EXHIBIT (d)(1)
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TENDER AGREEMENT
between
AMAZING SAVINGS HOLDING LLC
and
ODD JOB STORES, INC.
Dated as of June 3, 2003
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TABLE OF CONTENTS
PAGE
ARTICLE I - THE OFFER.......................................................................................3
1.1 The Offer............................................................................................3
1.2 Company Actions......................................................................................5
1.3 Purchase Limit.......................................................................................6
1.4 Information Statement................................................................................7
1.5 Offer Documents; Schedule 14D-9; Information Statement...............................................7
1.6 Stock Options........................................................................................7
1.7 Directors ...........................................................................................7
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................8
2.1 Organization.........................................................................................8
2.2 Capitalization.......................................................................................9
2.3 Authority...........................................................................................10
2.4 Consents and Approvals; No Violations...............................................................11
2.5 SEC Documents; Undisclosed Liabilities..............................................................11
2.6 Absence of Certain Changes or Events................................................................13
2.7 Legal Proceedings...................................................................................14
2.8 Compliance With Applicable Law; Permits.............................................................14
2.9 Schedule 14D-9; Offer Documents; Form 041; and Information Statement................................14
2.10 Contracts...........................................................................................15
2.11 Tax Matters.........................................................................................16
2.12 Employee Benefits and Labor Matters.................................................................18
2.13 Environmental and Health and Safety Matters.........................................................21
2.14 Properties; Real Estate; Intellectual Property......................................................22
2.15 Opinion of Financial Advisor........................................................................26
2.16 Finders or Brokers..................................................................................26
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER....................................................26
3.1 Organization........................................................................................26
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TABLE OF CONTENTS
(CONTINUED)
PAGE
3.2 Authority...........................................................................................26
3.3 Consents and Approvals; No Violations...............................................................26
3.4 Offer Documents; Schedule 14D-9; Form 041; Information Statement....................................27
3.5 Financing...........................................................................................27
3.6 Finders or Brokers..................................................................................27
3.7 Corporate Operations................................................................................27
3.8 Financials..........................................................................................28
ARTICLE IV - ADDITIONAL COVENANTS AND AGREEMENTS............................................................28
4.1 Conduct of Business.................................................................................28
4.2 No Solicitation by the Company......................................................................32
4.3 Reasonable Best Efforts.............................................................................35
4.4 Public Announcements................................................................................35
4.5 Access; Confidentiality.............................................................................36
4.6 Notification of Certain Matters.....................................................................36
4.7 Director and Officer Indemnification and Insurance..................................................37
4.8 Consents, Missing Documents, Disputes and Estoppels.................................................38
4.9 Approval by Independent Directors...................................................................38
4.10 Non-Distribution of Assets..........................................................................39
4.11 Certification.......................................................................................39
ARTICLE V - TERMINATION....................................................................................39
5.1 Termination.........................................................................................39
5.2 Effect of Termination...............................................................................40
5.3 Expenses; Termination Fee...........................................................................41
ARTICLE VI - MISCELLANEOUS..................................................................................42
6.1 No Survival of Representations and Warranties; etc..................................................42
6.2 Amendment or Supplement.............................................................................42
6.3 Extension of Time, Waiver, Etc......................................................................42
6.4 Assignment; Binding Effect..........................................................................43
6.5 Counterparts; Effectiveness.........................................................................43
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TABLE OF CONTENTS
(CONTINUED)
PAGE
6.6 Entire Agreement; No Third-Party Beneficiaries......................................................43
6.7 Governing Law; Enforcement; Jurisdiction; Waiver of Jury Trial......................................43
6.8 Notices.............................................................................................44
6.9 Severability........................................................................................45
6.10 Headings............................................................................................45
6.11 Definitions; Construction...........................................................................45
ANNEX A Conditions to the Offer
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AGREEMENT, dated as of June 3, 2003 (this "Agreement"), between
Amazing Savings Holding LLC, a Delaware limited liability company ("Purchaser"),
and Odd Job Stores, Inc., an Ohio corporation (the "Company"). Certain terms
used in this Agreement are defined in Section 6.11.
RECITALS:
WHEREAS, Purchaser wishes to acquire not less than 66 2/3% nor more
than 96% of the outstanding shares of common stock, without par value, of the
Company ("Company Common Stock") at a purchase price of $3.00 per share, and the
Company has determined that such acquisition is in the best interests of its
shareholders, in each case on the terms and subject to the conditions provided
for in this Agreement;
WHEREAS, it is contemplated that such acquisition be accomplished by
a wholly-owned subsidiary of Purchaser commencing a tender offer to purchase
outstanding shares of Company Common Stock (each, a "Share" and, collectively,
the "Shares") for $3.00 per Share (such amount, subject to decrease as provided
in Section 1.1 hereof, or any greater amount per Share paid pursuant to the
Offer being hereinafter referred to as the "Offer Price"), subject to any
required withholding of Taxes (as hereinafter defined), net to the seller in
cash, on the terms and subject to the conditions provided for in this Agreement
(such cash tender offer, as it may be amended from time to time as permitted by
this Agreement, the "Offer");
WHEREAS, the parties agree, at the option of Purchaser, that the
Offer Price may be reduced to $2.90 per Share if the Purchase Date has not
occurred within 25 business days after the commencement of the Offer; and
WHEREAS, the Voting Members of Purchaser and the Board of Directors
of the Company have each approved this Agreement and the Offer;
WHEREAS, shareholders of the Company owning at least 66 2/3% of the
Shares outstanding have executed a written consent (the "Shareholder Consent")
that would amend the Company's Amended and Restated Code of Regulations to
render inapplicable Section 1701.831 of the Ohio Revised Code to the Company
(the "Opt Out").
WHEREAS, it is a condition to the Offer that the Opt Out becomes
effective;
WHEREAS, the Opt Out shall become effective 20 calendar days after
the Company has sent to its shareholders an information statement on Schedule
14C relating thereto;
WHEREAS, Purchaser has required, as a condition to its willingness to
enter into this Agreement, that ZS Mazel Inc., ZS Mazel L.P., ZS Mazel II, L.P.
(collectively, "ZS") and Mazel/D&K, Inc. (the "Principal Shareholders") enter
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into the Principal Shareholders' Agreement, dated as of the date hereof (the
"Principal Shareholders' Agreement"), pursuant to which, among other things, the
Principal Shareholders have agreed to, subject to the provisions of the
Principal Shareholders' Agreement, (i) tender all Shares they beneficially own
into the Offer and (ii) if the Tender Offer is not completed under certain
circumstances, pay to Purchaser a portion of any proceeds received by the
Principal Shareholders from sales of their Shares in excess of the Offer Price
during a specified period of time; and
WHEREAS, in order to induce Purchaser to enter into this Agreement,
the Board of Directors of the Company has approved the execution and delivery of
the Principal Shareholders' Agreement by the Principal Shareholders.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, Purchaser and the Company hereby agree as follows:
ARTICLE I - THE OFFER
1.1 The Offer.
(a) Provided that none of the events or circumstances set forth in
paragraphs (a) through (h) of Annex A hereto shall have occurred and be existing
(and shall not have been waived by Purchaser), Purchaser shall commence (within
the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder (the "Exchange Act")) the
Offer to purchase not less than 66 2/3% of the Shares then outstanding (the
"Minimum Condition") nor more than 96% of the Shares then outstanding (the
"Maximum Amount") at the Offer Price as promptly as reasonably practicable after
the date hereof, but in any event on or before June 10, 2003. Notwithstanding
the foregoing, the parties agree that (i) if the Purchase Date has not occurred
on or before the 25th business day after the date of commencement of the Offer
for any reason other than as a result of Purchaser's intentional delay or
failure to use commercially reasonable efforts to take those actions within its
control to cause the Purchase Date to occur on or before the 25th business day
after the commencement of the Offer (which shall not include any obligation to
waive any condition to the Offer), the Offer Price may, at the option of
Purchaser, without any further action by or notice to the Company, be reduced
from $3.00 per Share to $2.90 per Share, and (ii) the Purchaser may, in its sole
discretion (but subject to applicable Law), reduce the Minimum Condition at any
time prior to the Purchase Date from 66-2/3% to a majority of the Shares then
outstanding (and, upon any such reduction, the term "Minimum Condition" shall
mean the reduced amount).
(b) The obligation of Purchaser to accept for payment and pay for all
Shares tendered pursuant to the Offer shall be subject only to (i) the
satisfaction of the condition that at the expiration of the Offer there be
validly tendered in accordance with the terms of the Offer and not withdrawn
that number of Shares which, when taken together with Shares, if any, then owned
by Purchaser or any of its subsidiaries, represents more than the Minimum
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Condition, (ii) the non-existence (or waiver by Purchaser) of the conditions set
forth in paragraphs (a) through (h) of Annex A hereto and (iii) the right of
Purchaser not to purchase more than the Maximum Amount. Purchaser expressly
reserves the right to waive any of such conditions, to increase the price per
Share payable in the Offer and to make any other changes in the terms of the
Offer; provided, however, that no change may be made without the prior written
consent of the Company which decreases the price per Share payable in the Offer
except as set forth in Section 1.1(a), changes the form of consideration to be
paid in the Offer, changes the Maximum Amount to be purchased in the Offer,
imposes conditions to the Offer in addition to the conditions set forth in Annex
A hereto, waives the Minimum Condition, modifies or amends any of the conditions
set forth in Annex A hereto or makes other changes in the terms of the Offer
that are in any manner adverse to the holders of Shares or, except as provided
in Section 1.1(c), extends the expiration date of the Offer.
(c) Purchaser may (i) extend the Offer beyond the initial scheduled
expiration date, which shall be 8:00 A.M. on the 21st business day following the
date of commencement of the Offer, or any subsequent scheduled expiration date,
if, at the scheduled expiration of the Offer, any of the conditions to
Purchaser's obligation to accept for payment and to pay for Shares tendered
shall not be satisfied or, to the extent permitted by this Agreement, waived,
subject, however, to the parties' respective rights to terminate this Agreement
pursuant to Section 5.1; provided, however, that Purchaser shall not be required
to extend the Offer beyond the initial expiration date unless, as of the initial
expiration date, all conditions other than the non-existence of the Opt Out
Condition (as defined in paragraph (f) of Annex A hereto) and the non-existence
of the Board Representation Condition (as defined in paragraph (g) of the Annex
A hereto) shall have been satisfied and the Company is in compliance with
Section 1.4 hereof), in which case Purchaser shall be required to extend the
Offer, in a minimum of five calendar day increments, until the Walk-Away Date
and (ii) extend the Offer for any period required by any rule, regulation or
interpretation of the Securities and Exchange Commission (the "SEC") or the
staff thereof applicable to the Offer but not after the Walk-Away Date. Any
extension of the Offer pursuant to clause (i) of the preceding sentence of this
Section 1.1 (other than pursuant to the proviso of such clause, which shall be
governed by such proviso) shall not exceed the lesser of five business days (or
such longer period as the Company and Purchaser may agree in writing in any
particular instance) or such fewer number of days that Purchaser reasonably
believes are necessary to cause the conditions of the Offer set forth in Annex A
hereto to be satisfied. Subject to the terms of the Offer and this Agreement,
the satisfaction of the Minimum Condition and the non-existence or earlier
waiver of all the conditions of the Offer set forth in Annex A hereto as of any
expiration date of the Offer, Purchaser shall accept for payment and pay for all
Shares validly tendered and not withdrawn pursuant to the Offer promptly after
it is permitted to do so under applicable Law. The Offer Price shall, subject to
any required withholding of Taxes, be net to the seller in cash, upon the terms
and subject to the conditions of the Offer. The Company agrees that no Shares
held by the Company or any of its subsidiaries will be tendered to Purchaser
pursuant to the Offer.
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(d) As promptly as practicable on the date of commencement of the
Offer, Purchaser shall file with the SEC a Tender Offer Statement on Schedule TO
(together with all amendments, supplements and exhibits thereto, the "Schedule
TO") with respect to the Offer. The Schedule TO shall contain or incorporate by
reference an offer to purchase and forms of the related letter of transmittal
and all other ancillary Offer documents (collectively, together with all
amendments, supplements and exhibits thereto, the "Offer Documents"). The
Company shall promptly provide Purchaser with all information concerning the
Company that is required to be included in the Offer Documents. Purchaser shall
cause the Offer Documents to be disseminated to the holders of the Shares as and
to the extent required by applicable federal securities Laws. Purchaser, on the
one hand, and the Company, on the other hand, shall promptly correct any
information provided by it for use in the Offer Documents if and to the extent
that it shall be or shall have become false or misleading in any material
respect, and Purchaser shall cause the Offer Documents as so corrected to be
filed with the SEC and disseminated to holders of the Shares, in each case, as
and to the extent required by applicable federal securities laws. The Company
and its counsel shall be given a reasonable opportunity to review and comment
upon the Offer Documents before they are filed with the SEC and disseminated to
holders of Shares. In addition, Purchaser agrees to provide the Company and its
counsel with any comments, whether written or oral, that Purchaser or its
counsel may receive from time to time from the SEC or its staff with respect to
the Offer Documents promptly after the receipt of such comments, to consult with
the Company and its counsel prior to responding to any such comments and to
provide the Company with copies of all such responses, whether written or oral.
1.2 Company Actions.
(a) The Company hereby represents and warrants that the Company's
Board of Directors, at a meeting duly called and held, has (i) approved this
Agreement and the Transactions, including the Offer (such approval having been
made in accordance with Chapter 1701 of the Ohio Revised Code (the "OGCL"), as
well as an approval of the Principal Shareholders' Agreement and the purchase of
the Shares by Purchaser for purposes of Chapter 1704 of the OGCL ("Chapter
1704")), and (ii) resolved to recommend that shareholders of the Company accept
the Offer, tender their Shares to Purchaser pursuant thereto. The Company hereby
consents to the inclusion in the Offer Documents of the recommendation of the
Company's Board of Directors described in the immediately preceding sentence.
The recommendation of the Company's Board of Directors described in the first
sentence of this Section 1.2(a) may not be withdrawn or modified in a manner
adverse to Purchaser, except in accordance with Section 4.2. The Company hereby
further represents and warrants that (A) the Board of Directors of the Company
has received the opinion of Morgan Joseph & Co., Inc. ("Morgan Joseph"), dated
May 27, 2003, to the effect that, as of such date, and subject to the various
assumptions and qualifications set forth therein, the consideration to be
received by the Company's shareholders in the Offer is fair to such holders from
a financial point of view (the "Fairness Opinion") and (B) the Company has been
authorized by Morgan Joseph to permit the inclusion of the Fairness Opinion
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and/or references thereto in the Offer Documents, the Schedule 14D-9 and the
Information Statement, subject to prior review and consent by Morgan Joseph
(such consent not be unreasonably withheld or delayed).
(b) As promptly as practicable on the date of commencement of the
Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments, supplements and
exhibits thereto, the "Schedule 14D-9") which shall contain the recommendation
of the Board of Directors of the Company referred to in Section 1.2(a). The
Company shall cause the Schedule 14D-9 to be disseminated to holders of the
Shares as and to the extent required by applicable federal securities Laws. The
Company, on the one hand, and Purchaser, on the other hand, shall promptly
correct any information provided by it for use in the Schedule 14D-9 if and to
the extent that it shall be or shall have become false or misleading in any
material respect, and the Company shall cause the Schedule 14D-9 as so corrected
to be filed with the SEC and disseminated to holders of the Shares, in each
case, as and to the extent required by applicable federal securities Laws.
Purchaser and its counsel shall be given a reasonable opportunity to review and
comment upon the Schedule 14D-9 before it is filed with the SEC and disseminated
to holders of Shares. In addition, the Company agrees to provide Purchaser and
its counsel with any comments, whether written or oral, that the Company or its
counsel may receive from time to time from the SEC or its staff with respect to
the Schedule 14D-9, promptly after the receipt of such comments, to consult with
Purchaser and its counsel prior to responding to any such comments and to
provide Purchaser with copies of all such responses, whether written or oral.
(c) The Company shall promptly furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Shares and with
security position listings of Shares held in stock depositories, each as of a
recent date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of Shares. The Company shall furnish Purchaser with such
additional information, including updated listings and computer files of
shareholders, mailing labels and security position listings, and such other
assistance as Purchaser or its agents may reasonably require in communicating
the Offer to the record and beneficial holders of Shares. Subject to the
requirements of applicable Law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Offer, Purchaser shall hold in confidence the information contained in such
labels, listings and files, shall use such information solely in connection with
the Offer and, if this Agreement is terminated in accordance with Section 5.1 or
if the Offer is otherwise terminated, shall promptly deliver or cause to be
delivered to the Company all copies of such information, labels, listings and
files then in its possession or in the possession of its agents or
representatives.
1.3 Purchase Limit. In the event that holders of Shares tender more
than the Maximum Amount, Purchaser shall be obligated to accept for payment and
pay for only the number of Shares tendered by any given holder of Shares equal
to the product of (a) the total number of Shares tendered by such holder
multiplied by (b) the Proration Ratio. The "Proration Ratio" shall be calculated
6
by dividing (x) the Maximum Amount by (y) the total number of Shares validly
tendered and not properly withdrawn by all holders of Shares adjusted to avoid
purchases of fractional Shares.
1.4 Information Statement.
As promptly as practicable after the date hereof, the Company, acting
through its Board of Directors, shall, in accordance with applicable Law and the
Charter Documents, in consultation with Purchaser, prepare and file with the SEC
a preliminary information statement relating to the Opt Out and obtain and
furnish the information required by the SEC to be included therein and, after
consultation with Purchaser, respond promptly to any comments made by the SEC
with respect to the preliminary information statement and cause a definitive
information statement (together with all amendments, supplements and exhibits
thereto, the "Information Statement") to be mailed to the Company's shareholders
at the earliest practicable date; provided that no amendments or supplements to
the Information Statement shall be made by the Company without consultation with
Purchaser. Purchaser shall promptly provide the Company with such information
with respect to Purchaser and its affiliates as shall be required to be included
in the Information Statement.
1.5 Offer Documents; Schedule 14D-9; Information Statement. Without
limiting any other provision of this Agreement, whenever any party hereto
becomes aware of any event or change which is required to be set forth in an
amendment or supplement to the Offer Documents, the Schedule 14D-9 and/or the
Information Statement, such party shall promptly inform the other party thereof
and each of the parties shall cooperate in the preparation, filing with the SEC
and, as and to the extent required by applicable federal securities laws,
dissemination to the Company's shareholders of such amendment or supplement.
1.6 Stock Options. On the Purchase Date, the Company will take all
actions necessary to ensure that, as of the Purchase Date, each outstanding
Option, vested or unvested, exercisable or non-exercisable, shall be
extinguished and converted into a cash amount equal to the product of (x) the
excess, if any, of the Offer Price minus the exercise price of each such Option
multiplied by (y) the aggregate number of shares of the Company Common Stock
issuable upon the exercise in full of such Option at the Purchase Date.
1.7 Directors
(a) The Company shall request that all directors of the Company
immediately prior to the Purchase Date (all "Current Directors") resign on the
Purchase Date after electing successors designated by Purchaser; provided,
however, that, if the successors designated by Purchaser include less than two
persons who are not officers, employees or affiliates of the Company, Purchaser
or their respective executive officers or principal shareholders or of any of
their respective subsidiaries ("Independent Directors"), the Company shall
request that one or two (as applicable) Current Directors remain on the
Company's Board of Directors until such time as the Company's Board of Directors
7
contains at least two Independent Directors who are not Current Directors;
provided, however, that the failure of any Current Director to remain on the
Company's Board of Directors shall not constitute a default of this section.
(b) From and after the Purchase Date until the first anniversary of
the Purchase Date, Purchaser shall use its reasonable best efforts to ensure
that at least two of the members of the Board of Directors of the Company are
Independent Directors and, from the first anniversary of the Purchase Date until
the third anniversary thereof, Purchaser should use its reasonable best efforts
to ensure that at least one member of the Board of Directors of the Company is
an Independent Director.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser as follows:
2.1 Organization.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Ohio and has the requisite
corporate power and authority necessary to own or lease all of its properties
and assets and to carry on its business as it is now being conducted. The
Company is duly licensed or qualified to do business and is in good standing in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing has not had and would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
(b) Set forth in Section 2.1(b) of the disclosure schedule of the
Company delivered to Purchaser concurrently herewith (the "Company Disclosure
Schedule") is a list of all subsidiaries of the Company together with the
jurisdiction of organization of each such subsidiary. Except for the
subsidiaries of the Company, the Company does not own any capital stock or
ownership interests, directly or indirectly, in any other entities. Each of the
Company's subsidiaries is a corporation or entity duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
organization and has the requisite power and authority to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted. Each of the Company's subsidiaries is duly licensed or qualified to
do business and is in good standing in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed, qualified or in good standing has
not had and would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(c) The Company has heretofore made available to Purchaser a complete
and correct copy of its articles of incorporation and code of regulations as
amended to date (the "Company Charter Documents") and complete and correct
8
copies of the certificates of incorporation and by-laws (or equivalent
organizational documents) of each of its subsidiaries as amended to date (the
"Subsidiary Documents"). All such Company Charter Documents and Subsidiary
Documents are in full force and effect and neither the Company nor any of its
subsidiaries is in violation of any of the provisions of the Company Charter
Documents or the Subsidiary Documents.
2.2 Capitalization.
(a) The authorized capital stock of the Company consists of
14,000,000 shares of Company Common Stock and 2,000,000 shares of preferred
stock, without par value (the "Company Preferred Stock"). At the close of
business on April 30, 2003, there were 9,060,695 Shares issued and outstanding
and no shares of Company Preferred Stock issued and outstanding. On the date
hereof, there were 931,800 shares of Company Common Stock reserved for issuance
upon the exercise of outstanding options (the "Options") pursuant to the Stock
Plan. All Shares have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights. Since March 31, 2003, the
Company has not issued any shares of its capital stock, voting securities or
equity interests, or any securities convertible into or exchangeable or
exercisable for any shares of its capital stock, voting securities or equity
interests, other than pursuant to the exercise of the outstanding Options
referred to above in this Section 2.2(a). Except (A) as set forth above or (B)
as otherwise expressly permitted by Section 4.1, as of the date of this
Agreement there are not, and as of the Purchase Date there will not be, any
shares of capital stock, voting securities or equity interests of the Company
issued and outstanding or any subscriptions, options, warrants, calls,
convertible or exchangeable securities, rights, commitments or agreements of any
character providing for the issuance of any shares of capital stock, voting
securities or equity interests of the Company, including any representing the
right to purchase or otherwise receive any Company Common Stock, other than the
Options referred to above in this Section 2.2(a). Section 2.2(a) of the Company
Disclosure Schedule sets forth the name of the holder of, the number of shares
underlying, the grant and expiration date and exercise price of, each Option as
of the date hereof.
(b) (i) Except as set forth in Section 2.2(b) of the Company
Disclosure Schedule, the Company owns, directly or indirectly, all of the issued
and outstanding shares of capital stock, voting securities and equity interests
of each of its subsidiaries, free and clear of any liens, pledges, charges,
mortgages, encumbrances, adverse rights or claims and security interests
whatsoever (including any restriction on the right to vote or transfer the same,
except for such transfer restrictions of general applicability as may be
provided under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), and the "blue sky"
Laws of the various States of the United States) ("Liens"), and all of such
shares, securities and interests are duly authorized and validly issued and are
fully paid and nonassessable, and (ii) none of the Company or any of its
subsidiaries has issued or is bound by any outstanding subscriptions, options,
warrants, calls, convertible or exchangeable securities, rights, commitments or
agreements of any character providing for the issuance or disposition of any
9
shares of capital stock, voting securities or equity interests of any subsidiary
of the Company.
(c) Except as set forth in Section 2.2(c) of the Company Disclosure
Schedule, there are no outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock, voting securities or equity interests (or any options, warrants or other
rights to acquire any shares of capital stock, voting securities or equity
interests) of the Company or any of its subsidiaries.
2.3 Authority.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and, subject to the effectiveness of the Opt
Out as a result of the actions contemplated by Section 1.4 to perform its
obligations hereunder and to consummate the Transactions. The execution,
delivery and performance by the Company of this Agreement, and the consummation
by it of the Transactions, have been duly authorized and approved by its Board
of Directors and, except for the effectiveness of the Opt Out as a result of the
actions contemplated by Section 1.4, no other corporate action on the part of
the Company is necessary to authorize the execution and delivery by the Company
of this Agreement and the consummation by it of the Transactions. This Agreement
has been duly executed and delivered by the Company and, assuming due
authorization, execution and delivery hereof by Purchaser, constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to the Bankruptcy and Equity Exception.
(b) The Company's Board of Directors, at a meeting duly called and
held, has duly adopted resolutions (i) approving this Agreement and the
Transactions, including the Offer and the Principal Shareholders' Agreement
(such approval having been made in accordance with the OGCL, as well as an
approval for purposes of Chapter 1704), and (ii) resolving to recommend that
shareholders of the Company accept the Offer, tender their Shares to Purchaser
pursuant thereto. The Company has taken all actions such that no restrictive
provision of Chapter 1704 is, or at the expiration of the Offer or at the
Purchase Date will be, applicable to Purchaser or the Transactions (including
the Offer).
(c) The Shareholder Consent (i) has been duly executed and delivered
by the holders of at least two-thirds of the outstanding shares, (ii) subject to
the effectiveness of the Opt Out as the result of the actions contemplated by
Section 1.4, is in full force and effect and (iii) is irrevocable and not
subject to revocation, modification, withdrawal or amendment by any of the
holders who have executed and delivered the same. No vote or approval of the
holders of any class or series of capital stock of the Company or any of its
subsidiaries is necessary to adopt this Agreement and approve the Transactions.
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2.4 Consents and Approvals; No Violations.
(a) Except for the filing with the SEC of the Schedule 14D-9, the
filing with the Ohio Division of Securities ("ODS") of a Form 041("Form 041")
and the Information Statement relating to the Opt Out, and other filings
required under, and compliance with other applicable requirements of, the
Exchange Act and the rules of The Nasdaq Stock Market, no consents or approvals
of, or filings, declarations or registrations with, any Governmental Entity are
necessary for the consummation by the Company of the Transactions other than
consents, approvals, filings, declarations or registrations that, if not
obtained, made or given, would not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect.
(b) Neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the Transactions, nor compliance
by the Company with any of the terms or provisions hereof, will (i) conflict
with or violate any provision of the Company Charter Documents or any of the
Subsidiary Documents or (ii) assuming that the authorizations, consents and
approvals referred to in Section 2.4(a) (and the effectiveness of the Opt Out as
a result of the actions contemplated by Section 1.4) are obtained and the
filings referred to in Section 2.4(a) are made, (x) violate any Law, judgment,
writ or injunction of any Governmental Entity applicable to the Company or any
of its subsidiaries or any of their respective properties or assets, or (y)
violate, conflict with, result in the loss of any material benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of, the Company or any of its subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, Permit, lease, agreement or other instrument or obligation to which the
Company or any of its subsidiaries is a party, or by which they or any of their
respective properties or assets may be bound or affected except, in the case of
clause (ii), for such violations, conflicts, losses, defaults, terminations,
cancellations, accelerations or Liens as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
2.5 SEC Documents; Undisclosed Liabilities.
(a) The Company has filed all required reports, schedules, forms and
registration, proxy and other statements with the SEC since January 1, 2000
(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, the "SEC Documents"). None of the
Company's subsidiaries is required to file periodic reports with the SEC
pursuant to the Exchange Act. As of their respective effective dates (in the
case of SEC Documents that are registration statements filed pursuant to the
Securities Act) and as of their respective SEC filing dates (in the case of all
other SEC Documents), the SEC Documents complied in all material respects with
the requirements of the Exchange Act and the Securities Act, as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable to
11
such SEC Documents, and none of the SEC Documents as of such respective dates
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent that information contained in any SEC Document
has been revised or superseded by a later-filed SEC Document, none of the SEC
Documents contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of the Company included in
the SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except, in the case
of unaudited quarterly statements, as indicated in the notes thereto) applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited quarterly
statements, to normal year-end audit adjustments none of which has been or will
be, individually or in the aggregate, material).
(b) The Company is in compliance in all material respects with the
provisions of Section 13(b) of the Exchange Act.
(c) Except as set forth in the SEC Documents filed prior to the date
hereof or in Section 2.5(c) of the Company Disclosure Schedule, or for events
(or series of related matters) as to which the amounts involved do not exceed
$60,000, since the filing of the Company's proxy statement dated July 22, 2002,
no event has occurred that would be required to be reported as a "Certain
Relationship or Related Transaction" pursuant to Item 404 of Regulation S-K
promulgated by the SEC. Neither the Company nor any of its subsidiaries nor, to
the Company's knowledge, any director, officer, agent, employee or other Person
acting on behalf of the Company or any of its subsidiaries, has, in any material
respect, (i) used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others or established or
maintained any unlawful or unrecorded funds in violation of Section 30A of the
Exchange Act or (ii) accepted or received any unlawful contributions, payments,
gifts or expenditures.
(d) Neither the Company nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) whether or not required, if known, to be reflected or reserved
against on a consolidated balance sheet of the Company prepared in accordance
with GAAP or the notes thereto, except liabilities (i) as and to the extent set
forth on the audited balance sheet of the Company and its subsidiaries as of
December 31, 2002 (the "Balance Sheet Date") (including the notes thereto)
included in the Company's Report on Form 10-K for the period then ended, (ii)
incurred after the Balance Sheet Date in the ordinary course of business
consistent with past practice, as have not had and would not reasonably be
12
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, (iii) incurred after the Balance Sheet Date in connection with
negotiating this Agreement and the Transactions and a reasonable estimate of
which is set forth in Section 2.5(d) of the Company Disclosure Schedule, and
(iv) incurred after the Balance Sheet Date not in the ordinary course that are
in the aggregate, immaterial in amount.
2.6 Absence of Certain Changes or Events. Except (i) as disclosed in
the SEC Documents filed and publicly available not later than two days prior to
the date hereof (the "Filed SEC Documents"), (ii) as set forth in Section 2.6 of
the Company Disclosure Schedule, or (iii) for the Transactions, since the
Balance Sheet Date, the Company and its subsidiaries have carried on and
operated their respective businesses in all material respects in the ordinary
course of business consistent with past practice, and there has not occurred
any: (a) event or change that has had or would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, (b) sale or
other disposition of or pledge or other encumbrance upon a material amount of
property or other assets or any Real Property Lease as defined in Section 2.14
herein of the Company or any of its subsidiaries, except sales of inventory in
the ordinary course of business consistent with past practice, (c) declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any class of capital stock of the Company or
any of its subsidiaries (other than dividends by a direct or indirect wholly
owned subsidiary of the Company to its parent), or any repurchase, redemption or
other acquisition by the Company or any of its subsidiaries of any capital stock
of the Company, (d) split, combination or reclassification of any capital stock
of the Company, (e) change in financial or tax accounting methods, principles or
practices by the Company or its subsidiaries, except insofar as may have been
required by a change in GAAP or applicable Law, (f) material Tax election
inconsistent with past practices or the settlement or compromise of any material
Tax liability, (g) damage, destruction or loss of any material asset of the
Company or any of its subsidiaries which materially affects the use or value
thereof or a material part of any improvement Leased by the Company or any of
its subsidiaries pursuant to the Real Property Lease and which damage,
destruction or loss is not covered by insurance, subject to reasonable
deductible limits (it being agreed that the existence, level and coverage of
insurance, if any, shall be taken into account but shall not be determinative
for purposes of determining whether any damage, destruction or loss is material
or would result in a Company Material Adverse Effect), (h) grant by the Company
or any of its subsidiaries to any officer of any increase in compensation,
except as was required under any employment agreements set forth on Section
2.6(h) of the Company Disclosure Schedule, copies of which have been made
available to Purchaser, or any granting by the Company or any of its
subsidiaries to any employee of any increase in compensation, except for normal
increases in the ordinary course of business consistent with past practice, (i)
grant by the Company or any of its subsidiaries to any officer of any increase
in (or acceleration of vesting or payment of) severance or termination pay,
except as was required under any employment, severance or termination agreements
set forth on Section 2.6(i) of the Company Disclosure Schedule, copies of which
have been made available to Purchaser, or any grant by the Company or any of its
subsidiaries to any employee other than an officer of any increase in (or
13
acceleration of vesting or payment of) severance or termination pay, except in
the ordinary course of business consistent with past practice, (j) entry by the
Company or any of its subsidiaries into any (or amendment of any existing)
employment, severance or termination agreement with any officer, (k)
establishment, adoption, amendment or modification of, or increase of benefits
under, any plan that would constitute a Company Plan (as hereinafter defined) or
(l) acceleration of vesting of any Option, except acceleration previously
provided for in the Stock Plan.
2.7 Legal Proceedings. Except as set forth on Section 2.7 of the
Company Disclosure Schedule, there is no pending or, to the knowledge of the
Company, threatened, legal, administrative, arbitral or other proceeding, claim,
suit or action against, or governmental or regulatory investigation of, the
Company or any of its subsidiaries, nor is there any injunction, order,
judgment, ruling or decree imposed (or, to the knowledge of the Company,
threatened to be imposed) upon the Company, any of its subsidiaries or the
assets of the Company or any of its subsidiaries by any Governmental Entity,
that (a) has had or would reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect or (b) challenges any of the
Transactions, provided that the representation in clause (b) is made only as of
the date hereof.
2.8 Compliance With Applicable Law; Permits. The Company and its
subsidiaries are (and since January 1, 2003 have been) in compliance with all
laws, statutes, ordinances, codes, rules, regulations, decrees and orders of
Governmental Entities (collectively, "Laws") applicable to the Company or any of
its subsidiaries, any of their properties or other assets or any of their
businesses or operations, except for such non-compliance as has not had and
would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. The Company and each of its subsidiaries hold
all licenses, franchises, permits, certificates, approvals and authorizations
from Governmental Entities necessary for the lawful conduct of their respective
businesses (collectively, "Permits"), except where the failure to hold the same
has not had and would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. The Company and its subsidiaries
are (and since January 1, 2003 have been) in compliance with the terms of all
Permits, except for such non-compliance as has not had and would not reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect.
2.9 Schedule 14D-9; Offer Documents; Form 041; and Information
Statement. Subject to the accuracy of the representations and warranties of
Purchaser set forth in Section 3.4, neither the Schedule 14D-9 nor any
information supplied (or to be supplied) in writing by or on behalf of the
Company for inclusion in the Offer Documents or the Form 041 will, at the
respective times the Schedule 14D-9, the Offer Documents, or any amendments or
supplements thereto, are filed with the SEC or are first published, sent or
given to shareholders of the Company or at the expiration of the Offer, as the
case may be, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in the light of the circumstances under which they
are made, not misleading. The Information Statement will not, on the date the
Information Statement (or any amendment or supplement thereto) is first mailed
14
to shareholders of the Company, contain any untrue statement of a material fact,
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading and will not, at the time of the Company
Shareholders Meeting, omit to state any material fact necessary to correct any
statement in any earlier communication from the Company with respect to the
solicitation of proxies for the Company Shareholders Meeting which shall have
become false or misleading in any material respect. The Information Statement
and the Schedule 14D-9 will comply as to form in all material respects with the
applicable requirements of the Exchange Act. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to information supplied
by or on behalf of Purchaser for inclusion in any of the foregoing documents.
2.10 Contracts.
(a) Set forth in Section 2.10(a) of the Company Disclosure Schedule
is a list of each (i) contract or agreement that would be required to be filed
as an exhibit to any Securities Act registration statement or Exchange Act
report if such registration statement or report was filed by the Company with
the SEC on the date hereof, (ii) contract or agreement that purports to limit,
curtail or restrict the ability of the Company or any of its affiliates to
compete in any geographic area or line of business, (iii) partnership or joint
venture agreement, (iv) contract or agreement for the acquisition, sale or lease
of material properties or assets other than inventory (by merger, purchase or
sale of stock or assets or otherwise) entered into since January 1, 2002, (v)
agreement with any Governmental Entity, (vi) loan or credit agreement, mortgage,
indenture, note or other agreement or instrument evidencing indebtedness for
borrowed money by the Company or any of its subsidiaries or any agreement or
instrument pursuant to which indebtedness for borrowed money may be incurred or
is guaranteed by the Company or any of its subsidiaries, (vii) voting agreement
or registration rights agreement, (viii) executory supply contract or other
executory agreement of the Company or any subsidiary of the Company (including
for the purchase of inventory) that involves consideration in excess of $100,000
and which contract or agreement is not terminable by the Company without a
penalty, (ix) other executory contract or agreement involving consideration in
excess of $100,000 not terminable by the Company without a penalty, (x)
collective bargaining agreement, (xi) "standstill" or similar agreement, (xii)
to the extent material to the business or financial condition of the Company and
its subsidiaries, taken as a whole, (A) product design or development agreement,
(B) consulting agreement, (C) indemnification contract, (D) license or royalty
agreement, (E) merchandising, sales representative or distribution agreement or
(F) contract granting a right of first refusal or first negotiation, and (xiii)
commitment or agreement to enter into any of the foregoing (the contracts,
agreements and other documents required to be listed on Section 2.10(a) of the
Company Disclosure Schedule, together with any such agreements or contracts
entered into in accordance with Section 4.1, each a "Material Contract"). The
Company has heretofore made available to Purchaser true and complete copies of
15
each Material Contract in existence as of the date hereof, together with any and
all amendments and supplements thereto and material "side letters" and similar
documentation relating thereto.
(b) Each of the Material Contracts is enforceable in accordance with
its terms by the Company and its subsidiaries party thereto, except that such
enforceability (i) may be limited by bankruptcy, insolvency, fraudulent
transfer, moratorium or other similar Laws of general application affecting or
relating to the enforcement of creditors' rights generally and (ii) is subject
to general principles of equity, whether considered in a proceeding at law or in
equity (together, the "Bankruptcy and Equity Exception"). Neither the Company
nor any of its subsidiaries is in default under any Material Contract, nor does
any condition exist that, with notice or lapse of time or both, would constitute
a default thereunder by the Company and its subsidiaries party thereto, except
for such defaults as have not had and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. To the
knowledge of the Company, no other party to any Material Contract is in default
thereunder, nor does any condition exist that with notice or lapse of time or
both would constitute a default by any such other party thereunder, except for
such defaults as have not had and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Except as
separately identified in Section 2.10(b) of the Company Disclosure Schedule, no
approval or consent of any Person is needed in order that any Material Contract
continue in full force and effect following the consummation of the
Transactions.
2.11 Tax Matters.
(a) Each of the Company and its subsidiaries has timely filed, or has
caused to be timely filed on its behalf (taking into account any extension of
time within which to file), all material Tax Returns (as hereinafter defined)
required to be filed by it, and all such filed tax returns are correct and
complete in all material respects. All Taxes shown to be due on such Tax
Returns, or otherwise required to be paid by the Company or a subsidiary of the
Company, have been timely paid.
(b) The most recent financial statements contained in the Filed SEC
Documents reflect an adequate reserve for all Taxes payable by the Company and
its subsidiaries for all taxable periods and portion thereof through the date of
such financial statements. No deficiency with respect to Taxes has been
proposed, asserted or assessed against the Company or any of its subsidiaries.
(c) The Federal income Tax Returns of the Company and each of its
subsidiaries have been examined by and settled with the IRS (or the applicable
statute of limitations has expired) for all years through 1995. All assessments
for Taxes due with respect to such completed and settled examinations or any
concluded litigation have been fully paid.
16
(d) Neither the Company nor any of its subsidiaries has any
obligation under any agreement (either with any Person or any taxing authority)
with respect to Taxes.
(e) Neither the Company nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code since the
effective date of Section 355(e) of the Code.
(f) Neither the Company nor any of its subsidiaries has been a member
of an affiliated group of corporations within the meaning of Section 1504 of the
Code, other than the affiliated group of which the Company is the common parent.
(g) Except as set forth on Schedule 2.11(g) of the Disclosure
Schedule, no audit or other administrative or court proceedings are pending with
any Governmental Entity with respect to Taxes of the Company or any of its
subsidiaries and no written notice thereof has been received. No issue has been
raised by any taxing authority in any presently pending Tax audit that could be
material and adverse to the Company or any of its subsidiaries for any period
after the Purchase Date. Neither the Company nor any of its subsidiaries has any
outstanding agreements, waivers, or arrangements extending the statutory period
of limitations applicable to any claim for, or the period for the collection or
assessment of Taxes.
(h) No claim has been made by a taxing authority in a jurisdiction
where the Company or a subsidiary of the Company does not file a Tax Return that
the Company or a subsidiary of the Company is or may be subject to taxation in
that jurisdiction.
(i) Neither the Company nor any of its subsidiaries is a party to any
contract, agreement or other arrangement which provides for the payment of any
amount which would not be deductible by reason of Section 162(m) or Section 280G
of the Code.
(j) The Company has made available to Purchaser true and complete
copies of (i) all income and franchise Tax Returns of the Company and its
subsidiaries for the preceding three taxable years and (ii) any audit report
issued within the last three years (or otherwise with respect to any audit or
proceeding in progress) relating to income and franchise Taxes of the Company or
any subsidiary of the Company.
(k) No Liens for Taxes exist with respect to any assets or properties
of the Company or any of its subsidiaries except for Liens for Taxes not yet due
and payable.
(l) All material Taxes required to be withheld by the Company or any
of its subsidiaries have been withheld and duly and timely paid to the proper
taxing authority.
17
(m) For purposes of this Agreement: (1) "Taxes" shall mean taxes of
any kind (including but not limited to those measured by or referred to as
income, franchise, gross receipts, sales, use, ad valorem, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
value added, property, windfall profits, customs, duties or similar fees,
assessments or charges of any kind whatsoever) together with any interest and
any penalties, additions to tax or additional amounts imposed by any
Governmental Authority, domestic or foreign and shall include any transferee or
successor liability in respect of Taxes (whether by contract or otherwise) and
any several liability in respect of any Tax as a result of being a member of any
affiliated, consolidated, combined, unitary or similar group; and (2) "Tax
Returns" shall mean any return, report, claim for refund, estimate, information
return or statement or other similar document relating to or required to be
filed with any Governmental Entity with respect to Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
2.12 Employee Benefits and Labor Matters.
(a) Section 2.12(a) of the Company Disclosure Schedule sets forth a
true and complete list of: all "employee benefit plans", as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and all other employee benefit plans, programs, agreements, policies,
arrangements or payroll practices, including bonus plans, employment, consulting
or other compensation agreements, collective bargaining agreements, incentive,
equity or equity-based compensation, or deferred compensation arrangements,
change in control, termination or severance plans or arrangements, stock
purchase, severance pay, sick leave, vacation pay, salary continuation for
disability, hospitalization, medical insurance, life insurance and scholarship
plans and programs maintained by the Company or any of its subsidiaries or to
which the Company or any of its subsidiaries contributed or is obligated to
contribute thereunder for current or former employees of the Company or any of
its subsidiaries (the "Employees") (the "Company Plans"). Neither the Company
nor any of its affiliates and any trade or business (whether or not
incorporated) which is or has ever been under common control, or which is or has
ever been treated as a single employer, with any of them under Section 414(b),
(c), (m) or (o) of the Code ("ERISA Affiliate") or to which the Company or any
ERISA Affiliate contributed or has ever been obligated to contribute thereunder
within the last six years maintains, sponsors, contributes or is or has been
obligated to contribute to any "employee pension plans", as defined in Section
3(2) of ERISA, subject to Title IV of ERISA or Section 412 of the Code (the
"Title IV Plans") or to any multiemployer plan, as defined in Section 3(37) of
ERISA ("Multiemployer Plan"), or is or has been subject to Sections 4063 or 4064
of ERISA ("Multiple Employer Plans").
(b) True, current and complete copies of the following documents,
with respect to each of the Company Plans, have been made available or delivered
to Purchaser by the Company, to the extent applicable: (i) any plans, all
amendments thereto and related trust documents, insurance contracts or other
funding arrangements, and amendments thereto; (ii) the most recent Forms 5500
18
and all schedules thereto and the most recent actuarial report, if any; (iii)
the most recent IRS determination letter; (iv) summary plan descriptions; (v)
written communications to employees relating to the Company Plans; and (vi)
written descriptions of all non-written agreements relating to the Company
Plans.
(c) Except as set forth on Section 2.12(c) of the Company Disclosure
Schedule, the Company Plans have been maintained, in all material respects, in
accordance with their terms and with all provisions of ERISA, the Code
(including rules and regulations thereunder) and other applicable federal and
state laws and regulations, and neither the Company nor any "party in interest"
or "disqualified person" with respect to the Company Plans has engaged in a
non-exempt "prohibited transaction" within the meaning of Section 4975 of the
Code or Section 406 of ERISA. No fiduciary has any liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any Company Plan.
(d) The Company Plans intended to qualify under Section 401 of the
Code are so qualified and any trusts intended to be exempt from federal income
taxation under Section 501 of the Code are so exempt, and nothing has occurred
with respect to the operation of the Company Plans which could cause the loss of
such qualification or exemption or the imposition of any liability, penalty or
tax under ERISA or the Code.
(e) Each Company Plan which is intended to meet the requirements for
tax-favored treatment under Subchapter B of Chapter 1 of Subtitle A of the Code
meets such requirements.
(f) Section 2.12(f) of the Company Disclosure Schedule sets forth, on
a plan by plan basis, the present value of benefits payable presently or in the
future to present or former employees of the Company or any subsidiary of the
Company under each unfunded Company Plan, which is a "pension plan" (within the
meaning of Section 3(2) of ERISA).
(g) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under any of
the Company Plans (including workers compensation) or by Law (without regard to
any waivers granted under Section 412 of the Code), to any funds or trusts
established thereunder or in connection therewith have been made by the due date
thereof (including any valid extension), and all contributions for any period
ending on or before the Purchase Date which are not yet due will have been paid
or sufficient accruals for such contributions and other payments, to the extent
required by GAAP have been duly and fully provided for on the most recent
consolidated balance sheet of the Company included in the filed SEC Documents.
No accumulated funding deficiencies exist in any of the Company Plans subject to
Section 412 of the Code.
(h) No liability under any Company Plan has been funded nor has any
such obligation been satisfied with the purchase of a contract from an insurance
19
company that is not rated AA by Standard & Poor's Corporation and the equivalent
by each other nationally recognized rating agency.
(i) There are no pending actions, claims or lawsuits which have been
asserted or instituted against the Company Plans, the assets of any of the
trusts under such plans or the plan sponsor or the plan administrator, or
against any fiduciary of the Company Plans with respect to the operation of such
plans (other than routine benefit claims), nor, to the knowledge of the Company,
are there facts which could form the basis for any such claim or lawsuit.
(j) There is no material violation of ERISA or the Code with respect
to the filing of applicable reports, documents and notices regarding the Company
Plans with the Secretary of Labor and the Secretary of the Treasury or the
furnishing of such documents to the participants or beneficiaries of the Company
Plans.
(k) All amendments and actions required to bring the Company Plans
into conformity in all material respects with all of the applicable provisions
of the Code, ERISA and other applicable Laws have been made or taken except to
the extent that such amendments or actions are not required by Law to be made or
taken until a date after the date hereof.
(l) Any bonding required with respect to the Company Plans in
accordance with applicable provisions of ERISA has been obtained and is in full
force and effect.
(m) None of the Company Plans provide for post-employment life or
health insurance, benefits or coverage for any participant or any beneficiary of
a participant, except as may be required under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), and at the expense of the
participant or the participant's beneficiary. Each of the Company and any ERISA
Affiliate which maintains a "group health plan" within the meaning Section
5000(b)(1) of the Code has complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regulations thereunder.
(n) Except as set forth on Section 2.12(n) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the Transactions will (i) result in any payment becoming due to
any employee (current, former or retired) of the Company or any of its
subsidiaries, (ii) increase any benefits otherwise payable under any Company
Plan or (iii) result in the acceleration of the time of payment or vesting of
any such benefits under any such plan.
(o) The Company has no contract, plan or commitment, whether legally
binding or not, to create any additional Company Plan or to modify any existing
Company Plan.
20
(p) No stock or other security issued by the Company forms or has
formed a material part of the assets of any Company Plan.
(q) Any individual who performs services for the Company or its
subsidiaries (other than through a contract with an organization other than such
individual) and who is not treated as an employee of the Company or a subsidiary
of the Company for federal income tax purposes by the Company is not an employee
for such purposes.
(r) Except as set forth on Section 2.12(r) of the Company Disclosure
Schedule: (i) none of the Employees is represented in his or her capacity as an
employee of the Company or its subsidiaries by any labor organization; (ii)
neither the Company nor any of its subsidiaries has recognized any labor
organization nor has any labor organization been elected as the collective
bargaining agent of any Employees, nor has the Company or any of its
subsidiaries entered into any collective bargaining agreement or union contract
recognizing any labor organization as the bargaining agent of any Employees;
(iii) there is no union organization activity involving any of the Employees
pending or, to the knowledge of the Company, threatened, nor has there been
since February 3, 1998 any union representation efforts involving any of the
Employees; (iv) there is no picketing pending or, to the knowledge of the
Company, threatened, and there are no strikes, slowdowns, work stoppages, other
job actions, lockouts, arbitrations, grievances or other labor disputes
involving any of the Employees pending or, to the knowledge of the Company,
threatened; (v) there are no complaints, charges or claims against the Company
or any of its subsidiaries pending or, to the knowledge of the Company,
threatened, which could be brought or filed with any Governmental Entity or
arbitrator based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment or failure to employ by the
Company or any of its subsidiaries, of any individual; (vi) the Company and its
subsidiaries are in compliance with all Laws relating to the employment of
labor, including all such Laws relating to wages, hours, the Worker Adjustment
and Retraining Notification Act and any similar state or local "mass layoff" or
"plant closing" law ("WARN"), collective bargaining, discrimination, civil
rights, safety and health, workers' compensation and the collection and payment
of withholding and/or social security taxes and any similar tax, except for
immaterial non-compliance; and (vii) there has been no "mass layoff" or "plant
closing" as defined by WARN with respect to the Company or any of its
subsidiaries since February 3, 2002.
2.13 Environmental and Health and Safety Matters. Except for those
matters that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect: (i) each of
the Company and its subsidiaries is, and has been, in compliance with all
applicable Environmental Laws (as hereinafter defined), which compliance
includes the possession, maintenance, and compliance with all permits, licenses,
authorizations or similar approvals required by Environmental Laws and (ii)
there is no investigation, suit, claim, action or proceeding pending, or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its subsidiaries or any real property owned, operated or leased by the Company
21
or any of its subsidiaries relating to or arising under Environmental Laws;
(iii) to the knowledge of the Company, neither the Company nor any of its
subsidiaries has received any notice of or entered into or assumed by contract
or operation of law or otherwise, any obligation, liability, order, settlement,
judgment, injunction or decree relating to or arising under Environmental Laws;
(iv) the Company is not aware of any facts, circumstances or conditions relating
to the operations of the Company or any subsidiary or any real property
currently or formerly owned, operated or leased by or for the Company that could
reasonably be expected to result in the Company or subsidiaries incurring
liabilities, losses or damages under Environmental Laws; (v) the transactions
contemplated by this Agreement does not trigger or otherwise require compliance
with the Industrial Site Recovery Act, 13 N.J. Sta. Ann. ss.13:1K-6 and (vi) the
Company has made available to Purchaser copies of any environmental, health and
safety assessments, audits, investigation or similar reports relating to the
Company any subsidiary or any real property owned, operated or leased by the
Company or any subsidiary. For purposes of this Agreement: "Environmental Laws"
means all applicable Laws pertaining to the environment, preservation or
reclamation of natural resources, or to human health and safety, including, but
not limited to, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. App. ss. 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Clean Water Act (33 U.S.C.
ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. ss. 2601 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the Occupational
Safety and Health Act (29 U.S.C. ss. 651 et seq.), as each has been amended and
the regulations promulgated pursuant thereto, and any analogous state or local
laws.
2.14 Properties; Real Estate; Intellectual Property.
(a) Each of the Company and its subsidiaries (i) has good and
marketable title to all properties and other assets which are reflected on the
most recent consolidated balance sheet of the Company included in the Filed SEC
Documents as being owned by the Company or one of its subsidiaries (or acquired
after the date thereof) and which are, individually or in the aggregate,
material to the Company's business or financial condition on a consolidated
basis (except properties sold or otherwise disposed of since the date thereof in
the ordinary course of business), free and clear of all Liens except (x)
statutory liens securing payments not yet due, (y) security interests, mortgages
and pledges that are reflected in the Filed SEC Documents that secure
indebtedness that is reflected in the most recent consolidated financial
statements of the Company included in the Filed SEC Documents and (z) such other
imperfections or irregularities of title or other Liens as do not, individually
or in the aggregate, materially affect the value or use of the properties or
assets subject thereto or otherwise materially impair business operations, and
(ii) is the lessee, sublessee, sub-sublessee or sublandlord of all leasehold
estates and leasehold interests reflected in the Filed SEC Documents (or
acquired after the date thereof) as more particularly set forth on Section
2.14(a) of the Company Disclosure Schedule (each a "Real Property Lease" and
22
collectively, the "Real Property Leases", however, the leasehold estates and
leasehold interests whereby the Company or its subsidiaries is the sublandlord
shall also be referred to hereinafter as the "Sublease"), which schedule shall
list all material lease related documentation including, without limitation, all
leases, amendments, assignments, letter agreements, modifications, supplements,
commencement agreements, subleases and prime lease agreements, if applicable,
that the Company or any of its subsidiaries have executed, received, or of which
the Company or any of its subsidiaries otherwise have knowledge(collectively
referred to hereinafter as the "Real Property Lease Documentation").
(b) (i) There is no real property owned in fee by the Company or its
subsidiaries.
(ii) Each of the Real Property Leases and Subleases are in full
force and effect and neither the Company nor any of its subsidiaries, nor, to
the Company's knowledge, any other party to any of the Real Property Leases or
Subleases, have exercised any termination rights with respect thereto. Except
where such defaults are immaterial, (a) neither the Company nor any of its
subsidiaries have received or given any notice of any default under the Real
Property Leases or Subleases, (b) no default or event that with notice or lapse
of time, or both, would constitute a default by the Company or any of its
subsidiaries under any of the Real Property Leases or Subleases has occurred and
is continuing, and (c) to the Company's knowledge no other party to a Real
Property Lease or Sublease is in default thereof.
(iii) All rent and other sums and charges due and payable by the
Company and its subsidiaries as tenants, subtenant or sub-subtenants (each a
"Tenant" and collectively, "Tenants") under the Real Property Leases have been
paid. Except as set forth on Section 2.14(a) of the Company Disclosure Schedule,
all of the personal property, fixtures and improvements included on or in all
properties leased pursuant to the Real Property Leases (each a "Leased Real
Property and collectively, the "Leased Real Properties") by the Company or its
subsidiaries are in good operating condition and repair and are in a
satisfactory condition for the continued use of the Leased Real Properties in
the ordinary course of business consistent with past practices; reasonable wear
and tear excepted.
(iv) Section 2.14(a) of the Company Disclosure Schedule is a
true, correct and complete list of all Real Property Leases and all other Real
Property Lease Documentation and the Company has delivered to Purchaser true,
correct and complete copies of each Real Property Lease and all Real Property
Lease Documentation (except for such prime leases, and amendments thereto, and
other documents noted on Section 2.14(a) of the Company Disclosure Schedule as
missing, copies of which have been or will be requested by the Company from the
landlords in accordance with the provisions of Section 4.8 herein).
(v) Except for the dispute and litigation at the East Hanover, NJ
store which is described in more detail on Section 2.14(a) of the Company
Disclosure Schedule, there are no pending or, to the knowledge of the Company,
23
threatened, disputes or , legal, administrative, arbitral or other proceeding,
claim, suit or action arising from, or relating to the Real Property or the Real
Property Leases.
(vi) The Company and its subsidiaries hold all material Permits
with respect to the use and occupancy of the Leased Real Property, except where
the failure to hold the same has not had and would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect. The
Leased Real Property and the current use and operation thereof by the Company
and its subsidiaries do not violate any Permits, except where such violation has
not had and would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(vii) There does not exist any actual or, to the knowledge of the
Company, threatened or contemplated condemnation or eminent domain proceedings
that affect any of its or its subsidiaries' Leased Real Properties or any part
thereof, except where such condemnation or eminent domain proceeding has not had
and would not reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect.
(viii) Neither the Company nor any of its subsidiaries have
received any written notice from any insurance company that has issued a policy
with respect to any of Leased Real Property requiring performance of any
material repairs or alterations to such Leased Real Property.
(ix) Other than option rights contained in the Real Property
Leases, neither the Company nor any or its subsidiaries own or hold, or is
obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell, assign or dispose of any real
estate or any portion thereof or interest therein.
(x) Except as set forth on Section 2.14(a) of the Company
Disclosure Schedule, there are no unpaid commissions or fees due or payable and
no obligation to pay or fund any construction or completion of improvements
under any Real Property Lease or Sublease.
(xi) Except for the premises subleased under the Subleases, each
of the Real Property Leases covers the entire estate it purports to cover, and,
upon the consummation of the transactions contemplated hereby, will entitle
Purchaser to the exclusive use, occupancy and possession of the Leased Real
Property specified therein for the purposes such Leased Real Property is now
being used.
(xii) Except as set forth on Section 2.14(a) of the Company
Disclosure Schedule, each Real Property Lease subject to a superior lease or an
underlying mortgage, deed of trust or other security interest affecting the
landlord's, sublandlord's or fee owner's interest in the Real Property Lease is
subject to a non-disturbance agreement, a copy of which has been provided to
24
Purchaser or, as noted on Section 2.14(a) of the Company Disclosure Schedule as
missing, fully executed copies of which have been requested by the Company from
the landlords thereunder.
(xiii) With respect to the Subleases, (a) all rent and other sums
and charges payable by Tenants under the Subleases are current; and (b) neither
rent or any other sums and charges payable by Tenants under the Subleases, nor
any other material item payable by any Tenant under any Sublease has been
prepaid for more than one month in advance.
(c) As used herein, the term (i) "Intellectual Property" shall mean
all patents, patent applications, provisional patent applications, reissues,
statutory invention registrations, inventions and other industrial property
rights; trademarks, service marks, trade names, trade dress, logos, and other
source identifiers, including registrations and applications for the
registration thereof; copyrights (including without limitation, copyrights in
computer software programs); Internet domain name registrations; Internet web
sites, web content, and registrations and applications for registrations
thereof; confidential and proprietary information, including know-how and trade
secret rights, technologies, techniques and processes; computer software,
programs and databases in any form, all versions, updates, corrections,
enhancements, replacements, and modifications thereof, and all documentation
related thereto; and rights of privacy, publicity and endorsement, in each case
under the Laws of any jurisdiction in the world, and including rights under and
with respect to all applications, registrations, continuations, divisions,
renewals, extensions and reissues of the foregoing; and (ii) "Company
Intellectual Property" shall mean the Intellectual Property used in connection
with the business of the Company or any of its subsidiaries or owned or held for
use by the Company or any of its subsidiaries.
(d) Except as set forth in Section 2.14(d) of the Company Disclosure
Schedule, the Company and/or each of its subsidiaries owns, or is licensed or
otherwise possesses sufficient rights to use and transfer such rights as it has
in and to all the Company Intellectual Property, except as has not had and would
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The use of the Company Intellectual Property by the
Company and its subsidiaries and the operation of the Company's or its
subsidiaries' businesses does not constitute an infringement or misappropriation
of any valid third party Intellectual Property, except as has not had and would
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Except as set forth in Section 2.14(d) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries has
received any written notice from any Person since January 1, 2000 that the use
of any of the Company Intellectual Property or the operation of the Company's or
its subsidiaries' businesses infringes, dilutes (in the case of trademarks), or
otherwise violates the Intellectual Property of any Person.
(e) Except as set forth in Section 2.14(e) of the Company Disclosure
Schedule or as has not had and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, there are
25
no pending claims by the Company or any of its subsidiaries alleging or
asserting that any third party has violated, misappropriated or infringed any of
the Company Intellectual Property nor, to the knowledge of the Company, is there
any basis for such a claim.
2.15 Opinion of Financial Advisor. The Board of Directors of the
Company has received the Fairness Opinion and the Company has delivered to
Purchaser a true and complete copy of the Fairness Opinion.
2.16 Finders or Brokers. Other than Morgan Joseph, no broker,
investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
the Company or any of its subsidiaries.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as follows:
3.1 Organization. Purchaser is a limited liability company duly
organized, validly existing and in good standing under the Laws of the State of
Delaware.
3.2 Authority. Purchaser has all necessary limited liability company
power and authority to execute and deliver this Agreement and to consummate the
Transactions. The execution, delivery and performance by Purchaser of this
Agreement, and the consummation by Purchaser of the Transactions, have been duly
authorized and approved by both of its Voting Members and no other limited
liability company action on the part of Purchaser is necessary to authorize the
execution and delivery by Purchaser of this Agreement and the consummation by it
of the Transactions. This Agreement has been duly executed and delivered by
Purchaser and, assuming due authorization, execution and delivery hereof by the
Company, constitutes a valid and binding obligation of Purchaser, enforceable
against it in accordance with its terms, subject to the Bankruptcy and Equity
Exception.
3.3 Consents and Approvals; No Violations.
(a) Except for (i) the filing with the SEC of the Offer Documents and
a Information Statement in definitive form relating to the Opt Out, the filing
with the ODS of the Form 041 and other filings required under, and compliance
with other applicable requirements of, the Exchange Act and the rules of The
Nasdaq Stock Market, no consents or approvals of, or filings, declarations or
registrations with, any Governmental Entity are necessary for the consummation
by Purchaser of the Transactions except as would not reasonably be expected to
prevent or materially delay Purchaser's performance of their respective material
obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement by
Purchaser, nor the consummation by Purchaser of the Transactions, nor compliance
by Purchaser with any of the terms or provisions hereof, will (i) conflict with
26
or violate any provision of the certificate of formation or operating agreement
of Purchaser or (ii) assuming that the authorizations, consents, approvals and
filings referred to in Section 3.3(a) are obtained and made, violate any Law,
judgment, writ or injunction of any Governmental Entity applicable to Purchaser
or any of its subsidiaries or any of their respective properties or assets.
3.4 Offer Documents; Schedule 14D-9; Form 041; Information Statement.
Subject to the accuracy of the representations and warranties of the Company set
forth in Section 2.9, neither the Offer Documents nor any information supplied
(or to be supplied) in writing by or on behalf of Purchaser for inclusion in the
Schedule 14D-9 or the Form 041 will, at the respective times the Offer
Documents, the Schedule 14D-9, or any amendments or supplements thereto, are
filed with the SEC or are first published, sent or given to shareholders of the
Company or at the expiration of the Offer, as the case may be, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they are made, not misleading. The
information supplied by Purchaser for inclusion in the Information Statement
will not, on the date the Information Statement (or any amendment or supplement
thereto) is first mailed to shareholders of the Company, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading, and will
not, at the time of the effectiveness of the Opt Out, omit to state any material
fact necessary to correct any statement in the earlier communication with
respect to the Opt Out which shall have become false or misleading in any
material respect. The Offer Documents will comply as to form in all material
respects with the applicable requirements of the Exchange Act. Notwithstanding
the foregoing, Purchaser makes no representation or warranty with respect to any
information supplied by or on behalf of the Company for inclusion in any of the
foregoing documents.
3.5 Financing. Attached as Exhibit A hereto is a copy of a stand-by
letter of credit in favor of Purchaser, which letter of credit provides for a
draw up to $30 million by Purchaser upon the issuance by Purchaser of a demand
certificate (the "Demand Certificate") certifying that (i) all the conditions
set forth on Annex A have been satisfied and not waived, (ii) the amounts
required to be funded by Ascend Retail Investment LLC ("ARI") pursuant to the
Financing Agreement between Purchaser and ARI of even date herewith have not
been funded and (iii) the Purchase Date has occurred (the "Letter of Credit").
3.6 Finders or Brokers. Except for Peter J. Solomon Company Limited,
no broker, investment banker, financial advisor or other Person is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the Transactions based upon arrangements made by or on behalf
of Purchaser or any of its subsidiaries.
3.7 Corporate Operations. Purchaser directly or indirectly owns and
operates approximately 14 stores.
27
3.8 Financials. Purchaser has provided the Company with a true and
correct copy of the audited consolidated balance sheet, statement of income and
cash flow of Purchaser and its subsidiaries for the year ending at and on
December 31, 2002.
ARTICLE IV - ADDITIONAL COVENANTS AND AGREEMENTS
4.1 Conduct of Business. (a) Except as expressly contemplated or
permitted by this Agreement or as required by applicable Law, during the period
from the date of this Agreement until the Purchase Date, or the earlier
termination of this Agreement in accordance with Article V unless Purchaser
otherwise agrees in writing, the Company shall, and shall cause each of its
subsidiaries to, (w) conduct its business in the ordinary course consistent with
past practice, (x) comply in all material respects with all applicable Laws and
the requirements of all Material Contracts, (y) use commercially reasonable
efforts to maintain and preserve intact its business organization and the
goodwill of those having business relationships with it and retain the services
of its present officers and key employees, in each case, to the end that such
goodwill and ongoing business shall be unimpaired at the Purchase Date and (z)
keep in full force and effect all material insurance policies maintained by the
Company and its subsidiaries, other than changes to such policies made in the
ordinary course. Without limiting the generality of the foregoing, except (i) as
expressly contemplated or permitted by this Agreement, (ii) as set forth on
Section 4.1 of the Company Disclosure Schedule, or (iii) as required by
applicable Laws, during the period from the date of this Agreement to the
Purchase Date, the Company shall not, and shall not permit any of its
subsidiaries to, without the prior written consent of Purchaser:
(i) (A) issue, sell, grant, dispose of, pledge or otherwise
encumber any shares of its capital stock, voting securities or equity
interests, or any securities or rights convertible into, exchangeable
or exercisable for, or evidencing the right to subscribe for any
shares of its capital stock, voting securities or equity interests, or
any rights, warrants, options, calls, commitments or any other
agreements of any character to purchase or acquire any shares of its
capital stock, voting securities or equity interests or any securities
or rights convertible into, exchangeable or exercisable for, or
evidencing the right to subscribe for, any shares of its capital
stock, voting securities or equity interests, provided that (x) the
Company may issue shares of Company Common Stock upon the exercise of
Options that are outstanding on the date hereof and in accordance with
the terms thereof and (y) capital stock, voting securities or equity
interests of the Company's subsidiaries may be issued to the Company
or a direct or indirect wholly owned subsidiary of the Company; (B)
redeem, purchase or otherwise acquire any of its outstanding shares of
capital stock, voting securities or equity interests, or any rights,
warrants, options, calls, commitments or any other agreements of any
character to acquire any shares of its capital stock, voting
securities or equity interests; (C) split, combine, subdivide or
reclassify any shares of its capital stock or declare, set aside for
payment or pay any dividend, or make any other distribution in respect
28
of any shares of its capital stock or otherwise make any payments to
its shareholders in their capacity as such (other than dividends by a
direct or indirect wholly owned subsidiary of the Company to its
parent); or (D) amend or waive any of its rights under, or except as
automatically provided in the Stock Plan, accelerate the vesting
under, any provision of the Stock Plan or any agreement evidencing any
outstanding Option or other right to acquire capital stock of the
Company or any restricted stock purchase agreement or any related
contract, except such vesting as required pursuant to employment
agreements in effect on the date of this Agreement (complete copies of
which have been made available to Purchaser);
(ii) incur any indebtedness for borrowed money or guarantee any
indebtedness (or enter into a "keep well" or similar agreement), other
than (A) borrowings by the Company in the ordinary course of business
under the Company's existing credit facility listed on Section 2.10(a)
of the Company Disclosure Schedule and guarantees of such borrowings
issued by the Company's subsidiaries to the extent required under the
terms of such credit facility, and (B) borrowings from the Company by
a direct or indirect wholly owned subsidiary of the Company in the
ordinary course of business consistent with past practice;
(iii) sell, transfer, lease, mortgage, encumber or otherwise
dispose of (including pursuant to a sale-leaseback transaction or an
asset securitization transaction) any of its properties or assets
(including securities of subsidiaries) to any Person, except (A) sales
of inventory in the ordinary course of business consistent with past
practice, (B) pursuant to contracts or agreements in force at the date
of this Agreement and listed on Section 4.1(a)(iii) of the Company
Disclosure Schedule, complete copies of which have been made available
to Purchaser, or (C) disposition of obsolete or worthless assets;
(iv) except for the purpose of effecting repairs in the ordinary
course of business (which are contemplated to include the replacement
of an HVAC system in a Manhattan store) or those capital expenditures
associated with the store opening plans for Ewing, New Jersey (which
capital expenditures shall not exceed the budgeted amount of
$365,000), make any capital expenditures (including, without
limitation, no capital expenditures to remodel or refixture any
stores);
(v) make any acquisition (by purchase of securities or assets,
merger or consolidation, or otherwise) of any other Person, business
or division (other than acquisitions of inventories, supplies and raw
materials for operations in the ordinary course of business consistent
with past practice, and capital expenditures to the extent permitted
under clause (iv) above);
29
(vi) make any investment (by contribution to capital, property
transfers, purchase of securities or otherwise) in, or loan or advance
(other than travel and similar advances to its employees in the
ordinary course of business consistent with past practice) to, any
Person other than a direct or indirect wholly owned subsidiary of the
Company in the ordinary course;
(vii) (A) enter into, terminate or amend any Material Contract,
other than in the ordinary course of business consistent with past
practice, terminate or amend any existing Real Property Lease without
the consent of Purchaser, which consent shall not be unreasonably
withheld (it being understood that the Purchaser shall not be required
to consent to any increase in rent or the term of any such lease) or
enter into any new Real Property Lease, other than as part of the
Company's store opening plans for Manalapan and Ewing, New Jersey; (B)
enter into or extend the term or scope of any contract or agreement
that purports to restrict the Company or any subsidiary from engaging
in any line of business or in any geographic area, (C) enter into any
contract that would be breached by, or require the consent of any
third party in order to continue in full force following, consummation
of the Transactions, or (D) release any Person from, or modify or
waive any provision of, any confidentiality, standstill or similar
agreement;
(viii) increase in any manner the compensation of any of its
directors, officers or employees or enter into, establish, amend or
terminate any employment, consulting, retention, change in control,
collective bargaining, bonus or other incentive compensation, profit
sharing, health or other welfare, stock option or other equity (or
equity-based), pension, retirement, vacation, severance, deferred
compensation or other compensation or benefit plan, policy, agreement,
trust, fund or arrangement with, for or in respect of, any
shareholder, director, officer, other employee, consultant or
affiliate, other than (A) as required pursuant to applicable Law or
the terms of agreements in effect on the date of this Agreement
(complete copies of which have been made available to Purchaser) set
forth on Section 4.1(a)(viii) of the Company Disclosure Schedule and
(B) increases in salaries, wages and benefits of employees (other than
officers) made in the ordinary course of business and in amounts and
in a manner consistent with past practice;
(ix) make any material Tax election or settle or compromise any
material Tax liability or agree to an extension of a statute of
limitations for Taxes;
(x) make any changes in financial or tax accounting methods,
principles or practices, except insofar as may be required by a change
in GAAP or applicable Law;
30
(xi) amend the Company Charter Documents or the Subsidiary
Documents;
(xii) adopt a plan or agreement of complete or partial
liquidation, dissolution, restructuring, recapitalization, merger,
consolidation or other reorganization (other than transactions
exclusively between wholly owned subsidiaries of the Company);
(xiii) pay, discharge, settle or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge, settlement or
satisfaction in the ordinary course of business consistent with past
practice or in accordance with their terms of other liabilities,
claims or obligations reflected or reserved against in the most recent
consolidated financial statements (or the notes thereto) of the
Company included in the Filed SEC Documents or incurred since the date
of such financial statements in the ordinary course of business
consistent with past practice;
(xiv) settle or compromise any material litigation or proceeding;
(xv) agree, in writing or otherwise, to take any of the foregoing
actions or take any action or agree, in writing or otherwise, to take
any action, which would cause any of the representations or warranties
of the Company set forth in this Agreement (A) that are qualified as
to materiality or Material Adverse Effect to be untrue and (B) that
are not so qualified to be untrue in any material respect; and
(xvi) purchase directors' and officers' liability insurance
except in the ordinary course of business consistent with past
practice; provided, however, that the Company may spend up to $450,000
to purchase "tail" coverage providing directors' and officers'
liability insurance covering acts or omissions occurring prior to the
Purchase Date with respect to those persons who are currently covered
by the Company's directors' and officers' liability insurance policy.
(b) Purchaser agrees that, during the period from the date of this
Agreement until the Purchase Date, or the earlier termination of this Agreement,
except as expressly contemplated or permitted by this Agreement or as required
by applicable Law, and except as may be agreed in writing by the Company,
Purchaser shall not, and shall not permit any of its subsidiaries to, take any
action or agree, in writing or otherwise, to take any action which would cause
any of the representations or warranties of Purchaser set forth in this
Agreement (A) that are qualified as to materiality or Material Adverse Effect to
be untrue and (B) that are not so qualified to be untrue in any material
respect.
31
(c) During the period from the date of this Agreement until the
Purchase Date, or the earlier termination of this Agreement in accordance with
Article V, the Company shall, and shall cause each of its subsidiaries to,
consult with Purchaser regarding opportunities of the Company to purchase goods
at a volume discount in a quantity greater than the Company anticipates needing
for its retail purposes, in order to permit both Purchaser and the Company to
jointly purchase such goods in order to realize the volume discount; provided,
however, that a breach by the Company of the foregoing provisions shall not give
rise to a default under this Agreement enabling Purchaser to terminate this
Agreement.
(d) During the period from the date of this Agreement until the
Purchase Date, or the earlier termination of this Agreement in accordance with
Article V, the Company shall, and shall cause each of its subsidiaries not to,
make any inventory purchase except in the ordinary course of business consistent
with past practice; provided, however, that the Company shall consult with Sam
Friedland or such other person as may be designated in writing by Purchaser
("Purchaser's Designee") prior to making any purchase or series of related
purchases of inventory, health insurance, medical insurance and dental insurance
that exceed, individually or in the aggregate, $200,000 and, provided, further,
that if Purchaser's Designee objects in writing to any such purchase or series
of related purchases in excess of $200,000, the Company shall not, and shall
cause its subsidiaries not to, effect such purchase or related series of
purchases unless such purchase or purchases have been approved by the Company's
Board of Directors or a duly authorized committee thereof..
4.2 No Solicitation by the Company.
(a) The Company shall immediately cease, and shall cause its
subsidiaries and the Company's and its subsidiaries' respective directors,
officers, employees, investment bankers, attorneys, accountants and other
representatives to cease, any discussions or negotiations with any Person that
may be ongoing with respect to a Takeover Proposal (as hereinafter defined) and
use its reasonable best efforts to obtain the return from all such Persons or
cause the destruction of all copies of confidential information provided to such
parties by the Company or its representatives that are still in the possession
of such Persons. The Company shall not, and shall cause its subsidiaries and the
Company's and its subsidiaries' respective directors, officers, employees,
investment bankers, attorneys, accountants and other representatives not to,
directly or indirectly (i) solicit, initiate or knowingly encourage the
initiation of (including by way of furnishing information that has not been
previously publicly disseminated) any inquiries or proposals that constitute, or
may reasonably be expected to lead to, any Takeover Proposal or (ii) participate
in any discussions with any third party regarding, or furnish to any third party
any non-public information with respect to, or assist or facilitate, any
Takeover Proposal; provided, however, that if the Board of Directors of the
Company receives an unsolicited, bona fide written Takeover Proposal that was
made in circumstances not involving a breach of this Agreement and that in the
opinion of the Board of Directors of the Company could lead to a Superior
Proposal, then the Company may, in response to such Takeover Proposal and after
providing Purchaser written notice of its intention to take such actions, (A)
furnish information with respect to the Company to the Person making such
32
Takeover Proposal, but only after such Person enters into a customary
confidentiality agreement with the Company (which confidentiality agreement must
be no less favorable to the Company (i.e., no less restrictive with respect to
the conduct of such Person) than the confidentiality agreement entered into with
Purchaser), provided that (1) such confidentiality agreement may not include any
provision calling for an exclusive right to negotiate with the Company and (2)
the Company advises Purchaser of all such non-public information delivered to
such Person concurrently with its delivery to such Person and concurrently with
its delivery to such Person the Company delivers to Purchaser all such
information not previously provided to Purchaser, and (B) participate in
discussions and negotiations with such Person regarding such Takeover Proposal.
(b) In addition to the other obligations of the Company set forth in
this Section 4.2, the Company shall promptly advise Purchaser, orally and in
writing, and in no event later than two (2) business days after receipt, if any
proposal, offer, inquiry or other contact is received by, any information is
requested from, or any discussions or negotiations are sought to be initiated or
continued with, the Company in respect of any Takeover Proposal and, if the
Company shall have received a proposal or offer (but not an inquiry or other
contact) with respect to a Takeover Proposal (whether or not binding), the
Company shall, in any such notice to Purchaser, indicate the identity of the
Person making such proposal or offer and the terms and conditions of the
proposal or offer (and shall include with such notice copies of any written
materials received from or on behalf of such Person relating to such proposal or
offer), and thereafter shall keep Purchaser informed, on a reasonably current
basis and in reasonable detail, of all material developments affecting the
status and terms of any such proposal or offers (and the Company shall provide
Purchaser with copies of any additional written materials received that relate
to such proposals or offers) and of the status of any such discussions or
negotiations.
(c) Except as expressly permitted by this Section 4.2(c), neither the
Board of Directors of the Company nor any committee thereof shall (i)(A)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Purchaser, the approval or recommendation by such Board of Directors
described in the first sentence of Section 1.2(a) or (B) approve or recommend,
or propose publicly to approve or recommend, any Takeover Proposal or (ii) cause
or authorize the Company or any of its subsidiaries to enter into any letter of
intent, agreement in principle, memorandum of understanding, acquisition,
purchase or merger agreement or other agreement related to any Takeover Proposal
(other than a confidentiality agreement in accordance with Section 4.2(a))
(each, a "Company Acquisition Agreement"). Notwithstanding the foregoing, the
Board of Directors of the Company may withdraw or modify its recommendation
described in Section 1.2(a), or recommend a Takeover Proposal, (x) if such Board
receives an unsolicited, bona fide written Takeover Proposal that was made in
circumstances not involving a breach of this Agreement and the Board determines
in good faith constitutes a Superior Proposal, and (y) the Company, in response
33
to such Superior Proposal, enters into a Company Acquisition Agreement with
respect to such Superior Proposal, but only if the Company shall have
concurrently with entering into such Company Acquisition Agreement terminated
this Agreement pursuant to Section 5.1(c)(ii) and prior thereto paid the
Termination Fee required pursuant to Section 5.3, but only after the second
business day following Purchaser's receipt of written notice from the Company
advising Purchaser that the Board of Directors of the Company is prepared to
enter into a Company Acquisition Agreement with respect to such Superior
Proposal and terminate this Agreement, and only if, during such two business day
period, the Company and its representatives shall have negotiated in good faith
with Purchaser and Purchaser's representatives to make such adjustments in the
terms of this Agreement as would enable Purchaser to proceed with the
transactions contemplated by this Agreement on such adjusted terms and, at the
end of such two business day period, after taking into account any such adjusted
terms as may have been proposed by Purchaser since its receipt of such written
notice, the Board of Directors of the Company has again in good faith made the
determination referred to above in clause (x).
(d) For purposes of this Agreement:
"Takeover Proposal" means any inquiry, proposal or offer from any
Person (other than Purchaser and its subsidiaries) relating to any (A)
direct or indirect acquisition (whether in a single transaction or a
series of related transactions) of assets of the Company and its
subsidiaries (including securities of subsidiaries, but excluding
sales of inventory in the ordinary course of business) equal to 20% or
more of the Company's consolidated assets or to which 20% or more of
the Company's revenues or earnings on a consolidated basis are
attributable, (B) direct or indirect acquisition (whether in a single
transaction or a series of related transactions) of 20% or more of any
class of equity securities of the Company, (C) tender offer or
exchange offer that if consummated would result in any Person
beneficially owning 20% or more of any class of equity securities of
the Company or (D) merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company or involving any subsidiary (or
subsidiaries) or any assets of the Company and its subsidiaries equal
to 20% or more of the Company's consolidated assets or to which 20% or
more of the Company's revenues or earnings on a consolidated basis are
attributable; in each case, other than the Transactions.
"Superior Proposal" means a bona fide written proposal obtained
not in breach of this Agreement to acquire, directly or indirectly,
for consideration consisting of cash and/or securities, 96% or more of
the outstanding equity securities of the Company or all or
substantially all of the assets of the Company and its subsidiaries on
a consolidated basis, made by a third party, which is not subject to a
financing contingency and which is otherwise on terms and conditions
which the Board of Directors of the Company determines in its good
faith to be more favorable to the Company's constituencies that may be
34
considered by the directors under Section 1701.59(E) of the OGCL than
the Offer, and the other Transactions.
(e) Nothing in this Section 4.2 shall prohibit the Board of Directors
of the Company from taking and disclosing to the Company's shareholders a
position contemplated by Rule 14e-2(a) or Item 1012(a) of Regulation M-A under
the Exchange Act.
4.3 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement, the
Company and Purchaser shall each cooperate with the other and use (and shall
cause their respective subsidiaries to use) their respective reasonable best
efforts to promptly (i) take or cause to be taken all actions, and do or cause
to be done all things, necessary, proper or advisable under this Agreement and
applicable Laws to consummate the Transactions as soon as practicable, including
preparing and filing promptly and fully all documentation to effect all
necessary filings, notices, petitions, statements, registrations, submissions of
information, applications and other documents and (ii) obtain all approvals,
consents, registrations, permits, authorizations and other confirmations
required to be obtained from any Governmental Entity or third party necessary,
proper or advisable to consummate the Transactions. Subject to applicable Laws
relating to the exchange of information, the Company and Purchaser shall have
the right to review in advance, and to the extent practicable each will consult
the other on, all the information relating to the Company and its subsidiaries
or Purchaser and its subsidiaries, as the case may be, that appears in any
filing made with, or written materials submitted to, any third party and/or any
Governmental Entity in connection with the Transactions.
(b) In furtherance and not in limitation of the foregoing, the
Company and Purchaser shall each use its reasonable best efforts to (x) take all
action necessary to ensure that no state takeover statute or similar Law is or
becomes applicable to any of the Transactions and (y) if any state takeover
statute or similar Law becomes applicable to any of the Transactions, take all
action necessary to ensure that the Transactions may be consummated as promptly
as practicable on the terms contemplated by this Agreement and otherwise
minimize the effect of such Law on the Transactions.
4.4 Public Announcements. The initial press release with respect to
the execution of this Agreement shall be a joint press release to be reasonably
agreed upon by Purchaser and the Company. Thereafter, except as may be required
by Law or in the case of the Company, Nasdaq as determined in the good faith
judgment of the party proposing to make such release, neither the Company nor
Purchaser shall issue or cause the publication of any press release or other
public announcement (to the extent not previously issued or made in accordance
with this Agreement) with respect to the Offer, this Agreement or the other
Transactions without the prior consent of the other party (which consent shall
not be unreasonably withheld or delayed).
35
4.5 Access; Confidentiality. Upon reasonable notice and subject to
applicable Laws relating to the exchange of information, the Company shall, and
shall cause each of its subsidiaries to, afford to the officers, employees,
accountants, counsel, financial advisors and other representatives of Purchaser,
during normal business hours during the period prior to the Purchase Date or
earlier termination of this Agreement, reasonable access to all its properties,
books, contracts, commitments and records, and to its officers, employees,
accountants, counsel, financial advisors and other representatives and, during
such period, the Company shall, and shall cause its subsidiaries to, make
available to Purchaser (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of Federal securities laws and (b) all other information
concerning its business, properties and personnel as Purchaser may reasonably
request; provided that no investigation shall affect or modify any
representation or warranty of the Company. In order to assure a smooth
integration of the Company's operations following the Purchase Date, Purchaser
will be permitted at its own expense to have up to three (3) of its
representatives to be stationed at the Company's offices in Ohio and New Jersey
to become trained on and familiar with the Company's existing information
systems. Until the Purchase Date, the information provided will be (i) used
solely in connection with the Transactions and (ii) subject to the terms of the
Confidentiality Agreement dated as January 6, 2003 between Purchaser and the
Company (the "Confidentiality Agreement").
4.6 Notification of Certain Matters. The Company shall give prompt
notice to Purchaser, and Purchaser shall give prompt notice to the Company, of
(i) any notice or other communication received by such party from any
Governmental Entity in connection with the Transactions or from any Person
alleging that the consent of such Person is or may be required in connection
with the Transactions, if the subject matter of such communication or the
failure of such party to obtain such consent could be material to the Company or
Purchaser, (ii) any actions, suits, claims, investigations or proceedings
commenced or, to such party's knowledge, threatened against, relating to or
involving or otherwise affecting such party or any of its subsidiaries which
relate to the Transactions, (iii) the discovery of any fact or circumstance
that, or the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which, would cause any representation or warranty made by such
party contained in this Agreement (A) that is qualified as to materiality or
Material Adverse Effect to be untrue and (B) that is not so qualified to be
untrue in any material respect, and (iv) any material failure of such party to
comply with or satisfy any covenant or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 4.6 shall not (x) (nor shall any information provided
pursuant to Section 4.5) be considered in determining whether any representation
or warranty is true for purposes of Section 5.1 or the conditions to the Offer,
(y) cure any breach or non-compliance with any other provision of this Agreement
or (z) limit the remedies available to the party receiving such notice.
36
4.7 Director and Officer Indemnification and Insurance.
(a) From and after the Purchase Date, the Company shall indemnify and
hold harmless the individuals who at or prior to the Purchase Date were
directors or officers of the Company or subsidiaries of the Company
(collectively, the "Indemnitees") with respect to all acts or omissions by them
in their capacities as such or taken at the request of the Company or such
subsidiaries at any time prior to the Purchase Date, to the fullest extent (A)
permitted by the Company Charter Documents and the Subsidiary Documents of such
subsidiaries as currently in effect and (B) permitted under applicable Law.
(b) An Indemnitee shall notify the Company in writing promptly upon
learning of any claim, action, suit, proceeding, investigation or other matter
in respect of which such indemnification may be sought, provided that the
failure to provide such notice shall not relieve the Company of its obligations
under this Section 4.7 except to the extent that it is materially prejudiced as
a result of such failure. The Company shall have the right, but not the
obligation, to control the defense of, including the investigation of, and
corrective action required to be undertaken in response to, any litigation,
claim or proceeding (each, a "Claim") relating to any acts or omissions covered
under this Section 4.7 with counsel selected by the Company, which counsel shall
be reasonably acceptable to the Indemnitee (and, if the Company shall have
assumed such defense, it shall not be liable for the fees or expenses of any
separate counsel retained by the Indemnitee); provided, however, that the
Indemnitee shall be permitted to participate in the defense of such Claim at his
or her own expense. Notwithstanding anything to the contrary, in no event shall
the Company be liable for any settlement or compromise effected without its
written consent.
(c) In the event any Claim is asserted or made, any determination
required to be made with respect to whether an Indemnitee's conduct complies
with the standards set forth under applicable Law, the applicable Company
Charter Documents and Subsidiary Documents as the case may be, shall be made by
independent legal counsel selected by the Company and reasonably acceptable to
the Indemnitee; provided that nothing in this Section 4.7 shall impair any
rights of any current or former director or officer of the Company or such
subsidiaries, including pursuant to the respective Company Charter Documents and
the Subsidiary Documents of such subsidiaries, under applicable Law or
otherwise.
(d) Each of the Company and the Indemnitees shall cooperate in the
defense of any Claim and shall provide access to properties and individuals as
reasonably requested and furnish or cause to be furnished records, information
and testimony, and attend such conferences, discovery proceedings, hearings,
trials or appeals, as may be reasonably requested in connection therewith.
(e) The obligations of the Company under this Section 4.7 shall not
be terminated or modified in such a manner as to adversely affect the rights of
any Indemnitee to whom this Section 4.7 applies unless (x) such termination or
37
modification is required by applicable Law or (y) the affected Indemnitee shall
have consented to such termination or modification (it being expressly agreed
that the Indemnitees to whom this Section 4.7 applies shall be third party
beneficiaries of this Section 4.7). The provisions of this Section 4.7 are (i)
intended to be for the benefit of, and shall be enforceable by, each Indemnitee,
his or her heirs and his or her representatives and (ii) in addition to, and not
in substitution for, any other rights to indemnification or contribution that
any such Person may have by contract or otherwise.
(f) In the event that the Company or any of its successors or assigns
(i) consolidates with or merges into any other Person and is not the continuing
or surviving corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and assets to
any Person, then, and in each such case, proper provision shall be made so that
the successors and assigns of the Company shall assume all of the obligations
thereof set forth in this Section 4.7.
4.8 Consents, Missing Documents, Disputes and Estoppels. On or prior
to the Purchase Date, the Company and its subsidiaries (i) shall use reasonable
efforts to obtain a consent from the landlord and sublandlord, if applicable,
under each Real Property Lease, which is necessary to consummate the
Transactions or is required to assign such Real Property Lease in connection
with the Transactions, as more particularly set forth on Section 4.8 of the
Company Disclosure Schedule; (ii) shall use reasonable efforts to obtain from
the applicable landlords copies of the documents listed on Section 2.14(a) of
the Company Disclosure Schedule as missing (the "Missing Documents") and shall
deliver same to Purchaser promptly after receipt, (iii) shall, with respect to
the dispute and litigation at the East Hanover store, not renew the existing
lease for such store nor enter into any agreement with the landlord at such
store, including without limitation, any lease or other occupancy agreement,
without Purchaser's prior consent, and (iv) shall use reasonable efforts to
obtain estoppel certificates from the landlord and sublandlord, if applicable,
under each Real Property Lease (a) setting forth that the lease is unmodified
and in full force and effect (or if there have been modifications, that the same
is in full force and effect as modified and stating the modifications), and
whether any options granted to Tenant pursuant to the provisions of the lease
have been exercised, (b) certifying the dates to which the fixed rent and
additional rent have been paid and the amounts thereof, (c) stating whether or
not, to the best knowledge of the landlord, either party is in default in
performance of any of its obligations under the lease, and, if so, specifying
each such default of which the landlord may have knowledge and (d) setting forth
the commencement date and the expiration date of the lease.
4.9 Approval by Independent Directors. Prior to the third anniversary
of the Purchase Date, Purchaser shall not, and shall cause its affiliates not
to, effect any merger, consolidation or other business combination with the
Company or any of its subsidiaries unless (i) such transaction shall have been
approved by a special committee of the Company's Board of Directors, which
committee consists solely of Independent Directors and (ii) a favorable opinion
shall have been received from an investment banking firm retained by the special
committee as to the fairness of such transaction from a financial point of view
to the shareholders of the Company.
38
4.10 Non-Distribution of Assets. During the period from the date of
this Agreement until the Purchase Date, or the earlier termination of this
Agreement in accordance with Article V, Purchaser shall not generally liquidate
its assets or make distributions to its members other than distributions
sufficient to fund any payment by its Members of taxes attributable to the
business of Purchaser.
4.11 Certification. The Company will provide the certification set
forth in Treasury Regulation Section 1.897-2(g)(1)(ii) certifying that it is not
a U.S. real property holding company.
ARTICLE V - TERMINATION
5.1 Termination. This Agreement may be terminated and the
Transactions abandoned at any time prior to the Purchase Date, whether before or
after the effectiveness of the Opt Out:
(a) By the mutual written consent of the Company and Purchaser duly
authorized by the respective Boards of Directors of the Company and both the
Voting Members of the Purchaser.
(b) By either of the Company or Purchaser:
(i) if any Governmental Entity shall have enacted, promulgated,
issued, entered, amended or enforced (A) a Law prohibiting the Offer or making
the Offer illegal, or (B) an injunction, judgment, order, decree or ruling, or
taken any other action, in each case, permanently enjoining, restraining,
preventing or prohibiting the Offer and such injunction, judgment, order, decree
or ruling or other action shall have become final and non-appealable; provided,
that the right to terminate this Agreement under this Section 5.1(b)(i) shall
not be available to a party if the issuance of such final, non-appealable
injunction, judgment, order, decree or ruling was primarily due to the failure
of such party to perform any of its obligations under this Agreement (including
Section 4.3);
(ii) if the Offer shall have expired or terminated pursuant to
its terms without any Shares being purchased therein, provided, that the right
to terminate this Agreement under this Section 5.1(b)(ii) shall not be available
to any party whose failure to perform any of its obligations under this
Agreement resulted in the failure of Purchaser to purchase Shares in the Offer;
or
(iii) the Purchase Date has not occurred by the Walk-Away Date
(unless extended, in writing, by the parties); provided that the right to
terminate this Agreement under this Section 5.1(b)(iii) shall not be available
to any party whose failure to perform any of its obligations under this
Agreement resulted in the failure of Purchaser to purchase Shares in the Offer.
39
(c) By the Company:
(i) if Purchaser or any of its affiliates shall have failed to
commence the Offer on or prior to the date provided therefor in Section 1.1;
provided, that the Company may not terminate this Agreement pursuant to this
Section 5.1(c)(i) if the Company is in material breach of this Agreement;
(ii) if concurrently it enters into a definitive Company
Acquisition Agreement providing for a Superior Proposal in accordance with
Section 4.2, provided that (x) prior thereto or simultaneously therewith the
Company shall have paid or cause to be paid the Termination Fee to Purchaser in
accordance with Section 5.3 (and such termination of this Agreement by the
Company shall not take effect unless and until the Termination Fee shall have
been paid to Purchaser) and (y) the Company shall also have complied with all
the other requirements of Section 4.2; or
(iii) if (A) the representations and warranties of Purchaser set
forth in this Agreement shall not be true and correct on and as of the date of
this Agreement and on and as of the date of such determination as if made on
such date (other than those representations and warranties that address matters
only as of a particular date which are true and correct as of such date), except
(x) for changes specifically permitted by this Agreement or (y) where failure to
be true and correct (without giving effect to any limitation as to "materiality"
set forth therein) would not have, individually or in the aggregate, a Material
Adverse Effect on Purchaser, or (B) Purchaser shall have breached or failed in
any material respect to perform or comply with any obligation, agreement or
covenant required by this Agreement to be performed or complied with by them,
which inaccuracy, breach or failure (in each case under clauses (A) and (B))
cannot be cured or has not been cured by the earlier of (I) the next scheduled
expiration date of the Offer pursuant to Section 1.1 and (II) ten days after
Purchaser receives notice of such inaccuracy, breach or failure.
(d) By Purchaser if (i) any of the conditions set forth in paragraphs
(a) through (e) of Annex A hereto shall exist, (ii) either the Opt Out Condition
contained in paragraph (f) of Annex A hereto or the Forbearance Condition
contained in paragraph (h) of Annex A hereto shall exist on the Walk-Away Date
or (iii) the Board Representation Condition contained in paragraph (g) of Annex
A, shall exist at the time Purchaser would otherwise be required to accept for
payment shares tendered in the Offer in accordance with the terms of the Offer.
5.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 5.1, written notice thereof shall be given to
the other party or parties, specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall forthwith become null and
void (other than the last sentence of Section 4.5 and the provisions of the
Confidentiality Agreement (subject to its terms), Sections 5.2, 5.3 and Article
VI, all of which shall survive termination of this Agreement), and there shall
be no liability on the part of Purchaser or the Company or their respective
directors, officers and affiliates, except (i) the Company may have liability as
40
provided in Section 5.3, and (ii) nothing contained herein shall relieve any
party from liability for any breach of this Agreement prior to such termination.
In the event of termination of this Agreement pursuant to Section 5.1 prior to
the expiration of the Offer, Purchaser will promptly terminate the Offer upon
such termination of this Agreement without the purchase of Shares thereunder.
5.3 Expenses; Termination Fee.
(a) Except as provided in this Section 5.3, all fees and expenses
incurred by the parties in connection with this Agreement and the Transactions
shall be borne solely and entirely by the party that incurred such fees and
expenses, irrespective of whether or not the Transactions are consummated. In
the event that this Agreement is terminated by (i) the Company pursuant to
Section 5.1(c)(ii) hereof, or (ii) by Purchaser pursuant to Section 5.1(d)
hereof as a result of the existence of the conditions set forth in paragraph (e)
or (g) of Annex A hereto, then in any such event, the Company shall pay to
Purchaser a termination fee equal to 5% of the purchase consideration that would
have been paid in the Offer if the Maximum Amount had been tendered (the
"Termination Fee") plus Expenses as defined in Section 5.3(d).
(b) The payment of the Termination Fee required to be made pursuant
to Section 5.3(a) shall be made to Purchaser promptly following termination of
this Agreement (and in any event not later than two business days after delivery
to the Company of notice of demand for payment); and the payment of Expenses
shall be made to Purchaser not later than two business days after delivery to
the Company of an itemization setting forth in reasonable detail all Expenses of
Purchaser (which itemization may be supplemented and updated from time to time
by such party until the 60th day after such party delivers such notice of demand
for payment). All such payments shall be made by wire transfer of immediately
available funds to an account to be designated by Purchaser.
(c) In the event that the Company shall fail to pay the Termination
Fee and/or Expenses required pursuant to this Section 5.3 when due, such fee
and/or Expenses, as the case may be, shall accrue interest for the period
commencing on the date such fee and/or Expenses, as the case may be, became past
due, at a rate equal to the rate of interest publicly announced by Citibank from
time to time, in the City of New York, as such bank's Prime Lending Rate. In
addition, if the Company shall fail to pay such fee and/or Expenses, as the case
may be, when due, the Company shall also pay to Purchaser all of Purchaser's
costs and expenses (including attorneys' fees) in connection with efforts to
collect such fee and/or Expenses, as the case may be. The Company acknowledges
that the Termination Fee, Expenses and the other provisions of this Section 5.3
are an integral part of the Transactions and that, without these agreements,
Purchaser would not enter into this Agreement.
(d) As used herein, "Expenses" shall mean all reasonable
out-of-pocket fees and expenses (including all reasonable fees and expenses of
counsel, accountants and investment bankers to a party hereto and its
affiliates), up to $500,000 in the aggregate, incurred by Purchaser or on its
41
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Offer Documents, and all other matters
related to the Offer and the other Transactions.
(e) Other than any Taxes imposed upon a holder of Shares or Options,
the Company shall pay all Taxes incident to preparing for, entering into and
carrying out this Agreement and the consummation of the Transactions (including
(i) transfer, stamp and documentary Taxes or fees and (ii) sales, use, gains,
real property transfer and other or similar Taxes or fees).
ARTICLE VI - MISCELLANEOUS
6.1 No Survival of Representations and Warranties; etc. Except as
otherwise provided in this Agreement, the representations, warranties and
agreements of each party hereto shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any other party
hereto, any Person controlling any such party or any of their officers,
directors or representatives, whether prior to or after the execution of this
Agreement, and no information provided or made available shall be deemed to be
disclosed in this Agreement or in the Company Disclosure Schedule, except to the
extent actually set forth herein or therein. The representations, warranties and
agreements in this Agreement shall terminate at the Purchase Date or, except as
otherwise provided in Section 5.2, upon the termination of this Agreement
pursuant to Section 5.1, as the case may be, except that the agreements set
forth in Sections 1.7, 4.7 and 4.9 and any other agreement in this Agreement
which contemplates performance after the Purchase Date shall survive the
Purchase Date indefinitely and those set forth in Sections 5.2 and 5.3 and this
Article VI shall survive termination indefinitely. The Confidentiality Agreement
shall survive termination of this Agreement in accordance with its terms and
terminate as of the Purchase Date.
6.2 Amendment or Supplement. At any time prior to the Purchase Date,
this Agreement may be amended or supplemented in any and all respects, whether
before or after approval of any of the transactions contemplated hereby by
shareholders of the Company, by written agreement of the parties hereto, by
action taken by the Company's Board of Directors and the Voting Members of
Purchaser. Notwithstanding the foregoing, following the Purchase Date, neither
this sentence nor Sections 1.7, 4.7 and 4.9 may be amended.
6.3 Extension of Time, Waiver, Etc. At any time prior to the Purchase
Date, any party may (a) waive any inaccuracies in the representations and
warranties of any other party hereto or (b)(i) extend the time for the
performance of any of the obligations or acts of any other party hereto or (ii)
waive compliance by the other party with any of the agreements contained herein
or, except as otherwise provided herein, waive any of such party's conditions.
Notwithstanding the foregoing, no failure or delay by the Company or Purchaser
in exercising any right hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
42
thereof or the exercise of any other right hereunder. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
6.4 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Purchaser may assign to any
affiliate of Purchaser all of its rights, interests and obligation under this
Agreement, including without limitation, the right to assign the rights,
interests and obligations relating to the Offer provided, however, that any such
assignment shall not release Purchaser from any liability under this Agreement.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Any purported assignment not permitted under this Section
shall be null and void.
6.5 Counterparts; Effectiveness. This Agreement may be executed in
two or more separate counterparts, each of which shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by the other parties hereto.
6.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement,
together with Annex A hereto, the Company Disclosure Schedule, the Principal
Shareholders' Agreement and the Confidentiality Agreement, constitute the entire
agreement, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof and thereof. This Agreement, except for the provisions of Sections
1.7, 4.7 and 4.9, is not intended to and shall not confer upon any Person other
than the parties hereto any rights hereunder.
6.7 Governing Law; Enforcement; Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio, without regard to the principles of
conflicts of laws thereof.
(b) The parties agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Ohio or New York or in an Ohio or New York state court,
without bond or other security being required, this being in addition to any
other remedy to which they are entitled at law or in equity.
43
(c) Each of the parties hereto (i) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Ohio or New
York or any Ohio or New York state court in the event any dispute arises out of
this Agreement or any of the transactions contemplated hereby, (ii) agrees that
it will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court and (iii) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a Federal or State court sitting in
the State of Ohio or New York.
(d) Each of the parties hereto hereby irrevocably waives any and all
rights to trial by jury in any legal proceeding arising out of or related to
this Agreement or the transactions contemplated hereby.
6.8 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission) and shall
be given,
If to Purchaser, to:
Amazing Savings Holding LLC
20 Industry Dr.
P.O. Box 25
Mountainville, NY 10953
Attention: Sam Friedland
Facsimile: (845) 534-4264
with a copy (which shall not constitute notice) to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: David E. Zeltner
Facsimile: (212) 310-8007
If to the Company, to:
Mr. Robert Horne
Chairman, Special Committee
c/o ZS Fund
54 Morris Lane
Scarsdale, NY 10583
44
with a copy (which shall not constitute notice) to:
Kahn Kleinman, L.P.A.
2600 Erieview Tower
1301 E. Ninth Street
Cleveland, OH 44114
Attention: Marc H. Morgenstern, Esq.
or Michael A. Ellis, Esq.
Facsimile: (216) 623-4912
and
Jones Day
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Attention: Charles W. Hardin, Jr.
Facsimile: (216) 579-0212
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5 P.M. in the place of
receipt and such day is a business day in the place of receipt. Otherwise, any
such notice, request or communication shall be deemed not to have been received
until the next succeeding business day in the place of receipt.
6.9 Severability. If any term or other provision of this Agreement is
determined by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
terms, provisions and conditions of this Agreement shall nevertheless remain in
full force and effect. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
6.10 Headings. Headings of the Articles and Sections of this
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
6.11 Definitions; Construction.
(a) As used in this Agreement, the following terms have the meanings
ascribed thereto below:
45
"AFFILIATE" shall mean, as to any Person, any other Person which,
directly or indirectly, controls, or is controlled by, or is under common
control with, such Person. For this purpose, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of management or policies of a Person, whether through the ownership
of securities or partnership or other ownership interests, by contract or
otherwise.
"BUSINESS DAY" shall mean any day, other than Saturday, Sunday or a
federal holiday, and shall consist of the time period from 12:01 through 12:00
midnight Eastern time.
"COMPANY MATERIAL ADVERSE EFFECT" shall mean (i) a state of facts,
effect, event, change or occurrence which has or would reasonably be expected to
have a material adverse effect on the business, operations, financial condition,
assets or liabilities of the Company and its subsidiaries taken as a whole, it
being understood that such events may include the commencement of any action,
proceeding or litigation that would or that is reasonably likely to result in
(A) liability to the Company that would have a material adverse effect on its
business, operations or financial condition or (B) the imposition of material
limitations on the ability of Purchaser or any of its affiliates effectively to
exercise full rights of ownership of the Shares or their ownership or operation
of all or any material portion of the businesses and assets of the Company and
its subsidiaries taken as a whole; provided, however, that a "Company Material
Adverse Effect" shall not include any change, effect, event or occurrence (i)
relating to the economy or capital or securities markets of the United States or
any other region in general, including changes in the general retail
environment, (ii) resulting from entering into this Agreement or the
consummation of the Transactions contemplated hereby or the announcement
thereof, (iii) relating to geopolitical events (including war or acts of
terrorism, other than such acts that actually damage or destroy property of or
premises leased by the Company) or (iv) relating to its business, financial
condition or results of operations that has been disclosed in writing by the
Company to Purchaser with specific reference to this definition prior to the
date of this Agreement (including but not limited to, sales results through the
period ending April 21, 2003 and earnings results through the period ending
March 31, 2003.").
"CREDIT FACILITY" shall mean the Amended and Restated Loan and
Security Agreement dated February 11, 2002, as amended through the date hereof,
by and among the Company and the Lenders.
"GAAP" shall mean generally accepted accounting principles in the
United States.
"GOVERNMENTAL ENTITY" shall mean any government, court, regulatory or
administrative agency, commission or authority or other governmental
instrumentality, federal, state or local, domestic, foreign or multinational.
46
"KNOWLEDGE" shall mean, in the case of the Company, the actual
knowledge of the Company's officers set forth on Section 6.11 of the Company
Disclosure Schedule after reasonable inquiry and, in the case of Purchaser, the
actual knowledge of Purchaser's senior executive officers after reasonable
inquiry.
"LENDERS" shall mean Whitehall Retail Finance, a division of
Whitehall Business Credit Corporation, as agent for the Tranche A Lenders,
Whitehall Retail Finance, as Collateral Agent, and the Tranche A Lenders (as
defined in the Credit Facility).
"OPTION" shall mean each option outstanding immediately prior to the
Purchase Date (whether or not then vested or exercisable) that represents the
right to acquire shares of Company Common Stock.
"PERSON" shall mean an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity, including a
Governmental Entity.
"PURCHASE DATE" shall mean the first date on which Purchaser accepts
for payment Shares tendered and not withdrawn pursuant to the Offer.
"STOCK PLAN" shall mean the Company's 1996 Stock Option Plan, as
amended in 2002.
"SUBSIDIARY" when used with respect to any party, shall mean any
corporation, limited liability company, partnership, association, trust or other
entity the accounts of which would be consolidated with those of such party in
such party's consolidated financial statements if such financial statements were
prepared in accordance with GAAP, as well as any other corporation, limited
liability company, partnership, association, trust or other entity of which
securities or other ownership interests representing more than 50% of the equity
or more than 50% of the ordinary voting power (or, in the case of a partnership,
more than 50% of the general partnership interests) are, as of such date, owned
by such party or one or more subsidiaries of such party or by such party and one
or more subsidiaries of such party.
"TRANSACTIONS" refers collectively to this Agreement and the
transactions contemplated hereby, including the Offer and the Principal
Shareholders' Agreement and the transactions contemplated thereby.
"VOTING MEMBERS" shall have the meaning set forth in the Amended and
Restated Limited Liability Company Agreement of Purchaser.
"WALK-AWAY DATE" shall mean August 31, 2003.
The following terms are defined on the page of this Agreement set
forth after such term below:
47
Agreement...............................................2
ARI................................................... 27
Balance Sheet Date.....................................12
Bankruptcy and Equity Exception........................16
Board Representation Condition..........................2
Chapter 1704............................................5
Company.................................................2
Company Charter Documents...............................8
Company Common Stock....................................2
Company Disclosure Schedule.............................8
Company Plans..........................................18
Confidentiality Agreement..............................36
Demand Certificate.....................................27
ERISA..................................................18
Exchange Act............................................3
Fairness Opinion........................................5
Filed SEC Documents....................................13
Form 041...............................................11
Information Statement...................................7
Laws...................................................14
Letter of Credit.......................................27
Liens...................................................9
Material Contract......................................15
Minimum Condition.......................................4
Morgan Joseph...........................................5
ODS....................................................11
Offer...................................................2
Offer Documents.........................................5
Offer Price.............................................2
OGCL....................................................5
Permits................................................14
Principal Shareholder...................................2
Principal Shareholders' Agreement.......................3
Proration Ratio.........................................6
Purchaser...............................................2
Schedule 14D-9..........................................6
SEC.................................................... 4
SEC Documents..........................................11
Securities Act..........................................9
Share...................................................2
Subsidiary Documents....................................9
Superior Proposal......................................34
Takeover Proposal......................................34
Taxes..................................................18
Termination Fee........................................41
(c) As used in this Agreement, "INCLUDING" shall mean "including,
without limitation."
(d) Any reference in this Agreement to words imparting the singular
shall include the plural and vice versa.
(e) The parties hereto have participated jointly in the negotiation
and drafting of this Agreement and, in the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as jointly
drafted by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.
[signature page follows]
48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
AMAZING SAVINGS HOLDING LLC
By: /s/ Sam Friedland
-------------------------------------
Name: Sam Friedland
Title: President
ODD JOB STORES, INC.
By: /s/ Stephen A. Furner
-------------------------------------
Name: Stephen A. Furner
Title: Chief Executive Officer
49
ANNEX A
-------
Conditions to the Offer
-----------------------
The capitalized terms used in this Annex A have the meanings set
forth in the Agreement to which this Annex A is attached.
Notwithstanding any other provision of the Offer, Purchaser shall not
be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and (subject to the provisions of the Agreement) may
terminate the Offer and not accept for payment any tendered shares if (i) the
Minimum Condition shall not have been satisfied at the expiration of the Offer,
or (ii) at any time on or after the date of the Agreement and prior to the
expiration of the Offer, any of the following conditions shall exist and be
continuing:
(a) there shall be any Law, injunction, judgment, ruling, order or
decree enacted, issued, promulgated or entered by any Governmental Entity or any
third party that would (i) restrain, enjoin, prevent, prohibit or make illegal
(A) the acceptance for payment, payment for or purchase of some or all of the
Shares by Purchaser or the consummation of the Transactions, or (B) Purchaser's
or any of its affiliates' ownership or operation of all or any material portion
of the businesses and assets of the Company and its subsidiaries taken as a
whole;
(b) (i) there shall have occurred any events or changes that,
individually or in the aggregate, have had or would reasonably be expected to
have a Company Material Adverse Effect or (ii) (A) the representations and
warranties of the Company set forth in the Agreement shall not be true and
correct in all material respects at and as of the expiration of the Offer as if
made on such date, other than those representations and warranties that (1)
address matters only as of a particular date which are true and correct as of
such date and (2) are qualified as to "materiality" or "Company Material Adverse
Effect" which representation must be true in all respects, or (B) the Company
shall have breached or failed in any material respect to perform or comply with
any obligation, agreement or covenant required by the Agreement to be performed
or complied with by it, which breach or failure has not been cured prior to the
expiration of the Offer;
(c) any Principal Shareholder shall have in any material respect
breached or failed to perform any of its representations, warranties, covenants
or agreements contained in the Principal Shareholders' Agreement;
(d) the Agreement shall have been terminated in accordance with its
terms;
(e) the Board of Directors of the Company or any committee thereof
(i) shall have withdrawn or modified, in a manner adverse to Purchaser, its
A-1
approval or recommendation of any of the Transactions or (ii) shall have
approved or recommended to shareholders of the Company a Takeover Proposal;
(f) the Opt Out shall not be effective under the OGCL and Rule 14c-2
under the Exchange Act (the "Opt Out Condition");
(g) Persons designated by Purchaser shall not constitute a majority
of the members of the Board of Directors of the Company upon acceptance for
payment of shares tendered in the Offer or more than two persons who were
directors immediately prior to such acceptance for payment shall continue as
members of the Board of Directors of the Company (the "Board Representation
Condition"); or
(h) The Lenders shall not have entered into a forbearance agreement
with the Company pursuant to which they shall agree to forebear from exercising
any remedies or taking any action to collect the obligations owed by the Company
to the Lenders under the Credit Facility and to continue to provide liquidity to
the Company under the Credit Facility consistent with past practice until August
31, 2003 unless the Purchaser is otherwise satisfied in its reasonable
discretion that the Lenders have not sought to, and do not have the right to,
exercise any remedies or take any action to collect the obligations owed by the
Company to the Lenders under the Credit Facility and have provided, and are
obligated to continue to provide, liquidity to the Company under the Credit
Facility consistent with past practice until August 31, 2003 (the "Forbearance
Condition").
The foregoing conditions are for the sole benefit of Purchaser and
may be asserted it regardless of the circumstances giving rise to such
conditions or may be waived by Purchaser, in whole or in part at any time and
from time to time in the sole discretion of Purchaser (except for any conditions
which, pursuant to Section 1.1 of the Agreement, may only be waived with the
Company's consent). The failure by Purchaser at any time to exercise any of the
foregoing rights will not be deemed a waiver of any right, the waiver of such
right with respect to any particular facts or circumstances shall not be deemed
a waiver with respect to any other facts or circumstances, and each right will
be deemed an ongoing right which may be asserted at any time and from time to
time.
If the Offer is terminated, all tendered Shares not theretofore
accepted for payment shall forthwith be returned to the tendering shareholders.
A-2