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AGREEMENT AND PLAN OF MERGER
by and between
PETCO ANIMAL SUPPLIES, INC.
and
BD RECAPITALIZATION CORP.
Dated as of
May 17, 2000
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TABLE OF CONTENTS
PAGE
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AGREEMENT AND PLAN OF MERGER................................................................... 1
ARTICLE I DEFINITIONS...................................................................... 2
Section 1.1 CERTAIN DEFINITIONS....................................................... 2
Section 1.2 TERMS GENERALLY........................................................... 8
ARTICLE II THE MERGER....................................................................... 9
Section 2.1 THE MERGER................................................................ 9
Section 2.2 CONVERSION (OR RETENTION) OF SHARES....................................... 9
Section 2.3 PAYMENT OF CASH FOR OTHER SHARES.......................................... 11
Section 2.4 EXCHANGE OF STOCK CERTIFICATES............................................ 13
Section 2.5 DISSENTING SHARES......................................................... 14
Section 2.6 STOCK OPTIONS............................................................. 15
ARTICLE III THE SURVIVING CORPORATION........................................................ 15
Section 3.1 CERTIFICATE OF INCORPORATION.............................................. 15
Section 3.2 BYLAWS.................................................................... 16
Section 3.3 DIRECTORS AND OFFICERS.................................................... 16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OFTHE COMPANY..................................... 16
Section 4.1 CORPORATE EXISTENCE AND POWER............................................. 16
Section 4.2 CORPORATE AUTHORIZATION................................................... 16
Section 4.3 CORPORATE RECORDS......................................................... 17
Section 4.4 CONSENTS AND APPROVALS; NO VIOLATION...................................... 17
Section 4.5 CAPITALIZATION............................................................ 18
Section 4.6 COMPANY SEC REPORTS....................................................... 20
Section 4.7 PROVIDED INFORMATION...................................................... 21
Section 4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS...................................... 21
Section 4.9 ACCOUNTS PAYABLE AND INVENTORY............................................ 25
Section 4.10 NO UNDISCLOSED MATERIAL LIABILITIES....................................... 25
Section 4.11 LITIGATION................................................................ 25
Section 4.12 TAXES..................................................................... 26
Section 4.13 EMPLOYEE BENEFIT PLANS; ERISA............................................. 28
Section 4.14 LABOR MATTERS............................................................. 31
Section 4.15 COMPLIANCE WITH LAWS AND COURT ORDERS..................................... 33
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Section 4.16 FINDERS' FEES............................................................. 33
Section 4.17 ENVIRONMENTAL MATTERS..................................................... 33
Section 4.18 SUBSIDIARIES.............................................................. 34
Section 4.19 YEAR 2000 MATTERS......................................................... 35
Section 4.20 INSURANCE................................................................. 35
Section 4.21 SUPPLIERS................................................................. 36
Section 4.22 PERSONNEL, ETC............................................................ 36
Section 4.23 STOCKHOLDERS RIGHTS PLAN.................................................. 36
Section 4.24 CONTRACTS................................................................. 36
Section 4.25 PERMITS; COMPLIANCE WITH APPLICABLE LAWS AND MATERIAL
AGREEMENTS................................................................ 38
Section 4.26 INTELLECTUAL PROPERTY..................................................... 38
Section 4.27 RELATED PARTY TRANSACTIONS................................................ 41
Section 4.28 REAL ESTATE............................................................... 41
Section 4.29 ASSETS.................................................................... 44
Section 4.30 OPINION OF FINANCIAL ADVISOR.............................................. 44
Section 4.31 STATE ANTI-TAKEOVER STATUTES; DELAWARE SECTION 203........................ 44
Section 4.32 INTERNATIONAL TRADE LAWS AND REGULATIONS.................................. 46
Section 4.33 INVESTMENTS IN AFFILIATED ENTITIES........................................ 45
Section 4.34 NASDAQ LISTING; HOLDERS OF EQUITY SECURITIES AS OF RECORD
DATE FOR MOST RECENT MEETING OF STOCKHOLDERS............................ 46
ARTICLE V REPRESENTATIONS AND WARRANTIES OF MERGERSUB...................................... 46
Section 5.1 CORPORATE EXISTENCE AND POWER............................................. 46
Section 5.2 CORPORATE AUTHORIZATION................................................... 47
Section 5.3 GOVERNMENTAL AUTHORIZATION................................................ 47
Section 5.4 NON-CONTRAVENTION......................................................... 47
Section 5.5 DISCLOSURE DOCUMENTS...................................................... 47
Section 5.6 FINDERS' FEES............................................................. 48
Section 5.7 FINANCING................................................................. 48
ARTICLE VI COVENANTS OF THE COMPANY......................................................... 48
Section 6.1 CONDUCT OF THE COMPANY.................................................... 48
Section 6.2 COMPANY STOCKHOLDERS MEETING.............................................. 51
Section 6.3 ACCESS TO INFORMATION; RIGHT OF INSPECTION................................ 52
Section 6.4 OTHER POTENTIAL ACQUIRERS................................................. 52
Section 6.5 RESIGNATION OF DIRECTORS.................................................. 56
Section 6.6 WARN ACT.................................................................. 56
Section 6.7 LEASE CONSENTS............................................................ 56
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ARTICLE VII COVENANTS OF MERGERSUB........................................................... 56
Section 7.1 DIRECTOR AND OFFICER LIABILITY............................................ 56
ARTICLE VIII COVENANTS OF MERGERSUB AND THE COMPANY........................................... 56
Section 8.1 REASONABLE BEST EFFORTS................................................... 57
Section 8.2 CONSENTS AND APPROVALS.................................................... 57
Section 8.3 CERTAIN FILINGS........................................................... 58
Section 8.4 HSR ACT................................................................... 59
Section 8.5 ADVICE OF CHANGES......................................................... 59
Section 8.6 FINANCING................................................................. 59
Section 8.7 RECAPITALIZATION.......................................................... 60
Section 8.8 PUBLIC ANNOUNCEMENTS...................................................... 60
Section 8.9 FURTHER ASSURANCES........................................................ 60
Section 8.10 NOTICES OF CERTAIN EVENTS................................................. 60
ARTICLE IX CONDITIONS TO THE MERGER......................................................... 61
Section 9.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY............................... 61
Section 9.2 CONDITIONS TO THE OBLIGATIONS OF MERGERSUB................................ 61
Section 9.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY.............................. 63
ARTICLE X TERMINATION...................................................................... 63
Section 10.1 TERMINATION............................................................... 63
Section 10.2 TERMINATION FEE........................................................... 65
Section 10.3 EFFECT OF TERMINATION..................................................... 66
ARTICLE XI MISCELLANEOUS.................................................................... 66
Section 11.1 NOTICES................................................................... 66
Section 11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES................................ 68
Section 11.3 AMENDMENTS AND WAIVERS.................................................... 68
Section 11.4 EXPENSES.................................................................. 68
Section 11.5 SUCCESSORS AND ASSIGNS; ASSIGNMENT........................................ 69
Section 11.6 GOVERNING LAW............................................................. 69
Section 11.7 COUNTERPARTS; EFFECTIVENESS............................................... 69
Section 11.8 SEVERABILITY.............................................................. 69
Section 11.9 SPECIFIC PERFORMANCE...................................................... 69
Section 11.10 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES............................ 69
Section 11.11 "KNOWLEDGE"............................................................... 70
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AGREEMENT AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER, dated as of May 17, 2000 (this
"Agreement"), by and between Petco Animal Supplies, Inc., a
Delaware corporation
(the "Company"), and BD Recapitalization Corp., a
Delaware corporation
("MergerSub").
WHEREAS, it is the intention of the parties that MergerSub shall merge
with and into the Company (the "Merger"), with the Company being the surviving
corporation;
WHEREAS, a Special Committee (the "Special Committee") of the Board of
Directors of the Company (composed entirely of directors who have no direct or
indirect interest in the transactions contemplated hereby) has unanimously
determined, and the Board of Directors of the Company has unanimously
determined, that the Merger and the other transactions contemplated by this
Agreement, are fair to, advisable and in the best interests of the Company and
its stockholders, and each of the Special Committee and the Board of Directors
of the Company has approved this Agreement and recommended its adoption by the
stockholders of the Company;
WHEREAS, the Special Committee, the Board of Directors of the Company and
the sole stockholder of MergerSub have each approved and adopted this Agreement
and have approved the transactions contemplated hereby;
WHEREAS, as of the date hereof, certain holders of outstanding capital
stock of the Company have entered into a voting agreement (the "Voting
Agreement") with respect to approximately 0.6% of the outstanding capital stock
of the Company and certain employees of the Company have entered into employment
agreements which are conditioned upon the consummation of the Merger and,
following the date hereof, but on or prior to the consummation of the Merger,
the stockholders who are parties to the Voting Agreement and certain additional
stockholders will enter into a stockholders agreement in the form attached as an
exhibit to the Voting Agreement;
WHEREAS, MergerSub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger (as defined
below) and also to prescribe certain conditions to the Merger; and
WHEREAS, it is intended that the Merger be accounted for as a
"Recapitalization" for financial reporting purposes.
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NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the respective meanings set forth below:
"Affiliate" of a Person shall mean any Person that directly or indirectly
through one or more intermediaries controls, is controlled by, or is under
common control with such Person.
"Affiliated Entity" shall mean any corporation or other entity in which
the Company or any Subsidiary owns capital stock, a limited partnership interest
or other security which constitutes at least 10% of all of such outstanding
securities or class of securities.
"Aggregate Spread Amount" shall have the meaning given to it in Section
2.2(d).
"Balance Sheet" shall mean the consolidated balance sheet of the Company
as of January 29, 2000 (and the notes thereto) set forth in the Company's Annual
Report on Form 10-K for the fiscal year ended January 29, 2000.
"Balance Sheet Date" shall mean January 29, 2000.
"Business Day" shall mean any day that is not a Saturday, Sunday or legal
holiday in the State of New York.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Share Exchange Ratio" shall have the meaning set forth in Section
2.2(d).
"Common Shares" shall mean the shares of Common Stock.
"Common Stock" shall mean the capital stock of the Company designated as
common stock, $0.0001 par value per share.
"Company" shall mean Petco Animal Supplies, Inc., a
Delaware
corporation.
"Company Proxy Statement" shall have the meaning set forth in Section 4.4.
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"Company SEC Reports" shall have the meaning set forth in Section 4.6.
"Company Securities" shall have the meaning set forth in Section 4.5(b).
"Company Stockholders Meeting" shall have the meaning set forth in Section
6.2.
"Contracts" shall have the meaning set forth in Section 4.24.
"Current Policies" shall have the meaning set forth in Section 7.1.
"
Delaware Corporate Law" shall mean the
Delaware General Corporation Law,
as amended.
"Director Options" shall mean the outstanding options to acquire Shares
granted to directors of the Company.
"Disbursing Agent" shall have the meaning set forth in Section 2.3.
"Disclosure Letter" shall have the meaning set forth in the preamble to
Article IV.
"Dissenting Shares" shall have the meaning set forth in Section 2.5.
"Effective Time" shall have the meaning set forth in Section 2.1(b).
"Employee Options" shall mean the outstanding options to acquire Shares
granted to employees or consultants of the Company.
"Environmental Claims" shall have the meaning set forth in Section 4.17.
"Environmental Laws" shall have the meaning set forth in Section 4.17.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Expenses" shall have the meaning set forth in Section 10.2.
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"Financing" shall have the meaning set forth in Section 5.7.
"Financing Letters" shall have the meaning set forth in Section 5.7.
"GAAP" shall mean generally accepted accounting principles, as in effect
in the United States, from time to time.
"Governmental Authority" shall mean any agency, public or regulatory
authority, instrumentality, department, commission, court, ministry, tribunal or
board of any government, whether foreign or domestic and whether national,
federal, tribal, provincial, state, regional, local or municipal.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Insurance Policies" shall have the meaning set forth in Section 4.20.
"Intellectual Property" shall mean all trademarks, service marks, trade
names, Internet domain names, designs, logos, slogans, and general intangibles
of like nature, whether registered or unregistered, together with all goodwill,
registrations and applications related to the foregoing (collectively,
"Trademarks"); patents and industrial designs (including any continuations,
divisionals, continuations-in-part, renewals, reissues, and applications for any
of the foregoing); copyrights (including any registrations and applications for
any of the foregoing); Software; technology, trade secrets and other
confidential information, know-how, proprietary processes, formulae, algorithms,
models, and methodologies (collectively, "Trade Secrets"); rights of publicity
and privacy relating to the use of the names, likenesses, voices, signatures and
biographical information of real persons; in each case used in or necessary for
the conduct of Company's business as currently conducted or contemplated to be
conducted.
"Irrevocable Proxies" shall have the meaning set forth in the preamble to
this Agreement.
"IRS" shall mean the United States Internal Revenue Service.
"Law" shall mean statutes, common laws, rules, ordinances, regulations,
codes, licensing requirements, orders, judgments, injunctions, decrees,
licenses, agreements, settlements, governmental guidelines or interpretations,
permits, rules and bylaws of a Governmental Authority.
"Leased Real Property" shall have the meaning set forth in Section
4.28(b).
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"Leases" shall have the meaning set forth in Section 4.28(b).
"Lien" shall mean, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
"Material Adverse Effect" shall mean, with respect to any Person, any
event, circumstance, change, condition, development or occurrence either
individually or in the aggregate with all other events, circumstances, changes,
conditions, developments or occurrences, resulting in or reasonably likely to
result in a material adverse effect on (i) the business (as now conducted or as
now proposed by such Person to be conducted), results of operations, condition
(financial or otherwise), assets or liabilities (contingent or otherwise), or
prospects of such Person and its Subsidiaries, taken as a whole, (ii) the
legality or enforceability of this Agreement, or (iii) the ability of such
Person to perform its obligations and to consummate the transactions under this
Agreement.
"Materials of Environmental Concern" shall have the meaning set forth in
Section 4.17.
"Merger" shall have the meaning set forth in Section 2.1(a).
"Merger Consideration" shall have the meaning set forth in Section 2.2(a).
"MergerSub" shall mean BD Recapitalization Corp., a
Delaware
corporation.
"MergerSub Common Shares" shall mean the common stock, $0.01 par value, of
MergerSub.
"MergerSub Securities" shall have the meaning set forth in Section 5.8.
"MergerSub Series A Preferred Shares" shall mean the shares of 14% Series
A Senior Redeemable Exchangeable Cumulative Preferred Stock of MergerSub.
"MergerSub Series B Preferred Shares" shall mean the shares of 12% Series
B Junior Redeemable Exchangeable Cumulative Preferred Stock of MergerSub.
"Minimum Lease Consents" shall mean (i) any and all consents of landlords
under the Leases for all Leased Real Property at which the distribution centers
of the Company and its Subsidiaries are located, (ii) any and all consents of
landlords under the Leases required by MergerSub's lender(s) in connection with
the Financing, except with respect to leaseholds which the Agents (as defined in
the Financing Letters) determine are immaterial to the collateral package (as
contemplated by the Financing Letters) as a whole, and (iii) any and
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all consents of landlords under the Leases sufficient to ensure that, as of
the Effective Time, the stores (on an annualized basis) occupied under the
Leases for which the consents of the landlords thereunder were required under
such Leases but have not been obtained do not account, in the aggregate, for
more than five percent (5%) of the Company's total annual gross revenue for
its fiscal year ended January 29, 2000 as indicated in the Company's
accounting books and records.
"New Series A Preferred Stock" shall have the meaning set forth in Section
2.2(f).
"New Series A Preferred Stock Exchange Ratio" shall have the meaning set
forth in Section 2.2(e).
"New Series B Preferred Stock" shall have the meaning set forth in Section
2.2(g).
"New Series B Preferred Stock Exchange Ratio" shall have the meaning set
forth in Section 2.2(g).
"Notice of Superior Proposal" shall have the meaning set forth in Section
6.4(b).
"Other Shares" shall have the meaning set forth in Section 2.2(a).
"Options" shall mean Employee Options and Director Options.
"Owned Real Property" shall have the meaning set forth in Section 4.28(a).
"Permits" shall mean any licenses, franchises, permits, certificates,
consents, approvals or other similar authorizations affecting, or relating in
any way to, the assets or business of the Company.
"Person" shall mean any individual, corporation, limited liability
company, partnership, association, trust or any other entity or organization,
including any government or political subdivision or any agency or
instrumentality thereof.
"Plans" shall have the meaning set forth in Section 4.13(a).
"Proceeding" shall have the meaning set forth in Section 4.11.
"Real Property" shall have the meaning set forth in Section 4.28(c).
"Related Parties" shall have the meaning set forth in Section 4.27.
6
"Replacement Policies" shall have the meaning set forth in Section 7.1.
"Retained Shares" shall have the meaning set forth in Section 2.2(c).
"Retaining Stockholders" shall have the meaning set forth in Section
2.2(c).
"Rights" shall mean the preferred share purchase rights issued with
respect to each share of Common Stock pursuant to the Rights Agreement.
"Rights Agreement" shall mean the Rights Agreement, dated September 14,
1998, between the Company and American Stock Transfer and Trust Company as
Rights Agent.
"Roll-over Schedule" shall have the meaning set forth in Section 2.2(d).
"Roll-over Share Number" shall have the meaning set forth in Section
2.2(d).
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Shares" shall mean the Common Stock of the Company, including the Rights.
"Software" means any and all (a) computer programs, including any and all
software implementation of algorithms, models and methodologies, whether in
source code or object code form, (b) databases and compilations, including any
and all data and collections of data, and (c) all documentation, including user
manuals and training materials, relating to any of the foregoing.
"Spread Amount" shall have the meaning set forth in section 2.6(b).
"Subsidiary" shall mean any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by such Person.
"Superior Proposal" shall have the meaning set forth in Section 6.4(c).
"Surviving Corporation" shall have the meaning set forth in Section
2.1(a).
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"System" shall have the meaning set forth in Section 4.19.
"Tax or Taxes" shall mean (A) all taxes, charges, fees, duties, levies,
penalties or other assessments, including, without limitation, income, gross
receipts, excise, real and personal property, sales, use, transfer, license,
payroll, withholding, social security, franchise, unemployment insurance,
workers' compensation, employer health tax or other taxes, fees, assessments or
charges of any kind whatsoever, imposed by any Governmental Authority and shall
include any interest, penalties or additions to any of the foregoing, (B) any
liability for payment of amounts described in clause (A) whether as a result of
transferee liability, of being a member of an affiliated, consolidated, combined
or unitary group for any period, or otherwise through operation of law, and (C)
any liability for the payment of amounts described in clauses (A) or (B) as a
result of any tax sharing agreement, tax allocation agreement, tax indemnity
agreement, or other agreement that includes indemnification for any tax
liability.
"Tax Return" shall mean all returns, declarations, reports, forms,
estimates, information returns, statements or other documents (including any
related or supporting information) filed or required to be filed with or
supplied to any Governmental Authority or any Person, in each case, in
connection with any Taxes.
"Terminal Date" shall have the meaning set forth in Section 10.1(b).
"Third Party" shall have the meaning set forth in Section 6.4(c).
"Third Party Acquisition" shall have the meaning set forth in Section
6.4(c).
"Voting Agreement" shall have the meaning set forth in the Recitals
hereto.
"WARN Act" shall have the meaning set forth in section 6.6.
"Year 2000 Compliant" shall have the meaning set forth in Section 4.19.
Section 1.2 TERMS GENERALLY. The definitions in Sections 1.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation" even if not followed
actually by such phrase unless the context expressly provides otherwise. All
references herein to Sections, paragraphs and Exhibits shall be deemed
references to Sections or paragraphs of or Exhibits to this Agreement unless the
context shall otherwise require. Unless otherwise expressly defined, terms
defined in this Agreement shall have the same meanings when used in any Exhibit
and terms defined in any Exhibit shall have
8
the same meanings when used in this Agreement or in any other Exhibit. The
words "herein," "hereof," "hereto" and "hereunder" and similar words refer to
this Agreement as a whole and not to any particular provision of this Agreement.
ARTICLE II
THE MERGER
Section 2.1 THE MERGER.
(a) At the Effective Time, MergerSub shall be merged with and
into the Company in accordance with
Delaware Corporate Law and the terms and
conditions hereof (the "Merger"). Upon consummation of the Merger, the separate
existence of MergerSub shall cease and the Company shall be the surviving
corporation (the "Surviving Corporation").
(b) As soon as practicable after satisfaction (or, to the extent
permitted hereunder, waiver) of all conditions to the Merger, the Company and
MergerSub will file a certificate of merger with the Secretary of State of the
State of
Delaware in accordance with
Delaware Corporate Law and make all other
filings or recordings required by Law in connection with the Merger. The Merger
shall become effective at such time as the certificate of merger is certified
by the Secretary of State of the State of Delaware or at such later time as is
specified in the certificate of merger (such date and time being referred to
herein as the "Effective Time").
(c) The Merger shall have the effects set forth in the Delaware
Corporate Law.
Section 2.2 CONVERSION (OR RETENTION) OF SHARES. At the Effective Time,
pursuant to this Agreement and by virtue of the Merger and without any action on
the part of MergerSub, the Company or the holders of any of the following
securities:
(a) Each share of Common Stock issued and outstanding immediately
prior to the Effective Time other than: (i) any shares of Common Stock to be
canceled pursuant to Section 2.2(b), (ii) each share of Common Stock to remain
outstanding pursuant to Section 2.2(c) or 2.2(d), and (iii) each Dissenting
Share complying with Section 2.5, shall be canceled, retired and shall cease to
exist and shall be converted automatically into the right to receive an amount
equal to $22 in cash, without interest (the "Merger Consideration"), payable to
the holder thereof upon surrender of the certificate formerly representing such
share of Common Stock in the manner provided in Section 2.3; and no other
consideration shall be delivered or deliverable on or in exchange therefor (the
shares of Common Stock being
9
converted into the right to receive the Merger Consideration are hereinafter
referred to as the "Other Shares.")
(b) Each Share held in the treasury of the Company and each Share
owned by any of the Company's Subsidiaries or by MergerSub, if any, immediately
prior to the Effective Time shall be canceled without any conversion thereof and
no payment or distribution shall be made with respect thereto.
(c) The shares of Common Stock registered in the names of the
persons (the "Retaining Stockholders") listed and as set forth in Section 2.2(c)
of the Disclosure Letter (collectively, the "Retained Shares") shall not be
converted, exchanged or canceled as provided above but shall remain outstanding.
(d) That number of shares of Common Stock registered in the names
of the persons (which shall not include the Retained Shares) and as identified
in a schedule prepared by the Company (the "Roll-over Schedule"), shall not be
converted, exchanged or canceled as provided in Sections 2.2(a) or (b) above,
but shall remain outstanding. The Roll-over Schedule shall be delivered by the
Company to MergerSub prior to the consummation of the Merger, and shall
identify a number of shares of Common Stock to remain outstanding (the
"Rollover Share Number") and a number of Options to remain outstanding such
that (x) the sum of (A) the product of $22 and the Rollover Share Number, and
(B) the Aggregate Spread Amount (as defined in Section 2.6(b) hereof and
subject to the adjustment provided in Section 2.6(c)) for all Options
identified in the Roll-over Schedule (the "Aggregate Spread Amount") shall be
less than or equal to (y) $1,735,927.
(e) Each MergerSub Common Share that is issued and outstanding
immediately prior to the Effective Time shall be converted into one newly
issued, fully paid and nonassessable shares of Common Stock (the "Common Share
Exchange Ratio").
(f) Each MergerSub Series A Preferred Share that is issued and
outstanding immediately prior to the Effective Time shall be converted into one
newly issued, fully paid and nonassessable share of Series A Preferred Stock
(the "New Series A Preferred Stock") of the Surviving Corporation (the "New
Series A Preferred Stock Exchange Ratio"). The terms of the New Series A
Preferred Stock shall be as provided in the Surviving Corporation's certificate
of incorporation.
(g) Each MergerSub Series B Preferred Share that is issued and
outstanding immediately prior to the Effective Time shall be converted into one
newly issued, fully paid and nonassessable share of Series B Preferred Stock
(the "New Series B Preferred Stock") of the Surviving Corporation (the "New
Series B Preferred Stock Exchange Ratio").
10
The terms of the New Series B Preferred Stock shall be as provided in the
Surviving Corporation's certificate of incorporation.
(h) If between the date of this Agreement and the Effective Time
the number of outstanding Shares shall have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split-up, combination,
exchange of shares or the like other than pursuant to the Merger, the amount of
the Merger Consideration, the Common Share Exchange Ratio, the New Series A
Preferred Stock Exchange Ratio and the New Series B Preferred Stock Exchange
Ratio and the Roll-over Share Number shall be correspondingly adjusted and, if
and as appropriate, all other appropriate corresponding adjustments shall be
made, including, without limitation, as necessary to properly adjust the
numbers in Sections 2.2(c) and (d).
Section 2.3 PAYMENT OF CASH FOR OTHER SHARES.
(a) At the Effective Time, the Surviving Corporation shall
irrevocably deposit or cause to be deposited with a bank or trust company to be
designated by the Surviving Corporation which is organized and doing business
under the laws of the United States or any state thereof and has a combined
capital and surplus of at least $100,000,000 (the "Disbursing Agent"), as agent
for the holders of Other Shares, cash in the aggregate amount required to pay
the Merger Consideration in respect of the Other Shares outstanding immediately
prior to the Effective Time. Pending distribution pursuant to Section 2.3(b)
hereof of the cash deposited with the Disbursing Agent, such cash shall be held
in trust for the benefit of the holders of Other Shares and such cash shall not
be used for any other purposes; PROVIDED, HOWEVER, that the Surviving
Corporation may direct the Disbursing Agent to invest such cash, provided that
such investments (i) shall be obligations of or guaranteed by the United States
of America, in commercial paper obligations receiving the highest rating from
either Xxxxx'x Investors Services, Inc. or Standard & Poor's Corporation, or in
certificates of deposit, bank repurchase agreements or bankers acceptances of
domestic commercial banks with capital exceeding $250,000,000 (collectively
"Permitted Investments") or in money market funds which are invested solely in
Permitted Investments and (ii) shall have maturities that will not prevent or
delay payments to be made pursuant to Section 2.3(b) hereof. Each holder of a
certificate or certificates representing Other Shares canceled and extinguished
at the Effective Time pursuant to Section 2.2(a) hereof may thereafter in
accordance with the provisions of Section 2.3(b) hereof, surrender such
certificate or certificates to the Disbursing Agent, as agent for such holder of
Other Shares, to effect the exchange of such certificate or certificates on such
holder's behalf for a period ending six months after the Effective Time.
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(b) As soon as reasonably practicable after the Effective Time,
the Surviving Corporation shall cause the Disbursing Agent to mail to each
holder of record of Other Shares, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates representing Other Shares shall pass, only upon delivery of such
certificates to the Disbursing Agent and shall be in such form and have such
other provisions not inconsistent with this Agreement as the Surviving
Corporation may specify) and (ii) instructions for use in effecting the
surrender of certificates representing Other Shares in exchange for payment of
the Merger Consideration. Upon surrender of a certificate or certificates
representing Other Shares for cancellation to the Disbursing Agent or to such
other agent or agents as may be appointed by the Surviving Corporation,
together with such letter of transmittal, duly executed and completed, the
holder of such certificate or certificates shall be entitled to receive in
exchange therefor the Merger Consideration for each Other Share formerly
represented by such certificate or certificates, and the certificate or
certificates so surrendered shall forthwith be cancelled, less any amounts
required to be withheld by applicable law. Until so surrendered and exchanged,
each such certificate shall, after the Effective Time, be deemed to represent
only the right to receive the Merger Consideration, and until such surrender
and exchange, no cash or other consideration or payment of any kind shall be
paid to the holder of such outstanding certificate in respect thereof.
(c) If payment is to be made to a Person other than the registered
holder of the Other Shares represented by the certificate or certificates
surrendered in exchange therefor, it shall be a condition to such payment that
the certificate or certificates so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting such
payment shall pay to the Disbursing Agent any transfer or other Taxes required
as a result of such payment to a Person other than the registered holder of such
Other Shares or establish to the satisfaction of the Disbursing Agent that such
Tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further transfers
on the stock transfer books of the Surviving Corporation of the Other Shares
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing Other Shares are presented to the
Surviving Corporation, they shall be canceled and exchanged for the
consideration provided for, and in accordance with the procedures set forth, in
this Article II.
(e) If any cash deposited with the Disbursing Agent for purposes
of payment in exchange for Other Shares remains unclaimed six months after the
Effective Time, such cash; together with all interest and earnings thereon
shall be returned to the Surviving Corporation, upon demand, and any such
holder who has not converted his Other Shares into the Merger Consideration
prior to that time shall thereafter look only to the Surviving
12
Corporation for payment of the Merger Consideration. Notwithstanding the
foregoing, the Surviving Corporation shall not be liable to any holder of Other
Shares for any amount paid to a public official pursuant to applicable
unclaimed property laws. Any amounts remaining unclaimed by holders of Other
Shares six (6) years after the Effective Time (or such earlier date immediately
prior to such time as such amounts would otherwise escheat to or become
property of any Governmental Authority) shall, to the extent permitted by
applicable Law, become the property of the Surviving Corporation free and clear
of any claims or interest of any Person previously entitled thereto.
(f) Any portion of the Merger Consideration; together with all
interest and earnings thereon made available to the Disbursing Agent pursuant to
Section 2.5(a) to pay for Other Shares for which dissenter's rights have been
perfected shall be returned to the Surviving Corporation, upon demand.
(g) No dividends or other distributions with respect to capital
stock of the Surviving Corporation with a record date after the Effective Time
shall be paid to the holder of any unsurrendered certificate for Other Shares.
(h) From and after the Effective Time, the holders of Other Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Other Shares, other than the right to receive the
Merger Consideration as provided in this Agreement.
(i) In the event that any certificate representing Other Shares
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such certificate representing Other Shares to
be lost, stolen or destroyed and, if required by the Company, the posting by
such holder of a bond in such reasonable amount as the Company may direct as
indemnity against any claim that may be made against it with respect to such
certificate representing Other Shares, the Disbursing Agent will issue in
exchange for such lost, stolen or destroyed certificate representing Other
Shares the Merger Consideration, and unpaid dividends and distributions on Other
Shares deliverable in respect thereof pursuant to this Agreement and the Merger.
Section 2.4 EXCHANGE OF STOCK CERTIFICATES. Immediately after the
Effective Time, the Surviving Corporation shall (i) deliver to the record holder
of the certificates which immediately prior to the Effective Time represented
all the outstanding shares of MergerSub Common Shares that were converted into
the right to receive shares of Common Stock in accordance with Section 2.2(e),
in exchange for such certificates, duly endorsed in blank, share certificates,
registered in the name of such record holder, representing the number of shares
of Common Stock to which such record holder is so entitled by virtue of Section
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2.2(e), (ii) deliver to the record holder of the certificates which immediately
prior to the Effective Time represented all the outstanding MergerSub Series A
Preferred Shares that were converted into the right to receive shares of New
Series A Preferred Stock in accordance with Section 2.2(f), in exchange for such
certificates, duly endorsed in blank, share certificates, registered in the name
of such record holder, representing the number of shares of New Series A
Preferred Stock to which such record holder is so entitled by virtue of Section
2.2(f), and (iii) deliver to the record holder of the certificates which
immediately prior to the Effective Time represented all the outstanding
MergerSub Series B Preferred Shares that were converted into the right to
receive shares of New Series B Preferred Stock in accordance with Section
2.2(g), in exchange for such certificates, duly endorsed in blank, share
certificates, registered in the name of such record holder, representing the
number of shares of New Series B Preferred Stock to which such record holder is
so entitled by virtue of Section 2.2(g). Such certificate will bear a legend
restricting the transferability of such shares to the extent contemplated by the
form of stockholders agreement attached as an exhibit to the Voting Agreement,
which restrictions include restrictions designed to assure the Surviving
Corporation that these shares will not be offered or sold in contravention of
any federal or state securities laws.
Section 2.5 DISSENTING SHARES. Notwithstanding Section 2.2, Shares which
are issued and outstanding immediately prior to the Effective Time and which are
held by a holder who has not voted such Shares in favor of the Merger and who
has delivered a written demand for relief as a dissenting stockholder in the
manner provided by Delaware Corporate Law and who, as of the Effective Time,
shall not have effectively withdrawn or lost such right to relief as a
dissenting stockholder ("Dissenting Shares") shall not be converted into a right
to receive the Merger Consideration. The holders of such Dissenting Shares shall
be entitled only to such rights as are granted by Section 262 of Delaware
Corporate Law. Each holder of Dissenting Shares who becomes entitled to payment
for such Shares pursuant to Section 262 of Delaware Corporate Law shall receive
payment therefor from the Surviving Corporation in accordance with Delaware
Corporate Law; provided, however, that if any such holder of Dissenting Shares
(i) shall have failed to establish his entitlement to relief as a dissenting
stockholder as provided in Section 262 of Delaware Corporate Law, (ii) shall
have effectively withdrawn his demand for relief as a dissenting stockholder
with respect to such Shares or lost his right to relief as a dissenting
stockholder and payment for his Shares under Section 262 of Delaware Corporate
Law, or (iii) shall have failed to file a complaint with the appropriate court
seeking relief as to determination of the value of all Dissenting Shares within
the time provided in Section 262 of Delaware Corporate Law, such holder shall
forfeit the right to relief as a dissenting stockholder with respect to such
Shares and each such Share shall be converted into the right to receive the
appropriate Merger Consideration without interest thereon, from the Surviving
Corporation as provided in Section 2.2. The Company shall give MergerSub prompt
written notice of any demands received by the Company for
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relief as a dissenting stockholder and MergerSub shall have the right to
participate in all negotiations and proceedings with respect to such demands.
The Company shall not, except with the prior written consent of MergerSub, make
any payment with respect to, or settle or offer to settle, any such demands.
Section 2.6 STOCK OPTIONS.
(a) Each Option, whether vested or unvested, that has an exercise
price equal to or greater than $22 shall be canceled immediately prior to the
Effective Time for no consideration.
(b) Immediately prior to the Effective Time, all other outstanding
and vested Options (other than Options being retained pursuant to Section 2.6(c)
hereof) shall be canceled and, in lieu thereof, as soon as reasonably
practicable as of or after the Effective Time, the holders of such Options shall
receive a cash payment from the Company equal to the product of (i) the total
number of Shares previously subject to such Option and (ii) the excess (x) of
the Merger Consideration that would be paid with respect to the Share subject to
such Option if the Option were exercised over (y) the exercise price per Share
subject to such Option (such excess, the "Spread Amount"), as reduced by any
required withholding of taxes. Immediately prior to the Effective Time, all
unvested Options other than Options being retained pursuant to Section 2.6(c)
hereof shall be vested.
(c) Subject to the provisions of Section 2.2(d) hereof, at the
Effective Time, those Options identified in the Roll-over Schedule shall not be
converted, exchanged or canceled as provided above but shall remain outstanding,
provided, however, that the exercise price of such Options shall be adjusted to
$4.40 per Share and the number of Shares subject to such Options shall be
adjusted such that the Aggregate Spread Amount for all such Options, after such
adjustments, shall be equal to 80% of the Aggregate Spread Amount for all such
Options immediately prior to such adjustments.
ARTICLE III
THE SURVIVING CORPORATION
Section 3.1 CERTIFICATE OF INCORPORATION. The certificate of incorporation
of the Surviving Corporation shall be amended in the Merger to be the
Certificate of Incorporation of MergerSub immediately prior to the Effective
Time until amended in accordance therewith and with applicable law, except that
Article First thereof shall continue to read, "The name of the Corporation
(hereafter the "Corporation") is PETCO ANIMAL SUPPLIES, INC.".
15
Section 3.2 BYLAWS. The bylaws of MergerSub in effect at the Effective
Time shall be the bylaws of the Surviving Corporation (with the name of the
Surviving Corporation changed, as appropriate) until amended in accordance
therewith and in accordance with the certificate of incorporation of the
Surviving Corporation and applicable law.
Section 3.3 DIRECTORS AND OFFICERS. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable Law, (i) the directors of MergerSub at the Effective Time shall be
the initial directors of the Surviving Corporation and (ii) the officers of the
Company at the Effective Time shall be the initial officers of the Surviving
Corporation, in each case to hold office in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to MergerSub that, except as set forth
in the corresponding sections or subsections of the Disclosure Letter delivered
to MergerSub by the Company concurrently with entering into this Agreement (the
"Disclosure Letter"):
Section 4.1 CORPORATE EXISTENCE AND POWER. Each of the Company and its
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers required to carry on its business as now conducted. Each of the
Company and its Subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, be reasonably likely
to have a Material Adverse Effect on the Company. Without limiting the
generality of the foregoing, the Company and it Subsidiaries are qualified to do
business in the states shown on Section 4.1 of the Disclosure Letter. The
Company has heretofore made available to MergerSub true and complete copies of
the currently effective amended and restated certificate of incorporation and
bylaws or similar organizational documents of the Company and each of its
Subsidiaries (as the same may be amended and restated as of the date hereof).
Section 4.2 CORPORATE AUTHORIZATION. (a) The Company has the full
corporate power and authority to execute and deliver this Agreement and, subject
to approval of this Agreement by the affirmative vote of a majority of the votes
represented by the shares of Common Stock outstanding on the record date to be
established for the Company Stockholders Meeting, to consummate the transactions
contemplated by this Agreement. The
16
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby on the part of the Company have been (i) duly
and validly authorized and adopted by the unanimous vote of the Special
Committee and by the unanimous vote of the Company's Board of Directors, and
(ii) determined to be fair to, advisable and in the best interests of the
stockholders of the Company (other than the Retaining Stockholders) by the
Special Committee and the Company's Board of Directors. The Special Committee
and the Board of Directors have each recommended that the Stockholders of the
Company adopt this Agreement and approve the Merger. No corporate proceedings
on the part of the Company are necessary, as a matter of law or otherwise, for
the consummation of the transactions contemplated hereby, other than the
approval of this Agreement by the Company's stockholders at the Company
Stockholders Meeting. This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery of this Agreement by MergerSub, is a valid and binding agreement of
the Company enforceable against it in accordance with its terms, except to the
extent that the enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to creditor's rights generally, (ii)
general principles of equity (regardless of whether such enforcement is
considered in a proceeding at law or in equity) and (iii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the discretion of the court before which any enforcement proceeding
therefor may be brought.
Section 4.3 CORPORATE RECORDS. The Company has made available to
MergerSub a complete and correct copy of the certificate of incorporation and
bylaws, each as amended to date, of each of the Company and the Company's
Subsidiaries. Each of the certificates of incorporation and bylaws so delivered
is in full force and effect. The corporate records and minute books of the
Company and the Company's Subsidiaries provided to MergerSub reflect all
material action taken and authorizations made at meetings of such companies'
Boards of Directors or any committees thereof and at any stockholders' meetings
thereof.
Section 4.4 CONSENTS AND APPROVALS; NO VIOLATION. The execution and
delivery of this Agreement by the Company, the consummation of the transactions
contemplated hereby (including completion of the Financing on the terms set
forth in the Financing Letters) and the performance by the Company of its
obligations hereunder will not:
(a) conflict with or result in any breach of any provision of the
Company's Certificate of Incorporation or the Bylaws or other organizational
documents;
(b) require any consent, approval, order, authorization or permit
of, or registration, filing with or notification to, any Governmental Authority
or any private third party except for (i) the filing of a pre-merger
notification and report form by the Company under the
17
HSR Act, (ii) the filing with the SEC of (A) a proxy statement relating to the
Company Stockholders Meeting (together with any amendments thereof or
supplements thereto and any other required proxy materials, the "Company Proxy
Statement"), (B) a Rule 13e-3 transaction statement on Schedule 13E-3 (the
"Schedule 13E-3"), and (C) such reports under Section 13(a) of the Exchange
Act as may be required in connection with this Agreement and the transactions
contemplated hereby, (iii) any registration, filing or notification required
pursuant to state securities or Blue Sky laws, and (iv) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware in
connection with the Merger;
(c) result in the creation or imposition of any material Lien on
any asset of the Company or any of its Subsidiaries or Affiliated Entities;
(d) result in any violation of or the breach of or constitute a
default (with notice or lapse of time or both) under (or give rise to any
right of termination, cancellation or acceleration or guaranteed payments
under or to, a loss of a material benefit or result in the creation or
imposition of a lien under) any of the terms, conditions or provisions of any
note, lease, mortgage, indenture, license, agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is a party or by
which the Company, any of its Subsidiaries or any of their respective
Affiliates may be bound, except for such violations, breaches, defaults, or
rights of termination, cancellation or acceleration, losses or the imposition
of liens as to which requisite waivers or consents have been obtained or will
be obtained prior to the Effective Time or which, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect; or
(e) violate the provisions of any order, writ, injunction,
judgment, decree, statute, rule or regulation applicable to the Company or any
of its Subsidiaries, in such a manner as could, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
Section 4.5 CAPITALIZATION. (a) The authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock, par value $0.0001 per
share including the associated Rights and 2,000,000 shares of preferred stock,
par value $0.0001 per share. As of the date hereof, (i) 21,107,329 shares of
Common Stock were issued and outstanding, all of which were validly issued,
fully paid and nonassessable and were issued free of preemptive (or similar)
rights, and (ii) an aggregate of 250,000 shares of preferred stock were
designated as the company's Series A Junior Participating Preferred Stock,
none of which are issued and outstanding. Section 4.5 of the Disclosure Letter
contains a true, complete and correct list of all outstanding Options and all
other options, warrants, rights or other securities convertible into or
exercisable for shares of capital stock of the Company, the holders of such
options, warrants, rights and other securities and the exercise price with
respect to such securities.
18
(b) Except as set forth in this Section 4.5 and except as may result
from the exercise, prior to the consummation of the Merger, of Options
outstanding on the date hereof, there are no outstanding (i) shares of capital
stock or other voting securities of the Company, (ii) securities of the Company
convertible into or exchangeable for shares of capital stock or voting
securities of the Company or its Subsidiaries, (iii) options or other rights,
other than the Rights, to acquire from the Company or its Subsidiaries, or
obligations of the Company or its Subsidiaries to issue, any shares of capital
stock, voting securities or securities of the Company, and (iv) no equity
equivalent interests in the ownership or earnings of the Company or its
Subsidiaries or other similar rights (the items in clauses (b)(i), (ii), (iii)
and (iv) being referred to collectively as the "Company Securities"). There are
no outstanding obligations of the Company or any Subsidiary to repurchase,
redeem or otherwise acquire any Company Securities.
(c) Other than the Voting Agreement, 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 shares of any capital
stock of the Company or any of its Subsidiaries. Neither the Company nor any of
its Subsidiaries will be required to redeem, repurchase or otherwise acquire any
shares of capital stock of the Company (other than pursuant to the Merger in
accordance with the terms of this Agreement) or any of its Subsidiaries, as a
result of the transactions contemplated by this Agreement.
(d) No agreement or other document grants or imposes on any shares
of Common Stock any right, preference, privilege or restriction with respect to
the transactions contemplated hereby (including, without limitation, any rights
of first refusal). All of the outstanding shares of Common Stock are, and all
shares of Common Stock that may be issued upon the exercise of outstanding
Options will be, when issued in accordance with the terms thereof, duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. There are no outstanding contractual obligations of the Company or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiary or to provide funds to
make any investment (in the form of a loan, capital contribution or otherwise)
in the Company, any of its Subsidiaries or any other Person.
(e) All of the issued and outstanding shares of capital stock of the
Company's Subsidiaries are owned beneficially and of record by the Company, free
and clear of all liens, charges, pledges, encumbrances, equities, voting
restrictions, claims and options of any nature, and all such shares have been
duly authorized, validly issued and are fully paid, nonassessable and free of
preemptive rights. The Company has not made, directly or
19
indirectly, any material investment in, advance to or purchase or guaranty of
any obligations of, any Person other than obligations of its Subsidiaries.
Section 4.6 COMPANY SEC REPORTS.
(a) The Company has filed with the SEC all forms, reports,
schedules, statements and other documents required to be filed by it since
January 1, 1996 under the Securities Act or the Exchange Act (such documents, as
supplemented or amended since the time of filing, collectively, the "Company SEC
Reports"). As of their respective dates, the Company SEC Reports, including,
without limitation, any financial statements or schedules included or
incorporated by reference therein, at the time filed (and, in the case of
registration statements and proxy statements, on the dates of effectiveness and
the dates of mailing, respectively) (a) complied, in all material respects, with
all applicable requirements of the Securities Act and the Exchange Act, as the
case may be and (b) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The audited consolidated financial statements
and unaudited consolidated interim financial statements (the "Financial
Statements") included or incorporated by reference in the Company SEC Reports
(including any related notes and schedules) fairly present, in all material
respects, the financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the results of their operations and
their cash flows for the periods set forth therein, in each case in accordance
with past practices and GAAP consistently applied during the periods involved
(except as otherwise disclosed in the notes thereto and subject, where
appropriate, to normal year-end adjustments that would not be material in amount
or effect).
(b) The Company has heretofore made available or promptly will make
available to MergerSub a complete and correct copy of any amendments or
modifications to any Company SEC Reports filed prior to the date hereof which
are required to be filed with the SEC but have not yet been filed with the SEC.
(c) The Company will file with the SEC and promptly will make
available to MergerSub true and complete copies of each form, registration
statement, report, schedule, proxy or information statement and other documents
(including exhibits thereto) required to be filed with the SEC under the
Securities Act or the Exchange Act.
Section 4.7 PROVIDED INFORMATION. The information supplied or to be
supplied by the Company, for inclusion in (a) offering documents (the "Offering
Documents") in connection with the Financing; (b) the Schedule 13E-3; and (c)
the Company Proxy Statement will not, in the case of the Offering Documents and
the Schedule 13E-3, as of the date thereof, of each
20
amendment or supplement thereto and as of the Effective Time, and in the case
of the Company Proxy Statement, either at the date mailed to the Company's
Stockholders or at the time of the Company Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Each of the Company Proxy Statement and the Schedule 13E-3, as to information
supplied by the Company, will comply in all material respects with all
applicable provisions of the Exchange Act.
Section 4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as expressly contemplated by this Agreement, since the
Balance Sheet Date, the business of the Company and its Subsidiaries has been
conducted in all material respects in the ordinary course of business and
consistent with past practices, neither the Company nor any of its Subsidiaries
has engaged in any transaction or series of related transactions material to the
Company or its Subsidiaries other than in the ordinary course of business and
consistent with past practices, and there has not been any event, occurrence or
development, alone or taken together with all other existing facts, that,
individually or in the aggregate, constitutes a Material Adverse Effect on the
Company.
(b) Without limiting the generality of the foregoing Section 4.8(a),
since the Balance Sheet Date there has not been:
(i) any damage, destruction or loss to any of the assets or
properties of the Company or any of its Subsidiaries that, individually or
in the aggregate, constitutes a Material Adverse Effect on the Company;
(ii) any declaration, setting aside or payment of any dividend
or distribution (whether in cash, stock or property) or capital return in
respect of any shares of the Company's capital stock or any redemption,
purchase or other acquisition by the Company or any of its Subsidiaries of
any shares of the Company's capital stock or any repurchase, redemption or
other purchase by the Company or any of its Subsidiaries of any
outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company or any of its Subsidiaries, or any
amendment of any material term of any outstanding security of the Company
or any of its Subsidiaries;
(iii) any sale, assignment, transfer, lease or other
disposition or agreement to sell, assign, transfer, lease or otherwise
dispose of any of the assets of
21
the Company or any of its Subsidiaries or other than in the ordinary
course of business consistent with past practices;
(iv) any acquisition (by merger, consolidation, or acquisition
of stock or assets) by the Company or any of its Subsidiaries of any
corporation, partnership or other business organization or division
thereof or any equity interest therein for consideration, or any loans or
advances to any Person;
(v) any (a) incurrence of, (b) guarantee with respect to, or
(c) provision of credit support for, any indebtedness by the Company or
any of its Subsidiaries other than pursuant to the Company's existing
credit facilities in the ordinary course of business or any creation or
assumption by the Company or any of its Subsidiaries of any material Lien
on any material asset;
(vi) any material change in any method of accounting or
accounting practice (whether for financial accounting or Tax purposes)
used by the Company or any of its Subsidiaries;
(vii) (A) any employment, deferred compensation, severance or
similar agreement entered into or amended by the Company or any of its
Subsidiaries and any employee, in each case other than sales commission
agreements and product promotional agreements entered into in the ordinary
course of business consistent with past practices, (B) any increase in the
compensation payable or to become payable by it to any of its directors or
officers or generally applicable to all or any category of the Company's
or any of its Subsidiaries' employees, (C) any increase in the coverage or
benefits available under any vacation pay, company awards, salary
continuation or disability, sick leave, deferred compensation, bonus or
other incentive compensation, insurance, pension or other employee benefit
plan, payment or arrangement made to, for or with any of the directors or
officers of the Company or any of its Subsidiaries or generally applicable
to all or any category of the Company's or any of its Subsidiaries'
employees or (D) severance pay arrangements made to, for or with such
directors, officers or employees other than, in the case of (B) and (C)
above and only with respect to employees who are not officers or directors
of the Company or any of its Subsidiaries, increases in the ordinary
course of business consistent with past practices and that in the
aggregate have not resulted in a material increase in the benefits or
compensation expense of the Company or any of its Subsidiaries;
(viii) any revaluing in any material respect any of the assets
of the Company or any of its Subsidiaries, including without limitation
writing down the value
22
of any assets or inventory or writing off notes or accounts receivable
other than in the ordinary course of business and consistent with past
practices;
(ix) any loan, advance or capital contribution made by the
Company or any of its Subsidiaries to, or investment in, any person other
than loans, advances or capital contributions, or investments of the
Company made in the ordinary course of business consistent with past
practices;
(x) any adoption or amendment of any Plan (as defined in
Section 4.13);
(xi) any waiver, direct or indirect, by the Company or any of
its Subsidiaries of (A) any right or rights of material value or (B) any
payment of any material debt, liability or other obligation, except for
non-material waivers and payments made in the ordinary course of business
consistent with past practice;
(xii) any change in or amendment to the Company's or any of its
Subsidiaries' Certificate of Incorporation, Bylaws or other organizational
documents;
(xiii) any payment, loan or advance of any amount to or in
respect of, or the sale, transfer or lease of any properties or assets
(whether real, personal or mixed, tangible or intangible) to, or entering
into of any agreement arrangement or transaction with or on behalf of, any
officer, director, or employee of the Company, any of its Subsidiaries or
any Affiliate of any of them, or any business or entity in which the
Company, any Subsidiary or any Affiliate of any of them, or relative of
any such Person, has any material, direct or indirect, interest, except
for (i) directors' fees, (ii) compensation to the officers and employees
of the Company in the ordinary course of business and consistent with past
practices and (iii) advancement or reimbursement of expenses in the
ordinary course of business and consistent with past practices;
(xiv) any material modification or change that would result in
a diminishment of coverage under any insurance policies; or
(xv) any material reduction in any cash or short-term
investments or their equivalent, other than to meet cash needs arising in
the ordinary course of business, generally consistent with past practices;
sale, assignment, disposition, transfer, pledge, mortgage or lease of any
Owned Real Estate or Leased Real Estate;
23
(xvi) any issuance, sale or disposition of any capital
stock or other equity interest in the Company, except upon the valid
exercise of Options in accordance with the terms thereof, or issuance
or grant of any options, warrants or other rights to purchase any such
capital stock or equity interest or any securities convertible into or
exchangeable for such capital stock or equity interest or any other
change in the issued and outstanding capitalization of the Company;
(xvii) any amendment, alteration or modification in the
terms of any currently outstanding options, warrants or other rights to
purchase any capital stock or equity interest in the Company or any
securities convertible into or exchangeable for such capital stock or
equity interest, including without limitation any reduction in the
exercise or conversion price of any such rights or securities, any
change to the vesting or acceleration terms of any such rights or
securities, or any change to terms relating to the grant of any such
rights or securities;
(xviii) any material changes in the business policies
(including advertising, investment, marketing, pricing, purchasing,
production, personnel, sales or budgeting) or organization of the
Company, the Company's relationships with employees or the Company's
relationships with suppliers, agents, servicers or customers that are
material to the Company;
(xix) any closure, shut down or other elimination of any
of the Company's stores, offices, store franchises or any material
change in the basic character of its business, properties or assets,
other than those store closures effected or proposed to be effected as
set forth in Section 4.8(b)(xix) of the Disclosure Letter and
additional closures of stores which did not account in the aggregate
for more than 1% of the Company's total annual gross revenue for the
fiscal year ended January 29, 2000 as indicated in the Company's
accounting books and records;
(xx) any action which, if it had been taken after the
date hereof, would have required the consent of MergerSub under Section
6.1 hereof.
(xxi) any agreement to take any actions specified in this
Section 4.8(b), except for this Agreement;
Section 4.9 ACCOUNTS PAYABLE AND INVENTORY. Since the Balance Sheet Date
to the date hereof, the Company has (i) discharged its material accounts payable
and other material current liabilities and obligations in accordance with past
practice, and (ii) purchased and maintained inventory in an amount which it
reasonably believes to be appropriate for normal
24
seasonal requirements of the Company's business and current business
conditions and consistent with its past practices.
Section 4.10 NO UNDISCLOSED MATERIAL LIABILITIES. There are no liabilities
of the Company or any of its Subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, which
would be required by generally accepted accounting principles to be reflected on
a consolidated balance sheet of the Company (including the notes thereto), other
than:
(i) liabilities disclosed in the Company SEC Reports filed
prior to the date hereof;
(ii) actual trade payables incurred in the ordinary course of
business consistent with past practices;
(iii) liabilities incurred to perform this Agreement and
permitted pursuant to Section 6.1 hereof; and,
(iv) liabilities incurred in the ordinary course of business
consistent with past practices;
PROVIDED, HOWEVER, that, no liability listed in clauses (ii) and (iv) above,
individually or in the aggregate, constitutes a Material Adverse Effect on the
Company or any of its Subsidiaries, taken as a whole.
Section 4.11 LITIGATION. (a) There is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Company threatened
against or affecting, the Company or any of its Subsidiaries or their respective
properties before any court or arbitrator or any Governmental Authority which,
if determined adversely, would constitute a Material Adverse Effect on the
Company (a "Proceeding") and (b) to the knowledge of the Company, there is no
basis for any such Proceeding. All Proceedings disclosed in Section 4.11 of the
Disclosure Letter have been timely reported to all applicable insurance carriers
and no reservation of rights or denial of coverage has been issued by any such
carrier. Neither the Company, any of its Subsidiaries nor any officer, director
or employee of the Company or any of its Subsidiaries has been permanently or
temporarily enjoined by any order, judgment or decree of any court or any other
Governmental Authority from engaging in or continuing any conduct or practice in
connection with the business or assets of the Company or any of its Subsidiaries
nor, to the Company's and its Subsidiaries' knowledge, is the Company, any of
its Subsidiaries or any officer, director or employee of the Company or any of
its Subsidiaries under investigation by any Governmental Authority related to
the conduct of the Company's
25
or any of its Subsidiaries' business. There is not in existence any order,
judgment or decree of any court or other tribunal or other agency that is
specifically applicable to the Company or any of its Subsidiaries enjoining
or requiring the Company or any of its Subsidiaries' to take any action of
any kind with respect to its business or assets.
Section 4.12 TAXES.
(a) The Company and each of its Subsidiaries and each
of its Affiliated Entities:
(i) have timely paid or caused to be paid all material Taxes
required to be paid by it. The accruals for Taxes payable in Company's
most recent consolidated financial statements are adequate to cover all
material Taxes attributable to periods (or portions thereof) ending on the
date of such financial statements, and no material Taxes attributable to
periods following the date of such financial statements have been incurred
other than in the ordinary course of business;
(ii) have filed or caused to be filed in a timely and proper
manner all material Tax Returns required to be filed by such entities with
the appropriate Governmental Authority in all jurisdictions in which Tax
Returns are required to be filed, and all such Tax Returns are true,
correct and complete in all material respects; and
(iii) have not requested or caused to be requested any
extension of time within which to file any material Tax Return, which
Tax Return has not since been filed.
(b) The Company has made available to MergerSub true, correct and
complete copies of all United States federal Tax Returns filed by or on behalf
of the Company or any of its Subsidiaries for all taxable periods ending on or
after December 31, 1995.
(c) Neither the Company nor any of its Subsidiaries has been
notified in writing by the Internal Revenue Service or any other Governmental
Authority of any issues relating to Taxes in connection with any Tax Return
filed by or on behalf of the Company or any of its Subsidiaries.
(d) There are no pending Tax audits relating to the Company or any
of its Subsidiaries and no waivers of statutes of limitations have been given or
requested by the Company or any of its Subsidiaries that are currently
outstanding.
26
(e) No Liens for Taxes have been filed against the Company or any
of its Subsidiaries, except for Liens for Taxes not yet due or payable for which
adequate reserves have been provided for in the latest balance sheet of the
Company.
(f) No unresolved deficiencies or additions to Taxes have been
proposed, asserted, or assessed against the Company or any of its Subsidiaries.
(g) Neither the Company nor any of its Subsidiaries has received
notice within the last three years from any Governmental Authority in a
jurisdiction in which the Company or any of its Subsidiaries does not file Tax
Returns that the Company or any of its Subsidiaries is or may be subject to
taxation by that jurisdiction.
(h) Neither the Company nor any of its Subsidiaries is (i) a party
to any Tax sharing, Tax allocation or similar agreement, or (ii) bound by any
closing agreement, offer in compromise or other agreement with any Governmental
Authority.
(i) Neither the Company nor any of its Subsidiaries is required
to include in its income any adjustment pursuant to Section 481 of the Code
following the Effective Time.
(j) The Company is not currently a "United States real property
holding corporation" ("USRPHC") within the meaning of Section 897(c)(2) of the
Code, and the Company will not have been a USRPHC at any time within the period
beginning five (5) years prior to the Effective Time and ending as of the
Effective Time.
(k) As of the date of this Agreement, the Company has not undergone
an "ownership change" within the meaning of Section 382(g) of the Code at any
time during the period set forth in Section 382(i) of the Code. The Company will
not undergo an "ownership change" (other than as a result of the Merger) at any
time within the period beginning three (3) years prior to the Effective Time and
ending as of the Effective Time.
Section 4.13 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Section 4.13 of the Disclosure Letter contains a true and
complete list of each employment, bonus, deferred compensation, incentive
compensation, stock purchase, stock option, stock appreciation right or other
stock-based incentive, severance, change-in-control, or termination pay,
hospitalization or other medical, disability, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension, or retirement plan,
program, agreement or arrangement and each other employee benefit plan,
27
program, agreement or arrangement, sponsored, maintained or contributed to or
required to be contributed to by the Company or any of its Subsidiaries, or
by any trade or business, whether or not incorporated (an "ERISA AFFILIATE"),
that together with the Company or any of its Subsidiaries would be deemed a
"single employer" within the meaning of Section 4001(b)(1) of ERISA, for the
benefit of any current or former employee or director of the Company, or any
of its Subsidiaries or any ERISA Affiliate (the "PLANS"). Section 4.13(a) of
the Disclosure Letter identifies each of the Plans that is an "employee
welfare benefit plan," or "employee pension benefit plan" as such terms are
defined in Sections 3(1) and 3(2) of ERISA (such plans being hereinafter
referred to collectively as the "ERISA PLANS"). None of the Company, any of
its Subsidiaries nor any ERISA Affiliate has any formal plan or commitment,
whether legally binding or not, to create any additional Plan or modify or
change any existing Plan that would affect any current or former employee or
director of the Company, any of its Subsidiaries or any ERISA Affiliate.
(b) With respect to each of the Plans, the Company has heretofore
delivered or made available to MergerSub true and complete copies of each of the
following documents, as applicable:
(i) a copy of the Plan documents (including all amendments
thereto) for each written Plan or a written description of any Plan that
is not otherwise in writing;
(ii) a copy of the annual report or Internal Revenue Service
Form 5500 Series, if required under ERISA, with respect to each ERISA
Plan for the last three Plan years ending prior to the date of this
Agreement for which such a report was filed;
(iii) a copy of the actuarial report, if required under ERISA,
with respect to each ERISA Plan for the last three Plan years ending
prior to the date of this Agreement;
(iv) a copy of the most recent Summary Plan Description ("SPD"),
together with all Summaries of Material Modification issued with respect
to such SPD, if required under ERISA, with respect to each ERISA Plan, and
all other material employee communications relating to each ERISA Plan;
(v) if the Plan is funded through a trust or any other funding
vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof, if any;
28
(vi) all contracts relating to the Plans with respect to which
the Company, any of its Subsidiaries or any ERISA Affiliate may have any
liability, including insurance contracts, investment management
agreements, subscription and participation agreements and record keeping
agreements; and
(vii) the most recent determination letter received from the IRS
with respect to each Plan that is intended to be qualified under Section
401(a) of the Code.
(c) No liability under Title IV of ERISA has been incurred by the
Company, any of its Subsidiaries or any ERISA Affiliate since the Effective Date
of ERISA that has not been satisfied in full, and no condition exists that
presents a material risk to the Company, or any of its Subsidiaries or any ERISA
Affiliate of incurring any liability under such Title, other than liability for
premiums due the Pension Benefit Guaranty Corporation ("PBGC"), which payments
have been or will be made when due. To the extent this representation applies to
Sections 4064, 4069 or 4204 of Title IV of ERISA, it is made not only with
respect to the ERISA Plans but also with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA to which the
Company, any of its Subsidiaries or any ERISA Affiliate made, or was required to
make, contributions during the past six years.
(d) The PBGC has not instituted proceedings pursuant to Section 4042
of ERISA to terminate any of the ERISA Plans subject to Title IV of ERISA, and
no condition exists that presents a material risk that such proceedings will be
instituted by the PBGC.
(e) With respect to each of the ERISA Plans that is subject to Title
IV of ERISA, the present value of accumulated benefit obligations under such
Plan, as determined by the Plan's actuary based upon the actuarial assumptions
used for funding purposes in the most recent actuarial report prepared by such
Plan's actuary with respect to such Plan, did not, as of its latest valuation
date, exceed the then current value of the assets of such Plan allocable to such
accumulated benefit obligations.
(f) None of the Company, any of its Subsidiaries, any ERISA
Affiliate, any of the ERISA Plans, any trust created thereunder, nor, to the
Company's knowledge, any trustee or administrator thereof has engaged in a
transaction or has taken or failed to take any action in connection with which
the Company, any of its Subsidiaries or any ERISA Affiliate could be subject to
any material liability for either a civil penalty assessed pursuant to Section
409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975(a) or (b), 4976
or 4980B of the Code.
29
(g) All contributions and premiums which the Company, any of its
Subsidiaries or any ERISA Affiliate is required to pay under the terms of each
of the ERISA Plans and Section 412 of the Code, have, to the extent due, been
paid in full or properly recorded on the financial statements or records of the
Company or its Subsidiaries, and none of the ERISA Plans or any trust
established thereunder has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each of the ERISA
Plans ended prior to the date of this Agreement. No lien has been imposed under
Section 412(n) of the Code or Section 302(f) of ERISA on the assets of the
Company, any of its Subsidiaries or any ERISA Affiliate, and no event or
circumstance has occurred that is reasonably likely to result in the imposition
of any such lien on any such assets on account of any ERISA Plan.
(h) With respect to any ERISA Plan that is a "multiemployer plan,"
as such term is defined in Section 3(37) of ERISA, (i) neither the Company, any
of its Subsidiaries nor any ERISA Affiliate has, since September 26, 1980, made
or suffered a "complete withdrawal" or a "partial withdrawal," as such terms are
respectively defined in Sections 4203 and 4205 of ERISA, (ii) no event has
occurred that presents a material risk of a complete or partial withdrawal,
(iii) neither the Company, each of its Subsidiaries nor any ERISA Affiliate has
any contingent liability under Section 4204 of ERISA, (iv) no circumstances
exist that present a material risk that any such multi-employer plan will go
into reorganization, and (v) the aggregate withdrawal liability of the Company,
each of its Subsidiaries and the ERISA Affiliates, computed as if a complete
withdrawal by the Company, each of its Subsidiaries and all of its ERISA
Affiliates had occurred under each such multiemployer plan on the date hereof,
would be zero.
(i) Each of the Plans has been operated and administered in all
material respects in accordance with applicable laws, including but not limited
to ERISA and the Code.
(j) Each of the ERISA Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified. The Company
has applied for and received a currently effective determination letter from the
IRS stating that it is so qualified, and no event has occurred which would
affect such qualified status.
(k) Any fund established under an ERISA Plan that is intended to
satisfy the requirements of Section 501(c)(9) of the Code has so satisfied such
requirements.
(l) No amounts payable under any of the Plans or any other
contract, agreement or arrangement with respect to which the Company or any of
its Subsidiaries may
30
have any liability could fail to be deductible for federal income tax
purposes by virtue of Section 162(m) or Section 280G of the Code.
(m) No Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees of the Company, its Subsidiaries or any ERISA Affiliate after
retirement or other termination of service (other than (i) coverage mandated by
applicable laws, (ii) death benefits or retirement benefits under any "employee
pension plan," as that term is defined in Section 3(2) of ERISA, (iii) deferred
compensation benefits accrued as liabilities on the books of the Company, any of
its Subsidiaries or an ERISA Affiliate, or (iv) benefits, the full direct cost
of which is borne by the current or former employee (or beneficiary thereof)).
(n) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with any other event, (i)
entitle any current or former employee, officer or director of the Company, any
of its Subsidiaries or any ERISA Affiliate to severance pay, unemployment
compensation or any other similar termination payment, or (ii) accelerate the
time of payment or vesting, or increase the amount of or otherwise enhance any
benefit due any such employee, officer or director.
(o) There are no pending or, to the Company's knowledge, threatened
or anticipated claims by or on behalf of any Plan, by any employee or
beneficiary under any such Plan or otherwise involving any such Plan (other than
routine claims for benefits).
Section 4.14 LABOR MATTERS.
(a) (i) there is no labor strike, dispute, slowdown, stoppage or
lockout actually pending, or to the knowledge of the Company and the
Subsidiaries, threatened against or affecting the Company or any Subsidiary and
during the past five years there has not been any such action; (ii) to the
knowledge of the Company and the Subsidiaries, no union claims to represent the
employees of the Company or any Subsidiary; (iii) neither the Company nor any
Subsidiary is a party to or bound by any collective bargaining or similar
agreement with any labor organization, or work rules or practices agreed to with
any labor organization or employee association applicable to employees of the
Company or any Subsidiary; (iv) none of the employees of the Company or any
Subsidiary are represented by any labor organization and none of the Company or
any Subsidiary have any knowledge of any current union organizing activities
among the employees of the Company or any Subsidiary, nor does any question
concerning representation exist concerning such employees; (v) Section 4.14 of
the Disclosure Letter contains a true and complete list of each written
personnel policy, rule or procedure applicable to employees of the Company or
any of its Subsidiaries, true correct and complete copies of which have
heretofore been made available to MergerSub; (vi) the
31
Company and the Subsidiaries are, and have at all times been, in material
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, and are not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other applicable
law, ordinance or regulation; (vii) there is no unfair labor practice charge
or complaint against the Company or any Subsidiary pending or, to the
knowledge of the Company and the Subsidiaries, threatened before the National
Labor Relations Board or any similar state or foreign agency; (viii) there is
no grievance or arbitration proceeding arising out of any collective
bargaining agreement or other grievance procedure relating to the Company or
any Subsidiary; (ix) to the knowledge of the Company and the Subsidiaries, no
charges with respect to or relating to the Company or the Subsidiaries are
pending before the Equal Employment Opportunity Commission or any other
corresponding state agency, and the Company and the Subsidiaries have at all
times been in material compliance with all federal and state laws and
regulations prohibiting discrimination in the workplace including, without
limitation, laws and regulations that prohibit discrimination and/or
harassment on account of race, national origin, religion, gender, disability,
age, workers compensation status or otherwise; (x) to the knowledge of the
Company and the Subsidiaries, no federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws intends to
conduct an investigation with respect to or relating to the Company and the
Subsidiaries and no such investigation is in progress; and (xi) there are no
material lawsuits, complaints, controversies or other proceedings pending or,
to the knowledge of the Company and the Subsidiaries, any applicant for
employment or classes of the foregoing alleging breach of any express or
implied contract or employment, any law or regulation governing employment or
the termination thereof or other discriminatory, wrongful or tortious conduct
in connection with the employment relationship. There are no employment
contracts or severance agreements with any employees of the Company and the
Subsidiaries. The execution of this Agreement and the consummation of the
transactions contemplated hereby shall not result in a breach or other
violation of any collective bargaining agreement to which the Company or any
Subsidiary is a party.
(b) Since the enactment of Worker Adjustment and Retraining
Notification Act of 1988 (the "WARN Act"), the Company and the Subsidiaries have
not effectuated (i) a "plant closing" (as defined in the WARN Act) affecting any
site of employment or one or more facilities or operating units within any site
of employment or facility of the Company or any Subsidiary, or (ii) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or
facility of the Company or any Subsidiary; nor has the Company or any Subsidiary
been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state or
local law. None of the employees of the Company and the Subsidiaries has
suffered an"employment loss" (as defined in the WARN Act).
32
Section 4.15 COMPLIANCE WITH LAWS AND COURT ORDERS.
(a) Neither the Company nor its Subsidiaries is in violation of, nor
has it since January 1, 1996 violated, and to the knowledge of the Company
nothing is under investigation with respect to or has been threatened to be
charged with or given notice of any violation of, any applicable Law, except for
possible violations that have not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company. This Section does not relate to matters with respect to Taxes or
Environmental Laws which are exclusively the subject of Sections 4.12 and 4.17,
respectively.
(b) None of the Company, any of its Subsidiaries or any directors,
officers, agents or employees of the Company or any of its Subsidiaries has (i)
used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to political activity, (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iii) made any other unlawful
payment. Neither the Company nor any of its Subsidiaries has participated in any
boycotts.
Section 4.16 FINDERS' FEES. There is no fee payable to any investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf, of the Company or any of its Subsidiaries by the
Company or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement.
Section 4.17 ENVIRONMENTAL MATTERS. (a) The Company, its Subsidiaries and
its Affiliated Entities are in compliance in all material respects with federal,
state, local and foreign laws and regulations relating to pollution, protection
or preservation of human health or the environment, including, without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of toxic or hazardous substances, materials or wastes,
petroleum and petroleum products, asbestos or asbestos-containing materials,
polychlorinated biphenyls, radon, or lead or lead-based paints or materials
("Materials of Environmental Concern"), or otherwise relating to the generation,
storage, containment (whether above ground or underground), disposal, transport
or handling of Materials of Environmental Concern, or the preservation of the
environment or mitigation of adverse effects thereon (collectively,
"Environmental Laws"), and including, but not limited to, compliance in all
material respects with any Permits or the terms and conditions thereof; (b)
neither the Company nor any of its Subsidiaries or its Affiliated Entities has
received any communication or notice, whether from a Governmental Authority or
otherwise, alleging any violation of or noncompliance with any Environmental
Laws by any of the Company or its Subsidiaries or its Affiliated Entities or for
which any of them is responsible, and there is no
33
pending or, to the knowledge of the Company, threatened claim, action,
investigation or notice by any person or entity alleging potential liability
for investigatory, cleanup or governmental response costs, or natural
resources or property damages, or personal injuries, attorney's fees or
penalties relating to (i) the presence, or release into the environment, of
any Materials of Environmental Concern at any location owned or operated by
the Company or its Subsidiaries or its Affiliated Entities, now or in the
past, or (ii) any violation, or alleged violation, of any Environmental Law
(collectively, "Environmental Claims"); and (c) to the knowledge of the
Company, there are no past or present facts or circumstances that could
reasonably be expected to form the basis of any material Environmental Claim
against the Company or its Subsidiaries or its Affiliated Entities or against
any person or entity whose liability for any Environmental Claim the Company
or its Subsidiaries or its Affiliated Entities have retained or assumed
either contractually or by operation of law. All Permits currently held or
required to be held by the Company, its Subsidiaries and Affiliated Entities
pursuant to any Environmental Laws are identified in Section 4.17 of the
Disclosure Letter. The Company has provided or made available to MergerSub
all assessments, reports, data, results of investigations or audits, and
other information that is in the possession of or reasonably available to the
Company and its Subsidiaries and Affiliated Entities regarding environmental
matters pertaining to, or the environmental condition of the business of the
Company and its Subsidiaries and Affiliated Entities, or the compliance (or
noncompliance) by the Company, its Subsidiaries or Affiliated Entities with
any Environmental Laws.
Section 4.18 SUBSIDIARIES. Section 4.18 of the Disclosure Letter lists
each Subsidiary of the Company together with the jurisdiction of incorporation
of each Subsidiary and the percentage of each Subsidiary's outstanding capital
stock or other equity interests owned by the Company or another Subsidiary of
the Company. All the outstanding shares of capital stock of each Subsidiary have
been validly issued, are fully paid and nonassessable and are owned by the
Company, by another Subsidiary or by the Company and another such Subsidiary,
free and clear of all Liens or any other limitation or restriction. Except for
the capital stock of the Subsidiaries and ownership interests in the Affiliates
described in Section 4.33, the Company does not own directly or indirectly, any
capital stock or other ownership interest in any other Person.
Section 4.19 YEAR 2000 MATTERS.
(a) Except as disclosed in the Company SEC Reports, to the
knowledge of the Company, the Company's central operating and accounting
systems described in the Company's most recently filed Form 10-K (the "System")
are Year 2000 Compliant.
34
(b) "Year 2000 Compliant" means the System:
(i) will accurately input, process and output all date and time
data, whether from years in the same century or in different centuries,
including by yielding correct results in arithmetic operations,
comparisons, sequencing and sorting of date and time data and in leap year
calculations; and
(ii) will not operate abnormally or cease to operate, return an
error message or otherwise fail due to date- or time-related processing
relating to the then current date being on or after January 1, 2000 or any
other date.
(c) The Company has not received any notification from any supplier
of critical information technology systems or material service provider of any
Year 2000-related problem that affects the Company.
Section 4.20 INSURANCE. Each of the Company and its Subsidiaries maintains
insurance policies (the "Insurance Policies") against all risks of a character
and in such amounts as are usually insured against by similarly situated
companies in the same or similar businesses. Section 4.20 of the Disclosure
Letter contains a complete and accurate list of all Insurance Policies of the
Company and its Subsidiaries. Each Insurance Policy is in full force and effect
and is valid, outstanding and enforceable, and all premiums due thereon have
been paid in full. None of the Insurance Policies will terminate or lapse (or be
affected in any other materially adverse manner) by reason of the transactions
contemplated by this Agreement. Each of the Company and its Subsidiaries has
complied in all material respects with the provisions of each Insurance Policy
under which it is the insured party. No insurer under any Insurance Policy has
canceled or generally disclaimed liability under any such policy or, to the
Company's knowledge, indicated any intent to do so or not to renew any such
policy. All material claims under the Insurance Policies have been filed in a
timely fashion. Since the Company's formation, there have been no historical
gaps in insurance coverage of the Company and/or its Subsidiaries.
Section 4.21 SUPPLIERS. Set forth in Section 4.21 of the Disclosure Letter
is a list of the ten largest suppliers of the Company based on the dollar value
of materials or products purchased by the Company for the fiscal year ended
January 29, 2000. Since such date, there has not been, nor as a result of the
Merger is there anticipated to be, any change in relations with any of the major
suppliers of the Company and its Subsidiaries that, individually or in the
aggregate, would result in a Material Adverse Effect. The existing suppliers of
the Company and its Subsidiaries are adequate for the operation of the Company's
business as operated on the date hereof.
35
Section 4.22 PERSONNEL, ETC. (a) Set forth in Section 4.22 of the
Disclosure Letter is a list setting forth:
(i) the name of each officer of each of the Company and the
Company's Subsidiaries, specifying the title of each such Person; and
(ii) the name of each director of each of the Company and the
Company's Subsidiaries.
(b) The Company has heretofore provided MergerSub with a complete
and accurate schedule of compensation which each of the officers referred to in
clause (a) above is currently entitled to receive, and all payroll records
relating to non-officer employees heretofore provided to MergerSub are accurate
and complete.
Section 4.23 STOCKHOLDERS RIGHTS PLAN. The Board of Directors of the
Company has approved and adopted an amendment to the Rights Agreement, a copy of
which has been previously delivered to MergerSub and which provides that neither
the execution nor delivery of this Agreement nor the consummation of any of the
transactions contemplated by this Agreement, including, without limitation, the
Merger, shall be deemed to (i) cause MergerSub or any of its respective
Affiliates to be deemed to be "Acquiring Persons" within the meaning of the
Rights Agreement, (ii) constitute a "Triggering Event" within the meaning of the
Rights Agreement, (iii) cause any Rights to become exercisable or to separate
from the shares of Common Stock to which they are attached, or (iii) trigger any
other provisions of the Rights Agreement, including giving rise to a
Distribution Date (as defined in the Rights Agreement), and such amendment shall
remain in full force and effect at all times from and after the date hereof.
Section 4.24 CONTRACTS. (a) Section 4.24 of the Disclosure Letter contains
a complete and accurate list of all contracts (written or oral), undertakings,
commitments or agreements (other than contracts, undertakings, commitments or
agreements for employee benefit matters set forth in Section 4.13 of the
Disclosure Letter and real property leases set forth in Section 4.28(b) of the
Disclosure Letter) of the following categories to which the Company or any of
its Subsidiaries is a party or by which any of them is bound (collectively, and
together with the contracts, undertakings, commitments or agreements for
employee benefit matters set forth in Section 4.13 of the Disclosure Letter and
the real property leases set forth in Section 4.28(b) of the Disclosure Letter,
the "Contracts"):
(i) contracts requiring annual expenditures by or liabilities
of the Company and its Subsidiaries in excess of One Million Dollars
($1,000,000) which have a remaining term in excess of one hundred eighty
(180) days or are not
36
cancellable (without material penalty, cost or other liability) within
one hundred eighty (180) days;
(ii) promissory notes, loans, agreements, indentures, evidences
of indebtedness or other instruments relating to the lending of money,
whether as borrower, lender or guarantor, in excess of One Million Dollars
($1,000,000).
(iii) contracts containing covenants limiting the freedom of the
Company or any of its Subsidiaries to engage in any line of business
(other than prohibitions against engaging in business relating to specific
product lines) or compete with any person, in any product line or line of
business, or operate at any location;
(iv) joint venture or partnership agreements or joint
development or similar agreements pursuant to which any third party has
been entitled or is reasonably expected to be entitled to share in profits
or losses of the Company or its Subsidiaries;
(v) contracts with any federal, state or local government which
have a remaining term in excess of one year or are not cancellable
(without material penalty, cost or other liability) within one year;
(vi) other contract or commitment in which the Company or any of
its Subsidiaries has granted manufacturing rights or exclusive marketing
rights relating to any product or service, any group of products or
services or any territory; and
(vii) as of the date hereof any other contract the performance of
which could be reasonably expected to require annual expenditures by the
Company or any of its Subsidiaries in excess of One Million Dollars
($1,000,000), except for purchase orders received in the ordinary course
of business consistent with past practices.
(b) True and complete copies of the written Contracts and
descriptions of verbal Contracts, if any, have been delivered or made available
to MergerSub. Each of the Contracts is a valid and binding obligation of the
Company and, to the Company's knowledge, the other parties thereto, enforceable
against the other parties thereto in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium,
reorganization, arrangement or similar laws affecting creditors' rights
generally and by general principles of equity. Except for the execution of this
Agreement and the consummation of the transactions contemplated hereby and
thereby, no event has occurred which would, on notice or lapse of time or both,
entitle the holder of any indebtedness issued pursuant to a Contract identified
in Section 4.24 of the Disclosure Letter in response to paragraph (ii) above to
accelerate, or which does accelerate, the maturity of any such indebtedness.
37
(c) None of the Company or its Subsidiaries is in breach, default or
violation (and no event has occurred or not occurred through the Company's
action or inaction or, to the knowledge of the Company, through the action or
inaction of any third parties, which with notice or the lapse of time or both
would constitute a breach, default or violation) of any term, condition or
provision of any Contract to which the Company or any of its Subsidiaries is now
a party or by which any of them or any of their respective properties or assets
may be bound, except for violations, breaches or defaults that, individually or
in the aggregate, would not have a Material Adverse Effect on the Company.
Section 4.25 PERMITS; COMPLIANCE WITH APPLICABLE LAWS AND MATERIAL
AGREEMENTS. The Company and its Subsidiaries hold all material licenses, permits
and authorizations necessary for the lawful conduct of its business, as now
conducted, and such business is not being, and the Company and its Subsidiaries
has not received any notice from any authority or person that such business has
been or is being, conducted in material violation of any law, ordinance or
regulation except to the extent that any such failure of conduct does not,
individually or in the aggregate, constitute a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole. The Company and its Subsidiaries
are not in conflict with, or in default or violation of any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which the Company and its Subsidiaries or any of their
respective properties is bound or affected, except to the extent that any such
conflict, default or violation does not, constitute a Material Adverse Effect on
the Company and its Subsidiaries, taken as a whole.
Section 4.26 INTELLECTUAL PROPERTY.
(a) Section 4.26(a) of the Disclosure Letter sets forth, for the
Intellectual Property owned by the Company, a complete and accurate list of all
U.S. and foreign (i) patents and patent applications; (ii) trademark
registrations (including Internet domain registrations), trademark applications,
and material unregistered trademarks; (iii) copyright registrations, and
material unregistered copyrights. Section 4.26(a) of the Disclosure Letter lists
all Software (other than readily available commercial software programs having
an acquisition price of less than $50,000) which are owned, licensed, leased, by
Company, and identifies which Software is owned, licensed, or leased, as the
case may be.
(b) Section 4.26(b) of the Disclosure Letter sets forth a complete
and accurate list of all agreements (whether oral or written) to which Company
is a party or otherwise bound, (i) granting or obtaining any right to use or
practice any rights under any Intellectual Property other than (A) licenses
entered into in connection with acquisitions by the
38
Company pursuant to which the Company or any of its Subsidiaries was granted
the right to use any trademark or service xxxx previously used in the conduct
of the business of the acquired company prior to such acquisition which are
not, individually or in the aggregate, material to the Company and its
Subsidiaries, taken as a whole, and (B) non-exclusive licenses to use
Intellectual Property in connection with co-promotion or other marketing
efforts which are not, individually or in the aggregate, material to the
Company and its Subsidiaries, taken as a whole, or (ii) restricting the
Company's rights to use any Intellectual Property, including license
agreements, development agreements, distribution agreements, settlement
agreements, consent to use agreements, and covenants not to xxx
(collectively, and including those licenses not set forth in Section 4.26(b)
of the Disclosure Letter pursuant to Section 4.26(b)(i)(A) and (B) above, the
"License Agreements"). The License Agreements are valid and binding
obligations of all parties thereto, enforceable in accordance with their
terms, and there exists no event or condition which will result in a
violation or breach of, or constitute (with or without due notice of lapse of
time or both) a default by any party under any such License Agreement.
Company has not licensed or sublicensed its rights in any Intellectual
Property other than pursuant to the License Agreements. No royalties,
honoraria or other fees are payable by Company to any third parties for the
use of or right to use any Intellectual Property except pursuant to the
License Agreements.
(c) The Company owns, or has a valid right to use, free and clear of
all Liens, all of the Intellectual Property. The Company is listed in the
records of the appropriate United States, state, or foreign registry as the sole
current owner of record for each application and registration listed on Section
4.26(b) of the Disclosure Letter.
(d) The Intellectual Property owned by Company, to the best of
Company's knowledge, and any Intellectual Property used by Company, is
subsisting, in full force and effect, and has not been cancelled, expired, or
abandoned, and, to the best of the Company's knowledge, is valid and
enforceable.
(e) There is no pending or threatened claim, suit, arbitration or
other adversarial proceeding before any court, agency, arbitral tribunal, or
registration authority in any jurisdiction (i) involving the Intellectual
Property owned by Company or licensed to Company, or (ii) alleging that the
activities or the conduct of the Company infringes upon, violates or constitutes
the unauthorized use of the intellectual property rights of any third party or
challenging the Company's ownership, use, validity, enforceability or
registrability of any Intellectual Property. There are no settlements,
forebearances to xxx, consents, judgments, or orders or similar obligations
other than the License Agreements which (i) restrict the Company's rights to use
any Intellectual Property, (ii) restrict Company's business in order to
accommodate a third party's intellectual property rights, or (iii) permit third
parties to use any Intellectual Property owned or controlled by the Company.
39
(f) The conduct of Company's business as currently conducted or
planned to be conducted does not infringe upon (either directly or indirectly
such as through contributory infringement or inducement to infringe) any
intellectual property rights owned or controlled by any third party. No third
party is misappropriating, infringing, diluting or violating any Intellectual
Property owned or used by Company, and no such claims, suits, arbitrations or
other adversarial proceedings have been brought against any third party by the
Company.
(g) Company takes reasonable measures to protect the
confidentiality of Trade Secrets, including requiring its employees and other
parties having access thereto to execute written non-disclosure agreements. To
the best of Company's knowledge, no Trade Secret has been disclosed or
authorized to be disclosed to any third party other than pursuant to a
non-disclosure agreement. To the best of Company's knowledge, no party to any
non-disclosure agreement relating to its Trade Secrets is in breach or default
thereof.
(h) No current or former partner, director, officer, or employee
of Company (or any of their respective predecessors in interest) will, after
giving effect to the transactions contemplated herein, own or retain any rights
to use any of the Intellectual Property owned or used by the Company where such
ownership or retention of rights would, individually or in the aggregate,
constitute a Material Adverse Effect on the Company and its Subsidiaries, taken
as a whole.
(i) The consummation of the transaction contemplated hereby will
not result in the loss or impairment of Company's right to own or use any of
the Intellectual Property, nor will it require the consent of any Governmental
Authority or third party in respect of any such Intellectual Property.
Section 4.27 RELATED PARTY TRANSACTIONS. No (a) beneficial owner of 5% or
more of the Company's outstanding capital stock, nor (b) officer or director of
the Company or (c) any Person (other than the Company) in which any such
beneficial owner, officer or director owns any beneficial interest (other than a
publicly held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than 1% of the stock of
which is beneficially owned by all such Persons) (collectively, "Related
Parties") has any interest in: (i) any contract, arrangement or understanding
with, or relating to, the business or operations of, the Company or any of its
Subsidiaries; (ii) any loan, arrangement, understanding, agreement or contract
for or relating to indebtedness of the Company or any of its Subsidiaries; or
(iii) any property (real, personal or mixed), tangible or intangible, used in
the business or operations of the Company or any of its Subsidiaries, excluding
any such contract, arrangement, understanding or agreement constituting a Plan.
Following the Effective Time, except for obligations set forth in this
Agreement, neither the Company nor any of its
40
Subsidiaries will have any obligations to any Related Party except for (i)
accrued salary for the pay period commencing immediately prior to the Effective
Time and (ii) the obligations set forth in the Company SEC Reports.
Section 4.28 REAL ESTATE.
(a) OWNED PROPERTIES. Section 4.28 of the Disclosure Letter sets
forth a true, correct and complete list of all real property (including
improvements thereon) owned by the Company (collectively, the "Owned Real
Property"). With respect to each such parcel of Owned Real Property: (i) such
parcel is free and clear of all encumbrances other than such encumbrances which
do not materially interfere with the present use thereof; (ii) there are no
leases, subleases, licenses, concessions, or other agreements, written or oral,
granting to any person the right of use or occupancy of any portion of such
parcel; and (iii) there are no outstanding actions, rights of first refusal or
options to purchase such parcel.
(b) LEASED PROPERTIES. Section 4.28(b) of the Disclosure Letter
sets forth a true, correct and complete list of all of the leases and subleases
("Leases") and each leased and subleased parcel of real property in which the
Company or any of its Subsidiaries is a tenant, subtenant, landlord or
sublandlord (collectively, the "Leased Real Property") and for each Lease
indicates whether or not the consent of the landlord thereunder will be
required in connection with (i) the Merger, (ii) the assignment of the Leases
as collateral in respect of the Financing (assuming it occurs on the terms set
forth in the Financing Letters) or (iii) the other transactions contemplated by
this Agreement. The Company (either directly or through a Subsidiary) holds a
valid and existing leasehold or subleasehold interest or landlord or
sublandlord interest as applicable, under each of the Leases described in
Section 4.28(b) of the Disclosure Letter. The Company has delivered or made
available to MergerSub true, correct, and complete copies of each of the
Leases. With respect to each Lease: (i) the Lease is legal, valid, binding,
enforceable and in full force and effect; (ii) the Lease will continue to be
legal, valid, binding, enforceable and in full force and effect on the same
terms and conditions following the Effective Time; (iii) neither the Company
(or its applicable Subsidiary), nor to the knowledge of the Company, any other
party to the Lease, is in breach or default under the Lease, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default by the Company (or such Subsidiary) or permit termination, modification
or acceleration under the Lease by any other party thereto; (iv) the Company
(or its applicable Subsidiary) has performed and will continue to perform all
of its obligations under the Lease, (v) the Company has not, and to the
knowledge of the Company, no third party has repudiated any provision of the
Lease; (vi) there are no disputes, oral agreements, or forbearance programs in
effect as to the Lease other than (x) those arising in the ordinary course of
business and (y) those which, individually or in the aggregate, do not
constitute a Material Adverse Effect on the Company and its Subsidiaries, taken
as a whole;
41
(vii) the Lease has not been modified in any respect, except to the extent that
such modifications are disclosed by the documents previously delivered or made
available to MergerSub; and (viii) the Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the Lease.
(c) REAL PROPERTY DISCLOSURE. Except as disclosed on Section 4.28
of the Disclosure Letter, there is no Real Property leased or owned by the
Company or any of its Subsidiaries that is used in their business. The Owned
Real Property and Leased Real Property are referred to collectively herein as
the "Real Property." To the knowledge of the Company, each parcel of Real
Property is in material compliance with all existing Laws, including, without
limitation, (a) the Americans with Disabilities Act, 42 U.S.C. Section 12102
et seq., together with all rules, regulations and official interpretations
promulgated pursuant thereto, and (b) all Laws with respect to zoning,
building, fire, life safety, health codes and sanitation. The Company and its
Subsidiaries have received no notice of, and have no knowledge of, any
condition currently or previously existing on the Real Property or any portion
thereof which may give rise to any violation of any existing Law applicable to
the Real Property if it were disclosed to the authorities having jurisdiction
over such Real Property other than those (x) arising in the ordinary course of
business or (y) which do not constitute, individually or in the aggregate, a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.
(d) NO PROCEEDINGS. There are no proceedings in eminent domain,
condemnation or other similar proceedings pending or, to the knowledge of the
Company, threatened, affecting any portion of the Real Property. There exists
no writ, injunction, decree, order or judgment outstanding, nor any litigation,
pending or, to the knowledge of the Company, threatened, relating to the
ownership, lease, use, occupancy or operation by any person of the Real
Property.
(e) CURRENT USE. The current use of the Real Property does not
violate in any material respect any instrument of record or agreement affecting
such Real Property. There are no violations of any covenants, conditions,
restrictions, easements, agreements or orders of any Governmental Authority
having jurisdiction over any of the Real Property that affect such Real Property
or the use or occupancy thereof other than those (x) arising in the ordinary
course of business or (y) which do not, individually or in the aggregate,
constitutes a Material Adverse Effect on the Company and its Subsidiaries, taken
as a whole. No damage or destruction has occurred with respect to any of the
Real Property that, individually or in the aggregate, has had or resulted in, or
is reasonably likely to have or result in, a Material Adverse Effect on the
Company or any of its Subsidiaries.
42
(f) INSURANCE. There are currently in effect such insurance
policies for the Real Property as are customarily maintained with respect to
similar properties. True, correct and complete copies of all insurance policies
maintained by the Company and its Subsidiaries with respect to the Real
Property have been delivered or made available to MergerSub. All premiums due
on such insurance policies have been paid by the Company and the Company will
maintain such insurance policies from the date hereof through the Effective
Time or earlier termination of this Agreement. The Company has not received and
has no knowledge of any notice or request from any insurance company requesting
the performance of any work or alteration with respect to the Real Property or
any portion thereof. The Company has received no notice from any insurance
company concerning, nor is the Company aware of, any defects or inadequacies in
the Real Property, which, if not corrected, would result in the termination of
insurance coverage or increase its cost.
(g) CONDITION AND OPERATION OF IMPROVEMENTS. All buildings and
other improvements included within the Real Property (the "Improvements") are,
in all material respects, in good condition and repair and adequate to operate
such facilities as currently used, and, to the Company's knowledge, there are
no facts or conditions affecting any of the Improvements which would,
individually or in the aggregate, interfere in any significant respect with the
current use, occupancy or operation thereof which interference would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company. No Improvement or portion thereof is dependent
for its access, operation or utility on any land, building or other improvement
not included in the Real Property.
(h) PERMITS. All required or appropriate certificates of
occupancy, permits, licenses, franchises, approvals and authorizations
(collectively, the "Real Property Permits") of all Governmental Authorities
having jurisdiction over the Real Property, the absence of which constitute a
Material Adverse Effect on the Company, have been issued to the Company to
enable the Real Property to be lawfully occupied and used for all of the
purposes for which it is currently occupied and used have been lawfully issued
and are, as of the date hereof, in full force and effect. The Company has
delivered or made available to MergerSub true, correct and complete copies of
the Real Property Permits to MergerSub. The Company has not received or been
informed by a third party of the receipt by it of any notice which constitutes
a Material Adverse Effect on the Company from any Governmental Authority having
jurisdiction over the Real Property threatening a suspension, revocation,
modification or cancellation of any Real Property Permit and, to the knowledge
of the Company, there is no basis for the issuance of any such notice or the
taking of any such action.
43
Section 4.29 ASSETS. The assets and properties of the Company and its
Subsidiaries, considered as a whole, constitute all of the material assets and
properties which are reasonably required for the business and operations of the
Company and its Subsidiaries as presently conducted. The Company and its
Subsidiaries have good and marketable title to or a valid leasehold estate in,
free and clear of any Liens, (i) all personal properties and assets reflected on
the Company's Balance Sheet at the Balance Sheet Date (except for properties or
assets subsequently sold in the ordinary course of business consistent with past
practices), except as such, individually or in the aggregate, do not constitute
a Material Adverse Effect on the Company.
Section 4.30 OPINION OF FINANCIAL ADVISOR. The Special Committee and the
Company have received the opinion of Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation, the Special Committee's and the Company's financial advisor, to the
effect that, as of the date hereof, the Merger Consideration to be received by
the Company's stockholders (other than the Retaining Stockholders and the
persons named in the Roll-over Schedule) is fair to such stockholders from a
financial point of view. The written confirmation of such opinion has been
provided to MergerSub.
Section 4.31 STATE ANTI-TAKEOVER STATUTES; DELAWARE SECTION 203. The
Company, the Special Committee and the Board of Directors of the Company have
each taken all action required to be taken by it in order to exempt this
Agreement (as it may be amended from time to time), the Voting Agreement and the
transactions contemplated hereby and thereby from, and such agreements and the
transactions contemplated hereby and thereby are exempt from, the requirements
of the provisions of Section 203 of the Delaware Corporate Law and other
antitakeover laws and regulations of any state, including without limitation the
State of Delaware. The Company has heretofore delivered to MergerSub complete
and correct copies of (i) a resolution of the Special Committee and of the Board
of Directors of the Company that Section 203 of Delaware Corporate Law and other
antitakeover laws and regulations of any state, including without limitation the
State of Delaware, are and shall be inapplicable to the Merger and the
transactions contemplated by this Agreement and the Voting Agreement, as they
may be amended from time to time, and (ii) the Company's certificate of
incorporation, which provides that the Company elects not to be governed by
Section 203 of Delaware Corporate Law.
Section 4.32 INTERNATIONAL TRADE LAWS AND REGULATIONS.
(a) The Company and each of its Subsidiaries has complied and is
in compliance with all Laws respecting international trade ("International
Trade Laws") applicable in connection with the conduct of their respective
businesses (including as the same relates to record keeping requirements),
except for possible violations which do not,
44
individually or in the aggregate, constitute a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole.
(b) Neither the Company nor any of its Subsidiaries is or has been
the subject of any civil or criminal investigation, litigation, audit, penalty,
proceeding or assessment, liquidated damages proceeding or claim, forfeiture or
forfeiture action, claim for additional customs duties or fees, denial orders,
suspension of export privileges, governmental sanctions, or any other action,
proceeding or claim by any foreign, federal, state, local or other Governmental
Authority involving or otherwise relating to any alleged or actual violation of
International Trade Laws or relating to any alleged or actual underpayment of
customs duties, fees, taxes or other amounts owed pursuant to any International
Trade Laws and, to the knowledge of the Company and its Subsidiaries, there is
no basis for any of the foregoing, except for possible proceedings, claims or
actions which do not, individually or in the aggregate, constitute a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole.
(c) Neither the Company nor any of its Subsidiaries has engaged in
or otherwise participated in, assisted or facilitated any transaction that is
prohibited by any applicable embargo or related trade restriction imposed by the
United States Office of Foreign Assets Control or any other agency of the United
States government.
(d) Set forth on Section 4.32 of the Disclosure Letter is a list
of each foreign jurisdiction to which the Company or any of its Subsidiaries
exports any products, equipment, services or technology, each foreign
jurisdiction from which the Company or any of its Subsidiaries imports any
products, equipment, services or technology and each foreign jurisdiction to
which the Company's or any of its Subsidiaries' products, equipment, services
or technology (or products of such technology) are reexported. The Company and
each of its Subsidiaries has complied and is in compliance with all
International Trade Laws applicable in connection with the conduct of their
respective businesses (including as the same relates to recordkeeping
requirements), except for possible violations which do not, individually or in
the aggregate, constitute a Material Adverse Effect on the Company.
Section 4.33 INVESTMENTS IN AFFILIATED ENTITIES. Section 4.33 of the
Disclosure Letter contains a true, complete and correct schedule of all
securities of Persons other than Subsidiaries ("Affiliated Entities") that are
owned by the Company (or its Subsidiaries) (the "Affiliated Entity Securities").
The Affiliated Entity Securities have been validly issued, are fully paid and
nonassessable and are owned by the Company (or its Subsidiaries, as the case may
be) free and clear of all Liens or any other limitation or restriction
(including limitations of transfer, rights of first refusal or similar rights).
45
Section 4.34 NASDAQ LISTING; HOLDERS OF EQUITY SECURITIES AS OF RECORD
DATE FOR MOST RECENT MEETING OF STOCKHOLDERS. As of the date hereof, all
outstanding shares of the Common Stock are designated as qualified for trading
as a national market security on the National Association of Securities Dealers
Automatic Quotation System. As of May 7, 1999, the record date (the "Annual
Meeting Record Date") for the most recent meeting of the Company's stockholders,
the Company had more than 800 holders of its equity securities, within the
meaning of California Corporations Code Section 2115 ("Section 2115"). The
Company is not subject to the requirements of subdivision (b) of Section 2115 of
the California Corporations Code.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MERGERSUB
MergerSub represents and warrants to the Company that:
Section 5.1 CORPORATE EXISTENCE AND POWER. MergerSub is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers to execute and
deliver this Agreement and to consummate the Merger and the transactions
contemplated hereby (including, without limitation, the Voting Agreements).
Since the date of its incorporation, MergerSub has not engaged in any activities
other than in connection with or as contemplated by this Agreement and the
Merger or in connection with arranging any financing required to consummate the
transactions contemplated hereby.
Section 5.2 CORPORATE AUTHORIZATION. No corporate proceedings on the part
of MergerSub are necessary, as a matter of law or otherwise, for the
consummation of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by MergerSub and, assuming the due
authorization, execution and delivery of this Agreement by the Company, is a
valid and binding agreement of MergerSub enforceable against it in accordance
with its terms, except to the extent that the enforcement thereof may be limited
by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or other similar laws now or hereafter in effect relating to creditor's rights
generally, (ii) general principles of equity (regardless of whether such
enforcement is considered in a proceeding at law or in equity) and (iii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to the discretion of the court before which any
enforcement proceeding therefor may be brought.
46
Section 5.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by MergerSub of this Agreement and the consummation by MergerSub of
the transactions contemplated by this Agreement require no action by or in
respect of, or filing with, any Governmental Authority other than (a) the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware, (b) compliance with any applicable requirements of the HSR Act; (c)
compliance with the applicable requirements of the Exchange Act; (d) compliance
with the applicable requirements of the Securities Act; (e) compliance with any
applicable Federal, foreign or state securities or Blue Sky laws; and (f) such
other items the failure of which to be obtained will not constitute a Material
Adverse Effect on MergerSub.
Section 5.4 NON-CONTRAVENTION. The execution, delivery and performance by
MergerSub of this Agreement and the consummation by MergerSub of the
transactions contemplated hereby do not and will not (a) contravene or conflict
with the certificate of incorporation or bylaws of MergerSub, (b) contravene,
conflict with or constitute a violation of any provision of law, regulation,
judgment, order or decree binding upon MergerSub, or (c) constitute a default
under or give rise to any right of termination, cancellation or acceleration of
any right or obligation of MergerSub or to a loss of any benefit to which
MergerSub is entitled under any agreement, contract or other instrument binding
upon MergerSub which constitutes a Material Adverse Effect on MergerSub.
Section 5.5 DISCLOSURE DOCUMENTS. None of the information supplied or to
be supplied by MergerSub regarding MergerSub for inclusion in the Company Proxy
Statement will, at the date it is first mailed to stockholders of the Company or
at the time of the Company Stockholder Meeting, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading.
Section 5.6 FINDERS' FEES. Except for Credit Suisse First Boston and the
parties providing the Financing, there is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of MergerSub who would be entitled to any fee or commission from
MergerSub or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement.
Section 5.7 FINANCING. MergerSub has delivered to the Company; (i) signed
counterpart(s) of the commitment letter(s) of Xxxxxxx Xxxxx Credit Partners
L.P., Xxxxx Fargo Bank N.A. and Trust Company of the West, dated as of the date
hereof, pursuant to which such persons have agreed, subject to the terms and
conditions set forth therein, to provide up to an aggregate of $525,000,000 of
debt financing to the Company in connection with the transactions contemplated
hereby and for working capital of the Company; (ii) the signed commitment letter
of Green Equity Investors III, LP, pursuant to which Green Equity
47
Investors III, LP has agreed, subject to the terms and conditions set forth in
such letter, to make or cause to be made an equity investment in MergerSub of
$92,500,000 and (iii) the signed commitment letter of TPG Partners III, L.P.,
pursuant to which TPG Partners III, L.P. has agreed, subject to the terms and
conditions set forth in such letter, to make or cause to be made an equity
investment in MergerSub of $92,500,000. The foregoing commitment letters are
referred to herein as the "Financing Letters". The Financing Letters are in
full force and effect as of the date hereof. The funds contemplated to be
provided by the Financing Letters would be sufficient to enable MergerSub and
the Company to pay the full Merger Consideration as provided herein, to make
all other necessary payments by it in connection with the Merger (including
the repayment of certain outstanding indebtedness of the Surviving
Corporation) and to pay all of the related fees and expenses (such amount of
funds, the "Financing"). The Company shall use all reasonable efforts to
cooperate with and assist MergerSub in obtaining the Financing.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 CONDUCT OF THE COMPANY. Except as otherwise specifically
provided in this Agreement, without the prior written consent of MergerSub, from
the date hereof to the Effective Time, the Company and each of its Subsidiaries
shall carry on its business in the ordinary and usual course of business and
consistent with past practices and shall use its best efforts to (i) preserve
intact its present business organization, (ii) maintain in effect all material
federal, state and local Permits that are required for the Company or any of its
Subsidiaries to carry on its business, (iii) keep available the services of its
present employees and consultants and (iv) preserve its present relationships
with its employees, consultants, customers, lenders, suppliers, licensors,
licensees, landlords and others having significant business relationships with
it. Without limiting the generality of the foregoing, and except as otherwise
specifically provided in this Agreement, without the prior written consent of
MergerSub, prior to the Effective Time, the Company and each of its Subsidiaries
shall not and shall not permit its Subsidiaries to:
(a) propose or adopt any change in its certificate of
incorporation or bylaws or comparable organizational documents;
(b) (i) merge with or acquire (by merger, consolidation,
acquisition of stock or assets, joint venture or otherwise of a direct or
indirect ownership interest or investment) any corporation, partnership or
other business organization or division thereof, or sell, lease or otherwise
dispose of a material amount of assets (excluding sales of inventory or other
assets in the ordinary course of business) or securities; (ii) waive, release,
grant, or
48
transfer any rights of value which are, individually or in the aggregate,
material; (iii) modify or change in any respect any material Permit; (iv)
incur, assume or prepay any indebtedness for borrowed money except in the
ordinary course of business, consistent with past practices; (v) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for any indebtedness of any other Person,
except in the ordinary course of business consistent with past practices; (vi)
mortgage, pledge or subject to any lien, charge or other encumbrance any of
the Company's or its Subsidiaries' material assets, properties or business,
whether tangible or intangible; (vii) make any loans, advances or capital
contributions to, or investments in, any other Person, except in the ordinary
course of business, consistent with past practices; (viii) authorize any
capital expenditure or expenditures not in the ordinary course of business;
(ix) pledge or otherwise encumber shares of capital stock of the Company or
any of its Subsidiaries; (x) enter into any contract or agreement other than
in the ordinary course of business consistent with past practices that would
be material to the Company and its Subsidiaries, taken as a whole; or (xi)
amend, modify or waive in any material respects any right under any material
contract of the Company or any of its Subsidiaries, except as permitted by
Section 6.1(d);
(c) enter into any new lease, sublease or other agreement in
respect of the Real Property without MergerSub's prior written consent (which
consent may be withheld in MergerSub's sole and absolute discretion), other
than leases related to the opening of new stores entered into in the ordinary
course of business consistent with past practices that are on terms consistent
with the Company's past practices;
(d) extend, renew, replace, amend, modify or alter any existing
Lease (other than in the ordinary course of business and consistent with past
practices in connection with new store openings and distribution center
expansions) in respect of the Real Property without MergerSub's prior written
consent (which consent may be withheld in MergerSub's sole and absolute
discretion);
(e) sell, contribute, assign or create any right, title or
interest whatsoever in or to the Owned Real Property, or create or permit to
exist thereon any lien, charge or encumbrance, or enter into any agreement to
do any of the foregoing, without the prior written consent of MergerSub (which
consent may be granted or withheld in MergerSub's sole and absolute
discretion);
(f) take any action that would result in any representation or
warranty of the Company contained in this Agreement which are qualified as to
materiality becoming untrue as of the Effective Time or any representation or
warranty not so qualified becoming untrue in any material respect as of the
Effective Time;
49
(g) split, combine or reclassify any shares of, or declare, or
set aside or pay any dividend (including, without limitation, an extraordinary
dividend) or other distribution (whether in cash, stock or property or any
combination thereof) in respect of, Company Securities or any other securities
of the Company or any of its Subsidiaries or redeem, repurchase or otherwise
acquire or offer to redeem, repurchase, or otherwise acquire any Company
Securities or any other securities of the Company or any of its Subsidiaries;
(h) adopt or amend any bonus, profit sharing, compensation,
severance, termination, stock option, pension, retirement, deferred
compensation, employment or employee benefit plan, agreement, trust, plan,
fund or other arrangement for the benefit and welfare of any director,
officer, employee, agent, consultant or person providing management services
or increase in any manner the compensation or fringe benefits of any director,
officer or any class of employees or pay any benefit not required by any
existing plan or arrangement (including, without limitation, the granting of
stock options or stock appreciation rights or the removal of existing
restrictions in any benefit plans or agreements); make any loans to any of its
officers, directors, employees, Affiliates, agents or consultants or make any
change in its existing borrowing or lending arrangements for or on behalf of
any of such persons, whether pursuant to a Plan or otherwise; or grant, issue,
accelerate, pay, accrue or agree to pay or make any accrual or arrangement for
payment of salary or other payments or benefits pursuant to, or adopt or
amend, any new or existing Plan; PROVIDED, HOWEVER, that notwithstanding the
foregoing, the Company shall be entitled to increase the compensation of
employees and make minor modifications in personnel policies and procedures
for non-officer employees, in each case in the ordinary course of business and
consistent with past practices;
(i) except as required by applicable Law or GAAP, revalue in any
material respect any of its assets, including writing down the value of
inventory in any material manner, or write-off notes or accounts receivable in
any material manner;
(j) pay, discharge or satisfy any material claims, liabilities
or obligations (whether absolute, accrued, asserted or unasserted, contingent
or otherwise) other than the payment, discharge or satisfaction in the
ordinary course of business, consistent with past practices;
(k) make any material Tax election or settle or compromise any
material Tax liability;
(l) make any change in accounting methods, principles or
practices materially affecting the reported consolidated assets, liabilities
or results of operations of the Company;
50
(m) authorize for issuance, issue, sell, deliver or agree or
commit to issue sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any Company Securities or any other securities of the Company or
any of its Subsidiaries or equity equivalents;
(n) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries;
(o) alter through merger, liquidation, reorganization,
restructuring or any other fashion the corporate structure or ownership of any
Subsidiary;
(p) permit to lapse any material Permits;
(q) permit to lapse any registrations or applications for
material Intellectual Property owned, licensed, or used by the Company; or
(r) agree or commit to do any of the foregoing.
Section 6.2 COMPANY STOCKHOLDERS MEETING. The Company shall cause a
meeting of its stockholders (the "Company Stockholder Meeting") to be duly
called, noticed and held as promptly as practicable for the purpose of voting on
the adoption of this Agreement and the Merger. In connection with the Company
Stockholders Meeting, the Company will use its best efforts to obtain the
necessary vote for adoption by its stockholders of this Agreement and the Merger
and shall take all other action necessary or, in the reasonable opinion of
MergerSub, advisable to secure any vote of stockholders required by Delaware
Corporate Law to effect the Merger and will otherwise comply with all legal
requirements applicable to such meeting. The Special Committee and the Board of
Directors of the Company shall, unless the Special Committee or the Board of
Directors of the Company, as the case may be, determines in its good faith
judgment, after receiving the advice of its outside legal counsel and otherwise
in accordance with the terms of this Agreement, that in order for the Special
Committee or the Board of Directors of the Company, as the case may be, to
comply with its fiduciary duties under applicable Law it must recommend a
Superior Proposal, recommend that the stockholders of the Company approve this
Agreement and the Merger.
Section 6.3 ACCESS TO INFORMATION; RIGHT OF INSPECTION. From the date
hereof until the Effective Time, the Company and each of its Subsidiaries will,
during normal business hours, (i) give MergerSub, its Affiliates and their
respective officers, employees, counsel, accountants, financial advisors,
financing sources and other agents and representatives full access to the
offices, properties, warehouses and other facilities and to all contracts,
internal
51
reports, data processing files, books and records, Federal, state, local and
foreign tax returns and records, commitments, books, records and affairs of
the Company, whether located on the premises of the Company, its Subsidiaries
or at another location; (ii) furnish promptly to MergerSub or its Affiliates a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of Federal
securities laws or regulations; (iii) permit MergerSub or its Affiliates to
make such inspections as they may reasonably require; (iv) cause its officers
to furnish MergerSub and its Affiliates such existing financial, operating and
product data and other information with respect to the business and properties
of the Company and its Subsidiaries as MergerSub or its Affiliates from time
to time may reasonably request, including without limitation financial
statements and schedules; (v) allow MergerSub and its Affiliates the
opportunity to interview such employees and other personnel of the Company and
its Subsidiaries; and (iv) otherwise instruct and cause the Company's and its
Subsidiaries' employees, accountants, counsel and financial advisors to fully
cooperate with MergerSub in its investigation of the business of the Company
and its Subsidiaries; PROVIDED, HOWEVER, that no investigation pursuant to
this Section 6.3 or notice pursuant to Section 8.5 shall affect or be deemed
to modify any representation or warranty made by the Company herein.
Section 6.4 OTHER POTENTIAL ACQUIRERS.
(a) Neither the Company, its Subsidiaries nor any of their
respective Affiliates shall, nor shall the Company or its Subsidiaries or
Affiliates authorize or permit any of their respective officers, directors,
employees, representatives, legal counsel, financial advisors or other agents
to, directly or indirectly, encourage, solicit, initiate, or engage in
discussions or negotiations with or provide any non-public information to any
person or group (other than MergerSub or its Affiliates or any designees of
MergerSub or its Affiliates), or take any action designed to facilitate any
inquiries or the making of any proposal with respect to, any Third Party
Acquisition; and neither the Company nor any Subsidiary or Affiliated Entity
shall enter into any agreement with respect to a Third Party Acquisition;
PROVIDED, HOWEVER, that nothing contained in this Section 6.4(a) shall prevent
the Special Committee or the Board of Directors of the Company from (i) taking
and disclosing to the Company's stockholders a position as required by Rules
14d-9 and 14e-2 promulgated under the Exchange Act with regard to any tender or
exchange offer, PROVIDED, THAT such disclosure states that no action will be
taken by the Special Committee or the Board of Directors of the Company or any
other committee thereof, as applicable, in violation of this Section 6.4; and
(ii) if it receives a written unsolicited expression of interest from a Person
relating to the submission by such Person of a Superior Proposal, supplying to
and receiving non-public information from such Person (subject to a customary
confidentiality agreement which expressly permits the Company to fulfill its
obligations set forth in the last sentence of this Section 6.4(a)), in response
to such unsolicited Third Party Acquisition proposal as, and to
52
the extent that, the Special Committee or the Board of Directors of the
Company, as applicable, determines in its good faith judgment, after
consultation with outside legal counsel, (A) such action is required in order
to comply with its fiduciary duties under applicable Law, and (B) there is a
reasonable prospect that such expression of interest will result in a Superior
Proposal from such Person, PROVIDED, THAT, after consultation with outside
legal counsel, the Company may conduct such discussions and negotiations as it
believes are necessary in light of the fiduciary duties of the Special
Committee and the Board of Directors of the Company concerning such
unsolicited Third Party Acquisition proposal. The Company shall immediately
terminate any pending discussion regarding any Third Party Acquisition (other
than with MergerSub or its Affiliates or any designees of MergerSub or its
Affiliates) and shall promptly notify MergerSub of (i) any inquiries or
proposals received by, any non-public information requested from, or any
negotiations or discussions sought to be initiated or continued with, the
Company or any of its Subsidiaries or Affiliated Entities, (ii) any inquiries
or proposals known by the Company to have been received by, any non-public
information known by the Company to have been requested from, or any
negotiation or discussions known by the Company to have been sought to be
initiated or continued with, the Company or any of its Affiliates or any of
the respective directors, officers, employees, agents or representatives of
the foregoing, in each case from a person (other than MergerSub and its
representatives and Affiliates) with respect to a Third Party Acquisition, and
(iii) the terms thereof, including the identity of such third party and the
general terms of any financing arrangement or commitment in connection with
such Third Party Acquisition, and the Company agrees to promptly update
MergerSub on an ongoing basis of the status thereof, including furnishing
copies of any such written inquiries or offers.
(b) Except as set forth in this Section 6.4(b), neither the
Special Committee nor the Board of Directors of the Company shall withdraw or
modify its approval or recommendation of this Agreement, the Merger or the
transactions contemplated hereby or approve or recommend, or cause or allow
the Company or any Subsidiary to enter into any agreement with respect to, any
Third Party Acquisition. If the Special Committee or the Board of Directors of
the Company, by a majority disinterested vote determines in its good faith
judgment after consultation with its outside legal counsel, that it is
required to do so in order to comply with its fiduciary duties under
applicable Law, the Special Committee or the Board of Directors of the
Company, as applicable, may, in the event that it receives a Superior Proposal
and in response thereto, (x) withdraw its recommendation of the transactions
contemplated hereby or (y) approve or recommend such Superior Proposal but in
each case only (i) after providing written notice to MergerSub (a "Notice of
Superior Proposal") advising MergerSub that the Special Committee or the Board
of Directors of the Company, as applicable, has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal, and (ii) the Special
Committee or the Board of Directors of the Company, as
53
applicable, by a majority disinterested vote determines in its good faith
judgment (after receipt of written advice of a financial adviser of nationally
recognized reputation consistent with such determination and consultation with
outside legal counsel) that any transaction proposed by MergerSub is not at
least as favorable to the Company's stockholders (other than the Retaining
Stockholders) as the Superior Proposal; PROVIDED, HOWEVER, that (I) no action
specified in clause (x) or (y) above shall be taken until the sixth Business
Day after receipt of a Notice of Superior Proposal by MergerSub and (II) the
Company shall not be entitled to enter into any agreement with respect to a
Superior Proposal unless and until this Agreement is terminated by its terms
pursuant to Section 10.1 and the Company has paid all amounts due to MergerSub
pursuant to Section 10.2. Nothing contained in this Section 6.4(b) shall
prevent the Special Committee or the Board of Directors of the Company from
(i) taking and disclosing to the Company's stockholders a position as required
by Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to any
tender or exchange offer, PROVIDED, THAT such disclosure states that no action
will be taken by the Special Committee or the Board of Directors of the
Company in violation of this Section 6.4, or (ii) disclosing the fact that the
Special Committee or the Board of Directors, as applicable, has received a
proposal for a Third Party Acquisition and the terms of such proposal, if the
Special Committee or the Board of Directors of the Company, as applicable,
determines, after consultation with outside legal counsel, that it is
compelled to make such disclosure in order to comply with its fiduciary duties
under applicable law or with federal securities laws.
(c) For the purposes of this Agreement, "Third Party
Acquisition" means the occurrence of any of the following events: (i) the
acquisition of the Company by merger or otherwise by any person (which
includes a "PERSON" as such term is defined in Section 13(d)(3) of the
Exchange Act) other than MergerSub (a "Third Party"); (ii) the acquisition by
a Third Party of any material portion of the assets of the Company and its
Subsidiaries taken as a whole; (iii) the acquisition by a Third Party of
fifteen percent (15%) or more of the outstanding Common Stock or the issuance
by the Company of capital stock containing terms which are inconsistent with
the consummation of the transactions contemplated by this Agreement; (iv) the
adoption by the Company of a plan of liquidation or the declaration or payment
of an extraordinary dividend; (v) the repurchase by the Company or any of its
Subsidiaries of more than fifteen percent (15%) of the outstanding Shares; or
(vi) the acquisition by the Company or any of its Subsidiaries by merger,
joint venture or otherwise of any person, or any purchase of stock or assets
or acquisition of any direct or indirect ownership interest or investment in
any business such that, after such acquisition, the Company and its
Subsidiaries' interest or investment in such business's annual revenues, net
income or assets is greater than or equal to fifteen percent (15%) of the
annual revenues, net income or assets of the Company. For purposes of this
Agreement, a "Superior Proposal" means any bona fide written unsolicited
proposal to acquire, by merger or otherwise, directly or indirectly for
consideration consisting of cash and/or securities more than fifty percent
(50%) of the
54
Shares then outstanding or all or substantially all the assets of the Company
and its Subsidiaries, taken as a whole (in either case, with funding that is
at least as committed as the funding commitments in the Financing Letters),
and otherwise for a consideration with a value higher than the Merger
Consideration and on terms and conditions that the Special Committee or the
Board of Directors of the Company, as applicable, by a majority disinterested
vote determines in its good faith judgment (after receipt of written advice of
a financial advisor of nationally recognized reputation consistent with such
determination and consultation with outside legal counsel) (i) is capable of
being so funded, and (ii) would, if consummated provide a higher value to the
Company's stockholders (excluding the Retaining Stockholders) from a financial
point of view than the transactions contemplated hereby and by any alternative
transaction proposal made by MergerSub pursuant to Section 6.4(b) hereof;
PROVIDED, HOWEVER, that such proposal or offer shall not be deemed to be a
"Superior Proposal" unless the Special Committee or the Board of Directors of
the Company, as applicable, reasonably determines that such proposal is
reasonably likely to be consummated in accordance with its terms and that the
financing required to consummate the transaction contemplated by such proposal
or offer is capable of being, and is reasonably likely to be, obtained.
Section 6.5 RESIGNATION OF DIRECTORS. Prior to the Effective Time, the
Company shall deliver to MergerSub evidence satisfactory to MergerSub of the
resignation of all directors of the Company effective as of the Effective Time.
Section 6.6 WARN ACT. The Company shall not, at any time prior to the
Effective Time, without the written consent of MergerSub and without complying
fully with the notice and other requirements of the Worker Adjustment and
Retraining Notification Act of 1988 ("WARN Act"), effectuate (1) a "plant
closing" as defined in the WARN Act affecting any site of employment or one or
more facilities or operating units within any site of employment of the Company;
or (2) a "mass layoff" as defined in the WARN Act affecting any site of
employment of the Company; or any similar action under applicable state or
foreign law requiring notice to employees in the event of a plant closing or
layoff.
Section 6.7 LEASE CONSENTS. Notwithstanding the provisions of Section 8.2
below, the Company hereby covenants and agrees to use its reasonable best
efforts to obtain the Minimum Lease Consents.
ARTICLE VII
COVENANTS OF MERGERSUB
55
Section 7.1 DIRECTOR AND OFFICER LIABILITY. The Surviving Corporation
shall honor all of the Company's obligations to indemnify and hold harmless
(including any obligations to advance funds for expenses) the present and former
officers and directors of the Company in respect of acts or omissions occurring
prior to the Effective Time to the extent provided under the Delaware General
Corporate Law and the Company's certificate of incorporation and bylaws in
effect on the date hereof, and such obligations shall survive the Merger and
shall continue in full force and effect from the Effective Time until six (6)
years after the Effective Time; PROVIDED, HOWEVER, that such indemnification
shall be subject to any limitation imposed from time to time under applicable
Law. For a period of six (6) years after the Effective Time, the Surviving
Corporation shall cause to be maintained the current policies of officers' and
directors' liability insurance maintained by the Company (the "Current
Policies") (provided that the Surviving Corporation may substitute therefor
policies with reputable and financially sound carriers of at least the same
coverage and amount containing terms and conditions that are no less favorable
(the "Replacement Policies")) in respect of acts or omissions occurring prior to
the Effective Time covering each such Person currently covered by such Current
Policies; PROVIDED, HOWEVER, that in no event will the Surviving Corporation be
required to expend, per annum, in excess of 250% of the annual premium currently
paid by the Company for such coverage (or such coverage as is available for 250%
of such annual premium); PROVIDED, FURTHER, that if the annual premium required
to provide the foregoing insurance exceeds 250% of the annual premium currently
paid by the Company, the Company shall provide as much of such insurance as can
be purchased for such premium, and, any present or former officer or director of
the Company who desires to be covered by the Current Policies may so elect and
shall be covered by the Current Policies so long as such former officer or
director pays the portion of the premium for such Current Policies in excess of
the amount which the Surviving Corporation is obligated to pay pursuant to this
Section 7.1.
ARTICLE VIII
COVENANTS OF MERGERSUB AND THE COMPANY
The parties hereto agree that:
Section 8.1 REASONABLE BEST EFFORTS. Subject to the terms and conditions
of this Agreement, each party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement. Each party shall
also refrain from taking, directly or indirectly, any action which would impair
such party's ability to consummate the Merger and the other transactions
contemplated hereby. Without limiting the foregoing, the Company shall use its
reasonable best efforts to (i) take all action necessary or desirable so that no
state takeover statute or
56
similar statute or regulation is or becomes applicable to the Merger or any of
the other transactions contemplated by this Agreement and (ii) if any state
takeover statute or similar statute or regulation becomes applicable to any of
the foregoing, take all action necessary so that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement. Each of the Company and MergerSub
will use their reasonable best efforts to exempt the Company, the Surviving
Corporation, this Agreement and the transactions contemplated hereby from the
applicability and provisions of Section 2115 of the California Corporations
Code. The Company shall deliver to MergerSub, within ten Business Days of the
date hereof, a complete list of the Company's Leases as of the date hereof, and
any amendments to such Leases.
Section 8.2 CONSENTS AND APPROVALS. The Company and MergerSub shall
cooperate with one another in determining whether any action by or in respect
of, or filing with, any Governmental Authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement. Each of the Company and MergerSub will, and will
cause its respective Subsidiaries, if any, to, take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, approval, waiver, authorization, order or approval of, or any exemption
by, any Governmental Authority or other public or private third party required
to be obtained or made by the Company, MergerSub, or any of their respective
Subsidiaries, if any, in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.
Section 8.3 CERTAIN FILINGS.
(a) SECURITIES LAWS. The Company and MergerSub shall use their
respective reasonable best efforts to take or cause to be taken such actions as
may be required to be taken under the Exchange Act, the Securities Act and any
other federal securities laws, and under any applicable state securities or Blue
Sky Laws in connection with the Merger and the other transactions contemplated
hereby, including, without limitation, the Company Proxy Statement, the Schedule
13E-3 and any other filings that may be required in connection with the
Financing and the Offering Documents.
(b) COMPANY PROXY STATEMENT; SCHEDULE 13E-3. In connection with the
Merger and the Company Stockholders Meeting, the Company shall prepare and file
with the SEC the Company Proxy Statement and a Rule 13e-3 Transaction Statement
on Schedule 13E-3 (the "Schedule 13E-3") relating to the Merger and the other
transactions contemplated by this Agreement and shall use its best efforts to
respond to the comments of the SEC and
57
to cause the Company Proxy Statement to be mailed to the Company's
stockholders, all as promptly as practicable; PROVIDED, HOWEVER, that prior to
the filing of the Company Proxy Statement and the Schedule 13E-3, the Company
shall consult with MergerSub with respect to such filings and shall afford
MergerSub reasonable opportunity to comment thereon. MergerSub shall provide
the Company with any information for inclusion in the Company Proxy Statement
and the Schedule 13E-3 which may be required under applicable law and which is
reasonably requested by the Company. The Company shall promptly notify
MergerSub of the receipt of comments of the SEC and of any request from the SEC
for amendments or supplements to the Company Proxy Statement or the Schedule
13E-3 or for additional information, and will promptly supply MergerSub with
copies of all correspondence between the Company or its representatives, on the
one hand, and the SEC or members of its staff, on the other hand, with respect
to the Company Proxy Statement, the Schedule 13E-3 or the Merger. If at any
time prior to the Company Stockholder Meeting any event should occur which is
required by applicable law to be set forth in an amendment of, or a supplement
to, the Company Proxy Statement or the Schedule 13E-3, the Company will
promptly inform MergerSub. In such case, the Company, with the cooperation of
MergerSub, will, upon learning of such event, promptly prepare and mail such
amendment or supplement; PROVIDED, HOWEVER, that prior to such mailing, the
Company shall consult with MergerSub with respect to such amendment or
supplement and shall afford MergerSub reasonable opportunity to comment
thereon. The Company will notify MergerSub at least 48 hours prior to the
mailing of the Company Proxy Statement, or 24 hours prior to the mailing of any
amendment or supplement thereto, to the stockholders of the Company.
(c) PROVIDED INFORMATION. The information supplied by each of the
Company and MergerSub for inclusion in any filing with the SEC, including, but
not limited to, the Company Proxy Statement and the Schedule 13E-3, shall not,
in the case of the Schedule 13E-3 as of the date thereof, the date of any
amendment thereto, and as of the Effective Time, and in the case of the Company
Proxy Statement, as of the time the Company Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to the stockholders of the
Company, as of the time of the Company Stockholders Meeting, or as of the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein, in circumstances when made, or
necessary in order to make the statements therein not misleading.
Section 8.4 HSR ACT. The Company and MergerSub shall take all reasonable
actions necessary to file as soon as practicable notifications under the HSR Act
and to respond as promptly as practicable to any inquiries received from the
Federal Trade Commission and the Antitrust Division of the Department of Justice
for additional information or documentation and to respond as promptly as
practicable to all inquiries and requests
58
received from any state attorney general or other Governmental Authority in
connection with antitrust matters.
Section 8.5 ADVICE OF CHANGES. The Company and MergerSub shall promptly
give notice to the other party upon becoming aware of any representation or
warranty of the Company or MergerSub contained in this Agreement which is
qualified as to materiality becoming untrue or inaccurate or, which is not
qualified as to materiality, becoming untrue or inaccurate in any material
respect or the failure by the Company or MergerSub to timely comply with or
satisfy any material covenant or agreement to be complied with or satisfied by
it under this Agreement and shall use its reasonable best efforts to prevent or
promptly remedy same. No notice given hereunder shall affect or be deemed to
modify any representation or warranty made by the Company or MergerSub herein.
Section 8.6 FINANCING. MergerSub shall use commercially reasonable
efforts to obtain the Financing, on terms reasonably acceptable to MergerSub,
prior to the Terminal Date, PROVIDED, HOWEVER, that the terms of the Financing
Letters as of the date hereof shall be deemed to be acceptable to MergerSub. The
Company agrees to provide, and will use commercially reasonable efforts to cause
its Subsidiaries, its officers, employees, representatives and advisors,
including legal and accounting, to provide, all necessary cooperation reasonably
requested by MergerSub in connection with the Financing, including, without
limitation, using commercially reasonable efforts to cause (a) appropriate
officers and employees to be available on a customary basis for "road show"
appearances and the preparation of disclosure documents in connection therewith
and (b) its independent accountants and counsel to provide assistance to
MergerSub for fees consistent with the Company's existing arrangements with such
accountants and counsel.
Section 8.7 RECAPITALIZATION. Each of the Company and MergerSub shall use
reasonable best efforts to cause the transactions contemplated by this
Agreement, including but not limited to the Merger, to be accounted for as a
recapitalization and such accounting treatment to be accepted by their
respective accountants and the SEC, and each of the Company and MergerSub agrees
that it shall take no action that would reasonably be likely to cause such
accounting treatment not to be obtained.
Section 8.8 PUBLIC ANNOUNCEMENTS. MergerSub and the Company will consult
with each other before issuing any press release or making any public statement
with respect to this Agreement and the transactions contemplated hereby, and
will not issue any such press release or make any such public statement prior to
such consultation.
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Section 8.9 FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or MergerSub, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Company or MergerSub, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets of the Company acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger.
Section 8.10 NOTICES OF CERTAIN EVENTS. Each of the parties
hereto shall promptly notify the other party of:
(i) the receipt by such party of 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;
(ii) the receipt by such party of any notice or other
communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of such party's knowledge threatened against, or
affecting such party which, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to this Agreement
or which relate to the consummation of the transactions contemplated by
this Agreement.
ARTICLE IX
CONDITIONS TO THE MERGER
Section 9.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of the Company and MergerSub to consummate the Merger are subject to the
satisfaction or waiver of the following conditions:
(a) This Agreement shall have been approved and adopted in
accordance with the Delaware Corporation Law by the affirmative vote of the
holders of a majority of the outstanding Common Shares;
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(b) Any applicable waiting period under the HSR Act relating to
the Merger shall have expired or been terminated; and
(c) No provision of any applicable Law and no judgment, order,
decree or injunction shall prohibit or restrain the consummation of the Merger;
provided, however, that the Company and MergerSub shall each use their
reasonable best efforts to have any such judgment, order, decree or injunction
vacated.
Section 9.2 CONDITIONS TO THE OBLIGATIONS OF MERGERSUB. The obligations
of MergerSub to consummate the Merger are subject to the satisfaction or waiver
of the following further conditions:
(a) The Company shall have performed in all material respects all
of its obligations hereunder required to be performed by it at or prior to the
Effective Time, the representations and warranties of the Company contained in
this Agreement which are qualified as to materiality shall be true and all
representations and warranties not so qualified shall be true in all material
respects on the date hereof and as of the Effective Time (provided that
representations made as of a specific date shall be required to be true as of
such date only) as if made at and as of such time and MergerSub shall have
received a certificate signed by the Chief Executive Officer and the Chief
Financial Officer of the Company to the foregoing effect;
(b) There shall not be pending (i) any action or proceeding by any
Governmental Authority or (ii) any action or proceeding by any other Person, in
any case referred to in clauses (i) and (ii), before any court or Governmental
Authority that has reasonable likelihood of success seeking (w) to make illegal,
to delay materially or otherwise directly or indirectly to restrain or prohibit
the consummation of the Merger or seeking to obtain material damages, (x) to
restrain or prohibit MergerSub's (including its Affiliates) ownership or
operation of all or any material portion of the business or assets of the
Surviving Corporation or the Company or any of their Subsidiaries or Affiliated
Entities, or to compel MergerSub or any of its Affiliates to dispose of or hold
separate all or any material portion of the business or assets of the Surviving
Corporation or the Company or any of their Subsidiaries, (y) to impose or
confirm material limitations on the ability of MergerSub or any of its
Affiliates to effectively control the business or operations of the Surviving
Corporation or the Company or any of their Subsidiaries or effectively to
exercise full rights of ownership of the Shares, including, without limitation,
the right to vote any Shares acquired or owned by MergerSub or any of its
Affiliates on all matters properly presented to the Company's stockholders, or
(z) to require divestiture by MergerSub or any of its Affiliates of any material
amount of Shares, and no court, arbitrator or Governmental Authority shall have
issued any judgment, order, decree or injunction, and there shall not be any
statute, rule or regulation,
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that, in the sole judgment of MergerSub is likely, directly or indirectly, to
result in any of the consequences referred to in the preceding clauses (w)
through (z); PROVIDED, HOWEVER, that MergerSub shall use its reasonable efforts
to have any such judgment, order, decree or injunction vacated;
(c) The Company shall have obtained the Minimum Lease Consents
and all consents, approvals, authorizations and permits required to be obtained
prior to the consummation of the Merger from any third party in connection with
this Agreement, the Merger and the other transactions contemplated hereby
including, without limitation, the Financing (assuming it occurs on the terms
set forth in the Financing Letters).
(d) The Financing and the retirement of all of the Company's and
its Subsidiaries' indebtedness and the release of any related Liens shall have
been consummated on terms acceptable to MergerSub, PROVIDED, HOWEVER, that the
terms of the Financing Letters as of the date hereof shall be deemed to be
acceptable to MergerSub.
(e) The aggregate number of Shares of the Company at the
Effective Time, the holders of which have demanded purchase of their shares
from the Company in accordance with the provisions of Section 262 of the
Delaware Corporate Law, shall not equal 10% or more of the Shares of the
Company outstanding as of the record date for the Company Stockholder Meeting;
(f) No change in accounting practices or policies after the date
hereof shall cause MergerSub (after consultation with its accountants) to
conclude that the Merger will not be recorded as a recapitalization for
financial reporting purposes;
(g) The SEC shall not object (or, if the SEC so objects, shall
not have withdrawn such objection) to the treatment of the transactions
contemplated hereby as a recapitalization for accounting purposes.
(h) Since the date of this Agreement, there shall not have
occurred any change, event, occurrence, development or circumstance which,
individually or in the aggregate, constitutes a Material Adverse Effect on the
Company.
Section 9.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligation
of the Company to consummate the Merger is subject to the satisfaction or waiver
of the following further condition:
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(a) MergerSub shall have performed in all material respects all
of its obligations hereunder required to be performed by it at or prior to the
Effective Time, the representations and warranties of MergerSub contained in
this Agreement which are qualified as to materiality shall be true and all
representations and warranties not so qualified shall be true in all material
respects on the date hereof and as of the Effective Time (provided that
representations made as of a specific date shall be required to be true as of
such date only) as if made at and as of such time and the Company shall have
received a certificate signed by the President or any Vice President of
MergerSub to the foregoing effect.
(b) The Company shall have received the opinion of a firm of
nationally recognized reputation in such area to the effect that as of the
Closing Date, after giving effect to the transactions contemplated hereby,
including the Financing, the Company will not be insolvent or unable to pay its
debts as they mature, and will not have unreasonably small capital. Such opinion
shall be in form and substance similar to the opinion to such effect provided by
a firm of nationally recognized reputation in such area to the lenders referred
to in the Financing Letters, and otherwise as reasonably acceptable to the
Company.
ARTICLE X
TERMINATION
Section 10.1 TERMINATION. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company):
(a) By mutual written consent of the Company on the one hand
and MergerSub on the other hand;
(b) By either the Company or MergerSub, if the Merger has not
been consummated on or prior to (the "Terminal Date") the earlier of (x)
November 1, 2000, and (y) the later of (i) September 30, 2000, provided that
such date shall be extended by one Business Day for each Business Day beyond
10 calendar weeks that pass between the date of the initial filing with the
SEC of the Company Proxy Statement and the date the SEC advises the Company
that it has completed its review of the Company Proxy Statement such that the
Company may deliver definitive copies of the Company Proxy Statement to its
stockholders; and (ii) the date 45 days after the SEC notifies the Company
that it has completed its review of the Company Proxy Statement such that the
Company may deliver definitive copies of the Company Proxy Statement to its
stockholders; PROVIDED, HOWEVER, that neither party shall have the right to
terminate this Agreement if such party seeking to terminate this Agreement
pursuant to this Section 10.1(b) is then in breach of any of its
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representations, warranties or obligations which are qualified as to
materiality, or is then in breach in any material respect of any of its
representations, warranties or obligations which are not so qualified;
(c) By either the Company or MergerSub, if MergerSub (in the
case of termination by the Company) or the Company (in the case of termination
by MergerSub) shall have breached any of its covenants or obligations under
this Agreement which are qualified as to materiality, or breached in any
material respect any of its covenants or obligations under this Agreement
which are not so qualified, or any representation or warranty of MergerSub (in
the case of termination by the Company) or of the Company (in the case of
termination by MergerSub) shall have been incorrect as to those which are
qualified as to materiality or incorrect in any material respect as to those
which are not so qualified, when made or at the Effective Time, PROVIDED,
HOWEVER, that the party terminating pursuant to this Section 10.1(c) shall
not be, at the time of such termination, in material breach of any of its
covenants or obligations hereunder;
(d) By either the Company or MergerSub, if any court of
competent jurisdiction in the United States or other United States federal or
state Governmental Authority shall have issued a final order, decree or
ruling, or taken any other final action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action is or
shall have become nonappealable; PROVIDED, THAT, the right to terminate this
Agreement pursuant to this Section 10.1(d) shall not be available to any party
whose breach of any provision of this Agreement results in the imposition of
such order, decree, ruling or other action.
(e) By MergerSub (i) if prior to the consummation of the
Merger, the Special Committee or the Board of Directors of the Company shall
have withdrawn, or modified or changed in a manner adverse to MergerSub its
approval or recommendation of this Agreement or the Merger or shall have
recommended or approved a Third Party Acquisition or, when required by
applicable law, failed to take a position with respect thereto; or (ii) if
there shall have occurred a Third Party Acquisition or the Company shall have
entered into an agreement to effect a Third Party Acquisition; or (iii) if the
Company, or any of the Company's Affiliates, or any of their respective
officers, directors, employees, representatives, legal counsel, financial
advisors or other agents, shall have breached any of the provisions of Section
6.4 hereof; or (iv) if prior to the consummation of the Merger, the Company
shall have breached any of its obligations under Sections 6.2, 8.6 or 8.7
hereof or breached any of its obligations under Section 6.3 hereof in any
material respect;
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(f) By the Company if the Company simultaneously enters into a
definitive agreement for a Superior Proposal in accordance with, and has
otherwise complied with the terms of, Section 6.4 hereof, provided the Company
has complied with all provisions thereof, including the notice provisions
therein, and that it makes payment of the Termination Fee; or
(g) By either the Company or MergerSub if, at a duly held
stockholders meeting of the Company or any adjournment thereof at which this
Agreement is voted upon, the requisite stockholder vote in favor of the
adoption of this Agreement shall not have been obtained.
The party desiring to terminate this Agreement pursuant to Sections 10.1(b)
through (g) shall give written notice of such termination to the other party in
accordance with Section 11.1 hereof.
Section 10.2 TERMINATION FEE.
(a) Notwithstanding any other provision of this Agreement, if
this Agreement is terminated pursuant to either of Sections 10.1(e)(i), (ii)
or 10.1(f), then the Company shall immediately pay to MergerSub a break-up fee
of $11,000,000 (the "Termination Fee"). In addition, (i) if this Agreement is
terminated pursuant to Section 10.1(e)(iv) or 10.1(g) then in the event that,
after the date hereof and prior to such termination, either (A) a Third Party
Acquisition occurs, or (B) any Third Party shall have made, proposed,
communicated or disclosed an intention to make a proposal with respect to a
Third Party Acquisition then the Company shall immediately pay to MergerSub
the Termination Fee; or (ii) if this Agreement is terminated pursuant to
Section 10.1(e)(iii) and within eighteen (18) months following the termination
of this Agreement (A) a Third Party Acquisition occurs or (B) the Company or
any of its Subsidiaries shall have entered into a definitive agreement with
respect to a Third Party Acquisition, then the Company shall immediately pay
to MergerSub the Termination Fee upon the first to occur of any of the events
specified in clause (A) or (B) of this clause (ii).
(b) The Company shall pay, or reimburse MergerSub, within two
Business Days of submission of one or more statements therefor, accompanied by
reasonable supporting documentation, for the amount of all out of pocket
costs, fees and expenses reasonably incurred by any of them or on their behalf
arising out of, in connection with, or related to this Agreement, the Merger
and the consummation of all transactions contemplated by this Agreement
(including, without limitation, HSR Act and other filing fees, fees and
expenses of printers, accountants, financial advisors, attorneys, consultants
and appraisers, or any Person providing or proposing to provide any portion of
the Financing, as well as commitment and other fees, charges and expenses of
any such Person) (the "Expenses"); if
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this Agreement is terminated by MergerSub pursuant to Section 10.1(c),
PROVIDED, THAT, the Company's aggregate payments and reimbursements pursuant
to this Section 10.2(b) shall in no event exceed $3,000,000.
Section 10.3 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto except to the extent that such
termination results from the willful and material breach by a party of any
representation, warranty or covenant contained in this Agreement and except that
the agreements contained in Sections 10.2, 10.3, 11.1, 11.4 and 11.7 shall
survive the termination hereof.
ARTICLE XI
MISCELLANEOUS
Section 11.1 NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given, if to MergerSub, to:
BD Recapitalization Corp.
c/o Xxxxxxx Xxxxx & Partners, L.P.
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
c/o Texas Pacific Group
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
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Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Company, to:
Petco Animal Supplies, Inc.
0000 Xxxxx Xxxx
Xxx Xxxxx, XX 00000-0000
Attention: Mr. Xxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (i) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section and the
appropriate telecopy confirmation is received or (ii) if given by any other
means when delivered at the address specified in this Section 11.1.
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Section 11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall survive until (but not beyond) the
Effective Time. This Section 11.2 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance after the Effective
Time.
Section 11.3 AMENDMENTS AND WAIVERS.
(a) Any provision of this Agreement may be amended or waived
prior to the Effective Time if, and only if, such amendment or waiver is in
writing and signed by each party, in the case of an amendment by the Company
and MergerSub, or in the case of a waiver, by the party against whom the
waiver is to be effective; PROVIDED, HOWEVER, that after the adoption of this
Agreement by the stockholders of the Company, there shall be no amendment that
by applicable Law requires further approval by the stockholders of the Company
without the further approval of such stockholders.
(b) No failure or delay by either party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by Law.
Section 11.4 EXPENSES. Except as provided in Sections 6.4 and 10.2 all
costs and expenses incurred in connection with this Agreement shall be paid by
the party incurring such cost or expense.
Section 11.5 SUCCESSORS AND ASSIGNS; ASSIGNMENT. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto except that MergerSub
may assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to Green Equity Investors III, LP, or TPG Partners III,
L.P., or to any, direct or indirect, wholly owned subsidiary of either of them.
Section 11.6 GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware.
Section 11.7 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become
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effective when each party hereto shall have received counterparts hereof
signed by all of the other parties hereto.
Section 11.8 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
Section 11.9 SPECIFIC PERFORMANCE. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties, for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder.
Section 11.10 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, (i) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter of this Agreement and (ii) except for the
provisions of Section 7.1, is not intended to confer upon any Person other than
the parties any rights or remedies.
Section 11.11 "KNOWLEDGE". As used in Article IV hereof, all references
to the knowledge of the Company shall refer to the actual knowledge of the
officers and directors, regional managers and other employees with relevant
compliance responsibility, of the Company.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
PETCO ANIMAL SUPPLIES, INC.
By: /s/ XXXXX X. XXXXXX
--------------------------------
Name:
Title:
BD Recapitalization Corp.
By: /s/ XXXX X. XXXXXXX
--------------------------------
Name: Xxxx X. Xxxxxxx
Title: President