EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
By and Among
GART SPORTS COMPANY,
a Delaware corporation,
GSC ACQUISITION CORP.,
a Delaware corporation
and
▇▇▇▇▇▇'▇ SPORTING GOODS, INC.,
a Delaware corporation
Dated as of February 21, 2001
TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS.............................................................. 1
1.1. CERTAIN TERMS............................................................ 1
1.2. DEFINITIONS.............................................................. 2
ARTICLE 2. THE MERGER............................................................... 12
2.1. THE MERGER............................................................... 12
2.2. MERGER CONSIDERATION AND CONVERSION OF SHARES............................ 12
2.3. EXCHANGE PROCEDURES...................................................... 14
2.4. EXCHANGE OF STOCK CERTIFICATES........................................... 16
2.5. DISSENTING SHARES........................................................ 16
2.6. STOCK OPTIONS............................................................ 17
ARTICLE 3. CLOSING.................................................................. 18
3.1. CLOSING.................................................................. 18
ARTICLE 4. THE SURVIVING CORPORATION................................................ 18
4.1. CERTIFICATE OF INCORPORATION AND BY-LAWS................................. 18
4.2. DIRECTORS AND OFFICERS................................................... 18
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................ 18
5.1. ORGANIZATION AND GOOD STANDING........................................... 19
5.2. CERTIFICATE OF INCORPORATION AND BY-LAWS................................. 19
5.3. CAPITALIZATION........................................................... 19
5.4. COMPANY SUBSIDIARIES..................................................... 20
5.5. CORPORATE AUTHORITY...................................................... 20
5.6. COMPLIANCE WITH APPLICABLE LAW........................................... 21
5.7. NON-CONTRAVENTION........................................................ 21
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5.8. GOVERNMENT APPROVALS AND CONSENTS........................................ 22
5.9. SEC DOCUMENTS AND OTHER REPORTS.......................................... 22
5.10. ABSENCE OF UNDISCLOSED LIABILITIES....................................... 22
5.11. ABSENCE OF CERTAIN CHANGES OR EVENTS..................................... 23
5.12. ACTIONS AND PROCEEDINGS.................................................. 26
5.13. CONTRACTS................................................................ 26
5.14. TAXES.................................................................... 27
5.15. TITLE TO PROPERTIES; ENCUMBRANCES........................................ 29
5.16. INTELLECTUAL PROPERTY.................................................... 30
5.17. PROVIDED INFORMATION..................................................... 30
5.18. COMPANY PLANS; ERISA..................................................... 31
5.19. ENVIRONMENTAL MATTERS.................................................... 34
5.20. LABOR MATTERS............................................................ 34
5.21. RELATED PARTY TRANSACTIONS............................................... 35
5.22. REAL ESTATE.............................................................. 35
5.23. INSURANCE................................................................ 38
5.24. MERCHANDISE VENDORS...................................................... 38
5.25. VENDORS AND LANDLORDS; CO-OPERATIVE ADVERTISING CONTRACTS................ 38
5.26. STORE CLOSINGS........................................................... 39
5.27. DISCLOSURE............................................................... 39
5.28. TAKEOVER STATUTES........................................................ 39
5.29. OPINION OF FINANCIAL ADVISOR............................................. 39
5.30. BROKERS.................................................................. 39
5.31. FINANCING................................................................ 39
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ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF GART AND MERGERSUB..................... 40
6.1. ORGANIZATION AND GOOD STANDING........................................... 40
6.2. CERTIFICATE OF INCORPORATION AND BY-LAWS................................. 40
6.3. CAPITALIZATION........................................................... 40
6.4. GART SUBSIDIARIES........................................................ 41
6.5. CORPORATE AUTHORITY...................................................... 41
6.6. COMPLIANCE WITH APPLICABLE LAW........................................... 42
6.7. NON-CONTRAVENTION........................................................ 42
6.8. GOVERNMENT APPROVALS AND CONSENTS........................................ 42
6.9. SEC DOCUMENTS AND OTHER REPORTS.......................................... 43
6.10. ABSENCE OF UNDISCLOSED LIABILITIES....................................... 43
6.11. ABSENCE OF CERTAIN CHANGES OR EVENTS..................................... 44
6.12. ACTIONS AND PROCEEDINGS.................................................. 46
6.13. CONTRACTS................................................................ 46
6.14. TAXES.................................................................... 47
6.15. TITLE TO PROPERTIES; ENCUMBRANCES........................................ 48
6.16. INTELLECTUAL PROPERTY.................................................... 49
6.17. PROVIDED INFORMATION..................................................... 50
6.18. GART PLANS; ERISA........................................................ 50
6.19. ENVIRONMENTAL MATTERS.................................................... 51
6.20. LABOR MATTERS............................................................ 51
6.21. RELATED PARTY TRANSACTIONS............................................... 52
6.22. REAL ESTATE.............................................................. 52
6.23. INSURANCE................................................................ 54
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6.24. MERCHANDISE VENDORS...................................................... 55
6.25. VENDORS AND LANDLORDS; CO-OPERATIVE ADVERTISING CONTRACTS................ 55
6.26. STORE CLOSINGS........................................................... 55
6.27. DISCLOSURE............................................................... 55
6.28. TAKEOVER STATUTES........................................................ 55
6.29. BROKERS.................................................................. 55
6.30. FINANCING................................................................ 55
6.31. NO PRIOR ACTIVITIES...................................................... 56
ARTICLE 7. COVENANTS................................................................ 56
7.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.................... 56
7.2. CONDUCT OF BUSINESS BY GART PENDING THE MERGER........................... 59
7.3. ACCESS AND INFORMATION................................................... 61
7.4. NO SOLICITATION.......................................................... 61
7.5. GOVERNMENTAL ENTITIES.................................................... 62
7.6. BEST EFFORTS............................................................. 63
7.7. CERTAIN FILINGS UNDER SECURITIES LAWS.................................... 63
7.8. STOCKHOLDERS MEETINGS.................................................... 63
7.9. HSR NOTIFICATION......................................................... 64
7.9.1. FILINGS.................................................................. 64
7.9.2. COOPERATION.............................................................. 64
7.10. FINANCIAL STATEMENT DELIVERIES........................................... 64
7.11. FINANCING................................................................ 64
7.12. DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION................... 65
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7.13. OPTIONS.................................................................. 65
7.14. EMPLOYEE BENEFITS........................................................ 66
7.15. ANTITAKEOVER STATUTES.................................................... 67
7.16. NOTIFICATION OF CERTAIN MATTERS.......................................... 68
7.17. FURTHER ASSURANCES....................................................... 68
7.18. FURTHER ACTION; REASONABLE COMMERCIAL EFFORTS............................ 68
7.19. TAX-FREE REORGANIZATION TREATMENT........................................ 69
7.20. DELIVERY OF OPINION OF FINANCIAL ADVISOR................................. 69
7.21. PUBLIC ANNOUNCEMENTS..................................................... 69
7.22. TERMINATION OF 401(K) SAVINGS PLAN....................................... 69
7.23. NASDAQ LISTING........................................................... 69
7.24. BOARD OF DIRECTORS....................................................... 69
7.25. REGISTRATION RIGHTS...................................................... 70
7.26. REAL ESTATE MATTERS...................................................... 70
ARTICLE 8. CONDITIONS OF MERGER..................................................... 70
8.1. GENERAL CONDITIONS....................................................... 70
8.1.1. NO LAW OR ORDERS................................................. 70
8.1.2. HSR ACT.......................................................... 70
8.1.3. LEGAL PROCEEDINGS................................................ 70
8.1.4. STOCKHOLDER APPROVAL............................................. 70
8.1.5. REGISTRATION STATEMENT........................................... 71
8.1.6. REGULATORY APPROVAL.............................................. 71
8.1.7. PERMITS AND APPROVALS............................................ 71
8.1.8. CLOSING SALE PRICE............................................... 71
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8.2. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY................... 71
8.2.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS..................................................... 71
8.2.2. DELIVERIES....................................................... 72
8.2.3. GART ADVERSE CHANGES............................................. 72
8.2.4. TAX OPINIONS..................................................... 72
8.2.5. COMFORT LETTERS.................................................. 72
8.2.6. THIRD PARTY CONSENTS............................................. 72
8.3. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF GART AND MERGERSUB............ 72
8.3.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS..................................................... 73
8.3.2. DELIVERIES....................................................... 73
8.3.3. COMPANY ADVERSE CHANGES.......................................... 73
8.3.4. TAX OPINIONS..................................................... 73
8.3.5. COMFORT LETTERS.................................................. 74
8.3.6. FINANCING........................................................ 74
8.3.7. THIRD PARTY CONSENTS............................................. 74
8.3.8. DISSENTING SHARES................................................ 74
8.3.9. CANCELLATION OF OPTIONS.......................................... 74
ARTICLE 9. TERMINATION.............................................................. 74
9.1. TERMINATION.............................................................. 74
9.1.1. MUTUAL CONSENT................................................... 74
9.1.2. BY GART.......................................................... 74
9.1.3. BY THE COMPANY................................................... 75
9.1.4. TERMINATION DATE................................................. 75
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9.1.5. BREACH OF COVENANT............................................... 75
9.1.6. BREACH OF REPRESENTATIONS AND WARRANTIES......................... 75
9.1.7. ORDER OR ACTION BY GOVERNMENTAL ENTITY........................... 75
9.2. MANNER AND EFFECT OF TERMINATION......................................... 76
9.3. CERTAIN PAYMENTS UPON TERMINATION........................................ 76
ARTICLE 10. MISCELLANEOUS............................................................ 77
10.1. CONFIDENTIALITY.......................................................... 77
10.2. EXPENSES................................................................. 78
10.3. NOTICES.................................................................. 78
10.4. ENTIRE AGREEMENT......................................................... 79
10.5. COUNTERPARTS............................................................. 79
10.6. INVALID PROVISIONS....................................................... 79
10.7. THIRD PARTY BENEFICIARIES................................................ 79
10.8. NO ASSIGNMENT; BINDING EFFECT............................................ 79
10.9. HEADINGS................................................................. 79
10.10. GOVERNING LAW............................................................ 80
10.11. CONSTRUCTION............................................................. 80
10.12. SPECIFIC PERFORMANCE..................................................... 80
10.13. AMENDMENT AND MODIFICATION............................................... 80
10.14. WAIVER................................................................... 80
10.15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES............................... 80
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
February 21, 2001, by and among Gart Sports Company, a Delaware corporation
(together with its Subsidiaries from time to time (except as the context may
otherwise require), "Gart"), GSC Acquisition Corp., a Delaware corporation
("MergerSub"), and ▇▇▇▇▇▇'▇ Sporting Goods, Inc., a Delaware corporation
(together with its Subsidiaries from time to time (except as the context may
otherwise require), the "Company"), with respect to the facts and circumstances
set forth below. Capitalized terms used herein without definition have the
meanings set forth elsewhere in this Agreement.
A. The board of directors of the Company and the board of directors of
Gart and MergerSub have each determined that it is advisable and in the best
interests of their respective stockholders to effect a merger of the Company
with and into MergerSub, with MergerSub as the surviving corporation, pursuant
to the Certificate of Merger and upon the terms and subject to the conditions
set forth herein.
B. Pursuant to the Merger, all shares of Company Common Stock (other
than Dissenting Shares, shares held by Gart or MergerSub, and shares held in the
Company's treasury) will be cancelled and converted automatically into the right
to receive shares of Gart Common Stock and an amount in cash per share, without
interest, as set forth in Section 2.2.1 of this Agreement.
C. In order to induce Gart and MergerSub to enter into this Agreement,
certain holders of Company Common Stock are entering into Voting Agreements in
the form attached hereto as Exhibit A (the "Company Voting Agreements"); and in
order to induce the Company to enter into this Agreement, a holder of Gart
Common Stock is entering into a Voting Agreement in the form attached hereto as
Exhibit B (the "Gart Voting Agreement" and, together with the Company Voting
Agreements, the "Voting Agreements"). Pursuant to the Voting Agreements, among
other things, such holders will agree to vote their shares of Company Common
Stock or Gart Common Stock, as applicable, in favor of adoption of this
Agreement and approval of the Merger.
D. For federal income tax purposes it is intended that the Merger shall
qualify as a tax-free reorganization under the provisions of Section 368 of the
Code.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants contained herein and intending to be
legally bound, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
1.1. CERTAIN TERMS. For all purposes of this Agreement, except as
otherwise expressly provided:
1.1.1. the terms defined in this Article 1 have the meanings
assigned to them in this Article 1 and include the plural as well as the
singular;
1.1.2. all accounting terms not otherwise defined herein have the
meanings assigned under GAAP;
1.1.3. all references in this Agreement to "Articles," "Sections,"
"Exhibits" and "Schedules" shall be deemed to be references to Articles and
Sections of, and Exhibits and Schedules to, this Agreement, unless the context
shall otherwise require;
1.1.4. pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms;
1.1.5. the words "include," "includes" and "including" shall be
deemed in each case to be followed by the words "without limitation";
1.1.6. the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision;
1.1.7. the term "party" or "parties" when used herein refer to Gart,
the Company and MergerSub; and
1.1.8. unless otherwise expressly provided herein, any agreement,
plan, instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, plan, instrument or
statute as may be from time to time amended, modified or supplemented, including
(in the case of agreements, plans or instruments) by waiver or consent and (in
the case of statutes) by succession of comparable successor statutes.
1.2. DEFINITIONS. As used in this Agreement and the exhibits and
schedules delivered pursuant to this Agreement, the following capitalized terms
have the meanings set forth below:
1.2.1. "Acquisition Transaction" has the meaning set forth in
Section 7.4.1.
1.2.2. "Action" means any action, complaint, petition,
investigation, suit, audit, arbitration, litigation or other proceeding, whether
civil or criminal, in law or in equity, before any arbitrator or Governmental
Entity.
1.2.3. "Affiliate" means, as applied to any Person, (i) any other
Person directly or indirectly controlling, controlled by, or under common
control with, that Person, (ii) any other Person that owns or controls (a) 10%
or more of any class of equity securities of that Person or any of its
Affiliates or (b) 10% or more of any class of equity securities (including any
equity securities issuable upon the exercise of any option or convertible
security) of that Person or any of its Affiliates, or (iii) as to a corporation,
each director and executive officer thereof, and, as to a partnership, each
general partner thereof, and, as to a limited liability company, each managing
member or similarly authorized person thereof (including officers), and, as to
any other entity, each Person exercising similar authority to that of a director
or officer of a corporation. For the purposes of this definition, the term
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and
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"under common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of that Person, whether through ownership of voting
securities, by Contract or otherwise.
1.2.4. "Agreement" means this Agreement, including (unless the
context otherwise requires) all exhibits and schedules attached or incorporated
by reference, as the same may be amended or supplemented from time to time in
accordance with the terms hereof.
1.2.5. "Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of Delaware are authorized or obligated
to close.
1.2.6. "Cash Consideration" has the meaning set forth in Section
2.2.1(a).
1.2.7. "Cash In Lieu" has the meaning set forth in Section 2.2.4.
1.2.8. "Certificate of Merger" has the meaning set forth in Section
2.1.2. 1.2.9. "Closing" has the meaning set forth in Section 3.1.
1.2.10. "Closing Date" means the date and time of the Closing.
1.2.11. "Closing Sale Price" has the meaning set forth in Section
2.2.1(b). 1.2.12. "COBRA" has the meaning set forth in Section 5.18.6.
1.2.13. "Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
1.2.14. "Company" has the meaning set forth in the preamble hereof.
1.2.15. "Company Common Stock" means the common stock, par value
$1.00 per share, of the Company.
1.2.16. "Company Credit Facility" means the Amended and Restated
Financing Agreement, by and among The CIT Group/Business Credit, Inc. and the
Company's Subsidiaries, dated December 15, 1997, as amended.
1.2.17. "Company Disclosure Schedule" means the schedules delivered
to Gart by, or on behalf of, the Company (concurrently with entering into this
Agreement), containing all lists, descriptions, exceptions, and other
information and materials that are required to be included therein in connection
with the representations and warranties made by the Company in Article 5 or that
are otherwise required to be included therein.
1.2.18. "Company ERISA Affiliate" has the meaning set forth in
Section 1.2.28.
1.2.19. "Company Expenses" has the meaning set forth in Section
9.3.2.
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1.2.20. "Company Financials" has the meaning set forth in Section
5.9.
1.2.21. "Company Improvements" has the meaning set forth in Section
5.22.7.
1.2.22. "Company Insurance Policies" has the meaning set forth in
Section 5.23.
1.2.23. "Company Intellectual Property Rights" has the meaning set
forth in Section 5.16.
1.2.24. "Company Interim Financial Information" has the meaning set
forth in Section 5.9.
1.2.25. "Company Leased Real Property" has the meaning set forth in
Section 5.22.2.
1.2.26. "Company Leases" has the meaning set forth in Section
5.22.2.
1.2.27. "Company Owned Real Property" has the meaning set forth in
Section 5.22.1.
1.2.28. "Company Plan" means (a) each of the "employee benefit
plans" (as such term is defined in Section 3(3) of ERISA), of which any of the
Company, any Subsidiary, or any member of the same controlled group of
businesses as the Company or any Subsidiary of the Company within the meaning of
Section 4001(a)(14) of ERISA (a "Company ERISA Affiliate") is or ever was a
sponsor or participating employer or as to which the Company or any Subsidiary
of the Company or any of their Company ERISA Affiliates makes contributions or
is required to make contributions, and (b) any similar employment, severance or
other arrangement or policy of any of the Company, any Subsidiary of the Company
or any of their Company ERISA Affiliates (whether written or oral) providing for
health, life, vision or dental insurance coverage (including self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits or retirement benefits, fringe
benefits, or for profit sharing, deferred compensation, bonuses, stock options,
stock appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits.
1.2.29. "Company Real Property" has the meaning set forth in Section
5.22.3.
1.2.30. "Company Real Property Permits" has the meaning set forth in
Section 5.22.8.
1.2.31. "Company SEC Documents" has the meaning set forth in Section
5.9.
1.2.32. "Company Stockholders Meeting" means the meeting of holders
of Company Common Stock to be held for the purpose of adopting this Agreement
and approving the Merger.
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1.2.33. "Company Voting Agreements" means the Voting Agreements in
the form attached hereto as Exhibit A.
1.2.34. "Confidentiality Agreement" has the meaning set forth in
Section 10.1.
1.2.35. "Contract" means any loan, note, bond, mortgage, indenture,
lease, agreement, contract, instrument, concession, guarantee of indebtedness or
credit agreement, franchise, right or license.
1.2.36. "Conversion Ratio" has the meaning set forth in Section
2.2.1(a).
1.2.37. "Designated Directors" has the meaning set forth in Section
7.24.
1.2.38. "DGCL" means the Delaware General Corporation Law and all
amendments and additions thereto.
1.2.39. "Dissenting Shares" has the meaning set forth in Section
2.5.
1.2.40. "Dollar Value Per Share" has the meaning set forth in
Section 2.2.1(b)(i).
1.2.41. "Effective Time" has the meaning set forth in Section 2.1.2.
1.2.42. "Employee" has the meaning set forth in Section 7.14.
1.2.43. "Environmental Law" means any federal, state, local or
foreign environmental, health and safety, or other Law, in each case in
existence as of the Closing Date, relating to Hazardous Materials, including the
Comprehensive Environmental Response Compensation and Liability Act, the Clean
Air Act, the Federal Water Pollution Control Act, the Solid Waste Disposal Act,
the Federal Insecticide, Fungicide and Rodenticide Act, and the California Safe
Drinking Water and Toxic Enforcement Act.
1.2.44. "Environmental Permit" means any permit, license, approval,
consent or authorization required under, or in connection with, any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued by or entered into with a Governmental Entity.
1.2.45. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
1.2.46. "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
1.2.47. "Exchange Agent" has the meaning set forth in Section 2.3.1.
1.2.48. "Exchange Fund" has the meaning set forth in Section 2.3.1.
1.2.49. "Financing" has the meaning set forth in Section 6.30.
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1.2.50. "Financing Letter" has the meaning set forth in Section
6.30.
1.2.51. "GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time, consistently applied.
1.2.52. "Gart" has the meaning set forth in the preamble hereof.
1.2.53. "Gart Common Stock" means the common stock, par value $.01
per share, of Gart.
1.2.54. "Gart Credit Facility" means the Financing Agreement, by and
among The CIT Group/Business Credit, Inc., Gart Bros. Sporting Goods Company and
Sportmart, Inc., dated January 9, 1998.
1.2.55. "Gart Disclosure Schedule" means the schedules delivered to
the Company by, or on behalf of, Gart (concurrently with entering into this
Agreement), containing all lists, descriptions, exceptions, and other
information and materials that are required to be included therein in connection
with the representations and warranties made by Gart in Article 6 or that are
otherwise required to be included therein.
1.2.56. "Gart ERISA Affiliate" has the meaning set forth in Section
1.2.66.
1.2.57. "Gart Expenses" has the meaning set forth in Section 9.3.2.
1.2.58. "Gart Financials" has the meaning set forth in Section 6.9.
1.2.59. "Gart Improvements" has the meaning set forth in Section
6.22.7.
1.2.60. "Gart Insurance Policies" has the meaning set forth in
Section 6.23.
1.2.61. "Gart Intellectual Property Rights" has the meaning set
forth in Section 6.16.
1.2.62. "Gart Interim Financial Information" has the meaning set
forth in Section 6.9.
1.2.63. "Gart Leased Real Property" has the meaning set forth in
Section 6.22.2.
1.2.64. "Gart Leases" has the meaning set forth in Section 6.22.2.
1.2.65. "Gart Owned Real Property" has the meaning set forth in
Section 6.22.1.
1.2.66. "Gart Plan" means (a) each of the "employee benefit plans"
(as such term is defined in Section 3(3) of ERISA), of which any of Gart, any
Subsidiary, or any member of the same controlled group of businesses as Gart or
any Subsidiary of Gart within the meaning of Section 4001(a)(14) of ERISA (a
"Gart ERISA Affiliate") is or ever was a
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sponsor or participating employer or as to which Gart or any Subsidiary of Gart
or any of their Gart ERISA Affiliates makes contributions or is required to make
contributions, and (b) any similar employment, severance or other arrangement or
policy of any of Gart, any Subsidiary of Gart or any of their Gart ERISA
Affiliates (whether written or oral) providing for health, life, vision or
dental insurance coverage (including self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits or retirement benefits, fringe benefits, or for profit sharing,
deferred compensation, bonuses, stock options, stock appreciation or other forms
of incentive compensation or post-retirement insurance, compensation or
benefits.
1.2.67. "Gart Real Property" has the meaning set forth in Section
6.22.3.
1.2.68. "Gart Real Property Permits" has the meaning set forth in
Section 6.22.8.
1.2.69. "Gart SEC Documents" has the meaning set forth in Section
6.9.
1.2.70. "Gart Stockholders Meeting" means the meeting of holders of
Gart Common Stock to be held for the purpose of approving the issuance of Gart
Common Stock contemplated hereby.
1.2.71. "Gart Voting Agreement" means the Voting Agreement in the
form attached hereto as Exhibit B.
1.2.72. "Governmental Entity" means any government or any agency,
public or regulatory authority, instrumentality, ministry, bureau, board,
arbitrator, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether foreign or domestic
and whether national, federal, tribal, provincial, state, regional, local or
municipal, and shall include any stock exchange, any quotation service and the
NASD.
1.2.73. "Hazardous Material" means (a) any chemical, material,
substance or waste including, containing or constituting petroleum or petroleum
products, solvents (including chlorinated solvents), nuclear or radioactive
materials, asbestos in any form that is or could become friable, radon, lead-
based paint, urea formaldehyde foam insulation or polychlorinated biphenyls, and
(b) any other chemical, material, substance or waste that is now defined as, or
included in the definition of, "hazardous substance(s)," "hazardous waste(s),"
"hazardous material(s)," "extremely hazardous waste(s)," "restricted hazardous
waste(s)," "toxic substance(s)," "toxic pollutant(s)" or words of similar import
under or pursuant to any Environmental Law.
1.2.74. "HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended.
1.2.75. "Income Tax" means (a) any income, alternative or add-on
minimum tax, gross income, gross receipts, franchise, profits, including
estimated taxes relating to any of the foregoing, or other similar tax or other
like assessment or charge of similar kind whatsoever, excluding any Other Tax,
together with any interest and any penalty, addition to tax or additional amount
imposed by any Taxing Authority responsible
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for the imposition of any such Tax (domestic or foreign); or (b) any liability
of a Person for the payment of any taxes, interest, penalty, addition to tax or
like additional amount resulting from the application of Treas. Reg. (S)1.1502-6
or comparable provisions of any Taxing Authority in respect of a Tax Return of a
Relevant Company Group or Relevant Gart Group, as applicable, or any Contract.
1.2.76. "Indemnified Parties" has the meaning set forth in Section
7.12.1.
1.2.77. "Intellectual Property Rights" means all trademarks,
trademark registrations, trademark applications, service marks, service ▇▇▇▇
registrations, service ▇▇▇▇ applications, trade names, trade dress, logos and
corporate names, all such existing worldwide, together with all renewals,
translations, adoptions, derivatives and combinations thereof and including all
goodwill associated therewith (collectively, "Trademark Rights"), all worldwide
patents, patent applications, and patent disclosures together with all reissues,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, material confidential business information, whether patentable or
unpatentable and whether or not reduced to practice (collectively, "Patent
Rights"), all know how and trade secrets, all computer software, all copyrights,
copyright registrations and applications for the registration of copyrights and
all other material proprietary rights used by or held by the Company (in the
case of Company Intellectual Property Rights) or Gart (in the case of Gart
Intellectual Property Rights) or any other third Person whether or not currently
used thereby and all contracts and arrangements for licensing the same to or
from third parties.
1.2.78. "IRS" means the United States Internal Revenue Service or
any successor entity.
1.2.79. "Knowledge," "Known to" or any similar phrase means, with
respect to any matter in question, that, with respect to the Company and its
Subsidiaries, a Company Executive Officer, or, with respect to Gart and its
Subsidiaries, a Gart Executive Officer: (a) has actual knowledge of such matter,
or (b) would have actual knowledge of such matter after making such inquiry, if
any, as a reasonable Person would have made under the circumstances applicable
to such matter (provided, that such "inquiry knowledge" as it relates to the
inquiry of other employees of the Company and its Subsidiaries or of Gart and
its Subsidiaries, as applicable, shall be limited to corporate-level employees
and shall not extend to store-level employees). For purposes of this Section
1.2.79, (i) a Company Executive Officer shall mean any of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇, and (ii) a Gart Executive Officer shall mean
any of ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
1.2.80. "Law" or "Laws" means any law, statute, order, decree,
consent decree, judgment, rule, regulation, ordinance or other pronouncement
having the effect of law whether in the United States, any foreign country, or
any domestic or foreign state, county, city or other political subdivision or of
any Governmental Entity.
1.2.81. "Liabilities" means all indebtedness, obligations and other
liabilities of a Person, whether absolute, accrued, contingent (or based upon
any contingency), known or unknown, fixed or otherwise, or whether due or to
become due.
-8-
1.2.82. "Liens" means any mortgage, deed of trust, pledge,
assessment, security interest, lease, lien, easement, license, covenant,
condition, adverse claim, levy, charge, option, equity, adverse restriction, or
other encumbrance of any kind, or any conditional sale Contract, title retention
Contract or other Contract to give any of the foregoing, except for any
restrictions on transfer generally arising under any applicable federal or state
securities law.
1.2.83. "Material Adverse Effect" means, with respect to any Person,
any event, circumstance, change, condition, development or occurrence either
individually or in the aggregate with all other events, circumstances, changes,
conditions, developments or occurrences, resulting in or reasonably likely to
result in a material adverse effect on (a) the business (as now conducted or as
now proposed by such Person to be conducted), results of operations, condition
(financial or otherwise), assets or Liabilities (contingent or otherwise), or
prospects of such Person and its Subsidiaries, taken as a whole, (b) the
legality or enforceability of this Agreement, or (c) the ability of such Person
to perform its obligations and to consummate the transactions under this
Agreement. Where the defined term "Material Adverse Effect" is used in a
particular representation or warranty in Article 5 or Article 6, the reference
to "all other events, circumstances, changes, conditions, developments or
occurrences" in the foregoing definition shall be deemed to refer to all other
events, circumstances, changes, conditions, developments or occurrences that are
within the same subject matter coverage as that particular representation or
warranty (i.e., excluding matters unrelated to that particular representation or
warranty); the foregoing convention shall not apply where the defined term
"Material Adverse Effect" is otherwise used in this Agreement. In determining
whether a "Material Adverse Effect" has occurred with respect to a party's
results of operations, extraordinary, non-recurring income items will be
disregarded. Notwithstanding the foregoing, the parties hereto agree that any
adverse effect resulting from the following shall not be considered to be a
Material Adverse Effect: (i) this Agreement or the transactions contemplated
hereby or the public announcement of this Agreement and the Merger; (ii) the
economy or securities markets in general; or (iii) the Company's or Gart's
industry in general and not in whole or in any part significantly related
specifically to the Company or Gart, as applicable.
1.2.84. "Merger" has the meaning set forth in Section 2.1.1.
1.2.85. "Merger Consideration" has the meaning set forth in Section
2.2.1(a).
1.2.86. "MergerSub" has the meaning set forth in the preamble
hereof.
1.2.87. "MergerSub Common Stock" means the common stock, par value
$.01 per share, of MergerSub.
1.2.88. "NASD" means the National Association of Securities Dealers,
Inc.
1.2.89. "New Credit Facility" has the meaning set forth in Section
6.9.
1.2.90. "Options" means all options, warrants and similar securities
or rights enabling the holder thereof to purchase or acquire shares of Company
Common Stock (including, without limitation, all such Options issued pursuant to
the Stock Option Plans).
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1.2.91. "Options Spread Value" has the meaning set forth in Section
2.6.1.
1.2.92. "Order" means any decree, judgment, ruling, arbitration
award, assessment, writ, injunction or similar order of any Governmental Entity
(in each such case whether preliminary or final).
1.2.93. "▇▇▇▇▇▇'▇ Stock Value" has the meaning set forth in Section
2.6.1.
1.2.94. "Other Shares" has the meaning set forth in Section
2.2.1(a).
1.2.95. "Other Tax" means any sales, use, ad valorem, business
license, withholding, payroll, employment, excise, stamp, transfer, recording,
occupation, premium, property, unclaimed property, value added, custom duty,
severance, windfall profit or license tax, governmental fee or other similar
assessment or charge, together with any interest and any penalty, addition to
tax or additional amount imposed by any Taxing Authority responsible for the
imposition of any such tax (domestic or foreign).
1.2.96. "Patent Rights" has the meaning set forth in Section 1.2.77.
1.2.97. "PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA.
1.2.98. "Permit" means any license, permit, approval, consent,
exemption, franchise or authorization, and includes any Environmental Permit.
1.2.99. "Permitted Investments" has the meaning set forth in Section
2.3.1.
1.2.100. "Permitted Liens" means: (a) liens disclosed in the Company
Disclosure Schedule or the Gart Disclosure Schedule; (b) liens, encumbrances or
imperfections of title that do not materially detract from the value of, or
materially interfere with, the present use or, in the case of Company Owned Real
Property or Gart Owned Real Property, the marketability of the property affected
thereby; (c) liens for taxes and assessments, governmental charges, levies,
mechanics liens or other statutory liens, both special and general that are not
yet due and payable or are being contested in good faith pursuant to appropriate
proceedings; (d) liens that are reserved on the financial statements as required
by GAAP, which such financial statements were received prior to the date hereof
by Gart (in the case of the Company's liens) or by the Company (in the case of
Gart's liens); or (e) zoning, building, use and other governmental ordinances,
if any.
1.2.101. "Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association or
Governmental Entity.
1.2.102. "Preferred Stock" means the Company's preferred stock, par
value $.01 per share.
1.2.103. "Proxy Statement" has the meaning set forth in Section 5.17.
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1.2.104. "Registration Rights Agreement" has the meaning set forth
in Section 7.25.
1.2.105. "Registration Statement" has the meaning set forth in
Section 5.17.
1.2.106. "Relevant Company Group" has the meaning set forth in
Section 5.14.1.
1.2.107. "Relevant Gart Group" has the meaning set forth in Section
6.14.1.
1.2.108. "SEC" means the United States Securities and Exchange
Commission or any successor entity.
1.2.109. "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder.
1.2.110. "Share Certificates" has the meaning set forth in Section
2.3.2.
1.2.111. "Stock Consideration" has the meaning set forth in Section
2.2.1(a).
1.2.112. "Stockholders Meetings" means the Company Stockholders
Meeting and the Gart Stockholders Meeting.
1.2.113. "Stock Option Plans" means, collectively, the Company's
1994 Omnibus Plan and the Company's 1993 Non-Employee Director Stock Option
Plan.
1.2.114. "Subsidiary" of a company means any Person in which such
company, directly or indirectly through Subsidiaries or otherwise, beneficially
owns or owned at least 50% of either the equity interest in, or the voting
control of, such Person, whether or not existing on the date hereof.
1.2.115. "Superior Proposal" has the meaning set forth in Section
7.4.2.
1.2.116. "Surviving Corporation" has the meaning set forth in
Section 2.1.1.
1.2.117. "Surviving Corporation Common Stock" means the common
stock, par value $.01 per share, of the Surviving Corporation.
1.2.118. "Takeover Statute" has the meaning set forth in Section
7.15.
1.2.119. "Tax" or "Taxes" means Income Taxes and/or Other Taxes, as
the context requires.
1.2.120. "Tax Laws" means the Code, federal, state, county, local or
foreign laws relating to Taxes and any regulations or official administrative
pronouncements released thereunder.
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1.2.121. "Tax Returns" means any return, report, information return,
schedule, certificate, statement or other document (including any related or
supporting information) filed or required to be filed with, or, where none is
required to be filed with a Taxing Authority, the statement or other document
issued by, a Taxing Authority in connection with any Tax.
1.2.122. "Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
1.2.123. "Termination Fee" has the meaning set forth in Section
9.3.1.
1.2.124. "Trademark Rights" has the meaning set forth in Section
1.2.77.
1.2.125. "Voting Agreements" has the meaning set forth in the
recitals hereto.
ARTICLE 2.
THE MERGER
2.1. THE MERGER.
2.1.1. At the Effective Time, the Company shall be merged with and
into MergerSub in accordance with the DGCL and the terms and conditions hereof
(the "Merger"). Upon consummation of the Merger, the separate existence of the
Company shall cease and MergerSub shall be the surviving corporation (the
"Surviving Corporation").
2.1.2. As soon as practicable after satisfaction (or, to the extent
permitted hereunder, waiver) of all conditions to the Merger, MergerSub will
file a certificate of merger (the "Certificate of Merger") with the Secretary of
State of the State of Delaware in accordance with the DGCL and will make all
other filings or recordings required by applicable Law in connection with the
Merger. The Merger shall become effective at such time as the Certificate of
Merger is certified by the Secretary of State of the State of Delaware or at
such later time as is agreed to by the parties hereto and is specified in the
Certificate of Merger (such date and time being referred to herein as the
"Effective Time").
2.1.3. The Merger shall have the effects set forth in the DGCL.
2.2. MERGER CONSIDERATION AND CONVERSION OF SHARES. At the Effective Time,
pursuant to this Agreement and by virtue of the Merger and without any action on
the part of Gart, MergerSub, the Company or the holders of any of the following
securities:
2.2.1. (a) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares and shares to be cancelled pursuant to Section 2.2.2) shall be cancelled
and shall be converted automatically into the right to receive an amount equal
to $7.00 in
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cash, without interest (subject to adjustment as provided in Section 2.2.1(b),
the "Cash Consideration"), and 0.55 (subject to adjustment as provided in
Section 2.2.1(b), the "Conversion Ratio") validly issued, duly authorized, fully
paid and non-assessable shares of Gart Common Stock (subject to adjustment as
provided in Section 2.2.1(b), the "Stock Consideration" and, together with the
Cash Consideration and the Cash In Lieu (as defined in Section 2.2.4), the
"Merger Consideration"), payable to the holder thereof upon surrender of the
certificate formerly representing such share of Company Common Stock in the
manner provided in Section 2.3 (the shares of Company Common Stock being
converted into the right to receive the Merger Consideration are hereinafter
referred to as the "Other Shares").
(b) In the event that the closing sale price of a share of Gart
Common Stock on the Closing Date (the "Closing Sale Price") is less than
$9.50, then the amount of the Cash Consideration, the Conversion Ratio and
the Stock Consideration shall be adjusted automatically as follows:
(i) first, the dollar value per share of the Merger
Consideration shall be determined by adding (A) the Cash Consideration
(before giving effect to this Section 2.2.1(b)) to (B) the result of
multiplying the Conversion Ratio (before giving effect to this Section
2.2.1(b)) by the Closing Sale Price (such amount being referred to as
the "Dollar Value Per Share");
(ii) next, the amount of the Cash Consideration shall
be adjusted to equal the result of multiplying 0.57 by the Dollar
Value Per Share;
(iii) next, the Conversion Ratio shall be adjusted to
equal the result of dividing (A) the amount determined as (x) the
Dollar Value Per Share minus (y) the Cash Consideration (after giving
effect to this Section 2.2.1(b)) by (B) the Closing Sale Price; and
(iv) finally, the amount of the Stock Consideration
shall be adjusted using the adjusted Conversion Ratio determined in
accordance with clause (iii) immediately above.
2.2.2. Each share of Company Common Stock held in the treasury of
the Company or held by MergerSub or Gart, if any, immediately prior to the
Effective Time, shall be cancelled without any conversion thereof and no payment
or distribution shall be made with respect thereto.
2.2.3. Each share of MergerSub Common Stock that is issued and
outstanding immediately prior to the Effective Time shall be converted into one
share of Surviving Corporation Common Stock.
2.2.4. No fractional shares of Gart Common Stock shall be issued
pursuant to this Agreement. All shares of Gart Common Stock to which a holder of
shares of Company Common Stock is entitled in connection with the Merger shall
be
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aggregated. If a fractional share results from such aggregation, in lieu of
the issuance of any such fractional share of Gart Common Stock, a cash
adjustment shall be paid to a Person in respect of any such fractional
share that otherwise would be issuable to such Person pursuant to Section
2.2.1 or Section 2.6. The amount of such cash adjustment (the "Cash In
Lieu") shall be equal to a fractional proportion of the Closing Sale Price.
2.2.5. If between the date of this Agreement and the Effective Time
the number of outstanding shares of Gart Common Stock shall have been
changed into a different number of shares or a different class, by reason
of any stock dividend, subdivision, reclassification, recapitalization,
split-up, combination, exchange of shares or the like other than pursuant
to the Merger, the Conversion Ratio shall be correspondingly adjusted.
2.3. EXCHANGE PROCEDURES.
2.3.1. Gart shall designate a bank or trust company reasonably
acceptable to the Company to act as exchange agent hereunder (the "Exchange
Agent"). At the Effective Time, Gart shall deliver or cause to be delivered, in
trust, to the Exchange Agent, for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with the provisions in this
Article 2, through the Exchange Agent, the Merger Consideration (such Merger
Consideration, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund") to be paid
pursuant to Section 2.2.1 and to be deposited pursuant to this Section 2.3.1 in
exchange for shares of Company Common Stock. Pending distribution pursuant to
Section 2.3.2 of the Exchange Fund deposited with the Exchange Agent, all cash
so deposited shall be held in trust for the benefit of the holders of Other
Shares and such cash shall not be used for any other purposes; provided,
however, that the Surviving Corporation may direct the Exchange Agent to invest
such cash, provided that such investments (a) shall be (i) obligations of, or
guaranteed by, the United States of America, (ii) in commercial paper
obligations receiving the highest rating from either ▇▇▇▇▇'▇ Investors Services,
Inc. or Standard & Poor's Corporation, or (iii) in certificates of deposit, bank
repurchase agreements or bankers acceptances of domestic commercial banks with
capital exceeding $250,000,000 (collectively, "Permitted Investments") or shall
be in money market funds that are invested solely in Permitted Investments and
(b) shall have maturities that will not prevent or delay payments to be made
pursuant to Section 2.3.2.
2.3.2. As soon as reasonably practicable after the Effective Time,
the Exchange Agent shall mail to each Person who was, at the Effective Time, a
holder of record of Other Shares, (i) a form of letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates evidencing the Other Shares (the "Share Certificates") shall pass,
only upon proper delivery of a Share Certificate to the Exchange Agent, and
which shall be in such form and have such other provisions as Gart and the
Company may reasonably specify prior to the Effective Time) and (ii)
instructions for use in effecting the surrender of Share Certificates pursuant
to such letter of transmittal. Upon surrender to the Exchange Agent of a Share
Certificate, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may be required pursuant to such instructions, the holder of such
Share Certificate shall be entitled to receive in exchange therefor the Merger
Consideration for each Other Share formerly represented by such Share
Certificate, and the Share Certificate so surrendered shall forthwith be
cancelled. No interest shall accrue or be paid on the Cash Consideration, the
Cash In Lieu or any unpaid dividends or distributions payable pursuant to
Section 2.3.3 upon the surrender of any Share Certificate for the benefit of the
holder of
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such Share Certificate. Until surrendered as contemplated by this Section 2.3,
each Share Certificate or other instrument shall, from and after the Effective
Time, be deemed to represent only the right to receive the Merger Consideration
(and any unpaid dividends or distributions payable pursuant to Section 2.3.3),
and, until such surrender, no cash or other consideration or payment of any kind
shall be paid to the holder of such outstanding Share Certificate or other
instrument in respect thereof.
2.3.3. No dividends or other distributions that are declared on or
after the Effective Time on Gart Common Stock, or are payable to the holders of
record thereof who became such on or after the Effective Time, shall be paid to
any Person entitled by reason of the Merger to receive certificates representing
shares of Gart Common Stock until such Person shall have surrendered its Share
Certificates as provided in Section 2.3.2 (or such Person shall have complied
with Section 2.3.5). Subject to applicable Law, Gart shall cause to be paid to
each person receiving a certificate representing such shares of Gart Common
Stock, (a) at the time of such receipt the amount of any dividends or other
distributions theretofore paid with respect to the shares of Gart Common Stock
represented by such certificate and having a record date on or after the
Effective Time, and (b) at the appropriate payment date the amount of any
dividends or other distributions payable with respect to the shares of Gart
Common Stock represented by such certificate, which dividends or other
distributions have a record date on or after the Effective Time and a payment
date on or subsequent to such receipt. In no event shall the Person entitled to
receive such dividends or other distributions be entitled to receive interest on
such dividends or other distributions. If payment is to be made to a Person
other than the registered holder of the Other Shares represented by the Share
Certificate or other instrument so surrendered in exchange therefor, it shall be
a condition to such payment that the Share Certificate or other instrument so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the Person requesting such payment shall pay to the Exchange
Agent any transfer or other taxes required as a result of such payment to a
Person other than the registered holder of such Other Shares or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable. Gart, the Surviving Corporation or the Exchange Agent shall be entitled
to deduct and withhold from the Merger Consideration otherwise payable pursuant
to this Agreement to any holder of Company Common Stock such amounts as Gart,
the Surviving Corporation or the Exchange Agent are required to deduct and
withhold under the Code or any provision of any applicable Law, with respect to
the making of such payment. To the extent that amounts are so withheld by Gart,
the Surviving Corporation or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Company Common Stock in respect of whom such deduction and withholding was
made by Gart, the Surviving Corporation or the Exchange Agent.
2.3.4. After the Effective Time, there shall be no further transfers
on the stock transfer books of the Surviving Corporation of the Other Shares
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Share Certificates
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representing Other Shares are presented to the Surviving Corporation, they shall
be cancelled and exchanged for the Merger Consideration (and any unpaid
dividends or distributions) provided for, and in accordance with the procedures
set forth, in this Article 2.
2.3.5. In the event that any Share Certificate or other instrument
representing Other Shares shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Share
Certificate or other instrument to be lost, stolen or destroyed and, if required
by the Surviving Corporation, the posting by such holder of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Share Certificate or
other instrument, the Exchange Agent will issue in exchange for and in lieu of
such lost, stolen or destroyed Share Certificate or other instrument
representing the Other Shares, the Merger Consideration and any unpaid dividends
or distributions payable pursuant to Section 2.3.3.
2.3.6. If any portion of the Exchange Fund deposited with the
Exchange Agent for purposes of payment in exchange for Other Shares remains
unclaimed six months after the Effective Time, such portion of the Exchange Fund
shall be returned to the Surviving Corporation, upon demand, and any such holder
who has not surrendered such holder's Share Certificates in compliance with this
Article 2 prior to that time shall thereafter look only to the Surviving
Corporation for payment of the Merger Consideration and any unpaid dividends or
distributions pursuant to Section 2.3.3. Notwithstanding the foregoing, the
Surviving Corporation shall not be liable to any holder of Other Shares for any
amount paid to a public official pursuant to applicable unclaimed property laws.
Any amounts remaining unclaimed by holders of Other Shares six (6) years after
the Effective Time (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become property of any Governmental
Entity) shall, to the extent permitted by applicable Law, become the property of
the Surviving Corporation, free and clear of any claims or interest of any
Person previously entitled thereto.
2.3.7. Any portion of the Merger Consideration, together with all
interest and earnings thereon, made available to the Exchange Agent pursuant to
Section 2.5 to pay for shares of Company Common Stock for which dissenters'
rights have been perfected as provided in Section 2.5 shall be returned to the
Surviving Corporation upon demand.
2.4. EXCHANGE OF STOCK CERTIFICATES. Immediately after the Effective
Time, the Surviving Corporation shall deliver to the record holders of the
certificates that immediately prior to the Effective Time represented all of the
outstanding shares of MergerSub Common Stock that were converted into the right
to receive shares of Surviving Corporation Common Stock in accordance with
Section 2.2.3, in exchange for such certificates, duly endorsed in blank, share
certificates, registered in the names of such record holders, representing the
number of shares of Surviving Corporation Common Stock to which such record
holders are so entitled by virtue of Section 2.2.3.
2.5. DISSENTING SHARES. Notwithstanding any other provisions of this
Agreement, shares of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time and that are held by a holder who has
not voted such shares of Company Common Stock in favor of the Merger and who has
delivered a written demand in
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the manner provided by Section 262 of the DGCL and who, as of the Effective
Time, shall not have effectively withdrawn or lost such right to relief as a
dissenting stockholder ("Dissenting Shares") shall not be converted into the
right to receive the Merger Consideration. The holders of such Dissenting Shares
shall be entitled only to such rights as are granted by Section 262 of the DGCL.
Each holder of Dissenting Shares who becomes entitled to payment for such
Dissenting Shares pursuant to Section 262 of the DGCL shall receive payment
therefor from the Surviving Corporation in accordance with the DGCL; provided,
however, that if any such holder of Dissenting Shares (a) shall have failed to
establish such holder's entitlement to relief as a dissenting stockholder as
provided in Section 262 of the DGCL, (b) shall have effectively withdrawn such
holder's demand for relief as a dissenting stockholder with respect to such
Dissenting Shares, (c) shall have lost such holder's right to relief as a
dissenting stockholder and payment under Section 262 of the DGCL, or (d) shall
have failed to file a complaint with the appropriate court seeking relief as to
determination of the value of all Dissenting Shares within the time provided in
Section 262 of the DGCL, such holder shall forfeit the right to relief as a
dissenting stockholder with respect to such Dissenting Shares and each such
Dissenting Share shall be converted into the right to receive the Merger
Consideration, without interest thereon, from the Surviving Corporation as
provided in Section 2.2.1. The Company shall give Gart prompt notice of any
demands made under Section 262 of the DGCL received by the Company prior to the
Effective Time, and Gart shall have the right to participate in all negotiations
and proceedings with respect to such demands. The Company shall not, except with
the prior written consent of Gart, make any payment with respect to, or settle
or offer to settle, any such demands.
2.6. STOCK OPTIONS.
2.6.1. At the Effective Time, each Option, whether or not vested,
that has an exercise price that is equal to or greater than the ▇▇▇▇▇▇'▇ Stock
Value shall be cancelled, without any payment or other consideration therefor.
At the Effective Time, except as otherwise provided in Section 7.13, all other
Options, whether or not vested, shall be cancelled and, as soon as reasonably
practicable after the Effective Time, each holder of such Options shall receive
in lieu of such Options an amount in cash, without interest, equal to the
Options Spread Value. For any holder of Options, the "Options Spread Value"
shall be equal to, with respect to such Options, the difference, if positive,
between (i) the product of the ▇▇▇▇▇▇'▇ Stock Value multiplied by the number of
shares of Company Common Stock subject to such Options less (ii) the aggregate
exercise price with respect to such Options. The "▇▇▇▇▇▇'▇ Stock Value" shall be
equal to the closing price of a share of Company Common Stock as reported on the
American Stock Exchange on the Business Day immediately prior to the Effective
Time.
2.6.2. Prior to the Effective Time, the Company (a) shall take all
reasonable steps necessary to make any amendments to the terms of the Stock
Option Plans, the individual Option agreements or the Options that are necessary
to give effect to the transactions contemplated by this Agreement, and (b) shall
take reasonable steps necessary to obtain at the earliest practicable date all
written consents (if necessary) from holders of Options to effect the
cancellation of such holders' Options at the Effective Time in accordance with
Section 2.6.1.
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2.6.3. At or prior to the Effective Time, the Company shall take all
reasonable and necessary actions to advise the holders of Options of their
respective rights under this Agreement (including, without limitation, as
contemplated by Section 7.13), the Options, the respective Option agreements and
the respective Stock Option Plans, to facilitate the timely exercise of such
rights and obligations to effectuate the provisions of this Section 2.6 and
Section 7.13. From and after the Effective Time, no holder of Options shall have
any rights in respect of such Options, other than to receive consideration in
the manner described in Section 2.6.1 (except as otherwise contemplated by
Section 7.13). The surrender of any Options and the receipt of consideration
therefor in accordance with Section 2.6.1 shall be deemed a release of any and
all rights the holder of such Options had, or may have had, in respect of such
Options.
ARTICLE 3.
CLOSING
3.1. CLOSING. The closing of the Merger (the "Closing") shall take place
(i) at the offices of Irell & ▇▇▇▇▇▇▇ LLP, 1800 Avenue of the Stars, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 9:00 A.M. (Los Angeles time) on the Business Day
that the parties hereto designate as the closing date, which such date shall be
a day that securities are traded on The Nasdaq Stock Market and shall be no
later than five Business Days following the fulfillment or waiver of the
conditions set forth in Article 8 in accordance with this Agreement, or (ii) at
such other place and time and/or on such other date as the Company and Gart may
agree.
ARTICLE 4.
THE SURVIVING CORPORATION
4.1. CERTIFICATE OF INCORPORATION AND BY-LAWS. The certificate of
incorporation and the by-laws of the Surviving Corporation immediately after the
Effective Time shall be the certificate of incorporation and the by-laws of
MergerSub as in effect immediately prior to the Effective Time.
4.2. DIRECTORS AND OFFICERS. From and after the Effective Time, until
successors are duly elected or appointed and qualified in accordance with
applicable Law, (a) the directors of MergerSub immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation and
(b) the officers of MergerSub immediately prior to the Effective Time shall be
the initial officers of the Surviving Corporation, in each case to hold office
in accordance with the certificate of incorporation and the by-laws of the
Surviving Corporation.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Gart and MergerSub that, except as
set forth in the Company Disclosure Schedule (provided, however, that each
disclosure set forth in the Company Disclosure Schedule shall not be deemed to
refer to any section other than (i) the specific section or sections referenced
in such disclosure and (ii) any other sections where the applicability of the
disclosed matter or circumstance to the representation or warranty in question
is reasonably obvious):
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5.1. ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to carry on its business as
it is now being conducted. The Company is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified or in good standing would not have a Material Adverse Effect,
individually or in the aggregate. Without limiting the generality of the
foregoing, the Company is qualified to do business in the states set forth on
Section 5.1 of the Company Disclosure Schedule.
5.2. CERTIFICATE OF INCORPORATION AND BY-LAWS. Complete and correct
copies of the certificates of incorporation and by-laws or equivalent
organizational documents, each as amended as of the date hereof, of the Company
and each of its current Subsidiaries have been made available to Gart. The
certificates of incorporation, by-laws and equivalent organizational documents
of the Company and each of its current Subsidiaries are in full force and
effect. Neither the Company nor any of its current Subsidiaries is in violation
of any provision of its certificate of incorporation, by-laws or equivalent
organizational documents.
5.3. CAPITALIZATION.
5.3.1. As of the date hereof, the authorized capital stock of the
Company consists of 500,000 shares of Preferred Stock and 15,000,000 shares of
Company Common Stock. At the close of business on February 1, 2001, (a) no
shares of Company Preferred Stock were outstanding and (b) 5,825,309 shares of
Company Common Stock were outstanding. Section 5.3.1 of the Company Disclosure
Schedule contains a true, complete and correct list as of such date of all
outstanding Options, warrants, rights and other securities of the Company
convertible into, or exercisable for, shares of capital stock of the Company,
the holders of such Options, warrants, rights and other securities, and the
exercise prices with respect to such Options, warrants, rights and other
securities. All outstanding shares of Company Common Stock have been duly
authorized and validly issued and are fully paid, non-assessable and free of
preemptive rights. No shares of Company Common Stock are owned by any direct or
indirect Subsidiary of the Company.
5.3.2. Except as described in this Section 5.3, set forth on Section
5.3.1 of the Company Disclosure Schedule and as contemplated by this Agreement,
(a) no shares of capital stock or other equity securities of the Company are
authorized, issued or outstanding, or reserved for issuance, and there are no
Options, warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character to which the Company or any of its
current Subsidiaries is a party relating to the issued or unissued capital stock
or other equity interests of the Company or any of its current Subsidiaries that
require the Company or any of its current Subsidiaries to grant, issue or sell
any shares of the capital stock or other equity interests of the Company or any
of its current Subsidiaries by sale, lease, license or otherwise; (b) neither
the Company nor any of its Subsidiaries have any obligation, contingent or
otherwise, to repurchase, redeem or otherwise acquire any shares of the capital
stock or other equity interests of the Company or any of its Subsidiaries; (c)
neither the Company nor any of its Subsidiaries, directly or indirectly,
-19-
owns, or has agreed to purchase or otherwise acquire, the capital stock or other
equity interests of, or any interest convertible into or exchangeable or
exercisable for such capital stock or such equity interests of, any corporation,
partnership, joint venture or other entity that would be material in value to
the Company; and (d) there are no voting trusts, proxies or other agreements or
understandings to which the Company or any of its Subsidiaries is a party with
respect to the voting of any shares of capital stock or other equity interests
of the Company or any of its Subsidiaries.
5.4. COMPANY SUBSIDIARIES. Section 5.4 of the Company Disclosure Schedule
contains a list of the following information for each current Subsidiary of the
Company: (a) the name of such Subsidiary; (b) its authorized, issued and
outstanding capital stock or other equity interests, and the percentage of such
capital stock or other equity interests owned by the Company or any Subsidiary
of the Company, and the identity of such owner; and (c) any capital stock
reserved for future issuance pursuant to outstanding options or other
agreements, and the identity of all parties to any such option or other
agreement. Each current Subsidiary of the Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each current Subsidiary of the
Company has all requisite corporate power and authority to carry on its business
as it is now being conducted. Each current Subsidiary of the Company is duly
qualified as a foreign corporation or organization authorized to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect on the Company. Without
limiting the generality of the foregoing, the current Subsidiaries of the
Company are qualified to do business in the states set forth on Section 5.4 of
the Company Disclosure Schedule. All of the outstanding shares of capital stock
or other ownership interests in each of the Company's current Subsidiaries have
been duly authorized and validly issued, are fully paid and non-assessable, and
are owned by the Company or another Subsidiary of the Company free and clear of
all Liens, and are not subject to preemptive rights created by statute, such
Subsidiary's certificate of incorporation, by-laws or equivalent organizational
documents, or any agreement to which such Subsidiary is a party.
5.5. CORPORATE AUTHORITY.
5.5.1. The Company has the requisite corporate power and authority
to execute and deliver this Agreement and, subject to the adoption of this
Agreement and the approval of the Merger by the Company's stockholders, to
consummate the transactions contemplated hereby. The execution and delivery by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by its board of
directors and, except for the adoption of this Agreement and the approval of the
Merger by the Company's stockholders, 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 contemplated
hereby. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding agreement of the Company and is enforceable
against the Company in accordance with its terms, except to the extent that (a)
such enforcement may be subject to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws,
-20-
now or hereafter in effect, relating to or limiting creditors' rights generally
and (b) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. The preparation
of the Proxy Statement has been duly authorized by the board of directors of the
Company. The corporate records and minute books or other applicable records of
the Company and its Subsidiaries reflect all material action taken and
authorizations made at meetings of such companies' boards of directors or any
committees thereof and at any stockholders' meetings thereof.
5.5.2. Prior to execution and delivery of this Agreement, the
Company's board of directors (at a meeting duly called and held) has (a)
approved this Agreement and the transactions contemplated hereby, (b) determined
that this Agreement and the transactions contemplated hereby are fair to,
advisable and in the best interests of the Company and the holders of Company
Common Stock and (c) determined to recommend the adoption of this Agreement and
the approval of the Merger to the Company's stockholders at the Company
Stockholders Meeting. The affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock is the only vote of the holders of
any class or series of the Company's capital stock necessary to adopt this
Agreement and to approve the Merger.
5.6. COMPLIANCE WITH APPLICABLE LAW. The Company and each of its
Subsidiaries hold, and are in compliance with the terms of, all material Permits
that are required for the operation of the businesses of the Company and its
Subsidiaries, except for failures to hold or to comply with such Permits that
would not have a Material Adverse Effect on the Company. With respect to
material Permits of the Company and its Subsidiaries, to the Knowledge of the
Company, no action or proceeding is pending or threatened that would reasonably
be expected to have a Material Adverse Effect on the Company. The businesses of
the Company and its Subsidiaries are being conducted in all material respects in
compliance with all applicable material Laws of any Governmental Entity. To the
Knowledge of the Company, no material investigation or review by any
Governmental Entity with respect to the Company or its Subsidiaries is pending
or threatened.
5.7. NON-CONTRAVENTION. Except as set forth in Section 5.7 of the Company
Disclosure Schedule, the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, (a) result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or require the consent of any Person that is a party to,
any Company Lease or any other material Contract to which the Company or any of
its Subsidiaries is a party, or result in the creation of any Lien (other than
any Permitted Lien) upon any of the properties or assets of the Company or any
of its Subsidiaries, (b) conflict with or result in any violation of any
provision of the certificate of incorporation or the by-laws or other equivalent
organizational document, in each case as amended, of the Company or any of its
Subsidiaries, or (c) subject to the governmental filings referenced in clause
(a) of Section 5.8, conflict with or violate any Order or, to the Knowledge of
the Company, any Law applicable to the Company or any of its Subsidiaries or any
of their respective properties or assets, other than, in the case of clauses (a)
and (c),
-21-
any such conflicts or violations that, individually or in the aggregate, would
not have a Material Adverse Effect on the Company.
5.8. GOVERNMENT APPROVALS AND CONSENTS. No filing or registration with,
or authorization, consent or approval of, any Governmental Entity is required by
or with respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by the Company or is necessary for the
consummation of the transactions contemplated hereby (including, without
limitation, the Merger) except: (a) in connection, or in compliance, with the
rules of the American Stock Exchange, the provisions of the HSR Act, the
Securities Act, the Exchange Act and any state securities or blue sky law, (b)
for the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware, (c) such consents, approvals, authorizations, permits,
filings and notifications listed in Section 5.8 of the Company Disclosure
Schedule, and (d) such other consents, Orders, authorizations, registrations,
declarations and filings the failure of which to obtain or make would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
5.9. SEC DOCUMENTS AND OTHER REPORTS. The Company has filed on a timely
basis all documents required to be filed by it with the SEC since February 1,
1997 (all such documents filed since February 1, 1997 and prior to the date
hereof are referred to as the "Company SEC Documents"). Complete and correct
copies of the Company SEC Documents have been made available to Gart. As of
their respective dates, or if amended as of the date of the last such amendment,
the Company SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be
(including all applicable rules and regulations promulgated by the SEC relating
to the Company's audit committee), and none of the Company SEC Documents as of
the date thereof contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Complete and accurate copies of the unaudited consolidated
balance sheet, consolidated statements of operations, consolidated statements of
stockholders' equity and consolidated statements of cash flows (together with
any supplementary information thereto) of the Company, all as of and for the
nine-month period ended October 28, 2000 (the "Company Interim Financial
Information") have been provided to Gart. The consolidated financial statements
of the Company included in the Company SEC Documents and the Company Interim
Financial Information (collectively, the "Company Financials") fairly present,
in all material respects, the consolidated financial position of the Company and
its consolidated Subsidiaries, as of and for the respective dates thereof, and
the consolidated results of their operations and their consolidated cash flows
for the respective periods then ended (subject, in the case of the Company
Interim Financial Information, to normal year-end audit adjustments and to any
other adjustments described therein) in conformity with GAAP during the periods
involved (except as may be indicated therein or in the notes thereto). Since
January 29, 2000, the Company has not made any change in the accounting
practices or policies applied in the preparation of its financial statements,
except as may be required by GAAP.
5.10. ABSENCE OF UNDISCLOSED LIABILITIES. There are no Liabilities of the
Company or any of its Subsidiaries of any kind whatsoever that would be required
by
-22-
GAAP to be reflected on a consolidated balance sheet of the Company (including
the notes thereto), other than:
(a) Liabilities incurred since January 29, 2000 in the ordinary
course of business consistent with past practices;
(b) reasonable and customary fees and expenses incurred in
connection with the consummation of the transactions contemplated by
this Agreement;
(c) payments required as a result of the consummation of the
Merger under the terms of any Company Plans, as identified in Section
5.10(c) of the Company Disclosure Schedule; and
(d) Liabilities disclosed in the Company SEC Documents filed prior
to the date hereof or reserved against on the Company's most recent
balance sheet delivered to Gart prior to the date hereof.
5.11. ABSENCE OF CERTAIN CHANGES OR EVENTS.
5.11.1. Except as expressly contemplated or permitted by this
Agreement, and other than the reasonable and customary fees and expenses
incurred in connection with the transactions contemplated by this Agreement,
since January 29, 2000, the business of the Company and its Subsidiaries has
been conducted in all material respects in the ordinary course of business
consistent with past practices, neither the Company nor any of its Subsidiaries
has engaged in any transaction or series of related transactions material to the
Company or its Subsidiaries taken as a whole other than in the ordinary course
of business consistent with past practices, and there has not been any event,
occurrence or development that, individually or in the aggregate, constitutes or
would constitute a Material Adverse Effect on the Company.
5.11.2. Without limiting the generality of the foregoing Section
5.11.1, since January 29, 2000, except as set forth in Section 5.11.2 of the
Company Disclosure Schedule, there has not been:
(a) any damage, destruction or loss to any of the assets or
properties of the Company or any of its Subsidiaries that,
individually or in the aggregate, constitutes a Material Adverse
Effect on the Company ;
(b) any declaration, setting aside or payment of any dividend
or distribution (whether in cash, capital stock or property) or
capital return in respect of any shares of the Company's capital
stock or any redemption, purchase or other acquisition by the Company
or any of its Subsidiaries of any shares of the Company's capital
stock, or any repurchase, redemption or other purchase by the Company
or any of its Subsidiaries of any outstanding shares of capital stock
or other securities of, or other ownership interests in, the Company
or any of its Subsidiaries, or any amendment of any material term of
any outstanding security of the Company or any of its Subsidiaries;
-23-
(c) any sale, assignment, transfer, lease or other disposition, or
agreement to sell, assign, transfer, lease or otherwise dispose of,
any of the assets of the Company or any of its Subsidiaries taken as
a whole other than in the ordinary course of business consistent with
past practices;
(d) any acquisition (by merger, consolidation, or acquisition of
stock or assets) by the Company or any of its Subsidiaries of any
corporation, partnership or other business organization or division
thereof or any equity interest therein for consideration;
(e) any (i) incurrence of, (ii) guarantee with respect to, or (iii)
provision of credit support for, any indebtedness by the Company or
any of its Subsidiaries other than pursuant to (A) the Company Credit
Facility in the ordinary course of business or (B) lease financings
for equipment used in the operation of the businesses of the Company
or any of its Subsidiaries in the ordinary course of business; or any
creation or assumption by the Company or any of its Subsidiaries of
any material Lien, other than any Permitted Lien, on any material
asset;
(f) any material change in any method of accounting or accounting
practice (whether for financial accounting or Tax purposes) used by
the Company or any of its Subsidiaries;
(g) (i) any employment, deferred compensation, severance or similar
agreement entered into or amended by the Company or any of its
Subsidiaries and any employee, in each case other than sales
commission agreements and product promotional agreements entered into
in the ordinary course of business consistent with past practices,
(ii) any increase in the compensation payable, or to become payable
by it, to any of its directors or officers or generally applicable to
all or any category of the Company's or any of its Subsidiaries'
employees, (iii) any increase in the coverage or benefits available
under any vacation pay, company awards, salary continuation or
disability, sick leave, deferred compensation, bonus or other
incentive compensation, insurance, pension or other employee benefit
plan, payment or arrangement made to, for or with any of the
directors or officers of the Company or any of its Subsidiaries or
generally applicable to all or any category of the Company's or any
of its Subsidiaries' employees, or (iv) severance pay arrangements
made to, for, or with such directors, officers or employees other
than, in the case of (ii) and (iii) above and only with respect to
employees who are not officers or directors of the Company or any of
its Subsidiaries, increases in the ordinary course of business
consistent with past practices and that, in the aggregate, have not
resulted in a material increase in the benefits or compensation
expense of the Company or any of its Subsidiaries taken as a whole;
(h) any revaluing in any material respect of any of the assets of
the Company or any of its Subsidiaries on the Company Financials,
including, without limitation, writing down the value of any assets
or inventory or
-24-
writing off notes or accounts receivable other than in the ordinary
course of business consistent with past practices;
(i) any loan, advance or capital contribution made by the Company or
any of its Subsidiaries to, or investment in, any Person other than
loans, advances or capital contributions, or investments of the
Company made in the ordinary course of business consistent with past
practices;
(j) any adoption or amendment of any Company Plan;
(k) any waiver, direct or indirect, by the Company or any of its
Subsidiaries of (i) any right or rights of material value or (ii) any
payment of any material debt, Liability or other obligation owed to
the Company or any of its Subsidiaries, except for non-material
waivers and payments made in the ordinary course of business
consistent with past practices;
(l) any change in or amendment to the Company's or any of its
Subsidiaries' certificate of incorporation, by-laws or other
organizational documents;
(m) any payment, loan or advance of any amount to or in respect of,
or the sale, transfer or lease of any properties or assets (whether
real, personal or mixed, tangible or intangible) to, or entering into
of any agreement, arrangement or transaction with or on behalf of,
any officer, director, or employee of the Company, any of its
Subsidiaries, or any Affiliate of any of them, or any business or
entity in which the Company, any Subsidiary or any Affiliate of any
of them, or relative of any such Person, has any material, direct or
indirect, interest, except for (i) directors' fees, (ii) compensation
to the officers and employees of the Company (including benefits
received by such officers and employees as a result of their
participation in Company Plans) in the ordinary course of business
consistent with past practices, and (iii) advancement or
reimbursement of expenses in the ordinary course of business
consistent with past practices;
(n) any material modification or change in any Company Insurance
Policy that would result in a diminishment of coverage under such
Company Insurance Policy;
(o) any acquisition of a fee simple interest or a leasehold or
subleasehold interest in, or any sale, assignment, disposition,
transfer, pledge, mortgage or lease of, any real property owned or
leased by the Company or any of its Subsidiaries;
(p) any issuance, sale or disposition of any capital stock or other
equity interest in the Company, except upon the valid exercise of
Options in accordance with the terms thereof, or any issuance or
grant of any options, warrants or other rights to purchase any such
capital stock or equity interest, or any securities convertible into
or exchangeable for such capital stock or equity interest, or any
other change in the issued and outstanding capitalization of the
Company;
(q) any amendment, alteration or modification in the terms of any
currently outstanding options, warrants or other rights to purchase
any capital stock or equity interest in the Company or any securities
convertible into or exchangeable for such capital stock or
-25-
equity interest, including, without limitation, any reduction in the
exercise or conversion price of any such rights or securities, any
change to the vesting or acceleration terms of any such rights or
securities, or any change to terms relating to the grant of any such
rights or securities;
(r) any closure, shut down or other elimination of any of the
Company's stores or offices or any material change in the basic
character of its business, properties or assets, other than any store
closures effected or proposed to be effected as set forth in Section
5.11.2 of the Company Disclosure Schedule;
(s) any action that, if it had been taken after the date hereof,
would have required the consent of Gart under Section 7.1; and
(t) any agreement to take any actions specified in this Section
5.11.2, except for this Agreement.
5.12. ACTIONS AND PROCEEDINGS. There are no outstanding Orders of any
Governmental Entity against the Company or any of its Subsidiaries, any of their
properties, assets or businesses, or, to the Knowledge of the Company, any of
the Company's or its Subsidiaries' current or former directors or officers or
any other Person whom the Company or any of its Subsidiaries has agreed to
indemnify that would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. Except as set forth in
Section 5.12 of the Company Disclosure Schedule, there are no Actions pending
or, to the Knowledge of the Company, threatened against the Company or any of
its Subsidiaries, any of their properties, assets or businesses, or, to the
Knowledge of the Company, any of the Company's or its Subsidiaries' current or
former directors or officers or any other Person whom the Company or any of its
Subsidiaries has agreed to indemnify that would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company. To
the Company's Knowledge, there are no facts or circumstances specific to the
Company that, if known to a third party, would reasonably be expected to result
in such an Action that could have a Material Adverse Effect on the Company.
5.13. CONTRACTS. Each Contract to which the Company or any of its
Subsidiaries is a party is valid, binding and enforceable and in full force and
effect in accordance with its terms, except where the failure to be so valid,
binding and enforceable and in full force and effect would not reasonably be
expected to have a Material Adverse Effect on the Company, and there are no
defaults by the Company or any of its Subsidiaries or, to the Knowledge of the
Company, another party thereto thereunder, except any default that would not
reasonably be expected to have a Material Adverse Effect on the Company. Except
as set forth in Section 5.13 of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a party to, or is bound by, any non-
competition
-26-
agreement or any other agreement or obligation that purports to limit in any
material respect the manner in which, or the localities in which, the Company or
any such Subsidiary is entitled to conduct all or any material portion of the
business of the Company and its Subsidiaries taken as a whole. Section 5.13 of
the Company Disclosure Schedule lists: (a) each Contract to which the Company or
any of its Subsidiaries is a party that is material to the business, financial
condition, results of operations or prospects of the Company and its
Subsidiaries taken as a whole; and (b) each Contract that is material to the
business, financial condition, results of operations or prospects of the Company
and its Subsidiaries taken as a whole and to which the Company or any of its
Subsidiaries is a party with respect to which a consent of any of the other
parties thereto will be required in connection with the transactions
contemplated by this Agreement.
5.14. TAXES.
5.14.1. All Tax Returns required to have been filed by, or with
respect to, the Company, any of its Subsidiaries, or any affiliated,
consolidated, combined, unitary or similar group of which the Company or any of
its Subsidiaries is or was a member (a "Relevant Company Group") have been duly
and timely filed (including any extensions), except for such Tax Returns where
the failure to file such Tax Returns would not have a Material Adverse Effect on
the Company. All such Tax Returns are true, complete and correct in all material
respects. All material Taxes due and payable by the Company, any of its
Subsidiaries or any member of a Relevant Company Group, whether or not shown on
any Tax Return, or claimed to be due by any Tax Authority, for periods (or
portions of periods) covered by the Company Financials, have been paid or
accrued on the balance sheet included in the Company Financials.
5.14.2. Neither the Company nor any of its Subsidiaries has incurred
any material liability for Taxes in the period after the date of the Company
Financials. The unpaid Taxes of the Company (a) did not, as of the most recent
fiscal quarter end, exceed by any material amount the reserve for liability for
Income Tax (other than the reserve for deferred taxes established to reflect
timing differences between book and tax income) or Other Tax set forth on the
face of the balance sheet included in the Company Financials and (b) will not
exceed by any material amount such reserve as adjusted for operations and
transactions in the ordinary course of business through the Closing Date.
5.14.3. Neither the Company nor any of its Subsidiaries is a party to
any agreement extending the time within which to file any Tax Return. Except for
those claims listed in Section 5.14.3 of the Company Disclosure Schedule, no
claim has ever been made by a Taxing Authority of any jurisdiction in which the
Company or any member of any Relevant Company Group does not file Tax Returns
that the Company or such member is or may be subject to taxation by that
jurisdiction.
5.14.4. The Company, each of its Subsidiaries and each member of any
Relevant Company Group has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor or independent contractor.
-27-
5.14.5. The Company does not have Knowledge of any actions by any
Taxing Authority in connection with assessing additional Taxes against, or in
respect of, it, any of its Subsidiaries, or any Relevant Company Group for any
past period. There is no dispute or claim concerning any Tax liability of the
Company or any of its Subsidiaries either (a) threatened, or to the Company's
Knowledge otherwise claimed or raised by any Taxing Authority or (b) of which
the Company is otherwise aware. There are no Liens for Taxes upon the assets and
properties of the Company or any of its Subsidiaries other than Liens for Taxes
not yet due. Section 5.14.5 of the Company Disclosure Schedule indicates those
Tax Returns, if any, of the Company, each of its Subsidiaries and each member of
any Relevant Company Group that have been audited or examined since the fiscal
year ended January 30, 1996 by Taxing Authorities, and indicates those Tax
Returns of the Company, each of its Subsidiaries and each member of any Relevant
Company Group that currently are the subject of audit or examination. The
Company has made available to Gart complete and correct copies of all federal,
state, local and foreign income Tax Returns filed by, and all Tax examination
reports and statements of deficiencies assessed against or agreed to by, the
Company, each of its Subsidiaries and each member of any Relevant Company Group
since the fiscal year ended January 30, 1999.
5.14.6. There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Returns required to be
filed by, or that include or are treated as including, the Company or any of its
Subsidiaries or with respect to any Tax assessment or deficiency affecting the
Company, any of its Subsidiaries or any Relevant Company Group.
5.14.7. Except for rulings and agreements listed in Section 5.14.7
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has received any written ruling related to Taxes or entered into
any agreement with a Taxing Authority relating to Taxes.
5.14.8. Neither the Company nor any of its Subsidiaries has any
liability for the Taxes of any Person other than the Relevant Company Group of
which the Company is the parent (a) under Section 1.1502-6 of the treasury
regulations (or any similar provision of state, local or foreign law), (b) as a
transferee or successor, (c) by Contract or (d) otherwise.
5.14.9. Neither the Company nor any of its Subsidiaries (a) has
agreed to make or is required to make any adjustment under Section 481 of the
Code by reason of a change in accounting method or (b) are a "consenting
corporation" within the meaning of Section 341(f)(1) of the Code.
5.14.10. Neither the Company nor any of its Subsidiaries is a party
to, or bound by, any obligations under any tax sharing, tax allocation, tax
indemnity, or similar agreement or arrangement.
5.14.11. Neither the Company nor any of its Subsidiaries is a
partner in any joint venture, partnership, Contract or other arrangement that is
treated as a partnership for federal, state, local or foreign Income Tax
purposes.
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5.14.12. Neither the Company nor any of its Subsidiaries was
included, nor is it includible in, the Tax Return of any Relevant Company Group
with any corporation other than such a return of which the Company is the common
parent corporation.
5.14.13. Neither the Company nor any of its Subsidiaries has made
any payments since January 29, 2000, is obligated to make any payments, nor is
it a party to any Contract or arrangement covering any current or former
employee or consultant of the Company that under certain circumstances could
require it to make or give rise to any payments that are not deductible as a
result of the provisions set forth in Section 280G, 404 or 162(m) of the Code or
the treasury regulations thereunder or that would result in an excise tax to the
recipient of any such payment under Section 4999 of the Code.
5.14.14. Neither the Company nor any of its Subsidiaries has been
the subject of an ownership change within the meaning of Section 382(g) of the
Code.
5.14.15. Each material election with respect to Income Taxes
affecting the Company and each of its Subsidiaries is set forth in Section
5.14.15 of the Company Disclosure Schedule.
5.14.16. No interest in the Company is a United States real property
interest within the meaning of Section 897(c) of the Code.
5.14.17. None of the assets of the Company, any of its Subsidiaries,
or any member of any Relevant Company Group are tax exempt use property within
the meaning of Section 168(h) of the Code.
5.14.18. None of the Company, any of its Subsidiaries, or any member
of any Relevant Company Group has distributed the stock of any corporation in a
transaction satisfying the requirements of Section 355 of the Code since April
16, 1997. The stock of none of the Company, any of its Subsidiaries, or any
member of any Relevant Company Group has been distributed in a transaction
satisfying the requirements of Section 355 of the Code since April 16, 1997 .
5.14.19. The Company has filed an election with the IRS, effective
for the fiscal year ending February 3, 2001, to change the Company's inventory
method of accounting from the retail method to the cost method.
5.15. TITLE TO PROPERTIES; ENCUMBRANCES. Except as described in the
following sentence, each of the Company and its Subsidiaries has good, valid
and, in the case of real property, marketable title to, or a valid leasehold
interest in, all of its material properties and assets (real, personal, tangible
and intangible), including, without limitation, all such properties and assets
reflected in the consolidated balance sheet of the Company and its Subsidiaries
as of January 29, 2000 included in the Company SEC Documents (except for
properties and assets disposed of in the ordinary course of business and
consistent with past practices since such date), except for such title or
interest the failure of which to have would not have, individually or in the
aggregate, a Material Adverse Effect on the Company. Except as described in
Section 5.15 of the Company Disclosure Schedule, none of such properties or
assets are subject to any material Liens (whether absolute, accrued, contingent
or otherwise) other than Permitted Liens.
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5.16. INTELLECTUAL PROPERTY. Section 5.16 of the Company Disclosure
Schedule sets forth a correct and complete list of all Intellectual Property
Rights (other than confidentiality and nondisclosure agreements, license
agreements, third-party software generally commercially available on a "shrink
wrap" license or similar basis and non-material copyright and trade secret
items) now used or presently proposed to be used in the business of the Company
and its Subsidiaries (the "Company Intellectual Property Rights"). The Company
owns or has the right to use (without the making of any payment to others or the
obligation to grant rights to others in exchange, except as set forth in Section
5.16 of the Company Disclosure Schedule) all Company Intellectual Property
Rights in all material respects necessary to the conduct of its business as
presently being conducted. To the Knowledge of the Company, the Company has no
limitation by contract or imposed by any court on its ability to use the Company
Intellectual Property Rights in any jurisdiction inside or outside the United
States in which the Company is engaged in material business activities to the
extent of the manner in which such business is currently conducted by the
Company in such jurisdiction. Except as set forth in Section 5.16 of the Company
Disclosure Schedule, the validity of the Company Intellectual Property Rights,
the title thereto of the Company, and the authority of the Company to use the
Company Intellectual Property Rights as such Company Intellectual Property
Rights are presently being used in any material manner is not being challenged
in any administrative or judicial proceeding to which the Company is a party or,
to the Knowledge of the Company, is subject, nor has any such claim been
threatened in writing to the Company or any of its Subsidiaries within the
preceding three years. To the Knowledge of the Company, the conduct of the
business of the Company as now conducted does not infringe or conflict in any
material respect with (a) the Trademark Rights or Patent Rights of others, or
(b) any other Intellectual Property Rights of others. The Company has, as of the
date hereof, and will have as of the Effective Time, satisfied all current
requirements necessary to maintain the validity of all Company Intellectual
Property Rights, and the right to use such Company Intellectual Property Rights
in all material respects, necessary to the conduct of the Company's business as
it is presently being conducted. The Company has no Knowledge of any use of any
Company Intellectual Property Rights owned by or exclusively licensed to the
Company that is now being made, except (i) by the Company or (ii) by any Person
duly licensed by it to use the same under a Contract as described in Section
5.16 of the Company Disclosure Schedule. Except as set forth in Section 5.16 of
the Company Disclosure Schedule, the Company has no Knowledge of any
infringement by others of any Company Intellectual Property Rights. To the
Knowledge of the Company, all licenses and other agreements pertaining to the
Company Intellectual Property Rights are in compliance in all material respects
with all applicable laws and regulations in all jurisdictions in which the
Company conducts any business operations, including, without limitation, those
pertaining to remittance of foreign exchange and taxation. The consummation of
the transactions contemplated hereby will not alter or impair the rights and
interests of the Company in the Company Intellectual Property Rights, and the
Company will have the same rights and interests in the Company Intellectual
Property Rights immediately after the Closing as it will have immediately prior
to the Closing.
5.17. PROVIDED INFORMATION. The information supplied, or to be supplied,
by the Company for inclusion in (a) the Registration Statement to be filed with
the SEC on Form S-4 under the Securities Act (the "Registration Statement") for
the purpose of registering the shares of Gart Common Stock to be issued in
connection with the Merger, (b)
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the joint proxy statement/prospectus to be distributed in connection with the
Stockholders Meetings to vote upon, as applicable, the adoption of this
Agreement, the approval of the Merger and the issuance of Gart Common Stock
contemplated hereby (the "Proxy Statement"), or (c) any other filing required to
be filed with the SEC, will not, (i) in the case of the Registration Statement
or such other required filing, as applicable, on the date it is filed with the
SEC, on the date each amendment or supplement thereto is filed with the SEC, on
the date it becomes effective, and as of the Effective Time, and (ii) in the
case of the Proxy Statement, on the dates of the mailing of the Proxy Statement
by the Company and Gart or on the dates of the Stockholders Meetings, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement and any amendments or supplements thereto, on
their respective dates of mailing, and any other filing required to be filed
with the SEC, as of the date thereof, insofar as they relate to or are filed or
are deemed to be filed by the Company or any of its Affiliates, will comply in
all material respects with all applicable requirements of the Exchange Act.
Notwithstanding the foregoing, the Company makes no representations with respect
to any statement in the foregoing documents based upon, and conforming to,
information supplied by Gart or MergerSub for inclusion therein.
5.18. COMPANY PLANS; ERISA.
5.18.1. Except as disclosed in Section 5.18.1 of the Company
Disclosure Schedule, during the six-year period ending on the Closing Date, (a)
neither the Company nor any of the Company ERISA Affiliates maintains or
sponsors (or maintained or sponsored), or is or was required to make
contributions to, any Company Plans, (b) none of the Company Plans is or was a
"multi-employer plan", as defined in Section 3(37) of ERISA, (c) none of the
Company Plans is or was a "defined benefit pension plan" within the meaning of
Section 3(35) of ERISA, (d) none of the Company Plans provides or provided post-
retirement medical or health benefits, (e) none of the Company Plans is or was a
"welfare benefit fund," as defined in Section 419(e) of the Code, or an
organization described in Sections 501(c)(9) or 501(c)(20) of the Code, (f)
neither the Company nor any of the Company ERISA Affiliates is or was a party to
any collective bargaining agreement, and (g) neither the Company nor any of the
Company ERISA Affiliates have announced or otherwise made any commitment to
create or amend any Company Plan. Except as disclosed in Section 5.18.1 of the
Company Disclosure Schedule, notwithstanding any statement or indication in this
Agreement to the contrary, there are no Company Plans (i) as to which Gart or
MergerSub will be required solely as a result of the execution of this Agreement
or the consummation of the transactions contemplated hereby to make any
contributions or with respect to which Gart or MergerSub shall have any
obligation or liability whatsoever, whether on behalf of any of the current
employees of the Company or any Subsidiary or on behalf of any other Person,
after the Closing, or (ii) that Gart or the Surviving Corporation will not be
able to terminate immediately after the Closing in accordance with their terms
and ERISA. With respect to each of such Company Plans, at the Closing there will
be no unrecorded material liabilities with respect to the establishment,
implementation, operation, administration or termination of any such Company
Plan, or the termination of the participation in any such Company Plan by the
Company or any of the Company ERISA Affiliates. The Company has delivered or
made available to Gart true and complete copies of: (A) each of the Company
Plans and any related funding agreements
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thereto (including insurance Contracts) including all amendments, and, to the
best Knowledge of the Company, all of the documents are legally valid and
binding and in full force and effect and there are no defaults thereunder, (B)
the currently effective Summary Plan Description pertaining to each of the
Company Plans that are required to provide such summaries, (C) all annual
reports for each of the Company Plans (including all related schedules) that are
required to file such reports, (D) the most recently filed PBGC Form 1 (if
applicable), (E) the most recent IRS determination letter, opinion, notification
or advisory letter (as the case may be) issued with respect to each Company Plan
that is intended to constitute a qualified plan under Section 401 of the Code,
and (F) for each unfunded Company Plan, any financial statements that are
available as of the Closing Date and that pertain to the most recently ended
plan year and consist of (1) the consolidated statement of assets and
liabilities of such Company Plan as of the last day of its recently ended plan
year, and (2) the statement of changes in fund balance and in financial position
or the statement of changes in net assets available for benefits under such
Company Plan for the most recently-ended plan year, which such financial
statements shall fairly present the financial condition and the results of
operations of such Company Plan in accordance with GAAP, consistently applied,
as of such dates.
5.18.2. During the six-year period ending on the Closing Date, neither the
Company nor any of the Company ERISA Affiliates sponsored, maintained or
contributed to (or had an obligation to contribute to) any defined benefit plan
described in Section 3(35) of ERISA or Section 414(j) of the Code, or any other
pension benefit plan that is or was subject to (a) the minimum funding standards
of Section 302 of ERISA or Section 412 of the Code or (b) Title IV of ERISA.
5.18.3. To the best Knowledge of the Company, neither the Company nor any
of the Company ERISA Affiliates is subject to any material liability, Tax or
penalty whatsoever to any person or agency whomsoever as a result of engaging in
a prohibited transaction under ERISA or the Code, and neither the Company nor
any of the Company ERISA Affiliates has any Knowledge of any circumstances that
reasonably might result in any material liability, Tax or penalty, including a
penalty under Section 502 of ERISA, as a result of a breach of any duty under
ERISA or under other applicable Laws. During the six-year period ending on the
Closing Date, no event has occurred that could subject any Company Plan to tax
under Section 511 of the Code.
5.18.4. Neither the Company nor any of the Company ERISA Affiliates has
any material unfunded liability under ERISA in respect of any of the Company
Plans. Each of the Company Plans that is intended to be a qualified plan under
Section 401(a) of the Code has received a favorable determination letter,
opinion, notification or advisory letter from the IRS, and, to the best
Knowledge of the Company, during the six-year period ending on the Closing Date,
has been operated in all material respects in accordance with its terms and with
the provisions of the Code. To the best Knowledge of the Company, during the
six-year period ending on the Closing Date, all of the Company Plans have been
administered and maintained in substantial compliance with ERISA, the Code and
all other applicable Laws. To the best Knowledge of the Company, during the six-
year period ending on the Closing Date, all contributions required to be made to
each of the Company Plans under the terms of that Company Plan, ERISA, the Code
or any other applicable Laws have been timely made. Each Company Plan intended
to meet the requirements for tax-favored
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treatment under Subchapter B of Chapter 1 of the Code is in all material
respects in compliance with such requirements. The Company Interim Financial
Statements properly reflect all amounts required to be accrued as liabilities to
date under each of the Company Plans.
5.18.5. Except as disclosed in Section 5.18.5 of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of any of the transactions contemplated hereby (whether alone or
upon the occurrence of any additional or further acts or events) will (a) result
in any obligation or liability (with respect to accrued benefits or otherwise)
on the part of the Company, Gart, the Surviving Corporation, or any of their
respective Subsidiaries, to any Company Plan, or to any present or former
employee, director, officer, stockholder, contractor or consultant (or any of
their dependents) of the Company, Gart, the Surviving Corporation, or any of
their respective Subsidiaries, (b) be a trigger event under any Company Plan
that will result in any payment (whether of severance pay or otherwise) becoming
due to any such present or former employee, officer, director, stockholder,
contractor, or consultant, or any of their dependents, or (c) accelerate the
time of payment or vesting, or increase the amount, of any compensation
theretofore or thereafter due or granted to any employee, officer, director,
stockholder, contractor, or consultant of the Company or any of their
dependents. With respect to any insurance policy that provides, or has provided,
funding for benefits under any Company Plan, (i) there is and will be no
liability of the Company, Gart, the Surviving Corporation or any of their
respective Subsidiaries in the nature of a retroactive or retrospective rate
adjustment, loss sharing arrangement, or actual or contingent liability as of
the Closing Date, nor would there be any such liability if such insurance policy
were terminated as of the Closing Date, and (ii) no insurance company issuing
any such policy is in receivership, conservatorship, bankruptcy, liquidation, or
similar proceeding, and, to the Knowledge of the Company, no such proceedings
with respect to any insurer are imminent.
5.18.6. With respect to each Company Plan that provides health care
coverage, during the six-year period ending on the Closing Date, the Company and
each Company ERISA Affiliate have complied in all material respects with (a) the
applicable health care continuation and notice provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), and the
applicable COBRA regulations and (b) the applicable requirements of the Health
Insurance Portability and Accountability Act of 1996 and the regulations
thereunder, and neither the Company nor any Company ERISA Affiliate has incurred
any material liability under Section 4980B or Section 4980C of the Code.
5.18.7. Other than routine claims for benefits under the Company Plans,
there are no pending, or, to the best Knowledge of the Company, threatened,
Actions or proceedings involving the Company Plans, or the fiduciaries,
administrators, or trustees of any of the Company Plans or the Company, any of
its Subsidiaries or any of their respective Company ERISA Affiliates as the
employer or sponsor under any Company Plan, with any of the IRS, the Department
of Labor, the PBGC, any participant in or beneficiary of any Company Plan or any
other person whomsoever. The Company knows of no reasonable basis for any such
claim, lawsuit, dispute or Action or proceeding.
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5.18.8. As of the date hereof, Section 5.18.8 of the Company
Disclosure Schedule completely and accurately identifies (by individual, in the
case of benefits to "key executives," "executives" and "key employees," as those
terms are used in the Company's severance plans, and, in an aggregate amount, in
the case of benefits to other employees of ▇▇▇▇▇▇'▇ Sporting Goods, Inc. -
Services on October 23, 2000 (it being understood that such aggregate amount
excludes (i) employees hired since October 23, 2000 and employees in the
warehouse and distribution centers and (ii) the effect of employee raises since
October 23, 2000)) the amount of all severance and/or "stay bonus" benefits that
may become payable as a result of the consummation of the transactions
contemplated by this Agreement.
5.19. ENVIRONMENTAL MATTERS. The Company and its Subsidiaries are and at
all times have been, and all real property currently or previously owned,
leased, occupied, used by or under the control of the Company or any of its
Subsidiaries and all operations or activities of the Company and its
Subsidiaries (including, without limitation, those conducted on or taking place
at any of such Company Real Property) are and have been, in compliance with and
not subject to any Liability or obligation under any applicable Environmental
Law or Environmental Permit except where any of the foregoing would not have a
Material Adverse Effect on the Company. There is no condition or circumstance
regarding the Company or any of its Subsidiaries or their business or any such
Company Real Property or the operations or activities conducted thereon, that,
to the Knowledge of the Company, could reasonably be expected to give rise to a
violation of, or Liability or obligation under, any applicable Environmental Law
or Environmental Permit which would have a Material Adverse Effect on the
Company. Neither the Company, any of its Subsidiaries nor, to the Knowledge of
the Company, any Person, the acts or omissions of which may be attributable to,
the responsibility of, or be the basis of a Liability to, the Company, has, or
has arranged to have, any Hazardous Material generated, released, treated,
stored or disposed of at, or transported to, any facility or property the
remediation or cleanup of which, or the response costs related thereto, could
reasonably be expected to become or result in a Material Adverse Effect on the
Company. The Company has not received written notice of any allegations, claims,
demands, citations, notices of violation, or orders of noncompliance made
against the Company relating or pursuant to any Environmental Law or
Environmental Permit except those that have been corrected or complied with or
that are not material to the Company, and, to the Knowledge of the Company, no
such allegation, claim, demand, citation, notice of violation or order of
noncompliance is threatened.
5.20. LABOR MATTERS. With respect to employees of the Company and its
Subsidiaries: (a) to the Knowledge of the Company, there are no pending or
threatened unfair labor practice charges or employee grievance charges; (b)
there is no request for union representation, labor strike, dispute, slowdown or
stoppage actually pending or, to the Knowledge of the Company, threatened
against the Company, and there has been no such event during the 18 months
preceding the date hereof; (c) the Company is not a party to any collective
bargaining agreements; and (d) except as set forth in Section 5.20 of the
Company Disclosure Schedule, the employment of each of the Company's employees
is terminable at will (in accordance with Company policy, irrespective of the
effect of any applicable Laws of any state) without cost to the Company except
for payments required under the Plans and the payment of accrued salaries or
wages and vacation pay. No employee or former employee has any contractual
right pursuant to any oral or written agreement to be rehired by the Company.
The Company is, and since January 29, 2000 has been, in compliance in
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all material respects with all applicable Laws respecting employment and
employment practices and the terms and conditions of employment, wages and
hours, including, without limitation, any such Laws respecting employment
discrimination, occupational safety and health, and unfair labor practices,
except where such failure to comply would not have a Material Adverse Effect on
the Company. The Company is not delinquent in any material respect in payments
to its employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed by them or any amounts required to be
reimbursed to such employees. Section 5.20 of the Company Disclosure Schedule
contains an accurate list of all employment Contracts between the Company or any
of its Subsidiaries and any employee of the Company or any of its Subsidiaries.
5.21. RELATED PARTY TRANSACTIONS. Except as set forth in Section 5.21 of
the Company Disclosure Schedule or as contemplated by the transactions
contemplated hereby, no (a) beneficial owner of 10% or more of the Company's
outstanding capital stock, (b) officer or director of the Company or (c) any
Person (other than the Company) in which any such beneficial owner, officer or
director owns any beneficial interest (other than a publicly held corporation
whose stock is traded on a national securities exchange or in the over-the-
counter market and less than 1% of the stock of which is beneficially owned by
all such Persons) has any interest in: (i) any Contract, arrangement or
understanding with, or relating to, the business or operations of, the Company
or any of its Subsidiaries; (ii) any loan, Contract, arrangement, understanding
or agreement for, or relating to, indebtedness of the Company or any of its
Subsidiaries; or (iii) any property (real, personal or mixed), tangible or
intangible, used in the business or operations of the Company or any of its
Subsidiaries, excluding any such Contract, arrangement or understanding
constituting a Company Plan.
5.22. REAL ESTATE.
5.22.1. Section 5.22.1 of the Company Disclosure Schedule sets forth
a true, correct and complete list of all real property (including improvements
thereon) owned in fee simple by the Company (collectively, the "Company Owned
Real Property"). With respect to each such parcel of Company Owned Real
Property: (a) the Company owns fee simple marketable title to such parcel,
subject to no Liens other than any Permitted Liens or any Liens set forth in
Section 5.22.1 of the Company Disclosure Schedule; (b) there are no leases,
subleases, licenses, concessions or other agreements, written or oral, granting
to any person the right of use or occupancy of any portion of such parcel; and
(c) there are no outstanding actions, rights of first refusal or options to
purchase such parcel.
5.22.2. Section 5.22.2 of the Company Disclosure Schedule sets forth
a true, correct and complete list of all of the leases and subleases ("Company
Leases") and each leased and subleased parcel of real property in which the
Company or any of its Subsidiaries is a tenant, subtenant, landlord or
sublandlord (collectively, the "Company Leased Real Property") and for each
Company Lease indicates: (a) whether or not the consent of and/or notice to the
landlord thereunder will be required in connection with the transactions
contemplated by this Agreement; (b) whether any third party or the Company is
the guarantor of the obligations of any Subsidiary of the Company under the
Company Lease and the identity of any such guarantor; (c) its term and any
options to extend the term; and (d) the current rent payable as set forth on the
rent roll report (it being understood that
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such amount reported on the rent roll report may not include percentage rent,
common area maintenance, tax and insurance amounts payable by the Company under
the Company Lease). The Company (either directly or through a Subsidiary) holds
a valid and existing leasehold or subleasehold interest or landlord or
sublandlord interest as applicable in the Company Leased Real Property, under
each of the Company Leases described in Section 5.22.2 of the Company Disclosure
Schedule. Except as noted in Section 5.22.2 of the Company Disclosure Schedule,
the Company has delivered or made available to Gart true, correct and complete
copies of each of the Company Leases, including, without limitation, all
amendments, modifications, side agreements, consents, subordination agreements
and guarantees. With respect to each Company Lease: (a) the Company Lease is
legal, valid, binding, enforceable and in full force and effect; (b) the Company
Lease will continue to be legal, valid, binding, enforceable and in full force
and effect on the same terms and conditions following the Effective Time; (c)
neither the Company (or its applicable Subsidiary), nor, to the Knowledge of the
Company, any other party to the Company Lease, is in any material respect in
breach or default under the Company Lease, and no event has occurred that, with
notice or lapse of time, would constitute a breach or default in any material
respect by the Company (or such Subsidiary) or permit termination, modification
or acceleration under the Company Lease by any other party thereto; (d) the
Company (or its applicable Subsidiary) has performed and will continue to
perform all of its obligations in all material respects under the Company Lease;
(e) the Company has not, and, to the Knowledge of the Company, no third party
has, repudiated any provision of the Company Lease; (f) there are no disputes,
oral agreements or forbearance programs in effect as to the Company Lease other
than those that, individually or in the aggregate, do not constitute a Material
Adverse Effect on the Company; (g) the Company Lease has not been modified in
any respect, except to the extent that such modifications are set forth in the
documents previously delivered or made available to Gart; (h) the Company has
not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered
any interest in the Company Lease; and (i) each guaranty by the Company is in
full force and effect and no default has occurred thereunder.
5.22.3. The Company Owned Real Property and the Company Leased Real
Property are referred to collectively herein as the "Company Real Property."
Except as disclosed on Section 5.22.1 or Section 5.22.2 of the Company
Disclosure Schedule, there is no Company Real Property used by the Company or
any of its Subsidiaries in their businesses. To the Knowledge of the Company,
each parcel of Company Real Property is in material compliance with all existing
Laws, including, without limitation, (a) the Americans with Disabilities Act, 42
U.S.C. Section 12102 et seq., together with all rules, regulations and official
interpretations promulgated pursuant thereto, and (b) all Laws with respect to
zoning, building, fire, life safety, health codes and sanitation. The Company
and its Subsidiaries have received no notice of, and have no Knowledge of, any
condition currently or previously existing on the Company Real Property or any
portion thereof that may give rise to any violation of, or require any
remediation under, any existing Law applicable to the Company Real Property if
it were disclosed to the authorities having jurisdiction over such Company Real
Property other than those (i) arising in the ordinary course of business or (ii)
that do not constitute, individually or in the aggregate, a Material Adverse
Effect on the Company.
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5.22.4. The Company has not received written notice of any
proceedings in eminent domain, condemnation or other similar proceedings that
are pending, and, to the Knowledge of the Company, there are no such proceedings
threatened, affecting any portion of the Company Real Property. The Company has
not received written notice of the existence of any outstanding writ,
injunction, decree, Order or judgment or of any pending proceeding, and, to the
Knowledge of the Company, there is no such writ, injunction, decree, Order,
judgment or proceeding threatened, relating to the ownership, lease, use,
occupancy or operation by any person of the Company Real Property.
5.22.5. To the Knowledge of the Company, the current use of the
Company Real Property does not violate in any material respect any instrument of
record or agreement affecting such Company Real Property. There are no
violations of any covenants, conditions, restrictions, easements, agreements or
Orders of any Governmental Entity having jurisdiction over any of the Company
Real Property that affect such Real Property or the use or occupancy thereof
other than those that do not, individually or in the aggregate, constitute a
Material Adverse Effect on the Company. No damage or destruction has occurred
with respect to any of the Company Real Property that, individually or in the
aggregate, has had or resulted in, or is reasonably likely to have or result in,
a Material Adverse Effect on the Company.
5.22.6. There are currently in effect such insurance policies for
the Company Real Property as are customarily maintained with respect to similar
properties. True, correct and complete copies of all insurance policies
maintained by the Company and its Subsidiaries with respect to the Company Real
Property have been delivered or made available to Gart. All premiums due on such
insurance policies have been paid by the Company, and the Company will maintain
such insurance policies from the date hereof through the Effective Time or
earlier termination of this Agreement. The Company has not received, and has no
Knowledge of, any notice or request from any insurance company requesting the
performance of, any work or alteration with respect to the Company Real Property
or any portion thereof. The Company has received no notice from any insurance
company concerning, nor does the Company have any Knowledge of, any defects or
inadequacies in the Company Real Property that, if not corrected, would result
in the termination of insurance coverage or would increase its cost.
5.22.7. All buildings and other improvements included within the
Company Real Property (the "Company Improvements") are, in all material
respects, adequate to operate such facilities as currently used and all of the
Company's SuperSports USA stores are in good condition and repair, and, to the
Company's Knowledge, there are no facts or conditions affecting any of the
Company Improvements that would, individually or in the aggregate, interfere in
any significant respect with the current use, occupancy or operation thereof,
which interference would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company. With respect to the
Company Improvements, the Company has all rights of access that are reasonably
necessary for the operation of its business.
5.22.8. All required or appropriate certificates of occupancy,
permits, licenses, franchises, approvals and authorizations (collectively, the
"Company Real Property Permits") of all Governmental Entities having
jurisdiction over the Company
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Real Property, the absence of which would be reasonably likely to cause a
Company store to cease its operations, have been issued to the Company to enable
the Company Real Property to be lawfully occupied and used for all of the
purposes for which it is currently occupied and used have been lawfully issued
and are, as of the date hereof, in full force and effect. The Company has not
received, or been informed by a third party of the receipt by it of, any notice
that would be reasonably likely to cause a Company store to cease its operations
from any Governmental Entity having jurisdiction over the Company Real Property
threatening a suspension, revocation, modification or cancellation of any
Company Real Property Permit or requiring any remediation in connection with
maintaining any Company Real Property Permit, and, to the Knowledge of the
Company, there is no basis for the issuance of any such notice or the taking of
any such action.
5.23. INSURANCE. Each of the Company and its Subsidiaries maintains
insurance policies (the "Company Insurance Policies") against all risks of a
character and in such amounts as are usually insured against by similarly
situated companies in the same or similar businesses. Section 5.23 of the
Company Disclosure Schedule contains a complete and accurate list of all Company
Insurance Policies including those of the Company's Subsidiaries. Each Company
Insurance Policy is in full force and effect and is valid, outstanding and
enforceable, and, other than as set forth in Section 5.23 of the Company
Disclosure Schedule, all premiums due thereon have been paid in full. None of
the Company Insurance Policies will terminate or lapse (or be affected in any
other materially adverse manner) prior to the Effective Time by reason of the
transactions contemplated by this Agreement. Each of the Company and its
Subsidiaries has complied in all material respects with the provisions of each
Company Insurance Policy under which it is the insured party. No insurer under
any Company Insurance Policy has cancelled or generally disclaimed Liability
under any such policy or, to the Company's Knowledge, indicated any intent to do
so or not to renew any such policy. All material claims under the Company
Insurance Policies have been filed in a timely fashion. Since February 3, 1996,
there have been no historical gaps in insurance coverage of the Company and/or
its Subsidiaries. The Company has provided to Gart a schedule setting forth the
Company's general liability loss history for the Company's last five fiscal
years and the Company's workers' compensation loss history for the Company's
last two policy years.
5.24. MERCHANDISE VENDORS. Set forth in Section 5.24 of the Company
Disclosure Schedule is a list of the ten largest merchandise vendors of the
Company based on the dollar value of materials or products purchased by the
Company for the fiscal year ended January 29, 2000. Since such date, there has
not been, nor as a result of the Merger to the Company's Knowledge is there
anticipated to be, any change in relations with any of the major merchandise
vendors of the Company and its Subsidiaries that, individually or in the
aggregate, would have a Material Adverse Effect on the Company.
5.25. VENDORS AND LANDLORDS; CO-OPERATIVE ADVERTISING CONTRACTS. There
are no disputes or disagreements between the Company or any of its Subsidiaries,
on the one hand, and any vendor or landlord of the Company or any of its
Subsidiaries or any Person that is a party to a co-operative advertising
contract with the Company or any of its Subsidiaries, on the other hand, that
are pending or, to the Knowledge of the Company, threatened that, in the
aggregate and net of the reserve for such disputes and disagreements set forth
in the most recent balance sheet (including the notes thereto)
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included in the Company SEC Documents, exceed $1,000,000; and the Company is not
aware of any basis on which any such material disputes or disagreements could
reasonably be expected to arise.
5.26. STORE CLOSINGS. Except as set forth in Section 5.26 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries have any
material Liability of any kind related to the closing of any store with respect
to which the Company or any of its Subsidiaries terminated, following January 1,
1990, its leasehold or subleasehold interest.
5.27. DISCLOSURE. Each representation and warranty made by the Company
contained in this Agreement, and the Company Disclosure Schedule and each
certificate prepared or delivered by, or on behalf of, the Company and provided,
or to be provided, to Gart in connection herewith, do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein or therein not misleading.
5.28. TAKEOVER STATUTES. The board of directors of the Company has
approved the Merger and this Agreement and such approval is sufficient to render
inapplicable to the Merger, this Agreement and the transactions contemplated
hereby, the restrictions on business combinations set forth in Section 203 of
the DGCL. To the Company's Knowledge, no other Takeover Statute applicable to
the Company is applicable to the Merger or any of the other transactions
contemplated hereby.
5.29. OPINION OF FINANCIAL ADVISOR. Except as set forth in Section 5.29 of
the Company Disclosure Schedule, the Company has received a written opinion from
Financo, Inc. to the effect that, as of the date hereof, the Merger
Consideration to be received in the Merger by the holders of the shares of
Company Common Stock is fair to such holders from a financial point of view.
5.30. BROKERS. Except as set forth in Section 5.30 of the Company
Disclosure Schedule, except for fees, commissions and expenses payable to its
financial advisor, Financo, Inc., with respect to its work in connection with
rendering a fairness opinion with respect to the transactions contemplated by
this Agreement, no broker, finder or financial advisor retained by the Company
is entitled to any brokerage, finder's or other fee or commission from the
Company in connection with the transactions contemplated by this Agreement.
5.31. FINANCING. The Company has no reason to believe that any condition
to the Financing contemplated by the Financing Letter will fail to be satisfied
in accordance with its terms (it being understood that, in making such
representation, the Company is not assuming any responsibility for the
representations, warranties and covenants of Gart and MergerSub set forth in
this Agreement, which responsibility shall remain solely that of Gart and
MergerSub).
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ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF GART AND MERGERSUB
Gart and MergerSub hereby represent and warrant to the Company that, except
as set forth in the Gart Disclosure Schedule (provided, however, that each
disclosure set forth in the Gart Disclosure Schedule shall not be deemed to
refer to any section other than (i) the specific section or sections referenced
in such disclosure and (ii) any other sections where the applicability of the
disclosed matter or circumstance to the representation or warranty in question
is reasonably obvious):
6.1. ORGANIZATION AND GOOD STANDING. Each of Gart and MergerSub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to carry on
its business as it is now being conducted. Each of Gart and MergerSub is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified or in good standing would not have a
Material Adverse Effect, individually or in the aggregate. Without limiting the
generality of the foregoing, Gart is qualified to do business in the states set
forth on Section 6.1 of the Gart Disclosure Schedule.
6.2. CERTIFICATE OF INCORPORATION AND BY-LAWS. Complete and correct copies
of the certificates of incorporation and by-laws or equivalent organizational
documents, each as amended as of the date hereof, of Gart and MergerSub have
been made available to the Company. The certificates of incorporation, by-laws
and equivalent organizational documents of Gart and each of its current
Subsidiaries are in full force and effect. Neither Gart nor any of its current
Subsidiaries is in violation of any provision of its certificate of
incorporation, by-laws or equivalent organizational documents.
6.3. CAPITALIZATION.
6.3.1. As of the date hereof, the authorized capital stock of Gart
consists of 3,000,000 shares of Gart Preferred Stock, and 22,000,000 shares of
Gart Common Stock. At the close of business on December 30, 2000, (a) no shares
of Gart Preferred Stock were outstanding and (b) 7,354,864 shares of Gart Common
Stock were outstanding. Section 6.3.1 of the Gart Disclosure Schedule sets forth
the aggregate number (by type) as of such date of all outstanding options,
warrants, rights and other securities of Gart convertible into, or exercisable
for, shares of capital stock of Gart. All outstanding shares of Gart Common
Stock have been duly authorized and validly issued and are fully paid, non-
assessable and free of preemptive rights. No shares of Gart Common Stock are
owned by any direct or indirect Subsidiary of Gart. All of the shares of
MergerSub Common Stock, upon their issuance, will be owned by Gart or an
Affiliate of Gart.
6.3.2. Except as described in this Section 6.3, set forth on Section
6.3.1 of the Gart Disclosure Schedule and as contemplated by this Agreement, (a)
no shares of capital stock or other equity securities of Gart are authorized,
issued or outstanding, or reserved for issuance, and there are no options,
warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character to which
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Gart or any of its current Subsidiaries is a party relating to the issued or
unissued capital stock or other equity interests of Gart or any of its current
Subsidiaries that require Gart or any of its current Subsidiaries to grant,
issue or sell any shares of the capital stock or other equity interests of Gart
or any of its current Subsidiaries by sale, lease, license or otherwise; (b)
neither Gart nor any of its Subsidiaries have any obligation, contingent or
otherwise, to repurchase, redeem or otherwise acquire any shares of the capital
stock or other equity interests of Gart or any of its Subsidiaries; (c) neither
Gart nor any of its Subsidiaries, directly or indirectly, owns, or has agreed to
purchase or otherwise acquire, the capital stock or other equity interests of,
or any interest convertible into or exchangeable or exercisable for such capital
stock or such equity interests of, any corporation, partnership, joint venture
or other entity that would be material in value to Gart; and (d) there are no
voting trusts, proxies or other agreements or understandings to which Gart or
any of its Subsidiaries is a party with respect to the voting of any shares of
capital stock or other equity interests of Gart or any of its Subsidiaries.
6.4. GART SUBSIDIARIES. Section 6.4 of the Gart Disclosure Schedule
contains a list of the following information for each current Subsidiary of
Gart: (a) the name of such Subsidiary; (b) its authorized, issued and
outstanding capital stock or other equity interests, and the percentage of such
capital stock or other equity interests owned by Gart or any Subsidiary of Gart,
and the identity of such owner; and (c) any capital stock reserved for future
issuance pursuant to outstanding options or other agreements, and the identity
of all parties to any such option or other agreement. Each current Subsidiary of
Gart is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization. Each
current Subsidiary of Gart has all requisite corporate power and authority to
carry on its business as it is now being conducted. Each current Subsidiary of
Gart is duly qualified as a foreign corporation or organization authorized to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect on Gart. Without limiting
the generality of the foregoing, the current Subsidiaries of Gart are qualified
to do business in the states set forth on Section 6.4 of the Gart Disclosure
Schedule. All of the outstanding shares of capital stock or other ownership
interests in each of Gart's current Subsidiaries have been duly authorized and
validly issued, are fully paid and non-assessable, and are owned by Gart or
another Subsidiary of Gart free and clear of all Liens, and are not subject to
preemptive rights created by statute, such Subsidiary's certificate of
incorporation, by-laws or equivalent organizational documents, or any agreement
to which such Subsidiary is a party.
6.5. CORPORATE AUTHORITY. Each of Gart and MergerSub has the requisite
corporate power and authority to execute and deliver this Agreement and, subject
to the approval of Gart's stockholders with respect to the issuance of Gart
Common Stock contemplated hereby, to consummate the transactions contemplated
hereby. The execution and delivery by each of Gart and MergerSub of this
Agreement and the consummation by each of Gart and MergerSub of the transactions
contemplated hereby have been duly authorized by its respective board of
directors and, except for the approval and adoption of Gart's stockholders with
respect to the issuance of Gart Common Stock contemplated hereby, no other
corporate action on the part of Gart or MergerSub is necessary to authorize the
execution and delivery by Gart and MergerSub, respectively, of this Agreement
and the
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consummation by it of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by each of Gart and MergerSub and constitutes a
valid and binding agreement of each of Gart and MergerSub and is enforceable
against Gart and MergerSub in accordance with its terms, except to the extent
that (a) such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or hereafter
in effect, relating to or limiting creditors' rights generally and (b) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. The preparation of the
Registration Statement and the Proxy Statement has been duly authorized by the
board of directors of Gart. The corporate records and minute books or other
applicable records of Gart and MergerSub reflect all material action taken and
authorizations made at meetings of such companies' boards of directors or any
committees thereof and at any stockholders' meetings thereof.
6.6. COMPLIANCE WITH APPLICABLE LAW. Gart and each of its Subsidiaries
hold, and are in compliance with the terms of, all material Permits required for
the operation of the businesses of Gart and its Subsidiaries, except for
failures to hold or to comply with such Permits that would not have a Material
Adverse Effect on Gart. With respect to material Permits of Gart and its
Subsidiaries, to the Knowledge of Gart, no action or proceeding is pending or
threatened that would reasonably be expected to have a Material Adverse Effect
on Gart. The businesses of Gart and its Subsidiaries are being conducted in all
material respects in compliance with all applicable material Laws of any
Governmental Entity. To the Knowledge of Gart, no material investigation or
review by any Governmental Entity with respect to Gart or its Subsidiaries is
pending or threatened.
6.7. NON-CONTRAVENTION. Except as set forth in Section 6.7 of the Gart
Disclosure Schedule, the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, (a) result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or require the consent of any Person that is a party to,
any Gart Lease or any other material Contract to which Gart or any of its
Subsidiaries is a party, or result in the creation of any Lien (other than any
Permitted Lien) upon any of the properties or assets of Gart or any of its
Subsidiaries, (b) conflict with or result in any violation of any provision of
the certificate of incorporation or the by-laws or other equivalent
organizational document, in each case as amended, of Gart or any of its
Subsidiaries, or (c) subject to the governmental filings referenced in clause
(a) of Section 6.8, conflict with or violate any Order, or to the Knowledge of
Gart, any Law applicable to Gart or any of its Subsidiaries or any of their
respective properties or assets, other than, in the case of clauses (a) and (c),
any such conflicts or violations that, individually or in the aggregate, would
not have a Material Adverse Effect on Gart.
6.8. GOVERNMENT APPROVALS AND CONSENTS. No filing or registration with, or
authorization, consent or approval of, any Governmental Entity is required by or
with respect to Gart or any of its Subsidiaries in connection with the execution
and delivery of this Agreement by Gart or MergerSub or is necessary for the
consummation of the transactions contemplated hereby (including, without
limitation, the Merger) except: (a) in connection, or in compliance, with the
rules of The Nasdaq Stock Market, the provisions of
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the HSR Act, the Securities Act, the Exchange Act, and any state securities or
blue sky law, (b) for the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware, and (c) such other consents, Orders,
authorizations, registrations, declarations and filings the failure of which to
obtain or make would not, individually or in the aggregate, have a Material
Adverse Effect on Gart.
6.9. SEC DOCUMENTS AND OTHER REPORTS. Gart has filed on a timely basis all
documents required to be filed by it with the SEC since January 4, 1997 (all
such documents filed since January 4, 1997 and prior to the date hereof are
referred to as the "Gart SEC Documents"). Complete and correct copies of the
Gart SEC Documents have been made available to the Company. As of their
respective dates, or if amended as of the date of the last such amendment, the
Gart SEC Documents complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be (including all
applicable rules and regulations promulgated by the SEC relating to Gart's audit
committee), and none of the Gart SEC Documents as of the date thereof contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Complete
and accurate copies of the unaudited consolidated balance sheet, consolidated
statements of operations, consolidated statements of stockholders' equity and
consolidated statements of cash flows (together with any supplementary
information thereto) of Gart, all as of and for the nine-month period ended
October 28, 2000 (the "Gart Interim Financial Information") have been provided
to the Company. The consolidated financial statements of Gart included in the
Gart SEC Documents and the Gart Interim Financial Information (collectively, the
"Gart Financials") fairly present, in all material respects, the consolidated
financial position of Gart and its consolidated Subsidiaries, as of and for the
respective dates thereof, and the consolidated results of their operations and
their consolidated cash flows for the respective periods then ended (subject, in
the case of the Gart Interim Financial Information, to normal year-end audit
adjustments and to any other adjustments described therein) in conformity with
GAAP during the periods involved (except as may be indicated therein or in the
notes thereto). Since January 29, 2000, Gart has not made any change in the
accounting practices or policies applied in the preparation of its financial
statements, except as may be required by GAAP.
6.10. ABSENCE OF UNDISCLOSED LIABILITIES. There are no Liabilities of Gart
or any of its Subsidiaries of any kind whatsoever that would be required by GAAP
to be reflected on a consolidated balance sheet of Gart (including the notes
thereto), other than:
(a) Liabilities incurred since January 29, 2000 in the ordinary
course of business consistent with past practices;
(b) reasonable and customary fees and expenses incurred in
connection with the consummation of the transactions contemplated by
this Agreement;
(c) payments required as a result of the consummation of the Merger
under the terms of any Gart Plans, as identified in Section 6.10(d)
of the Gart Disclosure Schedule; and
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(d) Liabilities disclosed in the Gart SEC Documents filed prior to
the date hereof or reserved against on Gart's most recent balance
sheet delivered to the Company prior to the date hereof.
6.11. ABSENCE OF CERTAIN CHANGES OR EVENTS.
6.11.1. Except as expressly contemplated or permitted by this
Agreement, and other than the reasonable and customary fees and expenses
incurred in connection with the transactions contemplated by this Agreement,
since January 29, 2000, the business of Gart and its Subsidiaries has been
conducted in all material respects in the ordinary course of business consistent
with past practices, neither Gart nor any of its Subsidiaries has engaged in any
transaction or series of related transactions material to Gart or its
Subsidiaries taken as a whole other than in the ordinary course of business
consistent with past practices, and there has not been any event, occurrence or
development that, individually or in the aggregate, constitutes or would
constitute a Material Adverse Effect on the Company.
6.11.2. Without limiting the generality of the foregoing Section
6.11.1, since January 29, 2000, except as set forth in Section 6.11.2 of the
Gart Disclosure Schedule, there has not been:
(a) any damage, destruction or loss to any of the assets or
properties of Gart or any of its Subsidiaries that, individually or
in the aggregate, constitutes a Material Adverse Effect on Gart;
(b) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, capital stock or property) or capital
return in respect of any shares of Gart's capital stock or any
redemption, purchase or other acquisition by Gart or any of its
Subsidiaries of any shares of Gart's capital stock, or any
repurchase, redemption or other purchase by Gart or any of its
Subsidiaries of any outstanding shares of capital stock or other
securities of, or other ownership interests in, Gart or any of its
Subsidiaries, or any amendment of any material term of any
outstanding security of Gart or any of its Subsidiaries;
(c) any sale, assignment, transfer, lease or other disposition, or
agreement to sell, assign, transfer, lease or otherwise dispose of,
any of the assets of Gart or any of its Subsidiaries taken as a whole
other than in the ordinary course of business consistent with past
practices;
(d) any acquisition (by merger, consolidation, or acquisition of
stock or assets) by Gart or any of its Subsidiaries of any
corporation, partnership or other business organization or division
thereof or any equity interest therein for consideration;
(e) any (i) incurrence of, (ii) guarantee with respect to, or (iii)
provision of credit support for, any indebtedness by Gart or any of
its Subsidiaries other than pursuant to (A) the Gart Credit Facility
in the ordinary course of business or (B) lease financings for
equipment used in the operation of the
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businesses of Gart or any of its Subsidiaries in the ordinary course
of business; or any creation or assumption by Gart or any of its
Subsidiaries of any material Lien, other than any Permitted Lien, on
any material asset;
(f) any material change in any method of accounting or accounting
practice (whether for financial accounting or Tax purposes) used by
Gart or any of its Subsidiaries;
(g) any revaluing in any material respect of any of the assets of
Gart or any of its Subsidiaries on the Gart Financials, including,
without limitation, writing down the value of any assets or inventory
or writing off notes or accounts receivable other than in the
ordinary course of business consistent with past practices;
(h) any loan, advance or capital contribution made by Gart or any of
its Subsidiaries to, or investment in, any Person other than loans,
advances or capital contributions, or investments of Gart made in the
ordinary course of business consistent with past practices;
(i) any waiver, direct or indirect, by Gart or any of its
Subsidiaries of (i) any right or rights of material value or (ii) any
payment of any material debt, Liability or other obligation owed to
Gart or any of its Subsidiaries, except for non-material waivers and
payments made in the ordinary course of business consistent with past
practices;
(j) any change in or amendment to Gart's or any of its Subsidiaries'
certificate of incorporation, by-laws or other organizational
documents;
(k) any payment, loan or advance of any amount to or in respect of,
or the sale, transfer or lease of any properties or assets (whether
real, personal or mixed, tangible or intangible) to, or entering into
of any agreement, arrangement or transaction with or on behalf of,
any officer, director, or employee of Gart, any of its Subsidiaries,
or any Affiliate of any of them, or any business or entity in which
Gart, any Subsidiary or any Affiliate of any of them, or relative of
any such Person, has any material, direct or indirect, interest,
except for (i) directors' fees, (ii) compensation to the officers and
employees of Gart (including benefits received by such officers and
employees as a result of their participation in Gart Plans) in the
ordinary course of business consistent with past practices, and (iii)
advancement or reimbursement of expenses in the ordinary course of
business consistent with past practices;
(l) any material modification or change in any Gart Insurance Policy
that would result in a diminishment of coverage under such Gart
Insurance Policy;
(m) any acquisition of a fee simple interest or a leasehold or
subleasehold interest in, or any sale, assignment, disposition,
transfer, pledge, mortgage or lease of, any real property owned or
leased by Gart or any of its Subsidiaries;
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(n) any issuance, sale or disposition of any capital stock or other
equity interest in Gart, except upon the valid exercise of options in
accordance with the terms thereof, or any issuance or grant of any
options, warrants or other rights to purchase any such capital stock
or equity interest, or any securities convertible into or
exchangeable for such capital stock or equity interest, or any other
change in the issued and outstanding capitalization of Gart;
(o) any amendment, alteration or modification in the terms of any
currently outstanding options, warrants or other rights to purchase
any capital stock or equity interest in Gart or any securities
convertible into or exchangeable for such capital stock or equity
interest, including, without limitation, any reduction in the
exercise or conversion price of any such rights or securities, any
change to the vesting or acceleration terms of any such rights or
securities, or any change to terms relating to the grant of any such
rights or securities;
(p) any closure, shut down or other elimination of any of Gart's
stores or offices or any material change in the basic character of
its business, properties or assets, other than any store closures
effected or proposed to be effected as set forth in Section 6.11.2 of
the Gart Disclosure Schedule;
(q) any action that, if it had been taken after the date hereof,
would have required the consent of the Company under Section 7.1; and
(r) any agreement to take any actions specified in this Section
6.11.2, except for this Agreement.
6.12. ACTIONS AND PROCEEDINGS. There are no outstanding Orders of any
Governmental Entity against Gart or any of its Subsidiaries, any of their
properties, assets or businesses, or, to the Knowledge of Gart, any of Gart's or
its Subsidiaries' current or former directors or officers or any other Person
whom Gart or any of its Subsidiaries has agreed to indemnify that would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Gart. Except as set forth in Section 6.12 of the Gart
Disclosure Schedule, there are no Actions pending or, to the Knowledge of Gart,
threatened against Gart or any of its Subsidiaries, any of their properties,
assets or businesses, or, to the Knowledge of Gart, any of Gart's or its
Subsidiaries' current or former directors or officers or any other Person whom
Gart or any of its Subsidiaries has agreed to indemnify that would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Gart. To the Knowledge of Gart, there are no facts or circumstances specific to
Gart that, if known to a third party, would reasonably be expected to result in
such an Action that could have a Material Adverse Effect on Gart.
6.13. CONTRACTS. Each Contract to which Gart or any of its Subsidiaries is
a party is valid, binding and enforceable and in full force and effect in
accordance with its terms, except where the failure to be so valid, binding and
enforceable and in full force and effect would not reasonably be expected to
have a
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Material Adverse Effect on Gart, and there are no defaults by Gart or any of its
Subsidiaries or, to the Knowledge of Gart, another party thereto thereunder,
except any default that would not reasonably be expected to have a Material
Adverse Effect on Gart. Except as set forth in Section 6.13 of the Gart
Disclosure Schedule, neither Gart nor any of its Subsidiaries is a party to, or
is bound by, any non-competition agreement or any other agreement or obligation
that purports to limit in any material respect the manner in which, or the
localities in which, Gart or any such Subsidiary is entitled to conduct all or
any material portion of the business of Gart and its Subsidiaries taken as a
whole. Section 6.13 of the Gart Disclosure Schedule lists: (a) each Contract to
which Gart or any of its Subsidiaries is a party that is material to the
business, financial condition, results of operations or prospects of Gart and
its Subsidiaries taken as a whole; and (b) each Contract that is material to the
business, financial condition, results of operations or prospects of Gart and
its Subsidiaries taken as a whole and to which Gart or any of its Subsidiaries
is a party with respect to which a consent of any of the other parties thereto
will be required in connection with the transactions contemplated by this
Agreement.
6.14. TAXES.
6.14.1. All Tax Returns required to have been filed by, or with
respect to, Gart, any of its Subsidiaries or any affiliated, consolidated,
combined, unitary or similar group of which Gart or any Subsidiary is or was a
member (a "Relevant Gart Group") have been duly and timely filed (including any
extensions), except for such Tax Returns where the failure to file such Tax
Returns would not have a Material Adverse Effect on Gart. All such Tax Returns
are true, complete and correct in all material respects. All material Taxes due
and payable by Gart, any of its Subsidiaries or any member of a Relevant Gart
Group, whether or not shown on any Tax Return, or claimed to be due by any Tax
Authority, for periods (or portions of periods) covered by the Gart Financials,
have been paid or accrued on the balance sheet included in the Gart Financials.
6.14.2. Gart and its Subsidiaries have not incurred any material
liability for Taxes in the period after the date of the Gart Financials. The
unpaid Taxes of Gart and its Subsidiaries (a) did not, as of the most recent
fiscal quarter end, exceed by any material amount the reserve for liability for
Income Tax (other than the reserve for deferred taxes established to reflect
timing differences between book and tax income) or Other Tax set forth on the
face of the balance sheet included in the Gart Financials and (b) will not
exceed by any material amount such reserve as adjusted for operations and
transactions in the ordinary course of business through the Closing Date.
6.14.3. Neither Gart nor any of its Subsidiaries is a party to any
agreement extending the time within which to file any Tax Return. Except for
claims listed in Section 6.14.3 of the Gart Disclosure Schedule, no claim has
ever been made by a Taxing Authority of any jurisdiction in which Gart or any
member of any Relevant Gart Group does not file Tax Returns that Gart or such
member is or may be subject to taxation by that jurisdiction.
6.14.4. Gart, each of its Subsidiaries and each member of any
Relevant Gart Group has withheld and paid all material Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
creditor or independent contractor.
6.14.5. Gart does not have knowledge of any actions by any Taxing
Authority in connection with assessing additional Taxes against, or in respect
of, it, any of its Subsidiaries, or any Relevant Gart Group for any past period.
There is no dispute or
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claim concerning any Tax liability of Gart or any of its Subsidiaries either (a)
threatened, or to Gart's knowledge otherwise claimed or raised by any Taxing
Authority or (b) of which Gart is otherwise aware. There are no Liens for Taxes
upon the assets and properties of Gart or any of its Subsidiaries other than
Liens for Taxes not yet due. Section 6.14.3 of the Gart Disclosure Schedule
indicates those Tax Returns, if any, of Gart, each of its Subsidiaries and each
member of any Relevant Gart Group that have been audited or examined since the
fiscal year ended January 6, 1996 by Taxing Authorities, and indicates those Tax
Returns of Gart, each of its Subsidiaries and each member of any Relevant Gart
Group that currently are the subject of audit or examination. Gart has made
available to the Company complete and correct copies of all federal, state,
local and foreign income Tax Returns filed by, and all Tax examination reports
and statements of deficiencies assessed against or agreed to by, Gart, each of
its Subsidiaries and each member of any Relevant Gart Group since the fiscal
year ended January 30, 1999.
6.14.6. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any Tax Returns required to be
filed by, or that include or are treated as including, Gart or any of its
Subsidiaries or with respect to any Tax assessment or deficiency affecting Gart,
any of its Subsidiaries or any Relevant Gart Group.
6.14.7. Except for rulings and agreements listed in Section 6.14.7
of the Gart Disclosure Schedule, neither Gart nor any of its Subsidiaries has
received any written ruling related to Taxes or entered into any agreement with
a Taxing Authority relating to Taxes.
6.14.8. Neither Gart nor any of its Subsidiaries has any liability
for the Taxes of any Person other than the Relevant Gart Group of which Gart is
the parent (a) under Section 1.1502-6 of the treasury regulations (or any
similar provision of state, local or foreign law), (b) as a transferee or
successor, (c) by Contract or (d) otherwise.
6.14.9. Neither Gart nor any of its Subsidiaries (a) has agreed to
make or is required to make any adjustment under Section 481 of the Code by
reason of a change in accounting method and (b) is not a "consenting
corporation" within the meaning of Section 341(f)(1) of the Code.
6.14.10. Neither Gart nor any of its Subsidiaries is a party to, or
bound by, any obligations under any tax sharing, tax allocation, tax indemnity,
or similar agreement or arrangement.
6.14.11. Neither Gart nor any of its Subsidiaries is a partner in
any joint venture, partnership, Contract or other arrangement that is treated as
a partnership for federal, state, local or foreign Income Tax purposes.
6.14.12. Neither Gart nor any of its Subsidiaries was included, nor
is it includible in, the Tax Return of any Relevant Gart Group with any
corporation other than such a return of which Gart is the common parent
corporation.
6.15. TITLE TO PROPERTIES; ENCUMBRANCES. Except as described in the
following sentence, each of Gart and its Subsidiaries has good, valid and, in
the case of real property, marketable title to, or a valid leasehold interest
in, all of its material properties and
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assets (real, personal, tangible and intangible), including, without limitation,
all such properties and assets reflected in the consolidated balance sheet of
Gart and its Subsidiaries as of January 29, 2000 included in the Gart SEC
Documents (except for properties and assets disposed of in the ordinary course
of business and consistent with past practices since such date), except for such
title or interest the failure of which to have would not have, individually or
in the aggregate, a Material Adverse Effect on Gart. Except as described in
Section 6.15 of the Gart Disclosure Schedule, none of such properties or assets
are subject to any material Liens (whether absolute, accrued, contingent or
otherwise) other than Permitted Liens.
6.16. INTELLECTUAL PROPERTY. Gart owns or has the right to use all
Intellectual Property Rights (other than confidentiality and nondisclosure
agreements, license agreements, third-party software generally commercially
available on a "shrink wrap" license or similar basis and non-material copyright
and trade secret items) now used or presently proposed to be used in the
business of Gart and its Subsidiaries (the "Gart Intellectual Property Rights")
(without the making of any payment to others or the obligation to grant rights
to others in exchange, except as set forth in Section 6.16 of the Gart
Disclosure Schedule) in all material respects necessary to the conduct of its
business as presently being conducted. To the Knowledge of Gart, Gart has no
limitation by contract or imposed by any court on its ability to use the Gart
Intellectual Property Rights in any jurisdiction inside or outside the United
States in which Gart is engaged in material business activities to the extent of
the manner in which such business is currently conducted by Gart in such
jurisdiction. Except as set forth in Section 6.16 of the Gart Disclosure
Schedule, the validity of the Gart Intellectual Property Rights, the title
thereto of Gart, and the authority of Gart to use the Gart Intellectual Property
Rights as such Gart Intellectual Property Rights are presently being used in any
material manner is not being challenged in any administrative or judicial
proceeding to which Gart is a party or, to the Knowledge of Gart, is subject,
nor has any such claim been threatened in writing to Gart or any of its
Subsidiaries within the preceding three years. To the Knowledge of Gart, the
conduct of the business of Gart as now conducted does not infringe or conflict
in any material respect with (a) the Trademark Rights or Patent Rights of
others, or (b) any other Intellectual Property Rights of others. Gart has, as of
the date hereof, and will have as of the Effective Time, satisfied all current
requirements necessary to maintain the validity of all Gart Intellectual
Property Rights, and the right to use such Gart Intellectual Property Rights in
all material respects, necessary to the conduct of Gart's business as it is
presently being conducted. Gart has no Knowledge of any use of any Gart
Intellectual Property Rights owned by or exclusively licensed to Gart that is
now being made, except (i) by Gart or (ii) by any Person duly licensed by it to
use the same under a Contract as described in Section 6.16 of the Gart
Disclosure Schedule. Except as set forth in Section 6.16 of the Gart Disclosure
Schedule, Gart has no Knowledge of any infringement by others of any Gart
Intellectual Property Rights. To the Knowledge of Gart, all licenses and other
agreements pertaining to the Gart Intellectual Property Rights are in compliance
in all material respects with all applicable laws and regulations in all
jurisdictions in which Gart conducts any business operations, including, without
limitation, those pertaining to remittance of foreign exchange and taxation. The
consummation of the transactions contemplated hereby will not alter or impair
the rights and interests of Gart in the Gart Intellectual Property Rights, and
Gart will have the same rights and interests in the Gart Intellectual Property
Rights immediately after the Closing as it will have immediately prior to the
Closing.
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6.17. PROVIDED INFORMATION. The information supplied, or to be supplied,
by Gart or MergerSub for inclusion in the Registration Statement, the Proxy
Statement or any other filing required to be filed with the SEC will not, (i) in
the case of the Registration Statement or such other required filing, as
applicable, on the date it is filed with the SEC, on the date each amendment or
supplement thereto is filed with the SEC, on the date it becomes effective, and
as of the Effective Time, and (ii) in the case of the Proxy Statement, on the
dates of the mailing of the Proxy Statement by the Company and Gart or on the
dates of the Stockholders Meetings, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. Each of (A) the Registration
Statement, on the date it becomes effective, (B) the Proxy Statement and any
amendments or supplements thereto, on their respective dates of mailing, and (C)
any other filing required to be filed with the SEC, as of the date thereof,
insofar as they relate to or are filed or are deemed to be filed by Gart or any
of its Affiliates, will comply in all material respects with all applicable
requirements of the Exchange Act. Notwithstanding the foregoing, Gart and
MergerSub make no representations with respect to any statement in the foregoing
documents based upon, and conforming to, information supplied by the Company for
inclusion therein.
6.18. GART PLANS; ERISA. During the six-year period ending on the Closing
Date, neither Gart nor any Gart ERISA Affiliate is or was obligated to make any
contributions to any "multi-employer plan," as defined in Section 3(37) of
ERISA. No amount is due or owing from Gart or any Gart ERISA Affiliate to any
"multi-employer plan," as defined in Section 3(37) of ERISA, on account of any
withdrawal therefrom. During the six-year period ending on the Closing Date,
neither Gart nor any Gart ERISA Affiliate maintains or maintained, or is or was
obligated to contribute to, any plan described in Section 414(j) of the Code or
subject to Title IV of ERISA other than a "multi-employer plan," as defined in
Section 3(37) of ERISA, and no such plan subject to Title IV of ERISA has ever
been terminated other than in a "standard termination" under Section 4041(b) of
ERISA. Neither Gart nor any Gart ERISA Affiliate is subject to any material
liability, tax or penalty whatsoever to any Person or agency whomsoever as a
result of engaging in a prohibited transaction under ERISA or the Code, and
neither Gart nor any Gart ERISA Affiliate has any Knowledge of any circumstances
that reasonably might result in any material liability, tax or penalty,
including, but not limited to, a penalty under Section 502 of ERISA, as a result
of a breach of any duty under ERISA or under other laws. Each Gart Plan that is
required to comply with the provisions of Sections 4980B and 4980C of the Code,
or with the requirements referred to in Section 4980D(a) of the Code, has
complied in all material respects, and, except as required by such sections of
the Code, no Gart Plan that is a "welfare benefit plan," as defined in Section
3(1) of ERISA, provides for post-employment benefits. None of the Gart Plans nor
any trust created thereunder has incurred any "accumulated funding deficiency,"
as such term is defined in Section 412 of the Code, whether or not waived, since
the effective date of said Section 412, and no condition has occurred or exists
that by the passage of time could be expected to result in an accumulated
funding deficiency as of the last day of the current plan year of any such Gart
Plan. Each of the Gart Plans that is intended to be a qualified plan under
Section 401(a) of the Code has received a favorable determination letter from
the IRS, and has been operated substantially in accordance with its terms and
with the provisions of the Code. All of the Gart Plans have been administered
and maintained in substantial compliance with ERISA, the Code and all
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other applicable Laws. All contributions required to be made to each of the Gart
Plans under the terms of that Gart Plan, ERISA, the Code or any other applicable
Laws have been timely made. Other than routine claims for benefits under the
Gart Plans, there are no pending, or, to the best Knowledge of Gart, threatened,
investigations, proceedings, claims, lawsuits, disputes, actions, audits or
controversies involving the Gart Plans, or the fiduciaries, administrators, or
trustees of any of the Gart Plans or Gart or any Gart ERISA Affiliate of either
as the employer or sponsor under any Gart Plan, with any of the IRS, the
Department of Labor, the PBGC, any participant in or beneficiary of any Gart
Plan or any other Person whomsoever. Gart knows of no reasonable basis for any
such claim, lawsuit, dispute, action or controversy.
6.19. ENVIRONMENTAL MATTERS. Gart and its Subsidiaries are and at all
times have been, and all real property currently or previously owned, leased,
occupied, used by or under the control of Gart or any of its Subsidiaries and
all operations or activities of Gart and its Subsidiaries (including, without
limitation, those conducted on or taking place at any of such Gart Real
Property) are and have been, in compliance with and not subject to any Liability
or obligation under any applicable Environmental Law or Environmental Permit
except where any of the foregoing would not have a Material Adverse Effect on
Gart. There is no condition or circumstance regarding Gart or any of its
Subsidiaries or their business or any such Gart Real Property or the operations
or activities conducted thereon, that, to the Knowledge of Gart, could
reasonably be expected to give rise to a violation of, or Liability or
obligation under, any applicable Environmental Law or Environmental Permit which
would have a Material Adverse Effect on Gart. Neither Gart, any of its
Subsidiaries nor, to the Knowledge of Gart, any Person, the acts or omissions of
which may be attributable to, the responsibility of, or be the basis of a
Liability to, Gart, has, or has arranged to have, any Hazardous Material
generated, released, treated, stored or disposed of at, or transported to, any
facility or property the remediation or cleanup of which, or the response costs
related thereto, could reasonably be expected to become or result in a Material
Adverse Effect on Gart. Gart has not received written notice of any allegations,
claims, demands, citations, notices of violation, or orders of noncompliance
made against Gart relating or pursuant to any Environmental Law or Environmental
Permit except those that have been corrected or complied with or that are not
material to Gart, and, to the Knowledge of Gart, no such allegation, claim,
demand, citation, notice of violation or order of noncompliance is threatened.
6.20. LABOR MATTERS. With respect to employees of Gart and its
Subsidiaries: (a) to the Knowledge of Gart, there are no pending or threatened
unfair labor practice charges or employee grievance charges; (b) there is no
request for union representation, labor strike, dispute, slowdown or stoppage
actually pending or, to the Knowledge of Gart, threatened against Gart, and
there has been no such event during the 18 months preceding the date hereof; and
(c) Gart is not a party to any collective bargaining agreements. Gart is, and
since January 29, 2000 has been, in compliance in all material respects with all
applicable Laws respecting employment and employment practices and the terms and
conditions of employment, wages and hours, including, without limitation, any
such Laws respecting employment discrimination, occupational safety and health,
and unfair labor practices, except where such failure to comply would not have a
Material Adverse Effect on Gart. Gart is not delinquent in any material respect
in payments to its employees for any
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wages, salaries, commissions, bonuses or other direct compensation for any
services performed by them or any amounts required to be reimbursed to such
employees.
6.21. RELATED PARTY TRANSACTIONS. Except as set forth in Section 6.21 of
the Gart Disclosure Schedule or as contemplated by the transactions contemplated
hereby, no (a) beneficial owner of 10% or more of Gart's outstanding capital
stock, (b) officer or director of Gart or (c) any Person (other than Gart) in
which any such beneficial owner, officer or director owns any beneficial
interest (other than a publicly held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market and less than 1%
of the stock of which is beneficially owned by all such Persons) has any
interest in: (i) any Contract, arrangement or understanding with, or relating
to, the business or operations of, Gart or any of its Subsidiaries; (ii) any
loan, Contract, arrangement, understanding or agreement for, or relating to,
indebtedness of Gart or any of its Subsidiaries; or (iii) any property (real,
personal or mixed), tangible or intangible, used in the business or operations
of the Company or any of its Subsidiaries, excluding any such Contract,
arrangement or understanding constituting a Gart Plan.
6.22. REAL ESTATE.
6.22.1. Section 6.22.1 of the Gart Disclosure Schedule sets forth a
true, correct and complete list of all real property (including improvements
thereon) owned in fee simple by Gart (collectively, the "Gart Owned Real
Property"). With respect to each such parcel of Gart Owned Real Property: (a)
Gart (either directly or through a Subsidiary) owns fee simple marketable title
to such parcel, subject to no Liens other than any Permitted Liens or any Liens
set forth in Section 6.22.1 of the Gart Disclosure Schedule; (b) there are no
leases, subleases, licenses, concessions or other agreements, written or oral,
granting to any person the right of use or occupancy of any portion of such
parcel; and (c) there are no outstanding actions, rights of first refusal or
options to purchase such parcel.
6.22.2. Section 6.22.2 of the Gart Disclosure Schedule sets forth a
true, correct and complete list of all of the leases and subleases ("Gart
Leases") and each leased and subleased parcel of real property in which Gart or
any of its Subsidiaries is a tenant, subtenant, landlord or sublandlord
(collectively, the "Gart Leased Real Property") and for each Gart Lease
indicates: (a) whether or not the consent of and/or notice to the landlord
thereunder will be required in connection with the transactions contemplated by
this Agreement; (b) whether any third party or Gart is the guarantor of the
obligations of any Subsidiary of Gart under the Gart Lease and the identity of
any such guarantor; (c) its term and any options to extend the term; and (d) the
current rent payable as set forth on the rent roll report (it being understood
that such amount reported on the rent roll report may not include percentage
rent, common area maintenance, tax and insurance amounts payable by Gart under
the Gart Lease). Gart (either directly or through a Subsidiary) holds a valid
and existing leasehold or subleasehold interest or landlord or sublandlord
interest as applicable in the Gart Leased Real Property, under each of the Gart
Leases described in Section 6.22.2 of the Gart Disclosure Schedule. With respect
to each Gart Lease: (a) the Gart Lease is legal, valid, binding, enforceable and
in full force and effect; (b) the Gart Lease will continue to be legal, valid,
binding, enforceable and in full force and effect on the same terms and
conditions following the Effective Time; (c) neither Gart (or its applicable
Subsidiary), nor, to the Knowledge of Gart, any other party to the Gart Lease,
is in any
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material respect in breach or default under the Gart Lease, and no event has
occurred that, with notice or lapse of time, would constitute a breach or
default in any material respect by Gart (or such Subsidiary) or permit
termination, modification or acceleration under the Gart Lease by any other
party thereto; (d) Gart (or its applicable Subsidiary) has performed and will
continue to perform all of its obligations in all material respects under the
Gart Lease; (e) Gart has not, and, to the Knowledge of Gart, no third party has,
repudiated any provision of the Gart Lease; (f) there are no disputes, oral
agreements or forbearance programs in effect as to the Gart Lease other than
those that, individually or in the aggregate, do not constitute a Material
Adverse Effect on Gart; (g) the Gart Lease has not been modified in any respect,
except to the extent that such modifications are set forth in documents
previously delivered or made available to the Company; (h) Gart has not
assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest in the Gart Lease; and (i) each guaranty by Gart is in full force and
effect and no default has occurred thereunder.
6.22.3. The Gart Owned Real Property and the Gart Leased Real
Property are referred to collectively herein as the "Gart Real Property." Except
as disclosed on Section 6.22.1 or Section 6.22.2 of the Gart Disclosure
Schedule, there is no Gart Real Property used by Gart or any of its Subsidiaries
in their businesses. To the Knowledge of Gart, each parcel of Gart Real Property
is in material compliance with all existing Laws, including, without limitation,
(a) the Americans with Disabilities Act, 42 U.S.C. Section 12102 et seq.,
together with all rules, regulations and official interpretations promulgated
pursuant thereto, and (b) all Laws with respect to zoning, building, fire, life
safety, health codes and sanitation. Gart and its Subsidiaries have received no
notice of, and have no Knowledge of, any condition currently or previously
existing on the Gart Real Property or any portion thereof that may give rise to
any violation of, or require any remediation under, any existing Law applicable
to the Gart Real Property if it were disclosed to the authorities having
jurisdiction over such Gart Real Property other than those (i) arising in the
ordinary course of business or (ii) that do not constitute, individually or in
the aggregate, a Material Adverse Effect on Gart.
6.22.4. Gart has not received written notice of any proceedings in
eminent domain, condemnation or other similar proceedings that are pending, and,
to the Knowledge of Gart, there are no such proceedings threatened, affecting
any portion of the Gart Real Property. Gart has not received written notice of
the existence of any outstanding writ, injunction, decree, Order or judgment or
of any pending proceeding, and, to the Knowledge of Gart, there is no such writ,
injunction, decree, Order, judgment or proceeding threatened, relating to the
ownership, lease, use, occupancy or operation by any person of the Gart Real
Property.
6.22.5. To the Knowledge of Gart, the current use of the Gart Real
Property does not violate in any material respect any instrument of record or
agreement affecting such Gart Real Property. There are no violations of any
covenants, conditions, restrictions, easements, agreements or Orders of any
Governmental Entity having jurisdiction over any of the Gart Real Property that
affect such Gart Real Property or the use or occupancy thereof other than those
that do not, individually or in the aggregate, constitute a Material Adverse
Effect on Gart. No damage or destruction has occurred with respect to any of the
Gart Real
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Property that, individually or in the aggregate, has had or resulted in, or is
reasonably likely to have or result in, a Material Adverse Effect on Gart.
6.22.6. There are currently in effect such insurance policies for
the Gart Real Property as are customarily maintained with respect to similar
properties. All premiums due on such insurance policies have been paid by Gart,
and Gart will maintain such insurance policies from the date hereof through the
Effective Time or earlier termination of this Agreement. Gart has not received,
and has no Knowledge of, any notice or request from any insurance company
requesting the performance of, any work or alteration with respect to the Gart
Real Property or any portion thereof. Gart has received no notice from any
insurance company concerning, nor does Gart have any Knowledge of, any defects
or inadequacies in the Gart Real Property that, if not corrected, would result
in the termination of insurance coverage or would increase its cost.
6.22.7. All buildings and other improvements included within the
Gart Real Property (the "Gart Improvements") are, in all material respects,
adequate to operate such facilities as currently used, and, to Gart's Knowledge,
there are no facts or conditions affecting any of the Gart Improvements that
would, individually or in the aggregate, interfere in any significant respect
with the current use, occupancy or operation thereof, which interference would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Gart. With respect to the Gart Improvements, Gart has all
rights of access that are reasonably necessary for the operation of its
business.
6.22.8. All required or appropriate certificates of occupancy,
permits, licenses, franchises, approvals and authorizations (collectively, the
"Gart Real Property Permits") of all Governmental Entities having jurisdiction
over the Gart Real Property, the absence of which would be reasonably likely to
cause a Gart store to cease its operations, have been issued to Gart to enable
the Gart Real Property to be lawfully occupied and used for all of the purposes
for which it is currently occupied and used have been lawfully issued and are,
as of the date hereof, in full force and effect. Gart has not received, or been
informed by a third party of the receipt by it of, any notice that would be
reasonably likely to cause a Gart store to cease its operations from any
Governmental Entity having jurisdiction over the Gart Real Property threatening
a suspension, revocation, modification or cancellation of any Gart Real Property
Permit or requiring any remediation in connection with maintaining any Gart Real
Property Permit, and, to the Knowledge of Gart, there is no basis for the
issuance of any such notice or the taking of any such action.
6.23. INSURANCE. Each of Gart and its Subsidiaries maintains insurance
policies (the "Gart Insurance Policies") against all risks of a character and in
such amounts as are usually insured against by similarly situated companies in
the same or similar businesses. Each Gart Insurance Policy is in full force
and effect and is valid, outstanding and enforceable, and, other than as set
forth in Section 6.23 of the Gart Disclosure Schedule, all premiums due thereon
have been paid in full. None of the Gart Insurance Policies will terminate or
lapse (or be affected in any other materially adverse manner) prior to the
Effective Time by reason of the transactions contemplated by this Agreement.
Each of Gart and its Subsidiaries has complied in all material respects with the
provisions of each Gart Insurance Policy under which it is the insured party.
No insurer under any Gart Insurance Policy has cancelled or generally disclaimed
Liability under any such policy or, to Gart's
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Knowledge, indicated any intent to do so or not to renew any such policy. All
material claims under the Gart Insurance Policies have been filed in a timely
fashion. Since January 6, 1996, there have been no historical gaps in insurance
coverage of Gart and/or its Subsidiaries.
6.24. MERCHANDISE VENDORS. Since January 29, 2000, there has not been any
change in relations with any of the major merchandise vendors of Gart and its
Subsidiaries that, individually or in the aggregate, would have a Material
Adverse Effect on Gart.
6.25. VENDORS AND LANDLORDS; CO-OPERATIVE ADVERTISING CONTRACTS. There are
no disputes or disagreements between Gart or any of its Subsidiaries, on the one
hand, and any vendor or landlord of Gart or any of its Subsidiaries or any
Person that is a party to a co-operative advertising contract with Gart or any
of its Subsidiaries, on the other hand, that are pending or, to the Knowledge of
Gart, threatened that, in the aggregate and net of the reserve for such disputes
and disagreements set forth in the most recent balance sheet (including the
notes thereto) included in the Gart SEC Documents, exceed $1,000,000; and Gart
is not aware of any basis on which any such material disputes or disagreements
could reasonably be expected to arise.
6.26. STORE CLOSINGS. Except as set forth in Section 6.26 of the Gart
Disclosure Schedule, neither Gart nor any of its Subsidiaries have any material
Liability of any kind related to the closing of any store with respect to which
Gart or any of its Subsidiaries terminated, following January 1, 1990, its
leasehold or subleasehold interest.
6.27. DISCLOSURE. Each representation and warranty made by Gart or
MergerSub contained in this Agreement, and the Gart Disclosure Schedule and each
certificate prepared or delivered by, or on behalf of, Gart or MergerSub and
provided, or to be provided, to the Company in connection herewith, do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.
6.28. TAKEOVER STATUTES. The board of directors of Gart has approved the
Merger and this Agreement and such approval is sufficient to render inapplicable
to the Merger, this Agreement and the transactions contemplated hereby, the
restrictions on business combinations set forth in Section 203 of the DGCL. To
Gart's Knowledge, no other Takeover Statute applicable to Gart is applicable to
the Merger or any of the other transactions contemplated hereby.
6.29. BROKERS. Except as set forth in Section 6.29 of the Gart Disclosure
Schedule, except for fees, commissions and expenses payable to its financial
advisor, ▇▇▇▇▇▇▇▇, Inc., no broker, finder or financial advisor retained by Gart
or MergerSub is entitled to any brokerage, finder's or other fee or commission
from Gart or MergerSub in connection with the transactions contemplated by this
Agreement.
6.30. FINANCING. Gart has received, and has delivered to the board of
directors of the Company, a copy of a letter dated February 9, 2001 from The CIT
Group/Business Credit, Inc., pursuant to which such Person has committed,
subject to the terms and
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conditions set forth therein, to enter into a new credit facility (the "New
Credit Facility") providing for loans to Gart and its Subsidiaries of up to
$300,000,000. As used in this Agreement, the aforementioned commitment shall be
referred to as the "Financing Letter," and the financing to be provided under
the New Credit Facility shall be referred to as the "Financing." The Financing
Letter contemplates that the New Credit Facility will be executed immediately
following the consummation of the transactions contemplated hereby and that,
concurrently with such execution, each of the Company Credit Facility and the
Gart Credit Facility will be terminated. Gart has no reason to believe that any
condition to the Financing contemplated by the Financing Letter will fail to be
satisfied in accordance with its terms (it being understood that, in making such
representation, Gart is not assuming any responsibility for the representations,
warranties and covenants of the Company set forth in this Agreement, which
responsibility shall remain solely that of the Company). The aggregate proceeds
of the Financing are in an amount sufficient (a) to pay when due, pursuant to
the terms and conditions herein, all necessary cash payments to be made by Gart
and the Surviving Corporation in connection with the Merger and the other
transactions contemplated hereby, (b) to provide a reasonable amount of working
capital financing, and (c) to pay related fees and expenses.
6.31. NO PRIOR ACTIVITIES. MergerSub has not incurred, directly or
indirectly, any material Liabilities or obligations except those incurred in
connection with its organization or with the negotiation and execution of this
Agreement and the performance of the transactions contemplated hereby. Except as
contemplated by this Agreement or in connection with the transactions
contemplated hereby, MergerSub has not engaged, directly or indirectly, in any
business or activity of any type or kind, or entered into any agreement or
arrangement with any person or entity, and is not subject to or bound by any
material obligation or undertaking.
ARTICLE 7.
COVENANTS
7.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Except as
otherwise specifically contemplated by this Agreement, without the prior written
consent of Gart, from the date hereof to the Effective Time, each of the Company
and its Subsidiaries shall carry on its business in the ordinary and usual
course of business and consistent with past practices and shall use its
commercially reasonable best efforts to (a) preserve intact its present business
organization, (b) maintain in effect all material federal, state and local
Permits that are required for the Company or any of its Subsidiaries to carry on
its business, (c) keep available the services of its present employees and
consultants, and (d) preserve its present relationships with its employees,
consultants, customers, lenders, suppliers, licensors, licensees, landlords and
others having significant business relationships with it. Without limiting the
generality of the foregoing, except as otherwise specifically contemplated by
this Agreement or the Company Disclosure Schedule, without the prior written
consent of Gart (with respect to which the determination by Gart whether to
provide such consent shall not be unreasonably delayed), prior to the Effective
Time, the Company shall not, nor shall it permit any of its Subsidiaries to:
7.1.1. propose or adopt any change in its certificate of
incorporation or by-laws or comparable organizational documents;
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7.1.2. (a) merge with or acquire a direct or indirect ownership
interest or investment in (by merger, consolidation, acquisition of stock or
assets, joint venture or otherwise) any corporation, partnership or other
business organization or division thereof; (b) sell, lease or otherwise dispose
of a material amount of assets (excluding sales of inventory or other assets in
the ordinary course of business consistent with past practices) or securities;
(c) waive, release, grant, or transfer any rights of value that are,
individually or in the aggregate, material to the Company and its Subsidiaries
taken as a whole; (d) modify or change in any material respect any material
Permit; (e) incur, assume or prepay any indebtedness for borrowed money except
in the ordinary course of business consistent with past practices; (f) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for any indebtedness of any other Person, except in
the ordinary course of business consistent with past practices; (g) mortgage,
pledge or subject to any Lien (other than any Permitted Lien), charge or other
encumbrance any of the Company's or its Subsidiaries' material assets,
properties or business, whether tangible or intangible; (h) make any loans,
advances or capital contributions to, or investments in, any other Person,
except in the ordinary course of business consistent with past practices; (i)
authorize any capital expenditure or expenditures not in the ordinary course of
business consistent with past practices; (j) pledge or otherwise encumber shares
of capital stock of the Company or any of its Subsidiaries; (k) enter into any
Contract other than in the ordinary course of business consistent with past
practices that would be material to the Company and its Subsidiaries taken as a
whole; or (l) amend, modify or waive any material right under any material
Contract of the Company or any of its Subsidiaries, except as otherwise
permitted by this Agreement;
7.1.3. enter into any new lease, sublease, assignment or other
agreement (other than any service or maintenance agreement entered into by the
Company or any of its Subsidiaries in the ordinary course of business consistent
with past practices) in respect of the Company Real Property without Gart's
prior written consent (which consent may be withheld in Gart's sole and absolute
discretion), except as described in Section 7.1 of the Company Disclosure
Schedule;
7.1.4. extend, renew, replace, amend, modify or alter any existing
Company Lease (other than in the ordinary course of business and consistent with
past practices and this Agreement, provided, that the Company shall provide Gart
with 10 days' advance notice of such proposed action and the opportunity to
discuss such proposed action with the Company) in respect of the Company Real
Property, except as described in Section 7.1 of the Company Disclosure Schedule;
7.1.5. sell, contribute, assign or create any right, title or
interest whatsoever in or to the Company Real Property, or create or permit to
exist thereon any Lien (other than any Permitted Lien), charge or encumbrance,
or enter into any agreement to do any of the foregoing, without the prior
written consent of Gart (which consent may be granted or withheld in Gart's sole
and absolute discretion);
7.1.6. knowingly take any action that would result in any
representation or warranty of the Company contained in this Agreement that is
qualified as to materiality becoming untrue as of the Effective Time or any
representation or warranty not so qualified becoming untrue in any material
respect as of the Effective Time;
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7.1.7. split, combine or reclassify any shares of, or declare, set
aside or pay any dividend (including, without limitation, an extraordinary
dividend) or other distribution (whether in cash, stock or property or any
combination thereof) in respect of, any capital stock of the Company or any of
its Subsidiaries, or redeem, repurchase or otherwise acquire, or offer to
redeem, repurchase or otherwise acquire, any capital stock of the Company or any
of its Subsidiaries;
7.1.8. adopt or amend any bonus, profit sharing, compensation,
severance, termination, stock option, pension, retirement, deferred
compensation, employment or employee benefit plan, agreement, trust, fund or
other arrangement for the benefit and welfare of any director, officer,
employee, agent or consultant providing management services or increase in any
manner the compensation or fringe benefits of any director, officer or any class
of employees or pay any benefit not required by any existing plan or arrangement
(including, without limitation, the granting of stock options or stock
appreciation rights or the removal of existing restrictions in any benefit plans
or agreements); make any loans to any of its officers, directors, employees,
Affiliates, agents or consultants or make any change in its existing borrowing
or lending arrangements for or on behalf of any of such persons, whether
pursuant to a Company Plan or otherwise; or grant, issue, accelerate, pay or
accrue, or agree to pay or make any accrual or arrangement for payment of,
salary or other payments or benefits pursuant to, or adopt or amend, any new or
existing Company Plan; provided, however, that, notwithstanding the foregoing,
the Company shall be entitled to increase the compensation of employees, make
arrangements with new employees that are not material, and make modifications in
incentive programs and personnel policies and procedures for non-officer
employees that are not material, in each case in the ordinary course of business
consistent in type and amount with past practices; and provided, further, that,
notwithstanding the foregoing, the Company shall be entitled to commit to or
provide for (a) severance and/or "stay bonus" benefits to employees who are
hired after the date hereof and prior to the Effective Time, or (b) increases in
benefits to existing employees of the Company or its Subsidiaries as of the date
hereof (other than any such employees who have the rank of a corporate-level
vice president or a more senior rank), provided that (i) the aggregate amount of
all such benefits committed to or provided for the employees under clauses (a)
and (b) does not exceed $400,000, (ii) the Company shall commit to or provide
for only such benefits as it determines are reasonably necessary to obtain the
services of each such employee, and (iii) in the case of increases in benefits
to employees under clause (b), the Company shall use commercially reasonable
efforts to implement other methods to retain such employees before committing to
or providing for such increases.
7.1.9. except in the ordinary course of business consistent with past
practices or as required by applicable Law or GAAP, revalue in any material
respect any of its assets on the Company Financials, including writing down the
value of inventory in any material manner or writing off notes or accounts
receivable in any material manner;
7.1.10. pay, discharge or satisfy any material claims, Liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent or
otherwise) other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practices;
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7.1.11. make any material Tax election, or settle or compromise any
material Tax Liability;
7.1.12. make any change in accounting methods, principles or
practices materially affecting the reported consolidated assets, Liabilities or
results of operations of the Company;
7.1.13. authorize for issuance, issue, sell or deliver, or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise),
any capital stock of the Company or any of its Subsidiaries or equity
equivalents;
7.1.14. adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its Subsidiaries;
7.1.15. alter through merger, liquidation, reorganization,
restructuring or any other fashion the corporate structure or ownership of any
Subsidiary;
7.1.16. permit to lapse any material Permits;
7.1.17. permit to lapse any registrations or applications for
material Company Intellectual Property Rights owned, licensed, or used by the
Company (provided, that the Company shall use commercially reasonable efforts to
provide Gart with at least 10 days' advance notice of such event and the
opportunity to discuss such matter with the Company); or
7.1.18. agree or commit to do any of the foregoing.
7.2. CONDUCT OF BUSINESS BY GART PENDING THE MERGER. Except as otherwise
specifically contemplated by this Agreement, without the prior written consent
of the Company, from the date hereof to the Effective Time, each of Gart and its
Subsidiaries shall carry on its business in the ordinary and usual course of
business and consistent with past practices and shall use its commercially
reasonable best efforts to (a) preserve intact its present business
organization, (b) maintain in effect all material federal, state and local
Permits that are required for Gart or any of its Subsidiaries to carry on its
business, (c) keep available the services of its present employees and
consultants, and (d) preserve its present relationships with its employees,
consultants, customers, lenders, suppliers, licensors, licensees, landlords and
others having significant business relationships with it. Without limiting the
generality of the foregoing, except as otherwise specifically contemplated by
this Agreement or in the Gart Disclosure Schedule, without the prior written
consent of the Company (with respect to which the determination by the Company
whether to provide such consent shall not be unreasonably delayed), prior to the
Effective Time, Gart shall not, nor shall it permit any of its Subsidiaries to:
7.2.1. propose or adopt any change in its certificate of
incorporation or by-laws or comparable organizational documents;
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7.2.2. (a) merge with or acquire a direct or indirect ownership
interest or investment (other than an ownership interest that is not material)
in (by merger, consolidation, acquisition of stock or assets, joint venture or
otherwise) any corporation, partnership or other business organization or
division thereof; (b) sell, lease or otherwise dispose of a material amount of
assets (excluding sales of inventory or other assets in the ordinary course of
business consistent with past practices) or securities; or (c) waive, release,
grant, or transfer any rights of value that are, individually or in the
aggregate, material to Gart and its Subsidiaries taken as a whole;
7.2.3. knowingly take any action that would result in any
representation or warranty of Gart contained in this Agreement that is qualified
as to materiality becoming untrue as of the Effective Time or any representation
or warranty not so qualified becoming untrue in any material respect as of the
Effective Time;
7.2.4. split, combine or reclassify any shares of, or declare, set
aside or pay any dividend (including, without limitation, an extraordinary
dividend) or other distribution (whether in cash, stock or property or any
combination thereof) in respect of, any capital stock of Gart or any of its
Subsidiaries, or redeem, repurchase or otherwise acquire, or offer to redeem,
repurchase or otherwise acquire, any capital stock of Gart or any of its
Subsidiaries;
7.2.5. except in the ordinary course of business consistent with past
practices or as required by applicable Law or GAAP, revalue in any material
respect any of its assets on the Gart Financials, including writing down the
value of inventory in any material manner or writing off notes or accounts
receivable in any material manner;
7.2.6. make any change in accounting methods, principles or practices
materially affecting the reported consolidated assets, Liabilities or results of
operations of Gart;
7.2.7. authorize for issuance, issue, sell or deliver, or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise),
any capital stock of Gart or any of its Subsidiaries or equity equivalents;
provided, however, that, notwithstanding the provisions of this Section 7.2.7,
Gart and its Subsidiaries shall be entitled to (a) issue or grant options to
employees, directors and consultants of Gart and its Subsidiaries, and issue
capital stock upon the exercise by holders of options to purchase capital stock
of Gart, and (b) issue securities of Gart or its Subsidiaries substantially all
the net proceeds of which are used to (i) retire indebtedness or other ordinary
course or general liabilities of Gart or its Subsidiaries and/or (ii) provide
working capital for Gart or its Subsidiaries, provided that any such
transactions pursuant to clause (b) shall be on fair market value terms, and
further provided that the Company's board of directors shall not have determined
in good faith, prior to the consummation of any such transactions pursuant to
clause (b), that any such transactions would adversely affect the fairness of
the Merger or materially delay the consummation of the Merger, and further
provided that Gart shall provide to the Company (x) notice as soon as reasonably
practicable following the consummation of any such transactions pursuant to
clause (a) (other than issuances of capital stock upon the exercise by holders
of options to purchase capital stock of Gart) and (y) notice as soon as
reasonably
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practicable (and, in any event, at least five Business Days) in advance of the
consummation of any such transactions pursuant to clause (b);
7.2.8. adopt a plan of complete or partial liquidation, dissolution
or restructuring of Gart or any of its Subsidiaries; or
7.2.9. agree or commit to do any of the foregoing.
7.3. ACCESS AND INFORMATION. Each of Gart and the Company shall (and shall
cause its Subsidiaries and its and their respective officers, directors,
employees, auditors and agents to) afford to the other party and to such other
party's officers, employees, financial advisors, legal counsel, accountants,
consultants and other representatives (except to the extent not permitted under
applicable Law as advised by counsel and except as may be limited by any
confidentiality obligation contained in any Contract with a third party)
reasonable access during normal business hours throughout the period prior to
the Effective Time to all of its books and records and its properties, plants
and personnel and, during such period, shall furnish promptly to the other party
a copy of each report, schedule and other document filed or received by it
pursuant to the requirements of federal securities laws. Such access may
include reasonable access to employees, books, records and properties necessary
to conduct Phase I environmental studies and surveys on Company Owned Real
Property. The Company agrees to cooperate reasonably with Gart with respect to
transition activities prior to the Effective Time, provided that such activities
(i) do not cause any unreasonable interference with the operation of the
Company's business and (ii) do not violate any applicable Laws. The Company
shall have provided to Gart prior to the date hereof a true and complete list,
as of a current date, of all employees who are employed by the Company at the
Company's headquarters and all other employees above the store manager level,
such list to include such employees' salaries, wages, other significant
compensation (other than benefits under the Company Plans), dates of employment
and positions.
7.4. NO SOLICITATION.
7.4.1. The Company agrees that neither it, nor any of its
Subsidiaries or Affiliates, nor any of the respective directors, executive
officers, agents or representatives of any of the foregoing, will, directly or
indirectly, (a) solicit, initiate or encourage (including by way of furnishing
information) any inquiries or the making of any proposal with respect to any
merger, consolidation or other business combination involving the Company or any
Subsidiary of the Company or the acquisition of all or any significant part of
the assets or capital stock (including, but not limited to, a control position
voting interest) of the Company or any Subsidiary of the Company (an
"Acquisition Transaction"), (b) negotiate or otherwise engage in discussions
with any Person with respect to any Acquisition Transaction, or that may
reasonably be expected to lead to a proposal for an Acquisition Transaction, or
(c) enter into any agreement, arrangement or understanding (including any letter
of intent, agreement in principle or similar agreement) with respect to any such
Acquisition Transaction, in the case of each clauses (a), (b) and (c) other than
in connection with the transactions with Gart and MergerSub contemplated by this
Agreement; provided, however, that, the Company may, in response to a proposal
or inquiry that is unsolicited and received by the Company after the date
hereof, furnish information to, negotiate or
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otherwise engage in discussions with any Person (pursuant to a customary
confidentiality agreement) that makes or indicates in writing an intention or
desire to make, and with respect to whom the board of directors of the Company
has concluded in good faith after consultation with its financial advisor is
capable of making, a Superior Proposal (as herein defined), if the board of
directors of the Company determines in good faith, after consultation with its
outside counsel, that the failure to take such action would be inconsistent with
the fiduciary duties of the board of directors of the Company under applicable
Law and such proposed Acquisition Transaction was not solicited by it in, or did
not otherwise result from a, breach of this Section 7.4.1, and the board of
directors of the Company complies with the other provisions of this Section
7.4.1; and, provided, further, that, notwithstanding anything to the contrary
contained herein, the board of directors of the Company may take and disclose to
the Company's stockholders a position contemplated by Rule 14e-2 promulgated
under the Exchange Act, comply with Rule 14d-9 thereunder and make all other
disclosures required by applicable Law. Notwithstanding any of the foregoing to
the contrary, the Company may engage in discussions with, or provide information
to, any Person or group that has made a proposal unsolicited after the date
hereof with respect to an Acquisition Transaction for the limited purpose of
determining whether such proposal is, or could lead to, a Superior Proposal.
7.4.2. The Company agrees that, as of the date hereof, it, its
Subsidiaries and Affiliates, and the respective directors, executive officers,
agents and representatives of any of the foregoing, shall immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any Person (other than Gart and its representatives) conducted heretofore with
respect to any Acquisition Transaction. The Company agrees to promptly advise
Gart of any inquiries or proposals received by, any information requested from,
or any negotiations or discussions sought to be initiated or continued with, the
Company, its Subsidiaries or Affiliates, or any of the respective directors,
executive officers, agents or representatives of any of the foregoing, in each
case from a Person (other than Gart, MergerSub and their representatives) with
respect to an Acquisition Transaction, and, concurrently with such advisement,
to provide to Gart a reasonable summary of the terms of such Acquisition
Transaction (including the terms of any financing arrangement or commitment in
connection therewith) and the identity of such third Person, and, except as
otherwise would be inconsistent with the fiduciary duties of the Company's board
of directors under applicable Law, to update on an ongoing basis or upon Gart's
reasonable request the status thereof, as well as any actions taken or other
developments pursuant to this Section 7.4.2. As used herein, "Superior Proposal"
means: (i) a bona fide fully-financed written proposal or offer made by any
Person or group (other than Gart or any of its Subsidiaries) with respect to an
Acquisition Transaction; or (ii) a bona fide written proposal or offer made by
any Person or group (other than Gart or any of its Subsidiaries) with respect to
an Acquisition Transaction that would produce a greater value per share of
Company Common Stock than the Merger Consideration; provided, that, in the case
of either clause (i) or (ii), such proposal or offer would otherwise be on terms
that the board of directors of the Company determines in good faith, based on
the advice of independent financial advisors and legal counsel, to be more
favorable to the Company's stockholders than the transactions contemplated
hereby.
7.5. GOVERNMENTAL ENTITIES. Subject to the terms and conditions provided
herein, each of the parties hereto agrees to use its reasonable best efforts to
take
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promptly, or to cause to be taken promptly, all actions and to do promptly,
or to cause to be done promptly, all things necessary, proper or advisable under
applicable Laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable, including
using reasonable best efforts to obtain all necessary actions or non-actions,
extensions, waivers, consents and approvals from all applicable Governmental
Entities, effecting all necessary registrations, applications and filings
(including, without limitation, filings under any applicable state securities
laws) and obtaining any required regulatory approvals and consents.
7.6. BEST EFFORTS. Subject to the terms and conditions provided herein,
the Company agrees that it shall use its commercially reasonable best efforts to
secure waivers and/or consents from such third parties as may be necessary in
the judgment of the Company or Gart in order to consummate the transactions
contemplated hereby; provided, however, that, unless requested by Gart, the
Company shall not make any payment (or provide any similar non-monetary benefit)
to a third party (other than any such payment or benefit that is de minimis in
amount) in connection with securing any waiver or consent from such third party
without the prior written approval of Gart.
7.7. CERTAIN FILINGS UNDER SECURITIES LAWS. As soon as reasonably
practicable after the date hereof, the Company and Gart shall prepare and file
with the SEC the Registration Statement (including the Proxy Statement in
preliminary form) and any other filing required to be filed with the SEC. The
Company and Gart shall each use its reasonable best efforts to have the Proxy
Statement and any other such required filing cleared by the SEC and the
Registration Statement declared effective as soon as practicable. The Company
and Gart shall, as promptly as practicable (or at such other time as may be
mutually agreed by the Company and Gart), cause the Proxy Statement in
definitive form to be mailed to its respective stockholders. The Company shall
furnish Gart with all information concerning the Company and the holders of its
capital stock and shall take such other action as Gart may reasonably request in
connection with the Registration Statement, the Proxy Statement and any other
filing required to be filed with the SEC. If, at any time prior to the Effective
Time, any event or circumstance relating to the Company (including any of its
Subsidiaries or any of the officers or directors of the Company or its
Subsidiaries) or to Gart (including any of its Subsidiaries or any of the
officers or directors of Gart or its Subsidiaries) should be discovered by such
party that should be set forth in an amendment or a supplement to the
Registration Statement, the Proxy Statement or any other filing required to be
filed with the SEC, such party shall promptly inform the other party thereof and
shall take appropriate action in respect thereof.
7.8. STOCKHOLDERS MEETINGS. Each of Gart and the Company, acting through
its board of directors, shall, subject to and in accordance with applicable Law
and its certificate of incorporation and by-laws, promptly and duly call, give
notice of, convene and hold as soon as practicable following the date on which
the Registration Statement becomes effective a Stockholders Meeting for the
purpose of voting (i) in the case of the Company, to adopt this Agreement and
approve the Merger and (ii) in the case of Gart, to approve the issuance of Gart
Common Stock in connection with the Merger. Except to the extent required for
the discharge by the board of directors of the Company of its fiduciary duties
under applicable Law and subject to Section 7.4, the board of directors of the
Company shall recommend the adoption of this Agreement and the approval of the
Merger by the
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Company's stockholders at the Company Stockholders Meeting and the board of
directors of Gart shall recommend the approval of the issuance of Gart Common
Stock contemplated hereby by Gart's stockholders at the Gart Stockholders
Meeting.
7.9. HSR NOTIFICATION.
7.9.1. FILINGS. As soon as reasonably practicable, each of the
Company and Gart shall file, or cause its Ultimate Parent Entity (as defined in
the HSR Act) to file, with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice pursuant to the HSR Act, the
notification and documentary material required in connection with the
transactions contemplated hereby.
7.9.2. COOPERATION. The Company and Gart shall use their reasonable
best efforts to obtain early termination of the applicable waiting period under
the HSR Act. The Company and Gart shall promptly file, or cause to be filed, any
additional information requested as soon as reasonably practicable after receipt
of a request for additional information. The parties hereto will coordinate and
cooperate with one another in exchanging such information and providing such
reasonable assistance as may be requested in connection with such filings.
Notwithstanding any provision in this Agreement to the contrary, neither
MergerSub nor Gart shall be required to agree to any divestiture by Gart or the
Company (or any Subsidiary or Affiliate of Gart or the Company) of shares of
capital stock or of any business, assets or property of Gart or the Company (or
any Subsidiary or Affiliate of Gart or the Company), or to the imposition of any
material limitation on the ability of any of them to conduct its business or to
own or exercise control of its assets, properties or capital stock.
7.10. FINANCIAL STATEMENT DELIVERIES. As soon as is reasonably practicable
and in no event later than 15 Business Days from the last day of each fiscal
month between the date hereof and the Closing Date, each of the Company and Gart
shall prepare and provide to the other party the monthly financial reports
routinely prepared for management of such party, utilizing the same format and
methodology used in preparing such reports as are provided internally to
management of such party (provided, however, that, if the end of the fiscal
quarter of such party occurs in such fiscal month, then such party shall provide
to the other party such reports no later than 45 days from the last day of such
fiscal month, and, if the end of the fiscal year of such party occurs in such
fiscal month, then such party shall provide to the other party such reports no
later than 90 days from the last day of such fiscal month). As soon as
reasonably practicable between the date hereof and the Closing Date, each of the
Company and Gart shall deliver any Form 10-Q or Form 10-K, including any
amendments thereto, prepared or filed by such party.
7.11. FINANCING. Each of Gart and MergerSub shall use good faith
commercially reasonable efforts to obtain the Financing, on terms reasonably
consistent with those contained in the Financing Letter. The Company agrees to
provide, and will use commercially reasonable efforts to cause its Subsidiaries,
officers, employees, representatives and advisors (including legal and
accounting advisors) to provide, all cooperation reasonably requested by Gart in
connection with the Financing. Gart will promptly provide to the Company written
notice of any fact or occurrence that might reasonably be expected to cause any
conditions of the Financing Letter not to be satisfied.
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7.12. DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION.
7.12.1. Gart and the Company agree that all rights to
indemnification, exculpation, advancement of expenses and the like now existing
in favor of any director or officer of the Company and its Subsidiaries (the
"Indemnified Parties") as provided in their respective charters or by-laws, or
in an agreement set forth in Section 7.12.1 of the Company Disclosure Schedule
between an Indemnified Party and the Company or one of its Subsidiaries, are
contract rights and shall survive the Merger. In addition, and without limiting
the foregoing, Gart and the Surviving Corporation shall indemnify all
Indemnified Parties to the fullest extent permitted by applicable Law with
respect to all acts and omissions arising out of such individuals' services as
officers, directors, employees or agents of the Company or any of its
Subsidiaries, or as trustees or fiduciaries of any plan for the benefit of
employees, occurring at or prior to the Effective Time, including, without
limitation, the transactions contemplated by this Agreement. Without limiting
the foregoing, in the event any such Indemnified Party is or becomes involved in
any capacity in any Action in connection with any matter, including, without
limitation, the transactions contemplated by this Agreement, occurring at or
prior to, and including, the Effective Time, Gart and the Surviving Corporation
will pay as incurred such Indemnified Party's legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith so long as such party shall enter into an undertaking with Gart and
the Surviving Corporation to reimburse Gart and the Surviving Corporation, to
the extent required by applicable Law, for all amounts advanced if a court of
competent jurisdiction shall ultimately determine, in a judgment that is not
subject to appeal or review, that indemnification of such Indemnified Party is
prohibited by applicable Law. Gart and the Surviving Corporation shall pay all
expenses, including reasonable attorneys' fees, that may be incurred by any
Indemnified Party in enforcing the indemnity and other obligations provided for
in this Section 7.12.1.
7.12.2. Gart and the Surviving Corporation shall cause to be
maintained in effect for six years from the Effective Time the current policies
of the directors' and officers' liability insurance maintained by the Company;
provided, that Gart and the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions that are
no less advantageous to the Indemnified Parties, and, provided, that such
substitution shall not result in any gaps or lapses in coverage with respect to
matters occurring prior to the Effective Time; and, provided, further, that Gart
and the Surviving Corporation shall not be required to pay an annual premium in
excess of 200% of the last annual premium paid by the Company prior to the date
hereof, and, if Gart and the Surviving Corporation are unable to obtain the
insurance required by this Section 7.12.2, then Gart and the Surviving
Corporation shall obtain as much comparable insurance as possible for an annual
premium equal to such maximum amount.
7.13. OPTIONS.
7.13.1. Prior to the Effective Time, the Company, by a resolution
duly adopted by its board of directors, shall (except as hereinafter provided)
cause all Options outstanding under the Company's 1993 Non-Employee Director
Plan to be cancelled, subject to the right of holders of such Options to
exercise such Options during the thirty-day period
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preceding the Closing, as provided in and in accordance with the provisions of
the 1993 Non-Employee Director Plan. In addition, prior to the Effective Time,
the Company, by a resolution duly adopted by its board of directors, shall
(except as hereinafter provided) cause all Options and shares of restricted
stock outstanding under the Company's 1994 Omnibus Plan to be transferred and
delivered to the Company in exchange for the payment of the value of such
Options and shares of restricted stock, as provided in and in accordance with
the provisions of the 1994 Omnibus Plan.
7.13.2. Notwithstanding any provision of Section 7.13.1: (a) with
respect to Options outstanding under any of the Stock Option Plans, the
Company's board of directors may, in its discretion, adopt amendments to such
plans and/or cause the Company to enter into amendments to stock option
agreements governing such Options, in order to permit such Options to be
exercised immediately prior to the Effective Time, such exercise(s) to be
contingent upon the occurrence of the Closing; (b) with respect to Options
outstanding under the 1993 Non-Employee Director Plan, the Company's board of
directors may, in its discretion, adopt amendments to such plan and/or cause the
Company to enter into amendments to stock option agreements governing such
Options, in order to permit such Options to be cancelled at the Effective Time
in accordance with Section 2.6; and (c) with respect to shares of restricted
stock outstanding under the 1994 Omnibus Plan, the Company's board of directors,
may, in its discretion, prior to the initial filing of the Registration
Statement, adopt amendments to such plan and/or cause the Company to enter into
amendments to restricted stock grant agreements governing such shares in order
to permit such shares to be cancelled and converted into the right to receive
the Merger Consideration at the Effective Time in accordance with this
Agreement.
7.13.3. With respect to Options that are not exercised, or that are
not transferred and delivered to the Company, in accordance with their terms or
pursuant to Section 7.13.1 or 7.13.2, the Company shall use its reasonable best
efforts to obtain the cancellation thereof as set forth in Section 2.6.
7.13.4. The Company shall have the right to advance (without
interest) to any holder of any Option, effective immediately prior to the
Effective Time, the amount necessary for such holder to exercise such Option
(provided that any such advance shall be contingent upon the consummation of the
transactions contemplated hereby); and, if any portion of such amount so
advanced remains unpaid at the Effective Time, then the terms of each such
advance shall permit Gart or the Surviving Corporation to withhold from the Cash
Consideration payable to such holder the advanced amount that such holder has
not repaid (and, to the extent that such Cash Consideration is less than the sum
of (a) any such unpaid portion and (b) any amount that Gart or the Surviving
Corporation is required under the Code or any provision of any applicable Law to
deduct and withhold from the amount otherwise payable to such holder, then the
terms of each such advance shall permit Gart or the Surviving Corporation to
withhold Stock Consideration (each share of Gart Common Stock being valued at
the Closing Sale Price) in an amount that (together with the Cash Consideration)
equals such sum).
7.14. EMPLOYEE BENEFITS. Following the Effective Time, Gart and the
Surviving Corporation shall (i) subject to Section 7.22, continue each Company
Plan until at least the earlier of (a) 60 days following the Closing and (b) the
date that Gart makes a
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corresponding plan available to employees of the Surviving Corporation who were
employed by the Company or any of its Subsidiaries at the Effective Time, and
(ii) cause to be provided, to each of the employees who was employed by the
Company or any of its Subsidiaries at the Effective Time and who continues to be
employed by the Surviving Corporation or any Affiliate of the Surviving
Corporation on the sixtieth day following the Closing ("Employee"), benefits
(including, without limitations, benefits under each Company Plan and Company
benefit plan) that, taken as a whole, are no less favorable to the Employee than
the benefits provided the Employee by the Company and its Subsidiaries
immediately prior to the Effective Time unless any of the benefits provided to
comparable employees by Gart would be significantly more favorable to the
Employee in which event such more favorable benefits will be provided to the
Employee as soon as reasonably practicable. Each of Gart and the Surviving
Corporation and its Affiliates shall credit Employees with any amounts paid for
the calendar year under the Company's medical and dental plans prior to the
transition to a new medical or dental program toward satisfaction of the
applicable deductible amounts and copayment and deductible maximums under any
new medical or dental program. With respect to each Employee, each of Gart and
the Surviving Corporation and its Affiliates shall treat service considered by
the Company or its Subsidiaries as service with the Company or its Subsidiaries
as service with each of Gart and the Surviving Corporation or its Affiliates for
purposes of employee benefits and fringe benefits, including, without
limitation, vacation benefits, waiting periods, vesting requirements and pre-
existing conditions limitations. Notwithstanding anything in the foregoing to
the contrary: (a) none of Gart, the Surviving Corporation and any Affiliate
thereof shall be required under the terms of this Agreement to provide (i)
severance benefits or other benefits related to termination of employment, or
"stay bonuses" or similar benefits (except that the Surviving Corporation shall
pay the benefits to be provided pursuant to plans adopted by the Company prior
to the date hereof and disclosed in Section 5.18.8 of the Company Disclosure
Schedule), (ii) sick leave or similar benefits, or (iii) benefits (other than
benefits described in Section 7.13 of this Agreement) under equity incentive
plans, consistent with or otherwise with reference to any preexisting Company
Plan or Company benefit plan (i.e., benefits, if any, in these categories shall
be governed exclusively by plans made available by Gart and its Affiliates); (b)
none of Gart, the Surviving Corporation and any Affiliate thereof shall be
obligated to continue any particular Company Plan or Company benefit plan
(except as set forth in Section 7.14 of the Company Disclosure Schedule); and
(c) the requirements of this Section 7.14 shall remain in effect for a period of
twelve months following the Effective Time and then shall expire. The parties
hereto agree and acknowledge that this Section 7.14 does not constitute an
agreement to continue the employment of any particular Employee or Employees of
the Company or any of its Subsidiaries; rather, all Employees will be subject to
generally applicable Gart policies concerning employment (including the status
of employment as "at will"). For the avoidance of doubt, the parties agree that
the provisions of Section 10.7 are expressly intended to be applicable to this
Section 7.14.
7.15. ANTITAKEOVER STATUTES. If any Takeover Statute (as defined below) is
or may become applicable to the transactions contemplated hereby, the board of
directors of the Company will grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and will otherwise act
to eliminate the effects of any Takeover Statute on any of the transactions
contemplated hereby. For purposes of this Agreement, a
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"Takeover Statute" means a "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States, including Section 203 of the DGCL.
7.16. NOTIFICATION OF CERTAIN MATTERS. Each of Gart and the Company shall
give prompt notice to the other of: (a) any notice of, or other communication
relating to, a default or event that, with notice or lapse of time or both,
would become a default, received by it or any of its Subsidiaries subsequent to
the date hereof and prior to the Effective Time, under any Contract material to
the financial condition, properties, business or results of operations of such
party taken as a whole to which such party, or any Subsidiary of such party, is
a party or is subject; and (b) any material adverse change in the condition
(financial or other), properties, assets, business, results of operations or
prospects of it and its Subsidiaries taken as a whole, or the occurrence of any
event that, so far as reasonably can be foreseen at the time of its occurrence,
is reasonably likely to result in any such change. Each of Gart and the Company
shall give prompt notice to the other party of any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated hereby. In the event
that, at any time prior to the Closing, the Company becomes aware of any matter
that, if existing or known as of the date hereof, would have been required to be
set forth or described in the Company Disclosure Schedule or would otherwise
have rendered any representation or warranty of the Company or any of its
Subsidiaries set forth herein false, the Company shall promptly provide written
notice of such matters to Gart. In the event that, at any time prior to the
Closing, Gart becomes aware of any matter that, if existing or known as of the
date hereof, would have been required to be set forth or described in the Gart
Disclosure Schedule or would otherwise have rendered any representation or
warranty of Gart or any of its Subsidiaries set forth herein false, Gart shall
promptly provide written notice of such matters to the Company. However, no such
notice provided under this Section 7.16 shall be deemed to cure any breach of
any representation or warranty made herein, whether for purposes of determining
whether or not the conditions set forth in Article 8 have been satisfied or
otherwise.
7.17. FURTHER ASSURANCES. At and after the Effective Time, the officers
and directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company, Gart or MergerSub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of the Company, Gart or MergerSub, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets of the Company acquired, or to be acquired, by the Surviving Corporation
as a result of, or in connection with, the transactions contemplated hereby.
7.18. FURTHER ACTION; REASONABLE COMMERCIAL EFFORTS. Subject to the terms
and conditions hereof, each party hereto shall use its reasonable commercial
efforts to take, or to cause to be taken, all appropriate action, and to do, or
to cause to be done, all things necessary, proper or advisable under applicable
Laws to consummate and make effective the transactions contemplated hereby.
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7.19. TAX-FREE REORGANIZATION TREATMENT. None of Gart, MergerSub and the
Company shall take, or cause to be taken, any action, whether before or after
the Effective Time, that would reasonably be expected to cause the Merger to
fail to qualify as a "reorganization" within the meaning of Section 368 of the
Code. Each of the Company and Gart agrees to, and agrees to cause its
respective Subsidiaries to, vigorously and in good faith defend all challenges
to the treatment of the reorganization as described in this Section 7.19.
7.20. DELIVERY OF OPINION OF FINANCIAL ADVISOR. The Company agrees to
deliver to Gart a true and complete copy of the written opinion of Financo, Inc.
(if not already so delivered), promptly following the execution and delivery of
this Agreement.
7.21. PUBLIC ANNOUNCEMENTS. Each of Gart and the Company agrees that,
except as may be required by applicable Law as advised by its respective
counsel, it will not issue any press release or otherwise make any public
statement with respect to this Agreement (including the Exhibits hereto) or the
transactions contemplated hereby without obtaining the approval of the other
party (which approval shall not be unreasonably withheld).
7.22. TERMINATION OF 401(K) SAVINGS PLAN. If Gart requests in writing
(which such request shall be delivered to the Company no later than 10 Business
Days prior to the Effective Time), then: (i) the board of directors of the
Company shall adopt resolutions terminating, effective as of the day prior to
the Closing Date, any Company Plan that is intended to meet the requirements of
Section 401(k) of the Code, and that is sponsored, or contributed to, by the
Company or any Company ERISA Affiliate; and (ii) at the Closing, the Company
shall provide to Gart (a) executed resolutions of the board of directors of the
Company authorizing such termination, and (b) an executed amendment to the
Company Plan that is sufficient to assure compliance with all applicable
requirements of the Code so that the tax-qualified status of the Company Plan
will be maintained at the time of termination.
7.23. NASDAQ LISTING. Gart agrees to cause the listing on the Nasdaq
National Market at the Effective Time of the shares of Gart Common Stock
issuable pursuant to this Agreement in the Merger, subject to official notice of
issuance.
7.24. BOARD OF DIRECTORS. Prior to the initial filing of the Proxy
Statement with the SEC, the board of directors of the Company shall identify two
individuals as designees to serve on Gart's board of directors (collectively,
the "Designated Directors"). Gart shall cause each of the Designated Directors
to be elected or appointed as members of Gart's board of directors effective as
of the Effective Time. Gart agrees to use commercially reasonable efforts to
cause its directors, subject to their fiduciary duties, to ensure that each of
the Designated Directors will be appointed or nominated for election to Gart's
board of directors at Gart's 2001 annual meeting of stockholders and at Gart's
2002 annual meeting of stockholders. In the event that one of the Designated
Directors is unable or unwilling to serve as a member of Gart's board of
directors, then a replacement nominee shall be chosen by the other Designated
Director, and Gart will use commercially reasonable efforts to cause its
directors, subject to their fiduciary duties, to ensure the election thereof. In
the event that both of the Designated Directors are unable or unwilling to serve
as members of Gart's board
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of directors, then Gart shall use commercially reasonable efforts to have the
individuals who were members of the Company's board of directors immediately
prior to the Effective Time choose replacement nominees, and Gart will use
commercially reasonable efforts to cause its directors, subject to their
fiduciary duties, to ensure the election thereof. Notwithstanding anything in
this Agreement to the contrary, Gart shall have no obligation to cause its
directors to appoint or nominate for election any of the Designated Directors to
Gart's board of directors at Gart's 2003 annual meeting of stockholders or
thereafter.
7.25. REGISTRATION RIGHTS. Gart agrees to enter into, as of the Effective
Time, a registration rights agreement (the "Registration Rights Agreement") with
certain holders of Company Common Stock substantially in the form attached
hereto as Exhibit C.
7.26. REAL ESTATE MATTERS. The Company agrees to cooperate with Gart in
providing any notices of the transactions contemplated hereby that are required
to be delivered prior to the consummation of the transactions contemplated
hereby under the terms of the Company Leases to the applicable landlords.
ARTICLE 8.
CONDITIONS OF MERGER
8.1. GENERAL CONDITIONS. The respective obligations of each party to
effect the transactions contemplated hereby shall be subject to the satisfaction
or written waiver on or prior to the Closing Date of the following conditions:
8.1.1. NO LAW OR ORDERS. No Law or Order shall have been enacted,
entered, issued or promulgated by any Governmental Entity (and be in effect)
that prohibits the consummation of the transactions contemplated hereby.
8.1.2. HSR ACT. Any applicable waiting period under the HSR Act
shall have expired or shall have been terminated with respect to the
transactions contemplated hereby.
8.1.3. LEGAL PROCEEDINGS. No Governmental Entity shall have
initiated proceedings to restrain or prohibit the transactions contemplated
hereby or to force rescission, unless such Governmental Entity shall have
withdrawn and abandoned any such proceedings prior to the time that otherwise
would have been the Closing Date.
8.1.4. STOCKHOLDER APPROVAL.
(a) This Agreement shall have been adopted and the transactions
contemplated hereby shall have been approved by the requisite vote of
the holders of the outstanding capital stock of the Company entitled
to vote thereon at the Company Stockholders Meeting.
(b) The issuance of Gart Common Stock contemplated hereby shall have
been approved by the requisite vote of the holders of the outstanding
capital stock of Gart entitled to vote thereon at the Gart
Stockholders Meeting.
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8.1.5. REGISTRATION STATEMENT. The Registration Statement shall
have become effective in accordance with the provisions of the Securities Act.
No stop order suspending the effectiveness of the Registration Statement shall
have been issued by the SEC and no proceedings for that purpose shall have been
initiated by the SEC.
8.1.6. REGULATORY APPROVAL. All regulatory approvals or waivers
required to consummate the transactions contemplated hereby shall have been
obtained and shall remain in full force and effect and all statutory waiting
periods in respect thereof shall have expired, other than those the failure of
which to be obtained or maintained would not have, or reasonably be expected to
have, a Material Adverse Effect on the Company or Gart, and no such approvals or
waivers shall contain any conditions, restrictions or requirements that would,
following the Effective Time, have a Material Adverse Effect on Gart or the
Surviving Corporation.
8.1.7. PERMITS AND APPROVALS. Each party hereto shall have obtained
all Permits and approvals that are legally required to be obtained by such party
or its Subsidiaries from any Governmental Entity prior to consummation of the
transactions contemplated hereby, which if not obtained, individually or in the
aggregate, would have a Material Adverse Effect on the Surviving Corporation and
its Subsidiaries, taken as a whole.
8.1.8. CLOSING SALE PRICE. The Closing Sale Price shall not be less
than $7.00.
8.2. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the transactions contemplated hereby shall
be subject to the satisfaction on or prior to the Closing Date of each of the
following additional conditions, unless waived in writing by the Company:
8.2.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS.
(a) The representations and warranties of Gart and MergerSub
contained in this Agreement shall be true and correct except where
the failure to be true and correct would not have a Material Adverse
Effect on Gart and its Subsidiaries taken as a whole (it being
understood that, notwithstanding anything to the contrary contained
in this Agreement, for the sole purpose of determining whether there
has been a Material Adverse Effect as a result of any inaccuracy of a
representation or warranty of Gart or MergerSub, such representation
or warranty shall be read as if it were not qualified by "material"
or "Material Adverse Effect"), in each case on the date hereof and at
the Effective Time (unless the representations and warranties address
matters as of a particular date, in which case they shall remain true
and correct in all respects as of such date).
(b) Each of Gart and MergerSub shall have performed or complied in
all material respects with all covenants contained in this Agreement
or in any agreement, certificate or instrument to be executed by such
party pursuant
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hereto required to be performed or complied with by such party either
at or prior to the Closing.
8.2.2. DELIVERIES. Each of Gart and MergerSub shall have delivered,
or shall have caused to be delivered, to the Company at or prior to the Closing
the following:
(a) certified copies of the resolutions duly adopted by (i) the
board of directors of Gart approving the Merger and the issuance of
Gart Common Stock contemplated hereby and (ii) the holders of Gart
Common Stock approving the issuance of Gart Common Stock contemplated
hereby;
(b) such other documents, instruments or certificates as shall be
reasonably requested by the Company or its counsel; and
(c) a certificate of (i) the chief executive officer, the president
or any vice president of such party and (ii) the secretary or any
assistant secretary of such party, certifying to the matters set
forth in Sections 8.2.1(a) and (b) above with respect to such party.
8.2.3. GART ADVERSE CHANGES. There shall not have occurred after
the date hereof any events or circumstances that, individually or in the
aggregate, have had or are reasonably expected to have a Material Adverse Effect
on Gart.
8.2.4. TAX OPINIONS. The Company shall have received opinions in
form and substance reasonably satisfactory to it from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP to the
Company, dated as of the date hereof and as of the Closing Date, each
substantially to the effect that the Merger should be treated as a
reorganization within the meaning of Section 368(a) of the Code, subject to
assumptions or representations including those of the Company and Gart typical
to opinions of this nature and reasonably acceptable to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP.
8.2.5. COMFORT LETTERS. The Company shall have received from Gart's
independent certified public accountants customary comfort letters dated (a) the
date of the effectiveness of the Registration Statement and (b) shortly prior to
the Closing Date, in each case with respect to certain financial information
regarding Gart and in the form customarily issued by such accountants at such
time in transactions of this type.
8.2.6. THIRD PARTY CONSENTS. Gart shall have received all consents
from third parties, and shall have delivered in a timely manner all notices to
third parties, that, if not so received or delivered, as applicable, prior to
the consummation of the transactions contemplated hereby, would be reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
Gart or the Surviving Corporation.
8.3. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF GART AND MERGERSUB. The
obligations of Gart and MergerSub to effect the transactions contemplated hereby
shall be subject to the satisfaction on or prior to the Closing Date of each of
the following additional conditions, unless waived in writing by Gart:
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8.3.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS.
(a) The representations and warranties of the Company contained in
this Agreement shall be true and correct except where the failure to
be true and correct would not have a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole (it being understood
that, notwithstanding anything to the contrary contained in this
Agreement, for the sole purpose of determining whether there has been
a Material Adverse Effect as a result of any inaccuracy of a
representation or warranty of the Company, such representation or
warranty shall be read as if it were not qualified by "material" or
"Material Adverse Effect"), in each case on the date hereof and at
the Effective Time (unless the representations and warranties address
matters as of a particular date, in which case they shall remain true
and correct in all respects as of such date).
(b) The Company shall have performed or complied in all material
respects with all covenants contained in this Agreement or in any
agreement, certificate or instrument to be executed by the Company
pursuant hereto required to be performed or complied with by the
Company either at or prior to the Closing.
8.3.2. DELIVERIES. The Company shall have delivered, or shall have
caused to be delivered, to Gart at or prior to the Closing the following:
(a) certified copies of the resolutions duly adopted by the board of
directors of the Company and by the holders of Company Common Stock
adopting this Agreement and approving the Merger;
(b) such other documents, instruments or certificates as shall be
reasonably requested by Gart or its counsel; and
(c) a certificate of (i) the chief executive officer, the president
or any vice president of the Company and (ii) the secretary or any
assistant secretary of the Company, certifying to the matters set
forth in Section 8.3.1(a) and (b) above.
8.3.3. COMPANY ADVERSE CHANGES. There shall not have occurred after
the date hereof any events or circumstances that, individually or in the
aggregate, have had or are reasonably expected to have a Material Adverse Effect
on the Company.
8.3.4. TAX OPINIONS. Gart shall have received opinions in form and
substance reasonably satisfactory to it from Deloitte & Touche LLP to the
Company, dated as of the date hereof and as of the Closing Date, each
substantially to the effect that the Merger should be treated as a
reorganization within the meaning of Section 368(a) of the Code, subject to
assumptions or representations including those of Gart and the Company typical
to opinions of this nature and reasonably acceptable to Deloitte & Touche LLP.
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8.3.5. COMFORT LETTERS. Gart shall have received from the Company's
independent certified public accountants customary comfort letters dated (a) the
date of the effectiveness of the Registration Statement and (b) shortly prior to
the Closing Date, in each case with respect to certain financial information
regarding the Company and in the form customarily issued by such accountants at
such time in transactions of this type.
8.3.6. FINANCING. The Financing shall have been consummated on
terms reasonably consistent with those contained in the Financing Letter, and
each of the Company Credit Facility and the Gart Credit Facility shall have been
terminated (it being acknowledged that if the parties to the Financing Letter
(other than Gart) are prepared to perform as contemplated thereby, but Gart is
unwilling to complete the Financing on terms reasonably consistent with those
contained in the Financing Letter, the condition contained in this Section 8.3.6
shall be deemed to have been satisfied).
8.3.7. THIRD PARTY CONSENTS. The Company shall have received all
consents from third parties, and shall have delivered in a timely manner all
notices to third parties, (i) that are identified as required pursuant to
Section 8.3.7 of the Company Disclosure Schedule, and (ii) (with respect to any
consent or notice not so identified pursuant to clause (i) above) that, if not
so received or delivered, as applicable, prior to the consummation of the
transactions contemplated hereby, would be reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on Gart or the Surviving
Corporation.
8.3.8. DISSENTING SHARES. The aggregate number of Dissenting Shares
shall not equal 6% or more of the shares of Company Common Stock outstanding as
of the record date for the Company Stockholders Meeting or at the Effective
Time.
8.3.9. CANCELLATION OF OPTIONS. The Company shall have obtained the
cancellation of the Options as set forth in Section 2.6 and received any
necessary agreements, approvals or consents from the holders thereof.
ARTICLE 9.
TERMINATION
9.1. TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Effective Time
(notwithstanding any adoption of this Agreement or approval of the Merger by the
stockholders of the Company or any approval of the issuance of Gart Common Stock
contemplated hereby by the stockholders of Gart):
9.1.1. MUTUAL CONSENT. By mutual written consent of Gart, MergerSub
and the Company;
9.1.2. BY GART. By Gart, if: (a) any of the conditions set forth in
Section 8.1 or 8.3 shall have become incapable of fulfillment (other than as a
result of a breach of this Agreement by Gart or MergerSub); or (b) the board of
directors of the Company or any committee thereof fails to recommend, withdraws
or modifies, or resolves to withdraw or modify, its recommendation of this
Agreement and the transactions
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contemplated hereby, or approves a Superior Proposal, whether or not in
compliance with Section 7.4;
9.1.3. BY THE COMPANY. By the Company, if (a) any of the conditions
set forth in Section 8.1 or 8.2 shall have become incapable of fulfillment
(other than as a result of a breach of this Agreement by the Company); or (b)
the board of directors of the Company has approved a Superior Proposal in
accordance with the terms of Section 7.4; or (c) the board of directors of the
Company withdraws its recommendation of the transactions contemplated hereby in
accordance with the terms of Section 7.4; or (d) Gart shall have been notified
in writing by The CIT Group/Business Credit, Inc. of its withdrawal of the
Financing Letter, or of its inability or unwillingness to provide the Financing
contemplated thereby, and within sixty (60) days following the date of such
written notification Gart does not either (i) cause the Financing Letter to be
reinstated or (ii) secure a new financing letter with alternative financial
institution(s) on terms and conditions at least as favorable to Gart and the
Company as those contained in the Financing Letter;
9.1.4. TERMINATION DATE. By either Gart or the Company, if the
transactions contemplated hereby are not consummated on or before the date that
is six months after the date hereof, but only if the failure to consummate such
transactions on or before such date did not result from the breach of any
representation, warranty or agreement herein of the party seeking termination
(or any of its Subsidiaries);
9.1.5. BREACH OF COVENANT. By either Gart or the Company, if the
other party (or any of such other party's Subsidiaries) shall be in material
breach of any of its covenants contained in this Agreement and such breach
either is incapable of cure or is not cured within 20 Business Days after notice
from the party wishing to terminate; provided, that the party seeking such
termination (or any of such party's Subsidiaries) shall not also then be in
material breach of this Agreement; and, provided, further, that any material
breach of the provisions of Section 7.4 shall entitle Gart to an immediate right
to termination without any notice or cure requirement;
9.1.6. BREACH OF REPRESENTATIONS AND WARRANTIES. By either Gart or
the Company, if the other party (or any of such other party's Subsidiaries)
shall be in breach of any of its representations or warranties contained in this
Agreement, which breach, individually or together with all other breaches, is
reasonably expected to have a Material Adverse Effect on such party, and such
breach either is incapable of cure or is not cured within 20 Business Days after
notice from the party wishing to terminate; provided, that the party seeking
such termination (or any of its Subsidiaries) shall not also then be in material
breach of this Agreement; or
9.1.7. ORDER OR ACTION BY GOVERNMENTAL ENTITY. By either Gart or
the Company, if a Governmental Entity shall have issued a non-appealable final
Order or shall have taken any other action having the effect of permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby (provided, that, (a) if the party seeking to terminate this Agreement (or
any of its Subsidiaries) pursuant to this Section 9.1.7 is subject to such
Order, it shall have used all reasonable efforts to have such Order removed, and
(b) the right to terminate this Agreement under this Section 9.1.7 shall not be
available to a party if such party (or any of such party's Subsidiaries) has not
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complied with its obligations under Section 7.5 and such noncompliance
materially contributed to the issuance of any such Order or the taking of any
such action).
9.2. MANNER AND EFFECT OF TERMINATION. Termination shall be effected by
the giving of written notice to that effect by the party seeking termination. If
this Agreement is validly terminated and the transactions contemplated hereby
are not consummated, then this Agreement shall become null and void and of no
further force and effect and no party shall be obligated to any other party
hereunder; provided, however, that termination shall not affect (a) the rights
and remedies available to a party as a result of the breach by the other party
or parties hereunder (provided, that the provisions of Section 9.3 shall
constitute the exclusive legal remedy of the parties hereto with respect to the
matters described therein other than intentional breaches of covenants; without
limiting the generality of the foregoing, the payment by the Company of the
Termination Fee and the Gart Expenses pursuant to Section 9.3 shall constitute
the exclusive legal remedy of Gart and MergerSub in the event of the Company's
acceptance of a Superior Proposal or the withdrawal by the board of directors of
the Company of its recommendation of adoption and approval of this Agreement and
the transactions contemplated hereby, each as contemplated by Section 7.4), (b)
the provisions of Sections 5.30, 6.29, 10.1, 10.2, 10.4 and 10.11 or this
Section 9.2, or (c) the obligations of the parties hereto pursuant to Section
9.3. The Company and Gart further agree that, for a period of two years from the
date of any termination of this Agreement in accordance with this Article IX,
neither party will offer employment to, or hire any of, the employees (other
than any store employees whose rank is junior to that of a store manager) of the
other party (or any Subsidiary thereof) with whom it has had contact or who
became known to the party in connection with the transactions contemplated
hereby.
9.3. CERTAIN PAYMENTS UPON TERMINATION.
9.3.1. In the event that:
(a) the Company terminates this Agreement under (i) Section 9.1.3(a),
based upon a failure of the condition expressed in Section 8.1.4(a),
(ii) Section 9.1.3(b) or (iii) Section 9.1.3(c); or
(b) Gart terminates this Agreement under (i) Section 9.1.2(a), based
upon a failure of the condition expressed in Section 8.1.4(a), or (ii)
Section 9.1.2(b); or
(c) (i) Gart terminates this Agreement under (A) Section 9.1.2(a),
based upon a failure of the condition expressed in Section 8.3.1(a) or
a failure of the condition expressed in Section 8.3.1(b), or (B)
Section 9.1.5, or (C) Section 9.1.6, and (ii) the Company enters into
an agreement to consummate an Acquisition Transaction with any Person
(other than Gart or any Affiliate of Gart) within twelve (12) months
of the effective date of such termination and consummates such
Acquisition Transaction thereafter, then upon the consummation of such
Acquisition Transaction;
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the Company shall pay to Gart a termination fee in the amount of $3,000,000 (the
"Termination Fee").
9.3.2. In any event in which the Termination Fee becomes payable,
the Company shall also pay to Gart all documented out-of-pocket fees and
expenses (including those of counsel, accountants and other advisors and
consultants and in connection with the negotiation and execution of the New
Credit Facility) incurred by any of Gart, MergerSub and their Affiliates in
connection with the transactions contemplated by this Agreement (the "Gart
Expenses"); provided, however, such Gart Expenses shall not exceed $1,500,000.
Notwithstanding the foregoing, in the event that Gart terminates this Agreement
as described in clause 9.3.1(c)(i), then Gart Expenses shall be payable by the
Company immediately, whether or not the condition expressed in clause
9.3.1(c)(ii) is satisfied. In the event that (a) Gart terminates this Agreement
under Section 9.1.2(a), based upon a failure of the condition expressed in
Section 8.3.6, or the Company terminates this Agreement under Section 9.1.3(d),
in either case provided that such failure is due to events or circumstances that
have had a Material Adverse Effect on Gart or is due to a Material Adverse
Effect that was caused by Gart, or (b) the Company terminates this Agreement
under (i) Section 9.1.3(a), based upon a failure of the condition expressed in
Section 8.2.1(a) or a failure of the condition expressed in Section 8.2.1(b), or
(ii) Section 9.1.5, or (iii) Section 9.1.6, Gart shall pay to the Company all
fees and expenses (including those of counsel, accountants and other advisors
and consultants and in connection with the negotiation and execution of the New
Credit Facility) incurred by the Company and its Affiliates in connection with
the transactions contemplated by this Agreement (the "Company Expenses");
provided, however, such Company Expenses shall not exceed $1,500,000.
9.3.3. Any payment required to be made pursuant to this Section 9.3
shall be made by wire transfer of immediately available funds within two (2)
Business Days of the event giving rise to such payment. Gart and the Company
acknowledge that the agreements contained in this Section 9.3 are an integral
part of the transactions contemplated by this Agreement and that, without said
agreements, neither Gart nor the Company would enter into this Agreement;
accordingly, (1) if the Company fails promptly to pay the Termination Fee and/or
the Gart Expenses due pursuant to this Section 9.3, and, in order to obtain such
payment, Gart commences a suit that results in a judgment against the Company
for the Termination Fee and/or the Expenses, then the Company will pay to Gart
reasonable expenses (including attorneys' fees and expenses) in connection with
such suit, together with interest on the amount due hereunder at the legal rate
determined by the court rendering such judgment, and (2) if Gart fails promptly
to pay the Company Expenses due pursuant to this Section 9.3, and, in order to
obtain such payment, the Company commences a suit that results in a judgment
against Gart for the Company Expenses, then Gart will pay to the Company
reasonable expenses (including attorneys' fees and expenses) in connection with
such suit, together with interest on the amount due hereunder at the legal rate
determined by the court rendering such judgment.
ARTICLE 10.
MISCELLANEOUS
10.1. CONFIDENTIALITY. Each of Gart and the Company agrees and
acknowledges that it will continue to be bound by the Confidentiality Agreement,
dated July
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18, 2000, between Gart and the Company (as such agreement may be amended, the
"Confidentiality Agreement").
10.2. EXPENSES. Except as otherwise specifically provided for herein
(including, without limitation, under Article 9), each of the Company, on the
one hand, and Gart and MergerSub, on the other, shall pay all of its costs and
expenses (including attorneys', accountants' and investment bankers' fees)
incurred in connection with this Agreement and the transactions contemplated
hereby; provided, however, that, with respect to any expenses incurred by the
Company in connection with the Merger that the Company has not paid as of the
Effective Time, MergerSub shall not distribute cash directly to the Company for
the payment of such expenses but instead shall directly pay the applicable
creditors of the Company at or following the Effective Time.
10.3. NOTICES. All notices, requests, claims, demands and other
communications hereunder must be in writing and will be deemed to have been duly
given only if delivered personally against written receipt or by facsimile
transmission against facsimile confirmation or mailed by a nationally recognized
overnight courier prepaid, to the parties at the following addresses or
facsimile numbers:
To the Company: ▇▇▇▇▇▇'▇ Sporting Goods, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Mayor, Day, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
To Gart or
MergerSub: Gart Sports Company
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Irell & ▇▇▇▇▇▇▇ LLP
1800 Avenue of the Stars, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices, requests, claims, demands and other communications will (a) if
delivered personally to the address as provided in this Section 10.3, be deemed
given upon delivery, (b) if delivered by facsimile transmission to the facsimile
number as provided for in this Section 10.3, be deemed given upon facsimile
confirmation, and (c) if delivered by
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overnight courier to the address as provided in this Section 10.3, be deemed
given on the earlier of the first Business Day following the date sent by such
overnight courier or upon receipt (in each case, regardless of whether such
notice, request, claim, demand or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this Section
10.3). Any party hereto from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other parties hereto.
10.4. ENTIRE AGREEMENT. This Agreement and the exhibits and schedules
hereto, including the Company Disclosure Schedule and the Gart Disclosure
Schedule, constitute the entire Agreement among the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties hereto with respect to
the subject matter hereof, except for the Confidentiality Agreement, which shall
continue in full force and effect and shall survive any termination of this
Agreement or the Closing in accordance with its terms.
10.5. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
10.6. INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom, and (d) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
10.7. THIRD PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties hereto to confer third party beneficiary rights, and this Agreement does
not confer any such rights, upon any other Person other than any Person entitled
to indemnity under Section 7.11.
10.8. NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party hereto without the prior written consent of the other
parties hereto and any attempt to do so will be void. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of, and is
enforceable by the parties hereto and their respective successors and assigns.
10.9. HEADINGS. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
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10.10. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
10.11. CONSTRUCTION. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in, and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentem.
10.12. SPECIFIC PERFORMANCE. The parties hereto agree that, if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist, and damages would be difficult to determine.
It is agreed that the parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
10.13. AMENDMENT AND MODIFICATION. At any time prior to the Effective
Time, this Agreement may be amended, modified or supplemented only by written
agreement (referring specifically to this Agreement) of Gart, MergerSub and the
Company with respect to any of the terms contained herein; provided, however,
that no such amendment, modification or supplementation shall be made that,
under applicable Law, requires the approval of stockholders of the Company or
Gart, without the further approval of such stockholders.
10.14. WAIVER. At any time prior to the Effective Time, Gart and
MergerSub, on the one hand, and the Company, on the other, may (a) extend the
time for the performance of any of the obligations or other acts of the other,
(b) waive any inaccuracies in the representations and warranties of the other
contained herein or in any documents delivered pursuant hereto, and (c) waive
compliance by the other with any of the agreements or conditions contained
herein that may legally be waived. 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 specifically referring to this Agreement and signed on
behalf of such party.
10.15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained herein and in any certificate or other writing
delivered pursuant hereto shall survive until (but not beyond) the Effective
Time. This Section 10.15 shall not limit any covenant or agreement of the
parties hereto that by its terms contemplates performance after the Effective
Time.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first
written above.
▇▇▇▇▇▇'▇ SPORTING GOODS, INC.,
a Delaware corporation
By:_________________________
Name:
Title:
GART SPORTS COMPANY,
a Delaware corporation
By:_________________________
Name:
Title:
GSC ACQUISITION CORP.,
a Delaware corporation
By:_________________________
Name:
Title:
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Exhibits
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Exhibit A Company Voting Agreements
Exhibit B Gart Voting Agreement
Exhibit C Registration Rights Agreement
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