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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE SPORTS AUTHORITY, INC.,
SLAP SHOT HOLDINGS CORP.
AND
SAS ACQUISITION CORP.
JANUARY 22, 2006
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made
and entered into as of this 22nd day of January, 2006 by and among The Sports
Authority, Inc., a Delaware corporation (the "COMPANY"), Slap Shot Holdings
Corp., a Delaware corporation ("PARENT"), and SAS Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Parent("MERGER SUB").
RECITALS
A. The parties intend that Merger Sub be merged with and into the
Company (the "MERGER"), with the Company surviving the Merger as a wholly-owned
subsidiary of Parent (the "SURVIVING CORPORATION").
B. The Special Committee and the Board of Directors of the Company
(except for directors affiliated with Parent or Merger Sub and members of
Company management who recused themselves) have, acting in joint session,
unanimously (i) determined that the Merger and this Agreement are fair to and in
the best interests of the Company, (ii) adopted this Agreement and (iii)
resolved to recommend that the Company shareholders approve this Agreement.
C. The Board of Directors of Merger Sub has unanimously adopted this
Agreement. The Board of Directors of Parent, and Parent, as the sole shareholder
of Merger Sub, in each case, has approved this Agreement and has approved the
Merger and the transactions contemplated hereby.
D. The Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger, as set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein,
intending to be legally bound, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. For purposes of this Agreement, the
following terms have the respective meanings set forth below:
"ACCEPTABLE CONFIDENTIALITY AGREEMENT" has the meaning set forth in
SECTION 6.4(F)(I).
"ADVERSE RECOMMENDATION CHANGE" has the meaning set forth in SECTION
6.4(D).
"AFFILIATE" means, with respect to any Person, any other Person,
directly or indirectly, controlling, controlled by, or under common control
with, such Person. For purposes of this definition, the term "control"
(including the correlative terms "CONTROLLING", "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"AGREEMENT" has the meaning set forth in the Preamble.
"AMENDED OPTION" has the meaning set forth in SECTION 2.4(A).
"BALANCE SHEET" means the consolidated balance sheet of the Company as
of October 29, 2005 (and the notes thereto) set forth in the Company's quarterly
report on Form 10-Q for the quarterly period ended October 29, 2005.
"BALANCE SHEET DATE" means October 29, 2005.
"BUSINESS DAY" means any day other than the days on which banks in the
City of New York generally are closed.
"CERTIFICATE OF MERGER" has the meaning set forth in SECTION 2.1(B).
"CLOSING" has the meaning set forth in SECTION 2.1(D).
"CLOSING DATE" has the meaning set forth in SECTION 2.1(D)
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON SHARES" means shares of Common Stock.
"COMMON STOCK" means the common stock of the Company, par value $0.01
per share.
"COMPANY" has the meaning set forth in the Preamble.
"COMPANY ACQUISITION AGREEMENT" has the meaning set forth in SECTION
6.4(D).
"COMPANY ACQUISITION PROPOSAL" has the meaning set forth in SECTION
6.4(F)(II).
"COMPANY EMPLOYEES" has the meaning set forth in SECTION 8.7(A).
"COMPANY FAIRNESS OPINION" has the meaning set forth in SECTION
4.2(D).
"COMPANY FINANCIAL ADVISOR" has the meaning set forth in SECTION
4.2(D).
"COMPANY JOINT VENTURE" means, with respect to the Company, any
corporation or other entity (including partnerships, limited liability companies
and other business associations and joint ventures) in which the Company,
directly or indirectly, owns an equity interest that does not have voting power
under ordinary circumstances to elect a majority of the board of directors or other person performing similar functions but in which the Company
has rights with respect to the management of such Person.
"COMPANY OPTIONS" means Employee Options and Director Options, as the
context requires.
"COMPANY PROXY STATEMENT" has the meaning set forth in SECTION 4.8.
"COMPANY REPRESENTATIVES" has the meaning set forth in SECTION 6.4(A).
"COMPANY RESTRICTED SHARES " has the meaning set forth in SECTION
2.2(F).
"COMPANY SEC REPORTS" has the meaning set forth in SECTION 4.7(A).
"COMPANY SECURITIES" has the meaning set forth in SECTION 4.5(B).
"COMPANY SHAREHOLDER MEETING" has the meaning set forth in SECTION
6.2(A).
"CONFIDENTIALITY AGREEMENT" means, collectively, the Confidentiality
Agreement dated December 22, 2005 between the Company and LGP.
"CONTRACTS" has the meaning set forth in SECTION 4.18(A).
"CONTRIBUTING HOLDERS" means John Douglas Morton, Thomas T.
Hendrickson, David J. Campisi, Gregory A. Waters and Nesa E. Hassanein and any
other holder of Common Shares or Company Options who enters into a Contribution
and Exchange Agreement or other agreement providing for such holder to (i)
acquire shares of capital stock of Parent immediately prior to the Effective
Time and/or (ii) agree to amend the terms of a portion of their Company Options
effective concurrently with the consummation of the Merger.
"CONTRIBUTION AND EXCHANGE AGREEMENT" means each agreement by and
between Parent and the Contributing Holders, in the form of EXHIBIT A attached,
pursuant to which (i) such Contributing Holders will exchange a portion of their
respective Common Shares for shares of capital stock of Parent immediately prior
to the Effective Time and/or (ii) a portion of such Contributing Holders'
respective Company Options will be assumed by Parent and amended concurrently
with the consummation of the Merger.
"CONTROLLED GROUP LIABILITY" means any and all liabilities (i) under
Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections 412 and
4971 of the Code, or (iv) as a result of a failure to comply with the
continuation coverage requirements of Section 601 et seq. of ERISA and Section
4980B of the Code, other than such liabilities that arise out of, or relate to,
the Employee Plans.
"CURRENT COMPANY SEC REPORTS" means the Company's annual report on
Form 10-K for the fiscal year ended January 29, 2005, the Company's Definitive
Proxy for the 2005 Annual Meeting of Company shareholders and the Company's
quarterly reports on Form 10-Q for the fiscal quarters ended April 30, 2005,
July 30, 2005 and October 29, 2005.
"CURRENT POLICIES" has the meaning set forth in SECTION 7.2(A).
"DAMAGES" has the meaning set forth in SECTION 7.2(A).
"DELAWARE CORPORATE LAW" means the Delaware General Corporation Law,
as amended.
"DIRECTOR OPTIONS" means the outstanding options to acquire Common
Shares granted to directors of the Company.
"DISBURSING AGENT" has the meaning set forth in SECTION 2.3(A).
"DISCLOSURE LETTER" has the meaning set forth in the preamble to
ARTICLE IV.
"DISSENTING COMMON SHARES" has the meaning set forth in SECTION
2.2(D).
"EFFECTIVE TIME" has the meaning set forth in SECTION 2.1(B).
"EMPLOYEE BENEFIT PLAN" has the meaning set forth in Section 3(3) of
ERISA.
"EMPLOYEE OPTIONS" means the outstanding options to acquire Common
Shares granted to employees of the Company and/or its Subsidiaries.
"EMPLOYEE PLAN" has the meaning set forth in SECTION 4.12(A).
"EMPLOYMENT AGREEMENT" means a contract, offer letter or agreement of
the Company or any of its Subsidiaries with or addressed to any individual who
is rendering or has rendered services thereto as an employee, officer, director,
independent contractor or consultant pursuant to which the Company or any of its
Subsidiaries has any liability or obligation to provide compensation and/or
benefits in consideration for past, present or future services.
"END DATE" means 180 days following the date of this Agreement.
"ENVIRONMENTAL LAWS" means any and all applicable federal, state,
local, municipal and foreign Laws relating to the environment or to Releases of
Hazardous Substances or to public health as it relates thereto or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances or the notification,
clean up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any entity, trade or business (whether or not
incorporated) that is a member of a controlled group including the Company or
that is under common control with the Company within the meaning of Section 414
of the Code.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXCLUDED PARTY" has the meaning set forth in SECTION 6.4(B).
"EXCLUSIVITY PERIOD START DATE" has the meaning set forth in SECTION
6.4(A).
"FINANCING" has the meaning set forth in SECTION 5.7.
"FINANCING LETTERS" has the meaning set forth in SECTION 5.7.
"GAAP" means United States generally accepted accounting principles.
"GEI IV LETTER" has the meaning set forth in SECTION 5.7.
"GOVERNMENTAL AUTHORITY" means any agency, public or regulatory
authority, instrumentality, department, commission, court, arbitrator, ministry,
tribunal or board of any nation or government or political subdivision thereof,
whether foreign or domestic and whether national, supranational, federal,
tribal, provincial, state, regional, local or municipal.
"HAZARDOUS SUBSTANCES" means any wastes, substances, radiation, matter
or materials (i) which are hazardous, toxic, infectious, explosive, dangerous,
flammable, radioactive, carcinogenic, or mutagenic; (ii) which are defined as
"hazardous materials," "hazardous wastes," "hazardous substances," "wastes" or
other similar designations in any Environmental Laws; or (iii) without
limitation, which contain asbestos and asbestos-containing materials,
polychlorinated biphenyls, lead-based paints, mold or other multicellular fungi,
urea-formaldehyde foam insulation, and petroleum or petroleum products
(including, without limitation, crude oil or any fraction thereof and all other
substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in
the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R.
Section 300.5).
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INSURANCE POLICIES" has the meaning set forth in SECTION 4.21.
"INTELLECTUAL PROPERTY" means all United States and foreign
trademarks, trademark rights, trade names, trade names rights, service marks and
service mark rights, service names and service names rights, copyrights and
copyright rights, trade secrets, Internet domain names and other proprietary
intellectual property rights and all pending applications for and registrations
of any of the foregoing.
"KNOWLEDGE" of any Person that is not an individual means, with
respect to any specific matter, the actual knowledge of such Person's executive
officers after due inquiry of individuals who are aware of the proposed Merger
as of the date hereof.
"LAW" means applicable, statutes, common laws, rules, ordinances,
regulations, codes, licensing requirements, orders, judgments, injunctions,
writs, decrees, licenses, governmental guidelines or interpretations having the
force of law, permits, rules and bylaws, in each case, of a Governmental
Authority.
"LEASED REAL PROPERTY" has the meaning set forth in SECTION 4.20(C)
"LEASES" has the meaning set forth in SECTION 4.20(C).
"LGP" means Leonard Green & Partners L.P.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
"MATERIAL ADVERSE EFFECT ON THE COMPANY" has the meaning set forth in
SECTION 4.9(A).
"MATERIAL CONTRACTS" has the meaning set forth in SECTION 4.18(A).
"MATERIAL EMPLOYMENT AGREEMENT" means an Employment Agreement pursuant
to which the Company or any of its Subsidiaries has or would reasonably be
expected to have any obligation to provide compensation and/or benefits
(including without limitation severance pay or benefits or payments related to
change in control of the Company) in an amount or having a value in excess of
$150,000 per year or $250,000 in the aggregate.
"MERGER" has the meaning set forth in the Recitals.
"MERGER CONSIDERATION" has the meaning set forth in SECTION 2.2(C).
"MERGER SHARES" has the meaning set forth in SECTION 2.2(C).
"MERGER SUB" has the meaning set forth in the Preamble.
"MERGER SUB COMMON SHARES" means the common stock of Merger Sub, par
value $0.01 per share.
"NEW FINANCING LETTERS" has the meaning set forth in SECTION 5.7.
"NEW PLANS" has the meaning set forth in SECTION 8.7(A).
"OLD PLANS" has the meaning set forth in SECTION 8.7(A).
"OTHER ANTITRUST LAWS" means any Law enacted by any Governmental
Authority relating to antitrust matters or regulating competition.
"OWNED REAL PROPERTY" has the meaning set forth in SECTION 4.20(B).
"PARENT" has the meaning set forth in the Preamble.
"PARENT EXPENSES" has the meaning set forth in SECTION 10.2.
"PERMITS" means any licenses, franchises, permits, certificates,
consents, approvals or other similar authorizations of, from or by a
Governmental Authority possessed by or granted to or necessary for the ownership
of the material assets or conduct of the business of, the Company or its
Significant Subsidiaries.
"PERMITTED ALTERNATIVE AGREEMENT" has the meaning set forth in SECTION
10.1(E).
"PERMITTED LIENS" means (i) liens for taxes not yet due and payable or
that are being contested in good faith and by appropriate proceedings; (ii)
mechanics', materialmen's or other liens or security interests that secure a
liquidated amount that are being contested in good faith and by appropriate
proceedings; or (iii) any other liens, encumbrances, security interests,
easements, rights-of-way, encroachments, restrictions, conditions and other
encumbrances that do not secure a liquidated amount, that have been incurred or
suffered in the ordinary course of business and that would not, individually or
in the aggregate, have a material effect on the Company.
"PERSON" means any individual, corporation, limited liability company,
partnership, association, trust or any other entity or organization, including
any government or political subdivision or any agency or instrumentality
thereof.
"PROCEEDING" has the meaning set forth in SECTION 4.10.
"REAL PROPERTY" has the meaning set forth in SECTION 4.20(D).
"RECOMMENDATION" has the meaning set forth in SECTION 6.2(B).
"RELEASE" means any emission, spill, seepage, leak, escape, leaching,
discharge, injection, ejection, pumping, pouring, emptying, dumping, disposal,
or release of Hazardous Substances into or upon the environment, including the
air, soil, surface water, groundwater, the sewer, septic system, storm drain,
publicly owned treatment works, or waste treatment, storage, or disposal
systems.
"REPLACEMENT POLICIES" has the meaning set forth in SECTION 7.2(A).
"REQUIRED CONTRACTUAL CONSENTS" has the meaning set forth in SECTION
4.4.
"REQUIRED GOVERNMENTAL APPROVALS" has the meaning set forth in SECTION
4.3.
"REQUISITE SHAREHOLDER VOTE" has the meaning set forth in SECTION
4.2(A).
"SCHEDULE 13E-3" has the meaning set forth in SECTION 4.8.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SIGNIFICANT SUBSIDIARIES" has the meaning set forth in SECTION
4.1(B).
"SPECIAL COMMITTEE" means a committee comprised of all of the members
of the Company's Board of Directors (other than those who are affiliated with
Parent or Merger Sub or are members of the Company's management) formed for the
purpose of evaluating, and making a recommendation to the full Board of
Directors of the Company with respect to, this Agreement and the Merger.
"SUBSIDIARY" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by such Person.
"SUPERIOR PROPOSAL" has the meaning set forth in SECTION 6.4(F)(III).
"SURVIVING CORPORATION" has the meaning set forth in the Recitals.
"TAX" (including "TAXES") means (i) all federal, state, local, foreign
and other taxes (including withholding taxes), fees and other governmental
charges of any kind or nature whatsoever, together with any interest and any
penalties, additions or additional amounts with respect thereto, (ii) any
liability for payment of amounts described in CLAUSE (I) whether as a result of
transferee liability, joint and several liability for being a member of an
affiliated, consolidated, combined, unitary or other group for any period, or
otherwise by operation of law, and (iii) any liability for the payment of
amounts described in CLAUSE (I) or (II) as a result of any tax sharing, tax
indemnity or tax allocation agreement or any other express or implied agreement
to pay or indemnify any other Person.
"TAX RETURN" means any return, declaration, report, statement,
information statement or other document filed or required to be filed with
respect to Taxes, including any claims for refunds of Taxes and any amendments
or supplements of any of the foregoing.
"TERMINATION FEE" has the meaning set forth in SECTION 10.2.
"THIRD PARTY" means any Person (which includes a "person" as such term
is defined in Section 13(d)(3) of the Exchange Act) other than Parent, Merger
Sub or any of their respective Affiliates.
"TRADE SECRETS" means non-public know-how, inventions, discoveries,
improvements, concepts, ideas, methods, processes, designs, plans, schematics,
drawings, formulae, technical data, specifications, research and development
information, technology and product roadmaps, data bases and other proprietary
or confidential information, including customer lists, but excluding any
Copyrights or Patents that may cover or protect any of the foregoing.
Section 1.2 TERMS GENERALLY. The definitions in SECTION 1.1 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation,"
unless the context expressly provides otherwise. All references herein to
Sections, paragraphs, subparagraphs, clauses, Exhibits or Schedules shall be
deemed references to Sections, paragraphs, subparagraphs or clauses of, or
Exhibits or Schedules to this Agreement, unless the context requires otherwise.
Unless otherwise expressly defined, terms defined in this Agreement have the
same meanings when used in any Exhibit or Schedule hereto, including the
Disclosure Letter. Unless otherwise specified, the words "herein," "hereof,"
"hereto" and "hereunder" and other words of similar import refer to this
Agreement as a whole (including the Schedules and Exhibits) and not to any
particular provision of this Agreement.
ARTICLE II
THE MERGER
Section 2.1 THE MERGER.
(a) At the Effective Time, in accordance with the Delaware
Corporate Law, and upon the terms and subject to the conditions set forth in
this Agreement, Merger Sub shall be merged with and into the Company, at which
time the separate existence of Merger Sub shall cease and the Company shall
survive the Merger as a wholly-owned subsidiary of Parent.
(b) As soon as reasonably practicable after the satisfaction or
valid waiver of all conditions to the Merger, the Company and Merger Sub will
file a certificate of merger (the "CERTIFICATE OF MERGER") meeting the
requirements of the Delaware Corporate Law with the Secretary of State of the
State of Delaware. The Merger shall become effective at such time as the
Certificate of Merger is endorsed by the Secretary of State of the State of
Delaware, or at such later time as the Company and Merger Sub may agree and
specify in the Certificate of Merger (such time as the Merger becomes effective,
the "EFFECTIVE TIME").
(c) The Merger shall have the effects set forth in the applicable
provisions of the Delaware Corporate Law. Without limiting the generality of the
foregoing, and subject thereto, from and after the Effective Time, all property,
rights, privileges, immunities, powers, franchises, licenses and authority of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions and duties of each of the Company
and Merger Sub shall become the debts, liabilities, obligations, restrictions
and duties of the Surviving Corporation.
(d) The closing of the Merger (the "CLOSING") shall take place (i) at
the offices of Gibson, Dunn & Crutcher LLP located in Los Angeles, California,
as soon as reasonably practicable (but in any event, no later than the second
Business Day) after the day on which the last condition to the Merger set forth
in ARTICLE IX is satisfied or validly waived (other than those conditions that
by their nature cannot be satisfied until the Closing Date, but subject to the
satisfaction or valid waiver of such conditions) or (ii) at such other place and
time or on such other date as the Company and Merger Sub may agree in writing
(the actual date of the Closing, the "CLOSING DATE").
Section 2.2 CONVERSION OF SECURITIES. At the Effective Time,
pursuant to this Agreement and by virtue of the Merger and without any action on
the part of the Company, Parent, Merger Sub or the holders of the Common Stock:
(a) Each share of Common Stock held by the Company as treasury stock
or otherwise owned by Parent, Merger Sub or any Company Subsidiary immediately
prior to the Effective Time (including shares of Common Stock acquired by Parent
immediately prior to the Effective Time pursuant to the Contribution and
Exchange Agreements), if any, shall be canceled and retired and shall cease to
exist, and no payment or distribution shall be made or delivered with respect
thereto.
(b) Each Merger Sub Common Share issued and outstanding immediately
prior to the Effective Time shall be converted into and become one newly issued,
fully paid and non-assessable share of common stock of the Surviving
Corporation.
(c) Each Common Share issued and outstanding immediately prior to the
Effective Time (other than Common Shares to be canceled pursuant to SECTION
2.2(A) and Dissenting Common Shares (as hereinafter defined)), automatically
shall be canceled and converted into the right to receive $37.25 in cash,
without interest (the "MERGER CONSIDERATION"), payable to the holder thereof
upon surrender of the stock certificate formerly representing such Common Share
in the manner provided in SECTION 2.3. Such Common Shares, other than those
canceled pursuant to SECTION 2.2(A), sometimes are referred to herein as the
"MERGER SHARES."
(d) Notwithstanding any provision of this Agreement to the contrary,
if required by the Delaware Corporate Law but only to the extent required
thereby, Common Shares that are issued and outstanding immediately prior to the
Effective Time (other than Common Shares to be canceled pursuant to SECTION
2.2 (A)) and that are held by holders of such Common Shares who have not voted in
favor of the adoption of this Agreement or consented thereto in writing and who
have properly exercised appraisal rights with respect thereto in accordance
with, and who have complied with, Section 262 of the Delaware Corporate Law (the
"DISSENTING COMMON SHARES") will not be convertible into the right to receive
the Merger Consideration, and holders of such Dissenting Common Shares will be
entitled to receive payment of the appraised value of such Dissenting Common
Shares in accordance with the provisions of such Section 262 unless and until
any such holder fails to perfect or effectively withdraws or loses its rights to
appraisal and payment under the Delaware Corporate Law. If, after the Effective
Time, any such holder fails to perfect or effectively withdraws or loses such
right, such Dissenting Common Shares will thereupon be treated as if they had
been converted into and have become exchangeable for, at the Effective Time, the
right to receive the Merger Consideration, without any interest thereon. At the
Effective Time, any holder of Dissenting Common Shares shall cease to have any
rights with respect thereto, except the rights provided in Section 262 of the
Delaware Corporate Law and as provided in the previous sentence. The Company
will give Parent (i) notice of any demands received by the Company for
appraisals of shares of Common Stock and (ii) the opportunity to participate in
and direct all negotiations and proceedings with respect to such notices and
demands. The Company shall not, except with the prior written consent of Parent,
make any payment with respect to any demands for appraisal or settle any such
demands.
(e) If between the date of this Agreement and the Effective Time the
number of outstanding Common Shares is 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 amount of Merger Consideration
payable per Common Share shall be correspondingly adjusted.
(f) All vested or unvested restricted shares of Common Stock
outstanding immediately prior to the Effective Time and all vested and unvested
restricted share units outstanding immediately prior to the Effective Time
(collectively, the "COMPANY RESTRICTED SHARES") shall, by virtue of this
Agreement and, without further action of the Company, Parent,
Merger Sub or the holder of such Company Restricted Shares, vest and
become free of all restrictions immediately prior to the Effective Time and
shall be canceled, retired and shall cease to exist and shall be converted into
the right to receive the Merger Consideration.
(g) The Company Options shall be treated as provided in SECTION 2.4.
(h) For the avoidance of doubt, the parties acknowledge and agree that
the contribution of Common Shares by the Contributing Holders to Parent pursuant
to the Contribution and Exchange Agreements shall be deemed to occur immediately
prior to the Effective Time and prior to any other above-described event.
Section 2.3 PAYMENT OF CASH FOR MERGER SHARES.
(a) Prior to the Closing Date, Parent shall designate a bank or
trust company that is reasonably satisfactory to the Company, that is organized
and doing business under the laws of the United States or any state thereof and
that has a combined capital and surplus of at least $500,000,000 to serve as the
disbursing agent for the Merger Consideration and payments in respect of the
Company Options, unless another agent is designated as provided in SECTION
2.4(A) (the "DISBURSING AGENT"). At or prior to the Closing, Parent will cause
to be deposited with the Disbursing Agent cash in the aggregate amount
sufficient to pay the Merger Consideration in respect of all Merger Shares
outstanding immediately prior to the Effective Time plus any cash necessary to
pay for Company Options pursuant to SECTION 2.4. Pending distribution of the
cash deposited with the Disbursing Agent, such cash shall be held in trust for
the benefit of the holders of Merger Shares and such Company Options and shall
not be used for any other purposes; PROVIDED, HOWEVER, that Parent may direct
the Disbursing Agent to invest such cash in obligations of or guaranteed by the
United States of America, as long as no such investments have maturities that
could prevent or delay payments to be made pursuant to SECTION 2.3(B).
(b) As promptly as practicable after the Effective Time (but no
later than five Business Days after the Effective Time), the Surviving
Corporation shall send, or cause the Disbursing Agent to send, to each record
holder of Merger Shares as of immediately prior to the Effective Time (other
than Common Shares to be canceled pursuant to SECTION 2.2(A)) a letter of
transmittal and instructions for exchanging their Merger Shares for the Merger
Consideration payable therefor. The letter of transmittal will be in customary
form and will specify that delivery of Merger Shares will be effected, and risk
of loss and title will pass, only upon delivery of the stock certificates
representing the Merger Shares to the Disbursing Agent. Upon surrender of such
stock certificate or certificates to the Disbursing Agent together with a
properly completed and duly executed letter of transmittal and any other
documentation that the Disbursing Agent may reasonably require, the record
holder thereof shall be entitled to receive the Merger Consideration payable
in exchange therefor, less any amounts required to be withheld for Tax. Until so
surrendered and exchanged, each such certificate shall, after the Effective
Time, be deemed to represent only the right to receive the Merger Consideration,
and until such surrender and exchange, no cash shall be paid to the holder of
such outstanding certificate in respect thereof.
(c) If payment is to be made to a Person other than the registered
holder of the Merger Shares represented by the certificate or certificates
surrendered in exchange therefor, it shall be a condition to such payment that
the certificate or certificates 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 Disbursing Agent any applicable stock transfer taxes
required as a result of such payment to a Person other than the registered
holder of such Merger Shares or establish to the satisfaction of the Disbursing
Agent that such stock transfer taxes have been paid or are not payable.
(d) After the Effective Time, there shall be no further transfers on
the stock transfer books of the Surviving Corporation of the Common Shares that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing Merger Shares are presented to the
Surviving Corporation, such shares shall be canceled and exchanged for the
consideration provided for, and in accordance with the procedures set forth, in
this ARTICLE II.
(e) If any cash deposited with the Disbursing Agent remains
unclaimed twelve months after the Effective Time, such cash shall be returned to
the Surviving Corporation upon demand, and any holder who has not surrendered
his Merger Shares certificates for the Merger Consideration prior to that time
shall thereafter look only to the Surviving Corporation for payment of the
Merger Consideration. Notwithstanding the foregoing, the Surviving Corporation
shall not be liable to any holder of Merger Shares for an amount paid to a
public official pursuant to any applicable unclaimed property laws. Any amounts
remaining unclaimed by holders of Merger Shares as of a date immediately prior
to such time that such amounts would otherwise escheat to or become property of
any Governmental Authority shall, to the extent permitted by applicable Law,
become the property of the Surviving Corporation on such date, free and clear of
any claims or interest of any Person previously entitled thereto.
(f) No dividends or other distributions with respect to capital
stock of the Surviving Corporation with a record date after the Effective Time
shall be paid to the holder of any unsurrendered certificate for Common Shares.
(g) From and after the Effective Time, the holders of Common Shares
(other than Dissenting Common Shares) outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Common
Shares, other than the right to receive the Merger Consideration as provided in
this Agreement.
(h) In the event that any Merger Share certificate has been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Merger Share certificate to be lost, stolen or destroyed, in
addition to the posting by such holder of any bond in such reasonable amount as
the Surviving Corporation may direct as indemnity against any claim that may be
made against the Surviving Corporation with respect to such Merger Share
certificate, the Disbursing Agent will issue in exchange for such lost, stolen
or destroyed Merger Share certificate the proper amount of the Merger
Consideration.
(i) Parent, Surviving Corporation and the Disbursing Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise payable
hereunder any amounts
required to be deducted and withheld under any applicable Tax Law. To the extent
any amounts are so withheld, such withheld amounts shall be treated for all
purposes as having been paid to the holder from whose Merger Consideration the
amounts were so deducted and withheld.
Section 2.4 TREATMENT OF OPTIONS.
(a) As of the Effective Time, each Company Option (other than
Amended Options) will be cancelled and extinguished, and the holder thereof will
be entitled to receive an amount in cash equal to the excess (if any) of (A) the
product of (i) the number of Common Shares subject to such Company Option and
(ii) the Merger Consideration over (B) the aggregate exercise price of such
Company Option, without interest and less any amounts required to be deducted
and withheld under any applicable Law. All payments with respect to canceled
Company Options shall be made by the Disbursing Agent (or such other agent
reasonably acceptable to the Company as Parent shall designate prior to the
Effective Time) as promptly as reasonably practicable after the Effective Time
from funds deposited by or at the direction of Parent to pay such amounts in
accordance with SECTION 2.3(A). Notwithstanding the foregoing, with respect to
Company Options that are identified in a Contribution and Exchange Agreement
between a Contributing Holder and Parent, such Company Options will be assumed
by Parent and amended concurrently with the consummation of the Merger pursuant
to the terms of such Contribution and Exchange Agreement (any Company Option so
to be amended, an "AMENDED OPTION").
(b) Prior to the Effective Time, the Company and Parent will adopt
such resolutions as may be reasonably required to effectuate the actions
contemplated by this SECTION 2.4, without paying any consideration or incurring
any debts or obligations on behalf of the Company or the Surviving Corporation.
(c) Parent and the Surviving Corporation shall be entitled to deduct
and withhold from any amounts to be paid hereunder in respect of Company Options
or Company Restricted Shares any amounts required to be deducted and withheld
under any applicable Tax Law. To the extent any amounts are so withheld, such
withheld amounts shall be treated for all purposes as having been paid to the
Company Option or Company Restricted Share holder from whose payments in respect
of Company Options or Company Restricted Shares the amounts were so deducted and
withheld.
ARTICLE III
THE SURVIVING CORPORATION
Section 3.1 ARTICLES OF INCORPORATION. The certificate of
incorporation of the Company as in effect immediately prior to the Effective
Time shall be amended as set forth on EXHIBIT B, and, as so amended, shall be
the certificate of incorporation of the Surviving Corporation until thereafter
amended in accordance with the terms thereof and as provided by applicable Law.
Section 3.2 BYLAWS. The bylaws of the Company in effect at the
Effective Time shall be amended to read the same as the bylaws of the Merger Sub
in effect immediately prior to the Effective Time, and shall be the bylaws of
the Surviving Corporation until thereafter amended in accordance with the terms
thereof and as provided by applicable Law.
Section 3.3 DIRECTORS AND OFFICERS. From and after the Effective
Time, (i) the directors of Merger Sub at the Effective Time shall be the
directors of the Surviving Corporation and (ii) the officers of the Company at
the Effective Time shall be the officers of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified in accordance with applicable Law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding sections or subsections of
the Disclosure Letter delivered to Parent and Merger Sub by the Company
concurrently with entering into this Agreement (the "DISCLOSURE LETTER") or as
may be disclosed in reasonable detail in any Current Company SEC Report filed
prior to the date hereof (it being understood that any information set forth in
a particular section or subsection of the Disclosure Letter shall be deemed to
be disclosed in each other section or subsection thereof to which the relevance
of such information is reasonably apparent), the Company hereby represents and
warrants to Parent and Merger Sub that:
Section 4.1 CORPORATE EXISTENCE AND POWER.
(a) Each of the Company and its Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of the Company and its Subsidiaries has all
corporate powers and authority required to own, lease and operate its respective
properties and to carry on its business as now conducted. The Company has all
corporate powers and authority to execute and deliver this Agreement, and to
consummate the Merger and the other transactions contemplated hereby and to
perform each of its obligations hereunder. Each of the Company Joint Ventures
has all powers and authority required to own, lease and operate its respective
properties and to carry on its business as now conducted, except where the
failure to have such power and authority would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company.
(b) Each of the Company and its Subsidiaries listed on Exhibit 21.1
to the Company's Annual Report on Form 10-K for the fiscal year ended January
29, 2005 (the "SIGNIFICANT SUBSIDIARIES") is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
or be in good standing would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Company. None of the
Company Subsidiaries (other than the Significant Subsidiaries) has any material
assets or liabilities, conducts any operations or has any employees.
(c) The Company has made available to Parent and Merger Sub true and
complete copies of the currently effective articles of incorporation and bylaws
or similar organizational and governing documents of the Company and its
Subsidiaries and the Company Joint Ventures. Neither the Company nor any
Subsidiary nor, to the Company's knowledge, any Company Joint Venture, is in
violation of its organizational or governing documents.
Section 4.2 CORPORATE AUTHORIZATION; COMPANY FAIRNESS OPINION.
(a) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the Merger and the other
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company. The only Company shareholder approval or
authorization required to approve this Agreement and effect the Merger is the
affirmative vote of the holders of Common Shares as required by the Delaware
Corporate Law (the "REQUISITE SHAREHOLDER VOTE").
(b) This Agreement has been duly and validly executed and delivered
by the Company and, assuming the due and valid execution and delivery by Parent
and Merger Sub, constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except (i) as
rights to indemnity hereunder may be limited by federal or state securities laws
or the public policies embodied therein, (ii) as such enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the enforcement of creditors' rights generally, and (iii) as the
remedy of specific performance and other forms of injunctive relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(c) On or prior to the date hereof, the Board of Directors of
the Company, based on the unanimous recommendation of the Special Committee, has
(except for directors who are affiliated with Parent or Merger Sub and members
of Company management who have recused themselves) unanimously adopted
resolutions (i) adopting this Agreement and declaring the Merger and the other
transactions contemplated by this Agreement advisable and (ii) resolving to
recommend that the Company shareholders approve this Agreement. As of the date
hereof, all such resolutions are in full force and effect and none have been
amended or superseded.
(d) Merrill Lynch & Co. (the "COMPANY FINANCIAL ADVISOR") has
delivered to the Board of the Directors of the Company its opinion to the effect
that, as of the date such opinion was delivered, the consideration to be
received in the Merger is fair, from a financial point of view, to the holders
of Common Shares other than Merger Sub and its Affiliates (the "COMPANY FAIRNESS
OPINION"). The Company has been authorized by the Company Financial Advisor to
permit the inclusion in full of the Company Fairness Opinion in the Company
Proxy Statement. As of the date hereof, the Company Fairness Opinion has not
been withdrawn, revoked or modified.
Section 4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Company of this Agreement and the consummation of the Merger
by the Company require no action by, or by the Company or any Subsidiary in
respect of, or filing by the Company or any Subsidiary with, any Governmental
Authority other than (i) the filing of the Certificate of Merger; (ii)
compliance with any applicable requirements of the HSR Act or any other
applicable Other Antitrust Laws or any other Laws specified in Section 4.3 of
the Disclosure Letter (the "REQUIRED GOVERNMENTAL APPROVALS"); (iii) compliance
with the applicable requirements of the Exchange Act; (iv) compliance with the
applicable requirements of the Securities Act; (v) compliance with any
applicable foreign or state securities or Blue Sky laws; and (vi) such other
items or filings, which if not taken or made, (A) would not, individually
or in the aggregate, be reasonably expected to be material to the Company or the
applicable Subsidiary and (B) would not reasonably be expected to adversely
effect in any material respect, or materially hinder or delay, the consummation
of the Merger or the Company's ability to observe and perform its obligations
hereunder.
Section 4.4 NON-CONTRAVENTION. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby do not and will not (i) contravene or
conflict with the organizational or governing documents of the Company or any of
its Significant Subsidiaries or Company Joint Ventures; (ii) assuming compliance
with the matters referenced in SECTION 4.3 and the receipt of the Requisite
Shareholder Vote, contravene or conflict with or constitute a violation of any
provision of any Law binding upon or applicable to the Company or any of its
Significant Subsidiaries or Company Joint Ventures or any of their respective
properties or assets; (iii) constitute a default under or give rise to a right
of termination, cancellation or acceleration of any right or obligation that is
material to the Company and its Significant Subsidiaries taken as a whole or to
a loss of any benefit that is material to the Company and its Significant
Subsidiaries taken as a whole to which any such Person is entitled under any
agreement, contract or other instrument applicable to or binding upon the
Company or any of its Subsidiaries or Company Joint Ventures, except those
consents set forth in Section 4.4 of the Disclosure Letter (the "REQUIRED
CONTRACTUAL CONSENTS"); or (iv) result in the creation or imposition of any Lien
on any assets that are material to the Company and its Subsidiaries taken as a
whole (other than any such Lien as may be created or imposed in connection with
the Financing or as otherwise may arise from any actions taken by Parent or
Merger Sub), except in the case of (ii) - (iv) above, which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company or materially hinder or delay the consummation of
the Merger or the Company's ability to observe and perform its obligations
hereunder.
Section 4.5 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of (i)
75,000,000 Common Shares, of which as of January 18, 2006 there were 26,436,542
Common Shares issued and outstanding (excluding 1,572,738 Common Shares held in
treasury) and (ii) 10,000,000 shares of Preferred Stock, par value $0.01 per
share, of which no shares are issued and outstanding. As of January 18, 2006
there were outstanding (A) Company Options to purchase an aggregate of 1,635,862
Common Shares and (B) 855,084 unvested restricted stock units. All outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable. Section 4.5(a) of the Disclosure
Letter sets forth a complete and accurate list of all outstanding Company
Options and other stock-related awards, including grants of Company Restricted
Shares, which list sets forth the name of the holders thereof and, to the extent
applicable thereto, the exercise price or purchase price thereof, the governing
stock option plan with respect thereto and the expiration date thereof.
(b) Except as set forth in SECTION 4.5(A), and except for changes
since January 18, 2006 resulting from the exercise of Company Options
outstanding on such date, there are no outstanding, and there have not been
reserved for issuance, any (i) shares of capital stock or other voting
securities of the Company; (ii) securities of the Company or any Subsidiary
convertible into or exchangeable for shares of capital stock or voting
securities of the Company
or its Subsidiaries; (iii) Company Options or other rights or options to acquire
from the Company or its Subsidiaries, or obligations of the Company or its
Subsidiaries to issue, any shares of capital stock, voting securities or
securities convertible into or exchangeable for shares of capital stock or
voting securities of the Company or such Subsidiary, as the case may be; or
(iv) equity equivalent interests in the ownership or earnings of the Company of
its Subsidiaries or other similar rights (the items in CLAUSES (I) through (IV)
collectively, "COMPANY SECURITIES"). There are no outstanding obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any Company
Securities. There are no shareholder agreements, voting trusts or other
agreements or understandings to which the Company or any of its Subsidiaries is
a party or by which it is bound relating to the voting or registration of any
shares of capital stock of the Company or any of its Subsidiaries or preemptive
rights with respect thereto.
(c) Other than the issuance of Common Shares upon exercise of
Company Options, since the Balance Sheet Date, the Company has not declared or
paid any dividend or distribution in respect of any Company Securities, and
neither the Company nor any Subsidiary has issued, sold, repurchased, redeemed
or otherwise acquired any Company Securities, and their respective Boards of
Directors have not authorized any of the foregoing.
(d) Neither the Company nor any of its Subsidiaries has entered into
any commitment or agreement, or are otherwise obligated, to contribute capital,
loan money or otherwise provide funds or make additional investments in any
Company Joint Venture or any other Person.
Section 4.6 COMPANY SUBSIDIARIES AND JOINT VENTURES.
(a) Section 4.6(a) of the Disclosure Letter sets forth all
Subsidiaries of the Company and Company Joint Ventures, as well as the
respective jurisdictions of incorporation and all jurisdictions in which the
Company and such Subsidiaries and Company Joint Ventures are qualified to do
business. Each of the Company Subsidiaries is wholly owned (directly or
indirectly) by the Company and, except for such Company Subsidiaries and Company
Joint Ventures, the Company does not directly or indirectly own any equity
interest in any other Person.
(b) All equity interests of the Company Subsidiaries and the Company
Joint Ventures held by the Company or any other Company Subsidiary are fully
paid and non-assessable and were not issued in violation of any preemptive or
similar rights. All such equity interests are free and clear of any Liens or any
other limitations or restrictions on such equity interests (including any
limitation or restriction on the right to vote, pledge or sell or otherwise
dispose of such equity interests).
Section 4.7 REPORTS AND FINANCIAL STATEMENTS.
(a) The Company has timely filed with or otherwise furnished to the
SEC all forms, reports, schedules, statements and other documents required to be
filed or furnished by it under the Securities Act or the Exchange Act since
August 4, 2003 (such documents, as supplemented or amended since the time of
filing, the "COMPANY SEC REPORTS"). No Subsidiary of the Company is or at any
time since August 4, 2003 has been required to file with
or furnish to the SEC any such forms, reports, schedules or other documents. As
of their respective dates, the Company SEC Reports, including any financial
statements or schedules included or incorporated by reference therein, at the
time filed (and, in the case of registration statements and proxy statements, on
the dates of effectiveness and the dates of mailing, respectively) (i) complied
as to form in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as applicable, and (ii) did not contain any
untrue statement of a material fact or omit to state a 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.
(b) The audited consolidated financial statements and unaudited
consolidated interim financial statements included or incorporated by reference
in the Company SEC Reports (including any related notes and schedules) fairly
present, in all material respects, the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof, and the
results of their operations and their cash flows for the periods set forth
therein, and in each case were prepared in accordance with GAAP consistently
applied during the periods involved (except as otherwise disclosed in the notes
thereto and subject, where appropriate, to normal year-end adjustments that
would not be material in amount or effect).
(c) There are no liabilities or obligations of the Company or any
Company Subsidiary (whether accrued, contingent, absolute, determined,
determinable or otherwise) which, individually or in the aggregate, would be
material to the Company and its Subsidiaries taken as a whole other than (i)
liabilities or obligations disclosed or provided for in the Balance Sheet or
disclosed in the notes thereto; (ii) liabilities or obligations incurred after
the Balance Sheet Date in the ordinary course of business; (iii) liabilities
under this Agreement or incurred in connection with the transactions
contemplated hereby; and (iv) liabilities disclosed on Section 4.15 of the
Disclosure Letter.
(d) The Company has heretofore made available or promptly will make
available to Parent and Merger Sub a complete and correct copy of any amendments
or modifications to any Company SEC Reports filed prior to the date hereof which
are required to be filed with the SEC but have not yet been filed with the SEC,
and any Company SEC Reports required to be filed by the Company on or after the
date hereof and prior to the Effective Time.
Section 4.8 DISCLOSURE DOCUMENTS. The proxy statement (the "COMPANY
PROXY STATEMENT") and the Rule 13e-3 Transaction Statement on Schedule 13E-3
(the "SCHEDULE 13E-3") relating to the Merger and the other transactions
contemplated hereby, to be filed by the Company with the SEC in connection with
seeking the adoption and approval of this Agreement by the Company shareholders
will not, at the date it is first mailed to shareholders of the Company (in the
case of the Proxy Statement) or at the time of the Company Shareholder Meeting
(other than as to information supplied by Parent and Merger Sub for inclusion
therein), 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 Company will cause the Company Proxy Statement, the Schedule
13E-3 and all related SEC filings to comply as to form in all material respects
with the requirements of the Exchange Act applicable thereto as of the date of
such filing. No representation is made by the Company with respect to statements
made in the
Company Proxy Statement or the Schedule 13E-3 based on information supplied, or
required to be supplied, by Parent and Merger Sub or their Affiliates
specifically for inclusion therein.
Section 4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Since the Balance Sheet Date through the date hereof, the
businesses of the Company and its Subsidiaries and, to the Company's knowledge,
the businesses of the Company Joint Ventures, have been conducted in all
material respects in the ordinary course and neither the Company nor any of its
Subsidiaries, nor to the Company's knowledge any Company Joint Venture, has
engaged in any transaction or series of related transactions outside the
ordinary course material to the Company and its Subsidiaries taken as a whole.
Since the Balance Sheet Date, there has not been a Material Adverse Effect on
the Company. For purposes of this Agreement, "MATERIAL ADVERSE EFFECT ON THE
COMPANY" means any change, circumstance, event or effect that would be
materially adverse to the assets and liabilities, business, financial condition
or results of operations of the Company and its Subsidiaries, taken as a whole,
other than any change, circumstance, event or effect resulting from (i) changes
in general economic conditions, (ii) the announcement or pendency of this
Agreement and the transactions contemplated hereby, (iii) general changes or
developments in the industries in which the Company and its Subsidiaries
operate, (iv) any actions required under this Agreement to obtain any approval
or authorization under the HSR Act or any applicable Other Antitrust Laws for
the consummation of the transactions contemplated by this Agreement or (v)
changes in any Laws or applicable accounting regulations or principles, except,
in the case of the foregoing clauses (i) and (iii), to the extent such changes
or developments referred to therein would reasonably be expected to have a
materially disproportionate impact on the business, financial condition or
results of operations of the Company and its Subsidiaries, taken as a whole,
relative to other industry participants, it being understood that in the event
the Company should fail to meet any expected financial or operating performance
targets, the fact of such failure, alone, would not constitute a Material
Adverse Effect on the Company (although any party can assert the facts
underlying any such failure in any dispute as to whether there has been a
Material Adverse Effect on the Company).
(b) Without limiting the generality of the foregoing SECTION 4.9(A),
since the Balance Sheet Date, there has not been (except, in each case, for
transactions solely among the Company and its wholly-owned Subsidiaries or among
the Company's wholly-owned Subsidiaries):
(i) any declaration, setting aside or payment of any dividend or
distribution 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 amendment of any material term of any outstanding capital
stock of the Company or any of its Subsidiaries;
(ii) any (A) incurrence of, or guarantee with respect to, or
provision of credit support for, any indebtedness for borrowed money by the
Company or any of its Subsidiaries, other than pursuant to the Company's or
any Company Subsidiary's existing credit facilities in the ordinary course
of business; (B) event of default or default under the Company's or any
Subsidiary's existing credit facilities or outstanding loans; or
(c) creation or assumption by the Company or any of its Subsidiaries
of any material Lien on any material asset, other than Permitted Liens;
(iii) any material change in any method of financial accounting or
financial accounting principle or practice used by the Company or any of
its Subsidiaries, other than such changes required by Law or a change in
GAAP;
(iv) (A) any deferred compensation, severance or similar agreement
entered into or amended by the Company or any of its Subsidiaries and any
employee; (B) any material increase in or acceleration of the compensation
or benefits payable or to become payable by the Company or any of its
Subsidiaries to its directors or officers or generally applicable to all or
any category of the Company's or any such Subsidiary's employees; (C) any
material 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 Subsidiary
or generally applicable to all or any category of the Company's or any
Subsidiary's employees; or (D) any Material Employment Agreement or any
amendment to the same, other than increases in compensation in the ordinary
course of business 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;
(v) 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 made to a Subsidiary;
(vi) any amendment, alteration or modification in any material term
of any currently outstanding Company Options, warrants or other rights to
purchase any capital stock or other equity interests in the Company or any
securities exchangeable or exercisable for or convertible into the same; or
(vii) any agreement to take or permit any actions specified in this
SECTION 4.9(B), except for this Agreement.
Section 4.10 LITIGATION. As of the date hereof, there is no material
action, suit, claim, investigation, arbitration or proceeding pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or their respective assets or properties before any arbitrator,
arbitration provider or Governmental Authority (a "PROCEEDING"). As of the date
hereof, neither the Company, nor any Subsidiary of the Company, nor any officer,
director or employee of the Company or any such Subsidiary has been permanently
or temporarily enjoined by any Law from engaging in or continuing any conduct or
practice in connection with the business or assets of the Company or any
Subsidiary of the Company. To the knowledge of the Company as of the date
hereof, none of the Company, nor any Subsidiary of the Company, nor any officer,
director or employee of the Company or any such Subsidiary is under
investigation by any Governmental Authority related to the conduct of the
Company's or any such Subsidiary's business, the results of which investigation
reasonably could be materially adverse to the business or assets of the Company
and its Subsidiaries taken as a whole.
Section 4.11 TAXES.
(a) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company:
(i) Within the times and in the manner prescribed by Law, the
Company and its Subsidiaries (and their predecessors) have properly
prepared and timely filed all Tax Returns required by Law, have timely paid
all Taxes due and payable (whether or not shown on any Tax Return) and have
timely withheld and deposited all Taxes required to be withheld and
deposited. Tax Returns filed by the Company and its Subsidiaries (and their
predecessors) are true, correct and complete, and include all statements
and other information required to avoid penalties or additions to Tax. The
Company and its Subsidiaries (and their predecessors) have complied with
all Law relating to Taxes. The Company has made available to Parent and
Merger Sub all federal and material state, local and foreign Tax Returns
containing material elections of the Company or any of its Subsidiaries
with respect to periods commencing on or after January 31, 2002. Neither
the Company nor any of its Subsidiaries (nor any of their predecessors) has
either (A) been a party to a "reportable transaction" (as such term is
defined in Treasury Regulations issued under the Code) that has not been
properly reported on its Tax Returns, or (B) been a party to a "listed
transaction" (as such term is defined in Treasury Regulations issued under
the Code).
(ii) Neither the Company nor any of its Subsidiaries (nor any
predecessor thereof) (A) is a party to or bound by any closing agreement,
offer in compromise or any other agreement with any Tax authority or any
Tax indemnity agreement, Tax sharing agreement or other agreement whereby
amounts due thereunder are determined with reference to Taxes or items used
to determine the amount of any Taxes, in each case, that is currently in
effect; (B) has requested in writing a ruling or other advice or guidance
from any Governmental Authority with respect to Taxes; (C) has present or
contingent liabilities for Taxes, other than Taxes that either have been
(1) incurred in the ordinary course of business thereof and reflected as a
liability on the most recent balance sheet included in the Financial
Statements or (2) incurred in the ordinary course of business with respect
to taxable periods or portions of taxable periods following the date of the
most recent balance sheet included in the Financial Statements in amounts
consistent with prior years (adjusted for changes in ordinary course
operating results and ordinary course changes in assets) and for which
adequate reserves have been established and separately reflected in the
financial records of the Company; or (D) that is subject to United States
federal income taxation, has engaged in a trade or business, or had a
permanent establishment (within the meaning of an applicable tax treaty),
within a country other than the United States.
(iii) There are no proposed, threatened or actual pending assessments,
audits, examinations, disputes or requests from a Governmental Authority
for filings or information pertaining to Taxes relating to the Company or
any of its Subsidiaries (or their predecessors). There are no (A)
adjustments under Section 481 of the Code or any similar adjustments with
respect to the Company or any Subsidiary (or their predecessors) applicable
to the current or any future taxable year of the Company or such
Subsidiary, (B) waivers or extensions of the statute of limitations with
respect to Taxes for which the Company or any Subsidiary could be held
liable, or (C)grants by the Company or any Subsidiary of power of attorney
to any Person with respect to Taxes for which the Company or any Subsidiary
would be liable.
(iv) During any taxable year for which the applicable statute of
limitations on the assessment of Tax against the Company or any of its
Subsidiaries remains open, neither the Company nor any of its Subsidiaries
(nor any predecessor thereof) has been (A) a "distributing corporation," or
a "controlled corporation" in connection with a distribution intended or
purported to be governed by Section 355 of the Code, or (B) a member of an
affiliated group of corporations, within the meaning of Section 1504 of the
Code, or a member of a combined, consolidated or unitary group for state,
local or foreign Tax purposes, other than such a group the common parent of
which is and at all times has been the Company (or TSA Stores, Inc.) or a
group that did not include as members entities other than the Company and
its Subsidiaries (or TSA Stores, Inc. and its Subsidiaries).
(v) No Subsidiary of the Company (or predecessor thereof) that is
not a United States person, as defined in the Code, is a passive foreign
investment company within the meaning of Section 1297 of the Code, and
neither the Company nor any Subsidiary is a shareholder, directly or
indirectly, in a passive foreign investment company, except, in each case,
as is properly reflected in Tax Returns with respect to periods commencing
on or after January 31, 2002. No Subsidiary of the Company (or any
predecessor thereof) that is not a United States person as defined in the
Code (x) is, or at any time has been, engaged in the conduct of a trade or
business within the United States or treated as or considered to be so
engaged and (y) has, or at any time has had, an investment in "United
States property" within the meaning of Section 956(c) of the Code other
than investments in United states property that are properly reflected in
Tax Returns filed by the Company or its Subsidiaries. Neither the Company
nor any Subsidiary is, or at any time has been, impacted by (A) the dual
consolidated loss provisions of the Section 1503(d) of the Code, (B) the
overall foreign loss provisions of Section 904(f) of the Code, or (C) the
recharacterization provisions of Section 952(c)(2) of the Code, except for
any such impacts that are properly reflected in Tax Returns filed by the
Company or its Subsidiaries.
(b) (i) To the knowledge of the Company, the Company is not and has
not been a United States real property holding corporation at any time during
the applicable period specified in Code Section 897(c)(1)(A)(ii), (ii) to the
knowledge of the Company, no interest in the stock in the Company constitutes a
United States real property interest pursuant to Section 897(c) of the Code, and
(iii) prior to Closing the Company will use commercially reasonable efforts to
provide to Parent an affidavit satisfying the requirements of Treasury
Regulation Section 1.1445-2(c)(3) in form and substance reasonably satisfactory
to Parent.
(c) It is understood and agreed that the Company does not provide
any representations or warranties under this Agreement regarding Taxes, except
for those set forth in this SECTION 4.11 or SECTION 4.12.
Section 4.12 ERISA.
(a) Section 4.12(a) of the Disclosure Letter sets forth a list
identifying as of the date hereof (i) all Employee Benefit Plans and all bonus,
stock option, stock purchase, incentive, deferred compensation, supplemental
retirement, health, life, or disability insurance, dependent care, severance and
other similar fringe or employee benefit plans or programs maintained or
contributed to by the Company or any of its Subsidiaries for the benefit of or
relating to any employee or former employee (each such plan or program, an
"EMPLOYEE PLAN") and (ii) each Material Employment Agreement; provided, however,
that there shall be no obligation to disclose on Section 4.12(a) of the
Disclosure Letter any Employee Plan that is not material. The most recent copies
of each material Employee Plan and Material Employment Agreement (and, if
applicable, related trust agreements) and all amendments thereto have been made
available to Parent and Merger Sub together with, to the extent applicable, (A)
the two most recent annual reports (Form 5500 including applicable schedules and
financial reports) or ERISA alternative compliance statements prepared in
connection with any such Employee Plan; (B) the most recent actuarial valuation
report prepared in connection with any such Employee Plan; (C) the most recent
summary plan description and any summaries of material modifications for each
such Employee Plan and (D) the most recent favorable IRS determination letter
for each Employee Plan that is intended to be qualified pursuant to Section
401(a) of the Code.
(b) Neither the Company nor any ERISA Affiliate sponsors,
maintains, contributes to or has an obligation to contribute to, has sponsored,
maintained, contributed to or been required to contribute to within the last
five years, or has any liability (contingent or otherwise) with respect to a
pension plan subject to Section 302 of ERISA, Title IV of ERISA or Section 412
of the Code. Neither the Company nor any ERISA Affiliate sponsors, maintains,
contributes to or has an obligation to contribute to, has in the last five years
sponsored, maintained, contributed to, or incurred an obligation to contribute
to, or has any liability (contingent or otherwise) with respect to any
multiemployer plan (as defined in Section 3(37) of ERISA) or any plan sponsored
by more than one employer within the meaning of Sections 4063 or 4064 of ERISA
or Section 413(c) of the Code. There does not now exist, nor do any
circumstances exist that could reasonably be expected to result in, any
Controlled Group Liability that would be a material liability of the Company or
any of its Subsidiaries following the Closing.
(c) Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code has received a determination letter from the Internal
Revenue Service to the effect that such Employee Plan is so qualified, and, to
the knowledge of the Company, nothing has occurred since the date of the most
recent Internal Revenue Service determination letters that could be reasonably
expected to adversely affect the tax-qualified status of any Plan. Each Employee
Plan has been maintained in material compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code, which are applicable to such
Employee Plan. No prohibited transaction (as defined in Section 406 of ERISA and
Section 4975 of the Code) has occurred in respect of any Employee Plan.
(d) There is no contract, agreement, plan or arrangement covering
any employee or former employee of the Company or any of its Affiliates that,
individually or collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the Code.
(e) No payment, accrual of additional benefits, acceleration of
payments or vesting in any benefit under any Employee Plan or Material
Employment Agreement will be caused by the Company's entering into this
Agreement or by the consummation of the transactions contemplated by this
Agreement (either alone or in combination with any other event).
(f) No Employee Plan that is a welfare benefit plan (within the
meaning of Section 3(1) of ERISA) provides benefits to former employees of the
Company, other than pursuant to Section 4980B of the Code or any similar state
or local law.
Section 4.13 LABOR MATTERS.
(a) There is no labor strike, dispute, slowdown, stoppage or lockout
actually pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary and since August 4, 2003 there has not
been any such action.
(b) To the knowledge of the Company, no union claims to represent
the employees of the Company or any Subsidiary. Neither the Company nor any
Subsidiary is a party to or bound by any collective bargaining or similar
agreement with any labor organization, or work rules or practices agreed to with
any labor organization or employee association applicable to employees of the
Company or any Subsidiary.
(c) None of the employees of the Company or any Subsidiary are
represented by any labor organization and, to the Company's knowledge, there are
no current union organizing activities among the employees of the Company or any
Subsidiary.
(d) From the Balance Sheet Date, except as has not had, and would
not reasonably be expected to have, a Material Adverse Effect on the Company,
there is no unfair labor practice charge or complaint against the Company or any
Subsidiary pending or, to the knowledge of the Company, threatened before the
National Labor Relations Board or any similar state or foreign agency.
Section 4.14 COMPLIANCE WITH LAWS.
(a) The Company and each of its Subsidiaries is, and at all times
since the Balance Sheet Date has been, in compliance in all material respects
with all material Laws applicable to the Company, its Subsidiaries and their
respective businesses and activities.
(b) The Company and each Company Subsidiary has and maintains in
full force and effect, and is in compliance with, all Permits necessary for the
Company and each Subsidiary to carry on their respective businesses as currently
conducted and currently proposed to be conducted, except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
Section 4.15 FINDERS' FEES. There is no investment banker, broker,
finder or other intermediary that has been retained by or is authorized to act
on behalf of the Company or any of its Subsidiaries or Affiliates and that might
be entitled to any fee or commission from the Company or any of its Affiliates
in connection with the transactions contemplated by this Agreement (other than
based on arrangements made by Parent or Merger Sub or any of their respective
Affiliates). The Company has provided true and complete copies of all engagement
letters or other agreements providing for the payment of the fees and
commissions described in Section 4.15 of the Disclosure Letter, and no such
letters or agreements have been amended or superseded.
Section 4.16 ENVIRONMENTAL MATTERS. Except as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company:
(a) the Company is and has at all times been in compliance in all
material respects with all Environmental Laws;
(b) there has been no Release of Hazardous Substances at any real
property that is or was owned or operated by the Company during the period of
such ownership or operation;
(c) no notice, demand, request for information, citation, summons,
complaint, order, consent decree, or settlement has been received or entered
into by, or to the knowledge of the Company is pending or threatened by any
Person against, the Company or any of its Subsidiaries nor has any penalty been
assessed against the Company or any such Subsidiary with respect to any alleged
violation of any Environmental Law;
(d) neither the Company nor any of its Subsidiaries has disposed or
arranged for the disposal of any Hazardous Substances that has resulted in or
reasonably may be expected to result in the Company or any Subsidiary having or
incurring any liability under any Environmental Law;
(e) to the Company's knowledge, no underground tanks or Hazardous
Substances are or have been located on real property that is owned or operated
by the Company or any of its Subsidiaries nor has the Company or any of its
Subsidiaries ever operated an underground tank or used, handled or stored
Hazardous Substances except for products and materials held as inventory (and of
a nature customarily held by sporting goods stores) and for generally accepted
cleaning agents in typical quantities;
(f) there has been no material written report of any environmental
investigation, study, audit, test, review or other analysis conducted of which
the Company or any of its Subsidiaries has knowledge and has in its possession
or control relating to the business of the Company or such Subsidiary or any
real property that is owned or operated by the Company or such Subsidiary that
has not been disclosed and made available to Parent and Merger Sub; and
(g) to the Company's knowledge, neither the Company nor any of its
Subsidiaries has agreed to assume, undertake or provide indemnification for any
liability of any other Person under any Environmental Law, including any
obligation for corrective or remedial action.
Section 4.17 SUPPLIERS AND RELATIONSHIPS. Set forth in Section 4.17
of the Disclosure Letter is a list of the twenty largest merchandise vendors of
the Company and its Subsidiaries based on the dollar value of materials or
products purchased by the Company and its Subsidiaries for the fiscal year ended
January 29, 2005. Since the Balance Sheet Date, there has not been, and the
Company has not received any notice of or threatening, any material change in
relations with any of the major suppliers of the Company or its Subsidiaries,
the result of which would be material to the Company and its Subsidiaries taken
as a whole.
Section 4.18 CONTRACTS.
(a) Section 4.18 of the Disclosure Letter contains a complete and
accurate list, as of the date hereof, of all Contracts (as hereinafter defined)
that are material Contracts within the meaning of Item 601 of Regulation S-K
promulgated under the Securities Act or Contracts that the Company's management
considers material to the Company and its Subsidiaries, taken as a whole
("MATERIAL CONTRACTS"). All of the Material Contracts are in full force and
effect, except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company. As used herein,
"CONTRACTS" means contracts, undertakings, commitments or agreements (other than
contracts, undertakings, commitments or agreements for employee benefit matters
set forth in Section 4.12(a) of the Disclosure Letter and real property leases
set forth in Section 4.20(c) of the Disclosure Letter and any vendor contracts
entered into in the ordinary course of business).
(b) True and complete copies of all written Material Contracts have
been either (i) filed as exhibits to the Company's annual report on Form 10-K
for the fiscal year ended January 29, 2005 or (ii) delivered or made available
to Parent and Merger Sub. Each such Material Contract is a valid and binding
obligation of the Company (or the Subsidiaries party thereto) and enforceable
against the Company and its Subsidiaries and, to the Company's knowledge, the
other parties thereto in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, moratorium, reorganization, arrangement or
similar laws affecting creditors' rights generally and by general principles of
equity, except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company.
(c) As of the date hereof, neither the Company nor any of its
Subsidiaries is, nor to the knowledge of the Company is any other party, in
material breach, default or violation (and no event has occurred or not occurred
through the Company's action or inaction or, to the knowledge of the Company,
through the action or inaction of any third parties, which with notice or the
lapse of time or both could constitute a breach, default or violation) of any
term, condition or provision of any Material Contract to which the Company or
any of its Subsidiaries is now a party or by which any of them or any of their
respective properties or assets may be bound, except as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company.
(d) With respect to each of the Company Joint Ventures, all
agreements to which the Company or any of its Subsidiaries is a party that
contain (i) any change of control provisions, put options or call options
related to the interests in such Company Joint Venture, (ii) any rights of first
refusal or other similar provisions or (iii) any provisions that are reasonably
likely to alter the Company's rights with respect to such Company Joint Venture
following consummation of the Merger and other transactions contemplated hereby,
in each case, have been disclosed in Section 4.6(a) of the Disclosure Letter and
true, correct and complete copies (or descriptions of oral agreements, if any)
of such agreements have been made available to Parent and Merger Sub. No Company
Joint Venture has any material liability for which the Company or any of its
Subsidiaries may be held liable.
Section 4.19 INTELLECTUAL PROPERTY. Section 4.19 of the Disclosure
Letter sets forth the material Intellectual Property of the Company and its
Subsidiaries that have been registered with any Governmental Authority (or as to
which there are pending applications for registration). With respect to
Intellectual Property that is used in the conduct of the business of the Company
or any of its Significant Subsidiaries, except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company:
(a) the Company and its Subsidiaries own or have a valid right to
use all of their material Intellectual Property free and clear of all material
Liens (other than Permitted Liens), and there are no agreements or arrangements
by which any such Intellectual Property has been licensed to any third parties;
(b) to the Company's knowledge, no third party is materially
infringing the Company's Intellectual Property, the Company and its Subsidiaries
are not materially infringing any Intellectual Property of a third party, and
the Company and its Subsidiaries are not in default (or with the giving of time
or lapse of notice would be in default) on any material license to use their
Intellectual Property; and
(c) no material claim has been asserted against the Company or any
of its Subsidiaries and is pending by any Person challenging the ownership or
use by the Company or any of its Subsidiaries of their Intellectual Property,
and the Company and its Subsidiaries have not asserted any material claims
against any third parties challenging the use by third parties of their
Intellectual Property.
Section 4.20 ASSETS AND PROPERTY.
(a) The Company and its Subsidiaries have good and valid title to or
a valid leasehold estate, free and clear of any Liens (other than Permitted
Liens), in all real property and personal properties and assets reflected on the
Balance Sheet at the Balance Sheet Date or acquired after the Balance Sheet Date
(except for properties or assets subsequently sold, including real property
leases that are subsequently terminated, in the ordinary course of business).
(b) Section 4.20(b) of the Disclosure Letter sets forth a true,
correct and complete list of all real property owned in fee simple by the
Company or any of its Subsidiaries (collectively, the "OWNED REAL PROPERTY").
With respect to each such parcel of Owned Real Property: (i) 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 other than the Leases (as defined below); and (ii) there are no
outstanding rights of first refusal or options to purchase such parcel.
(c) Section 4.20(c) of the Disclosure Letter sets forth a true,
correct and complete list of all of the leases and subleases (the "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 "LEASED REAL PROPERTY") and for each Lease indicates: (i) its term and any
options to extend the term; and (ii) other than in respect of subleases, closed
stores and non-store properties, the current rent payable (including all
occupancy costs other than utilities). 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 Leased Real Property,
under each of the Leases listed in Section 4.20(c) of the Disclosure Letter. The
Company has delivered or made available to Parent and Merger Sub true, correct
and complete copies of each of the Leases, including, without limitation, all
material amendments, modifications, side agreements, consents, subordination
agreements and guarantees. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company: (A) each Lease is legal, valid, binding, enforceable and in full force
and effect; (B) each 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 Company's knowledge, any other party to any Lease, has
received written notice of a material breach or default under any Lease, and to
the Company's knowledge, no event has occurred that, with notice or lapse of
time, would constitute a breach or material default by the Company (or such
Subsidiary) or permit termination, modification or acceleration under any Lease
by any other party thereto; (D) there are no material disputes, oral agreements
or rent forbearance programs in effect as to any Lease; (E) the Company has not
assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest in any Lease; (F) no Lease has been modified in any material respect,
except to the extent that such modifications are set forth in the documents
previously delivered or made available to Parent and Merger Sub; and (G) each
guaranty by the Company or any of its Subsidiaries is in full force and effect
and no default has occurred thereunder.
(d) The Owned Real Property and the Leased Real Property are
referred to collectively herein as the "REAL PROPERTY." To the knowledge of the
Company, each parcel of Real Property is in material compliance with all
existing material Laws applicable to such Real Property. Except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company, (i) the Company has not received written notice
of any proceedings in eminent domain, condemnation or other similar proceedings
that are pending, and, to the Company's knowledge, there are no such proceedings
threatened, affecting any portion of the Real Property and (ii) 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
Company's knowledge, 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 Real Property.
(e) To the knowledge of the Company, there are no violations of any
covenants, conditions, restrictions, easements, agreements or orders of any
Governmental Authority having jurisdiction over any of the 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.
Section 4.21 INSURANCE. Each of the Company and its Subsidiaries
maintains insurance policies (the "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. Except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company, (i) each Insurance Policy is in full force and
effect and all premiums due thereon have been paid in full; (ii) none of the
Insurance Policies will terminate or lapse (or be affected in any other
materially adverse manner) by reason of the transactions contemplated by this
Agreement; (iii) each of the Company and its Subsidiaries has complied in all
material respects with the provisions of each Insurance Policy under which it is
the insured party; and (iv) no insurer under any Insurance Policy has canceled
or generally disclaimed liability under any such policy and all material claims
for which coverage is provided under the Insurance Policies have been filed in a
timely fashion.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company that:
Section 5.1 CORPORATE EXISTENCE AND POWER. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all corporate powers and authority
required to execute and deliver this Agreement and to consummate the Merger and
the other transactions contemplated hereby and to perform each of its
obligations hereunder. Since their respective dates of organization, neither
Parent or Merger Sub has engaged in any activities other than in connection with
or as contemplated by this Agreement or in connection with arranging the
Financing.
Section 5.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by Parent and Merger Sub of this Agreement and the consummation by
Parent and Merger Sub of the transactions contemplated hereby have been duly
authorized by all necessary Parent and Merger Sub corporate and shareholder
action. This Agreement has been duly and validly executed and delivered by
Parent and Merger Sub and, assuming the due and valid execution and delivery of
the Agreement by the Company, constitutes a valid and binding agreement of
Parent and Merger Sub, respectively, enforceable against Parent and Merger Sub
except (i) as rights to indemnity hereunder may be limited by federal or state
securities laws or the public policies embodied therein, (ii) as such
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the enforcement of creditors' rights
generally, and (iii) as the remedy of specific performance and other forms of
injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
Section 5.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Parent and Merger Sub of this Agreement and the consummation by
Parent and Merger Sub of the transactions contemplated by this Agreement will
not require any action by Parent or Merger Sub in respect of, or filing by
Parent or Merger Sub with, any Governmental Authority other than (a) the filing
of the Certificate of Merger as provided in SECTION 2.1(B), (b) compliance with
any
applicable requirements of the HSR Act and any applicable Other Antitrust Law
and any other Law specified in Section 4.3 of the Disclosure Letter; (c)
compliance with the applicable requirements of the Exchange Act; (d) compliance
with the applicable requirements of the Securities Act; (e) compliance with any
applicable foreign or state securities or Blue Sky laws; and (f) such other
items the failure of which to do or be obtained would not reasonably be expected
to adversely effect in any material respect, or materially delay, Parent's and
Merger Sub's ability to observe and perform their respective obligations
hereunder.
Section 5.4 NON-CONTRAVENTION. The execution, delivery and
performance by Parent and Merger Sub of this Agreement and the consummation by
Parent and Merger Sub of the transactions contemplated hereby do not and will
not (a) contravene or conflict with the organizational or governing documents of
Parent or Merger Sub, (b) assuming compliance with the items specified in
SECTION 5.3, contravene, conflict with or constitute a violation of any
provision of Law binding upon Parent or Merger Sub, or (c) constitute a default
under or give rise to any right of termination, cancellation or acceleration of
any right or obligation of Parent or Merger Sub or to a loss of any material
benefit to which Parent or Merger Sub is entitled under any agreement, contract
or other instrument.
Section 5.5 DISCLOSURE DOCUMENTS. None of the information supplied
or to be supplied by Parent or Merger Sub specifically for inclusion in the
Company Proxy Statement or Schedule 13E-3 will, (a) at the date it is first
mailed to shareholders of the Company (in the case of the Company Proxy
Statement) or (b) at the time of the Company Shareholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
information so provided by Parent or Merger Sub that subsequently changes or
becomes incomplete or incorrect to the extent such changes or failure to be
complete or correct are promptly disclosed to the Company and to the further
extent that Parent and Merger Sub reasonably cooperate with the Company in
preparing, filing or disseminating updated information to the extent required by
Law.
Section 5.6 FINDERS' FEES. There is no investment banker, broker,
finder or other intermediary who is entitled to any fee or commission from the
Company in connection with the transactions contemplated by this Agreement based
on any arrangements made by Parent or Merger Sub or any of their respective
Affiliates.
Section 5.7 FINANCING. Parent and Merger Sub have delivered to the
Company financing letters from the following Persons: Green Equity Investors IV,
L.P. (the "GEI IV LETTER"), Banc of America Securities LLC and Bank of America,
N.A. and TCW/Crescent Mezzanine Management III, LLC and TCW/Crescent Mezzanine
Management IV, LLC (collectively, the "FINANCING LETTERS"), which together
reflect commitments from such equity investors and financial institutions, in
each case subject to the conditions set forth in the respective Financing
Letters, sufficient to pay the full Merger Consideration (and all other cash
amounts payable pursuant hereto), and all of the related fees and expenses
payable by Parent or Merger Sub (or, after the Closing, the Surviving
Corporation) in connection with the Merger (the funds necessary to pay the
foregoing amounts, the "FINANCING"). Such Financing Letters are in full force
and effect and the parties thereto have not withdrawn or indicated an intent to
withdraw
the commitments made therein. Notwithstanding anything in this Agreement to the
contrary, one or more Financing Letters may be superseded at the option of
Parent and Merger Sub after the date hereof but prior to the Effective Time by
instruments (the "NEW FINANCING LETTERS") which replace existing Financing
Letters and/or contemplate co-investment by or financing from one or more other
or additional parties; PROVIDED, that the terms of the New Financing Letters
shall not (a) expand upon the conditions precedent to the Financing as set forth
in the Financing Letters in any respect that would make such conditions less
likely to be satisfied, (b) reasonably be expected to delay the Closing or (c)
otherwise have an adverse impact on the Company at any time that is prior to the
Closing. In such event, the term "FINANCING LETTERS" as used herein shall be
deemed to include the Financing Letters that are not so superseded at the time
in question and the New Financing Letters to the extent then in effect. There
are no conditions precedent or other contingencies related to the funding of the
Financing other than as set forth or referred to in the Financing Letters.
Section 5.8 NO OTHER INFORMATION. Parent and Merger Sub acknowledge
that the Company makes no representations or warranties as to any matter
whatsoever except as expressly set forth in this Agreement, and specifically
(but without limitation) that the Company makes no representation or warranty
with respect to any projections, estimates or budgets delivered to or made
available to Parent and Merger Sub or to any of their respective Affiliates or
any representatives of future revenues, future results of operations (or any
component thereof), future cash flows or future financial condition (or any
component thereof) of the Company and its Subsidiaries or of the future business
and operations of the Company and its Subsidiaries.
Section 5.9 INTEREST IN COMPETITORS. Neither Parent nor Merger Sub
owns any interest(s) (nor do any of their respective Affiliates insofar as such
Affiliate-owned interests would be attributed to Parent or Merger Sub under the
HSR Act) in any entity or Person that derives a substantial portion of its
revenues from a line of business within the Company's principal lines of
business.
Section 5.10 OWNERSHIP OF COMMON SHARES. On the date hereof, neither
Parent nor Merger Sub owns any shares of Common Stock of the Company.
Section 5.11 SOLVENCY OF THE COMPANY FOLLOWING COMPLETION OF THE
MERGER. As of the date hereof, to the knowledge of Parent and Merger Sub,
immediately following the Effective Time and after giving effect to the Merger
and the other transactions contemplated hereby, the Company and each of its
Subsidiaries will not (i) be insolvent (either because of its financial
condition is such that the sum of its debts is greater than the fair market
value of its assets or because the fair saleable value of its assets is less
than the amount required to pay its probable liability on its existing debts as
they mature), (ii) have unreasonably small capital with which to engage in its
business or (iii) have incurred debts beyond its ability to pay as they become
due.
Section 5.12 MANAGEMENT AGREEMENTS. Other than (i) the Contribution
and Exchange Agreements, (ii) the stockholders agreement among Parent and the
Contributing Holders and (iii) those certain amendments to the Contributing
Holders' respective Employment Agreements entered into by the Contributing
Holders and Merger Sub in connection with the Contribution and Exchange
Agreements, there are no Contracts between Parent and/or Merger Sub, on the one
hand, and members of the Company's management on the other hand. None of the
foregoing agreements requires any material performance or forbearance by the
Contributing Holders prior to the Effective Time.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 CONDUCT OF THE COMPANY AND SUBSIDIARIES. Except for
matters set forth in Section 6.1 of the Disclosure Letter or as otherwise
contemplated by or specifically provided in this Agreement, without the prior
written consent of Parent and Merger Sub (which consent shall not be
unreasonably withheld, conditioned or delayed), from the date hereof to the
Effective Time, the Company shall, and shall cause its Subsidiaries to, conduct
their respective businesses in the ordinary and usual course consistent with
past practice, and shall use its reasonable best efforts (with the reasonable
cooperation of Parent and Merger Sub and their Affiliates) to (i) preserve
intact its and its Subsidiaries' present business organization and capital
structure; (ii) maintain in effect all material Permits that are required for
the Company or its Subsidiaries to carry on their respective businesses; (iii)
keep available the services of present officers and key employees (as a group);
and (iv) maintain the current relationships with its lenders, suppliers and
other Persons with which the Company or its Subsidiaries have significant
business relationships. Without limiting the generality of the foregoing, and
except for matters set forth in Section 6.1 of the Disclosure Letter or as
expressly contemplated or permitted by this Agreement, without the prior written
consent of Parent and Merger Sub (which consent shall not be unreasonably
withheld, conditioned or delayed), the Company shall not, and shall not permit
its Subsidiaries to (except, in each case, for transactions solely among the
Company and its wholly-owned Subsidiaries or among the Company's wholly-owned
Subsidiaries):
(a) (i) enter into any new line of business or discontinue any line
of business or (ii) propose or adopt any change in its organizational or
governing documents (other than with respect to Company Subsidiaries that are
not Significant Subsidiaries);
(b) merge or consolidate the Company or any of its Subsidiaries
with any Person;
(c) sell, lease or otherwise dispose of a material amount of assets
(other than the sale of inventory or the closing of stores in the ordinary
course of business) or securities;
(d) (i) other than in connection with intercompany transactions,
incur any third-party indebtedness for borrowed money or guarantee such
indebtedness of another Person, except for borrowings under the Company's and
its Subsidiaries' existing revolving lines of credit incurred in the ordinary
course of business repayable within 180 days without penalty; (ii) make any
loans, advances or capital contributions to, or investments in, any other
Person, except in the ordinary course of business consistent with past practice
or as required by existing contracts set forth in Section 6.1(d) of the
Disclosure Letter; (iii) authorize any capital expenditures in excess of
$5,000,000 in the aggregate in excess of the capital expenditures set forth in
the Company's 2005 and 2006 budget forecasts;
(e) pledge or otherwise encumber shares of capital stock or other
voting securities of the Company or any of its Subsidiaries;
(f) mortgage or pledge any of its material assets, tangible or
intangible, or create any material Lien thereupon (other than Permitted Liens);
(g) enter into any Contract other than in the ordinary course of
business that would be material to the Company and its Subsidiaries, taken as a
whole;
(h) amend, modify or waive in any material respect any material
right under any existing Material Contract, except in the ordinary course of
business;
(i) (i) split, combine or reclassify any Company Securities or
amend the terms of any Company Securities, (ii) declare, set aside or pay any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of Company Securities other than a dividend or
distribution by a wholly owned Subsidiary of the Company to its parent
corporation in the ordinary course of business, or (iii) issue or offer to issue
any Company Securities, or redeem, repurchase or otherwise acquire or offer to
redeem, repurchase, or otherwise acquire, any Company Securities, other than in
connection with (x) the exercise of Company Options outstanding on the date
hereof in accordance with their original terms or as set forth on Section
6.1(i)(iii) of the Disclosure Letter or (y) the withholding of Company
Securities to satisfy tax obligations with respect to Company Options or Company
Restricted Shares;
(j) except (x) as required pursuant to existing written agreements
or Employee Plans in effect on the date hereof, in each case, that are set forth
in Section 4.12(a) of the Disclosure Letter, (y) as specifically permitted by
the terms of this Agreement or (z) as otherwise required by Law, (i) enter into
any Material Employment Agreement (except for entry into a Material Employment
Agreement with respect to promotions of current employees or to the extent
necessary to replace a departing employee or to fill an existing vacancy), (ii)
adopt or amend any bonus, profit sharing, compensation, severance, termination,
stock option, pension, retirement, deferred compensation, employment or employee
benefit plan in a manner that materially increases the cost to the Company or
(iii) materially increase in any manner the compensation or fringe benefits of
any director, officer or any class of employee, except in the ordinary course of
business consistent with past practice (it being understood that (1) the normal
salary and bonus review process conducted each year and any resulting increases
and (2) bonus payments for fiscal year 2005 shall, in each case, be permitted
hereunder);
(k) except as required by applicable Law or GAAP or in the ordinary
course of business, revalue in any material respect any of its assets, including
writing down the value of inventory in any material manner or writing-off notes
or accounts receivable in any material manner;
(l) pay, discharge or satisfy any material claims, liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent or
otherwise), except (i) as required by Law or existing Contract or (ii) in the
ordinary course for an amount less than $1,000,000 individually excluding any
amounts which may be paid under existing Insurance Policies;
(m) (i) make, change or rescind any express or deemed material
election relating to Taxes (other than in the ordinary course of business, as
required by applicable Law, or as is consistent with past practice), (ii) take
any position or adopt any tax accounting method that is inconsistent with
methods used in preparing or filing Tax Returns for similar Taxes in prior
periods, other than with respect to such items that, in the aggregate, are not
material or such actions that are required by Law, (iii) settle or compromise
any material Tax liability for an amount in excess of the amount currently
reserved in the books and records of the Company for such Tax liability, (iv)
enter into any closing or other agreement with respect to any material Tax
liability with any Tax authority for an amount in excess of the amount currently
reserved in the books and records of the Company for such Tax liability, (v)
file or cause to be filed any material amended Tax Return (except as required by
applicable Law or as is consistent with past practice), (vi) file or cause to be
filed a material claim for refund of Taxes previously paid (except as required
by applicable Law or as is consistent with past practice), (vii) agree to an
extension of a statute of limitations with respect to the assessment or
determination of material Taxes, or (viii) grant any power of attorney with
respect to material Taxes;
(n) make any change in financial accounting methods, principles or
practices materially affecting the reported consolidated assets, liabilities or
results of operations of the Company and its Subsidiaries, except insofar as may
have been required by a change in GAAP or Law (including, without limitation,
Regulation S-X of the Exchange Act) and after consulting with the Company's
outside accountants;
(o) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its Subsidiaries (other than the Merger and other than
in respect of Company Subsidiaries that are not Significant Subsidiaries);
(p) alter the corporate structure of ownership of any Significant
Subsidiary, through merger, liquidation, reorganization, restructuring or any
other fashion;
(q) settle, pay or discharge, any litigation, investigation,
arbitration, proceeding or other claim, liability or obligation except in the
ordinary course for an amount less than $1,000,000 individually excluding any
amounts which may be paid under existing Insurance Policies; or
(r) authorize, agree or commit to do any of the foregoing.
Section 6.2 STOCKHOLDER MEETING; PROXY MATERIAL.
(a) The Company shall duly call and hold a meeting of its
shareholders (the "COMPANY SHAREHOLDER MEETING") for the purpose of obtaining
the approval of this Agreement and the Merger by the Company shareholders in
accordance with applicable Law as promptly as reasonably practicable after the
SEC clears the Company Proxy Statement and the Schedule 13E-3. In connection
with the Company Shareholder Meeting, the Company will (i) as promptly as
reasonably practicable prepare and file with the SEC the Company Proxy Statement
relating to the Merger and the other transactions contemplated hereby, (ii)
respond as promptly as reasonably practicable to any comments received from the
SEC with respect to such filings
and will provide copies of such comments to Parent and Merger Sub promptly upon
receipt, (iii) as promptly as reasonably practicable prepare and file (after
Parent and Merger Sub have had a reasonable opportunity to review and comment
on) any amendments or supplements necessary to be filed in response to any SEC
comments or as required by Law, (iv) use its reasonable best efforts to have
cleared by the SEC and will thereafter mail to its shareholders as promptly as
reasonably practicable, the Company Proxy Statement and all other customary
proxy or other materials for meetings such as the Company Shareholder Meeting,
(v) to the extent required by applicable Law, as promptly as reasonably
practicable prepare, file and distribute to the Company shareholders (in the
case of the Company Proxy Statement) any supplement or amendment to the Company
Proxy Statement if any event shall occur which requires such action at any time
prior to the Company Shareholder Meeting, and (vi) otherwise use commercially
reasonable efforts to comply with all requirements of Law applicable to the
Company Shareholder Meeting and the Merger. Parent and Merger Sub shall
cooperate with the Company in connection with the preparation and filing of the
Company Proxy Statement, including furnishing the Company upon request with any
and all information as may be required to be set forth in the Company Proxy
Statement under the Exchange Act. The Company will provide Parent and Merger Sub
a reasonable opportunity to review and comment upon the Company Proxy Statement,
or any amendments or supplements thereto, prior to filing the same with the SEC.
In connection with the filing of the Company Proxy Statement, the Company and
Parent and Merger Sub will cooperate to (i) concurrently with the preparation
and filing of the Company Proxy Statement, jointly prepare and file with the SEC
the Schedule 13E-3 relating to the Merger and the other transactions
contemplated hereby and furnish to each other all information concerning such
party as may be reasonably requested in connection with the preparation of the
Schedule 13E-3, (ii) respond as promptly as reasonably practicable to any
comments received from the SEC with respect to such filings and will consult
with each other prior to providing such response, (iii) as promptly as
reasonable practicable after consulting with each other, prepare and file any
amendments or supplements necessary to be filed in response to any SEC comments
or as required by Law, (iv) to have cleared by the SEC the Schedule 13E-3 and
(v) to the extent required by applicable Law, as promptly as reasonably
practicable prepare, file and distribute to the Company stockholders any
supplement or amendment to the Schedule 13E-3 if any event shall occur which
requires such action at any time prior to the Stockholders Meeting.
(b) Subject to SECTION 6.4, the Company Proxy Statement will
contain the recommendation of the Board of Directors of the Company that the
shareholders of the Company adopt this Agreement and the Merger (the
"RECOMMENDATION") and the Company shall use reasonable best efforts to solicit
the adoption and approval of this Agreement by the Company stockholders.
Section 6.3 ACCESS TO INFORMATION; COOPERATION IN FINANCING.
(a) Subject to applicable Law, the Company will provide and will
cause its Subsidiaries and its and their respective Representatives to provide
Parent and Merger Sub and their respective authorized representatives, during
normal business hours and upon reasonable advance notice (i) such access to the
offices, properties, books and records of the Company and such Subsidiaries (so
long as such access does not unreasonably interfere with the operations of the
Company) as Parent or Merger Sub reasonably may request and (ii) all documents
that Parent
or Merger Sub reasonably may request. Notwithstanding the foregoing, Parent,
Merger Sub and their representatives shall not have access to any books, records
and other information the disclosure of which would, in the Company's good faith
opinion after consultation with legal counsel, result in the loss of
attorney-client privilege with respect to such books, records and other
information.
(b) The Company will and will cause its Subsidiaries to and will
request their respective representatives to reasonably cooperate with Parent,
Merger Sub and their authorized representatives in connection with the
arrangement of the Financing, including (i) participation in meetings, (ii)
furnishing information (including any financial statements) required to be
included in the preparation of offering memoranda, private placement memoranda,
prospectuses and similar documents and (iii) cooperation in respect of the
preparation of any underwriting or placement agreements, pledge and security
documents, other definitive financing documents, including a certificate of the
chief financial officer of the Company with respect to solvency matters, comfort
letters of accountants and legal opinions as reasonably may be requested by
Parent or Merger Sub; PROVIDED, that any information provided to Parent or
Merger Sub pursuant to this SECTION 6.3 shall be subject to the Confidentiality
Agreement; and PROVIDED, FURTHER, that the Company shall not be required to
incur any significant expenses or become subject to any significant obligations
relating to such activities prior to the Closing.
Section 6.4 SOLICITATION.
(a) During the period beginning on the date of this Agreement and
continuing until 12:01 a.m. (EST) on the 21st day after the date of this
Agreement (the "EXCLUSIVITY PERIOD START DATE"), the Company and its
Subsidiaries and their respective officers, directors, employees, agents,
advisors, affiliates and other representatives (such Persons, together with the
Subsidiaries of the Company, collectively, the "COMPANY REPRESENTATIVES") shall
have the right (acting under the direction of the Special Committee) to: (i)
initiate, solicit and encourage Company Acquisition Proposals (as hereinafter
defined), including by way of providing access to non-public information
pursuant to (but only pursuant to) one or more Acceptable Confidentiality
Agreements (as hereinafter defined); PROVIDED that the Company shall promptly
provide to Parent and Merger Sub any material non-public information concerning
the Company or its Subsidiaries that is provided to any Person given such access
which was not previously provided to Parent and Merger Sub; and (ii) enter into
and maintain or continue discussions or negotiations with respect to Company
Acquisition Proposals or otherwise cooperate with or assist or participate in,
or facilitate any such inquiries, proposals, discussions or negotiations.
(b) Subject to SECTION 6.4(C), and except as may relate to any
Person or group of related Persons from whom the Company has received, after the
date hereof and prior to the Exclusivity Period Start Date, a written indication
of interest that the Board of Directors of the Company (acting through the
Special Committee if such committee still exists) believes in good faith is bona |
