EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
AMONG
ITURF INC.,
ITURF BREAKFAST CORP.
AND
▇▇▇▇▇*S INC.
DATED AS OF AUGUST 16, 2000
TABLE OF CONTENTS
PAGE
--------
ARTICLE I
THE MERGER.............................................. A-1
Section 1.01. THE MERGER............................... A-1
Section 1.02. EFFECTIVE TIME; CLOSING.................. A-1
Section 1.03. EFFECT OF THE MERGER..................... A-1
Section 1.04. CERTIFICATE OF INCORPORATION; BY-LAWS.... A-2
Section 1.05. DIRECTORS AND OFFICERS................... A-2
Section 1.06. EFFECT ON SHARES......................... A-2
Section 1.07. SURRENDER OF SHARES; EXCHANGE AGENT...... A-3
Section 1.08. STOCK TRANSFER BOOKS..................... A-4
Section 1.09. NO FURTHER OWNERSHIP RIGHTS.............. A-4
Section 1.10. LOST, STOLEN OR DESTROYED CERTIFICATES... A-4
Section 1.11. RESTRICTED STOCK......................... A-4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇*S............... A-5
Section 2.01. ORGANIZATION AND QUALIFICATION;
SUBSIDIARIES................................... A-5
Section 2.02. CERTIFICATE OF INCORPORATION AND
BY-LAWS........................................ A-5
Section 2.03. CAPITALIZATION........................... A-5
Section 2.04. AUTHORITY RELATIVE TO THIS AGREEMENT..... A-6
Section 2.05. NO CONFLICT; REQUIRED FILINGS AND
CONSENTS....................................... A-6
Section 2.06. SEC FILINGS; FINANCIAL STATEMENTS........ A-7
Section 2.07. ABSENCE OF CERTAIN CHANGES OR EVENTS..... A-7
Section 2.08. FAIRNESS OPINION......................... A-7
Section 2.09. BROKERS.................................. A-7
Section 2.10. NO ACCELERATION OF OPTIONS OR ▇▇▇▇▇*S
RESTRICTED STOCK; CHANGE OF CONTROL............ A-8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ITURF................. A-8
Section 3.01. ORGANIZATION AND QUALIFICATION;
SUBSIDIARIES................................... A-8
Section 3.02. CERTIFICATE OF INCORPORATION AND
BY-LAWS........................................ A-8
Section 3.03. CAPITALIZATION........................... A-8
Section 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT..... A-9
Section 3.05. NO CONFLICT; REQUIRED FILINGS AND
CONSENTS....................................... A-10
Section 3.06. SEC FILINGS; FINANCIAL STATEMENTS........ A-10
Section 3.07. ABSENCE OF CERTAIN CHANGES OR EVENTS..... A-11
Section 3.08. FAIRNESS OPINION AND APPROVAL BY THE
SPECIAL COMMITTEE.............................. A-11
Section 3.09. BROKERS.................................. A-11
Section 3.10. NO ACCELERATION OF OPTIONS OR ITURF
RESTRICTED STOCK; CHANGE OF CONTROL............ A-11
ARTICLE IV
COVENANTS............................................... A-11
Section 4.01. STOCKHOLDERS MEETINGS; VOTING OF
SHARES......................................... A-11
Section 4.02. JOINT PROXY STATEMENT/PROSPECTUS AND
REGISTRATION STATEMENT ON FORM S-4............. A-12
Section 4.03. NO SOLICITATION.......................... A-13
Section 4.04. DIRECTORS' AND OFFICERS' INDEMNIFICATION
AND INSURANCE.................................. A-14
Section 4.05. STOCK OPTIONS............................ A-14
A-i
PAGE
--------
Section 4.06. EMPLOYEE BENEFITS........................ A-16
Section 4.07. PUBLIC ANNOUNCEMENTS..................... A-16
Section 4.08. NOTIFICATION OF CERTAIN MATTERS.......... A-16
Section 4.09. FURTHER ACTION; REASONABLE BEST
EFFORTS........................................ A-16
Section 4.10. DELISTING; DEREGISTRATION................ A-16
Section 4.11. ELECTION OF DIRECTORS OF ITURF........... A-16
Section 4.12. NO ACCELERATION OF ITURF OPTIONS OR ITURF
RESTRICTED STOCK............................... A-16
Section 4.13. VOTING OF ▇▇▇▇▇*S COMMON STOCK........... A-16
Section 4.14. ISSUANCE OF OPTIONS OR RESTRICTED
STOCK.......................................... A-17
ARTICLE V
CONDITIONS TO THE MERGER................................ A-17
Section 5.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO
EFFECT THE MERGER.............................. A-17
Section 5.02. CONDITIONS TO THE OBLIGATION OF ▇▇▇▇▇*S
TO EFFECT THE MERGER........................... A-17
Section 5.03. CONDITIONS TO THE OBLIGATION OF ITURF AND
MERGER SUB TO EFFECT THE MERGER................ A-18
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER....................... A-18
Section 6.01. TERMINATION.............................. A-18
Section 6.02. EFFECT OF TERMINATION.................... A-19
Section 6.03. AMENDMENT................................ A-19
Section 6.04. WAIVER................................... A-19
ARTICLE VII
GENERAL PROVISIONS...................................... A-19
Section 7.01. NON-SURVIVAL OF REPRESENTATIONS AND
WARRANTIES..................................... A-19
Section 7.02. NOTICES.................................. A-19
Section 7.03. CERTAIN DEFINITIONS...................... A-20
Section 7.04. SEVERABILITY............................. A-21
Section 7.05. ENTIRE AGREEMENT; ASSIGNMENT............. A-21
Section 7.06. PARTIES IN INTEREST...................... A-21
Section 7.07. FEES AND EXPENSES........................ A-21
Section 7.08. GOVERNING LAW............................ A-21
Section 7.09. HEADINGS................................. A-21
Section 7.10. COUNTERPARTS............................. A-21
Section 7.11. SPECIFIC PERFORMANCE..................... A-21
A-ii
AGREEMENT AND PLAN OF MERGER, dated as of August 16, 2000 (this
"Agreement"), among iTurf Inc., a Delaware corporation ("iTurf"), iTurf
Breakfast Corp., a Delaware corporation and a wholly-owned subsidiary of iTurf
("Merger Sub"), and ▇▇▇▇▇*s Inc., a Delaware corporation ("▇▇▇▇▇*s").
WHEREAS, the Board of Directors of ▇▇▇▇▇*s (i) has determined that it is
advisable and in the best interests of its stockholders (other than ▇▇▇▇▇▇▇ ▇.
▇▇▇▇ and his family members) for ▇▇▇▇▇*s to enter into this Agreement and to
consummate a merger of Merger Sub with and into ▇▇▇▇▇*s (the "Merger") upon the
terms and subject to the conditions set forth in this Agreement and (ii) has
approved this Agreement, the Merger and the other transactions contemplated
hereby;
WHEREAS, the Board of Directors of iTurf, acting upon the unanimous
recommendation of a special committee of such Board comprised entirely of
independent directors (the "Special Committee"), (i) has determined that it is
advisable and in the best interests of the holders of iTurf's Class A Common
Stock, par value $.01 per share (the "Class A Common Stock") (other than
▇▇▇▇▇*s, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ or any affiliate thereof), for iTurf to enter into this
Agreement and to consummate the Merger upon the terms and subject to the
conditions set forth in this Agreement and (ii) has approved this Agreement, the
Merger and the other transactions contemplated hereby;
WHEREAS, the Board of Directors of Merger Sub (i) has determined that it is
advisable and in the best interests of its sole stockholder for Merger Sub to
enter into this Agreement and to consummate the Merger upon the terms and
subject to the conditions set forth in this Agreement and (ii) has approved this
Agreement, the Merger and the other transactions contemplated hereby.
NOW, THEREFORE, in consideration of the representations, warranties and
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law ("Delaware Law"), at the Effective Time (as defined below) Merger Sub shall
be merged with and into ▇▇▇▇▇*s. As a result of the Merger, the separate
corporate existence of Merger Sub shall cease and ▇▇▇▇▇*s shall continue as the
surviving corporation of the Merger (the "Surviving Corporation").
Section 1.02. EFFECTIVE TIME; CLOSING. As promptly as practicable after
the satisfaction or, if applicable, waiver of the conditions set forth in
Article V, the parties hereto shall cause the Merger to be consummated by filing
with the Secretary of State of the State of Delaware a certificate of merger
(the "Certificate of Merger"), in such form as required by, and executed in
accordance with the relevant provisions of, Delaware Law, and shall make all
other filings or recordings required under Delaware Law. The Merger shall become
effective at the time of filing of the Certificate of Merger with the Secretary
of State of the State of Delaware or at such later time as mutually agreed upon
by the parties to this Agreement and specified as the effective time in the
Certificate of Merger (the time the Merger becomes effective being the
"Effective Time"). Simultaneously with such filing, a closing shall be held at
the offices of Proskauer Rose LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
or such other place as the parties shall agree, for the purpose of confirming
the satisfaction or waiver, as the case may be, of the conditions set forth in
Article V.
Section 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of Delaware Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, powers and franchises of ▇▇▇▇▇*s and Merger Sub shall vest
in the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, disabilities and duties of
A-1
▇▇▇▇▇*s and Merger Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
Section 1.04. CERTIFICATE OF INCORPORATION; BY-LAWS. (a) The Certificate
of Incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, in the form of EXHIBIT A attached hereto, shall be the Certificate of
Incorporation of the Surviving Corporation following the Effective Time until
thereafter amended as provided by Delaware Law and such Certificate of
Incorporation; PROVIDED, HOWEVER, that Article I of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read as follows:
"FIRST: The name of the corporation is ▇▇▇▇▇*s Inc."
(b) The By-Laws of Merger Sub, as in effect immediately prior to the
Effective Time, in the form of EXHIBIT B attached hereto, shall be the By-Laws
of the Surviving Corporation following the Effective Time until thereafter
amended as provided by Delaware Law, the Certificate of Incorporation of the
Surviving Corporation and such By-Laws.
Section 1.05. DIRECTORS AND OFFICERS. (a) The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office from the Effective Time in accordance
with the Certificate of Incorporation and By-Laws of the Surviving Corporation
until their respective successors are duly elected or appointed and qualified.
(b) The officers of Merger Sub immediately prior to the Effective Time shall
be the initial officers of the Surviving Corporation, each to hold office from
the Effective Time in accordance with the Certificate of Incorporation and
By-Laws of the Surviving Corporation until their respective successors are duly
elected or appointed and qualified.
Section 1.06. EFFECT ON SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of iTurf, Merger Sub, ▇▇▇▇▇*s or the
holders of any of the following securities:
(a) CANCELLATION; RETIREMENT. Each share of common stock, par value
$.01 per share ("▇▇▇▇▇*s Common Stock"), of ▇▇▇▇▇*s held in the treasury of
▇▇▇▇▇*s immediately prior to the Effective Time shall be canceled and
retired without payment of any consideration therefor and cease to exist.
(b) CONVERSION OF SHARES. Subject to Sections 1.06(a), (e) and (f),
each share of ▇▇▇▇▇*s Common Stock (including each share held by iTurf or
any of its subsidiaries) issued and outstanding immediately prior to the
Effective Time shall be converted automatically into the right to receive
1.715 (the "Exchange Ratio") fully paid and non-assessable shares of
Class A Common Stock (together with any cash paid pursuant to
Section 1.06(f) in lieu of fractional shares of Class A Common Stock, the
"Merger Consideration");
(c) STOCK OPTIONS. All options to purchase shares of ▇▇▇▇▇*s Common
Stock granted under any stock option plan of ▇▇▇▇▇*s ("▇▇▇▇▇*s Option
Plans") or pursuant to any other arrangement to provide options, warrants or
other rights to purchase such shares to directors, officers or employees of
▇▇▇▇▇*s or other persons (in any such case, an "Option") outstanding
immediately prior to the Effective Time shall be subject to the provisions
of Section 4.05;
(d) CAPITAL STOCK OF MERGER SUB. Each share of common stock, par value
$.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted automatically into one fully paid and
non-assessable share of common stock, par value $.01 per share, of the
Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such
shares of capital stock of the Surviving Corporation;
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities
convertible into shares of ▇▇▇▇▇*s Common Stock or Class A Common Stock),
reorganization, recapitalization or other like change with respect to shares
of ▇▇▇▇▇*s Common
A-2
Stock or Class A Common Stock, the record date for which shall occur after
the date hereof and prior to the Effective Time;
(f) FRACTIONAL SHARES. No fraction of a share of Class A Common Stock
will be issued, but in lieu thereof each holder of ▇▇▇▇▇*s Common Stock who
would otherwise be entitled to a fraction of a share of Class A Common Stock
(after aggregating all fractional shares of Class A Common Stock to be
received by such holder) shall receive from iTurf an amount of cash (rounded
to the nearest whole cent), without interest, equal to the product of
(i) such fraction, multiplied by (ii) the closing price of the Class A
Common Stock on the trading day on which the Effective Time occurs (provided
that if the Effective Time does not occur on a trading day, then the closing
price of the Class A Common Stock on the next succeeding day that is a
trading day), as quoted in THE WALL STREET JOURNAL or other reliable
financial newspaper or publication, or, if the Class A Common Stock is not
so quoted on such day, then the fair market value of the Class A Common
Stock on such day as determined in good faith by the Board of Directors of
iTurf (with the approval of the Special Committee). For the purposes of the
preceding sentence, a "trading day" means a day on which trading generally
takes place on The Nasdaq Stock Market and on which trading in Class A
Common Stock has occurred.
Section 1.07. SURRENDER OF SHARES; EXCHANGE AGENT. (a) Prior to the
Effective Time, iTurf shall deposit, or shall cause to be deposited, to or for
the account of a bank or trust company designated by iTurf (the "Exchange
Agent"), which designation shall require the consent of ▇▇▇▇▇*s, in trust for
the benefit of the holders of ▇▇▇▇▇*s Common Stock, for exchange in accordance
with this Section 1.07, through the Exchange Agent, certificates evidencing the
Class A Common Stock and, in lieu of any fractional shares thereof, cash
issuable pursuant to Section 1.06 in exchange for the outstanding shares of
▇▇▇▇▇*s Common Stock.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, iTurf will instruct the Exchange Agent to mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time evidenced outstanding shares of ▇▇▇▇▇*s Common Stock (the "Certificates")
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as iTurf may reasonably specify) and
(ii) instructions to effect the surrender of the Certificates in exchange for
the certificates evidencing shares of Class A Common Stock and cash in lieu of
any fractional shares thereof. Upon surrender of a Certificate for cancellation
to the Exchange Agent together with such letter of transmittal, duly completed
and executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of shares of ▇▇▇▇▇*s Common Stock which is not registered in the transfer
records of ▇▇▇▇▇*s as of the Effective Time, the Merger Consideration may be
issued and paid in accordance with this Article I to a transferee if the
Certificate evidencing such shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
pursuant to this Section 1.07(b) and by evidence that any applicable stock
transfer taxes have been paid. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of ▇▇▇▇▇*s
Common Stock will be deemed from and after the Effective Time, for all corporate
purposes, other than the payment of dividends, to evidence the right to receive
the number of full shares of Class A Common Stock into which such shares of
▇▇▇▇▇*s Common Stock shall have been converted and the right to receive an
amount in cash in lieu of the issuance of any fractional shares in accordance
with Section 1.06(f).
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the Effective Time with respect to
the Class A Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate until the
A-3
holder of such Certificate shall surrender such Certificate. Subject to
applicable law, following surrender of any such Certificate, there shall be paid
to the record holder of the certificates representing whole shares of Class A
Common Stock issued in exchange therefor, without interest, at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Class A Common Stock.
(d) TRANSFERS OF OWNERSHIP. If any certificate for shares of Class A
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to iTurf or any person designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Class A Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of iTurf or any
agent designated by it that such tax has been paid or is not payable.
(e) NO LIABILITY. None of iTurf, Merger Sub or ▇▇▇▇▇*s shall be liable to
any holder of ▇▇▇▇▇*s Common Stock for any Merger Consideration (or dividends or
distributions with respect thereto) delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(f) WITHHOLDING RIGHTS. iTurf, Merger Sub, the Surviving Corporation and
the Exchange Agent shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
▇▇▇▇▇*s Common Stock such amounts as iTurf, Merger Sub, the Surviving
Corporation or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code"), or any provision of state, local, provincial or foreign
tax law. To the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of the ▇▇▇▇▇*s Common Stock in respect of which such deduction and withholding
was made.
Section 1.08. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of ▇▇▇▇▇*s shall be closed, and there shall be no further
registration of transfers of shares of ▇▇▇▇▇*s Common Stock thereafter on the
records of ▇▇▇▇▇*s. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be canceled and exchanged
as provided in this Article I.
Section 1.09. NO FURTHER OWNERSHIP RIGHTS. The Merger Consideration
delivered upon the surrender for exchange of shares of ▇▇▇▇▇*s Common Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares.
Section 1.10. LOST, STOLEN OR DESTROYED CERTIFICATES. If any Certificate
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificate, upon the making of an
affidavit of that fact by the holder thereof, such Merger Consideration as may
be required pursuant to Section 1.07; PROVIDED, HOWEVER, that iTurf may, in its
discretion and as a condition precedent to the issuance and delivery thereof,
require the owner of such lost, stolen or destroyed Certificate to deliver a
bond in such sum as it may reasonably direct as indemnity against any claim that
may be made against iTurf or the Exchange Agent with respect to the Certificate
alleged to have been lost, stolen or destroyed.
Section 1.11. RESTRICTED STOCK. If any shares of ▇▇▇▇▇*s Common Stock that
are outstanding immediately prior to the Effective Time are unvested or are
subject to a repurchase option, risk of forfeiture or other condition providing
that such shares ("▇▇▇▇▇*s Restricted Stock") may be forfeited or repurchased by
▇▇▇▇▇*s upon any termination of the stockholder's employment, directorship or
other relationship with ▇▇▇▇▇*s (and/or any affiliate of ▇▇▇▇▇*s) under the
terms of any restricted stock agreement or other agreement with ▇▇▇▇▇*s, then
the shares of Class A Common Stock issued upon the conversion of such shares of
▇▇▇▇▇*s Restricted Stock in the Merger will continue to be
A-4
unvested and subject to the same repurchase options, risks of forfeiture or
other conditions following the Effective Time, and the certificates representing
such shares of Class A Common Stock may accordingly be marked with appropriate
legends noting such repurchase options, risks of forfeiture or other conditions.
▇▇▇▇▇*s shall take all actions that may be necessary to ensure that, from and
after the Effective Time, iTurf is entitled to exercise any such repurchase
option or other right set forth in any such restricted stock agreement or other
agreement. A listing of the holders of ▇▇▇▇▇*s Restricted Stock, together with
the number of shares and the vesting schedule of ▇▇▇▇▇*s Restricted Stock held
by each, is set forth in Section 1.11 of the ▇▇▇▇▇*s Disclosure Schedule (as
defined below).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇*S
Except as otherwise disclosed in the ▇▇▇▇▇*s SEC Reports (as defined below)
or as set forth in the disclosure schedule delivered to iTurf on the date hereof
(the "▇▇▇▇▇*s Disclosure Schedule"), which exceptions shall not apply to the
representations and warranties contained in Section 2.10, ▇▇▇▇▇*s hereby
represents and warrants to iTurf and Merger Sub that:
Section 2.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
▇▇▇▇▇*s and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority and is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("Approvals") necessary to own, lease and
operate the properties it purports to own, lease or operate and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
Approvals would not have a Material Adverse Effect (as defined below). Each of
▇▇▇▇▇*s and its subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would not
have a Material Adverse Effect. ▇▇▇▇▇*s does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity. "Material
Adverse Effect" shall mean, with respect to any party hereto, any change, event
or effect that, when taken together with all other adverse changes, events or
effects, is or is reasonably likely to be materially adverse to the business,
properties, financial condition, assets or liabilities of such party and its
subsidiaries (if applicable), taken as a whole, or to the ability of such party
to perform its obligations under this Agreement; PROVIDED, HOWEVER, that
changes, events or effects that are applicable to or arise out of (i) any
changes in economic, regulatory or political conditions generally, (ii) this
Agreement or the transactions contemplated hereby, (iii) the industry of such
party generally or (iv) the effect of the public announcement of the
transactions contemplated hereby, shall be excluded from the definition of
Material Adverse Effect and from any determination as to whether a Material
Adverse Effect has occurred or may occur.
Section 2.02. CERTIFICATE OF INCORPORATION AND BY-LAWS. ▇▇▇▇▇*s has
heretofore furnished to iTurf a complete and correct copy of its Certificate of
Incorporation and By-Laws, each as amended to date. Such Certificate of
Incorporation and By-Laws are in full force and effect. ▇▇▇▇▇*s is not in
violation of any of the provisions of its Certificate of Incorporation or
By-Laws. None of ▇▇▇▇▇*s subsidiaries is in violation of any of the provisions
of its Certificate of Incorporation or By-Laws or equivalent organizational
documents.
Section 2.03. CAPITALIZATION. The authorized capital stock of ▇▇▇▇▇*s
consists of (i) 50,000,000 shares of ▇▇▇▇▇*s Common Stock, of which 16,786,786
shares are issued and outstanding as of the date hereof, and (ii) 1,000,000
shares of preferred stock, par value $.01 per share, of which no shares are
issued or outstanding as of the date hereof. All of the issued and outstanding
shares of capital
A-5
stock of ▇▇▇▇▇*s are duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights. Except for outstanding Options to
purchase an aggregate of no more than 1,937,374 shares of ▇▇▇▇▇*s Common Stock,
there are no outstanding options, warrants or other rights of any kind to
acquire (including preemptive rights) any additional shares of capital stock of
▇▇▇▇▇*s or securities convertible into or exchangeable for, or which otherwise
confer on the holder thereof any right to acquire, any such additional shares,
nor is ▇▇▇▇▇*s committed to issue any such option, warrant, right or security.
All outstanding Options have been issued pursuant to the ▇▇▇▇▇*s Inc. 1996 Stock
Incentive Plan or the ▇▇▇▇▇*s Inc. 1998 Stock Incentive Plan, except for 250,000
Options issued to ▇▇▇▇ ▇▇▇▇▇▇▇▇ pursuant to an agreement with ▇▇▇▇▇*s dated
July 10, 1998 (the "▇▇▇▇▇▇▇▇ Options"). There are no outstanding obligations of
▇▇▇▇▇*s to repurchase, redeem or otherwise acquire any shares of its capital
stock. All of the issued and outstanding shares of capital stock of each of
▇▇▇▇▇*s subsidiaries are duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights. There are no outstanding options,
warrants or other rights of any kind to acquire (including preemptive rights)
any additional equity interests of any subsidiary of ▇▇▇▇▇*s or securities
convertible into or exchangeable for, or which otherwise confer on the holder
thereof any right to acquire, any additional equity interests of any such
subsidiary, nor is any such subsidiary committed to issue any such option,
warrant, right or security.
Section 2.04. AUTHORITY RELATIVE TO THIS AGREEMENT. (a) ▇▇▇▇▇*s has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by ▇▇▇▇▇*s and
the consummation by ▇▇▇▇▇*s of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of ▇▇▇▇▇*s are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than the
approval of this Agreement and the Merger by the holders of at least 66 2/3% of
the outstanding shares of ▇▇▇▇▇*s Common Stock entitled to vote in accordance
with Delaware Law and ▇▇▇▇▇*s Certificate of Incorporation). This Agreement has
been duly and validly executed and delivered by ▇▇▇▇▇*s and, assuming the due
authorization, execution and delivery of this Agreement by iTurf and Merger Sub,
constitutes the legal, valid and binding obligation of ▇▇▇▇▇*s enforceable
against ▇▇▇▇▇*s in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally or by general equitable principles.
(b) The Board of Directors of ▇▇▇▇▇*s (i) has declared that this Agreement,
the Merger and the other transactions contemplated hereby are advisable and in
the best interests of the stockholders of ▇▇▇▇▇*s (other than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
and his family members) and (ii) has authorized, approved and adopted this
Agreement, the Merger and the other transactions contemplated hereby.
Section 2.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by ▇▇▇▇▇*s do not, and the performance
of this Agreement by ▇▇▇▇▇*s and the consummation of the Merger will not,
(i) conflict with or violate ▇▇▇▇▇*s Certificate of Incorporation or By-Laws or
the equivalent organizational documents of any of its subsidiaries,
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree (each, a "Law") applicable to ▇▇▇▇▇*s or any of its subsidiaries or by
which any property or asset of ▇▇▇▇▇*s or any of its subsidiaries is bound, or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or other encumbrance on any property or asset of
▇▇▇▇▇*s or any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which ▇▇▇▇▇*s or any of its subsidiaries is a party
or by which ▇▇▇▇▇*s or any of its subsidiaries or any property or asset of any
of them is bound, except in the case of clauses (ii) and (iii) for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
individually or in the
A-6
aggregate, have a Material Adverse Effect or prevent or materially delay the
consummation of the Merger.
(b) The execution and delivery of this Agreement by ▇▇▇▇▇*s do not, and the
performance of this Agreement by ▇▇▇▇▇*s and the consummation of the Merger will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign ("Government Entities"), except (i) for the applicable requirements of
the Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), state securities laws
("Blue Sky Laws") and the filing of the Certificate of Merger as required by
Delaware Law, (ii) for notifications required to be delivered to the Federal
Trade Commission pursuant to the Agreement Containing Consent Order between the
Federal Trade Commission and ▇▇▇▇▇*s, issued June 2, 1999, and (iii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
have a Material Adverse Effect or prevent or materially delay the performance by
▇▇▇▇▇*s of its obligations under this Agreement or the consummation of the
Merger.
Section 2.06. SEC FILINGS; FINANCIAL STATEMENTS. (a) ▇▇▇▇▇*s has filed all
forms, reports and documents required to be filed by it with the Securities and
Exchange Commission (the "SEC") under the Securities Act and the Exchange Act
since May 1, 1999 (collectively, the "▇▇▇▇▇*s SEC Reports"). The ▇▇▇▇▇*s SEC
Reports (i) were prepared in accordance with the requirements of the Securities
Act or the Exchange Act, as the case may be, and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of ▇▇▇▇▇*s
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the ▇▇▇▇▇*s SEC Reports (i) complies in
all material respects with the applicable accounting requirements and with the
published rules and regulations of the SEC, (ii) was prepared in accordance with
United States Generally Accepted Accounting Principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated
therein or in the notes thereto) and (iii) fairly presents in all material
respects the consolidated financial position of ▇▇▇▇▇*s and its subsidiaries as
at the respective dates thereof and the consolidated results of their operations
and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments and such statements do not contain the required notes thereto.
Section 2.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since April 29, 2000:
(a) ▇▇▇▇▇*s and its subsidiaries have not suffered any Material Adverse Effect;
and (b) ▇▇▇▇▇*s and its subsidiaries have conducted their businesses in all
material respects only in the ordinary course consistent with past practice,
except in connection with the negotiation and execution and delivery of this
Agreement.
Section 2.08. FAIRNESS OPINION. The Board of Directors of ▇▇▇▇▇*s has been
advised by ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ that, in its opinion, as of the date hereof, the
consideration to be received, pursuant to this Agreement, by the holders of
▇▇▇▇▇*s Common Stock (other than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and his family members) in the
Merger is fair from a financial point of view to such holders, and ▇▇▇▇▇▇▇ ▇▇▇▇▇
Barney will deliver a written copy of such opinion to the Board of Directors of
▇▇▇▇▇*s.
Section 2.09. BROKERS. No broker, finder or investment banker (other than
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney) is entitled to any brokerage, finder's or other fee or
commission in connection with this Agreement or the transactions contemplated
hereby based upon arrangements made by or on behalf of ▇▇▇▇▇*▇. ▇▇▇▇▇*s has
heretofore furnished to iTurf a complete and correct copy of all agreements
A-7
between ▇▇▇▇▇*s and ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ pursuant to which such firm would be
entitled to any payment relating to this Agreement or the transactions
contemplated hereby. Any such fees due shall be paid by ▇▇▇▇▇*s.
Section 2.10. NO ACCELERATION OF OPTIONS OR ▇▇▇▇▇*S RESTRICTED STOCK;
CHANGE OF CONTROL. Except as provided in Article XI of the 1996 Stock Incentive
Plan of ▇▇▇▇▇*s Inc. and the 1998 Stock Incentive Plan of ▇▇▇▇▇*s Inc., as such
Article applies to all outstanding Options (including the ▇▇▇▇▇▇▇▇ Options) and
▇▇▇▇▇*s Restricted Stock, no accelerated vesting of Options (including the
▇▇▇▇▇▇▇▇ Options) or Adjusted Options or ▇▇▇▇▇*s Restricted Stock, or lapse of
any repurchase option, risk of forfeiture or other condition with respect to
▇▇▇▇▇*s Restricted Stock, shall occur as a result of the Merger or any of the
other transactions contemplated hereby. The consummation of the Merger and the
other transactions contemplated hereby will not give rise to any liability for
severance pay, unemployment compensation, termination pay or withdrawal
liability, or accelerate the time of payment or vesting or increase the amount
of compensation or benefits due to any employee, director or stockholder of
▇▇▇▇▇*s (whether current, former or retired) or their beneficiaries or
affiliates solely by reason of such transactions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ITURF
Except as otherwise disclosed in the iTurf SEC Reports (as defined below) or
as set forth in the disclosure schedule delivered to ▇▇▇▇▇*s on the date hereof
(the "iTurf Disclosure Schedule"), which exceptions shall not apply to the
representations and warranties contained in Section 3.10, iTurf hereby
represents and warrants to ▇▇▇▇▇*s that:
Section 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of iTurf
and its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority and is in possession of all
Approvals necessary to own, lease and operate the properties it purports to own,
lease or operate and to carry on its business as it is now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority and Approvals would not have a Material Adverse
Effect. Each of iTurf and its subsidiaries is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not have a Material Adverse Effect. iTurf does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity.
Section 3.02. CERTIFICATE OF INCORPORATION AND BY-LAWS. iTurf has
heretofore furnished to ▇▇▇▇▇*s a complete and correct copy of its Certificate
of Incorporation and By-Laws and a complete and correct copy of the Certificate
of Incorporation and By-Laws of Merger Sub, in each case as amended to date. The
Certificate of Incorporation and By-Laws of each of iTurf and Merger Sub are in
full force and effect. iTurf is not in violation of any of the provisions of its
Certificate of Incorporation or By-Laws. None of iTurf's subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation or
By-Laws or equivalent organizational documents.
Section 3.03. CAPITALIZATION. The authorized capital stock of iTurf
consists of (i) 80,000,000 shares of common stock, par value $.01 per share
("iTurf Common Stock"), of which 67,500,000 shares are designated as Class A
Common Stock, of which 9,697,090 shares are issued and outstanding as of the
date hereof, and of which 12,500,000 shares are designated as Class B Common
Stock, of which 11,425,000 shares are issued and outstanding as of the date
hereof and 1,075,000 shares had been issued and outstanding but were
subsequently converted into shares of Class A Common Stock, and (ii) 1,000,000
shares of preferred stock, par value $.01 per share, of which no shares are
issued or
A-8
outstanding as of the date hereof. The authorized capital stock of Merger Sub
consists of 600,000 shares of common stock, par value $.01 per share, of which
100 shares are issued and outstanding as of the date hereof. All of the issued
and outstanding shares of capital stock of iTurf are duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights. Except for
outstanding options to purchase an aggregate of no more than 1,278,100 shares of
Class A Common Stock, there are no outstanding options, warrants or other rights
of any kind to acquire (including preemptive rights) any additional shares of
capital stock of iTurf or securities convertible into or exchangeable for, or
which otherwise confer on the holder thereof any right to acquire, any such
additional shares, nor is iTurf committed to issue any such option, warrant,
right or security. There are no outstanding obligations of iTurf to repurchase,
redeem or otherwise acquire any shares of its capital stock. All of the issued
and outstanding shares of capital stock of each of iTurf's subsidiaries are duly
authorized, validly issued, fully paid and non-assessable and free of preemptive
rights. There are no outstanding options, warrants or other rights of any kind
to acquire (including preemptive rights) any additional equity interests of any
subsidiary of iTurf or securities convertible into or exchangeable for, or which
otherwise confer on the holder thereof any right to acquire, any additional
equity interests of any such subsidiary, nor is any such subsidiary committed to
issue any such option, warrant, right or security. Subject to obtaining the
requisite stockholder approval of the iTurf Merger Matters (as defined below),
the shares of Class A Common Stock to be issued in the Merger have been duly
authorized and, when so issued in accordance with the terms hereof, such shares
will be validly issued, fully paid and non-assessable.
Section 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. (a) Each of iTurf and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each of iTurf and Merger Sub and the consummation by each of
iTurf and Merger Sub of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of iTurf or Merger Sub are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than (i) the
approval by the holders of at least a majority of the outstanding shares of
iTurf Common Stock entitled to vote of the Second Restated Certificate of
Incorporation of iTurf in the form of EXHIBIT C attached hereto (the "Second
Restated Certificate of Incorporation") and (ii) the approval by the holders of
at least a majority of the outstanding shares of iTurf Common Stock voted at the
iTurf Meeting (as defined below) of the issuance of Class A Common Stock in the
Merger in accordance with the terms of this Agreement, in each case in
accordance with Delaware Law and iTurf's Certificate of Incorporation
(collectively, the "iTurf Merger Matters")). This Agreement has been duly and
validly executed and delivered by each of iTurf and Merger Sub and, assuming the
due authorization, execution and delivery of this Agreement by ▇▇▇▇▇*s,
constitutes the legal, valid and binding obligation of each of iTurf and Merger
Sub, enforceable against each of iTurf and Merger Sub in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
or by general equitable principles.
(b) The Board of Directors of iTurf (i) has declared that this Agreement,
the Merger, the iTurf Merger Matters and the other transactions contemplated
hereby are advisable and in the best interests of the holders of the Class A
Common Stock (other than ▇▇▇▇▇*s, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ or any affiliate thereof),
(ii) has authorized, approved and adopted this Agreement, the Merger, the iTurf
Merger Matters and the other transactions contemplated hereby and (iii) has
taken appropriate action, pursuant to Section 203(a)(1) of Delaware Law, to
cause the restrictions contained in Section 203 of Delaware Law to be
inapplicable to the Merger and the other transactions contemplated hereby.
(c) The Board of Directors of Merger Sub (i) has declared that this
Agreement, the Merger and the other transactions contemplated hereby are
advisable and in the best interests of the sole stockholder of Merger Sub and
(ii) has authorized, approved and adopted this Agreement, the Merger and the
other transactions contemplated hereby. Pursuant to Section 203(a)(2) of
Delaware Law, the
A-9
restrictions contained in Section 203 of Delaware Law are inapplicable to the
Merger and the other transactions contemplated hereby.
Section 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by each of iTurf and Merger Sub do not,
and the performance of this Agreement by each of iTurf and Merger Sub and the
consummation of the Merger will not, (i) conflict with or violate iTurf's
Certificate of Incorporation or By-Laws or the equivalent organizational
documents of any of its subsidiaries, (ii) conflict with or violate any Law
applicable to iTurf or any of its subsidiaries or by which any property or asset
of iTurf or any of its subsidiaries is bound, or (iii) result in any breach of
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of iTurf or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which iTurf or any of its subsidiaries is a party or by which iTurf or any of
its subsidiaries or any property or asset of any of them is bound, except in the
case of clauses (ii) and (iii) for any such conflicts, violations, breaches,
defaults or other occurrences which would not, individually or in the aggregate,
have a Material Adverse Effect or prevent or materially delay the consummation
of the Merger.
(b) The execution and delivery of this Agreement by each of iTurf and Merger
Sub do not, and the performance of this Agreement by each of iTurf and Merger
Sub and the consummation of the Merger will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Government
Entity, except (i) for the applicable requirements of the Securities Act, the
Exchange Act, Blue Sky Laws and the filing of the Certificate of Merger as
required by Delaware Law and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not, individually or in the aggregate, have a Material Adverse Effect or
prevent or materially delay the performance by iTurf or Merger Sub of its
obligations under this Agreement or the consummation of the Merger.
Section 3.06. SEC FILINGS; FINANCIAL STATEMENTS. (a) iTurf has filed all
forms, reports and documents required to be filed by it with the SEC under the
Securities Act and the Exchange Act since May 1, 1999 (collectively, the "iTurf
SEC Reports"). The iTurf SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of iTurf's subsidiaries is required to file any forms, reports
or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the iTurf SEC Reports (i) complies in
all material respects with the applicable accounting requirements and with the
published rules and regulations of the SEC, (ii) was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated therein or in the notes thereto) and (iii) fairly presents in
all material respects the consolidated financial position of iTurf and its
subsidiaries as at the respective dates thereof and the consolidated results of
their operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments and such statements do not contain the required
notes thereto.
A-10
Section 3.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since April 29, 2000:
(a) iTurf and its subsidiaries have not suffered any Material Adverse Effect;
and (b) iTurf and its subsidiaries have conducted their businesses in all
material respects only in the ordinary course consistent with past practice,
except in connection with the negotiation and execution and delivery of this
Agreement.
Section 3.08. FAIRNESS OPINION AND APPROVAL BY THE SPECIAL COMMITTEE. On
or prior to the date hereof, the Special Committee (i) determined that the
Merger is fair to and in the best interests of the holders of the Class A Common
Stock (other than ▇▇▇▇▇*s, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ or any affiliate thereof) and
(ii) recommended that the Board of Directors of iTurf approve this Agreement,
the Merger, the iTurf Merger Matters and the other transactions contemplated
hereby. The Special Committee has been advised by U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇
that, in its opinion, as of the date hereof, the Exchange Ratio is fair from a
financial point of view to the holders of the Class A Common Stock (other than
▇▇▇▇▇*s, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ or any affiliate thereof), and U.S. Bancorp ▇▇▇▇▇
▇▇▇▇▇▇▇ will deliver a written copy of such opinion to the Special Committee.
Section 3.09. BROKERS. No broker, finder or investment banker (other than
U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇) is entitled to any brokerage, finder's or other fee
or commission in connection with this Agreement or the transactions contemplated
hereby based upon arrangements made by or on behalf of iTurf or the Special
Committee. iTurf has heretofore furnished to ▇▇▇▇▇*s a complete and correct copy
of all agreements between iTurf or the Special Committee and U.S. Bancorp ▇▇▇▇▇
▇▇▇▇▇▇▇ pursuant to which such firm would be entitled to any payment relating to
this Agreement or the transactions contemplated hereby. Any such fees due shall
be paid by iTurf.
Section 3.10. NO ACCELERATION OF OPTIONS OR ITURF RESTRICTED STOCK; CHANGE
OF CONTROL. Except as provided in Article XI of the 1999 Amended and Restated
Stock Incentive Plan of iTurf Inc., as such Article applies to all outstanding
iTurf Options and iTurf Restricted Stock (as such terms are defined below), no
accelerated vesting of iTurf Options or iTurf Restricted Stock, or lapse of any
repurchase option, risk of forfeiture or other condition with respect to iTurf
Restricted Stock, shall occur as a result of the Merger or any of the other
transactions contemplated hereby. The consummation of the Merger and the other
transactions contemplated hereby will not give rise to any liability for
severance pay, unemployment compensation, termination pay or withdrawal
liability, or accelerate the time of payment or vesting or increase the amount
of compensation or benefits due to any employee, director or stockholder of
iTurf (whether current, former or retired) or their beneficiaries or affiliates
solely by reason of such transactions.
For purposes of this Agreement, "iTurf Options" means all options to
purchase shares of iTurf Common Stock granted under any stock option plan of
iTurf ("iTurf Option Plans") or pursuant to any other arrangement to provide
options, warrants or other rights to purchase such shares to directors, officers
or employees of iTurf or other persons. For purposes of this Agreement, "iTurf
Restricted Stock" means shares of iTurf Common Stock that are unvested or are
subject to a repurchase option, risk of forfeiture or other condition providing
that such shares may be forfeited or repurchased by iTurf upon any termination
of the stockholder's employment, directorship or other relationship with iTurf
(and/or any affiliate of iTurf) under the terms of any restricted stock
agreement or other agreement with iTurf.
ARTICLE IV
COVENANTS
Section 4.01. STOCKHOLDERS MEETINGS; VOTING OF SHARES. (a) In order to
consummate the Merger, iTurf shall, in accordance with Delaware Law and iTurf's
Certificate of Incorporation and By-Laws, (i) duly call, give notice of, convene
and hold a meeting of its stockholders (the "iTurf Meeting") as promptly as
practicable, but in no event later than 45 days after the S-4 Registration
Statement (as defined below) is declared effective, for the purpose of
considering and voting upon the approval of the
A-11
iTurf Merger Matters and (ii) include in the Joint Proxy Statement/Prospectus
(as defined below) (x) subject to fiduciary obligations under applicable law,
the recommendation of the Special Committee and of the Board of Directors of
iTurf that the stockholders of iTurf approve the iTurf Merger Matters and
(y) the opinion of U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ that the Exchange Ratio is fair
from a financial point of view to the holders of the Class A Common Stock (other
than ▇▇▇▇▇*s, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ or any affiliate thereof). Subject to fiduciary
obligations under applicable law, iTurf shall take all lawful action to solicit
from the holders of iTurf Common Stock entitled to vote at the iTurf Meeting
proxies in favor of such approval. At the iTurf Meeting, ▇▇▇▇▇*s shall cause all
shares of iTurf Common Stock then owned by it to be voted in favor of such
approval.
(b) In order to consummate the Merger, ▇▇▇▇▇*s shall, in accordance with
Delaware Law and ▇▇▇▇▇*s Certificate of Incorporation and By-Laws, (i) duly
call, give notice of, convene and hold a meeting of its stockholders (the
"▇▇▇▇▇*s Meeting") as promptly as practicable, but in no event later than
45 days after the S-4 Registration Statement is declared effective, for the
purpose of considering and voting upon the approval of this Agreement and the
Merger and (ii) include in the Joint Proxy Statement/Prospectus (x) subject to
fiduciary obligations under applicable law, the recommendation of the Board of
Directors of ▇▇▇▇▇*s that the stockholders of ▇▇▇▇▇*s approve this Agreement and
the Merger and (y) the opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney that the consideration to
be received, pursuant to this Agreement, by the holders of ▇▇▇▇▇*s Common Stock
(other than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and his family members) in the Merger is fair from a
financial point of view to such holders. Subject to fiduciary obligations under
applicable law, ▇▇▇▇▇*s shall take all lawful action to solicit from the holders
of ▇▇▇▇▇*s Common Stock entitled to vote at the ▇▇▇▇▇*s Meeting proxies in favor
of such approval.
Section 4.02. JOINT PROXY STATEMENT/PROSPECTUS AND REGISTRATION STATEMENT
ON FORM S-4. (a) As promptly as practicable following the execution and
delivery of this Agreement, iTurf and ▇▇▇▇▇*s shall prepare and file with the
SEC a joint proxy statement/prospectus with respect to this Agreement, the
Merger and the iTurf Merger Matters (the "Joint Proxy Statement/Prospectus"),
and iTurf shall prepare and file with the SEC a Registration Statement on
Form S-4 with respect to the issuance of shares of Class A Common Stock in the
Merger (the "S-4 Registration Statement"). Each of iTurf and ▇▇▇▇▇*s shall use
its reasonable best efforts to have the S-4 Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing,
and promptly thereafter mail the Joint Proxy Statement/Prospectus to its
stockholders. iTurf and ▇▇▇▇▇*s shall cooperate with each other in the
preparation of the Joint Proxy Statement/Prospectus and the S-4 Registration
Statement and shall notify each other of the receipt of any comments of the SEC
with respect thereto and of any requests by the SEC for any amendment or
supplement thereto or for additional information. Each of iTurf and ▇▇▇▇▇*s
agrees to use its reasonable best efforts, after consultation with the other, to
respond promptly to all such comments of and requests by the SEC. Each of iTurf
and ▇▇▇▇▇*s (i) shall provide the other with information concerning it, and its
subsidiaries, officers, directors and stockholders, that is necessary or
advisable to be included in the Joint Proxy Statement/Prospectus and/or the S-4
Registration Statement and (ii) agrees promptly to (x) supplement, update and
correct any information provided by it for use in the Joint Proxy
Statement/Prospectus and/or the S-4 Registration Statement if and to the extent
that such information is or shall have become incomplete, false or misleading in
any material respect and (y) take all steps necessary to cause such Joint Proxy
Statement/Prospectus and/or S-4 Registration Statement as so corrected to be
filed with the SEC and/or disseminated to its stockholders in accordance with
applicable law.
(b) Each of iTurf and ▇▇▇▇▇*s agrees that none of the information supplied
or to be supplied by it for inclusion or incorporation by reference in (i) the
S-4 Registration Statement will, at the time the S-4 Registration Statement
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading and
A-12
(ii) the Joint Proxy Statement/Prospectus and any amendment or supplement
thereto will, at the date of mailing to the respective stockholders of iTurf and
▇▇▇▇▇*s and at the times of the iTurf Meeting and the ▇▇▇▇▇*s Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each of iTurf and ▇▇▇▇▇*s covenants that the Joint Proxy
Statement/Prospectus shall comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder and
iTurf covenants that the S-4 Registration Statement shall comply as to form in
all material respects with the provisions of the Securities Act and the rules
and regulations thereunder.
Section 4.03. NO SOLICITATION. ▇▇▇▇▇*s will not, and will not permit or
cause any of its subsidiaries or any of the officers and directors of it or its
subsidiaries to, and shall direct its and its subsidiaries' employees, agents
and representatives (including any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, directly or indirectly,
initiate, solicit, encourage or otherwise facilitate any inquiries or the making
of any proposal or offer with respect to a merger, reorganization, share
exchange, consolidation or similar transaction involving, or any purchase of 15%
or more of the consolidated assets or equity securities of, ▇▇▇▇▇*s or any of
its subsidiaries (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal"). ▇▇▇▇▇*s will not, and will not permit or cause any of
its subsidiaries or any of the officers and directors of it or its subsidiaries
to, and shall direct its and its subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, whether made before or after the date of this Agreement, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal;
PROVIDED, HOWEVER, that nothing contained in this Agreement shall prevent
▇▇▇▇▇*s or the Board of Directors of ▇▇▇▇▇*s from (i) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal,
(ii) soliciting any inquiries or the making of any proposal or offer with
respect to, engaging in negotiations or discussions concerning, or providing
confidential information with respect to, any of Storybook Inc., TSI Soccer
Corporation, the Droog business or any of their respective assets or (iii) at
any time prior to the approval of this Agreement and the Merger by the requisite
vote of the stockholders of ▇▇▇▇▇*s (A) providing information in response to a
request therefor by a person who has made an unsolicited bona fide written
Acquisition Proposal if the Board of Directors of ▇▇▇▇▇*s receives from the
person so requesting such information an appropriate confidentiality agreement;
(B) engaging in any negotiations or discussions with any person who has made an
unsolicited bona fide written Acquisition Proposal; or (C) recommending such an
Acquisition Proposal to the stockholders of ▇▇▇▇▇*s, if and only to the extent
that, (i) in each case referred to in clause (A), (B) or (C) above, the Board of
Directors of ▇▇▇▇▇*s determines in good faith after consultation with outside
legal counsel that such action is necessary in order for its directors to comply
with their fiduciary duties under applicable law and (ii) in each case referred
to in clause (B) or (C) above, the Board of Directors of ▇▇▇▇▇*s determines in
good faith (after consultation with its financial advisor) that such Acquisition
Proposal is reasonably likely to be consummated, taking into account all legal,
financial and regulatory aspects of the proposal and the person making the
proposal and would, if consummated, result in a more favorable transaction than
the transaction contemplated by this Agreement. ▇▇▇▇▇*s will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing.
▇▇▇▇▇*s agrees that it will take the necessary steps to inform promptly the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 4.03. ▇▇▇▇▇*s will notify iTurf
immediately if any such inquiries, proposals or offers are received by, any such
information requested from, or any such discussions or negotiations are sought
to be initiated or continued with, any of its representatives indicating, in
connection with such notice, the name of such person and the material terms and
conditions of any proposals or offers and thereafter shall keep iTurf informed,
on a
A-13
current basis, on the status and terms of any such proposals or offers and the
status of any such negotiations or discussions. ▇▇▇▇▇*s also will promptly
request each person that has heretofore executed a confidentiality agreement in
connection with its consideration of an Acquisition Proposal to return all
confidential information heretofore furnished to such person by or on behalf of
▇▇▇▇▇*s or any of its subsidiaries.
Section 4.04. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. (a)
All rights to indemnification or exculpation now existing in favor of the
present and former directors, officers, employees, agents and fiduciaries of
▇▇▇▇▇*s (collectively, the "Indemnified Parties"), as provided in ▇▇▇▇▇*s
Certificate of Incorporation and/or By-Laws or otherwise in effect as of the
date of this Agreement, with respect to matters occurring at or prior to the
Effective Time, shall survive the Merger and shall continue in full force and
effect; PROVIDED, HOWEVER, that any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under Delaware Law or under ▇▇▇▇▇*s Certificate of Incorporation or
By-Laws or otherwise, as the case may be, shall be made by independent legal
counsel selected by such Indemnified Party and reasonably acceptable to the
Surviving Corporation. The Surviving Corporation shall honor all such rights to
indemnification or exculpation described in this Section 4.04 in favor of the
Indemnified Parties.
(b) For a period of six years after the Effective Time, the Surviving
Corporation shall maintain in effect the current policies of directors' and
officers' liability insurance maintained by ▇▇▇▇▇*s (provided that the Surviving
Corporation may substitute therefor policies with reputable and financially
sound carriers of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
or related to facts or events that occurred at or before the Effective Time;
PROVIDED, HOWEVER, that the Surviving Corporation shall not be obligated to make
annual premium payments for such insurance to the extent such premiums exceed
200% of the annual premiums paid as of the date hereof by ▇▇▇▇▇*s for such
insurance (such 200% amount, the "Maximum Premium"). If such insurance coverage
cannot be obtained at all, or can only be obtained at an annual premium in
excess of the Maximum Premium, the Surviving Corporation shall maintain the most
advantageous policies of directors' and officers' insurance obtainable for an
annual premium equal to the Maximum Premium; PROVIDED, FURTHER, that if such
insurance coverage cannot be obtained at all, the Surviving Corporation shall
purchase all available extended reporting periods with respect to pre-existing
insurance in an amount that, together with all other insurance purchased
pursuant to this Section 4.03(b), does not exceed the Maximum Premium. The
Surviving Corporation shall not take any action that would have the effect of
limiting the aggregate amount of insurance coverage required to be maintained
for the individuals referred to in this Section 4.04(b).
(c) In the event that after the Effective Time the Surviving Corporation
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that any
successor or assign of the Surviving Corporation shall assume the obligations
set forth in this Section 4.04.
Section 4.05. STOCK OPTIONS. (a) On or as soon as practicable following
the date of this Agreement, the Board of Directors of ▇▇▇▇▇*s (or, if
appropriate, any committee thereof administering the ▇▇▇▇▇*s Option Plans) shall
adopt such resolutions or take such other actions as may be required to effect
the following:
(i) adjust the terms of all outstanding Options (each, as so adjusted,
an "Adjusted Option"), whether vested or unvested, as necessary to provide
that, at the Effective Time, each Option outstanding immediately prior to
the Effective Time shall be amended and converted into an option to acquire,
on the same terms and conditions as were applicable under such Option, the
number of shares of Class A Common Stock (rounded down to the nearest whole
share) equal to
A-14
(A) the number of shares of ▇▇▇▇▇*s Common Stock subject to such Option
immediately prior to the Effective Time multiplied by (B) the Exchange
Ratio, at an exercise price per share of Class A Common Stock (rounded up to
the nearest tenth of a cent) equal to (x) the exercise price per share of
such ▇▇▇▇▇*s Common Stock immediately prior to the Effective Time divided by
(y) the Exchange Ratio;
(ii) ensure that no accelerated vesting of Options (including the
▇▇▇▇▇▇▇▇ Options) or Adjusted Options or ▇▇▇▇▇*s Restricted Stock, or lapse
of any repurchase option, risk of forfeiture or other condition with respect
to ▇▇▇▇▇*s Restricted Stock, shall occur as a result of the Merger or any of
the other transactions contemplated hereby; and
(iii) make such other changes to the ▇▇▇▇▇*s Option Plans as ▇▇▇▇▇*s and
iTurf may agree are appropriate to give effect to the Merger.
(b) The adjustments provided in this Section 4.05 with respect to any Option
to which Section 421(a) of the Code applies shall be and are intended to be
effected in a manner that is consistent with Section 424(a) of the Code so that
no such adjustment shall cause (other than de minimis changes resulting from
mathematical rounding) (i) the ratio of the exercise price of each Adjusted
Option to the fair market value of the Class A Common Stock subject to such
Adjusted Option immediately following the Effective Time to be more favorable to
the optionee than the ratio of the corresponding Option exercise price to the
fair market value of the ▇▇▇▇▇*s Common Stock subject to such corresponding
Option immediately prior to the Effective Time or (ii) the excess of the
aggregate fair market value of all shares of Class A Common Stock subject to
each Adjusted Option immediately following the Effective Time over the aggregate
exercise price of such Adjusted Option to be more than the excess of the
aggregate fair market value of all shares of ▇▇▇▇▇*s Common Stock subject to the
corresponding Option immediately prior to the Effective Time over the aggregate
exercise price of such corresponding Option. As soon as practicable after the
Effective Time, iTurf shall deliver to the holders of Options appropriate
notices setting forth such holders' rights pursuant to the respective ▇▇▇▇▇*s
Option Plans and the agreements evidencing the grants of such Options and that
such Options and agreements shall be assumed by iTurf and shall continue in
effect on the same terms and conditions (subject to the adjustments required by
this Section 4.05 after giving effect to the Merger).
(c) A holder of an Adjusted Option may exercise such Adjusted Option in
whole or in part in accordance with its terms by following procedures to be
communicated by iTurf with the notice contemplated by Section 4.05(b), together
with the consideration therefor and the federal withholding tax information
required, if any.
(d) Except as otherwise expressly provided by this Section 4.05 and except
to the extent required under the respective terms of the Options, all
restrictions or limitations on transfer and vesting with respect to Options
awarded under the ▇▇▇▇▇*s Option Plans or any other plan, program or arrangement
of ▇▇▇▇▇*s, to the extent that such restrictions or limitations shall not have
already lapsed, and all other terms thereof, shall remain in full force and
effect with respect to such Options after giving effect to the Merger and the
assumption by iTurf as set forth above.
(e) As soon as practicable following the Effective Time, iTurf shall prepare
and file with the SEC a registration statement on Form S-8 (or another
appropriate form) registering (i) a number of shares of Class A Common Stock
equal to the number of shares subject to the Adjusted Options and (ii) the
shares of Class A Common Stock issued upon conversion of the ▇▇▇▇▇*s Restricted
Stock in the Merger. Prior to the Effective Time, iTurf shall take all necessary
action in connection with the assumption of the Adjusted Options, including the
reservation, issuance and listing of Class A Common Stock in a number at least
equal to the number of shares of Class A Common Stock that will be subject to
the Adjusted Options.
A-15
Section 4.06. EMPLOYEE BENEFITS. From and after the Effective Time, the
Surviving Corporation shall honor, in accordance with their respective terms as
in effect on the date hereof, the employment, severance and bonus agreements and
similar arrangements to which ▇▇▇▇▇*s is a party and all employee benefit plans
of ▇▇▇▇▇*s.
Section 4.07. PUBLIC ANNOUNCEMENTS. iTurf and ▇▇▇▇▇*s shall consult with
each other before issuing any press release or otherwise making any public
statement with respect to this Agreement or the Merger and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by applicable law or stock exchange or National
Association of Securities Dealers regulation, in which case iTurf or ▇▇▇▇▇*s, as
applicable, shall use its reasonable best efforts to consult with the other
party before issuing any such release or making any such public statement.
Section 4.08. NOTIFICATION OF CERTAIN MATTERS. ▇▇▇▇▇*s shall give prompt
notice to iTurf, and iTurf shall give prompt notice to ▇▇▇▇▇*s, of (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which would be likely to cause any representation or warranty of such party
contained in this Agreement to be untrue or inaccurate in any material respect
at or prior to the Effective Time and (ii) any failure of iTurf, Merger Sub or
▇▇▇▇▇*s, as the case may be, to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section 4.08 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 4.09. FURTHER ACTION; REASONABLE BEST EFFORTS. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective, in the most
expeditious manner practicable, the Merger, including, without limitation, using
its reasonable best efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Entities
and parties to contracts with ▇▇▇▇▇*s and iTurf as are necessary for the
consummation of the Merger. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the Surviving Corporation shall use its reasonable best efforts to
take all such action.
Section 4.10. DELISTING; DEREGISTRATION. Each of iTurf and the Surviving
Corporation shall use its reasonable best efforts to cause the ▇▇▇▇▇*s Common
Stock to be delisted from The Nasdaq Stock Market and deregistered under the
Exchange Act as soon as practicable following the Effective Time.
Section 4.11. ELECTION OF DIRECTORS OF ITURF. iTurf shall use its best
efforts to cause four individuals nominated by ▇▇▇▇▇*s to be elected, as soon as
practicable after the Effective Time, to the Board of Directors of iTurf and,
subject to the restrictions contained in Article Sixth of iTurf's Second
Restated Certificate of Incorporation, to be apportioned among the respective
classes of the Board of Directors of iTurf in the manner designated by ▇▇▇▇▇*s.
Section 4.12. NO ACCELERATION OF ITURF OPTIONS OR ITURF RESTRICTED
STOCK. On or as soon as practicable following the date of this Agreement, the
Board of Directors of iTurf (or, if appropriate, any committee thereof
administering the iTurf Option Plans) shall adopt such resolutions or take such
other actions as may be required to ensure that no accelerated vesting of iTurf
Options or iTurf Restricted Stock, or lapse of any repurchase option, risk of
forfeiture or other condition with respect to iTurf Restricted Stock, shall
occur as a result of the Merger or any of the other transactions contemplated
hereby.
Section 4.13. VOTING OF ▇▇▇▇▇*S COMMON STOCK. At the ▇▇▇▇▇*s Meeting,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ shall vote (or cause to be voted) all shares of ▇▇▇▇▇*s Common
Stock which he then holds of record or beneficially owns, including pursuant to
the Family Stockholders Agreement, dated December 18, 1996,
A-16
among ▇▇▇▇▇*s, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and the Family Holders (as defined therein), in
favor of the approval of this Agreement and the Merger.
Section 4.14. ISSUANCE OF OPTIONS OR RESTRICTED STOCK. (a) During the
period from the date of this Agreement and continuing until the earlier to occur
of the termination of this Agreement and the Effective Time, ▇▇▇▇▇*s covenants
and agrees that it shall not issue any Options or ▇▇▇▇▇*s Restricted Stock
except (i) with the prior written consent of the Special Committee,
(ii) issuances of Options or ▇▇▇▇▇*s Restricted Stock to new employees that are
not affiliated with ▇▇▇▇▇*s as of the date hereof or (iii) issuances of Options
or ▇▇▇▇▇*s Restricted Stock that do not, either individually or in the
aggregate, exceed 75,000 shares of ▇▇▇▇▇*s Common Stock.
(b) During the period from the date of this Agreement and continuing until
the earlier to occur of the termination of this Agreement and the Effective
Time, iTurf covenants and agrees that it shall not issue any iTurf Options or
iTurf Restricted Stock except with the prior written consent of the Special
Committee.
ARTICLE V
CONDITIONS TO THE MERGER
Section 5.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions (any of which may be waived by the parties hereto in
writing, in whole or in part, to the extent permitted by applicable law):
(a) NO INJUNCTION OR PROCEEDING. No preliminary or permanent injunction,
temporary restraining order or other decree of a court of competent jurisdiction
shall be in effect, no statute, rule or regulation shall have been enacted by a
Governmental Entity and no action, suit or proceeding by any Governmental Entity
shall have been instituted or threatened which prevents or prohibits the
consummation of the Merger.
(b) EFFECTIVENESS OF THE S-4 REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective under the Securities Act. No stop order
suspending the effectiveness of the S-4 Registration Statement shall have been
issued by the SEC and no proceedings for that purpose and no similar proceedings
in respect of the Joint Proxy Statement/Prospectus shall have been initiated or
threatened by the SEC.
(c) STOCKHOLDER APPROVALS. This Agreement, the Merger and the other
transactions contemplated hereby shall have been approved by the requisite vote
of the stockholders of ▇▇▇▇▇*s and the iTurf Merger Matters shall have been
approved by the requisite vote of the stockholders of iTurf.
(d) FILING OF SECOND RESTATED CERTIFICATE OF INCORPORATION. iTurf shall
have filed the Second Restated Certificate of Incorporation with the Secretary
of State of the State of Delaware.
Section 5.02. CONDITIONS TO THE OBLIGATION OF ▇▇▇▇▇*S TO EFFECT THE
MERGER. The obligation of ▇▇▇▇▇*s to effect the Merger is further subject to
the satisfaction or waiver of each of the following conditions prior to or at
the Effective Time:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
iTurf contained in this Agreement shall be true and correct in all material
respects at and as of the Effective Time as though made at and as of the
Effective Time.
(b) AGREEMENTS. Each of iTurf and Merger Sub shall have performed or
complied in all material respects with all of its covenants and agreements
required by this Agreement to be performed or complied with by it prior to or at
the Effective Time.
A-17
(c) NO ACCELERATION OF ITURF OPTIONS OR ITURF RESTRICTED STOCK. iTurf
shall have taken all necessary action, including, but not limited to, the Board
of Directors of iTurf or a committee thereof having made the determination
required under Section 11.1(c) of the 1999 Amended and Restated Stock Incentive
Plan of iTurf Inc., to ensure that no accelerated vesting of iTurf Options or
iTurf Restricted Stock, or lapse of any repurchase option, risk of forfeiture or
other condition with respect to iTurf Restricted Stock, shall occur as a result
of the Merger or any of the other transactions contemplated hereby.
Section 5.03. CONDITIONS TO THE OBLIGATION OF ITURF AND MERGER SUB TO
EFFECT THE MERGER. The obligations of iTurf and Merger Sub to effect the Merger
are further subject to the satisfaction or waiver of each of the following
conditions prior to or at the Effective Time:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
▇▇▇▇▇*s contained in this Agreement shall be true and correct in all material
respects at and as of the Effective Time as though made at and as of the
Effective Time.
(b) AGREEMENTS. ▇▇▇▇▇*s shall have performed or complied in all material
respects with all of its covenants and agreements required by this Agreement to
be performed or complied with by it prior to or at the Effective Time.
(c) NO ACCELERATION OF OPTIONS OR ▇▇▇▇▇*S RESTRICTED STOCK. ▇▇▇▇▇*s shall
have taken all necessary action, including, but not limited to, the Board of
Directors of ▇▇▇▇▇*s or a committee thereof having made the determination
required under Section 11.1(c) of the 1996 Stock Incentive Plan of ▇▇▇▇▇*s Inc.
and the 1998 Stock Incentive Plan of ▇▇▇▇▇*s Inc., to ensure that no accelerated
vesting of Options (including the ▇▇▇▇▇▇▇▇ Options) or Adjusted Options or
▇▇▇▇▇*s Restricted Stock, or lapse of any repurchase option, risk of forfeiture
or other condition with respect to ▇▇▇▇▇*s Restricted Stock, shall occur as a
result of the Merger or any of the other transactions contemplated hereby.
(d) CONSENT OBTAINED. ▇▇▇▇▇*s shall have obtained the required consent to
the Merger under the Amended and Restated Credit Facility, dated April 28, 2000,
among ▇▇▇▇▇*s, its subsidiaries listed on Schedule 1 thereto and Congress
Financial Corporation, or ▇▇▇▇▇*s shall not be required to obtain such consent.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
Section 6.01. TERMINATION. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval by the stockholders of iTurf and ▇▇▇▇▇*s:
(a) by mutual written consent duly authorized by the Boards of Directors of
each of iTurf and ▇▇▇▇▇*s (and, in the case of iTurf, only with the approval of
the Special Committee);
(b) by either iTurf or ▇▇▇▇▇*s (and, in the case of iTurf, only with the
approval of the Special Committee) if the Effective Time shall not have occurred
on or before the first anniversary of the date hereof; PROVIDED, HOWEVER, that
the right to terminate this Agreement under this Section 6.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date;
(c) by either iTurf or ▇▇▇▇▇*s (and, in the case of iTurf, only with the
approval of the Special Committee) if any court of competent jurisdiction or
Governmental Entity shall have issued an order, decree or ruling, or taken any
other action, restraining, enjoining or otherwise preventing or prohibiting the
Merger and such order, decree, ruling or other action shall have become final
and non-appealable;
A-18
(d) by either iTurf or ▇▇▇▇▇*s (and, in the case of iTurf, only with the
approval of the Special Committee) if (i) the Board of Directors of ▇▇▇▇▇*s
shall withdraw, modify or change its recommendation of this Agreement or the
Merger in a manner adverse to iTurf or shall have resolved to do so or (ii) the
Board of Directors of ▇▇▇▇▇*s shall have recommended, resolved to accept or
accepted an Acquisition Proposal;
(e) by either iTurf or ▇▇▇▇▇*s (and, in the case of iTurf, only with the
approval of the Special Committee) if at the iTurf Meeting (including any
adjournment or postponement thereof), the iTurf Merger Matters shall not have
been approved by the requisite vote of the stockholders of iTurf; or
(f) by either iTurf or ▇▇▇▇▇*s (and, in the case of iTurf, only with the
approval of the Special Committee) if at the ▇▇▇▇▇*s Meeting (including any
adjournment or postponement thereof), this Agreement and the Merger shall not
have been approved by the requisite vote of the stockholders of ▇▇▇▇▇*s.
Section 6.02. EFFECT OF TERMINATION. (a) In the event of the termination
of this Agreement as provided in Section 6.01, this Agreement shall forthwith
become null and void (except for the provisions set forth in Section 7.07 and,
to the extent applicable, Section 6.02(b), which shall survive any termination
of this Agreement) and there shall be no liability on the part of any party
hereto, except that nothing herein shall relieve any party from liability for
any willful breach hereof.
(b) In the event this Agreement is terminated by either iTurf or ▇▇▇▇▇*s
pursuant to Section 6.01(d), iTurf shall be entitled to receive from ▇▇▇▇▇*s
(i) a fee of $1,000,000 and (ii) reimbursement of iTurf's reasonable and
documented transaction costs (including costs incurred by or on behalf of the
Special Committee), including, without limitation, legal and accounting expenses
and amounts paid or payable to U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ in connection with
obtaining its fairness opinion relating to the Merger and its performance of
financial advisory services for the Special Committee; PROVIDED, HOWEVER, that
no fee or expense reimbursement shall be payable pursuant to this
Section 6.02(b) if iTurf or Merger Sub shall then be in willful material breach
of its obligations hereunder.
Section 6.03. AMENDMENT. This Agreement may not be amended except by
action of the Board of Directors of each of the parties hereto (and, in the case
of iTurf, only with the approval of the Special Committee) set forth in an
instrument in writing signed on behalf of each of the parties hereto.
Section 6.04. WAIVER. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any obligation or other
act of any other party hereto, (ii) waive any inaccuracies in the
representations and warranties of any other party contained herein or
(iii) waive compliance with any agreement or condition of any other party
contained herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party to be bound thereby but, in the case
of any extension or waiver by which iTurf is to be bound, only if approved by
the Special Committee.
ARTICLE VII
GENERAL PROVISIONS
Section 7.01. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to
Section 6.01, as the case may be.
Section 7.02. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery (i) in person, (ii) by
telecopy, (iii) by reputable overnight courier or (iv) by registered or
certified mail, postage prepaid, to the respective parties at the following
addresses (or at
A-19
such other address for a party as shall be specified in a notice given in
accordance with this Section 7.02):
if to ▇▇▇▇▇*s:
▇▇▇▇▇*s Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
if to iTurf or Merger Sub:
iTurf Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
with a copy to:
Squadron, Ellenoff, Plesent & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Section 7.03. CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "affiliate" of a specified person means a person that, directly or
indirectly, through one or more intermediaries controls, is controlled by, or is
under common control with, such specified person;
(b) "control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, as trustee or
executor, by contract or credit arrangement or otherwise;
(c) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act); and
(d) "subsidiary" or "subsidiaries" of any person means any corporation,
partnership, joint venture or other legal entity of which such person (either
alone or through or together with any other subsidiary) owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity; PROVIDED,
HOWEVER, that, for purposes of Article II and Section 4.02(a) of this Agreement,
▇▇▇▇▇*s disclaims liability for any representation, warranty or
A-20
covenant made by ▇▇▇▇▇*s on behalf of or with respect to iTurf or any of iTurf's
subsidiaries, and iTurf agrees that ▇▇▇▇▇*s shall not be liable for any such
representation, warranty or covenant.
Section 7.04. SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
Section 7.05. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including the
schedules, documents and instruments referred to herein) constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
the parties with respect to the subject matter hereof. This Agreement shall not
be assigned by any party hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties hereto.
Section 7.06. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Sections 4.04, 4.05 and 4.06 (which are intended
to be for the benefit of the persons covered thereby and may be enforced by such
persons).
Section 7.07. FEES AND EXPENSES. Except as otherwise contemplated by this
Agreement, all fees and expenses incurred in connection with this Agreement
shall be paid by the party incurring such fees and expenses, whether or not the
Merger is consummated.
Section 7.08. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware (without regard
to the conflicts of laws principle thereof).
Section 7.09. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
Section 7.10. COUNTERPARTS. This Agreement way be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 7.11. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity, without the need to post bond or
other security.
A-21
IN WITNESS WHEREOF, iTurf, Merger Sub and ▇▇▇▇▇*s have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
iTurf Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman, Chief Executive Officer
and President
iTurf Breakfast Corp.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
▇▇▇▇▇*s Inc.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
By his execution of this Agreement, the undersigned hereby agrees to be
bound solely with respect to his obligations under Section 4.13.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
A-22