Property owned by the Company and its Subsidiaries are valid, subsisting and
unexpired, free of all liens or encumbrances (other than pursuant to the Loan
Agreement), and have not been abandoned; (ii) to the knowledge of the Company,
the Company does not infringe the intellectual property rights of any
-22-
third party in any respect that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; (iii) no
judgment, decree, injunction, rule or order has been rendered by Governmental
Entity which would limit, cancel or question the validity of, or the Company's
or its Subsidiaries' rights in and to, any Intellectual Property owned by the
Company in any respect that would reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect; and (iv) the Company has
not received notice of any pending or threatened suit, action or adversarial
proceeding that seeks to limit, cancel or question the validity of, or the
Company's or its Subsidiaries' rights in and to, any Intellectual Property,
which would reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
(c) For purposes of this Agreement "Intellectual Property" shall mean
---------------------
all rights, privileges and priorities provided under U.S., state and foreign law
relating to intellectual property, including without limitation all (x) (1)
proprietary inventions, discoveries, processes, formulae, patterns, designs,
methods, techniques, procedures, concepts, developments, technology, new and
useful improvements to any of the foregoing and proprietary know-how relating
thereto, whether or not patented or eligible for patent protection; (2)
copyrights and copyrightable works; (3) trademarks, service marks, trade names,
domain names and trade dress, the goodwill of any business symbolized thereby,
and all common law rights relating thereto; (4) trade secrets and other
confidential information; (y) all registrations, applications and recordings for
any of the foregoing and (z) licenses or other similar agreements granting to
the Company or any of its Subsidiaries the rights to use any of the foregoing.
Section 3.18 Opinion Of Financial Advisor. The Company has received the
----------------------------
opinion of DB to the effect that, as of the date hereof, the consideration to be
received by the holders of Shares is fair from a financial point of view to such
holders.
Section 3.19 Board Recommendation. The Board of Directors of the Company,
--------------------
at a meeting duly called and held, has approved this Agreement and (i)
determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, taken together are fair to and in the best
interests of the stockholders of the Company; and (ii) resolved to recommend
that the stockholders of the Company tender their Shares into the Offer, adopt
this Agreement and approve the Merger.
Section 3.20 Rights Plan; Antitakover Statues. The Board of Directors of
--------------------------------
the Company has approved and adopted an amendment to the Preferred Shares Rights
Agreement between the Company and American Stock Transfer and Trust Co., dated
as of July 6, 1998 (the "Rights Agreement") which provides that neither the
----------------
execution and delivery of this Agreement nor the consummation of any of the
transactions contemplated by this Agreement shall cause Parent or Purchaser to
be deemed to be "Acquiring Persons" within the meaning of the Rights Agreement
-----------------
and the Company has taken all other action necessary to render the rights issued
pursuant to the Rights Agreement inapplicable to the Offer, the Merger, this
Agreement and the transactions contemplated hereby. The Company has taken all
action necessary to exempt the Offer, the Merger, this Agreement and the
transactions contemplated hereby from the provisions of Section 203 of DGCL,
-23-
and, accordingly, no such Section nor other antitakeover or similar statute or
regulation applies or purports to apply to any such transaction. No other
"control share acquisition," "fair price," "moratorium" or other antitakeover
laws or regulations enacted under U.S. state or federal laws apply to this
Agreement or any of the transactions contemplated hereby.
Section 3.21 Finders' Fees. Except for DB, whose fees will be paid by
-------------
the Company, there is no investment banker, broker, finder or other intermediary
which has been retained by, or is authorized to act on behalf of, the Company or
any Subsidiary of the Company that would be entitled to any fee or commission
from the Company, any Subsidiary of the Company, Parent or any of Parent's
affiliates upon consummation of the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and warrant to the
Company subject to such exceptions as are specifically disclosed in writing in
the disclosure letter and referencing a specific representation supplied by
Parent to Company, which disclosure shall provide an exception to or otherwise
qualify the representations or warranties of Parent specifically referred to in
such disclosure and such other representations and warranties to the extent such
disclosure shall reasonably appear to be applicable to such other
representations or warranties (the "Parent Disclosure Schedule"), as follows:
--------------------------
Section 4.1 Corporate Existence and Power. Each of Parent and Purchaser
-----------------------------
is a corporation duly incorporated (or other entity duly organized), validly
existing and in good standing under the laws of its jurisdiction of
incorporation, has all corporate or other power, as the case may be, and all
Licenses required to carry on its business as now conducted except for failures
to have any such License which would not, in the aggregate, have a Parent
Material Adverse Effect (as defined below). Each of Parent and Purchaser is
duly qualified to do business and is in good standing in each jurisdiction where
the character of the property owned, leased or operated by it or the nature of
its activities makes such qualification necessary, except for those
jurisdictions where failures to be so qualified would not reasonably be expected
to, in the aggregate, have a Parent Material Adverse Effect. As used herein,
the term "Parent Material Adverse Effect" means a material adverse effect on the
------------------------------
financial condition, business, assets or results of operations of Parent and its
Subsidiaries, taken as a whole, provided, however, that in no event shall any
-------- -------
effect that results from (a) changes affecting the retail industry generally or
(b) changes affecting the United States economy generally, constitute a Parent
Material Adverse Effect.
Section 4.2 Authorization. Each of Parent and Purchaser has the requisite
-------------
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement and the
performance of its obligations hereunder have been duly and validly authorized
by the Boards of Directors of Parent and Purchaser, by Parent as the sole
stockholder of Purchaser, this Agreement has been approved by the Board of
Directors of Purchaser, and no other proceedings on the part of Parent or
Purchaser are necessary to authorize the
-24-
execution, delivery and performance of this Agreement. This Agreement has been
duly executed and delivered by each of Parent and Purchaser and constitutes,
assuming due authorization, execution and delivery of this Agreement by the
Company, a valid and binding obligation of each of Parent and Purchaser,
enforceable against each of them in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
Section 4.3 Consents And Approvals; No Violations.
-------------------------------------
(a) Neither the execution and delivery of this Agreement nor the
performance by each of Parent and Purchaser of its obligations hereunder will
(i) conflict with or result in any breach of any provision of the articles of
incorporation or bylaws (or other governing or organizational documents) of
Parent or Purchaser, as the case may be, or (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration
or obligation to repurchase, repay, redeem or acquire or any similar right or
obligation) under any of the terms, conditions or provisions of any note,
mortgage, letter of credit, other evidence of indebtedness, guarantee, license,
lease or agreement or similar instrument or obligation to which any of Parent or
Purchaser is a party or by which any of them or any of the respective assets
used or held for use by any of them may be bound or (iii) assuming that the
filings, registrations, notifications, authorizations, consents and approvals
referred to in subsection (b) below have been obtained or made, as the case may
be, violate any order, injunction, decree, statute, rule or regulation of any
Governmental Entity to which either Parent or Purchaser is subject, excluding
from the foregoing clauses (ii) and (iii) such requirements, defaults, breaches,
rights or violations (A) that would not, in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect and would not reasonably be
expected to have a material adverse effect on the ability of either Parent or
Purchaser to consummate the transactions contemplated hereby or (B) that become
applicable as a result of any acts or omissions by, or facts specifically
pertaining to, the Company.
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any Governmental Entity is required in
connection with the execution and delivery of this Agreement by each of Parent
and Purchaser or the performance by any of them of their respective obligations
hereunder, except (i) the filing of an agreement of merger together with an
officer's certificate of the Company and Purchaser in accordance with the DGCL;
(ii) compliance with any applicable requirements of the HSR Act or any foreign
laws regulating competition, antitrust, investment or exchange controls; (iii)
compliance with any applicable requirements of the Securities Act and the
Exchange Act; (iv) compliance with any applicable requirements of state blue sky
or takeover laws; and (v) such other consents, approvals, orders,
authorizations, notifications, registrations, declarations and filings, the
failure of which to be obtained or made would not reasonably be expected to have
a Material Adverse Effect and would not have a material adverse effect on the
ability of either Parent or Purchaser to perform their respective obligations
hereunder or that become applicable as a result of any acts or omissions by, or
facts specifically pertaining to, the Company.
-25-
Section 4.4 Information in Proxy Statement. None of the information
------------------------------
supplied by Parent or Purchaser in writing expressly for inclusion or
incorporation by reference in the Proxy Statement (or any amendment thereof or
supplement thereto) will, at the date mailed to shareholders and at the time of
the meeting of shareholders to be held in connection with the Merger, contain
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they are made, not
misleading.
Section 4.5 Share Ownership. Neither Parent nor Purchaser beneficially
---------------
owns any shares of capital stock of the Company.
Section 4.6 Financing. Parent has, or will have prior to the expiration
---------
of the Offer, sufficient funds to consummate the transactions contemplated by
this Agreement, including payment in full for all Shares validly tendered into
the Offer or outstanding at the Effective Time.
Section 4.7 Finders' Fees. Except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc., whose
-------------
fees will be paid by Parent, there is no investment banker, broker, finder or
other intermediary that might be entitled to any fee or commission in connection
with or upon consummation of the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent or Purchaser.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Acquisition Proposals. The Company will notify Purchaser
---------------------
promptly (but in no event later than 24 hours) if any proposals are received by,
any information is requested from, or any negotiations or discussions are sought
to be initiated or continued with the Company or its executive officers,
directors, investment bankers, attorneys, accountants or other agents, in each
case in connection with any Acquisition Proposal (as defined below). The
Company shall provide such notice orally and in writing and, subject to the
Company's directors' performance of their fiduciary duties, shall identify the
person or entity making, and the terms and conditions of, any such Acquisition
Proposal, indication or request. Subject to the Company's directors'
performance of their fiduciary duties, the Company shall keep Parent fully
informed, on a current basis, of the status and details of any such Acquisition
Proposal, indication or request. The Company agrees that it will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. As used in this Agreement, "Acquisition Proposal" shall
--------------------
mean any tender or exchange offer involving the Company, any proposal for a
merger, consolidation or other business combination involving the Company, any
proposal or offer to acquire in any manner a substantial equity interest in, or
a substantial portion of the business or assets of, the Company or any material
Subsidiary (other than immaterial or insubstantial assets or inventory in the
ordinary course of business or assets held for sale), any proposal or offer with
respect to any recapitalization or restructuring with respect to the Company or
any material Subsidiary or any proposal or offer with respect to any other
transaction similar to any
-26-
of the foregoing with respect to the Company other than pursuant to the
transactions to be effected pursuant to this Agreement.
Section 5.2 Interim Operations of the Company. From the date hereof until
---------------------------------
the Effective Time, the Company and its Subsidiaries shall conduct their
businesses in the ordinary course consistent with past practice and shall use
their best efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and employees. Without limiting the generality of the
foregoing, from the date hereof until the Effective Time:
(a) The Company will not adopt or propose any change to its
certificate of incorporation or bylaws;
(b) The Company will not, and will not permit any of its Subsidiaries
to, merge or consolidate with any other Person or acquire a material amount of
stock or assets of any other Person;
(c) The Company will not, and will not permit any of its Subsidiaries
to, sell, lease, license or otherwise dispose of any material subsidiary or
material amount of assets, securities or property (including, without
limitation, the stock or assets of La Sportiva USA, Inc.) except pursuant to
existing contracts or commitments and in the ordinary course consistent with
past practice;
(d) The Company will not, and will not permit any of its Subsidiaries
to, knowingly take any action that would make any representation and warranty of
the Company hereunder inaccurate in any respect at, or as of any time prior to,
the Effective Time; and
(e) The Company will not, and will not permit any of its Subsidiaries
to, agree or commit to do any of the foregoing.
Section 5.3 No Solicitation.
---------------
(a) Except as provided in Section 5.3(b) below, the Company, from the
date of this Agreement until the earlier of termination of this Agreement or the
Acceptance Date, will not nor shall it authorize or permit its officers,
directors, employees, investment bankers, attorneys, accountants and other
agents to directly or indirectly (i) initiate, solicit or knowingly encourage,
or knowingly take any action to facilitate the making of, any offer or proposal
which constitutes or is reasonably likely to lead to any Acquisition Proposal,
(ii) enter into any agreement with respect to any Acquisition Proposal, (iii) in
the event of an unsolicited Acquisition Proposal for the Company, engage in
negotiations or discussions with, or provide any information or data to, or
afford access to the business, properties, assets, books or records of the
Company or any of its Subsidiaries to, otherwise cooperate in any way with, or
knowingly assist, participate in, facilitate or encourage any effort by, any
person or entity (other than Parent, any of its affiliates or representatives)
relating to any Acquisition Proposal or grant any waiver or release under any
standstill or similar agreement with respect to any class of equity securities
of the Company or any of its Subsidiaries; provided,
--------
-27-
however, that nothing contained in this Section 5.3 or any other provision
-------
hereof shall prohibit the Company or the Company Board of Directors from (i)
taking and disclosing to the Company's stockholders its position with respect to
a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act or (ii) making such disclosure to the
Company's stockholders as, in the good faith judgment of the Board of Directors
is necessary for the Company Board of Directors to comply with its fiduciary
duties to the Company's stockholders under applicable law.
(b) Notwithstanding the foregoing, prior to the acceptance of Shares
pursuant to the Offer, the Company may furnish information concerning its
business, properties or assets to any person or entity pursuant to a
confidentiality agreement with terms no less favorable to the Company than those
contained in the Confidentiality Agreement, dated January 20, 2000, entered into
between Parent and the Company (the "Confidentiality Agreement") and may
-------------------------
negotiate and participate in discussions and negotiations with such person or
entity concerning an Acquisition Proposal if (x) such entity or group has on an
unsolicited basis submitted a bona fide written proposal to the Company relating
to any such transaction which the Board of Directors determines in good faith,
after receiving advice from a nationally recognized investment banking firm and
taking into account all the terms and conditions of the Acquisition Proposal,
including any break-up fees, expense reimbursement provisions and conditions to
consummation, are more favorable and provide greater value to all the Company's
stockholders than as provided hereunder and for which financing, to the extent
required, is then fully committed or reasonably determined to be available by
the Board of Directors of the Company and (y) in the opinion of the Company
Board of Directors, the failure to provide such information or access or to
engage in such discussions or negotiations would cause the Board of Directors to
violate its fiduciary duties to the Company's stockholders under applicable law
(an Acquisition Proposal which satisfies clauses (x) and (y) being referred to
herein as a "Superior Proposal"). The Company shall promptly, and in any event
-----------------
within 24 hours following receipt of a Superior Proposal, notify Parent of the
receipt of the same and prior to entering into a confidentiality agreement with
such person or entity.
(c) Except as set forth herein, neither the Board of Directors of the
Company nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or Purchaser, the approval or
recommendation by such Board of Directors or any such committee of the Offer,
this Agreement or the Merger, (ii) approve or recommend or propose to approve or
recommend, any Acquisition Proposal or (iii) enter into any agreement with
respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to the
time of acceptance for payment of Shares in the Offer, the Board of Directors of
the Company may (subject to the terms of this Agreement) withdraw or modify its
approval or recommendation of the Offer, this Agreement or the Merger, in each
case, in connection with a Superior Proposal, or approve or recommend a Superior
Proposal.
Section 5.4 Notices of Certain Events. The Company shall promptly notify
-------------------------
Parent of:
-28-
(a) any notice or other communication from any person or entity
alleging that the consent of such person or entity is or may be required in
connection with the transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to or involving or
otherwise affecting the Company or any of its Subsidiaries that, if pending on
the date of this Agreement, would have been required to have been disclosed
pursuant to Section 3.12, 3.13 or 3.20, as the case may be, or that relate to
the consummation of the transactions contemplated by this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Proxy Statement. As promptly as practicable after the
---------------
consummation of the Offer and if required by the Exchange Act, the Company shall
prepare and file with the SEC, and shall use its best efforts to respond
promptly to any comments made by the SEC, and promptly thereafter shall mail to
stockholders, the Proxy Statement. In such event, the Proxy Statement shall
contain the recommendation of the Board of Directors in favor of the Merger.
Section 6.2 Meeting of Stockholders of the Company. At the Special
--------------------------------------
Meeting, if any, the Company shall use its best efforts to solicit from
stockholders of the Company proxies in favor of the Merger and shall take all
other action necessary or, in the reasonable opinion of Purchaser, advisable to
secure any vote or consent of stockholders required by the DGCL to effect the
Merger. Parent and Purchaser agree that each shall vote, or cause to be voted,
in favor of the Merger all Shares directly or indirectly beneficially owned by
it.
Section 6.3 Additional Agreements. Each of the parties hereto agrees to
---------------------
use its best efforts to obtain in a timely manner all necessary waivers,
consents and approvals and to effect all necessary registrations and filings,
and to use all reasonable efforts to take, or cause to be taken, all other
actions and to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement.
Section 6.4 Access; Confidentiality. From the date hereof to the
-----------------------
Effective Time, upon reasonable notice and subject to the terms of the
Confidentiality Agreement, the Company shall (and shall cause each of its
Subsidiaries to) afford to the officers, employees, accountants, counsel,
financing sources and other representatives of Parent, reasonable access, during
normal business hours during the period prior to the Acceptance Date, to all its
properties, books, contracts, commitments and records and, during such period,
the Company shall (and shall cause each of its subsidiaries to), subject to any
limitations imposed by law with respect to records of employees,
-29-
furnish promptly to the Parent upon Parent's request (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws and
(b) all other information concerning its business, properties and personnel as
Parent may reasonably request. The Company shall instruct the employees,
counsel, financial advisors, auditors and other authorized representatives of
the Company and its Subsidiaries to cooperate with Parent in its investigation
of the Company and its Subsidiaries. No information or knowledge obtained by
Parent in any investigation pursuant to this Section shall affect or be deemed
to modify any representation or warranty made by the Company hereunder.
Section 6.5 Consents and Approvals. Each of Parent, Purchaser and the
----------------------
Company will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on it with respect to this Agreement and
the Transactions (which actions shall include, without limitation, furnishing
all information required under the HSR Act and in connection with approvals of
or filings with any other Governmental Entity) and will promptly cooperate with
and, subject to such confidentiality agreements as may be reasonably necessary
or requested, furnish information to each other or their counsel in connection
with any such requirements imposed upon any of them or any of their subsidiaries
in connection with this Agreement and the Transactions.
(a) Each of the Company, Purchaser and Parent shall take all
reasonable actions (including cooperating with each other) necessary to file as
soon as practicable notifications under the HSR Act, or under comparable merger
notification laws of non-U.S. jurisdictions and to respond as promptly as
practicable to any inquiries received from the Federal Trade Commission and the
Antitrust Division of the Department of Justice or the authorities of such other
jurisdiction for additional information or documentation and to respond as
promptly as practicable to all inquiries and requests received from any State
Attorney General or other Governmental Entity in connection with antitrust
matters.
Section 6.6 Publicity. Parent and the Company will consult with each
---------
other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except
for any release or statement that may be required by applicable law or any
listing agreement with any national securities exchange, will not issue any such
press release or make any such public statement prior to such consultation.
Section 6.7 Directors' and Officers' Insurance and Indemnification.
------------------------------------------------------
Parent shall cause the Surviving Corporation, and the Surviving Corporation
hereby agrees, to do the following:
(a) For six years after the Effective Time, the Surviving
Corporation shall indemnify and hold harmless the present and former officers
and directors of the Company (each an "Indemnified Person") in respect of acts
------------------
or omissions occurring at or prior to the Effective Time to the fullest extent
permitted by the DGCL or any other applicable laws or as provided under the
certificate of incorporation and bylaws in effect on the date hereof, provided
--------
that such indemnification shall be subject to any limitation imposed from time
to time under applicable law.
(b) For six years after the Effective Time, the Surviving
Corporation shall provide officers' and directors' liability insurance in
respect of acts or omissions occurring prior to the
-30-
Effective Time covering each such Indemnified Person currently covered by the
Company's officers' and directors' liability insurance policy on terms with
respect to coverage and amount no less favorable than those of such policy in
effect on the date hereof, provided that, in satisfying its obligation under
--------
this Section 6.7(b), the Surviving Corporation shall not be obligated to pay
premiums in excess of 200% of the amount per annum the Company paid in its last
full fiscal year, which amount Company has disclosed to Parent prior to the date
hereof.
(c) If Parent, the Surviving Corporation or any of its successors
or assigns (i) consolidates with or merges into any other person or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially all
of its properties and assets to any person or entity, then, and in each such
case, to the extent necessary, proper provision shall be made so that the
successors and assigns of Parent or the Surviving Corporation, as the case may
be, shall assume the obligations set forth in this Section 6.7.
(d) The rights of each Indemnified Person under this Section 6.7
shall be in addition to any rights such Person may have under the certificate of
incorporation or bylaws of the Company or any of its Subsidiaries, under the
DGCL or any other applicable laws or under any agreement of any Indemnified
Person with the Company or any of its Subsidiaries. These rights shall survive
consummation of the Merger for the periods set forth above and are intended to
benefit, and shall be enforceable by, each Indemnified Person.
Section 6.8 Purchaser Compliance. Parent shall cause Purchaser to comply
--------------------
with all of its obligations under this Agreement.
Section 6.9 Best Efforts.
------------
(a) Prior to the Closing, upon the terms and subject to the
conditions of this Agreement, Purchaser and the Company, agree to use their
respective best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things reasonably necessary and appropriate, under any
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable
including, but not limited to (i) the preparation and filing of all forms,
registrations and notices required to be filed to consummate the transactions
contemplated by this Agreement and the taking of such actions as are necessary
to obtain any requisite approvals, consents, orders, exemptions or waivers by
any third party or Governmental Entity, and (ii) the satisfaction of the other
parties' conditions to Closing. In addition, no party hereto shall take any
action after the date hereof that would reasonably be expected to materially
delay the obtaining of, or result in not obtaining, any permission, approval or
consent from any Governmental Entity necessary to be obtained prior to the
acceptance for payment, and payment for, the Shares in the Offer or the Closing.
(b) Prior to the Closing, each party shall promptly consult with
the other parties hereto with respect to and subject to such confidentiality
agreements as may be reasonably necessary or requested, provide any necessary
information with respect to and provide the other (or its counsel)
-31-
copies of, all filings made by such party with any Governmental Entity or any
other information supplied by such party to a Governmental Entity in connection
with this Agreement and the transactions contemplated by this Agreement. Each
party hereto shall promptly inform the other of any communication from any
Governmental Entity regarding any of the transactions contemplated by this
Agreement unless otherwise prohibited by law. If any party hereto or affiliate
thereof receives a request for additional information or documentary material
from any such Government Entity with respect to the transactions contemplated by
this Agreement then such party will endeavor in good faith to make, or cause to
be made, as soon as reasonably practicable and after consultation with the other
party, an appropriate response in compliance with such request. To the extent
that transfers of permits or Environmental Permits are required as a result of
execution of this Agreement or consummation of the transactions contemplated
hereby, the Company shall use its commercially reasonable efforts to effect such
transfers.
(c) Notwithstanding anything else contained herein, the provisions
of Sections 6.3 and 6.5 and this Section 6.9 shall not be construed to require
any party to undertake any particular efforts or to take any particular action
if the result thereof would give rise to one of the events or conditions set
forth in Section (a) of Annex A.
Section 6.10 Employee Benefits.
-----------------
(a) Parent agrees that the Company will honor and, on and after
the Effective Time, Parent will cause the Surviving Corporation to honor all
employment, benefit, severance, termination, consulting and retirement
agreements to which the Company or any of its subsidiaries presently is a party,
including the Plans.
(b) Parent shall cause the Surviving Corporation to take such
actions as are necessary so that, until December 31, 2000, employees of the
Company and its subsidiaries during such period will be provided such employee
benefit plans and programs (other than incentive compensation or similar
programs) as will provide benefits which in the aggregate are not materially
less favorable than those provided to such employees as of the date hereof under
the Plans.
(c) Nothing in this Section 6.10 will be or be deemed to be for
the benefit of, or enforceable by, any person who is not a party hereto,
including, without limitation, any employee of the Company, the Surviving
Corporation or any of their respective subsidiaries or shall be deemed to limit
the Surviving Corporation's or its subsidiaries' ability to modify or eliminate
any Plan.
Section 6.11 Further Assurances. At and after the Effective Time, the
------------------
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Purchaser, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Company or Purchaser, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets of the Company acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger.
-32-
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligations to Effect the Merger.
-----------------------------------------------------------
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction on or prior to the Closing Date of each of the following
conditions, any and all of which may be waived in whole or in part by Parent,
Purchaser and the Company, as the case may be, to the extent permitted by
applicable law:
(a) Stockholder Approval. If required by the DGCL, this Agreement
--------------------
shall have been approved and adopted by the Company's stockholders in accordance
with such law; provided, however, that Parent and Purchaser shall vote all
-------- -------
Shares purchased in the Offer in favor of such approval;
(b) Statutes; Court Orders. No statute, rule, regulation,
----------------------
judgment, injunction, order or decree shall prohibit the consummation of the
Merger; and
(c) Purchase of Shares in Offer. Purchaser shall have purchased,
---------------------------
or caused to be purchased, the Shares pursuant to the Offer; provided, that this
-------- ----
condition shall be deemed to have been satisfied with respect to the obligation
of Parent and Purchaser to effect the Merger if Purchaser fails to accept for
payment or pay for Shares pursuant to the Offer in violation of the terms of the
Offer or of this Agreement.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated and the
-----------
transactions contemplated herein may be abandoned at any time before the
Effective Time, whether before or after stockholder approval thereof (provided,
--------
however, that if Shares are purchased pursuant to the Offer, Parent may not in
-------
any event terminate this Agreement):
(a) By mutual written consent of Parent and the Company; or
(b) By Parent or the Company if, without any material breach by
such terminating party of its obligations under this Agreement, the purchase of
Shares pursuant to the Offer shall not have occurred on or before June 15, 2000;
or
(c) By either Parent or the Company if there shall be any law or
regulation that makes acceptance for payment of, and payment for, the Shares
pursuant to the Offer or consummation of the Merger illegal or otherwise
prohibited or a court of competent jurisdiction or other Governmental Entity
shall have issued an order, decree or ruling or taken any other action, in each
case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated
-33-
by this Agreement and such judgment, injunction, order or decree shall have
become final and nonappealable; or
(d) By the Company, but only prior to the Acceptance Date, if it
shall have received a Superior Proposal which the Board of Directors has
determined is more favorable to the stockholders of the Company than the
transactions contemplated hereby in the manner permitted by, and in compliance
with, Section 5.3, provided that the Company shall have paid any amounts due
--------
pursuant to Section 9.3 in accordance with the terms, and at the times,
specified therein, and provided, further, that, unless the Company's Board of
-------- -------
Directors is advised by its principal, independent legal advisor that it would
be in contravention of the performance of the directors' fiduciary duties to do
so, (i) the Company notifies Parent, in writing and at least 72 hours prior to
such termination, promptly of its intention to terminate this Agreement and to
enter into a binding written agreement concerning an Acquisition Proposal that
constitutes a Superior Proposal of the nature described in Section 5.3(b),
attaching the most current version of such agreement (or a description of all
material terms and conditions thereof), and (ii) Parent does not make, within 72
hours of receipt of such written notification, an offer that is at least as
favorable to the shareholders of the Company as such Superior Proposal, it being
understood that the Company shall not enter into any such binding agreement
during such 72-hour period;
(e) By Parent, but only prior to the Acceptance Date, if (i) the
Company Board of Directors shall have withdrawn, modified, or changed in any
adverse respect its recommendation of this Agreement, the Merger and the
transactions contemplated hereby, (ii) the Company Board of Directors shall have
recommended to its stockholders a Superior Proposal, or (iii) resolved to do any
of the foregoing, provided that in no way shall such termination release the
--------
Company from its obligation to pay any amounts due pursuant to Section 9.3 in
accordance with the terms, and at the times, specified therein; or
(f) By Parent, if the 1999 10-K shall not have been filed on or
prior to May 1, 2000.
Section 8.2 Effect of Termination. In the event of the termination of
---------------------
this Agreement as provided in Section 8.1 hereof, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made (unless the Agreement is terminated
pursuant to Section 8.1(a)), and this Agreement shall forthwith become null and
void and there shall be no liability on the part of any party or its directors,
officers or shareholders, except for the provisions of this Section 8.2 and
Section 9.3 hereof; provided, however, that nothing in this Section 8.2 shall
-------- -------
relieve any party to this Agreement of liability for any willful or intentional
breach of this Agreement.
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ARTICLE IX
MISCELLANEOUS
Section 9.1 Amendment and Modification. Subject to applicable law and
--------------------------
except as otherwise provided in the Agreement, this Agreement may be amended,
modified and supplemented in any and all respects, whether before or after any
vote of the stockholders of the Company contemplated hereby, by written
agreement of the parties hereto, by action taken by their respective Boards of
Directors or equivalent governing bodies, but, after the purchase of Shares
pursuant to the Offer, no amendment shall be made which decreases the Merger
Consideration and, after the approval of this Agreement by the stockholders, no
amendment shall be made which by law requires further approval by such
stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 9.2 Non-Survival of Representations and Warranties. None of the
----------------------------------------------
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
acceptance for payment, and payment for, the Shares by Purchaser pursuant to the
Offer.
Section 9.3 Expenses.
--------
(a) Except as expressly set forth in Section 9.3(b) below, all
fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees,
costs and expenses.
(b) If a Payment Event occurs, then the Company shall pay Parent
(by wire transfer of immediately available funds), if, pursuant to clause (x) of
the definition of Payment Event below, simultaneously with the occurrence of
such Payment Event or, if pursuant to clause (y) of the definition of Payment
Event below, within two Business Days following such Payment Event a fee equal
to $5 million. Upon such termination, the Company shall also reimburse Parent
and its Affiliates (by wire transfer of immediately available funds), no later
than two Business Days after such termination, for 100% of their Expenses (as
defined in clause (c) below). "Payment Event" means (x) the termination of this
-------------
Agreement pursuant to Sections 8.1(d) or (e), or (y) if any Acquisition Proposal
has been made prior to the expiration or termination of the Offer, the
occurrence of any of the following events (in the case of clauses (i), (ii) and
(iii) below, whether or not the Third Party referred to therein was the person
or entity making the Acquisition Proposal) within 12 months of the termination
of this Agreement pursuant to Section 8.1(b) whereby stockholders of the Company
receive, pursuant to any such event, cash, securities or other consideration
having an aggregate value, when taken together with the value of any securities
of the Company or its Subsidiaries otherwise held by such stockholders after
such event, in excess of $2.00 per Share: (i) the Company merges with or into,
or is acquired, directly or indirectly, by merger or otherwise by, a person or
entity which is not an Affiliate of Parent or Purchaser (a "Third Party"); (ii)
-----------
a Third Party, directly or indirectly, acquires more than 50% of the total
assets of the Company and its Subsidiaries, taken as a whole; (iii) a Third
Party, directly or indirectly, acquires more than 50% of the outstanding Shares;
or (iv) the Company adopts or implements a plan of
-35-
liquidation, recapitalization or share repurchase relating to more than 50% of
the outstanding Shares or an extraordinary dividend relating to more than 50% of
the outstanding Shares or 50% of the assets of the Company and its Subsidiaries,
taken as a whole.
(c) As used herein, the term "Expenses" shall mean all of
--------
Parent's, Purchaser's and their affiliates' reasonable out-of-pocket expenses
(including all fees and expenses of counsel, accountants, experts, investment
bankers, financial and other consultants to Parent, Purchaser and their
affiliates) incurred by them or on their behalf in connection with the
transactions contemplated by this Agreement, including, but not limited to, in
connection with the negotiation, preparation, execution and performance of this
Agreement and the Parent's due diligence investigation of the Company.
(d) The Company acknowledges that the agreements contained in this
Section 9.3 are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, Parent and Purchaser would not
enter into this Agreement. Accordingly, if the Company fails to pay any amount
due to Parent pursuant to this Section 9.3 promptly, it shall also pay any costs
and expenses incurred by Parent or Purchaser in connection with a legal action
to enforce this Agreement that results in a judgment against the Company for
such amount.
Section 9.4 Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or sent by a nationally recognized overnight courier
service, such as Federal Express (providing proof of delivery), to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent or Purchaser, to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President, Administration and General Counsel
VF Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
-36-
if to the Company, to:
The North Face, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chairman of the Board of Directors and
Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Proskauer Rose, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.5 Interpretation. When a reference is made in this Agreement to
--------------
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation." As used in this Agreement, the term "affiliates" shall have the
meaning set forth in Rule 12b-2 of the Exchange Act. As used in this Agreement,
the term "Person" shall mean a natural person, partnership, corporation, limited
liability company, business trust joint stock company, trust, unincorporated
association, joint venture, Governmental Entity or other entity or organization.
Section 9.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.7 Entire Agreement; No Third Party Beneficiaries. This
----------------------------------------------
Agreement and the Confidentiality Agreement:
(a) constitute the entire agreement among the parties with respect
to the subject matter hereof and thereof and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof and thereof (provided that the
-------- ----
provisions of this Agreement shall supersede any conflicting provisions of the
Confidentiality Agreement), and
(b) except as provided in Section 6.7, is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
-37-
Section 9.8 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
Section 9.9 Specific Performance. The parties acknowledge and agree that
--------------------
any breach of the terms of this Agreement would give rise to irreparable harm
for which money damages would not be an adequate remedy and accordingly the
parties agree that, in addition to any other remedies, each shall be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy of money damages as a remedy.
Section 9.10 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
Section 9.11 Jurisdiction. Any suit, action or proceeding seeking to
------------
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal court located in the State of Delaware or any Delaware state court,
and each of the parties hereby consents to the jurisdiction of such courts (and
of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
form. Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in Section 12.01 shall be deemed effective service of
process on such party.
Section 9.12 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
--------------------
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.13 Assignment. This Agreement shall not be assigned by any of
----------
the parties hereto (whether by operation of law or otherwise) without the prior
written content of the other parties, except that Purchaser may assign, in its
sole discretion, any or all of its rights, interests and obligations hereunder
to Parent or any other subsidiary of Parent. Subject to the preceding sentence,
but without relieving any party hereto of any obligation hereunder, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
-38-
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
VF CORPORATION
By: _____________________________
Name:
Title:
SEQUOIA ACQUISITION, INC.
By: _____________________________
Name:
Title:
THE NORTH FACE, INC.
By: _____________________________
Name:
Title:
ANNEX A
Notwithstanding any other provisions of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
termination or expiration of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares (A) unless (i) there are validly tendered and not
withdrawn prior to the expiration date for the Offer that number of Shares
which, when added to the Shares owned by Purchaser, will represent at least a
majority of the outstanding Shares on a fully diluted basis (the "Minimum
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Condition"), (ii) any applicable waiting period under the HSR Act has expired or
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terminated prior to expiration of the Offer; and/or (B) if at any time on or
after the date of the Agreement and before the expiration date of this Offer, if
any of the following events shall have occurred and be continuing:
(a) (i) there shall be instituted or pending any action or proceeding
by any government or governmental authority or agency, domestic, foreign or
supranational, before any court or governmental authority or agency,
domestic, foreign or supranational, (A) challenging or seeking to make
illegal, to delay materially or otherwise directly or indirectly to
restrain or prohibit the making of the Offer, the acceptance for payment of
or payment for some or all of the Shares by Parent or Purchaser or the
consummation of the Merger, (B) seeking to obtain material damages or
otherwise directly or indirectly relating to the transactions contemplated
by the Offer or the Merger, (C) seeking to restrain or prohibit Parent's
ownership or operation (or that of its Affiliates) of all or any material
portion of the business or assets of the Company and its Subsidiaries,
taken as a whole, or of Parent and its Subsidiaries, taken as a whole, or
to compel Parent or any of its Affiliates to dispose of or hold separate
all or any material portion of the business or assets of the Company and
its Subsidiaries, taken as a whole, or of Parent and its Subsidiaries,
taken as a whole, (D) seeking to impose or confirm material limitations on
the ability of Parent, Purchaser or any of Parent's other Affiliates
effectively to exercise full rights of ownership of the Shares, including
the right to vote any Shares acquired or owned by Parent, Purchaser or any
of Parent's other Affiliates on all matters properly presented to the
Company's stockholders, (E) seeking to require divestiture by Parent,
Purchaser or any of Parent's other Affiliates of any Shares or (F) that
otherwise, in the judgment of Parent, is likely to have a Company Material
Adverse Effect or a Parent Material Adverse Effect (any action or
proceeding described in clauses (A) through (E), a "Significant
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Proceeding"); or (ii) there shall be instituted or pending any other
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Significant Proceeding, or any development shall have occurred in any
action or proceeding pending on the date hereof that, in each case, in the
judgment of Parent is reasonably likely to result in a Company Material
Adverse Effect or a Parent Material Adverse Effect; or
(b) there shall have been any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Offer or the Merger, by any
court, government or governmental authority or agency, domestic, foreign or
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supranational, other than the application of the waiting period provisions of
the HSR Act to the Offer or the Merger, that, in the judgment of Parent, is
likely, directly or indirectly, to result in any of the consequences referred to
in clauses (i)(A) through (F) of paragraph (a) above; or
(c) any change shall have occurred or been threatened (or any development
shall have occurred or been threatened involving a prospective change) in the
business, assets, liabilities, financial condition, capitalization, operations
or results of operations of the Company or any of its Subsidiaries that, in the
reasonable judgment of Parent, is or is likely to have a Company Material
Adverse Effect; or
(d) any of the representations and warranties of the Company contained in
the Agreement shall not be true and correct when made, (ii) any of the
representations and warranties of the Company contained in the Agreement (other
than Section 3.11(a)(3)) shall not be true and correct at any time prior to the
consummation of the Offer as if made at and as of such time or (iii) the
representation set forth in Section 3.11(a)(3) of the Agreement shall not be
true and correct at any time prior to the consummation of the Offer as if made
at and as of such time due to the existence of a Tax Issue or Tax Issues that
would, individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect; or
(e) the Company shall have breached or failed to perform or comply in all
material respects with the obligations under the Agreement to be performed or
complied with by it; or
(f) the Agreement shall have been terminated in accordance with its terms;
or
(g) prior to the purchase of Shares pursuant to the Offer, an Acquisition
Proposal for the Company exists and the Board shall have withdrawn or materially
modified or changed (including by amendment of the Schedule 14D-9) in a manner
adverse to Purchaser its recommendation of the Offer, the Agreement or the
Merger; or
(h) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that (1) any person or "group" (as defined in Section 13(d)(3)
of the Exchange Act), other than Parent or its affiliates or any group of which
any of them is a member or any person or group that, on the date of the
Agreement, has beneficial ownership (determined pursuant to Rule 13(d)-3
promulgated under the Exchange Act) of more than 10% of the outstanding Shares
and which had filed a Schedule 13D or 13G with the SEC on or prior to March 31,
2000, shall have acquired beneficial ownership of more than 10% of any class or
series of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall have been
granted an option, right or warrant, conditional or otherwise, to acquire
beneficial ownership of more than 10% of any class or series of capital stock of
the Company (including the Shares); or (2) any person or group that, prior to
March 31, 2000, had filed a Schedule 13D or 13G with the SEC, shall have
acquired beneficial ownership of additional shares of any class or series of
capital stock of the Company (including the Shares), through the acquisition of
stock, the formation of a group or otherwise, constituting 5% or more any such
class or series; or (3) any person or group shall have entered into a definitive
agreement or agreement in principle with the Company with respect to a merger,
consolidation or other business combination with the Company; or
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(i) the Company or any material Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency, reorganization
or other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing; or
(j) an involuntary case or other proceeding shall be commenced against the
Company or any material Subsidiary seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency,
reorganization or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property; or an order for relief
shall be entered against the Company or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect; or
(k) the Company's and its Subsidiaries' existing lenders and their
Affiliates shall not have continued to fund the business of the Company and its
Subsidiaries on substantially the same basis as had been applicable prior to the
date of the Agreement;
which, in the sole judgment of Purchaser in any such case, and regardless of the
circumstances (including any action or omission by Purchaser or Parent) giving
rise to any such condition, makes it inadvisable to proceed with such acceptance
for payment.
The foregoing conditions are for the sole benefit of Parent and Purchaser,
may be asserted by Parent or Purchaser regardless of the circumstances giving
rise to such condition and may be waived by Parent or Purchaser in whole or in
part at any time and from time to time in the sole discretion of Parent or
Purchaser, subject in each case to the terms of this Agreement. The failure by
Parent or Purchaser at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
The capitalized terms used in this Annex A shall have the meanings set
forth in the Agreement and Plan of Merger among the Parent, Purchaser and the
Company to which it is annexed (the "Agreement").
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