EXHIBIT 2.1
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TENDER AGREEMENT
between
AMAZING SAVINGS HOLDING LLC
and
ODD JOB STORES, INC.
Dated as of June 3, 2003
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TABLE OF CONTENTS
PAGE
ARTICLE I - THE OFFER......................................................................... 3
1.1 The Offer............................................................................. 3
1.2 Company Actions....................................................................... 5
1.3 Purchase Limit........................................................................ 6
1.4 Information Statement................................................................. 7
1.5 Offer Documents; Schedule 14D-9; Information Statement................................ 7
1.6 Stock Options......................................................................... 7
1.7 Directors............................................................................. 7
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................... 8
2.1 Organization.......................................................................... 8
2.2 Capitalization........................................................................ 9
2.3 Authority............................................................................. 10
2.4 Consents and Approvals; No Violations................................................. 11
2.5 SEC Documents; Undisclosed Liabilities................................................ 11
2.6 Absence of Certain Changes or Events.................................................. 13
2.7 Legal Proceedings..................................................................... 14
2.8 Compliance With Applicable Law; Permits............................................... 14
2.9 Schedule 14D-9; Offer Documents; Form 041; and Information Statement.................. 14
2.10 Contracts............................................................................. 15
2.11 Tax Matters........................................................................... 16
2.12 Employee Benefits and Labor Matters................................................... 18
2.13 Environmental and Health and Safety Matters........................................... 21
2.14 Properties; Real Estate; Intellectual Property........................................ 22
2.15 Opinion of Financial Advisor.......................................................... 26
2.16 Finders or Brokers.................................................................... 26
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER....................................... 26
3.1 Organization.......................................................................... 26
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TABLE OF CONTENTS
(CONTINUED)
PAGE
3.2 Authority............................................................................. 26
3.3 Consents and Approvals; No Violations................................................. 26
3.4 Offer Documents; Schedule 14D-9; Form 041; Information Statement...................... 27
3.5 Financing............................................................................. 27
3.6 Finders or Brokers.................................................................... 27
3.7 Corporate Operations.................................................................. 27
3.8 Financials............................................................................ 28
ARTICLE IV - ADDITIONAL COVENANTS AND AGREEMENTS............................................... 28
4.1 Conduct of Business................................................................... 28
4.2 No Solicitation by the Company........................................................ 32
4.3 Reasonable Best Efforts............................................................... 35
4.4 Public Announcements.................................................................. 35
4.5 Access; Confidentiality............................................................... 36
4.6 Notification of Certain Matters....................................................... 36
4.7 Director and Officer Indemnification and Insurance.................................... 37
4.8 Consents, Missing Documents, Disputes and Estoppels................................... 38
4.9 Approval by Independent Directors..................................................... 38
4.10 Non-Distribution of Assets............................................................ 39
4.11 Certification......................................................................... 39
ARTICLE V - TERMINATION....................................................................... 39
5.1 Termination........................................................................... 39
5.2 Effect of Termination................................................................. 40
5.3 Expenses; Termination Fee............................................................. 41
ARTICLE VI - MISCELLANEOUS..................................................................... 42
6.1 No Survival of Representations and Warranties; etc.................................... 42
6.2 Amendment or Supplement............................................................... 42
6.3 Extension of Time, Waiver, Etc........................................................ 42
6.4 Assignment; Binding Effect............................................................ 43
6.5 Counterparts; Effectiveness........................................................... 43
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TABLE OF CONTENTS
(CONTINUED)
PAGE
6.6 Entire Agreement; No Third-Party Beneficiaries........................................ 43
6.7 Governing Law; Enforcement; Jurisdiction; Waiver of Jury Trial........................ 43
6.8 Notices............................................................................... 44
6.9 Severability.......................................................................... 45
6.10 Headings.............................................................................. 45
6.11 Definitions; Construction............................................................. 45
ANNEX A Conditions to the Offer
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Schedules
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AGREEMENT, dated as of June 3, 2003 (this "Agreement"),
between Amazing Savings Holding LLC, a Delaware limited liability company
("Purchaser"), and Odd Job Stores, Inc., an Ohio corporation (the "Company").
Certain terms used in this Agreement are defined in Section 6.11.
RECITALS:
WHEREAS, Purchaser wishes to acquire not less than 66 2/3% nor
more than 96% of the outstanding shares of common stock, without par value, of
the Company ("Company Common Stock") at a purchase price of $3.00 per share, and
the Company has determined that such acquisition is in the best interests of its
shareholders, in each case on the terms and subject to the conditions provided
for in this Agreement;
WHEREAS, it is contemplated that such acquisition be
accomplished by a wholly-owned subsidiary of Purchaser commencing a tender offer
to purchase outstanding shares of Company Common Stock (each, a "Share" and,
collectively, the "Shares") for $3.00 per Share (such amount, subject to
decrease as provided in Section 1.1 hereof, or any greater amount per Share paid
pursuant to the Offer being hereinafter referred to as the "Offer Price"),
subject to any required withholding of Taxes (as hereinafter defined), net to
the seller in cash, on the terms and subject to the conditions provided for in
this Agreement (such cash tender offer, as it may be amended from time to time
as permitted by this Agreement, the "Offer");
WHEREAS, the parties agree, at the option of Purchaser, that
the Offer Price may be reduced to $2.90 per Share if the Purchase Date has not
occurred within 25 business days after the commencement of the Offer; and
WHEREAS, the Voting Members of Purchaser and the Board of
Directors of the Company have each approved this Agreement and the Offer;
WHEREAS, shareholders of the Company owning at least 66 2/3%
of the Shares outstanding have executed a written consent (the "Shareholder
Consent") that would amend the Company's Amended and Restated Code of
Regulations to render inapplicable Section 1701.831 of the Ohio Revised Code to
the Company (the "Opt Out").
WHEREAS, it is a condition to the Offer that the Opt Out
becomes effective;
WHEREAS, the Opt Out shall become effective 20 calendar days
after the Company has sent to its shareholders an information statement on
Schedule 14C relating thereto;
WHEREAS, Purchaser has required, as a condition to its
willingness to enter into this Agreement, that ZS Mazel Inc., ZS Mazel L.P., ZS
▇▇▇▇▇ ▇▇, L.P. (collectively, "ZS") and Mazel/D&K, Inc. (the "Principal
Shareholders") enter into the
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Principal Shareholders' Agreement, dated as of the date hereof (the "Principal
Shareholders' Agreement"), pursuant to which, among other things, the Principal
Shareholders have agreed to, subject to the provisions of the Principal
Shareholders' Agreement, (i) tender all Shares they beneficially own into the
Offer and (ii) if the Tender Offer is not completed under certain circumstances,
pay to Purchaser a portion of any proceeds received by the Principal
Shareholders from sales of their Shares in excess of the Offer Price during a
specified period of time; and
WHEREAS, in order to induce Purchaser to enter into this
Agreement, the Board of Directors of the Company has approved the execution and
delivery of the Principal Shareholders' Agreement by the Principal Shareholders.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, and intending
to be legally bound hereby, Purchaser and the Company hereby agree as follows:
ARTICLE I - THE OFFER
1.1 The Offer.
(a) Provided that none of the events or circumstances set
forth in paragraphs (a) through (h) of Annex A hereto shall have occurred and be
existing (and shall not have been waived by Purchaser), Purchaser shall commence
(within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the "Exchange
Act")) the Offer to purchase not less than 66 2/3% of the Shares then
outstanding (the "Minimum Condition") nor more than 96% of the Shares then
outstanding (the "Maximum Amount") at the Offer Price as promptly as reasonably
practicable after the date hereof, but in any event on or before June 10, 2003.
Notwithstanding the foregoing, the parties agree that (i) if the Purchase Date
has not occurred on or before the 25th business day after the date of
commencement of the Offer for any reason other than as a result of Purchaser's
intentional delay or failure to use commercially reasonable efforts to take
those actions within its control to cause the Purchase Date to occur on or
before the 25th business day after the commencement of the Offer (which shall
not include any obligation to waive any condition to the Offer), the Offer Price
may, at the option of Purchaser, without any further action by or notice to the
Company, be reduced from $3.00 per Share to $2.90 per Share, and (ii) the
Purchaser may, in its sole discretion (but subject to applicable Law), reduce
the Minimum Condition at any time prior to the Purchase Date from 66-2/3% to a
majority of the Shares then outstanding (and, upon any such reduction, the term
"Minimum Condition" shall mean the reduced amount).
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(b) The obligation of Purchaser to accept for payment and
pay for all Shares tendered pursuant to the Offer shall be subject only to (i)
the satisfaction of the condition that at the expiration of the Offer there be
validly tendered in accordance with the terms of the Offer and not withdrawn
that number of Shares which, when taken together with Shares, if any, then owned
by Purchaser or any of its subsidiaries, represents more than the Minimum
Condition, (ii) the non-existence (or waiver by Purchaser) of the conditions set
forth in paragraphs (a) through (h) of Annex A hereto and (iii) the right of
Purchaser not to purchase more than the Maximum Amount. Purchaser expressly
reserves the right to waive any of such conditions, to increase the price per
Share payable in the Offer and to make any other changes in the terms of the
Offer; provided, however, that no change may be made without the prior written
consent of the Company which decreases the price per Share payable in the Offer
except as set forth in Section 1.1(a), changes the form of consideration to be
paid in the Offer, changes the Maximum Amount to be purchased in the Offer,
imposes conditions to the Offer in addition to the conditions set forth in Annex
A hereto, waives the Minimum Condition, modifies or amends any of the conditions
set forth in Annex A hereto or makes other changes in the terms of the Offer
that are in any manner adverse to the holders of Shares or, except as provided
in Section 1.1(c), extends the expiration date of the Offer.
(c) Purchaser may (i) extend the Offer beyond the initial
scheduled expiration date, which shall be 8:00 A.M. on the 21st business day
following the date of commencement of the Offer, or any subsequent scheduled
expiration date, if, at the scheduled expiration of the Offer, any of the
conditions to Purchaser's obligation to accept for payment and to pay for Shares
tendered shall not be satisfied or, to the extent permitted by this Agreement,
waived, subject, however, to the parties' respective rights to terminate this
Agreement pursuant to Section 5.1; provided, however, that Purchaser shall not
be required to extend the Offer beyond the initial expiration date unless, as of
the initial expiration date, all conditions other than the non-existence of the
Opt Out Condition (as defined in paragraph (f) of Annex A hereto) and the
non-existence of the Board Representation Condition (as defined in paragraph (g)
of the Annex A hereto) shall have been satisfied and the Company is in
compliance with Section 1.4 hereof), in which case Purchaser shall be required
to extend the Offer, in a minimum of five calendar day increments, until the
Walk-Away Date and (ii) extend the Offer for any period required by any rule,
regulation or interpretation of the Securities and Exchange Commission (the
"SEC") or the staff thereof applicable to the Offer but not after the Walk-Away
Date. Any extension of the Offer pursuant to clause (i) of the preceding
sentence of this Section 1.1 (other than pursuant to the proviso of such clause,
which shall be governed by such proviso) shall not exceed the lesser of five
business days (or such longer period as the Company and Purchaser may agree in
writing in any particular instance) or such fewer number of days that Purchaser
reasonably believes are necessary to cause the conditions of the Offer set forth
in Annex A hereto to be satisfied. Subject to the terms of the Offer and this
Agreement, the satisfaction of the Minimum Condition and the non-existence or
earlier waiver of all the conditions of the Offer set forth in Annex A hereto as
of any expiration date of the Offer, Purchaser shall accept for payment and pay
for all Shares validly tendered and not withdrawn pursuant to the Offer promptly
after it is permitted to
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do so under applicable Law. The Offer Price shall, subject to any required
withholding of Taxes, be net to the seller in cash, upon the terms and subject
to the conditions of the Offer. The Company agrees that no Shares held by the
Company or any of its subsidiaries will be tendered to Purchaser pursuant to the
Offer.
(d) As promptly as practicable on the date of
commencement of the Offer, Purchaser shall file with the SEC a Tender Offer
Statement on Schedule TO (together with all amendments, supplements and exhibits
thereto, the "Schedule TO") with respect to the Offer. The Schedule TO shall
contain or incorporate by reference an offer to purchase and forms of the
related letter of transmittal and all other ancillary Offer documents
(collectively, together with all amendments, supplements and exhibits thereto,
the "Offer Documents"). The Company shall promptly provide Purchaser with all
information concerning the Company that is required to be included in the Offer
Documents. Purchaser shall cause the Offer Documents to be disseminated to the
holders of the Shares as and to the extent required by applicable federal
securities Laws. Purchaser, on the one hand, and the Company, on the other hand,
shall promptly correct any information provided by it for use in the Offer
Documents if and to the extent that it shall be or shall have become false or
misleading in any material respect, and Purchaser shall cause the Offer
Documents as so corrected to be filed with the SEC and disseminated to holders
of the Shares, in each case, as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given a reasonable
opportunity to review and comment upon the Offer Documents before they are filed
with the SEC and disseminated to holders of Shares. In addition, Purchaser
agrees to provide the Company and its counsel with any comments, whether written
or oral, that Purchaser or its counsel may receive from time to time from the
SEC or its staff with respect to the Offer Documents promptly after the receipt
of such comments, to consult with the Company and its counsel prior to
responding to any such comments and to provide the Company with copies of all
such responses, whether written or oral.
1.2 Company Actions.
(a) The Company hereby represents and warrants that the
Company's Board of Directors, at a meeting duly called and held, has (i)
approved this Agreement and the Transactions, including the Offer (such approval
having been made in accordance with Chapter 1701 of the Ohio Revised Code (the
"OGCL"), as well as an approval of the Principal Shareholders' Agreement and the
purchase of the Shares by Purchaser for purposes of Chapter 1704 of the OGCL
("Chapter 1704")), and (ii) resolved to recommend that shareholders of the
Company accept the Offer, tender their Shares to Purchaser pursuant thereto. The
Company hereby consents to the inclusion in the Offer Documents of the
recommendation of the Company's Board of Directors described in the immediately
preceding sentence. The recommendation of the Company's Board of Directors
described in the first sentence of this Section 1.2(a) may not be withdrawn or
modified in a manner adverse to Purchaser, except in accordance with Section
4.2. The Company hereby further represents and warrants that (A) the Board of
Directors of the Company has received the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc.
("▇▇▇▇▇▇ ▇▇▇▇▇▇"), dated May 27, 2003, to the effect that, as of such date, and
subject to the various
5
assumptions and qualifications set forth therein, the consideration to be
received by the Company's shareholders in the Offer is fair to such holders from
a financial point of view (the "Fairness Opinion") and (B) the Company has been
authorized by ▇▇▇▇▇▇ ▇▇▇▇▇▇ to permit the inclusion of the Fairness Opinion
and/or references thereto in the Offer Documents, the Schedule 14D-9 and the
Information Statement, subject to prior review and consent by ▇▇▇▇▇▇ ▇▇▇▇▇▇
(such consent not be unreasonably withheld or delayed).
(b) As promptly as practicable on the date of
commencement of the Offer, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments, supplements and exhibits thereto, the "Schedule 14D-9") which shall
contain the recommendation of the Board of Directors of the Company referred to
in Section 1.2(a). The Company shall cause the Schedule 14D-9 to be disseminated
to holders of the Shares as and to the extent required by applicable federal
securities Laws. The Company, on the one hand, and Purchaser, on the other hand,
shall promptly correct any information provided by it for use in the Schedule
14D-9 if and to the extent that it shall be or shall have become false or
misleading in any material respect, and the Company shall cause the Schedule
14D-9 as so corrected to be filed with the SEC and disseminated to holders of
the Shares, in each case, as and to the extent required by applicable federal
securities Laws. Purchaser and its counsel shall be given a reasonable
opportunity to review and comment upon the Schedule 14D-9 before it is filed
with the SEC and disseminated to holders of Shares. In addition, the Company
agrees to provide Purchaser and its counsel with any comments, whether written
or oral, that the Company or its counsel may receive from time to time from the
SEC or its staff with respect to the Schedule 14D-9, promptly after the receipt
of such comments, to consult with Purchaser and its counsel prior to responding
to any such comments and to provide Purchaser with copies of all such responses,
whether written or oral.
(c) The Company shall promptly furnish Purchaser with
mailing labels containing the names and addresses of all record holders of
Shares and with security position listings of Shares held in stock depositories,
each as of a recent date, together with all other available listings and
computer files containing names, addresses and security position listings of
record holders and beneficial owners of Shares. The Company shall furnish
Purchaser with such additional information, including updated listings and
computer files of shareholders, mailing labels and security position listings,
and such other assistance as Purchaser or its agents may reasonably require in
communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of applicable Law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Offer, Purchaser shall hold in confidence the information
contained in such labels, listings and files, shall use such information solely
in connection with the Offer and, if this Agreement is terminated in accordance
with Section 5.1 or if the Offer is otherwise terminated, shall promptly deliver
or cause to be delivered to the Company all copies of such information, labels,
listings and files then in its possession or in the possession of its agents or
representatives.
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1.3 Purchase Limit. In the event that holders of Shares tender
more than the Maximum Amount, Purchaser shall be obligated to accept for payment
and pay for only the number of Shares tendered by any given holder of Shares
equal to the product of (a) the total number of Shares tendered by such holder
multiplied by (b) the Proration Ratio. The "Proration Ratio" shall be calculated
by dividing (x) the Maximum Amount by (y) the total number of Shares validly
tendered and not properly withdrawn by all holders of Shares adjusted to avoid
purchases of fractional Shares.
1.4 Information Statement.
As promptly as practicable after the date hereof, the Company,
acting through its Board of Directors, shall, in accordance with applicable Law
and the Charter Documents, in consultation with Purchaser, prepare and file with
the SEC a preliminary information statement relating to the Opt Out and obtain
and furnish the information required by the SEC to be included therein and,
after consultation with Purchaser, respond promptly to any comments made by the
SEC with respect to the preliminary information statement and cause a definitive
information statement (together with all amendments, supplements and exhibits
thereto, the "Information Statement") to be mailed to the Company's shareholders
at the earliest practicable date; provided that no amendments or supplements to
the Information Statement shall be made by the Company without consultation with
Purchaser. Purchaser shall promptly provide the Company with such information
with respect to Purchaser and its affiliates as shall be required to be included
in the Information Statement.
1.5 Offer Documents; Schedule 14D-9; Information Statement.
Without limiting any other provision of this Agreement, whenever any party
hereto becomes aware of any event or change which is required to be set forth in
an amendment or supplement to the Offer Documents, the Schedule 14D-9 and/or the
Information Statement, such party shall promptly inform the other party thereof
and each of the parties shall cooperate in the preparation, filing with the SEC
and, as and to the extent required by applicable federal securities laws,
dissemination to the Company's shareholders of such amendment or supplement.
1.6 Stock Options. On the Purchase Date, the Company will take all
actions necessary to ensure that, as of the Purchase Date, each outstanding
Option, vested or unvested, exercisable or non-exercisable, shall be
extinguished and converted into a cash amount equal to the product of (x) the
excess, if any, of the Offer Price minus the exercise price of each such Option
multiplied by (y) the aggregate number of shares of the Company Common Stock
issuable upon the exercise in full of such Option at the Purchase Date.
1.7 Directors
(a) The Company shall request that all directors of the
Company immediately prior to the Purchase Date (all "Current Directors") resign
on the Purchase Date after electing successors designated by Purchaser;
provided, however, that, if the
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successors designated by Purchaser include less than two persons who are not
officers, employees or affiliates of the Company, Purchaser or their respective
executive officers or principal shareholders or of any of their respective
subsidiaries ("Independent Directors"), the Company shall request that one or
two (as applicable) Current Directors remain on the Company's Board of Directors
until such time as the Company's Board of Directors contains at least two
Independent Directors who are not Current Directors; provided, however, that the
failure of any Current Director to remain on the Company's Board of Directors
shall not constitute a default of this section.
(b) From and after the Purchase Date until the first
anniversary of the Purchase Date, Purchaser shall use its reasonable best
efforts to ensure that at least two of the members of the Board of Directors of
the Company are Independent Directors and, from the first anniversary of the
Purchase Date until the third anniversary thereof, Purchaser should use its
reasonable best efforts to ensure that at least one member of the Board of
Directors of the Company is an Independent Director.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser as follows:
2.1 Organization.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio and has the
requisite corporate power and authority necessary to own or lease all of its
properties and assets and to carry on its business as it is now being conducted.
The Company is duly licensed or qualified to do business and is in good standing
in each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing has not had and would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
(b) Set forth in Section 2.1(b) of the disclosure
schedule of the Company delivered to Purchaser concurrently herewith (the
"Company Disclosure Schedule") is a list of all subsidiaries of the Company
together with the jurisdiction of organization of each such subsidiary. Except
for the subsidiaries of the Company, the Company does not own any capital stock
or ownership interests, directly or indirectly, in any other entities. Each of
the Company's subsidiaries is a corporation or entity duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
organization and has the requisite power and authority to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted. Each of the Company's subsidiaries is duly licensed or qualified to
do business and is in good standing in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed, qualified
8
or in good standing has not had and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(c) The Company has heretofore made available to
Purchaser a complete and correct copy of its articles of incorporation and code
of regulations as amended to date (the "Company Charter Documents") and complete
and correct copies of the certificates of incorporation and by-laws (or
equivalent organizational documents) of each of its subsidiaries as amended to
date (the "Subsidiary Documents"). All such Company Charter Documents and
Subsidiary Documents are in full force and effect and neither the Company nor
any of its subsidiaries is in violation of any of the provisions of the Company
Charter Documents or the Subsidiary Documents.
2.2 Capitalization.
(a) The authorized capital stock of the Company consists
of 14,000,000 shares of Company Common Stock and 2,000,000 shares of preferred
stock, without par value (the "Company Preferred Stock"). At the close of
business on April 30, 2003, there were 9,060,695 Shares issued and outstanding
and no shares of Company Preferred Stock issued and outstanding. On the date
hereof, there were 931,800 shares of Company Common Stock reserved for issuance
upon the exercise of outstanding options (the "Options") pursuant to the Stock
Plan. All Shares have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights. Since March 31, 2003, the
Company has not issued any shares of its capital stock, voting securities or
equity interests, or any securities convertible into or exchangeable or
exercisable for any shares of its capital stock, voting securities or equity
interests, other than pursuant to the exercise of the outstanding Options
referred to above in this Section 2.2(a). Except (A) as set forth above or (B)
as otherwise expressly permitted by Section 4.1, as of the date of this
Agreement there are not, and as of the Purchase Date there will not be, any
shares of capital stock, voting securities or equity interests of the Company
issued and outstanding or any subscriptions, options, warrants, calls,
convertible or exchangeable securities, rights, commitments or agreements of any
character providing for the issuance of any shares of capital stock, voting
securities or equity interests of the Company, including any representing the
right to purchase or otherwise receive any Company Common Stock, other than the
Options referred to above in this Section 2.2(a). Section 2.2(a) of the Company
Disclosure Schedule sets forth the name of the holder of, the number of shares
underlying, the grant and expiration date and exercise price of, each Option as
of the date hereof.
(b) (i) Except as set forth in Section 2.2(b) of the
Company Disclosure Schedule, the Company owns, directly or indirectly, all of
the issued and outstanding shares of capital stock, voting securities and equity
interests of each of its subsidiaries, free and clear of any liens, pledges,
charges, mortgages, encumbrances, adverse rights or claims and security
interests whatsoever (including any restriction on the right to vote or transfer
the same, except for such transfer restrictions of general applicability as may
be provided under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), and the "blue sky"
Laws of the various
9
States of the United States) ("Liens"), and all of such shares, securities and
interests are duly authorized and validly issued and are fully paid and
nonassessable, and (ii) none of the Company or any of its subsidiaries has
issued or is bound by any outstanding subscriptions, options, warrants, calls,
convertible or exchangeable securities, rights, commitments or agreements of any
character providing for the issuance or disposition of any shares of capital
stock, voting securities or equity interests of any subsidiary of the Company.
(c) Except as set forth in Section 2.2(c) of the Company
Disclosure Schedule, there are no outstanding obligations of the Company or any
of its subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock, voting securities or equity interests (or any options, warrants
or other rights to acquire any shares of capital stock, voting securities or
equity interests) of the Company or any of its subsidiaries.
2.3 Authority.
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement and, subject to the
effectiveness of the Opt Out as a result of the actions contemplated by Section
1.4 to perform its obligations hereunder and to consummate the Transactions. The
execution, delivery and performance by the Company of this Agreement, and the
consummation by it of the Transactions, have been duly authorized and approved
by its Board of Directors and, except for the effectiveness of the Opt Out as a
result of the actions contemplated by Section 1.4, no other corporate action on
the part of the Company is necessary to authorize the execution and delivery by
the Company of this Agreement and the consummation by it of the Transactions.
This Agreement has been duly executed and delivered by the Company and, assuming
due authorization, execution and delivery hereof by Purchaser, constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to the Bankruptcy and Equity Exception.
(b) The Company's Board of Directors, at a meeting duly
called and held, has duly adopted resolutions (i) approving this Agreement and
the Transactions, including the Offer and the Principal Shareholders' Agreement
(such approval having been made in accordance with the OGCL, as well as an
approval for purposes of Chapter 1704), and (ii) resolving to recommend that
shareholders of the Company accept the Offer, tender their Shares to Purchaser
pursuant thereto. The Company has taken all actions such that no restrictive
provision of Chapter 1704 is, or at the expiration of the Offer or at the
Purchase Date will be, applicable to Purchaser or the Transactions (including
the Offer).
(c) The Shareholder Consent (i) has been duly executed
and delivered by the holders of at least two-thirds of the outstanding shares,
(ii) subject to the effectiveness of the Opt Out as the result of the actions
contemplated by Section 1.4, is in full force and effect and (iii) is
irrevocable and not subject to revocation, modification, withdrawal or amendment
by any of the holders who have executed and delivered the same. No vote or
approval of the holders of any class or series of capital stock of the
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Company or any of its subsidiaries is necessary to adopt this Agreement and
approve the Transactions.
2.4 Consents and Approvals; No Violations.
(a) Except for the filing with the SEC of the Schedule
14D-9, the filing with the Ohio Division of Securities ("ODS") of a Form
041("Form 041") and the Information Statement relating to the Opt Out, and other
filings required under, and compliance with other applicable requirements of,
the Exchange Act and the rules of The Nasdaq Stock Market, no consents or
approvals of, or filings, declarations or registrations with, any Governmental
Entity are necessary for the consummation by the Company of the Transactions
other than consents, approvals, filings, declarations or registrations that, if
not obtained, made or given, would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
(b) Neither the execution and delivery of this Agreement
by the Company nor the consummation by the Company of the Transactions, nor
compliance by the Company with any of the terms or provisions hereof, will (i)
conflict with or violate any provision of the Company Charter Documents or any
of the Subsidiary Documents or (ii) assuming that the authorizations, consents
and approvals referred to in Section 2.4(a) (and the effectiveness of the Opt
Out as a result of the actions contemplated by Section 1.4) are obtained and the
filings referred to in Section 2.4(a) are made, (x) violate any Law, judgment,
writ or injunction of any Governmental Entity applicable to the Company or any
of its subsidiaries or any of their respective properties or assets, or (y)
violate, conflict with, result in the loss of any material benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of, the Company or any of its subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, Permit, lease, agreement or other instrument or obligation to which the
Company or any of its subsidiaries is a party, or by which they or any of their
respective properties or assets may be bound or affected except, in the case of
clause (ii), for such violations, conflicts, losses, defaults, terminations,
cancellations, accelerations or Liens as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
2.5 SEC Documents; Undisclosed Liabilities.
(a) The Company has filed all required reports,
schedules, forms and registration, proxy and other statements with the SEC since
January 1, 2000 (collectively, and in each case including all exhibits and
schedules thereto and documents incorporated by reference therein, the "SEC
Documents"). None of the Company's subsidiaries is required to file periodic
reports with the SEC pursuant to the Exchange Act. As of their respective
effective dates (in the case of SEC Documents that are registration statements
filed pursuant to the Securities Act) and as of their respective SEC filing
dates (in the
11
case of all other SEC Documents), the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the Securities Act, as
the case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents as of such
respective dates contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Except to the extent that information contained in any SEC
Document has been revised or superseded by a later-filed SEC Document, none of
the SEC Documents contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited quarterly statements, as indicated in the
notes thereto) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present in all material
respects the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited quarterly statements, to normal year-end audit adjustments none of
which has been or will be, individually or in the aggregate, material).
(b) The Company is in compliance in all material respects
with the provisions of Section 13(b) of the Exchange Act.
(c) Except as set forth in the SEC Documents filed prior
to the date hereof or in Section 2.5(c) of the Company Disclosure Schedule, or
for events (or series of related matters) as to which the amounts involved do
not exceed $60,000, since the filing of the Company's proxy statement dated July
22, 2002, no event has occurred that would be required to be reported as a
"Certain Relationship or Related Transaction" pursuant to Item 404 of Regulation
S-K promulgated by the SEC. Neither the Company nor any of its subsidiaries nor,
to the Company's knowledge, any director, officer, agent, employee or other
Person acting on behalf of the Company or any of its subsidiaries, has, in any
material respect, (i) used any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others or
established or maintained any unlawful or unrecorded funds in violation of
Section 30A of the Exchange Act or (ii) accepted or received any unlawful
contributions, payments, gifts or expenditures.
(d) Neither the Company nor any of its subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) whether or not required, if known, to be reflected or
reserved against on a consolidated balance sheet of the Company prepared in
accordance with GAAP or the notes thereto, except liabilities (i) as and to the
extent set forth on the audited balance sheet of the Company and its
subsidiaries as of December 31, 2002 (the "Balance Sheet Date") (including the
12
notes thereto) included in the Company's Report on Form 10-K for the period then
ended, (ii) incurred after the Balance Sheet Date in the ordinary course of
business consistent with past practice, as have not had and would not reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect, (iii) incurred after the Balance Sheet Date in connection with
negotiating this Agreement and the Transactions and a reasonable estimate of
which is set forth in Section 2.5(d) of the Company Disclosure Schedule, and
(iv) incurred after the Balance Sheet Date not in the ordinary course that are
in the aggregate, immaterial in amount.
2.6 Absence of Certain Changes or Events. Except (i) as disclosed
in the SEC Documents filed and publicly available not later than two days prior
to the date hereof (the "Filed SEC Documents"), (ii) as set forth in Section 2.6
of the Company Disclosure Schedule, or (iii) for the Transactions, since the
Balance Sheet Date, the Company and its subsidiaries have carried on and
operated their respective businesses in all material respects in the ordinary
course of business consistent with past practice, and there has not occurred
any: (a) event or change that has had or would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, (b) sale or
other disposition of or pledge or other encumbrance upon a material amount of
property or other assets or any Real Property Lease as defined in Section 2.14
herein of the Company or any of its subsidiaries, except sales of inventory in
the ordinary course of business consistent with past practice, (c) declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any class of capital stock of the Company or
any of its subsidiaries (other than dividends by a direct or indirect wholly
owned subsidiary of the Company to its parent), or any repurchase, redemption or
other acquisition by the Company or any of its subsidiaries of any capital stock
of the Company, (d) split, combination or reclassification of any capital stock
of the Company, (e) change in financial or tax accounting methods, principles or
practices by the Company or its subsidiaries, except insofar as may have been
required by a change in GAAP or applicable Law, (f) material Tax election
inconsistent with past practices or the settlement or compromise of any material
Tax liability, (g) damage, destruction or loss of any material asset of the
Company or any of its subsidiaries which materially affects the use or value
thereof or a material part of any improvement Leased by the Company or any of
its subsidiaries pursuant to the Real Property Lease and which damage,
destruction or loss is not covered by insurance, subject to reasonable
deductible limits (it being agreed that the existence, level and coverage of
insurance, if any, shall be taken into account but shall not be determinative
for purposes of determining whether any damage, destruction or loss is material
or would result in a Company Material Adverse Effect), (h) grant by the Company
or any of its subsidiaries to any officer of any increase in compensation,
except as was required under any employment agreements set forth on Section
2.6(h) of the Company Disclosure Schedule, copies of which have been made
available to Purchaser, or any granting by the Company or any of its
subsidiaries to any employee of any increase in compensation, except for normal
increases in the ordinary course of business consistent with past practice, (i)
grant by the Company or any of its subsidiaries to any officer of any increase
in (or acceleration of vesting or payment of) severance or termination pay,
except as was required under any employment, severance
13
or termination agreements set forth on Section 2.6(i) of the Company Disclosure
Schedule, copies of which have been made available to Purchaser, or any grant by
the Company or any of its subsidiaries to any employee other than an officer of
any increase in (or acceleration of vesting or payment of) severance or
termination pay, except in the ordinary course of business consistent with past
practice, (j) entry by the Company or any of its subsidiaries into any (or
amendment of any existing) employment, severance or termination agreement with
any officer, (k) establishment, adoption, amendment or modification of, or
increase of benefits under, any plan that would constitute a Company Plan (as
hereinafter defined) or (l) acceleration of vesting of any Option, except
acceleration previously provided for in the Stock Plan.
2.7 Legal Proceedings. Except as set forth on Section 2.7 of the
Company Disclosure Schedule, there is no pending or, to the knowledge of the
Company, threatened, legal, administrative, arbitral or other proceeding, claim,
suit or action against, or governmental or regulatory investigation of, the
Company or any of its subsidiaries, nor is there any injunction, order,
judgment, ruling or decree imposed (or, to the knowledge of the Company,
threatened to be imposed) upon the Company, any of its subsidiaries or the
assets of the Company or any of its subsidiaries by any Governmental Entity,
that (a) has had or would reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect or (b) challenges any of the
Transactions, provided that the representation in clause (b) is made only as of
the date hereof.
2.8 Compliance With Applicable Law; Permits. The Company and its
subsidiaries are (and since January 1, 2003 have been) in compliance with all
laws, statutes, ordinances, codes, rules, regulations, decrees and orders of
Governmental Entities (collectively, "Laws") applicable to the Company or any of
its subsidiaries, any of their properties or other assets or any of their
businesses or operations, except for such non-compliance as has not had and
would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. The Company and each of its subsidiaries hold
all licenses, franchises, permits, certificates, approvals and authorizations
from Governmental Entities necessary for the lawful conduct of their respective
businesses (collectively, "Permits"), except where the failure to hold the same
has not had and would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. The Company and its subsidiaries
are (and since January 1, 2003 have been) in compliance with the terms of all
Permits, except for such non-compliance as has not had and would not reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect.
2.9 Schedule 14D-9; Offer Documents; Form 041; and Information
Statement. Subject to the accuracy of the representations and warranties of
Purchaser set forth in Section 3.4, neither the Schedule 14D-9 nor any
information supplied (or to be supplied) in writing by or on behalf of the
Company for inclusion in the Offer Documents or the Form 041 will, at the
respective times the Schedule 14D-9, the Offer Documents, or any amendments or
supplements thereto, are filed with the SEC or are first published, sent or
given to shareholders of the Company or at the expiration of the Offer, as the
case may be, contain any untrue statement of a material fact or omit to state
any material fact
14
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they are made, not
misleading. The Information Statement will not, on the date the Information
Statement (or any amendment or supplement thereto) is first mailed to
shareholders of the Company, 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 the light of the circumstances under
which they are made, not misleading and will not, at the time of the Company
Shareholders Meeting, omit to state any material fact necessary to correct any
statement in any earlier communication from the Company with respect to the
solicitation of proxies for the Company Shareholders Meeting which shall have
become false or misleading in any material respect. The Information Statement
and the Schedule 14D-9 will comply as to form in all material respects with the
applicable requirements of the Exchange Act. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to information supplied
by or on behalf of Purchaser for inclusion in any of the foregoing documents.
2.10 Contracts.
(a) Set forth in Section 2.10(a) of the Company
Disclosure Schedule is a list of each (i) contract or agreement that would be
required to be filed as an exhibit to any Securities Act registration statement
or Exchange Act report if such registration statement or report was filed by the
Company with the SEC on the date hereof, (ii) contract or agreement that
purports to limit, curtail or restrict the ability of the Company or any of its
affiliates to compete in any geographic area or line of business, (iii)
partnership or joint venture agreement, (iv) contract or agreement for the
acquisition, sale or lease of material properties or assets other than inventory
(by merger, purchase or sale of stock or assets or otherwise) entered into since
January 1, 2002, (v) agreement with any Governmental Entity, (vi) loan or credit
agreement, mortgage, indenture, note or other agreement or instrument evidencing
indebtedness for borrowed money by the Company or any of its subsidiaries or any
agreement or instrument pursuant to which indebtedness for borrowed money may be
incurred or is guaranteed by the Company or any of its subsidiaries, (vii)
voting agreement or registration rights agreement, (viii) executory supply
contract or other executory agreement of the Company or any subsidiary of the
Company (including for the purchase of inventory) that involves consideration in
excess of $100,000 and which contract or agreement is not terminable by the
Company without a penalty, (ix) other executory contract or agreement involving
consideration in excess of $100,000 not terminable by the Company without a
penalty, (x) collective bargaining agreement, (xi) "standstill" or similar
agreement, (xii) to the extent material to the business or financial condition
of the Company and its subsidiaries, taken as a whole, (A) product design or
development agreement, (B) consulting agreement, (C) indemnification contract,
(D) license or royalty agreement, (E) merchandising, sales representative or
distribution agreement or (F) contract granting a right of first refusal or
first negotiation, and (xiii) commitment or agreement to enter into any of the
foregoing (the contracts, agreements and other documents required to be listed
on Section 2.10(a) of the Company Disclosure Schedule, together with any such
15
agreements or contracts entered into in accordance with Section 4.1, each a
"Material Contract"). The Company has heretofore made available to Purchaser
true and complete copies of each Material Contract in existence as of the date
hereof, together with any and all amendments and supplements thereto and
material "side letters" and similar documentation relating thereto.
(b) Each of the Material Contracts is enforceable in
accordance with its terms by the Company and its subsidiaries party thereto,
except that such enforceability (i) may be limited by bankruptcy, insolvency,
fraudulent transfer, moratorium or other similar Laws of general application
affecting or relating to the enforcement of creditors' rights generally and (ii)
is subject to general principles of equity, whether considered in a proceeding
at law or in equity (together, the "Bankruptcy and Equity Exception"). Neither
the Company nor any of its subsidiaries is in default under any Material
Contract, nor does any condition exist that, with notice or lapse of time or
both, would constitute a default thereunder by the Company and its subsidiaries
party thereto, except for such defaults as have not had and would not reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect. To the knowledge of the Company, no other party to any Material
Contract is in default thereunder, nor does any condition exist that with notice
or lapse of time or both would constitute a default by any such other party
thereunder, except for such defaults as have not had and would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. Except as separately identified in Section 2.10(b) of the Company
Disclosure Schedule, no approval or consent of any Person is needed in order
that any Material Contract continue in full force and effect following the
consummation of the Transactions.
2.11 Tax Matters.
(a) Each of the Company and its subsidiaries has timely
filed, or has caused to be timely filed on its behalf (taking into account any
extension of time within which to file), all material Tax Returns (as
hereinafter defined) required to be filed by it, and all such filed tax returns
are correct and complete in all material respects. All Taxes shown to be due on
such Tax Returns, or otherwise required to be paid by the Company or a
subsidiary of the Company, have been timely paid.
(b) The most recent financial statements contained in the
Filed SEC Documents reflect an adequate reserve for all Taxes payable by the
Company and its subsidiaries for all taxable periods and portion thereof through
the date of such financial statements. No deficiency with respect to Taxes has
been proposed, asserted or assessed against the Company or any of its
subsidiaries.
(c) The Federal income Tax Returns of the Company and
each of its subsidiaries have been examined by and settled with the IRS (or the
applicable statute of limitations has expired) for all years through 1995. All
assessments for Taxes due with respect to such completed and settled
examinations or any concluded litigation have been fully paid.
16
(d) Neither the Company nor any of its subsidiaries has
any obligation under any agreement (either with any Person or any taxing
authority) with respect to Taxes.
(e) Neither the Company nor any of its subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code since the
effective date of Section 355(e) of the Code.
(f) Neither the Company nor any of its subsidiaries has
been a member of an affiliated group of corporations within the meaning of
Section 1504 of the Code, other than the affiliated group of which the Company
is the common parent.
(g) Except as set forth on Schedule 2.11(g) of the
Disclosure Schedule, no audit or other administrative or court proceedings are
pending with any Governmental Entity with respect to Taxes of the Company or any
of its subsidiaries and no written notice thereof has been received. No issue
has been raised by any taxing authority in any presently pending Tax audit that
could be material and adverse to the Company or any of its subsidiaries for any
period after the Purchase Date. Neither the Company nor any of its subsidiaries
has any outstanding agreements, waivers, or arrangements extending the statutory
period of limitations applicable to any claim for, or the period for the
collection or assessment of Taxes.
(h) No claim has been made by a taxing authority in a
jurisdiction where the Company or a subsidiary of the Company does not file a
Tax Return that the Company or a subsidiary of the Company is or may be subject
to taxation in that jurisdiction.
(i) Neither the Company nor any of its subsidiaries is a
party to any contract, agreement or other arrangement which provides for the
payment of any amount which would not be deductible by reason of Section 162(m)
or Section 280G of the Code.
(j) The Company has made available to Purchaser true and
complete copies of (i) all income and franchise Tax Returns of the Company and
its subsidiaries for the preceding three taxable years and (ii) any audit report
issued within the last three years (or otherwise with respect to any audit or
proceeding in progress) relating to income and franchise Taxes of the Company or
any subsidiary of the Company.
(k) No Liens for Taxes exist with respect to any assets
or properties of the Company or any of its subsidiaries except for Liens for
Taxes not yet due and payable.
(l) All material Taxes required to be withheld by the
Company or any of its subsidiaries have been withheld and duly and timely paid
to the proper taxing authority.
17
(m) For purposes of this Agreement: (1) "Taxes" shall
mean taxes of any kind (including but not limited to those measured by or
referred to as income, franchise, gross receipts, sales, use, ad valorem,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, value added, property, windfall profits, customs, duties or
similar fees, assessments or charges of any kind whatsoever) together with any
interest and any penalties, additions to tax or additional amounts imposed by
any Governmental Authority, domestic or foreign and shall include any transferee
or successor liability in respect of Taxes (whether by contract or otherwise)
and any several liability in respect of any Tax as a result of being a member of
any affiliated, consolidated, combined, unitary or similar group; and (2) "Tax
Returns" shall mean any return, report, claim for refund, estimate, information
return or statement or other similar document relating to or required to be
filed with any Governmental Entity with respect to Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
2.12 Employee Benefits and Labor Matters.
(a) Section 2.12(a) of the Company Disclosure Schedule
sets forth a true and complete list of: all "employee benefit plans", as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and all other employee benefit plans, programs, agreements,
policies, arrangements or payroll practices, including bonus plans, employment,
consulting or other compensation agreements, collective bargaining agreements,
incentive, equity or equity-based compensation, or deferred compensation
arrangements, change in control, termination or severance plans or arrangements,
stock purchase, severance pay, sick leave, vacation pay, salary continuation for
disability, hospitalization, medical insurance, life insurance and scholarship
plans and programs maintained by the Company or any of its subsidiaries or to
which the Company or any of its subsidiaries contributed or is obligated to
contribute thereunder for current or former employees of the Company or any of
its subsidiaries (the "Employees") (the "Company Plans"). Neither the Company
nor any of its affiliates and any trade or business (whether or not
incorporated) which is or has ever been under common control, or which is or has
ever been treated as a single employer, with any of them under Section 414(b),
(c), (m) or (o) of the Code ("ERISA Affiliate") or to which the Company or any
ERISA Affiliate contributed or has ever been obligated to contribute thereunder
within the last six years maintains, sponsors, contributes or is or has been
obligated to contribute to any "employee pension plans", as defined in Section
3(2) of ERISA, subject to Title IV of ERISA or Section 412 of the Code (the
"Title IV Plans") or to any multiemployer plan, as defined in Section 3(37) of
ERISA ("Multiemployer Plan"), or is or has been subject to Sections 4063 or 4064
of ERISA ("Multiple Employer Plans").
(b) True, current and complete copies of the following
documents, with respect to each of the Company Plans, have been made available
or delivered to Purchaser by the Company, to the extent applicable: (i) any
plans, all amendments thereto and related trust documents, insurance contracts
or other funding arrangements, and amendments thereto; (ii) the most recent
Forms 5500 and all schedules thereto and the
18
most recent actuarial report, if any; (iii) the most recent IRS determination
letter; (iv) summary plan descriptions; (v) written communications to employees
relating to the Company Plans; and (vi) written descriptions of all non-written
agreements relating to the Company Plans.
(c) Except as set forth on Section 2.12(c) of the Company
Disclosure Schedule, the Company Plans have been maintained, in all material
respects, in accordance with their terms and with all provisions of ERISA, the
Code (including rules and regulations thereunder) and other applicable federal
and state laws and regulations, and neither the Company nor any "party in
interest" or "disqualified person" with respect to the Company Plans has engaged
in a non-exempt "prohibited transaction" within the meaning of Section 4975 of
the Code or Section 406 of ERISA. No fiduciary has any liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any Company Plan.
(d) The Company Plans intended to qualify under Section
401 of the Code are so qualified and any trusts intended to be exempt from
federal income taxation under Section 501 of the Code are so exempt, and nothing
has occurred with respect to the operation of the Company Plans which could
cause the loss of such qualification or exemption or the imposition of any
liability, penalty or tax under ERISA or the Code.
(e) Each Company Plan which is intended to meet the
requirements for tax-favored treatment under Subchapter B of Chapter 1 of
Subtitle A of the Code meets such requirements.
(f) Section 2.12(f) of the Company Disclosure Schedule
sets forth, on a plan by plan basis, the present value of benefits payable
presently or in the future to present or former employees of the Company or any
subsidiary of the Company under each unfunded Company Plan, which is a "pension
plan" (within the meaning of Section 3(2) of ERISA).
(g) All contributions (including all employer
contributions and employee salary reduction contributions) required to have been
made under any of the Company Plans (including workers compensation) or by Law
(without regard to any waivers granted under Section 412 of the Code), to any
funds or trusts established thereunder or in connection therewith have been made
by the due date thereof (including any valid extension), and all contributions
for any period ending on or before the Purchase Date which are not yet due will
have been paid or sufficient accruals for such contributions and other payments,
to the extent required by GAAP have been duly and fully provided for on the most
recent consolidated balance sheet of the Company included in the filed SEC
Documents. No accumulated funding deficiencies exist in any of the Company Plans
subject to Section 412 of the Code.
(h) No liability under any Company Plan has been funded
nor has any such obligation been satisfied with the purchase of a contract from
an insurance company
19
that is not rated AA by Standard & Poor's Corporation and the equivalent by each
other nationally recognized rating agency.
(i) There are no pending actions, claims or lawsuits
which have been asserted or instituted against the Company Plans, the assets of
any of the trusts under such plans or the plan sponsor or the plan
administrator, or against any fiduciary of the Company Plans with respect to the
operation of such plans (other than routine benefit claims), nor, to the
knowledge of the Company, are there facts which could form the basis for any
such claim or lawsuit.
(j) There is no material violation of ERISA or the Code
with respect to the filing of applicable reports, documents and notices
regarding the Company Plans with the Secretary of Labor and the Secretary of the
Treasury or the furnishing of such documents to the participants or
beneficiaries of the Company Plans.
(k) All amendments and actions required to bring the
Company Plans into conformity in all material respects with all of the
applicable provisions of the Code, ERISA and other applicable Laws have been
made or taken except to the extent that such amendments or actions are not
required by Law to be made or taken until a date after the date hereof.
(l) Any bonding required with respect to the Company
Plans in accordance with applicable provisions of ERISA has been obtained and is
in full force and effect.
(m) None of the Company Plans provide for post-employment
life or health insurance, benefits or coverage for any participant or any
beneficiary of a participant, except as may be required under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), and at the
expense of the participant or the participant's beneficiary. Each of the Company
and any ERISA Affiliate which maintains a "group health plan" within the meaning
Section 5000(b)(1) of the Code has complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regulations thereunder.
(n) Except as set forth on Section 2.12(n) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the Transactions will (i) result in any payment becoming due
to any employee (current, former or retired) of the Company or any of its
subsidiaries, (ii) increase any benefits otherwise payable under any Company
Plan or (iii) result in the acceleration of the time of payment or vesting of
any such benefits under any such plan.
(o) The Company has no contract, plan or commitment,
whether legally binding or not, to create any additional Company Plan or to
modify any existing Company Plan.
20
(p) No stock or other security issued by the Company
forms or has formed a material part of the assets of any Company Plan.
(q) Any individual who performs services for the Company
or its subsidiaries (other than through a contract with an organization other
than such individual) and who is not treated as an employee of the Company or a
subsidiary of the Company for federal income tax purposes by the Company is not
an employee for such purposes.
(r) Except as set forth on Section 2.12(r) of the Company
Disclosure Schedule: (i) none of the Employees is represented in his or her
capacity as an employee of the Company or its subsidiaries by any labor
organization; (ii) neither the Company nor any of its subsidiaries has
recognized any labor organization nor has any labor organization been elected as
the collective bargaining agent of any Employees, nor has the Company or any of
its subsidiaries entered into any collective bargaining agreement or union
contract recognizing any labor organization as the bargaining agent of any
Employees; (iii) there is no union organization activity involving any of the
Employees pending or, to the knowledge of the Company, threatened, nor has there
been since February 3, 1998 any union representation efforts involving any of
the Employees; (iv) there is no picketing pending or, to the knowledge of the
Company, threatened, and there are no strikes, slowdowns, work stoppages, other
job actions, lockouts, arbitrations, grievances or other labor disputes
involving any of the Employees pending or, to the knowledge of the Company,
threatened; (v) there are no complaints, charges or claims against the Company
or any of its subsidiaries pending or, to the knowledge of the Company,
threatened, which could be brought or filed with any Governmental Entity or
arbitrator based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment or failure to employ by the
Company or any of its subsidiaries, of any individual; (vi) the Company and its
subsidiaries are in compliance with all Laws relating to the employment of
labor, including all such Laws relating to wages, hours, the Worker Adjustment
and Retraining Notification Act and any similar state or local "mass layoff" or
"plant closing" law ("WARN"), collective bargaining, discrimination, civil
rights, safety and health, workers' compensation and the collection and payment
of withholding and/or social security taxes and any similar tax, except for
immaterial non-compliance; and (vii) there has been no "mass layoff" or "plant
closing" as defined by WARN with respect to the Company or any of its
subsidiaries since February 3, 2002.
2.13 Environmental and Health and Safety Matters. Except for those
matters that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect: (i) each of
the Company and its subsidiaries is, and has been, in compliance with all
applicable Environmental Laws (as hereinafter defined), which compliance
includes the possession, maintenance, and compliance with all permits, licenses,
authorizations or similar approvals required by Environmental Laws and (ii)
there is no investigation, suit, claim, action or proceeding pending, or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its subsidiaries or any real property owned, operated or leased by the
21
Company or any of its subsidiaries relating to or arising under Environmental
Laws; (iii) to the knowledge of the Company, neither the Company nor any of its
subsidiaries has received any notice of or entered into or assumed by contract
or operation of law or otherwise, any obligation, liability, order, settlement,
judgment, injunction or decree relating to or arising under Environmental Laws;
(iv) the Company is not aware of any facts, circumstances or conditions relating
to the operations of the Company or any subsidiary or any real property
currently or formerly owned, operated or leased by or for the Company that could
reasonably be expected to result in the Company or subsidiaries incurring
liabilities, losses or damages under Environmental Laws; (v) the transactions
contemplated by this Agreement does not trigger or otherwise require compliance
with the Industrial Site Recovery Act, 13 N.J. Sta. ▇▇▇. Section 13:1K-6 and
(vi) the Company has made available to Purchaser copies of any environmental,
health and safety assessments, audits, investigation or similar reports relating
to the Company any subsidiary or any real property owned, operated or leased by
the Company or any subsidiary. For purposes of this Agreement: "Environmental
Laws" means all applicable Laws pertaining to the environment, preservation or
reclamation of natural resources, or to human health and safety, including, but
not limited to, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. App. Section 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean Water
Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401
et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et
seq.), and the Occupational Safety and Health Act (29 U.S.C. Section 651 et
seq.), as each has been amended and the regulations promulgated pursuant
thereto, and any analogous state or local laws.
2.14 Properties; Real Estate; Intellectual Property.
(a) Each of the Company and its subsidiaries (i) has good
and marketable title to all properties and other assets which are reflected on
the most recent consolidated balance sheet of the Company included in the Filed
SEC Documents as being owned by the Company or one of its subsidiaries (or
acquired after the date thereof) and which are, individually or in the
aggregate, material to the Company's business or financial condition on a
consolidated basis (except properties sold or otherwise disposed of since the
date thereof in the ordinary course of business), free and clear of all Liens
except (x) statutory liens securing payments not yet due, (y) security
interests, mortgages and pledges that are reflected in the Filed SEC Documents
that secure indebtedness that is reflected in the most recent consolidated
financial statements of the Company included in the Filed SEC Documents and (z)
such other imperfections or irregularities of title or other Liens as do not,
individually or in the aggregate, materially affect the value or use of the
properties or assets subject thereto or otherwise materially impair business
operations, and (ii) is the lessee, sublessee, sub-sublessee or sublandlord of
all leasehold estates and leasehold interests reflected in the Filed SEC
Documents (or acquired after the date thereof) as more particularly set forth on
Section 2.14(a) of the Company Disclosure Schedule (each a "Real Property Lease"
and
22
collectively, the "Real Property Leases", however, the leasehold estates and
leasehold interests whereby the Company or its subsidiaries is the sublandlord
shall also be referred to hereinafter as the "Sublease"), which schedule shall
list all material lease related documentation including, without limitation, all
leases, amendments, assignments, letter agreements, modifications, supplements,
commencement agreements, subleases and prime lease agreements, if applicable,
that the Company or any of its subsidiaries have executed, received, or of which
the Company or any of its subsidiaries otherwise have knowledge(collectively
referred to hereinafter as the "Real Property Lease Documentation").
(b) (i) There is no real property owned in fee by
the Company or its subsidiaries.
(ii) Each of the Real Property Leases and
Subleases are in full force and effect and neither the Company nor any of its
subsidiaries, nor, to the Company's knowledge, any other party to any of the
Real Property Leases or Subleases, have exercised any termination rights with
respect thereto. Except where such defaults are immaterial, (a) neither the
Company nor any of its subsidiaries have received or given any notice of any
default under the Real Property Leases or Subleases, (b) no default or event
that with notice or lapse of time, or both, would constitute a default by the
Company or any of its subsidiaries under any of the Real Property Leases or
Subleases has occurred and is continuing, and (c) to the Company's knowledge no
other party to a Real Property Lease or Sublease is in default thereof.
(iii) All rent and other sums and charges due and
payable by the Company and its subsidiaries as tenants, subtenant or
sub-subtenants (each a "Tenant" and collectively, "Tenants") under the Real
Property Leases have been paid. Except as set forth on Section 2.14(a) of the
Company Disclosure Schedule, all of the personal property, fixtures and
improvements included on or in all properties leased pursuant to the Real
Property Leases (each a "Leased Real Property and collectively, the "Leased Real
Properties") by the Company or its subsidiaries are in good operating condition
and repair and are in a satisfactory condition for the continued use of the
Leased Real Properties in the ordinary course of business consistent with past
practices; reasonable wear and tear excepted.
(iv) Section 2.14(a) of the Company Disclosure
Schedule is a true, correct and complete list of all Real Property Leases and
all other Real Property Lease Documentation and the Company has delivered to
Purchaser true, correct and complete copies of each Real Property Lease and all
Real Property Lease Documentation (except for such prime leases, and amendments
thereto, and other documents noted on Section 2.14(a) of the Company Disclosure
Schedule as missing, copies of which have been or will be requested by the
Company from the landlords in accordance with the provisions of Section 4.8
herein).
(v) Except for the dispute and litigation at the
East Hanover, NJ store which is described in more detail on Section 2.14(a) of
the Company Disclosure
23
Schedule, there are no pending or, to the knowledge of the Company, threatened,
disputes or, legal, administrative, arbitral or other proceeding, claim, suit
or action arising from, or relating to the Real Property or the Real Property
Leases.
(vi) The Company and its subsidiaries hold all
material Permits with respect to the use and occupancy of the Leased Real
Property, except where the failure to hold the same has not had and would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The Leased Real Property and the current use and
operation thereof by the Company and its subsidiaries do not violate any
Permits, except where such violation has not had and would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
(vii) There does not exist any actual or, to the
knowledge of the Company, threatened or contemplated condemnation or eminent
domain proceedings that affect any of its or its subsidiaries' Leased Real
Properties or any part thereof, except where such condemnation or eminent domain
proceeding has not had and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(viii) Neither the Company nor any of its
subsidiaries have received any written notice from any insurance company that
has issued a policy with respect to any of Leased Real Property requiring
performance of any material repairs or alterations to such Leased Real Property.
(ix) Other than option rights contained in the
Real Property Leases, neither the Company nor any or its subsidiaries own or
hold, or is obligated under or a party to, any option, right of first refusal or
other contractual right to purchase, acquire, sell, assign or dispose of any
real estate or any portion thereof or interest therein.
(x) Except as set forth on Section 2.14(a) of
the Company Disclosure Schedule, there are no unpaid commissions or fees due or
payable and no obligation to pay or fund any construction or completion of
improvements under any Real Property Lease or Sublease.
(xi) Except for the premises subleased under the
Subleases, each of the Real Property Leases covers the entire estate it purports
to cover, and, upon the consummation of the transactions contemplated hereby,
will entitle Purchaser to the exclusive use, occupancy and possession of the
Leased Real Property specified therein for the purposes such Leased Real
Property is now being used.
(xii) Except as set forth on Section 2.14(a) of
the Company Disclosure Schedule, each Real Property Lease subject to a superior
lease or an underlying mortgage, deed of trust or other security interest
affecting the landlord's, sublandlord's or fee owner's interest in the Real
Property Lease is subject to a non-disturbance agreement, a copy of which has
been provided to Purchaser or, as noted on
24
Section 2.14(a) of the Company Disclosure Schedule as missing, fully executed
copies of which have been requested by the Company from the landlords
thereunder.
(xiii) With respect to the Subleases, (a) all rent
and other sums and charges payable by Tenants under the Subleases are current;
and (b) neither rent or any other sums and charges payable by Tenants under the
Subleases, nor any other material item payable by any Tenant under any Sublease
has been prepaid for more than one month in advance.
(c) As used herein, the term (i) "Intellectual Property"
shall mean all patents, patent applications, provisional patent applications,
reissues, statutory invention registrations, inventions and other industrial
property rights; trademarks, service marks, trade names, trade dress, logos, and
other source identifiers, including registrations and applications for the
registration thereof; copyrights (including without limitation, copyrights in
computer software programs); Internet domain name registrations; Internet web
sites, web content, and registrations and applications for registrations
thereof; confidential and proprietary information, including know-how and trade
secret rights, technologies, techniques and processes; computer software,
programs and databases in any form, all versions, updates, corrections,
enhancements, replacements, and modifications thereof, and all documentation
related thereto; and rights of privacy, publicity and endorsement, in each case
under the Laws of any jurisdiction in the world, and including rights under and
with respect to all applications, registrations, continuations, divisions,
renewals, extensions and reissues of the foregoing; and (ii) "Company
Intellectual Property" shall mean the Intellectual Property used in connection
with the business of the Company or any of its subsidiaries or owned or held for
use by the Company or any of its subsidiaries.
(d) Except as set forth in Section 2.14(d) of the Company
Disclosure Schedule, the Company and/or each of its subsidiaries owns, or is
licensed or otherwise possesses sufficient rights to use and transfer such
rights as it has in and to all the Company Intellectual Property, except as has
not had and would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. The use of the Company
Intellectual Property by the Company and its subsidiaries and the operation of
the Company's or its subsidiaries' businesses does not constitute an
infringement or misappropriation of any valid third party Intellectual Property,
except as has not had and would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect. Except as set forth in
Section 2.14(d) of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries has received any written notice from any Person since
January 1, 2000 that the use of any of the Company Intellectual Property or the
operation of the Company's or its subsidiaries' businesses infringes, dilutes
(in the case of trademarks), or otherwise violates the Intellectual Property of
any Person.
(e) Except as set forth in Section 2.14(e) of the Company
Disclosure Schedule or as has not had and would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect, there
are no pending claims by the
25
Company or any of its subsidiaries alleging or asserting that any third party
has violated, misappropriated or infringed any of the Company Intellectual
Property nor, to the knowledge of the Company, is there any basis for such a
claim.
2.15 Opinion of Financial Advisor. The Board of Directors of the
Company has received the Fairness Opinion and the Company has delivered to
Purchaser a true and complete copy of the Fairness Opinion.
2.16 Finders or Brokers. Other than ▇▇▇▇▇▇ ▇▇▇▇▇▇, no broker,
investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
the Company or any of its subsidiaries.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as follows:
3.1 Organization. Purchaser is a limited liability company duly
organized, validly existing and in good standing under the Laws of the State of
Delaware.
3.2 Authority. Purchaser has all necessary limited liability
company power and authority to execute and deliver this Agreement and to
consummate the Transactions. The execution, delivery and performance by
Purchaser of this Agreement, and the consummation by Purchaser of the
Transactions, have been duly authorized and approved by both of its Voting
Members and no other limited liability company action on the part of Purchaser
is necessary to authorize the execution and delivery by Purchaser of this
Agreement and the consummation by it of the Transactions. This Agreement has
been duly executed and delivered by Purchaser and, assuming due authorization,
execution and delivery hereof by the Company, constitutes a valid and binding
obligation of Purchaser, enforceable against it in accordance with its terms,
subject to the Bankruptcy and Equity Exception.
3.3 Consents and Approvals; No Violations.
(a) Except for (i) the filing with the SEC of the Offer
Documents and a Information Statement in definitive form relating to the Opt
Out, the filing with the ODS of the Form 041 and other filings required under,
and compliance with other applicable requirements of, the Exchange Act and the
rules of The Nasdaq Stock Market, no consents or approvals of, or filings,
declarations or registrations with, any Governmental Entity are necessary for
the consummation by Purchaser of the Transactions except as would not reasonably
be expected to prevent or materially delay Purchaser's performance of their
respective material obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement
by Purchaser, nor the consummation by Purchaser of the Transactions, nor
compliance by Purchaser with any of the terms or provisions hereof, will (i)
conflict with or violate any provision
26
of the certificate of formation or operating agreement of Purchaser or (ii)
assuming that the authorizations, consents, approvals and filings referred to in
Section 3.3(a) are obtained and made, violate any Law, judgment, writ or
injunction of any Governmental Entity applicable to Purchaser or any of its
subsidiaries or any of their respective properties or assets.
3.4 Offer Documents; Schedule 14D-9; Form 041; Information
Statement. Subject to the accuracy of the representations and warranties of the
Company set forth in Section 2.9, neither the Offer Documents nor any
information supplied (or to be supplied) in writing by or on behalf of Purchaser
for inclusion in the Schedule 14D-9 or the Form 041 will, at the respective
times the Offer Documents, the Schedule 14D-9, or any amendments or supplements
thereto, are filed with the SEC or are first published, sent or given to
shareholders of the Company or at the expiration of the Offer, as the case may
be, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading. The information supplied by Purchaser for inclusion in the
Information Statement will not, on the date the Information Statement (or any
amendment or supplement thereto) is first mailed to shareholders of the Company,
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 the light of the circumstances under which they are made, not
misleading, and will not, at the time of the effectiveness of the Opt Out, omit
to state any material fact necessary to correct any statement in the earlier
communication with respect to the Opt Out which shall have become false or
misleading in any material respect. The Offer Documents will comply as to form
in all material respects with the applicable requirements of the Exchange Act.
Notwithstanding the foregoing, Purchaser makes no representation or warranty
with respect to any information supplied by or on behalf of the Company for
inclusion in any of the foregoing documents.
3.5 Financing. Attached as Exhibit A hereto is a copy of a
stand-by letter of credit in favor of Purchaser, which letter of credit provides
for a draw up to $30 million by Purchaser upon the issuance by Purchaser of a
demand certificate (the "Demand Certificate") certifying that (i) all the
conditions set forth on Annex A have been satisfied and not waived, (ii) the
amounts required to be funded by Ascend Retail Investment LLC ("ARI") pursuant
to the Financing Agreement between Purchaser and ARI of even date herewith have
not been funded and (iii) the Purchase Date has occurred (the "Letter of
Credit").
3.6 Finders or Brokers. Except for ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Company
Limited, no broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of Purchaser or any of its subsidiaries.
3.7 Corporate Operations. Purchaser directly or indirectly owns
and operates approximately 14 stores.
27
3.8 Financials. Purchaser has provided the Company with a true and
correct copy of the audited consolidated balance sheet, statement of income and
cash flow of Purchaser and its subsidiaries for the year ending at and on
December 31, 2002.
ARTICLE IV - ADDITIONAL COVENANTS AND AGREEMENTS
4.1 Conduct of Business. (a) Except as expressly contemplated or
permitted by this Agreement or as required by applicable Law, during the period
from the date of this Agreement until the Purchase Date, or the earlier
termination of this Agreement in accordance with Article V unless Purchaser
otherwise agrees in writing, the Company shall, and shall cause each of its
subsidiaries to, (w) conduct its business in the ordinary course consistent with
past practice, (x) comply in all material respects with all applicable Laws and
the requirements of all Material Contracts, (y) use commercially reasonable
efforts to maintain and preserve intact its business organization and the
goodwill of those having business relationships with it and retain the services
of its present officers and key employees, in each case, to the end that such
goodwill and ongoing business shall be unimpaired at the Purchase Date and (z)
keep in full force and effect all material insurance policies maintained by the
Company and its subsidiaries, other than changes to such policies made in the
ordinary course. Without limiting the generality of the foregoing, except (i) as
expressly contemplated or permitted by this Agreement, (ii) as set forth on
Section 4.1 of the Company Disclosure Schedule, or (iii) as required by
applicable Laws, during the period from the date of this Agreement to the
Purchase Date, the Company shall not, and shall not permit any of its
subsidiaries to, without the prior written consent of Purchaser:
(i)(A) issue, sell, grant, dispose of, pledge or
otherwise encumber any shares of its capital stock, voting securities
or equity interests, or any securities or rights convertible into,
exchangeable or exercisable for, or evidencing the right to subscribe
for any shares of its capital stock, voting securities or equity
interests, or any rights, warrants, options, calls, commitments or any
other agreements of any character to purchase or acquire any shares of
its capital stock, voting securities or equity interests or any
securities or rights convertible into, exchangeable or exercisable for,
or evidencing the right to subscribe for, any shares of its capital
stock, voting securities or equity interests, provided that (x) the
Company may issue shares of Company Common Stock upon the exercise of
Options that are outstanding on the date hereof and in accordance with
the terms thereof and (y) capital stock, voting securities or equity
interests of the Company's subsidiaries may be issued to the Company or
a direct or indirect wholly owned subsidiary of the Company; (B)
redeem, purchase or otherwise acquire any of its outstanding shares of
capital stock, voting securities or equity interests, or any rights,
warrants, options, calls, commitments or any other agreements of any
character to acquire any shares of its capital stock, voting securities
or equity interests; (C) split, combine, subdivide or reclassify any
shares of its capital stock or declare, set aside for payment or pay
any dividend, or make any other distribution in respect of any shares
of
28
its capital stock or otherwise make any payments to its shareholders in
their capacity as such (other than dividends by a direct or indirect
wholly owned subsidiary of the Company to its parent); or (D) amend or
waive any of its rights under, or except as automatically provided in
the Stock Plan, accelerate the vesting under, any provision of the
Stock Plan or any agreement evidencing any outstanding Option or other
right to acquire capital stock of the Company or any restricted stock
purchase agreement or any related contract, except such vesting as
required pursuant to employment agreements in effect on the date of
this Agreement (complete copies of which have been made available to
Purchaser);
(ii) incur any indebtedness for borrowed money or
guarantee any indebtedness (or enter into a "keep well" or similar
agreement), other than (A) borrowings by the Company in the ordinary
course of business under the Company's existing credit facility listed
on Section 2.10(a) of the Company Disclosure Schedule and guarantees of
such borrowings issued by the Company's subsidiaries to the extent
required under the terms of such credit facility, and (B) borrowings
from the Company by a direct or indirect wholly owned subsidiary of the
Company in the ordinary course of business consistent with past
practice;
(iii) sell, transfer, lease, mortgage, encumber or
otherwise dispose of (including pursuant to a sale-leaseback
transaction or an asset securitization transaction) any of its
properties or assets (including securities of subsidiaries) to any
Person, except (A) sales of inventory in the ordinary course of
business consistent with past practice, (B) pursuant to contracts or
agreements in force at the date of this Agreement and listed on Section
4.1(a)(iii) of the Company Disclosure Schedule, complete copies of
which have been made available to Purchaser, or (C) disposition of
obsolete or worthless assets;
(iv) except for the purpose of effecting repairs
in the ordinary course of business (which are contemplated to include
the replacement of an HVAC system in a Manhattan store) or those
capital expenditures associated with the store opening plans for Ewing,
New Jersey (which capital expenditures shall not exceed the budgeted
amount of $365,000), make any capital expenditures (including, without
limitation, no capital expenditures to remodel or refixture any
stores);
(v) make any acquisition (by purchase of
securities or assets, merger or consolidation, or otherwise) of any
other Person, business or division (other than acquisitions of
inventories, supplies and raw materials for operations in the ordinary
course of business consistent with past practice, and capital
expenditures to the extent permitted under clause (iv) above);
29
(vi) make any investment (by contribution to
capital, property transfers, purchase of securities or otherwise) in,
or loan or advance (other than travel and similar advances to its
employees in the ordinary course of business consistent with past
practice) to, any Person other than a direct or indirect wholly owned
subsidiary of the Company in the ordinary course;
(vii) (A) enter into, terminate or amend any
Material Contract, other than in the ordinary course of business
consistent with past practice, terminate or amend any existing Real
Property Lease without the consent of Purchaser, which consent shall
not be unreasonably withheld (it being understood that the Purchaser
shall not be required to consent to any increase in rent or the term of
any such lease) or enter into any new Real Property Lease, other than
as part of the Company's store opening plans for Manalapan and Ewing,
New Jersey; (B) enter into or extend the term or scope of any contract
or agreement that purports to restrict the Company or any subsidiary
from engaging in any line of business or in any geographic area, (C)
enter into any contract that would be breached by, or require the
consent of any third party in order to continue in full force
following, consummation of the Transactions, or (D) release any Person
from, or modify or waive any provision of, any confidentiality,
standstill or similar agreement;
(viii) increase in any manner the compensation of
any of its directors, officers or employees or enter into, establish,
amend or terminate any employment, consulting, retention, change in
control, collective bargaining, bonus or other incentive compensation,
profit sharing, health or other welfare, stock option or other equity
(or equity-based), pension, retirement, vacation, severance, deferred
compensation or other compensation or benefit plan, policy, agreement,
trust, fund or arrangement with, for or in respect of, any shareholder,
director, officer, other employee, consultant or affiliate, other than
(A) as required pursuant to applicable Law or the terms of agreements
in effect on the date of this Agreement (complete copies of which have
been made available to Purchaser) set forth on Section 4.1(a)(viii) of
the Company Disclosure Schedule and (B) increases in salaries, wages
and benefits of employees (other than officers) made in the ordinary
course of business and in amounts and in a manner consistent with past
practice;
(ix) make any material Tax election or settle or
compromise any material Tax liability or agree to an extension of a
statute of limitations for Taxes;
(x) make any changes in financial or tax
accounting methods, principles or practices, except insofar as may be
required by a change in GAAP or applicable Law;
30
(xi) amend the Company Charter Documents or the
Subsidiary Documents;
(xii) adopt a plan or agreement of complete or
partial liquidation, dissolution, restructuring, recapitalization,
merger, consolidation or other reorganization (other than transactions
exclusively between wholly owned subsidiaries of the Company);
(xiii) pay, discharge, settle or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge, settlement or satisfaction in the ordinary course of
business consistent with past practice or in accordance with their
terms of other liabilities, claims or obligations reflected or reserved
against in the most recent consolidated financial statements (or the
notes thereto) of the Company included in the Filed SEC Documents or
incurred since the date of such financial statements in the ordinary
course of business consistent with past practice;
(xiv) settle or compromise any material litigation
or proceeding;
(xv) agree, in writing or otherwise, to take any
of the foregoing actions or take any action or agree, in writing or
otherwise, to take any action, which would cause any of the
representations or warranties of the Company set forth in this
Agreement (A) that are qualified as to materiality or Material Adverse
Effect to be untrue and (B) that are not so qualified to be untrue in
any material respect; and
(xvi) purchase directors' and officers' liability
insurance except in the ordinary course of business consistent with
past practice; provided, however, that the Company may spend up to
$450,000 to purchase "tail" coverage providing directors' and officers'
liability insurance covering acts or omissions occurring prior to the
Purchase Date with respect to those persons who are currently covered
by the Company's directors' and officers' liability insurance policy.
(b) Purchaser agrees that, during the period from the
date of this Agreement until the Purchase Date, or the earlier termination of
this Agreement, except as expressly contemplated or permitted by this Agreement
or as required by applicable Law, and except as may be agreed in writing by the
Company, Purchaser shall not, and shall not permit any of its subsidiaries to,
take any action or agree, in writing or otherwise, to take any action which
would cause any of the representations or warranties of Purchaser set forth in
this Agreement (A) that are qualified as to materiality or Material Adverse
Effect to be untrue and (B) that are not so qualified to be untrue in any
material respect.
31
(c) During the period from the date of this Agreement
until the Purchase Date, or the earlier termination of this Agreement in
accordance with Article V, the Company shall, and shall cause each of its
subsidiaries to, consult with Purchaser regarding opportunities of the Company
to purchase goods at a volume discount in a quantity greater than the Company
anticipates needing for its retail purposes, in order to permit both Purchaser
and the Company to jointly purchase such goods in order to realize the volume
discount; provided, however, that a breach by the Company of the foregoing
provisions shall not give rise to a default under this Agreement enabling
Purchaser to terminate this Agreement.
(d) During the period from the date of this Agreement
until the Purchase Date, or the earlier termination of this Agreement in
accordance with Article V, the Company shall, and shall cause each of its
subsidiaries not to, make any inventory purchase except in the ordinary course
of business consistent with past practice; provided, however, that the Company
shall consult with ▇▇▇ ▇▇▇▇▇▇▇▇▇ or such other person as may be designated in
writing by Purchaser ("Purchaser's Designee") prior to making any purchase or
series of related purchases of inventory, health insurance, medical insurance
and dental insurance that exceed, individually or in the aggregate, $200,000
and, provided, further, that if Purchaser's Designee objects in writing to any
such purchase or series of related purchases in excess of $200,000, the Company
shall not, and shall cause its subsidiaries not to, effect such purchase or
related series of purchases unless such purchase or purchases have been approved
by the Company's Board of Directors or a duly authorized committee thereof..
4.2 No Solicitation by the Company.
(a) The Company shall immediately cease, and shall cause
its subsidiaries and the Company's and its subsidiaries' respective directors,
officers, employees, investment bankers, attorneys, accountants and other
representatives to cease, any discussions or negotiations with any Person that
may be ongoing with respect to a Takeover Proposal (as hereinafter defined) and
use its reasonable best efforts to obtain the return from all such Persons or
cause the destruction of all copies of confidential information provided to such
parties by the Company or its representatives that are still in the possession
of such Persons. The Company shall not, and shall cause its subsidiaries and the
Company's and its subsidiaries' respective directors, officers, employees,
investment bankers, attorneys, accountants and other representatives not to,
directly or indirectly (i) solicit, initiate or knowingly encourage the
initiation of (including by way of furnishing information that has not been
previously publicly disseminated) any inquiries or proposals that constitute, or
may reasonably be expected to lead to, any Takeover Proposal or (ii) participate
in any discussions with any third party regarding, or furnish to any third party
any non-public information with respect to, or assist or facilitate, any
Takeover Proposal; provided, however, that if the Board of Directors of the
Company receives an unsolicited, bona fide written Takeover Proposal that was
made in circumstances not involving a breach of this Agreement and that in the
opinion of the Board of Directors of the Company could lead to a Superior
Proposal, then the Company may, in response to such Takeover Proposal and after
providing Purchaser written notice
32
of its intention to take such actions, (A) furnish information with respect to
the Company to the Person making such Takeover Proposal, but only after such
Person enters into a customary confidentiality agreement with the Company (which
confidentiality agreement must be no less favorable to the Company (i.e., no
less restrictive with respect to the conduct of such Person) than the
confidentiality agreement entered into with Purchaser), provided that (1) such
confidentiality agreement may not include any provision calling for an exclusive
right to negotiate with the Company and (2) the Company advises Purchaser of all
such non-public information delivered to such Person concurrently with its
delivery to such Person and concurrently with its delivery to such Person the
Company delivers to Purchaser all such information not previously provided to
Purchaser, and (B) participate in discussions and negotiations with such Person
regarding such Takeover Proposal.
(b) In addition to the other obligations of the Company
set forth in this Section 4.2, the Company shall promptly advise Purchaser,
orally and in writing, and in no event later than two (2) business days after
receipt, if any proposal, offer, inquiry or other contact is received by, any
information is requested from, or any discussions or negotiations are sought to
be initiated or continued with, the Company in respect of any Takeover Proposal
and, if the Company shall have received a proposal or offer (but not an inquiry
or other contact) with respect to a Takeover Proposal (whether or not binding),
the Company shall, in any such notice to Purchaser, indicate the identity of the
Person making such proposal or offer and the terms and conditions of the
proposal or offer (and shall include with such notice copies of any written
materials received from or on behalf of such Person relating to such proposal or
offer), and thereafter shall keep Purchaser informed, on a reasonably current
basis and in reasonable detail, of all material developments affecting the
status and terms of any such proposal or offers (and the Company shall provide
Purchaser with copies of any additional written materials received that relate
to such proposals or offers) and of the status of any such discussions or
negotiations.
(c) Except as expressly permitted by this Section 4.2(c),
neither the Board of Directors of the Company nor any committee thereof shall
(i)(A) withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to Purchaser, the approval or recommendation by such Board of
Directors described in the first sentence of Section 1.2(a) or (B) approve or
recommend, or propose publicly to approve or recommend, any Takeover Proposal or
(ii) cause or authorize the Company or any of its subsidiaries to enter into any
letter of intent, agreement in principle, memorandum of understanding,
acquisition, purchase or merger agreement or other agreement related to any
Takeover Proposal (other than a confidentiality agreement in accordance with
Section 4.2(a)) (each, a "Company Acquisition Agreement"). Notwithstanding the
foregoing, the Board of Directors of the Company may withdraw or modify its
recommendation described in Section 1.2(a), or recommend a Takeover Proposal,
(x) if such Board receives an unsolicited, bona fide written Takeover Proposal
that was made in circumstances not involving a breach of this Agreement and the
Board determines in good faith constitutes a Superior Proposal, and (y) the
Company, in response to such
33
Superior Proposal, enters into a Company Acquisition Agreement with respect to
such Superior Proposal, but only if the Company shall have concurrently with
entering into such Company Acquisition Agreement terminated this Agreement
pursuant to Section 5.1(c)(ii) and prior thereto paid the Termination Fee
required pursuant to Section 5.3, but only after the second business day
following Purchaser's receipt of written notice from the Company advising
Purchaser that the Board of Directors of the Company is prepared to enter into a
Company Acquisition Agreement with respect to such Superior Proposal and
terminate this Agreement, and only if, during such two business day period, the
Company and its representatives shall have negotiated in good faith with
Purchaser and Purchaser's representatives to make such adjustments in the terms
of this Agreement as would enable Purchaser to proceed with the transactions
contemplated by this Agreement on such adjusted terms and, at the end of such
two business day period, after taking into account any such adjusted terms as
may have been proposed by Purchaser since its receipt of such written notice,
the Board of Directors of the Company has again in good faith made the
determination referred to above in clause (x).
(d) For purposes of this Agreement:
"Takeover Proposal" means any inquiry, proposal or
offer from any Person (other than Purchaser and its subsidiaries)
relating to any (A) direct or indirect acquisition (whether in a single
transaction or a series of related transactions) of assets of the
Company and its subsidiaries (including securities of subsidiaries, but
excluding sales of inventory in the ordinary course of business) equal
to 20% or more of the Company's consolidated assets or to which 20% or
more of the Company's revenues or earnings on a consolidated basis are
attributable, (B) direct or indirect acquisition (whether in a single
transaction or a series of related transactions) of 20% or more of any
class of equity securities of the Company, (C) tender offer or exchange
offer that if consummated would result in any Person beneficially
owning 20% or more of any class of equity securities of the Company or
(D) merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving the Company or involving any subsidiary (or subsidiaries) or
any assets of the Company and its subsidiaries equal to 20% or more of
the Company's consolidated assets or to which 20% or more of the
Company's revenues or earnings on a consolidated basis are
attributable; in each case, other than the Transactions.
"Superior Proposal" means a bona fide written
proposal obtained not in breach of this Agreement to acquire, directly
or indirectly, for consideration consisting of cash and/or securities,
96% or more of the outstanding equity securities of the Company or all
or substantially all of the assets of the Company and its subsidiaries
on a consolidated basis, made by a third party, which is not subject to
a financing contingency and which is otherwise on terms and conditions
which the Board of Directors of the Company determines in its good
faith to be more favorable to the Company's constituencies that may be
considered by the
34
directors under Section 1701.59(E) of the OGCL than the Offer, and the
other Transactions.
(e) Nothing in this Section 4.2 shall prohibit the Board
of Directors of the Company from taking and disclosing to the Company's
shareholders a position contemplated by Rule 14e-2(a) or Item 1012(a) of
Regulation M-A under the Exchange Act.
4.3 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this
Agreement, the Company and Purchaser shall each cooperate with the other and use
(and shall cause their respective subsidiaries to use) their respective
reasonable best efforts to promptly (i) take or cause to be taken all actions,
and do or cause to be done all things, necessary, proper or advisable under this
Agreement and applicable Laws to consummate the Transactions as soon as
practicable, including preparing and filing promptly and fully all documentation
to effect all necessary filings, notices, petitions, statements, registrations,
submissions of information, applications and other documents and (ii) obtain all
approvals, consents, registrations, permits, authorizations and other
confirmations required to be obtained from any Governmental Entity or third
party necessary, proper or advisable to consummate the Transactions. Subject to
applicable Laws relating to the exchange of information, the Company and
Purchaser shall have the right to review in advance, and to the extent
practicable each will consult the other on, all the information relating to the
Company and its subsidiaries or Purchaser and its subsidiaries, as the case may
be, that appears in any filing made with, or written materials submitted to, any
third party and/or any Governmental Entity in connection with the Transactions.
(b) In furtherance and not in limitation of the
foregoing, the Company and Purchaser shall each use its reasonable best efforts
to (x) take all action necessary to ensure that no state takeover statute or
similar Law is or becomes applicable to any of the Transactions and (y) if any
state takeover statute or similar Law becomes applicable to any of the
Transactions, take all action necessary to ensure that the Transactions may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise minimize the effect of such Law on the Transactions.
4.4 Public Announcements. The initial press release with respect
to the execution of this Agreement shall be a joint press release to be
reasonably agreed upon by Purchaser and the Company. Thereafter, except as may
be required by Law or in the case of the Company, Nasdaq as determined in the
good faith judgment of the party proposing to make such release, neither the
Company nor Purchaser shall issue or cause the publication of any press release
or other public announcement (to the extent not previously issued or made in
accordance with this Agreement) with respect to the Offer, this Agreement or the
other Transactions without the prior consent of the other party (which consent
shall not be unreasonably withheld or delayed).
35
4.5 Access; Confidentiality. Upon reasonable notice and subject to
applicable Laws relating to the exchange of information, the Company shall, and
shall cause each of its subsidiaries to, afford to the officers, employees,
accountants, counsel, financial advisors and other representatives of Purchaser,
during normal business hours during the period prior to the Purchase Date or
earlier termination of this Agreement, reasonable access to all its properties,
books, contracts, commitments and records, and to its officers, employees,
accountants, counsel, financial advisors and other representatives and, during
such period, the Company shall, and shall cause its subsidiaries to, make
available to Purchaser (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of Federal securities laws and (b) all other information
concerning its business, properties and personnel as Purchaser may reasonably
request; provided that no investigation shall affect or modify any
representation or warranty of the Company. In order to assure a smooth
integration of the Company's operations following the Purchase Date, Purchaser
will be permitted at its own expense to have up to three (3) of its
representatives to be stationed at the Company's offices in Ohio and New Jersey
to become trained on and familiar with the Company's existing information
systems. Until the Purchase Date, the information provided will be (i) used
solely in connection with the Transactions and (ii) subject to the terms of the
Confidentiality Agreement dated as January 6, 2003 between Purchaser and the
Company (the "Confidentiality Agreement").
4.6 Notification of Certain Matters. The Company shall give prompt
notice to Purchaser, and Purchaser shall give prompt notice to the Company, of
(i) any notice or other communication received by such party from any
Governmental Entity in connection with the Transactions or from any Person
alleging that the consent of such Person is or may be required in connection
with the Transactions, if the subject matter of such communication or the
failure of such party to obtain such consent could be material to the Company or
Purchaser, (ii) any actions, suits, claims, investigations or proceedings
commenced or, to such party's knowledge, threatened against, relating to or
involving or otherwise affecting such party or any of its subsidiaries which
relate to the Transactions, (iii) the discovery of any fact or circumstance
that, or the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which, would cause any representation or warranty made by such
party contained in this Agreement (A) that is qualified as to materiality or
Material Adverse Effect to be untrue and (B) that is not so qualified to be
untrue in any material respect, and (iv) any material failure of such party to
comply with or satisfy any covenant or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 4.6 shall not (x) (nor shall any information provided
pursuant to Section 4.5) be considered in determining whether any representation
or warranty is true for purposes of Section 5.1 or the conditions to the Offer,
(y) cure any breach or non-compliance with any other provision of this Agreement
or (z) limit the remedies available to the party receiving such notice.
36
4.7 Director and Officer Indemnification and Insurance.
(a) From and after the Purchase Date, the Company shall
indemnify and hold harmless the individuals who at or prior to the Purchase Date
were directors or officers of the Company or subsidiaries of the Company
(collectively, the "Indemnitees") with respect to all acts or omissions by them
in their capacities as such or taken at the request of the Company or such
subsidiaries at any time prior to the Purchase Date, to the fullest extent (A)
permitted by the Company Charter Documents and the Subsidiary Documents of such
subsidiaries as currently in effect and (B) permitted under applicable Law.
(b) An Indemnitee shall notify the Company in writing
promptly upon learning of any claim, action, suit, proceeding, investigation or
other matter in respect of which such indemnification may be sought, provided
that the failure to provide such notice shall not relieve the Company of its
obligations under this Section 4.7 except to the extent that it is materially
prejudiced as a result of such failure. The Company shall have the right, but
not the obligation, to control the defense of, including the investigation of,
and corrective action required to be undertaken in response to, any litigation,
claim or proceeding (each, a "Claim") relating to any acts or omissions covered
under this Section 4.7 with counsel selected by the Company, which counsel shall
be reasonably acceptable to the Indemnitee (and, if the Company shall have
assumed such defense, it shall not be liable for the fees or expenses of any
separate counsel retained by the Indemnitee); provided, however, that the
Indemnitee shall be permitted to participate in the defense of such Claim at his
or her own expense. Notwithstanding anything to the contrary, in no event shall
the Company be liable for any settlement or compromise effected without its
written consent.
(c) In the event any Claim is asserted or made, any
determination required to be made with respect to whether an Indemnitee's
conduct complies with the standards set forth under applicable Law, the
applicable Company Charter Documents and Subsidiary Documents as the case may
be, shall be made by independent legal counsel selected by the Company and
reasonably acceptable to the Indemnitee; provided that nothing in this Section
4.7 shall impair any rights of any current or former director or officer of the
Company or such subsidiaries, including pursuant to the respective Company
Charter Documents and the Subsidiary Documents of such subsidiaries, under
applicable Law or otherwise.
(d) Each of the Company and the Indemnitees shall
cooperate in the defense of any Claim and shall provide access to properties and
individuals as reasonably requested and furnish or cause to be furnished
records, information and testimony, and attend such conferences, discovery
proceedings, hearings, trials or appeals, as may be reasonably requested in
connection therewith.
(e) The obligations of the Company under this Section 4.7
shall not be terminated or modified in such a manner as to adversely affect the
rights of any Indemnitee to whom this Section 4.7 applies unless (x) such
termination or modification
37
is required by applicable Law or (y) the affected Indemnitee shall have
consented to such termination or modification (it being expressly agreed that
the Indemnitees to whom this Section 4.7 applies shall be third party
beneficiaries of this Section 4.7). The provisions of this Section 4.7 are (i)
intended to be for the benefit of, and shall be enforceable by, each Indemnitee,
his or her heirs and his or her representatives and (ii) in addition to, and not
in substitution for, any other rights to indemnification or contribution that
any such Person may have by contract or otherwise.
(f) In the event that the Company or any of its
successors or assigns (i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Company shall
assume all of the obligations thereof set forth in this Section 4.7.
4.8 Consents, Missing Documents, Disputes and Estoppels. On or
prior to the Purchase Date, the Company and its subsidiaries (i) shall use
reasonable efforts to obtain a consent from the landlord and sublandlord, if
applicable, under each Real Property Lease, which is necessary to consummate the
Transactions or is required to assign such Real Property Lease in connection
with the Transactions, as more particularly set forth on Section 4.8 of the
Company Disclosure Schedule; (ii) shall use reasonable efforts to obtain from
the applicable landlords copies of the documents listed on Section 2.14(a) of
the Company Disclosure Schedule as missing (the "Missing Documents") and shall
deliver same to Purchaser promptly after receipt, (iii) shall, with respect to
the dispute and litigation at the East Hanover store, not renew the existing
lease for such store nor enter into any agreement with the landlord at such
store, including without limitation, any lease or other occupancy agreement,
without Purchaser's prior consent, and (iv) shall use reasonable efforts to
obtain estoppel certificates from the landlord and sublandlord, if applicable,
under each Real Property Lease (a) setting forth that the lease is unmodified
and in full force and effect (or if there have been modifications, that the same
is in full force and effect as modified and stating the modifications), and
whether any options granted to Tenant pursuant to the provisions of the lease
have been exercised, (b) certifying the dates to which the fixed rent and
additional rent have been paid and the amounts thereof, (c) stating whether or
not, to the best knowledge of the landlord, either party is in default in
performance of any of its obligations under the lease, and, if so, specifying
each such default of which the landlord may have knowledge and (d) setting forth
the commencement date and the expiration date of the lease.
4.9 Approval by Independent Directors. Prior to the third
anniversary of the Purchase Date, Purchaser shall not, and shall cause its
affiliates not to, effect any merger, consolidation or other business
combination with the Company or any of its subsidiaries unless (i) such
transaction shall have been approved by a special committee of the Company's
Board of Directors, which committee consists solely of Independent Directors and
(ii) a favorable opinion shall have been received from an investment banking
firm retained by the special committee as to the fairness of such transaction
from a financial point of view to the shareholders of the Company.
38
4.10 Non-Distribution of Assets. During the period from the date of
this Agreement until the Purchase Date, or the earlier termination of this
Agreement in accordance with Article V, Purchaser shall not generally liquidate
its assets or make distributions to its members other than distributions
sufficient to fund any payment by its Members of taxes attributable to the
business of Purchaser.
4.11 Certification. The Company will provide the certification set
forth in Treasury Regulation Section 1.897-2(g)(1)(ii) certifying that it is not
a U.S. real property holding company.
ARTICLE V - TERMINATION
5.1 Termination. This Agreement may be terminated and the
Transactions abandoned at any time prior to the Purchase Date, whether before or
after the effectiveness of the Opt Out:
(a) By the mutual written consent of the Company and
Purchaser duly authorized by the respective Boards of Directors of the Company
and both the Voting Members of the Purchaser.
(b) By either of the Company or Purchaser:
(i) if any Governmental Entity shall have
enacted, promulgated, issued, entered, amended or enforced (A) a Law prohibiting
the Offer or making the Offer illegal, or (B) an injunction, judgment, order,
decree or ruling, or taken any other action, in each case, permanently
enjoining, restraining, preventing or prohibiting the Offer and such injunction,
judgment, order, decree or ruling or other action shall have become final and
non-appealable; provided, that the right to terminate this Agreement under this
Section 5.1(b)(i) shall not be available to a party if the issuance of such
final, non-appealable injunction, judgment, order, decree or ruling was
primarily due to the failure of such party to perform any of its obligations
under this Agreement (including Section 4.3);
(ii) if the Offer shall have expired or
terminated pursuant to its terms without any Shares being purchased therein,
provided, that the right to terminate this Agreement under this Section
5.1(b)(ii) shall not be available to any party whose failure to perform any of
its obligations under this Agreement resulted in the failure of Purchaser to
purchase Shares in the Offer; or
(iii) the Purchase Date has not occurred by the
Walk-Away Date (unless extended, in writing, by the parties); provided that the
right to terminate this Agreement under this Section 5.1(b)(iii) shall not be
available to any party whose failure to perform any of its obligations under
this Agreement resulted in the failure of Purchaser to purchase Shares in the
Offer.
39
(c) By the Company:
(i) if Purchaser or any of its affiliates shall
have failed to commence the Offer on or prior to the date provided therefor in
Section 1.1; provided, that the Company may not terminate this Agreement
pursuant to this Section 5.1(c)(i) if the Company is in material breach of this
Agreement;
(ii) if concurrently it enters into a definitive
Company Acquisition Agreement providing for a Superior Proposal in accordance
with Section 4.2, provided that (x) prior thereto or simultaneously therewith
the Company shall have paid or cause to be paid the Termination Fee to Purchaser
in accordance with Section 5.3 (and such termination of this Agreement by the
Company shall not take effect unless and until the Termination Fee shall have
been paid to Purchaser) and (y) the Company shall also have complied with all
the other requirements of Section 4.2; or
(iii) if (A) the representations and warranties of
Purchaser set forth in this Agreement shall not be true and correct on and as of
the date of this Agreement and on and as of the date of such determination as if
made on such date (other than those representations and warranties that address
matters only as of a particular date which are true and correct as of such
date), except (x) for changes specifically permitted by this Agreement or (y)
where failure to be true and correct (without giving effect to any limitation as
to "materiality" set forth therein) would not have, individually or in the
aggregate, a Material Adverse Effect on Purchaser, or (B) Purchaser shall have
breached or failed in any material respect to perform or comply with any
obligation, agreement or covenant required by this Agreement to be performed or
complied with by them, which inaccuracy, breach or failure (in each case under
clauses (A) and (B)) cannot be cured or has not been cured by the earlier of (I)
the next scheduled expiration date of the Offer pursuant to Section 1.1 and (II)
ten days after Purchaser receives notice of such inaccuracy, breach or failure.
(d) By Purchaser if (i) any of the conditions set forth
in paragraphs (a) through (e) of Annex A hereto shall exist, (ii) either the Opt
Out Condition contained in paragraph (f) of Annex A hereto or the Forbearance
Condition contained in paragraph (h) of Annex A hereto shall exist on the
Walk-Away Date or (iii) the Board Representation Condition contained in
paragraph (g) of Annex A, shall exist at the time Purchaser would otherwise be
required to accept for payment shares tendered in the Offer in accordance with
the terms of the Offer.
5.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 5.1, written notice thereof shall be given to
the other party or parties, specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall forthwith become null and
void (other than the last sentence of Section 4.5 and the provisions of the
Confidentiality Agreement (subject to its terms), Sections 5.2, 5.3 and Article
VI, all of which shall survive termination of this Agreement), and there shall
be no liability on the part of Purchaser or the Company or their respective
directors, officers and affiliates, except (i) the Company may have
40
liability as provided in Section 5.3, and (ii) nothing contained herein shall
relieve any party from liability for any breach of this Agreement prior to such
termination. In the event of termination of this Agreement pursuant to Section
5.1 prior to the expiration of the Offer, Purchaser will promptly terminate the
Offer upon such termination of this Agreement without the purchase of Shares
thereunder.
5.3 Expenses; Termination Fee.
(a) Except as provided in this Section 5.3, all fees and
expenses incurred by the parties in connection with this Agreement and the
Transactions shall be borne solely and entirely by the party that incurred such
fees and expenses, irrespective of whether or not the Transactions are
consummated. In the event that this Agreement is terminated by (i) the Company
pursuant to Section 5.1(c)(ii) hereof, or (ii) by Purchaser pursuant to Section
5.1(d) hereof as a result of the existence of the conditions set forth in
paragraph (e) or (g) of Annex A hereto, then in any such event, the Company
shall pay to Purchaser a termination fee equal to 5% of the purchase
consideration that would have been paid in the Offer if the Maximum Amount had
been tendered (the "Termination Fee") plus Expenses as defined in Section
5.3(d).
(b) The payment of the Termination Fee required to be
made pursuant to Section 5.3(a) shall be made to Purchaser promptly following
termination of this Agreement (and in any event not later than two business days
after delivery to the Company of notice of demand for payment); and the payment
of Expenses shall be made to Purchaser not later than two business days after
delivery to the Company of an itemization setting forth in reasonable detail all
Expenses of Purchaser (which itemization may be supplemented and updated from
time to time by such party until the 60th day after such party delivers such
notice of demand for payment). All such payments shall be made by wire transfer
of immediately available funds to an account to be designated by Purchaser.
(c) In the event that the Company shall fail to pay the
Termination Fee and/or Expenses required pursuant to this Section 5.3 when due,
such fee and/or Expenses, as the case may be, shall accrue interest for the
period commencing on the date such fee and/or Expenses, as the case may be,
became past due, at a rate equal to the rate of interest publicly announced by
Citibank from time to time, in the City of New York, as such bank's Prime
Lending Rate. In addition, if the Company shall fail to pay such fee and/or
Expenses, as the case may be, when due, the Company shall also pay to Purchaser
all of Purchaser's costs and expenses (including attorneys' fees) in connection
with efforts to collect such fee and/or Expenses, as the case may be. The
Company acknowledges that the Termination Fee, Expenses and the other provisions
of this Section 5.3 are an integral part of the Transactions and that, without
these agreements, Purchaser would not enter into this Agreement.
(d) As used herein, "Expenses" shall mean all reasonable
out-of-pocket fees and expenses (including all reasonable fees and expenses of
counsel, accountants and investment bankers to a party hereto and its
affiliates), up to $500,000 in
41
the aggregate, incurred by Purchaser or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Offer Documents, and all other matters related to the Offer and the other
Transactions.
(e) Other than any Taxes imposed upon a holder of Shares
or Options, the Company shall pay all Taxes incident to preparing for, entering
into and carrying out this Agreement and the consummation of the Transactions
(including (i) transfer, stamp and documentary Taxes or fees and (ii) sales,
use, gains, real property transfer and other or similar Taxes or fees).
ARTICLE VI - MISCELLANEOUS
6.1 No Survival of Representations and Warranties; etc. Except as
otherwise provided in this Agreement, the representations, warranties and
agreements of each party hereto shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any other party
hereto, any Person controlling any such party or any of their officers,
directors or representatives, whether prior to or after the execution of this
Agreement, and no information provided or made available shall be deemed to be
disclosed in this Agreement or in the Company Disclosure Schedule, except to the
extent actually set forth herein or therein. The representations, warranties and
agreements in this Agreement shall terminate at the Purchase Date or, except as
otherwise provided in Section 5.2, upon the termination of this Agreement
pursuant to Section 5.1, as the case may be, except that the agreements set
forth in Sections 1.7, 4.7 and 4.9 and any other agreement in this Agreement
which contemplates performance after the Purchase Date shall survive the
Purchase Date indefinitely and those set forth in Sections 5.2 and 5.3 and this
Article VI shall survive termination indefinitely. The Confidentiality Agreement
shall survive termination of this Agreement in accordance with its terms and
terminate as of the Purchase Date.
6.2 Amendment or Supplement. At any time prior to the Purchase
Date, this Agreement may be amended or supplemented in any and all respects,
whether before or after approval of any of the transactions contemplated hereby
by shareholders of the Company, by written agreement of the parties hereto, by
action taken by the Company's Board of Directors and the Voting Members of
Purchaser. Notwithstanding the foregoing, following the Purchase Date, neither
this sentence nor Sections 1.7, 4.7 and 4.9 may be amended.
6.3 Extension of Time, Waiver, Etc. At any time prior to the
Purchase Date, any party may (a) waive any inaccuracies in the representations
and warranties of any other party hereto or (b)(i) extend the time for the
performance of any of the obligations or acts of any other party hereto or (ii)
waive compliance by the other party with any of the agreements contained herein
or, except as otherwise provided herein, waive any of such party's conditions.
Notwithstanding the foregoing, no failure or delay by the Company or Purchaser
in exercising any right hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
42
thereof or the exercise of any other right hereunder. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
6.4 Assignment; Binding Effect. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Purchaser may assign to any
affiliate of Purchaser all of its rights, interests and obligation under this
Agreement, including without limitation, the right to assign the rights,
interests and obligations relating to the Offer provided, however, that any such
assignment shall not release Purchaser from any liability under this Agreement.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Any purported assignment not permitted under this Section
shall be null and void.
6.5 Counterparts; Effectiveness. This Agreement may be executed in
two or more separate counterparts, each of which shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by the other parties hereto.
6.6 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, together with Annex A hereto, the Company Disclosure Schedule, the
Principal Shareholders' Agreement and the Confidentiality Agreement, constitute
the entire agreement, and supersede all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and thereof. This Agreement, except for the
provisions of Sections 1.7, 4.7 and 4.9, is not intended to and shall not confer
upon any Person other than the parties hereto any rights hereunder.
6.7 Governing Law; Enforcement; Jurisdiction; Waiver of Jury
Trial.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without regard to the principles
of conflicts of laws thereof.
(b) The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Ohio or New York or in an Ohio or New York state court,
without bond or other security being required, this being in addition to any
other remedy to which they are entitled at law or in equity.
43
(c) Each of the parties hereto (i) consents to submit
itself to the personal jurisdiction of any Federal court located in the State of
Ohio or New York or any Ohio or New York state court in the event any dispute
arises out of this Agreement or any of the transactions contemplated hereby,
(ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (iii)
agrees that it will not bring any action relating to this Agreement or any of
the transactions contemplated hereby in any court other than a Federal or State
court sitting in the State of Ohio or New York.
(d) Each of the parties hereto hereby irrevocably waives
any and all rights to trial by jury in any legal proceeding arising out of or
related to this Agreement or the transactions contemplated hereby.
6.8 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission) and shall
be given,
If to Purchaser, to:
Amazing Savings Holding LLC
▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇.▇. ▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company, to:
Mr. ▇▇▇▇▇▇ ▇▇▇▇▇
Chairman, Special Committee
c/o ZS Fund
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
44
with a copy (which shall not constitute notice) to:
▇▇▇▇ ▇▇▇▇▇▇▇▇, L.P.A.
2600 Erieview Tower
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇ Day
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5 P.M. in the place of
receipt and such day is a business day in the place of receipt. Otherwise, any
such notice, request or communication shall be deemed not to have been received
until the next succeeding business day in the place of receipt.
6.9 Severability. If any term or other provision of this Agreement
is determined by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
terms, provisions and conditions of this Agreement shall nevertheless remain in
full force and effect. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
6.10 Headings. Headings of the Articles and Sections of this
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
6.11 Definitions; Construction.
(a) As used in this Agreement, the following terms have
the meanings ascribed thereto below:
45
"AFFILIATE" shall mean, as to any Person, any other Person
which, directly or indirectly, controls, or is controlled by, or is under common
control with, such Person. For this purpose, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of management or policies of a Person, whether through the ownership
of securities or partnership or other ownership interests, by contract or
otherwise.
"BUSINESS DAY" shall mean any day, other than Saturday, Sunday
or a federal holiday, and shall consist of the time period from 12:01 through
12:00 midnight Eastern time.
"COMPANY MATERIAL ADVERSE EFFECT" shall mean (i) a state of
facts, effect, event, change or occurrence which has or would reasonably be
expected to have a material adverse effect on the business, operations,
financial condition, assets or liabilities of the Company and its subsidiaries
taken as a whole, it being understood that such events may include the
commencement of any action, proceeding or litigation that would or that is
reasonably likely to result in (A) liability to the Company that would have a
material adverse effect on its business, operations or financial condition or
(B) the imposition of material limitations on the ability of Purchaser or any of
its affiliates effectively to exercise full rights of ownership of the Shares or
their ownership or operation of all or any material portion of the businesses
and assets of the Company and its subsidiaries taken as a whole; provided,
however, that a "Company Material Adverse Effect" shall not include any change,
effect, event or occurrence (i) relating to the economy or capital or securities
markets of the United States or any other region in general, including changes
in the general retail environment, (ii) resulting from entering into this
Agreement or the consummation of the Transactions contemplated hereby or the
announcement thereof, (iii) relating to geopolitical events (including war or
acts of terrorism, other than such acts that actually damage or destroy property
of or premises leased by the Company) or (iv) relating to its business,
financial condition or results of operations that has been disclosed in writing
by the Company to Purchaser with specific reference to this definition prior to
the date of this Agreement (including but not limited to, sales results through
the period ending April 21, 2003 and earnings results through the period ending
March 31, 2003.").
"CREDIT FACILITY" shall mean the Amended and Restated Loan and
Security Agreement dated February 11, 2002, as amended through the date hereof,
by and among the Company and the Lenders.
"GAAP" shall mean generally accepted accounting principles in
the United States.
"GOVERNMENTAL ENTITY" shall mean any government, court,
regulatory or administrative agency, commission or authority or other
governmental instrumentality, federal, state or local, domestic, foreign or
multinational.
46
"KNOWLEDGE" shall mean, in the case of the Company, the actual
knowledge of the Company's officers set forth on Section 6.11 of the Company
Disclosure Schedule after reasonable inquiry and, in the case of Purchaser, the
actual knowledge of Purchaser's senior executive officers after reasonable
inquiry.
"LENDERS" shall mean Whitehall Retail Finance, a division of
Whitehall Business Credit Corporation, as agent for the Tranche A Lenders,
Whitehall Retail Finance, as Collateral Agent, and the Tranche A Lenders (as
defined in the Credit Facility).
"OPTION" shall mean each option outstanding immediately prior
to the Purchase Date (whether or not then vested or exercisable) that represents
the right to acquire shares of Company Common Stock.
"PERSON" shall mean an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity,
including a Governmental Entity.
"PURCHASE DATE" shall mean the first date on which Purchaser
accepts for payment Shares tendered and not withdrawn pursuant to the Offer.
"STOCK PLAN" shall mean the Company's 1996 Stock Option Plan,
as amended in 2002.
"SUBSIDIARY" when used with respect to any party, shall mean
any corporation, limited liability company, partnership, association, trust or
other entity the accounts of which would be consolidated with those of such
party in such party's consolidated financial statements if such financial
statements were prepared in accordance with GAAP, as well as any other
corporation, limited liability company, partnership, association, trust or other
entity of which securities or other ownership interests representing more than
50% of the equity or more than 50% of the ordinary voting power (or, in the case
of a partnership, more than 50% of the general partnership interests) are, as of
such date, owned by such party or one or more subsidiaries of such party or by
such party and one or more subsidiaries of such party.
"TRANSACTIONS" refers collectively to this Agreement and the
transactions contemplated hereby, including the Offer and the Principal
Shareholders' Agreement and the transactions contemplated thereby.
"VOTING MEMBERS" shall have the meaning set forth in the
Amended and Restated Limited Liability Company Agreement of Purchaser.
"WALK-AWAY DATE" shall mean August 31, 2003.
47
(b) The following terms are defined on the page of this
Agreement set forth after such term below:
Agreement...................................... 2
ARI............................................ 27
Balance Sheet Date............................. 12
Bankruptcy and Equity Exception................ 16
Board Representation Condition................. 2
Chapter 1704................................... 5
Company........................................ 2
Company Charter Documents...................... 9
Company Common Stock........................... 2
Company Disclosure Schedule.................... 8
Company Plans.................................. 18
Confidentiality Agreement...................... 36
Demand Certificate............................. 27
ERISA.......................................... 18
Exchange Act................................... 3
Fairness Opinion............................... 6
Filed SEC Documents............................ 13
Form 041....................................... 11
Information Statement.......................... 7
Laws........................................... 14
Letter of Credit............................... 27
Liens.......................................... 9
Material Contract.............................. 15
Minimum Condition.............................. 4
▇▇▇▇▇▇ ▇▇▇▇▇▇.................................. 5
ODS............................................ 11
Offer.......................................... 2
Offer Documents................................ 5
Offer Price.................................... 2
OGCL........................................... 5
Permits........................................ 14
Principal Shareholder.......................... 2
Principal Shareholders' Agreement.............. 3
Proration Ratio................................ 7
Purchaser...................................... 2
Schedule 14D-9................................. 6
SEC............................................ 4
SEC Documents.................................. 11
Securities Act................................. 9
Share.......................................... 2
Subsidiary Documents........................... 9
Superior Proposal.............................. 34
Takeover Proposal.............................. 34
Taxes.......................................... 18
Termination Fee................................ 41
(c) As used in this Agreement, "INCLUDING" shall mean
"including, without limitation."
(d) Any reference in this Agreement to words imparting
the singular shall include the plural and vice versa.
(e) The parties hereto have participated jointly in the
negotiation and drafting of this Agreement and, in the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as jointly drafted by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provision of this Agreement.
[signature page follows]
48
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first above written.
AMAZING SAVINGS HOLDING LLC
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇▇
Title:
ODD JOB STORES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title:
49
ANNEX A
Conditions to the Offer
The capitalized terms used in this Annex A have the meanings set forth
in the Agreement to which this Annex A is attached.
Notwithstanding any other provision of the Offer, Purchaser shall not
be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and (subject to the provisions of the Agreement) may
terminate the Offer and not accept for payment any tendered shares if (i) the
Minimum Condition shall not have been satisfied at the expiration of the Offer,
or (ii) at any time on or after the date of the Agreement and prior to the
expiration of the Offer, any of the following conditions shall exist and be
continuing:
(a) there shall be any Law, injunction, judgment, ruling, order or
decree enacted, issued, promulgated or entered by any Governmental Entity or any
third party that would (i) restrain, enjoin, prevent, prohibit or make illegal
(A) the acceptance for payment, payment for or purchase of some or all of the
Shares by Purchaser or the consummation of the Transactions, or (B) Purchaser's
or any of its affiliates' ownership or operation of all or any material portion
of the businesses and assets of the Company and its subsidiaries taken as a
whole;
(b) (i) there shall have occurred any events or changes that,
individually or in the aggregate, have had or would reasonably be expected to
have a Company Material Adverse Effect or (ii) (A) the representations and
warranties of the Company set forth in the Agreement shall not be true and
correct in all material respects at and as of the expiration of the Offer as if
made on such date, other than those representations and warranties that (1)
address matters only as of a particular date which are true and correct as of
such date and (2) are qualified as to "materiality" or "Company Material Adverse
Effect" which representation must be true in all respects, or (B) the Company
shall have breached or failed in any material respect to perform or comply with
any obligation, agreement or covenant required by the Agreement to be performed
or complied with by it, which breach or failure has not been cured prior to the
expiration of the Offer;
(c) any Principal Shareholder shall have in any material respect
breached or failed to perform any of its representations, warranties, covenants
or agreements contained in the Principal Shareholders' Agreement;
(d) the Agreement shall have been terminated in accordance with
its terms;
(e) the Board of Directors of the Company or any committee thereof
(i) shall have withdrawn or modified, in a manner adverse to Purchaser, its
approval or
A-1
recommendation of any of the Transactions or (ii) shall have approved or
recommended to shareholders of the Company a Takeover Proposal;
(f) the Opt Out shall not be effective under the OGCL and Rule
14c-2 under the Exchange Act (the "Opt Out Condition");
(g) Persons designated by Purchaser shall not constitute a
majority of the members of the Board of Directors of the Company upon acceptance
for payment of shares tendered in the Offer or more than two persons who were
directors immediately prior to such acceptance for payment shall continue as
members of the Board of Directors of the Company (the "Board Representation
Condition"); or
(h) The Lenders shall not have entered into a forbearance
agreement with the Company pursuant to which they shall agree to forebear from
exercising any remedies or taking any action to collect the obligations owed by
the Company to the Lenders under the Credit Facility and to continue to provide
liquidity to the Company under the Credit Facility consistent with past practice
until August 31, 2003 unless the Purchaser is otherwise satisfied in its
reasonable discretion that the Lenders have not sought to, and do not have the
right to, exercise any remedies or take any action to collect the obligations
owed by the Company to the Lenders under the Credit Facility and have provided,
and are obligated to continue to provide, liquidity to the Company under the
Credit Facility consistent with past practice until August 31, 2003 (the
"Forbearance Condition").
The foregoing conditions are for the sole benefit of Purchaser and may
be asserted it regardless of the circumstances giving rise to such conditions or
may be waived by Purchaser, in whole or in part at any time and from time to
time in the sole discretion of Purchaser (except for any conditions which,
pursuant to Section 1.1 of the Agreement, may only be waived with the Company's
consent). The failure by Purchaser at any time to exercise any of the foregoing
rights will not be deemed a waiver of any right, the waiver of such right with
respect to any particular facts or circumstances shall not be deemed a waiver
with respect to any other facts or circumstances, and each right will be deemed
an ongoing right which may be asserted at any time and from time to time.
If the Offer is terminated, all tendered Shares not theretofore
accepted for payment shall forthwith be returned to the tendering shareholders.
A-2
