EXHIBIT 2.1
EXECUTION COPY
______________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
AMONG
DESIGNER APPAREL HOLDING COMPANY,
DAH MERGER CORPORATION
AND
XXXXXXXX'X HOLDINGS INC.
DATED AS OF APRIL 22, 2004
______________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
Table of Contents
Page
ARTICLE I THE MERGER.................................................................................2
Section 1.1. The Merger.............................................................................2
Section 1.2. Effective Time; Closing................................................................2
Section 1.3. Effect of the Merger...................................................................2
Section 1.4. Conversion of Company Common Stock.....................................................3
Section 1.5. Dissenting Shares......................................................................3
Section 1.6. Stock Option Plans.....................................................................4
Section 1.7. Surrender of Shares of Company Common Stock; Stock Transfer Books......................4
ARTICLE II THE SURVIVING CORPORATION..................................................................6
Section 2.1. Certificate of Incorporation...........................................................6
Section 2.2. Bylaws.................................................................................7
Section 2.3. Directors and Officers.................................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................................7
Section 3.1. Organization and Standing..............................................................7
Section 3.2. Capitalization.........................................................................7
Section 3.3. Authority for Agreement................................................................8
Section 3.4. No Conflict............................................................................9
Section 3.5. Required Filings and Consents.........................................................10
Section 3.6. Compliance............................................................................10
Section 3.7. SEC Filings, Financial Statements.....................................................10
Section 3.8. Absence of Certain Changes or Events..................................................12
Section 3.9. Taxes.................................................................................12
Section 3.10. Change of Control Agreements..........................................................13
Section 3.11. Litigation............................................................................13
Section 3.12. Contracts and Commitments.............................................................13
Section 3.13. Information Supplied..................................................................14
Section 3.14. Employee Benefit Plans................................................................14
Section 3.15. Labor and Employment Matters..........................................................16
Section 3.16. Environmental Compliance and Disclosure...............................................17
Section 3.17. Intellectual Property.................................................................19
Section 3.18. Brokers...............................................................................20
Section 3.19. Insurance Policies....................................................................20
Section 3.20. Bankruptcy............................................................................20
Section 3.21. Transactions with Affiliates..........................................................20
Section 3.22. No Existing Discussions...............................................................20
Section 3.23. Stockholders' Rights Agreement........................................................20
Section 3.24. Major Merchandise Vendors and Suppliers...............................................20
Section 3.25. Real Estate...........................................................................21
Section 3.26. Terminated Leases.....................................................................22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB..........................................23
Section 4.1. Organization and Standing.............................................................23
Section 4.2. Authority for Agreement...............................................................23
Section 4.3. No Conflict...........................................................................23
Section 4.4. Required Filings and Consents.........................................................23
Section 4.5. Information Supplied..................................................................24
Section 4.6. Parent Net Worth......................................................................24
Section 4.7. Sufficient Funds......................................................................24
Section 4.8. Brokers...............................................................................25
Section 4.9. Arrangements with Certain Officers....................................................25
ARTICLE V COVENANTS.................................................................................25
Section 5.1. Conduct of the Business Pending the Merger............................................25
Section 5.2. Access to Information; Confidentiality................................................27
Section 5.3. Notification of Certain Matters.......................................................28
Section 5.4. Further Assurances....................................................................28
Section 5.5. Board Recommendations.................................................................29
Section 5.6. Stockholder Litigation................................................................31
Section 5.7. Indemnification.......................................................................31
Section 5.8. Public Announcements..................................................................32
Section 5.9. Acquisition Proposals.................................................................32
Section 5.10. Company Stockholders' Meeting.........................................................33
Section 5.11. Proxy Statement; Schedule 13E-3.......................................................34
Section 5.12. Undertakings of Parent................................................................35
Section 5.13. Director Resignations.................................................................35
Section 5.14. Tax Matters...........................................................................35
Section 5.15. Employees.............................................................................35
Section 5.16. Delisting.............................................................................36
Section 5.17. Closing of Chapter 11 Case............................................................36
ARTICLE VI CONDITIONS................................................................................36
Section 6.1. Conditions to the Obligation of Each Party............................................36
Section 6.2. Conditions to Obligations of Parent and Sub to Effect the Merger......................37
Section 6.3. Conditions to Obligations of the Company to Effect the Merger.........................37
ARTICLE VII TERMINATION AND WAIVER....................................................................38
Section 7.1. Termination...........................................................................38
Section 7.2. Effect of Termination.................................................................40
Section 7.3. Waiver................................................................................42
ARTICLE VIII GENERAL PROVISIONS........................................................................42
Section 8.1. No Third Party Beneficiaries..........................................................42
Section 8.2. Entire Agreement; Amendment...........................................................42
Section 8.3. Succession and Assignment.............................................................42
Section 8.4. Counterparts..........................................................................43
Section 8.5. Headings..............................................................................43
Section 8.6. Governing Law; Jurisdiction...........................................................43
Section 8.7. Severability..........................................................................43
Section 8.8. Specific Performance..................................................................44
Section 8.9. Construction..........................................................................44
Section 8.10. Non-Survival of Representations and Warranties and Agreements.........................44
Section 8.11. Certain Definitions...................................................................44
Section 8.12. Fees and Expenses.....................................................................45
Section 8.13. Notices...............................................................................45
Section 8.14. Waiver of Claims......................................................................47
LIST OF DEFINED TERMS
2001 Option Plan..................................................................................................4
Acquisition Agreement............................................................................................29
Acquisition Proposal.............................................................................................33
Affected Employees...............................................................................................35
Agreement.........................................................................................................1
Alternative Transaction..........................................................................................29
Appraisal Condition Trigger Date.................................................................................37
Bankruptcy Code..................................................................................................36
Bankruptcy Court.................................................................................................20
Blue Sky Laws....................................................................................................10
Canceled Options..................................................................................................4
CERCLA...........................................................................................................17
Certificate.......................................................................................................3
Certificate of Merger.............................................................................................2
Chapter 11 Case..................................................................................................20
Claims...........................................................................................................46
Closing...........................................................................................................2
Closing Order....................................................................................................36
Code..............................................................................................................6
Commitment Letters...............................................................................................24
Company...........................................................................................................1
Company 2000 Options..............................................................................................4
Company 2000 Stock Option Plans...................................................................................4
Company 2001 Options..............................................................................................4
Company Benefit Plans............................................................................................14
Company Bylaws....................................................................................................7
Company Certificate of Incorporation..............................................................................7
Company Common Stock..............................................................................................1
Company Disclosure Letter.........................................................................................7
Company Facility.................................................................................................22
Company Financial Statements.....................................................................................11
Company Leased Real Property.....................................................................................21
Company Leased Real Property Permits.............................................................................22
Company Leases...................................................................................................21
Company Material Adverse Effect..................................................................................44
Company Parties..................................................................................................46
Company Policies.................................................................................................31
Company Stockholders..............................................................................................1
Confidentiality Agreement........................................................................................27
Crescent.........................................................................................................27
Debt Commitment Letter...........................................................................................24
Debt Financing...................................................................................................24
DGCL..............................................................................................................1
Dissenting Shares.................................................................................................3
Drop Dead Date...................................................................................................38
XXXXX............................................................................................................10
Effective Time....................................................................................................2
Environmental Laws...............................................................................................18
Equity Commitment Letter.........................................................................................24
ERISA............................................................................................................14
ERISA Affiliate..................................................................................................15
Exchange Act......................................................................................................6
Expense Payment..................................................................................................40
FIIB.............................................................................................................24
Financing Date....................................................................................................2
Fund..............................................................................................................4
GAAP.............................................................................................................11
Governmental Entity..............................................................................................10
Hazardous Materials..............................................................................................18
Indemnified Parties..............................................................................................31
Independent Advisor Engagement Letter............................................................................34
Independent Financial Advisor.....................................................................................1
Intellectual Property Rights.....................................................................................19
Law...............................................................................................................9
Licensed Rights..................................................................................................19
Litigation.......................................................................................................13
Major Supplier...................................................................................................20
Material Contract................................................................................................13
Material Contracts...............................................................................................13
Merger............................................................................................................1
Merger Consideration..............................................................................................3
NLRB.............................................................................................................16
Option Consideration..............................................................................................4
Orders or Awards.................................................................................................13
Parent............................................................................................................1
Paying Agent......................................................................................................4
Proxy Statement..................................................................................................14
Related Parties..................................................................................................46
Release..........................................................................................................18
Released Parties.................................................................................................46
Representatives..................................................................................................27
Schedule 13E-3...................................................................................................34
SEC...............................................................................................................6
SEC Reports......................................................................................................10
Section 8.14 Claims..............................................................................................46
Securities Act....................................................................................................8
Special Committee.................................................................................................1
Specified Stockholders............................................................................................1
Stockholder's Meeting............................................................................................14
Sub...............................................................................................................1
Subsequent Determination.........................................................................................29
Subsidiaries.....................................................................................................44
Subsidiary.......................................................................................................44
Superior Proposal................................................................................................30
Surviving Corporation.............................................................................................2
Tax..............................................................................................................12
Tax Return.......................................................................................................12
Taxes............................................................................................................12
Termination Date.................................................................................................44
Termination Fee..................................................................................................40
Voting Agreement..................................................................................................1
WARN.............................................................................................................16
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of April 22,
2004, by and among DESIGNER APPAREL HOLDING COMPANY, a Delaware corporation
("Parent"), DAH MERGER CORPORATION, a Delaware corporation ("Sub") and wholly
owned subsidiary of Parent, and XXXXXXXX'X HOLDINGS INC., a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement desire to effect the
acquisition of the Company by Parent;
WHEREAS, in furtherance of the foregoing, upon the terms and subject
to the conditions of this Agreement and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), Sub will merge with and
into the Company (the "Merger") in accordance with the provisions of the DGCL,
with the Company as the surviving corporation;
WHEREAS, as of the date hereof, Alpine Associates, A Limited
Partnership, Alpine Partners, L.P., Palisades Partners, L.P. and Alpine
Associates Offshore Fund Ltd. (the "Specified Stockholders") beneficially own
or have the power to vote shares of the common stock, par value $.01 per share,
of the Company (the "Company Common Stock"), representing approximately 32.69%
of the outstanding Company Common Stock;
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to Parent entering into this
Agreement, the Specified Stockholders have entered into a voting agreement,
dated as of the date hereof (the "Voting Agreement"), whereby each Specified
Stockholder has agreed to vote its shares of Company Common Stock and shares of
Company Common Stock acquired by such Specified Stockholder after the date
hereof in favor of the Merger, this Agreement and the transactions contemplated
hereby;
WHEREAS, the Board of Directors of Parent and Sub have each approved
this Agreement and the Merger, upon the terms and subject to the conditions set
forth herein;
WHEREAS, the Board of Directors of the Company and the Special
Committee of the Board of Directors of the Company (the "Special Committee")
have unanimously approved this Agreement and the Merger, and the transactions
contemplated hereby, which approval was based in part on the opinion of Xxxxx
X. Xxxxxxx Company (the "Independent Financial Advisor"), independent financial
advisor to the Special Committee, that, as of the date of such opinion and
based on the assumptions, qualifications and limitations contained therein, the
consideration to be received in the Merger by the holders of Company Common
Stock (the "Company Stockholders") for their shares of Company Common Stock is
fair, from a financial point of view, to the Company Stockholders; and
WHEREAS, the Board of Directors of the Company has unanimously
resolved to recommend approval of the Merger to the Company Stockholders, has
determined that the Merger is in the best interests of the Company Stockholders
and has resolved to recommend that the Company Stockholders approve the Merger,
this Agreement and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements contained in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions
of this Agreement, and in accordance with the DGCL, at the Effective Time (as
hereinafter defined), Sub shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Sub shall cease and
the Company shall continue as the surviving corporation following the Merger
(the "Surviving Corporation"). The corporate existence of the Company, with all
its purposes, rights, privileges, franchises, powers and objects, shall
continue unaffected and unimpaired by the Merger and, as the Surviving
Corporation, it shall be governed by the laws of the State of Delaware.
Section 1.2. Effective Time; Closing. The closing (the "Closing")
shall occur as promptly as practicable (and in any event within three business
days) after the date on which the conditions set forth in Article VI hereof
have been satisfied, or to the extent permitted hereunder waived, unless as of
such date the Debt Financing (as hereinafter defined) on the terms set forth in
the Debt Commitment Letter, or alternative debt financing on terms not
materially less favorable to Parent than the terms set forth in the Debt
Commitment Letter, shall not have been obtained (the date on which such debt
financing is obtained, the "Financing Date"), in which case the Closing shall
occur no later than 45 days (or such shorter period as may be then remaining
prior to the Drop Dead Date (as hereinafter defined)) after the date on which
the conditions set forth in Article VI hereof shall be satisfied; provided,
that such extension of the Closing shall be permitted if and only if Parent and
Sub shall have sent the Company a letter in which they irrevocably and without
qualification waive the conditions set forth in Section 6.2 hereof, other than
the condition set forth in Section 6.2(a)(ii) hereof. At the Closing, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger (the "Certificate of Merger") with the Secretary of State of the
State of Delaware and by making all other filings or recordings required under
the DGCL in connection with the Merger, in such form as is required by, and
executed in accordance with the relevant provisions of, the DGCL. The Merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Secretary of State of the State of Delaware, or at such later time as
the parties hereto agree shall be specified in the Certificate of Merger (the
date and time the Merger becomes effective, the "Effective Time"). On the date
of such filing, the Closing shall be held at 10:00 a.m., Eastern Standard Time,
at the offices of King & Spalding LLP, 1185 Avenue of the Americas, New York,
New York or at such other time and location as the parties hereto shall
otherwise agree.
Section 1.3. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Sub shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of the Company
and Sub shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
Section 1.4. Conversion of Company Common Stock. At the Effective
Time, by virtue of the Merger and without any action on the part of Sub, the
Company or the holders of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares canceled pursuant to
Section 1.4(b) and Dissenting Shares (as defined in Section 1.5), if any)
shall, subject to Section 1.5, by virtue of the Merger and without any action
on the part of the holder thereof be converted automatically into the right to
receive an amount in cash equal to $23.00 payable, without interest, to the
holder of such share of Company Common Stock, upon surrender of the certificate
("Certificate") that formerly evidenced such share of Company Common Stock in
the manner provided in Section 1.7 (the "Merger Consideration");
(b) Each share of Company Common Stock that is owned by the Company as
treasury stock immediately prior to the Effective Time shall be canceled and
retired and cease to exist and no payment or distribution shall be made with
respect thereto;
(c) All shares of the Company Common Stock converted pursuant to
Section 1.4(a) shall no longer be outstanding and shall automatically be
canceled and retired and cease to exist, and each holder of a Certificate shall
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration in accordance with Section 1.4(a); and
(d) Each share of common stock, par value $.01 per share, of Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and nonassessable
share of common stock, par value $.01 per share, of the Surviving Corporation
and shall constitute the only outstanding shares of capital stock of the
Surviving Corporation.
Section 1.5. Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary, shares
of Company Common Stock that are issued and outstanding immediately prior to
the Effective Time and which are held by Company Stockholders who have demanded
and perfected their demands for appraisal of such shares of Company Common
Stock in the time and manner provided in Section 262 of the DGCL and, as of the
Effective Time, have neither effectively withdrawn such demand for appraisal
rights nor voted in favor of, or consented in writing to, the Merger (the
"Dissenting Shares") shall not be converted as described in Section 1.4(a), but
shall, by virtue of the Merger, be entitled to only such rights as are granted
by Section 262 of the DGCL; provided, however, that if such holder shall have
failed to perfect or shall have effectively withdrawn or lost his, her or its
right to appraisal and payment under the DGCL, such holder's shares of Company
Common Stock shall thereupon be deemed to have been converted, at the Effective
Time, as described in Section 1.4(a), into the right to receive the Merger
Consideration set forth in such provisions, without any interest thereon.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal pursuant to Section 262 of the DGCL received by the Company,
withdrawals of such demands, and any other instruments served pursuant to
Section 262 of the DGCL and received by the Company, and (ii) the opportunity
to direct all negotiations and proceedings with respect to demands for
appraisal under the DGCL. The Company shall not, except with the prior written
consent of Parent, make any payment with respect to any such demands for
appraisal or offer to settle or settle any such demands.
Section 1.6. Stock Option Plans.
(a) The Company shall ensure that, pursuant to the Company's 2000
Director Option Plan and 2000 Equity Incentive Plan (together, the "Company
2000 Stock Option Plans"), all outstanding options to acquire Company Common
Stock (the "Company 2000 Options") granted under the Company 2000 Stock Option
Plans shall either (i) be exercised in full immediately prior to the
consummation of the Merger or (ii) be exchanged for cash for the cancellation
of the Company 2000 Options as set forth in Section 1.6(c).
(b) The Company shall ensure that, pursuant to the Amended and
Restated 2001 Stock Option Plan (the "2001 Option Plan") and the outstanding
options to acquire Company Common Stock issued thereunder (the "Company 2001
Options") (i) the Company 2001 Options set forth on Exhibit A hereto held by
each option holder shall be canceled and exchanged for cash immediately prior
to the consummation of the Merger as provided in Section 1.6(c), and (ii) the
remaining Company 2001 Options held by each option holder shall be retained by
such option holder, provided that, the Company shall take any actions necessary
to make appropriate adjustments in the retained Company 2001 Options as
provided in Section 12 of the 2001 Option Plan.
(c) Each holder of Company 2000 Options and Company 2001 Options which
are canceled in exchange for cash pursuant to Section 1.6(a) or 1.6(b) shall
receive, upon the consummation of the Merger, in exchange for the cancellation
of such holder's Company 2000 Options or Company 2001 Options (the "Canceled
Options"), an amount in cash determined by multiplying (A) the excess, if any,
of the Merger Consideration over the applicable exercise price per share of the
Canceled Option by (B) the number of shares of Company Common Stock then
subject to such Canceled Option (the "Option Consideration"), and each such
Company 2000 Option or Company 2001 Option shall thereafter be canceled.
Section 1.7. Surrender of Shares of Company Common Stock; Stock
Transfer Books.
(a) Prior to the Effective Time, Parent shall designate a bank or
trust company reasonably acceptable to the Company to act as agent (the "Paying
Agent") for the Company Stockholders to receive the funds necessary to make the
payments to such holders pursuant to Section 1.4 upon surrender of their
Certificates. Parent will, on or prior to the Effective Time, deposit with the
Paying Agent the aggregate Merger Consideration to be paid in respect of the
shares of Company Common Stock (the "Fund"). To the extent necessary, Parent
shall provide to the Company at Closing all funds necessary to pay the Option
Consideration. The Fund shall be invested by the Paying Agent as directed by
Parent. Any net profit resulting from, or interest or income produced by, such
investments, shall be payable to the Surviving Corporation. Parent shall
replace any monies lost through any investment made pursuant to this Section
1.7(a). The Paying Agent shall make the payments provided for in Section 1.4.
(b) Promptly after the Effective Time but in no event more than five
business days thereafter, the Surviving Corporation shall cause to be mailed to
each person who was, at the Effective Time, a Company Stockholder entitled to
receive the Merger Consideration pursuant to Section 1.4 a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for use in effecting the
surrender of the Certificates pursuant to such letter of transmittal. Upon
surrender to the Paying Agent of a Certificate, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each share of Company Common
Stock formerly evidenced by such Certificate, and such Certificate shall then
be canceled. Until so surrendered, each such Certificate shall, at and after
the Effective Time, represent for all purposes, only the right to receive such
Merger Consideration. No interest shall accrue or be paid to any beneficial
owner of shares of Company Common Stock or any holder of any Certificate with
respect to the Merger Consideration payable upon the surrender of any
Certificate. If payment of the Merger Consideration is to be made to a person
other than the person in whose name the surrendered Certificate is registered
on the stock transfer books of the Company, it shall be a condition of payment
that the Certificate so surrendered shall be properly endorsed or otherwise be
in proper form for transfer and that the person requesting such payment shall
have paid all transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such taxes either have been paid or are not
applicable. If any Certificate shall have been lost, stolen or destroyed, upon
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Surviving Corporation or
Parent, the posting by such person of a bond, in such reasonable amount as the
Surviving Corporation or Parent may direct, as indemnity against any claim that
may be made against it with respect to such Certificate, the Paying Agent will
issue in exchange for such lost, stolen or destroyed Certificate the applicable
Merger Consideration such holder is entitled to receive pursuant to Section
1.4. Delivery of such affidavit and the posting of such bond shall be deemed
delivery of a Certificate with respect to the relevant shares of Company Common
Stock for purposes of this Article I.
(c) At any time following the date that is nine months after the
Effective Time, the Surviving Corporation shall be entitled to require the
Paying Agent to deliver to it any portion of the Fund which had been made
available to the Paying Agent and not disbursed to Company Stockholders
(including all interest and other income received by the Paying Agent in
respect of all amounts held in the Fund, and thereafter each such holder shall
be entitled to look only to the Surviving Corporation (subject to abandoned
property, escheat and other similar Laws (as hereinafter defined)), and only as
general creditors thereof, with respect to any Merger Consideration that may be
payable upon due surrender of the Certificates held by such holder. If any
Certificates representing shares of Company Common Stock shall not have been
surrendered immediately prior to such date on which the Merger Consideration in
respect of such Certificate would otherwise escheat to or become the property
of any Governmental Entity (as hereinafter defined), any such cash, shares,
dividends or distributions payable in respect of such Certificate shall, to the
extent permitted by applicable Law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto. Notwithstanding the foregoing, none of the Surviving
Corporation, Parent, Sub or the Paying Agent shall be liable to any Company
Stockholder for any Merger Consideration delivered in respect of such share of
Company Common Stock to a public official pursuant to any abandoned property,
escheat or other similar Law.
(d) At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, the Company Stockholders immediately prior to the
Effective Time shall cease to have any rights with respect to such shares of
Company Common Stock except as otherwise provided herein or by applicable Law,
and all cash paid pursuant to this Article I hereof upon the surrender or
exchange of Certificates shall be deemed to have been paid in full satisfaction
of all rights pertaining to the shares of Company Common Stock theretofore
represented by such Certificate.
(e) Parent, the Surviving Corporation and the Paying Agent, as the
case may be, shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock and Company Options such amounts that Parent,
the Surviving Corporation or the Paying Agent is required to deduct and
withhold with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code"), the rules and regulations promulgated
thereunder or any provision of state, local or foreign tax Law. To the extent
that amounts are so withheld by Parent, the Surviving Corporation or the Paying
Agent, such amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common Stock and
Company Options in respect of which such deduction and withholding was made by
Parent, the Surviving Corporation or the Paying Agent.
(f) The Company shall take such steps as may be required to cause, to
the extent possible, the disposition of Company equity securities (including
derivative securities) held by Company directors or officers to be exempt
under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), in accordance with the interpretative letter,
dated January 12, 1999, issued by the Securities and Exchange Commission (the
"SEC") to Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1. Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of the Company shall be amended and restated in
its entirety to be identical to the certificate of incorporation of Sub, which
certificate of incorporation shall include the provisions required by Section
5.7(a) hereof, as in effect immediately prior to the Effective Time, except
that the name of Company, as the Surviving Corporation, shall continue to be
"Xxxxxxxx'x Holdings Inc.", and Section 1 of the certificate of incorporation
shall read in its entirety as follows: "The name of the corporation is
Xxxxxxxx'x Holdings Inc."
Section 2.2. Bylaws. At the Effective Time, the Bylaws of the Company
shall be amended and restated in their entirety to be identical to the bylaws
of Sub, which bylaws shall include the provisions required by Section 5.7(a)
hereof, as in effect immediately prior to the Effective Time, until the same
shall, subject to Section 5.7(a) hereof, thereafter be altered, amended or
repealed in accordance with applicable Law, the certificate of incorporation of
the Surviving Corporation or such bylaws.
Section 2.3. Directors and Officers. From and after the Effective
Time, until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed and qualified in accordance
with applicable Law, (i) the directors of Sub at the Effective Time shall be
the directors of the Surviving Corporation, and (ii) the officers of Sub at the
Effective Time shall be the officers of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth under the section heading referring to a specific
section of this Agreement in the disclosure letter delivered to Parent by the
Company simultaneously with the execution of this Agreement (the "Company
Disclosure Letter"), the Company represents and warrants to each of the other
parties hereto as follows:
Section 3.1. Organization and Standing. Each of the Company and each
Subsidiary (as hereinafter defined) (i) is a corporation duly organized,
validly existing and in good standing under the Laws of its jurisdiction of
incorporation, (ii) has all requisite corporate power and authority to own,
lease and operate its properties and assets and to conduct its business as
presently conducted, and (iii) is duly qualified or licensed to do business as
a foreign corporation and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed could not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect (as
hereinafter defined). The Company has furnished or made available to Parent
true and complete copies of its certificate of incorporation (the "Company
Certificate of Incorporation") and its Bylaws (the "Company Bylaws") and the
certificate of incorporation and bylaws (or equivalent organizational
documents) of each Subsidiary, each as amended to date. Such certificates of
incorporation, bylaws or equivalent organizational documents are in full force
and effect, and neither the Company nor any Subsidiary is in violation of any
provision of its certificate of incorporation, bylaws or equivalent
organizational documents.
Section 3.2. Capitalization. The authorized capital stock of the
Company consists of 20,000,000 shares of Company Common Stock. As of the date
hereof, (i) 6,729,236 shares of Company Common Stock are issued and
outstanding, all of which are validly issued, fully paid and nonassessable and
free of preemptive rights and have been issued in compliance with all
applicable Laws in all material respects; (ii) 1,400,200 Company Options are
outstanding, each such option entitling the holder thereof to purchase one
share of Company Common Stock. The Company Disclosure Letter lists the
outstanding Company Options with the exercise price of such Company Options.
There are no other shares of capital stock of the Company authorized, issued or
outstanding or any options, warrants, convertible securities, subscriptions,
stock appreciation rights, phantom stock plans or stock equivalents or other
rights, agreements, arrangements or commitments (contingent or otherwise) of
any character issued or authorized by the Company relating to the issued or
unissued capital stock of the Company or any Subsidiary or obligating the
Company or any Subsidiary to issue or sell any shares of capital stock of, or
options, warrants, convertible securities, subscriptions or other equity
interests in, the Company or any Subsidiary. All shares of Company Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid, nonassessable and are not subject to
any preemptive rights. There are no outstanding contractual obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any shares
of Company Common Stock or any capital stock of any Subsidiary or to pay any
dividend or make any other distribution in respect thereof or to provide funds
to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any person. Neither the Company nor any Subsidiary is under any
obligation, contingent or otherwise, by reason of any agreement to register the
offer and sale or resale of any of their securities under the Securities Act of
1933, as amended (the "Securities Act"). The Company Disclosure Letter sets
forth a correct and complete list of each Subsidiary of the Company. The
Company owns, directly or indirectly, beneficially and of record all of the
issued and outstanding capital stock of each Subsidiary and does not own an
equity interest in any other corporation, association, partnership, limited
liability company or other entity, other than in the Subsidiaries. Each
outstanding share of capital stock of each Subsidiary is duly authorized,
validly issued, fully paid and nonassessable and each such share owned by the
Company or another Subsidiary is free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Company's or such other Subsidiary's voting rights, charges
and other encumbrances of any nature whatsoever. There are no voting trusts or
other agreements or understandings to which the Company or any of its
Subsidiaries is a party with respect to the voting of the capital stock of the
Company or any of its Subsidiaries.
Section 3.3. Authority for Agreement.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and,
subject to obtaining necessary stockholder approval, to consummate the Merger
and the other transactions contemplated by this Agreement. 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 by this
Agreement, have been duly authorized by all necessary corporate action
including, without limitation, the unanimous approval of the Board of Directors
of the Company and, except for obtaining the affirmative vote of the holders of
a majority of the outstanding shares of Company Common Stock entitled to vote
thereon, no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement. This Agreement has been duly
executed and delivered by the Company and, assuming due authorization,
execution and delivery by Parent and Sub, constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms. The affirmative vote of holders of a majority of the
outstanding shares of Company Common Stock entitled to vote at a duly called
and held meeting of stockholders is the only vote of the Company's Stockholders
necessary to approve this Agreement and the Merger.
(b) At a meeting duly called and held on April 22, 2004, the Board of
Directors of the Company, based in part on the recommendation of the Special
Committee, unanimously (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, are in the best interests of the
Company and the Company Stockholders and declared the advisability of the
Merger, (ii) approved and authorized this Agreement, the Merger and the other
transactions contemplated hereby, and (iii) resolved to recommend approval and
adoption of this Agreement and the Merger by the Company Stockholders. The
actions taken by the Board of Directors of the Company and the Special
Committee constitute approval of the Merger, this Agreement and the Voting
Agreement and the other transactions contemplated hereby and thereby by the
Board of Directors of the Company under the provisions of Section 203 of the
DGCL and the Company has taken all actions necessary such that Section 203 of
the DGCL does not apply to this Agreement, the Voting Agreement or the
transactions contemplated hereby or thereby. Other than Section 203 of the
DGCL, the Company has no knowledge of any state anti-takeover or similar
statute that is applicable to Parent or Sub in connection with the Merger, this
Agreement, or the Voting Agreement or any of the transactions contemplated
hereby or thereby.
(c) The Independent Financial Advisor has delivered to the Board of
Directors of the Company its written opinion, dated as of the date of this
Agreement, that, as of such date and based on the assumptions, qualifications
and limitations contained therein, the consideration to be received by the
Company Stockholders in the Merger is fair to such holders from a financial
point of view. The Company has previously furnished to Parent such opinion.
Section 3.4. No Conflict. The execution and delivery of this Agreement
by the Company does not, and the performance of this Agreement by the Company
and the consummation of the Merger and the other transactions contemplated by
this Agreement will not, (i) conflict with or violate the Company Certificate
of Incorporation or the Company Bylaws or equivalent organizational documents
of any of its Subsidiaries, (ii) subject to Section 3.5, conflict with or
violate any United States federal, state or local or any foreign statute, law,
rule, regulation, ordinance, code, order, judgment, decree or any other
requirement or rule of law (a "Law") applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound, or (iii) result in a breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, give to others any right of termination, amendment, acceleration or
cancellation of, result in triggering any payment or other obligations, or
result in the creation of a lien or other encumbrance on any property or asset
of the Company or any of its Subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, lease, license, permit, franchise, instrument or
other agreement or obligation to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries or any property
or asset of any of them is bound except, in the case of clauses (ii) and (iii),
as could not, individually or in the aggregate, reasonably be expected to
materially impair the business of the Company or prevent or impair in any
material respect the ability of the Company to consummate the Merger.
Section 3.5. Required Filings and Consents. The execution and delivery
of this Agreement by the Company does not, and the performance of this
Agreement by the Company will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any United States federal,
state or local or any foreign government or any court, administrative or
regulatory agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), except (i) for applicable
requirements, if any, of the Exchange Act and the rules and regulations
promulgated thereunder, state securities or "blue sky" laws ("Blue Sky Laws")
and filing and recordation of appropriate merger documents as required by the
DGCL, and (ii) for filings contemplated by Sections 1.1, 1.2 and 5.11 hereof.
Section 3.6. Compliance. Each of the Company and its Subsidiaries (i)
is and has been operated at all times since October 10, 2000 in compliance in
all material respects with all Laws applicable to the Company or any of its
Subsidiaries or by which any property, business or asset of the Company or any
of its Subsidiaries is bound, and (ii) is not in default or violation in any
material respect of any licenses or permits to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any property or asset of the Company or any of its Subsidiaries is bound.
Section 3.7. SEC Filings, Financial Statements.
(a) The Company has on a timely basis filed all forms, reports,
schedules, statements and documents required to be filed with the SEC since
October 10, 2000 (collectively, as supplemented and amended, the "SEC
Reports"), each of which has complied in all material respects with the
applicable requirements of the Securities Act, and the rules and regulations
promulgated thereunder, and the Exchange Act, and the rules and regulations
promulgated thereunder. Neither the Company nor any of its Subsidiaries has
made, or is required to make, any filings with any regulatory authority
established by Law in a foreign jurisdiction. Except to the extent available in
full without redaction on the SEC's website through the Electronic Data
Gathering, Analysis and Retrieval System ("XXXXX") five days prior to the date
of this Agreement, the Company has delivered to Parent copies in the form filed
with the SEC, of (i) the Company's Annual Reports on Form 10-K filed since
October 10, 2000, (ii) the Company's Quarterly Reports on Form 10-Q filed since
October 10, 2000, (iii) all proxy statements relating to the Company's meetings
of stockholders (whether annual or special) held since October 10, 2000, and
all information relating to stockholder consents since October 10, 2000, (iv)
all certifications and statements required by Sections 302 and 906 of the
Xxxxxxxx-Xxxxx Act of 2002, and the rules and regulations of the SEC
promulgated thereunder with respect to the Company's filings pursuant to the
Exchange Act, or by the SEC's Order dated June 27, 2002 pursuant to Section
21(a)(1) of the Exchange Act (File No. 4-460), (v) all other SEC Reports, and
(vi) all comment letters received by the Company from the Staff of the SEC
since October 10, 2000 and all responses to such comment letters by or on
behalf of the Company. Except to the extent that information contained in any
SEC Report has been revised or superseded by a later filed SEC Report, none of
the SEC Reports contained when filed any untrue statement of a material fact or
omitted or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. No Subsidiary of the
Company is or has been required to file any form, report, registration
statement or other document with the SEC. The Company maintains disclosure
controls and procedures required under the Exchange Act and the rules and
regulations promulgated thereunder. To the knowledge of the Company, each
director and executive officer of the Company has filed with the SEC on a
timely basis all statements required by Section 16(a) of the Exchange Act and
the rules and regulations promulgated thereunder since October 10, 2000. As
used in this Section 3.7, the term "file" shall be broadly construed to include
any manner in which a document or information is furnished, supplied or
otherwise made available to the SEC.
(b) All of the financial statements included in the SEC Reports, in
each case, including any related notes thereto (the "Company Financial
Statements") have been prepared from, and are in accordance with, the books and
records of the Company, and have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as may be permitted by
Form 10-Q by the SEC and subject, in the case of the unaudited statements, to
normal, recurring audit adjustments). Each balance sheet included in the
Company Financial Statements (including the related notes and schedules) fairly
presents the combined consolidated financial position of the Company and its
Subsidiaries as of the date of such balance sheet, and each statement of income
and cash flows included in the Company Financial Statements (including the
related notes and schedules) fairly presents the combined consolidated results
of operations and changes in cash flows, as the case may be, of the Company and
its Subsidiaries for the periods set forth therein, in each case in accordance
with GAAP (except as expressly noted therein) consistently applied during the
periods involved. Neither the Company nor any of its Subsidiaries are parties
to any securitization transaction or "off-balance sheet arrangement" (as
defined in Item 303 of Regulation S-K promulgated by the SEC). Each of the
Company and its Subsidiaries is in material compliance with the Xxxxxxxx-Xxxxx
Act of 2002.
(c) There are no material liabilities of the Company and its
Subsidiaries, taken as a whole, of any kind whatsoever, whether or not accrued
and whether or not contingent or absolute, other than (i) liabilities disclosed
or provided for in the consolidated balance sheet of the Company and its
Subsidiaries at February 1, 2004, including the notes thereto, (ii) liabilities
disclosed in the SEC Reports, (iii) liabilities incurred on behalf of the
Company in connection with this Agreement and the contemplated Merger, and (iv)
liabilities incurred in the ordinary course of business consistent with past
practices since February 1, 2004.
(d) The Company has heretofore furnished or made available to Parent
a complete and correct copy of any amendments or modifications which have not
yet been filed with the SEC to agreements, documents or other instruments
which previously had been filed by the Company with the SEC as exhibits to the
SEC Reports pursuant to the Securities Act and the rules and regulations
promulgated thereunder or the Exchange Act and the rules and regulations
promulgated thereunder.
(e) Neither the Company nor any of its Subsidiaries nor any officers
thereof has received notice from any Governmental Entity questioning or
challenging the accuracy, completeness, form or manner of filing or submission
of the certifications required by Sections 302 and 906 of the Xxxxxxxx-Xxxxx
Act of 2002 with respect to the Company's filings, and the rules and
regulations of the SEC promulgated thereunder with respect to the Company's
filings pursuant to the Exchange Act, and none of such certifications have
been modified or withdrawn.
Section 3.8. Absence of Certain Changes or Events. Except as
contemplated by this Agreement or as disclosed in the SEC Reports filed prior
to the date hereof, since February 1, 2004, the Company and its Subsidiaries
have conducted their respective businesses only in the ordinary course and
consistent with prior practices and there has not been (i) any event or
occurrence of any condition that has had or could reasonably be expected to
have, a Company Material Adverse Effect, (ii) any declaration, setting aside or
payment of any dividend or any other distribution with respect to any of the
capital stock of the Company or any Subsidiary, (iii) any material change in
accounting methods, principles or practices employed by the Company, or (iv)
any action of the type described in Sections 5.1(b) or 5.1(c) which had such
action been taken after the date of this Agreement would be in violation of any
such Section.
Section 3.9. Taxes.
(a) The Company and each of its Subsidiaries have timely filed all Tax
Returns (as hereinafter defined) required to be filed by any of them. All such
Tax Returns are true, correct and complete in all material respects. Neither
the Company nor any Subsidiary of the Company is currently the beneficiary of
any extension of time within which to file any material Tax Return. All Taxes
(as hereinafter defined) of the Company and its Subsidiaries which are (i)
shown as due on such Tax Returns, (ii) otherwise due and payable or (iii)
claimed or asserted by any taxing authority to be due, have been paid, except
for those Taxes being contested in good faith and for which adequate reserves
have been established in the Company Financial Statements in accordance with
GAAP. There are no liens for any Taxes upon the assets of the Company or any of
its Subsidiaries, other than statutory liens for Taxes not yet due and payable
and liens for Taxes being contested in good faith. The Company has not received
written notice of any proposed material Tax claims or assessments. No federal,
state or local Tax audits or administrative or judicial Tax proceedings are
pending or being conducted with respect to the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries has waived any
statute of limitations in respect of Taxes, which waiver remains in force, or
agreed to any extension of time with respect to a Tax assessment or deficiency
that remains unpaid. The Company and each Subsidiary have withheld and paid
over to the relevant taxing authority all Taxes required to have been withheld
and paid over in connection with payments to employees, independent
contractors, creditors, Stockholders or other third parties. The reserve for
current Taxes on the balance sheet in the most recent Company Financial
Statements is adequate for the payment of all unpaid current Taxes through the
date of such Company Financial Statements.
(b) For purposes of this Agreement, (a) "Tax" (and, with correlative
meaning, "Taxes") means any federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise, employment,
payroll, premium, withholding, alternative or added minimum, ad valorem,
transfer or excise tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty or addition thereto, whether disputed or not, imposed by
any Governmental Entity, and (b) "Tax Return" means any return, report or
similar statement required to be filed with respect to any Tax (including any
attached schedules), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax.
(c) The Company has made available to Parent correct and complete
copies of (i) all federal and other material Tax Returns of the Company and its
Subsidiaries relating to the taxable periods ending since December 31, 2000,
which have been filed and (ii) any audit report within the last five years
relating to any material Taxes due from or with respect to the Company or any
of its Subsidiaries.
Section 3.10. Change of Control Agreements. Except as set forth in
Section 1.6 herein, neither the execution and delivery of this Agreement nor
the consummation of the Merger or the other transactions contemplated by this
Agreement, will (either alone or in conjunction with any other event) result
in, cause the accelerated vesting or delivery of, or increase the amount or
value of, any payment or benefit to any director, officer or employee of the
Company. Without limiting the generality of the foregoing, no amount paid or
payable by the Company in connection with the Merger or the other transactions
contemplated by this Agreement, including accelerated vesting of Company
Options, (either solely as a result thereof or as a result of such transactions
in conjunction with any other event) will be an "excess parachute payment"
within the meaning of Section 280G of the Code.
Section 3.11. Litigation. There are no claims, suits, actions,
investigations, indictments, audits or information, or administrative,
arbitration or other proceedings (whether absolute, accrued, asserted or
unasserted, contingent or otherwise) ("Litigation") pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries which, if adversely determined, could be reasonably likely to
result in payments, penalties or fines payable by the Company individually or
in the aggregate with respect to Litigation arising out of the same or similar
facts or circumstances, in excess of $500,000, or in excess of $1,000,000 in
the aggregate. As of the date hereof, there is no Litigation pending, or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries which could reasonably be expected to materially impair the
business of the Company or prevent or impair in any material respect the
ability of the Company to consummate the Merger. There are no judgments,
orders, injunctions, decrees, stipulations, settlement agreements or awards
(whether rendered by a court, administrative agency, or by arbitration,
pursuant to a grievance or other procedure) ("Orders or Awards") against or
relating to the Company or any of its Subsidiaries, (i) which could reasonably
be expected to materially impair the business of the Company or prevent or
impair in any material respect the ability of the Company to consummate the
Merger; or (ii) which have required since October 10, 2000, payments, penalties
or fines payable by the Company individually or in the aggregate with respect
to Orders or Awards arising out of the same or similar facts or circumstances
in excess of $500,000 or in excess of $1,000,000 in the aggregate.
Section 3.12. Contracts and Commitments. The Company Disclosure Letter
sets forth a true, correct and complete list of the following contracts,
instruments, commitments or other similar agreements, including oral contracts
and agreements, to which the Company or a Subsidiary is a party as of the date
hereof (including every amendment, modification or supplement to the
foregoing): (i) any contracts of employment and contracts or agreements which
limit or restrict the Company, any Subsidiary or any employee from engaging in
any business in any jurisdiction; (ii) agreements or arrangements for the
purchase or sale of any assets in excess of $250,000, individually or in the
aggregate, other than purchase orders for the purchase of inventory "on the
spot" in the ordinary course of business; (iii) all bonds, debentures, notes,
loans, credit or loan agreements or commitments, mortgages, indentures or
guarantees or other agreements or contracts relating to the borrowing of money;
(iv) agreements with unions, material independent contractor agreements and
material leased or temporary employee agreements; and (v) all other contracts,
agreements, instruments or commitments involving payments made by or to the
Company or a Subsidiary in excess of $250,000, individually or in the
aggregate, other than purchase orders for the purchase of inventory "on the
spot" in the ordinary course of business (individually, a "Material Contract"
and collectively, "Material Contracts"). Except for the Material Contracts and
the agreements, arrangements or commitments listed in Sections 3.14, 3.17 and
3.25 of the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries is a party to any other agreement, arrangement or commitment as of
the date hereof which is material to the business of the Company or any of its
Subsidiaries. The Company has delivered or made available true, correct and
complete copies of all Material Contracts to Parent. Neither the Company nor
any of its Subsidiaries is in material default under any Material Contract.
Section 3.13. Information Supplied. Neither the proxy statement to be
mailed to the Company Stockholders in connection with the meeting (the
"Stockholder's Meeting") to be called to consider the Merger (the "Proxy
Statement") at the date such document is first published, sent or delivered to
Company Stockholders or, unless promptly corrected, at any time during the
pendency of the Stockholder's Meeting, nor any other documents to be filed by
the Company with the SEC in connection with the Merger or the transactions
contemplated hereby will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The Proxy Statement will comply as to
form and substance in all material respects with the requirements of the
Exchange Act and the applicable rules and regulations of the SEC thereunder.
None of the information supplied or to be supplied by the Company or any of its
Subsidiaries for inclusion or incorporation by reference in the Schedule 13E-3
to be filed with the SEC will, at the time of its filing with the SEC, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, no representation or warranty is
made by the Company with respect to statements made or incorporated by
reference therein based on information supplied by Parent or Sub for inclusion
or incorporation by reference in the foregoing documents.
Section 3.14. Employee Benefit Plans.
(a) All employee benefit plans, programs, schemes, funds, compensation
arrangements and other benefit arrangements covering employees of the Company
or any of its Subsidiaries (the "Company Benefit Plans") and all employee
agreements providing for compensation, severance or other benefits to any
employee or former employee of the Company or any of its Subsidiaries are
listed in the Company Disclosure Letter. True, correct and complete copies of
the following documents with respect to each of the Company Benefit Plans have
been provided by the Company to Parent: (i) any plans and related trust
documents and amendments thereto, (ii) summary plan descriptions and material
modifications thereto, (iii) material written communications made since
February 1, 2004 to employee(s) relating to the Company Benefit Plans, and (iv)
written descriptions of all non-written agreements relating to the Company
Benefit Plans. To the extent applicable, each Company Benefit Plan complies, in
all material respects, with the requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Code, and has been operated
in accordance with its terms. Any Company Benefit Plan intended to be qualified
under Section 401(a) of the Code has received a determination letter or is a
model prototype plan and continues to satisfy the requirements for such
qualification. Neither the Company nor any of its Subsidiaries nor any ERISA
Affiliate of the Company maintains, contributes to or has maintained or
contributed in the past six years to any benefit plan which is covered by Title
IV of ERISA or Section 412 of the Code. No Company Benefit Plan or a benefit
plan of an ERISA Affiliate is a "multi employer pension plan" as defined in
Section 4001(a)(3) of ERISA, or subject to Section 302 of ERISA. Neither any
Company Benefit Plan, nor the Company nor any Subsidiary has incurred any
material liability or penalty under Section 4975 of the Code or Section 502(i)
of ERISA or engaged in any transaction that is reasonably likely to result in
any such material liability or penalty. Each of the Company and its
Subsidiaries and any ERISA Affiliate which maintains a "group health plan"
within the meaning of Section 5000(b)(1) of the Code has complied in all
material respects with the notice and continuation requirements of Section
4980B of the Code, Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder (COBRA), and the creditable coverage certification requirements and
limitations on pre-existing condition exclusion requirements of Section 9801 of
the Code, Part 7 of Subtitle B of Title I of ERISA and the regulations
thereunder (HIPAA). There is no pending or, to the knowledge of the Company,
threatened or anticipated Litigation against or otherwise involving any of the
Company Benefit Plans, and no Litigation (excluding claims for benefits
incurred in the ordinary course of Company Benefit Plan activities) has been
brought against or with respect to any such Company Benefit Plan that would
result in a material liability to, or a material penalty against, the Company,
any of its Subsidiaries or a Company Benefit Plan. All contributions required
to be made as of the date hereof to the Company Benefit Plans have been made or
provided for, and all premiums for each insurance policy issued to insure
benefits provided by a Company Benefit Plan have been timely paid in full.
Except as described in the SEC Reports, including exhibits thereto, or as
required by Law, neither the Company nor any of its Subsidiaries maintains or
contributes to any plan or arrangement which provides or has any liability to
provide life insurance or medical or other employee welfare benefits to any
employee or former employee upon his retirement or termination of employment,
and neither the Company nor any of its Subsidiaries has ever represented,
promised or contracted (whether in oral or written form) to any employee or
former employee that such benefits would be provided.
(b) Any individual who performs services for the Company or any of its
Subsidiaries (other than through a contract with an organization other than
such individual) and who is not treated as an employee for federal income tax
purposes by the Company or its Subsidiaries is not an employee for such
purposes. There are no agreements (whether written or oral) in effect between
the Company or any Subsidiary and any individual retained by the Company or any
Subsidiary to provide services as a consultant or other type of independent
contractor (other than through a contract with an organization other than such
individual).
(c) For purposes of this Agreement "ERISA Affiliate" means any
business or entity which is a member of the same "controlled group of
corporations," an "affiliated service group" or is under "common control" with
an entity within the meanings of Sections 414(b), (c) or (m) of the Code, is
required to be aggregated with the entity under Section 414(o) of the Code, or
is under "common control" with the entity, within the meaning of Section
4001(a)(14) of ERISA, or any regulations promulgated or proposed under any of
the foregoing Sections.
Section 3.15. Labor and Employment Matters.
(a) Neither the Company nor any of its Subsidiaries is a party to, or
bound by, any collective bargaining agreement or other contracts, arrangements,
agreements or understandings (collectively, "CBAs") with a labor union or labor
organization that was certified by the National Labor Relations Board ("NLRB"),
and neither the Company nor any of its Subsidiaries has received written notice
that any representation petition respecting the employees of the Company or any
of its Subsidiaries has been filed with the NLRB. There is no existing, pending
or, to the knowledge of the Company, threatened (i) unfair labor practice
charge or complaint, labor arbitration proceeding or any other matter before
the NLRB involving the Company or any of its Subsidiaries or (ii) lockout,
strike, organized slowdown, work stoppage or work interruption with respect to
such employees. There are no CBAs which in any way limit or restrict the
Company or any of its Subsidiaries from relocating or closing any of the
operations of the Company or any of its Subsidiaries.
(b) The Company and its Subsidiaries are in compliance in all material
respects with the Worker Adjustment and Retraining Notification ("WARN") Act or
similar applicable Laws.
(c) Neither the Company nor any of its Subsidiaries has failed to pay
when due any material amount of wages owed for services performed by any
employee, officer, director, sales representative, contractor, consultant or
other agent.
(d) The Company and its Subsidiaries are in compliance in all material
respects with all applicable Laws relating to employment and employment
practices, terms and conditions of employment and wages and hours including,
without limitation, the Fair Labor Standards Act, the Immigration Control and
Reform Act, 42 U.S.C. Sec. 1981, 42 U.S.C. Sec. 1985 and Title VII of the Civil
Rights Act of 1964, as amended, the Equal Pay Act, the Age Discrimination in
Employment Act, as amended, the Americans with Disabilities Act, the Family and
Medical Leave Act, the whistleblower provisions of the Xxxxxxxx-Xxxxx Act of
2002, the Occupational Safety and Health Act, the Fair Credit Reporting Act, or
any other similar Laws regulating employment practices.
(e) There is no Litigation pending against the Company or any of its
Subsidiaries before the Equal Employment Opportunity Commission, the Department
of Labor or any other Governmental Entity regarding employment practices
including, without limitation, Litigation under the Fair Labor Standards Act,
the Immigration Control and Reform Act of 1986, 42 U.S.C. Sec. 1981, 42 U.S.C.
Sec. 1985 and Title VII of the Civil Rights Act of 1964, as amended, the Equal
Pay Act, the Age Discrimination in Employment Act, as amended, the Americans
with Disabilities Act, the Family and Medical Leave Act, the whistleblower
provisions of the Xxxxxxxx-Xxxxx Act of 2002, the Occupational Safety and
Health Act, the Fair Credit Reporting Act, or any other similar Laws regulating
employment practices or Litigation involving claims of wrongful discharge,
libel, slander, invasion of privacy, whistleblower violations, retaliation,
discrimination on the basis or marital status, discrimination on the basis of
sexual preference or comparable claims of tortious conduct, nor to the
knowledge of the Company, is any such Litigation threatened, which, if
adversely determined, could be reasonably likely to result in payments,
penalties or fines payable by the Company individually or in the aggregate with
respect to Litigation arising out of the same or similar facts or
circumstances, in excess of $100,000, or in excess of $500,000 in the
aggregate.
(f) Neither the Company nor any of its Subsidiaries is a Federal or
State contractor as defined by the Office of Federal Contract Compliance
Programs or any comparable Governmental Entity.
Section 3.16. Environmental Compliance and Disclosure.
(a) Each of the Company and its Subsidiaries possesses, and is in
compliance in all material respects with, all permits, licenses and
governmental authorizations and has filed all notices that are required under,
all Environmental Laws (as hereinafter defined) applicable to the Company or
any Subsidiary, as applicable, and the Company and each of its Subsidiaries is
in compliance in all material respects with all applicable limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in those Laws or contained in any Law,
regulation, code, plan, order, decree, judgment, notice, permit or demand
letter issued, entered, promulgated or approved thereunder, including, but not
limited to, with respect to the use, storage, treatment, manufacture,
generation, disposal and handling of Hazardous Materials (as hereinafter
defined).
(b) Neither the Company nor any Subsidiary has received written notice
of actual or threatened liability under the Federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or any similar state or
local statute or ordinance from any governmental agency or any third party and,
to the knowledge of the Company, there are no facts or circumstances which
could reasonably be expected to form the basis for the assertion of any
material claim against the Company or any Subsidiary under any Environmental
Laws including, without limitation, CERCLA or any similar local, state or
foreign Law with respect to any on-site or off-site location.
(c) None of the assets owned by the Company or any Subsidiary or any
real property leased by the Company or any Subsidiary contain any friable
asbestos, regulated PCBs or underground storage tanks. No amount of Hazardous
Materials has ever been, is being, or is threatened to be Released under, in or
upon any plant, facility, site, area or property currently, or, to the
knowledge of the Company, previously, owned or leased by the Company or any
Subsidiary or on which the Company or any Subsidiary is conducting or, to the
knowledge of the Company has conducted its business or operations, in each case
which could reasonably be expected to result in any material liability of the
Company.
(d) Neither the Company nor any Subsidiary has entered into or agreed
to, nor is it currently discussing with any Governmental Entity entering into,
any consent decree or order, and neither the Company nor any Subsidiary is
subject to any judgment, decree or judicial or administrative order relating to
compliance with, or the cleanup of Hazardous Materials under, any applicable
Environmental Laws.
(e) Neither the Company nor any Subsidiary has been subject to any
administrative or judicial proceeding under any applicable Environmental Laws
or regulations either now or any time during the past five years.
(f) Neither the Company nor any Subsidiary has received notice that it
is subject to any claim, obligation, liability, loss, damage or expense of
whatever kind or nature, contingent or otherwise, incurred or imposed or based
upon any provision of any Environmental Law and arising out of any act or
omission of the Company or any Subsidiary, its employees, agents or
representatives or, to the knowledge of the Company, arising out of the
ownership, use, control or operation by the Company or any Subsidiary of any
plant, facility, site, area or property (including, without limitation, any
plant, facility, site, area or property currently or previously owned or leased
by the Company or any Subsidiary) or any other area on which the Company or any
Subsidiary is conducting or has conducted its business or operations from which
any Hazardous Materials were Released and, to the knowledge of the Company, no
such notices are threatened in writing.
(g) The Company has heretofore provided Parent with true, correct and
complete copies of all files of the Company and each Subsidiary relating to
environmental matters (or an opportunity to review such files). Neither the
Company nor any Subsidiary has paid any fines, penalties or assessments within
the last five years with respect to environmental matters.
(h) As used in this Section 3.16, the term "Release" means any
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, disposing, placing or otherwise causing
to become located in any plant, facility, site, area or other property or the
Environment, and the term "Environment" means any surface or ground water,
drinking water supply, soil, surface or subsurface strata or medium, or the
ambient air). As used in this Section 3.16, the term "Environmental Laws" means
any and all past and present Laws (including without limitation statutes and
regulations) of the United States, including, without limitation, federal and
state Laws and the Laws or any political subdivision thereof, and for the
protection of the environment or human health and safety, including without
limitation, judgments, awards, decrees, regulations, rules, standards,
requirements, orders and permits issued by any court, administrative agency or
commission or other Governmental Entity under such Laws, and shall include
without limitation the Comprehensive Environmental Response Compensation and
Liability Act (42 U.S.C. 9601 et seq.), the Clean Air Act (42 U.S.C. xx.xx.
7401 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. xx.xx.
6901 et seq.), the Clean Water Act (33 U.S.C. xx.xx. 1251 et seq.), the
Occupational Safety and Health Act (29 U.S.C. xx.xx. 651 et seq.), the Toxic
Substance Control Act (15 U.S.C. xx.xx. 2601 et seq.), and the Safe Drinking
Water Act (42 U.S.C. xx.xx. 300f et seq.), as well as any and all Laws that
relate to pollution, contamination of the environment, protection of human
health, or safety, and all regulations, rules, standards, requirements, orders
and permits issued thereunder.
(i) As used in this Section 3.16, the term "Hazardous Materials" means
any pollutant, hazardous substance, toxic, radioactive, ignitable, reactive or
corrosive substance, hazardous waste, petroleum or petroleum-derived substance
or waste as defined or regulated under any Environmental Law.
Section 3.17. Intellectual Property.
(a) The Company Disclosure Letter sets forth a true and complete list
of all of the following items which the Company or any of its Subsidiaries owns
in whole or in part or has a valid claim for ownership in whole or in part
(such as a contract right of assignment from an employee or independent
contractor): (i) all United States and foreign patents and applications
therefor, (ii) all United States and foreign trademark, trade name, service
xxxx, collective xxxx, and certification xxxx registrations and applications
therefor at the federal, state or local level, (iii) all United States and
foreign copyright registrations and applications therefor, and (iv) all
material copyrightable computer software programs that have not been the
subject of a copyright registration or application therefor (items (i)-(iv)
together with all other material patentable inventions, trademarks, trade
names, service marks, collective marks and certification marks which the
Company or any of its Subsidiaries owns in whole or in part or have a valid
claim for ownership in whole or in part, the "Intellectual Property Rights").
The Company Disclosure Letter also sets forth a true and complete list of all
material agreements pursuant to which the Company or any of its Subsidiaries
licenses any intellectual property from third parties (the "Licensed Rights").
The Intellectual Property Rights are free and clear of any liens, claims or
encumbrances, are not subject to any license (royalty bearing or royalty free)
and are not subject to any other arrangement requiring any payment to any
person other than as employee, contractor or other third party compensation for
services rendered. The Company owns or has a valid right to use all
Intellectual Property Rights and Licensed Rights material to the business of
the Company and its Subsidiaries as presently conducted. The validity of the
Intellectual Property Rights and title thereto and the Company's use of the
Licensed Rights (i) have not been questioned in any prior Litigation to which
the Company or any Subsidiary was a party or by which the Company or any
Subsidiary is subject or bound, (ii) are not being questioned in any pending
Litigation to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary is subject or bound, and (iii) to the knowledge of
the Company, are not the subject(s) of any threatened or proposed Litigation
involving the Company or any Subsidiary. To the knowledge of the Company, the
business of each of the Company and its Subsidiaries, as presently conducted,
does not conflict with and has not been alleged to conflict with any patents,
trademarks, trade names, service marks, copyrights or other intellectual
property rights of others. The consummation of the transactions contemplated
hereby will not result in the loss or impairment of any of the Intellectual
Property Rights or the Company's or its Subsidiaries' right to use any of the
Licensed Rights. To the knowledge of the Company, there are no third parties
infringing any of the Intellectual Property Rights material to the business of
the Company or its Subsidiaries as presently conducted.
(b) Each of the Company and its Subsidiaries owns, or possesses
sufficient rights to, all computer software programs that are material to the
conduct of the business of the Company and its Subsidiaries. There is no
Litigation pending or, to the knowledge of the Company, threatened against the
Company or any Subsidiary with respect to any software owned or licensed by the
Company or any Subsidiary.
(c) In connection with the use, collection and disclosure of personal
information by the Company and its Subsidiaries, the Company and its
Subsidiaries are, and have at all times been, in compliance with their posted
privacy policies and all Laws and agreements by which the Company or any of its
Subsidiaries is bound.
Section 3.18. Brokers. Except pursuant to the Independent Advisor
Engagement Letter (as hereinafter defined), no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement, the Merger or the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The Company has previously furnished to Parent a complete and
correct copy of the Independent Advisor Engagement Letter.
Section 3.19. Insurance Policies. The material insurance policies
naming a Company Benefit Plan or the Company, any of its Subsidiaries or
employees thereof as an insured or beneficiary or as a loss payable payee or
for which the Company or any Subsidiary has paid or is obligated to pay all or
part of the premiums are in full force and effect and neither the Company nor
any of its Subsidiaries has received written notice with respect to the
cancellation of any such insurance policy.
Section 3.20. Bankruptcy. All of the distributions and payments
required to be made under the Second Amended Plan of Reorganization of
Xxxxxxxx'x, Inc. under Chapter 11 of the Bankruptcy Code, as Modified on July
28, 2000 and September 6, 2000, which was confirmed on or about September 6,
2000 by the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court") in the Chapter 11 bankruptcy case of Xxxxxxxx'x, Inc.
(Chapter 11 case no. 99-1138) (the "Chapter 11 Case"), have been made,
completed and paid in full.
Section 3.21. Transactions with Affiliates. The SEC Reports disclose
the contracts, arrangements, understandings with or similar agreements or other
transactions relating to the business or operations of Company or any
Subsidiary which are required to be disclosed pursuant to Item 404 of
Regulation S-K of the SEC.
Section 3.22. No Existing Discussions. As of the date hereof, the
Company is not engaged, directly or indirectly, in any negotiations or
discussions with any other party with respect to an Acquisition Proposal (as
hereinafter defined).
Section 3.23. Stockholders' Rights Agreement. As of the date hereof,
neither the Company nor any Subsidiary has adopted, or intends to adopt, a
stockholders' rights agreement or any similar plan or agreement which limits or
impairs the ability to purchase, or become the direct or indirect beneficial
owner of, shares of Company Common Stock or any other equity or debt securities
of the Company or any of its Subsidiaries.
Section 3.24. Major Merchandise Vendors and Suppliers. For purposes of
this Section 3.24, a "Major Supplier" shall mean any merchandise vendor or
other supplier of goods or services to the Company or its Subsidiaries to whom
the Company or its Subsidiaries paid in the aggregate more than $2,500,000
during the 12-month period ended January 31, 2004. Neither the Company nor any
Subsidiary is engaged in any material dispute with any Major Supplier. No Major
Supplier has given the Company notice or has taken any action as a result of
which the Company believes that such Major Supplier intends to terminate, limit
or materially reduce its business relations with the Company or any Subsidiary
or adversely change in any material respect the terms on which it supplies
merchandise for the Company.
Section 3.25. Real Estate.
(a) The Company Disclosure Letter sets forth a true, correct and
complete list of the common address of each parcel of real property leased or
subleased by the Company or its applicable Subsidiary (collectively, the
"Company Leased Real Property") pursuant to leases, subleases and other
occupancy agreements, and all subordination, nondisturbance and attornment
agreements, including, without limitation, all amendments, modifications, work
letters, side agreements, consents, subordination agreements, guarantees and
other similar arrangements or agreements with respect to any of the foregoing
(the "Company Leases") under which the Company or any of its Subsidiaries is a
tenant, subtenant or sublandlord and for each Company Lease indicates: (i)
whether or not the consent of the landlord or any lender to the landlord will
be required to be obtained in connection with the transactions contemplated by
this Agreement, (ii) its term and any options to extend the term, (iii) the
current minimum or base rent payable, and (iv) whether or not the Company or a
Subsidiary has the option to purchase a fee interest in the property subject
thereto or to lease additional space in such property. The Company (either
directly or through a Subsidiary) holds a valid and existing leasehold or
subleasehold interest or sublandlord interest, as applicable, in the Company
Leased Real Property under each of the Company Leases. The Company has
delivered or made available to Parent true, correct and complete copies of each
of the Company Leases to which the Company or any of its Subsidiaries is a
party (or that are otherwise in the possession of the Company or any of its
Subsidiaries). With respect to each Company Lease: (i) each such Company Lease
is, and upon the consummation of the Merger will be, (A) in full force and
effect and (B) the legal, valid, and binding obligation of the Company or its
applicable Subsidiary, enforceable against the Company or such Subsidiary in
accordance with its terms (provided, however, that the foregoing representation
as to the validity and enforceability of each Company Lease upon the
consummation of the Merger shall be inapplicable to any Company Lease for which
the landlord's consent to a change in control of the Company is required as set
forth in the Company Disclosure Letter), (ii) neither the Company nor any of
its Subsidiaries is in default in any material respect under such Company Lease
and, to the knowledge of the Company, no other party to a Company Lease is in
default under such Company Lease and, to the knowledge of the Company, no event
has occurred that, with notice or lapse of time, would constitute a breach or
default by the Company (or its applicable Subsidiary) or permit termination,
modification or acceleration under such Company Lease by any party thereto,
(iii) there are no material disputes, oral agreements or arrangements whereby
any landlord under a Company Lease has agreed to forbear enforcement of any
remedies applicable to a default by the Company or its Subsidiaries under a
Company Lease in effect as to such Company Lease, (iv) the terms of such
Company Lease have not been modified in any respect, except to the extent that
such modifications are set forth in the documents previously delivered or made
available to Parent and neither the Company nor any of its Subsidiaries is in
negotiations with any landlord to cancel or terminate any Company Lease prior
to the stated maturity date of such Company Lease, (v) the Company (or its
applicable Subsidiary) has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered its leasehold interest in such Company Lease, and
(vi) each guaranty by the Company (or its applicable Subsidiary), if any, with
respect to a Company Lease is in full force and effect.
(b) The Company and its Subsidiaries have received no notice of, and
have no knowledge of, any condition currently or previously existing on the
Company Leased Real Property or any portion thereof that may give rise to any
material violation by the Company or any of its Subsidiaries of any existing
Law applicable to any store, distribution facility or warehouse facility
operated by the Company or its applicable Subsidiaries pursuant to a Company
Lease (a "Company Facility") if it were disclosed to the authorities having
jurisdiction over such Company Facility, and the use and occupancy of the
Company Facilities by the Company and its Subsidiaries complies in all material
respects with all applicable Laws.
(c) The Company has not received written notice of any Litigation and,
to the knowledge of the Company, there is no Litigation threatened, affecting
the interest of the Company or any of its Subsidiaries in any portion of the
Company Leased Real Property. The Company has not received written notice of
the existence of any outstanding or pending Order or Award and, to the
knowledge of the Company there are no Orders or Awards relating to the lease,
use, occupancy or operation by the Company or any of its Subsidiaries of the
Company Leased Real Property.
(d) To the knowledge of the Company, the current use of the Company
Leased Real Property by the Company and its Subsidiaries does not violate any
instrument of record or agreement affecting such Company Leased Real Property.
Since February 1, 2004, no material damage or destruction has occurred with
respect to any of the Company Leased Real Property which has not been repaired
prior to the date hereof.
(e) All certificates of occupancy, permits, licenses, franchisees,
approvals and authorizations of all Governmental Entities having jurisdiction
over the Company Leased Real Property required to be obtained by the Company or
its applicable Subsidiary (collectively, the "Company Leased Real Property
Permits"), the absence of which would be reasonably likely to cause any Company
Facility to cease its operations, have been issued to the Company or its
applicable Subsidiary and are, as of the date hereof, in full force and effect.
Neither the Company nor any of its Subsidiaries has received, or has been
informed by a third party of the receipt by it of, any notice from a
Governmental Entity having jurisdiction over the Company Leased Real Property
threatening a suspension, revocation, modification or cancellation of any
Company Leased Real Property Permit that would be reasonably likely to cause a
Company Facility to cease its operations, and, to the knowledge of the Company
and its Subsidiaries, there is no basis for the issuance of any such notice or
the taking of any such action.
Section 3.26. Terminated Leases. Neither the Company nor any of its
Subsidiaries have any material liability of any kind related to the closing of
any Company Facility with respect to which the Company or any of its
Subsidiaries terminated its leasehold or subleasehold interest. Neither the
Company nor any of its Subsidiaries has received any notice of any such
material liability (whether actual, pending or threatened).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Each of Parent and Sub represents and warrants to the Company as
follows:
Section 4.1. Organization and Standing. Such person (i) is a
corporation duly organized, validly existing and in good standing under the
Laws of its jurisdiction of incorporation, (ii) has all requisite corporate
power and authority to own, lease and operate its properties and assets and to
conduct its business as presently conducted, and (iii) is duly qualified or
licensed to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed
could not, individually or in the aggregate, reasonably be expected to prevent
or materially delay, or materially impair the ability of Parent or Sub to
consummate, the transactions contemplated by this Agreement.
Section 4.2. Authority for Agreement. Such person has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the Merger and the other
transactions contemplated by this Agreement. The execution, delivery and
performance by such person of this Agreement, and the consummation by each such
person of the Merger and the other transactions contemplated by this Agreement,
have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of such person are necessary to authorize
this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement. This Agreement has been duly executed and
delivered by such person and, assuming due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligation of
each of such person enforceable against such person in accordance with its
terms.
Section 4.3. No Conflict. The execution and delivery of this Agreement
by such person does not, and the performance of this Agreement by such person
and the consummation of the Merger and the other transactions contemplated by
this Agreement will not, (i) conflict with or violate the certificate of
incorporation or bylaws of such person, (ii) subject to Section 4.4, conflict
with or violate any Law applicable to such person or by which any property or
asset of such person is bound, or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, give to others any right of termination, amendment,
acceleration or cancellation of, result in triggering any payment or other
obligations, or result in the creation of a lien or other encumbrance on any
property or asset of such person pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which such person is a party or by which such
person or any property or asset of either of them is bound, except, in the case
of clauses (ii) and (iii), as could not, individually or in the aggregate,
reasonably be expected to prevent or impair, in any material respect, the
ability of Parent or Sub to consummate the Merger.
Section 4.4. Required Filings and Consents. The execution and delivery
of this Agreement by such person does not, and the performance of this
Agreement by such person will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Entity,
except (i) for applicable requirements, if any, of the Exchange Act and the
rules and regulations promulgated thereunder, Blue Sky Laws and filing and
recordation of appropriate merger documents as required by the DGCL and (ii)
for filings contemplated by Sections 1.1, 1.2 and 5.11.
Section 4.5. Information Supplied. None of the information supplied or
to be supplied by such person for inclusion or incorporation by reference in
the Proxy Statement, the Schedule 13E-3 or any other documents to be filed by
the Company with the SEC in connection with the Merger or the transactions
contemplated hereby will, at the date such document is first published, sent or
delivered to Company Stockholders or, unless promptly corrected, at any time
during the pendency of the Stockholders' 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 made therein, in light of
the circumstances under which they were made, not misleading. Notwithstanding
the foregoing, no representation or warranty is made by such person with
respect to statements made or incorporated by reference therein based on
information supplied by the Company for inclusion or incorporation by reference
in the foregoing documents.
Section 4.6. Parent Net Worth. As of the date hereof, Parent has, and
through the later of (i) the Effective Time and (ii) the six month period
following the Termination Date (as hereinafter defined), Parent will have, an
aggregate net worth of at least $7,000,000 in the form of cash or cash
equivalents, which amount the parties hereto agree is, and until FIIB has
provided the equity financing to Parent pursuant to the Equity Commitment
Letter (as hereinafter defined) or if later the Effective Time, shall be, an
adequate capitalization for purposes of this Agreement, including, but not
limited to, Section 8.14 hereof; provided, however, that if during such six
month period Parent shall have been notified by the Company of a dispute
concerning a breach of this Agreement by Parent or Sub and such dispute has not
been finally resolved or disposed of at the end of such six month period, then
such six month period shall be extended until such time as such dispute is
finally resolved or disposed of in accordance with the terms hereof.
Section 4.7. Sufficient Funds. Sub is a newly formed corporation which
has conducted no business other than in connection with the transactions
contemplated by this Agreement. Parent, The CIT Group/Business Credit, Inc.,
The CIT Group/Commercial Services, Inc. and Silver Point Finance, LLC have
entered into a letter agreement, dated April 22, 2004 (the "Debt Commitment
Letter") describing the sources of debt financing (the "Debt Financing") to
consummate the Merger and the transactions contemplated by this Agreement.
Parent and First Islamic Investment Bank ("FIIB") have entered into a letter
agreement, dated April 22, 2004 (the "Equity Commitment Letter" and together
with the Debt Commitment Letter, the "Commitment Letters") describing the
sources of equity financing to consummate the Merger and the transactions
contemplated by this Agreement. Pursuant to the Commitment Letters, Parent is
entitled to obtain, subject to the terms and conditions therein, funds
sufficient to consummate the transactions contemplated by this Agreement and to
pay all related fees and expenses. Neither Parent nor Sub is, as of the date
hereof, aware of any fact, occurrence or condition that makes any of the
assumptions or statements set forth in the Debt Commitment Letter inaccurate in
any material respect or that would cause the commitment provided in the
Commitment Letter to be terminated or ineffective or any of the conditions
contained therein not to be met; provided, however, that neither Parent nor Sub
makes any representation or warranty hereunder with respect to assumptions and
statements contained in the Debt Commitment Letter with respect to information
relating to the Company, its Subsidiaries or their respective businesses. The
Commitment Letters are in full force and effect and have not been amended or
terminated. Parent has delivered true, correct and complete copies of the
Commitment Letters to the Company.
Section 4.8. Brokers. Other than Xxxxx, Xxxxxxxx & White, LLC and Banc
of America Securities, LLC, no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission payable by such person in
connection with this Agreement, the Merger or the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
such person.
Section 4.9. Arrangements with Certain Officers. Parent has delivered
true and complete copies of any agreements with key officers of the Company,
including but not limited to Xxxxxx Xxxxxxxx and Xxxxxx Xxxxx, relating to such
employees' equity investments and employment arrangements entered into in
connection with this Agreement or the transactions contemplated hereby.
ARTICLE V
COVENANTS
Section 5.1. Conduct of the Business Pending the Merger. Except as
contemplated by this Agreement or as expressly permitted pursuant to Section
5.1 of the Company Disclosure Letter, without the prior written consent of
Parent:
(a) The Company covenants and agrees that, between the date of this
Agreement and the Effective Time, (i) the business of the Company and its
Subsidiaries shall be conducted only in the ordinary course of business and in
a manner consistent with prior practice, (ii) the Company and its Subsidiaries
shall use all commercially reasonable efforts to preserve intact their business
organizations, to keep available the services of their current officers and
employees and to preserve the current relationships of the Company and its
Subsidiaries with material merchandise vendors and suppliers, landlords and
other persons and entities with which the Company or its Subsidiaries has
material business relations, and (iii) the Company and its Subsidiaries will
comply with all applicable Laws in all material respects wherever their
respective businesses are conducted, including, without limitation, the timely
filing of all reports, forms or other documents with the SEC required pursuant
to the Securities Act and the rules and regulations promulgated thereunder or
the Exchange Act and the rules and regulations promulgated thereunder.
(b) Between the date of this Agreement and the Effective Time the
Company shall not, nor shall the Company permit any of its Subsidiaries to, (i)
declare or pay any dividends on or make other distributions (whether in cash,
stock or property) in respect of any of its capital stock, except for dividends
by a wholly owned Subsidiary of the Company to the Company or another wholly
owned Subsidiary of the Company, (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, other than pursuant to any stockholders' rights agreement or
similar plan or agreement entered into by the Company which by its terms
provides that none of Parent, Sub or their respective affiliates shall be
deemed to be an "Acquiring Person" by virtue of Parent and Sub entering into
this Agreement and consummating the transactions contemplated hereby and which
shall not limit or impair the ability of Parent or Sub to consummate the Merger
as contemplated by this Agreement, (iii) directly or indirectly redeem,
repurchase or otherwise acquire any capital stock or any right to acquire
capital stock, (iv) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any
securities convertible into any such shares of its capital stock, or any
rights, warrants or options to acquire any such shares or convertible
securities or any stock appreciation rights, phantom stock plans or stock
equivalents, other than (x) the issuance of shares of Company Common Stock upon
the exercise of Company Options outstanding as of the date of this Agreement,
(y) options and other equity awards granted in the ordinary course of business
to any new employee hired after the date hereof but prior to the date of the
Closing; provided, that the shares of Common Stock issuable upon exercise of
such options and award grants do not exceed 20,000 in the aggregate for each
new employee or 25,000 in the aggregate for all new employees, or (z) the
issuance of the options and equity awards listed in the Company Disclosure
Schedule, or (v) take any action that could reasonably be expected to result in
any of the conditions set forth in Article VI hereof not being satisfied.
(c) Between the date of this Agreement and the Effective Time, the
Company shall not, nor shall the Company permit any of its Subsidiaries to, (i)
amend the Company Certificate of Incorporation or the Company Bylaws or the
other equivalent organizational documents of the Subsidiaries, (ii) create,
assume or incur any indebtedness for borrowed money or guaranty any such
indebtedness of another person, other than (A) borrowings under existing lines
of credit (or under any refinancing of such existing lines) of up to $7,000,000
in the aggregate, (B) borrowings pursuant to letters of credit of up to
$12,000,000 in the aggregate, or (C) indebtedness owing to, or guaranties of
indebtedness owing to, the Company, (iii) make any loans or advances to any
other person other than loans or advances between any Subsidiaries of the
Company or between the Company and any of its Subsidiaries, (iv) mortgage or
pledge any of its assets or properties with an aggregate book value,
individually or in the aggregate, in excess of $50,000, (v) merge or
consolidate with any other entity in any transaction, or sell any business or
assets in a single transaction or series of transactions which have an
aggregate value of $50,000 or greater, other than sales of inventory in the
ordinary course of business consistent with past practices, (vi) change its
accounting policies except as required by GAAP, (vii) make any payments to, or
change any employment terms for, any of its directors or officers other than
the payment of compensation or directors' fees in the ordinary course of
business; provided, that the Company shall be permitted to advance expenses to
directors or officers as contemplated by the indemnification obligations set
forth in the Company Certificate of Incorporation or Company Bylaws or pursuant
to any employment agreement with the Company previously delivered to Parent;
provided, further that the Company shall be permitted to reimburse officers and
directors for reasonable expenses in the ordinary course of business consistent
with past practices, (viii) alter, amend or create any obligations with respect
to compensation, severance, benefits, change of control payments or any other
payments to employees, directors or affiliates of the Company or its
Subsidiaries, other than increases in wages for hourly employees made in the
ordinary course of business consistent with past practices, or enter into any
new, or amend any existing, employment agreements, (ix) make any change to the
Company Benefit Plans other than as required by Law, (x) amend or cancel or
agree to the amendment or cancellation of any Material Contract or, without the
prior written consent of Parent, execute any new contract or agreement or enter
into any arrangement which would constitute a Material Contract hereunder, (xi)
pay, loan or advance (other than the payment of compensation, directors' fees
or reimbursement of reasonable expenses in the ordinary course of business
consistent with past practices or the advancement of expenses as contemplated
by the indemnification obligations of the Company Certificate of Incorporation
or Company Bylaws, or pursuant to any employment agreement with the Company
previously delivered to Parent) any amount to, or sell, transfer or lease any
properties or assets to, or enter into any agreement with any of its officers
or directors or any "affiliate" or "associate" of any of its officers or
directors, (xii) form or commence the operations of any business or any
corporation, partnership, joint venture, business association or other business
organization or division thereof, (xiii) except as set forth in Section 5.6
hereof, or with respect to matters covered by insurance to the extent of such
insurance proceeds, pay, discharge, settle or satisfy any Litigation (whether
or not commenced prior to the date of this Agreement) involving amounts in
excess of $100,000 in the aggregate, (xiv) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing a liquidation,
dissolution, reorganization or similar transaction, (xv) adopt a stockholders'
rights agreement or any similar plan or agreement which limits or impairs the
ability to purchase, or become the direct or indirect beneficial owner of,
shares of Company Common Stock or any other equity or debt securities of the
Company or any of its Subsidiaries, other than any stockholders' rights
agreement or similar plan or agreement entered into by the Company which by its
terms provides that none of Parent, Sub or their respective affiliates shall be
deemed to be an "Acquiring Person" by virtue of Parent and Sub entering into
this Agreement and consummating the transactions contemplated hereby and which
shall not limit or impair the ability of Parent or Sub to consummate the Merger
as contemplated by this Agreement, (xvi) make any capital expenditures in an
amount greater than $500,000 which are inconsistent with, or not provided for
by, the Company's 2004 budget contained in the Company Disclosure Letter,
(xvii) make any change to their respective lines of business, (xviii) enter
into a lease or sublease with respect to any new store or new facility of the
Company or any existing Company Facility, (xix) renew any Company Lease or
agree to a renewal rate for any Company Lease, (xx) open any new store or new
facility of the Company, close any existing Company Facility or materially
change the operations of any existing Company Facility, or (xxi) enter into any
contract, agreement or other arrangement to do or engage in any of the
foregoing.
Section 5.2. Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time, the Company shall, and
shall cause the officers, directors, employees, auditors, attorneys, financial
advisors, lenders and other agents (collectively, the "Representatives") of the
Company to, afford the Representatives of Parent and Sub reasonable access
during normal business hours upon reasonable notice to the officers, employees,
agents, properties, offices and other facilities, books and records of the
Company and its Subsidiaries, and shall furnish Parent and Sub with all
financial, operating and other data and information as Parent or Sub, through
its Representatives, may reasonably request. The Company shall furnish to
Parent and Sub monthly financial and operating data and information within 15
days following the end of each calendar month. Parent will use all commercially
reasonable efforts to minimize any unnecessary disruption to the business of
the Company and its Subsidiaries which may result from the requests for access,
data and information hereunder. All requests for access and information shall
be coordinated through designated senior executives of each of the parties.
Parent and Sub will hold any such information, including all such information
disclosed in the Company Disclosure Letter confidential in accordance with the
terms of the confidentiality agreement between the Company and Crescent Capital
Investments, Inc. ("Crescent"), dated February 4, 2004 (the "Confidentiality
Agreement").
(b) No investigation pursuant to this Section 5.2, or any similar
investigation prior to the date hereof, shall affect any representation or
warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto.
Section 5.3. Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence, or nonoccurrence, of any event which would cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or which would result in any condition to
the obligations of the parties hereunder not being satisfied, (ii) any change
or event known to the Company which could reasonably be expected to have a
Company Material Adverse Effect, (iii) any material failure by such party (or
Sub, in the case of Parent) to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder, (iv) any notice
or other communication from any person alleging that the consent of such person
is or may be required in connection with the transactions contemplated by this
Agreement, (v) any notice or other communication from any Governmental Entity
in connection with the transactions contemplated by this Agreement, and (vi)
any material Litigation commenced or, to the knowledge of the Company,
threatened against, relating to or involving or otherwise affecting the Company
or any of its Subsidiaries; provided, however, that the delivery of any notice
pursuant to this Section 5.3 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice. If any event or matter
arises after the date of this Agreement which, if existing or occurring at the
date of this Agreement, would have been required to be set forth or described
in the Company Disclosure Letter or which is necessary to correct any
information in the Company Disclosure Letter which has been rendered inaccurate
thereby, then the Company shall, for informational purposes only, promptly
supplement, or amend, and deliver to Parent the Company Disclosure Letter which
it has delivered pursuant to this Agreement.
Section 5.4. Further Assurances.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all commercially reasonable efforts to take, or cause
to be taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under Law to make effective the Merger and the
other transactions contemplated by this Agreement, including, without
limitation, using all commercially reasonable efforts to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of each
Governmental Entity and parties to contracts with the Company and its
Subsidiaries as are necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement and to fulfill the conditions set
forth in Article VI hereof. Each of Parent and the Company shall, in connection
with the efforts referenced in this Section 5.4(a) to obtain all required
approvals, use all commercially reasonable efforts to cooperate in all respects
with each other in connection with any filing or submission and in connection
with any investigation or other inquiry, including any proceeding initiated by
a private party. If at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers of each party to this Agreement and the Surviving Corporation shall
use all commercially reasonable efforts to take all such action.
(b) In connection with, and without limiting the foregoing, the
Company and the Board of Directors of the Company shall use all commercially
reasonable efforts to (i) take all actions necessary to ensure that no "fair
price," "merger moratorium," "control share acquisition" or other form of
anti-takeover statute or regulation is or becomes operative with respect to
this Agreement, the Voting Agreement, the Merger or any other transactions
contemplated by this Agreement or the Voting Agreement, and (ii) if any state
anti-takeover statute or similar statute or regulation is or becomes operative
with respect to this Agreement, the Voting Agreement, the Merger or any other
transaction contemplated by this Agreement or the Voting Agreement, take all
actions necessary to ensure that this Agreement, the Voting Agreement, the
Merger and any other transactions contemplated by this Agreement or the Voting
Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and the Voting Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement and the Voting Agreement.
Section 5.5. Board Recommendations.
(a) In connection with the Merger and Stockholders' Meeting, the Board
of Directors of the Company shall (i) subject to Section 5.5(c), recommend to
the Company Stockholders to vote in favor of the Merger and use all
commercially reasonable efforts to obtain the necessary approval by the Company
Stockholders of this Agreement, and (ii) otherwise comply with legal
requirements applicable to such meeting.
(b) Neither the Board of Directors of the Company nor the Special
Committee shall, except as expressly permitted by Section 5.5(c):
(i) withdraw, qualify, or in a manner adverse to
Parent, modify, or propose publicly to withdraw, qualify or
in a manner adverse to Parent, modify, the approval or
recommendation of such Board of Directors or such committee
of the Merger or this Agreement,
(ii) approve or recommend, or propose publicly to
approve or recommend, any transaction involving an
Acquisition Proposal (as hereinafter defined) from a third
party (an "Alternative Transaction"), or
(iii) cause the Company to enter into any letter of
intent, agreement in principle, acquisition agreement or
other similar agreement (each, an "Acquisition Agreement")
related to any Alternative Transaction.
(c) Notwithstanding Sections 5.5(a) and 5.5(b), prior to the approval
of this Agreement by the Company Stockholders, the Board of Directors of the
Company or the Special Committee may (subject to this Section 5.5(c)):
(i) inform Company Stockholders that it no longer
believes that the Merger is advisable and no longer
recommends approval of the Merger (a "Subsequent
Determination"), but only if (A) the Board of Directors of
the Company or the Special Committee receives a Superior
Proposal (as hereinafter defined) which is not subsequently
withdrawn, and (B) the Board of Directors of the Company or
the Special Committee determines in good faith and after
consultation with its outside legal counsel with respect to
its fiduciary duties to Company Stockholders under applicable
Delaware Law, that the failure to make a Subsequent
Determination would be inconsistent with its fiduciary
obligations to the Company Stockholders under applicable
Delaware Law; or
(ii) terminate this Agreement in accordance with
Section 7.1(d)(ii) hereof if the Board of Directors of the
Company or the Special Committee authorizes the Company to
enter into any Acquisition Agreement with respect to any
Superior Proposal, but only if: (A) the Board of Directors of
the Company or the Special Committee receives a Superior
Proposal which is not subsequently withdrawn, (B) at least
three business days shall have elapsed since delivery by the
Company to Parent of written notice (1) specifying the terms
and conditions of such Superior Proposal, (2) identifying the
person making such Superior Proposal, and (3) stating that
the Board of Directors of the Company or the Special
Committee intends to make a Subsequent Determination and
enter into an Acquisition Agreement with respect to such
Superior Proposal, all of which information will be kept
confidential in accordance with the terms of the
Confidentiality Agreement, (C) during the elapsed time period
described in Section 5.5(c)(ii)(B) above, the Company shall
have provided an opportunity for Parent to propose such
adjustments to the terms and conditions of this Agreement as
would enable the Company to proceed with its recommendation
to the Company Stockholders without a Subsequent
Determination, and (D) the Board of Directors of the Company
or the Special Committee determines in good faith and after
consultation with its outside legal counsel with respect to
its fiduciary duties to Company Stockholders under applicable
Delaware Law, that the failure to enter into the Acquisition
Agreement with respect to such Superior Proposal would be
inconsistent with its fiduciary obligations to the Company
Stockholders under applicable Delaware Law.
(d) For purposes of this Agreement, a "Superior Proposal" means any
unsolicited bona fide proposal (on its most recently amended or modified terms,
if amended or modified) made by a third party to enter into an Alternative
Transaction and which the Board of Directors of the Company or the Special
Committee determines in its good faith judgment (after consultation with its
legal counsel and independent financial advisors) is more favorable to the
Company Stockholders than the Merger from a financial point of view (taking
into account whether, in the good faith judgment of the Board of Directors of
the Company, after obtaining the advice of such independent financial advisor,
the third party is reasonably able to finance the transaction, any proposed
changes to this Agreement that may be proposed by Parent in response to such
Alternative Transaction and the ability and timing for the satisfaction of the
conditions to closing the Merger and such Alternative Transaction).
Notwithstanding any other provision of this Agreement, unless and until this
Agreement is terminated, the Company shall submit this Agreement to the Company
Stockholders for a vote at the Stockholders' Meeting.
(e) Nothing contained in this Section 5.5 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act and the rules and regulations
promulgated thereunder or from making any disclosure to the Company
Stockholders if, in the good faith judgment of the Board of Directors of the
Company or the Special Committee, after consultation with outside legal
counsel, such disclosure is advisable under applicable Law; provided, however,
neither the Company nor its Board of Directors nor any committee thereof shall,
except as specifically permitted by Section 5.5(c), withdraw, qualify, or
modify, or propose to withdraw, qualify or modify, its position with respect to
the Merger or this Agreement or approve or recommend, or propose to approve or
recommend an Alternative Transaction.
Section 5.6. Stockholder Litigation. The Company shall give Parent the
opportunity to participate in the defense or settlement of any stockholder
Litigation against the Company and its directors relating to the transactions
contemplated by this Agreement or the Merger; provided, however, that no such
settlement involving monetary payments in excess of $500,000 in the aggregate
or involving non-monetary relief shall be agreed to without Parent's consent
which consent will not be unreasonably withheld.
Section 5.7. Indemnification.
(a) It is understood and agreed that all rights to indemnification by
the Company now existing in favor of each present and former director and
officer of the Company or its Subsidiaries (the "Indemnified Parties") as
provided in the Company Certificate of Incorporation or the Company Bylaws, in
each case as in effect on the date of this Agreement, or pursuant to any other
agreements in effect on the date hereof, copies of which have been provided to
Parent, shall survive the Merger and the Surviving Corporation shall (i) keep
such indemnification provisions in full force and effect for a period of at
least six years from the Effective Time and (ii) in a timely manner, perform
its obligation with respect thereto. Any claims for indemnification hereunder
as to which the Surviving Corporation has received written notice prior to the
sixth anniversary of the Effective Time shall survive, whether or not such
claims shall have been finally adjudicated or settled; provided, that any
determination required to be made with respect to whether an Indemnified
Party's conduct complies with the standards set forth under Delaware Law, the
Company Certificate of Incorporation or the Company Bylaws or such agreements,
as the case may be, shall be made by independent legal counsel selected by the
Indemnified Party and reasonably acceptable to Parent.
(b) The Surviving Corporation shall maintain in effect for six years
from the Effective Time, if available, the current directors' and officers'
liability insurance policies (the "Company Policies"); provided, that if the
Company Policies expire or are canceled during such period, the Surviving
Corporation will use all commercially reasonable efforts to obtain insurance
policies substantially similar to the Company Policies with respect to matters
occurring prior to the Effective Time. The Surviving Corporation may substitute
other policies for the Company Policies provided that such policies contain
terms and conditions which are not materially less favorable to such present
and former officers and directors than the Company Policies and that any such
substitution shall not result in any material gaps or lapses in coverage with
respect to facts, events, acts or omissions covered under the Company Policies
occurring prior to the Effective Time. Notwithstanding the foregoing, in no
event shall the Surviving Corporation be required to expend pursuant to this
Section 5.7(b) more than an amount per year equal to 225% of current annual
premiums paid by the Company for such insurance. In the event that, but for the
proviso to the immediately preceding sentence, the Surviving Corporation would
be required to expend more than 225% of current annual premiums, the Surviving
Corporation shall obtain the maximum amount of such insurance obtainable by
payment of annual premiums equal to 225% of current annual premiums.
(c) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation shall assume the
obligations set forth in this Section 5.7.
(d) It is expressly agreed that the Indemnified Parties to whom this
Section 5.7 applies shall be third-party beneficiaries of this Section 5.7. The
provisions of this Section 5.7 are intended to be for the benefit of, and will
be enforceable by, each Indemnified Party, his or her heirs and his or her
representatives and are in addition to any other rights of indemnification or
contribution set forth in written employment agreements with the Company
previously delivered to Parent.
(e) Parent shall cause the Surviving Corporation or any successor or
assign thereto to comply with its obligations under this Section 5.7.
Section 5.8. Public Announcements. Parent and the Company shall
consult with each other before issuing any press release or otherwise making
any public statements with respect to this Agreement, the Voting Agreement or
the Merger and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by Law or any
listing agreement with a national securities exchange or trading system to
which Parent or the Company is a party.
Section 5.9. Acquisition Proposals.
(a) The Company shall not, and shall not authorize any of its
Subsidiaries or Representatives to, and will not permit any of its Subsidiaries
or Representatives to, directly or indirectly, (i) solicit, initiate or
knowingly encourage, or take any other action to facilitate, the submission of
any Acquisition Proposal or (ii) participate in or knowingly encourage any
discussion or negotiations regarding, or furnish to any person any non-public
information with respect to, or take any other action to facilitate any
inquiries or the making of, any proposal that constitutes or may reasonably be
expected to lead to, any Acquisition Proposal; provided, however, that the
foregoing shall not prohibit the Board of Directors of the Company or the
Special Committee from furnishing information to, or entering into discussions
or negotiations with, any person or entity that makes an unsolicited
Acquisition Proposal prior to the approval of this Agreement by the Company
Stockholders if, and only to the extent that, (A) the Board of Directors of the
Company or the Special Committee, after consultation with its outside legal
counsel, determines in good faith that the failure to take such action would be
inconsistent with its fiduciary obligations to the Company Stockholders under
applicable Delaware Law, (B) prior to taking such action, the Company receives
from such person or entity an executed agreement in reasonably customary form
relating to the confidentiality of information to be provided to such person or
entity (provided, that if the Company enters into such confidentiality
agreement with respect to such Acquisition Proposal that contains provisions
that are less protective in any material respect to the Company than the
Confidentiality Agreement, the Company agrees to amend the Confidentiality
Agreement so as to provide Crescent the benefit of such less protective
provisions), and (C) the Board of Directors of the Company or the Special
Committee concludes in good faith, based upon discussions with its independent
financial advisor, that the Acquisition Proposal is reasonably expected to lead
to a Superior Proposal. The Company shall provide prompt (but in no event less
than two business days after receipt of any Acquisition Proposal or inquiry)
oral and written notice to Parent of (a) the receipt of any such Acquisition
Proposal or any inquiry which may reasonably be expected to lead to any
Acquisition Proposal, (b) the material terms and conditions of such Acquisition
Proposal or inquiry, (c) the identity of such person or entity making any such
Acquisition Proposal or inquiry, and (d) the Company's intention to furnish
information to, or enter into discussions or negotiations with, such person or
entity. The Company shall continue to keep Parent reasonably informed of the
status and details of any such Acquisition Proposal or inquiry. All information
provided to Parent under this Section 5.9 shall be kept confidential by Parent
in accordance with the terms of the Confidentiality Agreement.
(b) For purposes of this Agreement, "Acquisition Proposal" means,
other than the Merger, any proposal with respect to (i) a merger,
consolidation, reorganization, recapitalization, reclassification, share
exchange, tender offer, spin-off, split-off, joint venture or other business
combination, liquidation, dissolution or similar transaction involving the
Company, any of its Subsidiaries or any of their assets, (ii) any purchase or
other acquisition of 10% or more of the consolidated assets of the Company and
its Subsidiaries or assets representing 10% or more of the net revenues of the
Company or 10% or more of the net income of the Company, or (iii) any purchase
or other acquisition (by tender offer, exchange offer or otherwise) of 15% or
more of the outstanding voting or equity securities of the Company. For
purposes of clarification, any interests held by the Company or any of its
Subsidiaries in another corporation, association, subsidiary, partnership,
limited liability company or other entity shall be considered assets of the
Company.
Section 5.10. Company Stockholders' Meeting.
(a) The Company shall cause the Stockholders' Meeting to be duly
called and held as soon as practicable for the purpose of voting on the
approval and adoption of this Agreement and the Merger. The Company shall take
all action necessary in accordance with applicable Law and the Company
Certificate of Incorporation and Company Bylaws to duly call, give notice of,
and convene the Stockholders' Meeting.
(b) The Company shall solicit from Company Stockholders entitled to
vote at the Stockholders' Meeting proxies in favor of such approval and,
subject to Section 5.5 hereof, shall take all other action reasonably necessary
or, in the reasonable judgment of Parent, helpful to secure the vote or consent
of such holders required by the DGCL or this Agreement to effect the Merger.
Section 5.11. Proxy Statement; Schedule 13E-3.
(a) The Company will as promptly as practicable following the
execution of this Agreement prepare and file the Proxy Statement with the SEC
and will use all commercially reasonable efforts to respond to the comments of
the SEC and to cause the Proxy Statement to be mailed to the Company
Stockholders at the earliest practical time. Parent, Sub and the Company shall
cooperate with each other in the preparation of the Proxy Statement, and the
Company shall notify Parent of the receipt of any comments of the SEC with
respect to the Proxy Statement and of any requests by the SEC for any amendment
or supplement thereto or for additional information, and shall provide to
Parent promptly copies of all correspondence between the Company or any
Representative of the Company and the SEC with respect to the Proxy Statement.
The Company shall give Parent and its counsel the opportunity to review the
Proxy Statement and all responses to requests for additional information by and
replies to comments of the SEC before their being filed with, or sent to, the
SEC. The Company and its counsel shall permit Parent and its counsel to
participate in all communications with the SEC and its staff, including any
meetings and telephone conferences, relating to the Proxy Statement, the
Merger, the Voting Agreement or this Agreement. Each of the Company, Parent and
Sub agrees to use all commercially reasonable efforts, after consultation with
the other parties hereto, to respond promptly to all such comments of and
requests by the SEC. If (i) at any time prior to the Stockholders' Meeting, any
event should occur relating to the Company or any of its Subsidiaries which
should be set forth in an amendment of, or a supplement to, the Proxy
Statement, the Company will promptly inform Parent, and (ii) if at any time
prior to the Stockholders' Meeting, any event should occur relating to Parent
or Sub or any of their respective associates or affiliates, or relating to the
plans of any such persons for the Company after the Effective Time that should
be set forth in an amendment of, or a supplement to, the Proxy Statement,
Parent will promptly inform the Company, and in the case of (i) or (ii) the
Company will, upon learning of such event, promptly prepare and file and, if
required, mail such amendment or supplement to the Company Stockholders;
provided, that prior to such filing or mailing, the Company shall consult with
Parent with respect to such amendment or supplement and Parent shall have a
reasonable opportunity to comment thereon. Parent shall vote, or cause to be
voted, in favor of the Merger and this Agreement all shares of Company Common
Stock directly or indirectly beneficially owned by it.
(b) The Company hereby consents to the inclusion in the Proxy
Statement of the recommendation of the Board of Directors of the Company and
the Special Committee described in Section 3.3, subject to any modification,
amendment or withdrawal thereof, and represents that the Independent Financial
Advisor has, subject to the terms of its engagement letter with the Company
(the "Independent Advisor Engagement Letter"), consented to the inclusion of
references to its opinion in the Proxy Statement.
(c) Concurrently with the filing of the Proxy Statement, the parties
and their respective affiliates (to the extent required by Law) shall prepare
and file with the SEC a Rule 13E-3 Transaction Statement on Schedule 13E-3
(together with all supplements and amendments thereto, the "Schedule 13E-3")
with respect to the transactions contemplated by this Agreement. Each party
shall promptly furnish to the other parties all information concerning such
party as may reasonably be requested in connection with the preparation of the
Schedule 13E-3. The parties shall promptly supplement, update and correct any
information provided by them for use in the Schedule 13E-3 if and to the extent
that it is or shall have become incomplete, false or misleading. In any such
event, Parent and the Company shall take all steps necessary to cause the
Schedule 13E-3 as so supplemented, updated or corrected to be filed with the
SEC and to be disseminated to the holders of the Company Common Stock, in each
case, as and to the extent required by applicable Law. Each party and its
counsel shall be given an opportunity to review and comment with respect
thereto prior to its being filed with or delivered to the SEC. Each party
agrees to provide the other parties and their counsel with any comments that
the Company or its counsel may receive from the staff of the SEC promptly after
receipt thereof.
Section 5.12. Undertakings of Parent. Parent shall perform, or cause
to be performed, when due all obligations of Sub under this Agreement to be
performed at or prior to the Merger.
Section 5.13. Director Resignations. The Company shall cause to be
delivered to Parent resignations of all of the directors of the Company's
Subsidiaries to be effective upon the consummation of the Merger. The Company
shall cause such directors, prior to resignation, to appoint new directors
nominated by Parent to fill such vacancies.
Section 5.14. Tax Matters.
(a) Except as permitted pursuant to Section 5.14 of the Company
Disclosure Letter, as otherwise required by applicable Law or with the consent
of Parent (which consent shall not be unreasonably withheld, delayed or
conditioned), neither the Company nor any of its Subsidiaries shall make or
change any Tax election, change any annual Tax accounting period, adopt or
change any method of tax accounting, file any amended Tax Returns or claims
for Tax refunds, enter into any closing agreement with a taxing authority or
settle or compromise any Tax claim, audit or assessment if any such action or
omission, considered in the aggregate, would have the effect of materially
increasing the Tax liability or reducing any material Tax asset of the Company
or any of its Subsidiaries.
(b) The Company and Parent shall cooperate in the preparation,
execution and filing of all returns, questionnaires, applications or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transaction contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time.
Section 5.15. Employees.
(a) Following the Effective Time and for at least one year thereafter,
Parent shall cause to be provided to individuals who are employed by the
Company and its Subsidiaries immediately prior to the Effective Time who remain
employed with the Surviving Corporation or any Subsidiary of the Parent (the
"Affected Employees"), for so long as such Affected Employees remain so
employed during such one year period, employee benefits (other than incentive
and equity compensation) which in the aggregate are comparable to the employee
benefits provided by the Company and its Subsidiaries for Affected Employees
immediately prior to the Effective Time.
(b) Parent will, or will cause the Surviving Corporation to, give
Affected Employees full credit for purposes of eligibility, vesting, benefit
accrual and determination of the level of benefits under any employee benefit
plans or arrangements maintained by Parent or any Subsidiary of Parent for such
Affected Employees' service with the Company or any Subsidiary of the Company
to the same extent recognized immediately prior to the Effective Time;
provided, however, that such crediting of service shall not operate to
duplicate any benefit or the funding of any such benefit, and the Surviving
Corporation shall not be required to credit such service for purposes of any
defined benefit pension plan benefit accrual.
(c) Parent will, or will cause the Surviving Corporation to, (i) waive
all limitations as to preexisting conditions, exclusions and waiting periods
with respect to participation and coverage requirements applicable to the
Affected Employees under any welfare benefit plans that such employees may be
eligible to participate in after the Effective Time, other than limitations or
waiting periods that are already in effect with respect to such employees and
that have not been satisfied as of the Effective Time under any welfare plan
maintained for the Affected Employees immediately prior to the Effective Time,
and (ii) provide each Affected Employee with credit for any co-payments and
deductibles paid in the calendar year in which the Effective Time occurs for
purposes of satisfying any applicable deductible or out-of-pocket requirements
for such year under any welfare plans that Affected Employees are eligible to
participate in after the Effective Time.
Section 5.16. Delisting. Each of the parties agrees to cooperate with
each other in taking, or causing to be taken, all actions necessary to delist
the Company Common Stock from the Nasdaq National Market and terminate
registration under the Exchange Act; provided that such delisting and
termination shall not be effective until after the Effective Time.
Section 5.17. Closing of Chapter 11 Case. The Company shall use all
commercially reasonable efforts to take, or cause to be taken, all actions
necessary, desirable or appropriate in connection with seeking and obtaining
the entry of an order (the "Closing Order") of the Bankruptcy Court in the
Chapter 11 Case closing the Chapter 11 Case pursuant to section 350(a) of title
11 of the United States Code (11 U.S.C. ss.101 et seq.) (the "Bankruptcy
Code"), and the Company shall otherwise use all commercially reasonable efforts
to cause the entry of the Closing Order.
ARTICLE VI
CONDITIONS
Section 6.1. Conditions to the Obligation of Each Party. The
respective obligations of Parent, Sub and the Company to effect the Merger are
subject to the satisfaction of the following conditions:
(a) This Agreement and the Merger shall have been approved and adopted
by the requisite vote of the Company Stockholders, if and to the extent
required by the DGCL, the Company Certificate of Incorporation and the Company
Bylaws.
(b) No temporary restraining order, preliminary or permanent
injunction or other order restraining, prohibiting or preventing consummation
of the Merger issued by any court of competent jurisdiction shall be in effect;
provided, however, that the parties invoking this condition shall use all
commercially reasonable efforts to have any such order or injunction vacated.
Section 6.2. Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger are further
subject to satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) (i) Except for the representations and warranties contained in
Sections 3.1, 3.2 and 3.3 which shall be true and correct in all material
respects, the representations and warranties of the Company in this Agreement,
disregarding all qualifications and exceptions contained therein relating to
materiality or Company Material Adverse Effect, shall be true and correct in
all respects as of the date of this Agreement and as of the Effective Time,
except where the failure to be true and correct would not, individually or in
the aggregate with all other such failures, reasonably be expected to have a
Company Material Adverse Effect; provided, that any actions taken by the
Company or its Subsidiaries after the date hereof set forth in Section 5.1 of
the Company Disclosure Letter shall not cause the condition set forth in clause
(i) of this Section 6.2(a) not to be satisfied, and (ii) the Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement. The Company shall have delivered to Parent and Sub a
certificate the effect that each condition specified in this Section 6.2(a) is
satisfied in all respects.
(b) There shall not be threatened, instituted or pending any action,
proceeding, application or counterclaim by any Governmental Entity before any
court or regulatory or administrative agency, authority or tribunal which
challenges or seeks to challenge, restrain or prohibit the consummation of the
Merger.
(c) The aggregate number of Dissenting Shares shall not exceed 10% of
the total number of shares of Company Common Stock outstanding on the Closing
Date; provided, that in the event this condition is not satisfied as of the
first date on which all of the other conditions to Parent's and Sub's
obligations to effect the Merger pursuant to this Article VI have been
satisfied or waived (such date, the "Appraisal Condition Trigger Date", Parent
and Sub shall be deemed to have automatically and irrevocably waived the
condition set forth in this Section 6.2(c) unless, within 15 business days
following the Appraisal Condition Trigger Date, Parent gives written notice to
the Company of its intention to continue to invoke the condition set forth in
this Section 6.2(c).
(d) There shall not have occurred after the date hereof any event,
individually or in the aggregate with other events, which has had, or could
reasonably be expected to have, a Company Material Adverse Effect.
Section 6.3. Conditions to Obligations of the Company to Effect the
Merger. The obligations of the Company to effect the Merger are further subject
to satisfaction or waiver at or prior to the Effective Time of the following
condition:
(a) (i) Except for the representations and warranties contained in
Sections 4.1, 4.2 and 4.3 which shall be true and correct in all material
respects, the representations and warranties of Parent and Sub in this
Agreement, disregarding all qualifications and exceptions contained therein
relating to materiality, shall be true and correct in all respects as of the
date of this Agreement and as of the Effective Time, except where the failure
to be true and correct would not, individually or in the aggregate with all
other such failures, reasonably be expected to prevent or materially delay, or
materially impair the ability of Parent or Sub to consummate, the transactions
contemplated by this Agreement, and (ii) Parent and Sub shall have performed in
all material respects all obligations required to be performed by them under
this Agreement. Parent and Sub shall each have delivered to the Company a
certificate to the effect that each condition specified in this Section 6.3(a)
is satisfied in all respects.
ARTICLE VII
TERMINATION AND WAIVER
Section 7.1. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval of matters presented in connection with the Merger by the
Company Stockholders:
(a) By mutual written consent of duly authorized representatives of
Parent and the Company;
(b) By any of Parent, Sub or the Company:
(i) If any Governmental Entity shall have issued an
order, decree, or ruling or taken any other action
permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree,
ruling or other action shall have become final and
nonappealable; provided, however, that the party
terminating this Agreement pursuant to this Section
7.1(b)(i) shall have used all commercially
reasonable efforts to have such order, decree,
ruling or action vacated;
(ii) If the Merger shall not have been consummated
on or before November 1, 2004 (the "Drop Dead
Date"); provided, however, that the right to
terminate this Agreement under this Section
7.1(b)(ii) shall not be available to any party whose
failure to fulfill any obligation under this
Agreement has been the primary cause of, or resulted
in, the failure to consummate the Merger on or
before such date; or
(iii) If this Agreement and the Merger shall fail to
be approved by the Company Stockholders at the
Stockholders' Meeting;
(c) By Parent or Sub:
(i) If the Board of Directors of the Company or the
Special Committee shall have (A) made or proposed
publicly to make a Subsequent Determination, (B)
approved or recommended, or proposed publicly to
approve or recommend, any Alternative Transaction,
(C) caused the Company to enter into any Acquisition
Agreement related to any Alternative Transaction, or
(D) resolved to do any of the foregoing;
(ii) If (A) a tender or exchange offer has been
commenced by any person (other than Parent or Sub)
and (B) in connection with such tender or exchange
offer Company Common Stock representing at least 20%
of the shares of Company Common Stock outstanding on
a fully-diluted basis immediately prior to the
commencement of such tender or exchange offer shall
have been tendered and accepted for payment; or
(iii) If (A) any of the conditions set forth in
Section 6.2 shall have become incapable of
fulfillment and shall not have been waived by Parent
and Sub, or (B) there has been any inaccuracy in or
breach of any of the Company's representations and
warranties, or the Company shall have breached or
failed to perform any of its covenants or other
agreements contained in this Agreement, in each case
such that the conditions set forth in Section 6.2(a)
could not then be satisfied and such failure or
breach with respect to any such representations,
warranties or obligations shall not be cured for a
period of 30 days after the Company has received
written notice from Parent of the occurrence of such
failure or breach; or
(d) By the Company:
(i) If (A) any of the conditions set forth in
Section 6.3 shall have become incapable of
fulfillment and shall not have been waived by the
Company, or (B) there has been any inaccuracy in or
breach of any of the representations and warranties
of Parent or Sub, or Parent or Sub shall have
breached or failed to perform any of their covenants
or other agreements contained in this Agreement, in
each case such that the condition set forth in
Section 6.3(a) could not then be satisfied and such
failure or breach with respect to any such
representations, warranties or obligations shall not
be cured for a period of 30 days after the Parent
has received written notice from the Company of the
occurrence of such failure or breach; or
(ii) Prior to approval of this Agreement by the
Company Stockholders if:
(A) the Board of Directors of the Company or the
Special Committee receives a Superior Proposal which is not
subsequently withdrawn;
(B) at least three business days shall have elapsed
since delivery by the Company to Parent of written notice (1)
specifying the terms and conditions of such Superior
Proposal, (2) identifying the person making such Superior
Proposal, and (3) stating that the Board of Directors of the
Company or the Special Committee intends to make a Subsequent
Determination and that, immediately upon termination of this
Agreement, the Company shall enter into an Acquisition
Agreement with respect to such Superior Proposal, all of
which information will be kept confidential in accordance
with the terms of the Confidentiality Agreement;
(C) during the elapsed time period described in
Section 7.1(d)(ii)(B), the Company shall have provided an
opportunity for Parent to propose such adjustments to the
terms and conditions of this Agreement as would enable the
Company to proceed with its recommendation to the Company
Stockholders without a Subsequent Determination; and
(D) the Board of Directors of the Company or the
Special Committee determines in good faith and after
consultation with its outside legal counsel with respect to
its fiduciary duties to Company Stockholders under applicable
Delaware Law, that the failure to enter into the Acquisition
Agreement with respect to such Superior Proposal would be
inconsistent with its fiduciary obligations to the Company
Stockholders under applicable Delaware Law.
Section 7.2. Effect of Termination.
(a) In the event of the termination of this Agreement pursuant to
Section 7.1 hereof, this Agreement shall forthwith be terminated and have no
further effect except as specifically provided herein and, except as provided
in this Section 7.2 and in Section 8.10, there shall be no liability on the
part of any party hereto, provided that nothing herein shall relieve any party
from liability for any willful breach hereof.
(b) If Parent or Sub exercises its right to terminate this Agreement
under Section 7.1(c)(i) or Section 7.1(c)(ii), then the Company shall pay to
Parent (i) upon demand $4,000,000 (the "Termination Fee"), payable in same-day
funds, and (ii) upon receipt of reasonable supporting documentation, all actual
and reasonably documented out-of-pocket expenses incurred or payable by or on
behalf of Parent or Sub in connection with or in anticipation of the Merger,
this Agreement and the consummation of the transactions contemplated hereby
(including all attorneys' fees, accountants' fees, consultant fees, commitment
fees and filing fees), in an amount not to exceed $2,000,000 (the expenses so
payable by the Company, the "Expense Payment").
(c) If (i) the Company, Parent or Sub exercises its right to terminate
this Agreement under Section 7.1(b)(ii), and (ii) after the date of this
Agreement and on or before the date of termination an Acquisition Proposal
shall have been disclosed, announced, commenced, submitted or made to the
Company or the Company Stockholders generally or any person shall have publicly
announced an Acquisition Proposal or an intention to make an Acquisition
Proposal and as of at least five days prior to the Drop Dead Date, either (A)
such Acquisition Proposal has not been publicly rejected by the Board of
Directors and the Special Committee and publicly withdrawn and abandoned or (B)
the Stockholders' Meeting has not been held, then unless the failure of Parent
or Sub to fulfill any obligation under this Agreement shall have been the
primary cause of, or resulted in, the failure to consummate the Merger on or
before the Drop Dead Date, the Company shall pay to Parent the Expense Payment
upon receipt of reasonable supporting documentation with respect to such
Expense Payment.
(d) If (i) the Company, Parent or Sub exercises its right to terminate
this Agreement under Section 7.1(b)(iii), and (ii) after the date of this
Agreement and on or before the date of termination an Acquisition Proposal
shall have been disclosed, announced, commenced, submitted or made to the
Company or the Company Stockholders generally or any person shall have publicly
announced an Acquisition Proposal or an intention to make an Acquisition
Proposal, then unless, as of the fifth day prior to the Stockholders Meeting,
such Acquisition Proposal has been publicly rejected by the Board of Directors
and the Special Committee and publicly withdrawn and abandoned, the Company
shall pay to Parent the Expense Payment upon receipt of reasonable supporting
documentation with respect to such Expense Payment.
(e) If the Company is required to pay to Parent the Expense Payment
pursuant to Section 7.2(c) or Section 7.2(d) above and an Acquisition Proposal
shall have been consummated within one year of the Termination Date or the
Company shall have entered into an Acquisition Agreement with respect to an
Acquisition Proposal within one year of the Termination Date, then in addition
to the payment required to be made pursuant to Section 7.2(c) or Section 7.2(d)
hereof, as applicable, the Company shall pay to Parent the Termination Fee
within three business days after the consummation of such Acquisition Proposal.
(f) If the Company exercises its right to terminate this Agreement
under Section 7.1(d)(ii), the Company shall pay to Parent, within one business
day after such termination, the Termination Fee and that portion of the Expense
Payment for which reasonable supporting documentation has been provided to the
Company prior to the date on which the Termination Fee is to be paid; provided,
that the Company shall be obligated to pay the remaining portion of the Expense
Payment upon receipt of reasonable supporting documentation with respect to
such remaining portion of the Expense Payment.
(g) The parties agree that the liquidated damages amount set forth in
Sections 7.2(b) through 7.2(f) hereof (i) shall be the sole and exclusive
remedy of Parent and Sub for any claim, loss, cost, expense, damage or
liability or obligation relating to this Agreement and the transactions
contemplated hereby in the event such amount is payable to and paid in full to
Parent and (ii) is reasonable in proportion to the probable damages likely to
be sustained by Parent if the transactions contemplated hereby are not
consummated under the circumstances upon which such amount becomes payable to
Parent. The parties agree and acknowledge that the amount of actual damages to
be sustained by Sub or Parent in the event of the nonconsummation of the
transaction under the circumstances referred to above is uncertain and
difficult to predict at this time and incapable of precise estimation.
(h) Notwithstanding anything to the contrary set forth in this
Agreement, if the Company fails promptly to pay to Parent any amounts due under
this Section 7.2 within five business days of the date of such demand for
payment of the Termination Fee or the Expense Payment, the Company shall pay
the costs and expenses (including reasonable legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee or obligation at the publicly announced prime rate of Citibank, N.A.
in effect from time to time from the date such fee or obligation was required
to be paid.
Section 7.3. Waiver. To the extent legally permissible, at any time
prior to the Effective Time, whether before or after the Stockholders' Meeting,
any party hereto may (i) extend the time for the performance of any of the
covenants, obligations or other acts of any other party hereto, or (ii) waive
any inaccuracy of any representations or warranties or compliance with any of
the agreements, covenants or conditions of any other party or with any
conditions to its own obligations. Except as expressly set forth in Section
6.2(c), any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party by its duly authorized officer. Except as expressly set
forth in Section 6.2(c), the failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of such rights. The waiver of any such right with respect to particular
facts and other circumstances shall not be deemed a waiver with respect to any
other facts and circumstances and each such right shall be deemed an ongoing
right that may be asserted at any time and from time to time.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1. No Third Party Beneficiaries. Other than as provided in
Section 5.7 and Section 8.14 hereof, nothing in this Agreement shall confer any
rights or remedies upon any person other than the parties hereto.
Section 8.2. Entire Agreement; Amendment. This Agreement and the
Confidentiality Agreement constitute the entire Agreement among the parties
with respect to the subject matter hereof and supersede any prior
understandings, agreements, or representations by or among the parties, written
or oral, with respect to the subject matter hereof. The parties hereby agree
that for purposes of this Agreement (including, but not limited to conditions
to Closing) neither party has made to the other any representations, warranties
or covenants or other disclosures other than those contained in this Agreement
or the Company Disclosure Letter. No amendment, modification or alteration of
the terms or provisions of this Agreement or the Company Disclosure Letter
shall be binding unless the same shall be in writing and duly executed by the
parties hereto; provided, however, that after approval of the Merger by the
Company Stockholders, no amendment may be made without the further approval of
the Company Stockholders if the effect of such amendment would be to reduce the
Merger Consideration or change the form thereof.
Section 8.3. Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties named herein and their
respective successors. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties; provided, however, that Sub may freely assign its rights
to another wholly owned subsidiary of Parent without such prior written
approval but no such assignment shall relieve Sub of any of its obligations
hereunder.
Section 8.4. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. This Agreement shall
become effective when each party hereto shall have received a counterpart
hereof signed by the other parties hereto.
Section 8.5. Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 8.6. Governing Law; Jurisdiction. All disputes, claims or
controversies arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement, or the transactions contemplated by
this Agreement shall be governed by and construed in accordance with the Laws
of the State of Delaware without regard to its rules of conflict of laws. Each
of the Company, Parent and Sub hereby irrevocably and unconditionally consents
to submit to the sole and exclusive jurisdiction of the courts of the State of
Delaware for any litigation arising out of or relating to this Agreement, or
the negotiation, validity or performance of this Agreement, or the transactions
contemplated by this Agreement (and agrees not to commence any litigation
relating thereto except in such courts), waives any objection to the laying of
venue of any such litigation in the courts of the State of Delaware and agrees
not to plead or claim in any court of the State of Delaware that such
litigation brought therein has been brought in any inconvenient forum. Each of
the parties hereto hereby irrevocably waives the right to a trial by jury. Each
of the parties hereto agrees, (a) to the extent such party is not otherwise
subject to service of process in the State of Delaware, to appoint and maintain
an agent in the State of Delaware as such party's agent for acceptance of legal
process, and (b) that service of process may also be made on such party by
prepaid certified mail with a proof of mailing receipt validated by the United
States Postal Service constituting evidence of valid service. Service made
pursuant to (a) or (b) above shall have the same legal force and effect as if
served upon such party personally within the State of Delaware. For purposes of
implementing the parties' agreement to appoint and maintain an agent for
service of process in the State of Delaware, each such party does hereby
appoint CT Corporation, Corporation Trust Center, 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxx, XX 00000, as such agent.
Section 8.7. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
Section 8.8. Specific Performance. Each of the parties acknowledges
and agrees that the other party would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the parties
agrees that the other party shall be entitled to seek an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof having
jurisdiction over the parties and the matter, in addition to any other remedy
to which it may be entitled, at or in equity. Accordingly, each of the parties
hereto acknowledges and agrees that the other parties hereto shall be entitled
to seek, subject to Section 8.6, an injunction to prevent a breach of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in addition to any other remedy to which it may be entitled,
at law or in equity.
Section 8.9. Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party. Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 8.10. Non-Survival of Representations and Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the earlier of the Effective Time or the date, if any, on
which this Agreement is earlier terminated pursuant to Section 7.1 (the
"Termination Date"), except that (i) the agreements set forth in Articles I and
VIII hereof and Sections 5.4, 5.6 and 5.7 hereof shall survive the Effective
Time indefinitely, and (ii) the representations and agreements set forth in
Article VIII hereof, Sections 4.6 and 7.2 hereof and the confidentiality
provisions of Sections 5.2, 5.5 and 5.9 hereof shall survive the termination of
this Agreement indefinitely.
Section 8.11. Certain Definitions.
(a) For purposes of this Agreement, the terms "associate" and
"affiliate" shall have the same meaning as set forth in Rule 12b-2 promulgated
under the Exchange Act, and the term "person" shall mean any individual,
corporation, partnership (general or limited), limited liability company,
limited liability partnership, trust, joint venture, joint-stock company,
syndicate, association, entity, unincorporated organization or government or
any political subdivision, agency or instrumentality thereof.
(b) For purposes of this Agreement, the phrase "Company Material
Adverse Effect" shall mean, with respect to the Company, any change, event or
effect shall have occurred that, when taken together with all other adverse
changes, events or effects that have occurred, is or, if adversely determined,
would reasonably be expected to (i) be materially adverse to the business,
operations, condition (financial or otherwise), assets, liabilities (including,
without limitation, contingent liabilities) of the Company and its Subsidiaries
taken as a whole, or (ii) prevent or materially delay the performance by the
Company of any of its obligations under this Agreement or the consummation of
the Merger or the other transactions contemplated by this Agreement, except to
the extent that such adverse effect (A) results from changes in (1) general
economic conditions which do not disproportionately adversely affect the
Company or its Subsidiaries, (2) conditions generally affecting the industry in
which the Company operates or which it serves which do not disproportionately
adversely affect the Company or its Subsidiaries, (3) Law or applicable
regulations or the official interpretations thereof, (4) GAAP, or (B)
specifically relates to the announcement or expectation of the consummation of
the transactions contemplated hereby.
(c) For purposes of this Agreement, the term "Subsidiary" or
"Subsidiaries" shall mean, when used with respect to any party to this
Agreement, any corporation, association, subsidiary, partnership, limited
liability company or other entity of which such party to this Agreement or any
of its Subsidiaries controls, directly or indirectly, 50% or more of the
outstanding equity interests.
(d) For purposes of this Agreement, the term "knowledge" shall mean
the actual knowledge of the persons set forth in Section 8.11 of the Company
Disclosure Letter.
Section 8.12. Fees and Expenses. Whether or not the Merger is
consummated, except as provided in Section 7.2, all fees, costs and expenses
incurred by the parties hereto in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
fees, costs or expenses. The total amount of all fees, costs and expenses of
the Company with respect to the transactions contemplated hereby, including,
without limitation, fees, costs or expenses from services rendered by or on
behalf of any of its brokers, accountants, investment bankers, attorneys or
other representatives retained or used by the Company and its Subsidiaries in
connection with the negotiation of this Agreement and the consummation of the
transactions contemplated hereby shall be reasonable and customary for a
transaction of this type giving consideration to the facts and circumstances of
the transaction contemplated by this Agreement, as such facts and circumstances
existed as of and prior to the date of this Agreement and evolve after the date
of this Agreement.
Section 8.13. Notices. All notices, communications and deliveries
required or permitted hereunder shall be made in writing signed by the party
making the same, shall specify the Section hereunder pursuant to which the same
is given or being made, and shall be delivered personally or sent by telecopy
transmission by registered mail, or by any internationally recognized overnight
delivery service (with postage and other fees prepaid, in each case) as
follows:
To Parent or Sub: Designer Apparel Holding Company
c/o Crescent Capital Investments, Inc.
Attn.: Xxxxx X. Xxxxxxxx
00 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a required, simultaneous King & Spalding LLP
copy transmitted in like Attn.: W. Xxxxxx Xxxxxx, Jr.
manner to: Xxxxxxx X. Xxxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
To the Company: Loehmann's Holdings, Inc.
Attn.: Xxxxxx Xxxxx
0000 Xxxxxx Xxxxxx
Xxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
and
Arcade Marketing
Attn.: Xxxxxxx X. Xxx
0000 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a required, simultaneous Skadden, Arps, Slate, Xxxxxxx
copy transmitted in like & Xxxx LLP
manner to: Attn.: Xxxx X. Xxxxx and
Xxxxxxx X. Xxxxxxxx
0 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a required, simultaneous Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
copy transmitted in like Attn.: Xxxxxxx X. Xxxx
manner to: The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
or to such other representative or at such other address of a party of which a
party hereto may hereafter give notice to the other parties in writing. Notices
shall be effective upon the date of delivery or refusal of delivery, if given
by personal delivery, registered mail or courier delivery, or upon transmission
by facsimile transmission, if (a) the addressee confirms by telephone or
electronic means that the facsimile transmission in question was received in
legible form or (b) responds to the communication in the facsimile transmission
in question without indicating that it was not received in legible form.
Section 8.14. Waiver of Claims. Any and all claims, actions, causes of
action, demands, rights, costs, loss of services, expenses, obligations,
liabilities, compensation, damages, punitive damages, recoveries and
deficiencies, or actions of any kind (whether legal or equitable and whether in
contract or tort or for statutory violation) including, without limitation,
interest, fines, penalties, court costs, costs and expenses incurred in
enforcing such claims and reasonable attorneys' fees and all other indirect or
consequential damages, whether known or unknown, whether fixed or contingent
(collectively, the "Claims"), that the Company or any of its Subsidiaries may
have had, may now have or which may arise in the future against Parent, Sub,
FIIB or Crescent or any of their respective Related Parties, including, but not
limited to, any Claims arising out of, relating to or resulting from this
Agreement or the transactions contemplated hereby or any other transaction or
proposed transaction with respect to the sale of the capital stock or the
assets of the Company or any of its Subsidiaries, shall be brought solely
against Parent and Sub (all such Claims, the "Section 8.14 Claims"). Subject to
the last two sentences of this Section 8.14, the Company and its Subsidiaries
hereby agree to waive, release, acquit and forever discharge the Released
Parties from any and all Section 8.14 Claims, or any rights that they may have
had, may now have or which may arise in the future with respect to any Section
8.14 Claim. The parties hereto expressly intend the Released Parties to be
third party beneficiaries with respect to the provisions set forth in this
Section 8.14. For purposes of this Section 8.14, "Released Parties" shall mean
FIIB and Crescent and their respective Related Parties, excluding Parent and
Sub, and "Related Parties" shall include with respect to any entity, (i) its
direct and indirect equity holders, debt holders, partners, investors, parent
companies, subsidiaries, and its affiliated companies, and (ii) all
predecessors, successors, assigns, officers, directors, employees, agents,
representatives and attorneys of the persons described in clause (i) of this
sentence. Notwithstanding anything in this Section 8.14 to the contrary, in no
event shall this Section 8.14 limit (i) the obligations of FIIB pursuant to the
Equity Commitment Letter, (ii) any Claim arising out of an intentional
misrepresentation in connection with the execution and delivery of this
Agreement or (iii) any Claim arising out of a breach by Parent of Section 4.6
of this Agreement. If the Company or any Subsidiary asserts a Claim as
described in clause (ii) of the preceding sentence, the prevailing party shall
be reimbursed for all attorneys fees and expenses incurred by it in connection
with such Claim. Notwithstanding anything in this Section 8.14 to the contrary,
nothing shall prevent the Company or any of its Subsidiaries from pursuing any
Claims that the Company or any of its Subsidiaries may have against FIIB
arising out of, relating to or resulting from the Equity Commitment Letter and
the covenants of FIIB contained therein.
[SIGNATURES ON FOLLOWING PAGE]
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
IN WITNESS WHEREOF, the Company, Parent and Sub have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
XXXXXXXX'X HOLDINGS INC.
By: /s/ Xxxxxxx X. Xxx
Name: Xxxxxxx X. Xxx
Title: Co-Chairman
DESIGNER APPAREL HOLDING COMPANY
By: /s/ Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx
Title: President
DAH MERGER CORPORATION
By: /s/ Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx
Title: President
EXHIBIT A
Pursuant to Section 1.6(b), the following Company 2001 Options shall
be canceled and cashed out:
XXXXXX XXXXXXXX
o 165,000 options granted on March 25, 2002
o 68,033 options granted on May 10, 2002
XXXXXX XXXXX
o 165,000 options granted on March 25, 2002
o 68,033 options granted on May 10, 2002
