Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
dated as of
July 7, 2003
among
NAUTICA ENTERPRISES, INC.,
VF CORPORATION
and
VOYAGER ACQUISITION CORPORATION
TABLE OF CONTENTS(1)
PAGE
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions.....................................................1
ARTICLE 2
THE MERGER
Section 2.01. The Merger......................................................6
Section 2.02. Consummation....................................................6
Section 2.03. Conversion of Shares............................................6
Section 2.04. Surrender and Payment...........................................7
Section 2.05. Dissenting Shares...............................................8
Section 2.06. Stock Options...................................................9
Section 2.07. Adjustments....................................................10
Section 2.08. Withholding Rights.............................................10
Section 2.09. Lost Certificates..............................................10
ARTICLE 3
THE SURVIVING CORPORATION
Section 3.01. Restated Certificate of Incorporation..........................11
Section 3.02. Bylaws.........................................................11
Section 3.03. Directors and Officers.........................................11
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.01. Corporate Existence and Power..................................11
Section 4.02. Corporate Authorization........................................11
Section 4.03. Governmental Authorization.....................................12
Section 4.04. Non-contravention..............................................12
Section 4.05. Capitalization.................................................13
Section 4.06. Subsidiaries...................................................13
Section 4.07. SEC Filings....................................................15
Section 4.08. Financial Statements...........................................15
Section 4.09. Disclosure Documents...........................................16
Section 4.10. Absence of Certain Changes.....................................16
Section 4.11. No Undisclosed Material Liabilities............................18
Section 4.12. Compliance with Laws and Court Orders..........................19
Section 4.13. Litigation.....................................................19
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1 The Table of Contents is not a part of this Agreement.
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Section 4.14. Taxes.........................................................19
Section 4.15. Labor Matters..................................................21
Section 4.16. Employee Benefit Plans.........................................21
Section 4.17. Intellectual Property..........................................23
Section 4.18. Certain Contracts..............................................23
Section 4.19. Antitakeover Statutes And Rights Agreement.....................24
Section 4.20. Finder's Fees..................................................24
Section 4.21. Opinion of Financial Advisors..................................24
Section 4.22. Disclaimer of Other Representations and Warranties.............24
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 5.01. Corporate Existence and Power..................................25
Section 5.02. Corporate Authorization........................................25
Section 5.03. Governmental Authorization.....................................25
Section 5.04. Non-contravention..............................................26
Section 5.05. Disclosure Documents...........................................26
Section 5.06. Finders' Fees..................................................26
Section 5.07 . Financing......................................................26
Section 5.08. Chu Purchase Agreement.........................................26
ARTICLE 6
COVENANTS OF THE COMPANY
Section 6.01. Conduct of the Company.........................................27
Section 6.02. Stockholder Meeting; Proxy Material............................27
Section 6.03. No Solicitation; Other Offers..................................28
Section 6.04. Tax Matters....................................................30
Section 6.05. Access to Information..........................................30
Section 6.06. Notices of Certain Events......................................31
Section 6.07. Disclosure Schedule............................................31
ARTICLE 7
COVENANTS OF PARENT
Section 7.01. Obligations of Merger Subsidiary...............................31
Section 7.02. Voting of Shares...............................................32
Section 7.03. Director and Officer Liability.................................32
Section 7.04. Parent Employee Matters........................................35
ARTICLE 8
COVENANTS OF PARENT AND THE COMPANY
Section 8.01. Reasonable Efforts.............................................37
Section 8.02. Certain Filings................................................37
Section 8.03. Public Announcements...........................................37
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Section 8.04. Further Assurances.............................................38
Section 8.05. Confidentiality................................................38
Section 8.06. Chu Purchase Agreement.........................................39
ARTICLE 9
CONDITIONS TO THE MERGER
Section 9.01. Conditions to Obligations of Each Party........................39
Section 9.02. Conditions to the Obligations of Parent and Merger Subsidiary..40
Section 9.03. Conditions to the Obligations of the Company...................41
ARTICLE 10
TERMINATION
Section 10.01. Termination...................................................42
Section 10.02. Effect of Termination.........................................43
ARTICLE 11
MISCELLANEOUS
Section 11.01. Notices.......................................................44
Section 11.02. Nonsurvival of Representations and Warranties.................45
Section 11.03. Amendments and Waivers........................................45
Section 11.04. Expenses......................................................45
Section 11.05. Binding Effect; Benefit; Assignment...........................47
Section 11.06. Governing Law.................................................47
Section 11.07. Jurisdiction..................................................47
Section 11.08. WAIVER OF JURY TRIAL..........................................48
Section 11.09. Counterparts..................................................48
Section 11.10. Entire Agreement..............................................48
Section 11.11. Captions......................................................48
Section 11.12. Severability..................................................48
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of July 7, 2003
among Nautica Enterprises, Inc., a Delaware corporation (the "Company"), VF
Corporation, a Pennsylvania corporation ("Parent"), and Voyager Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Merger Subsidiary").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Company, Parent and
Merger Subsidiary have approved and deemed it advisable that the respective
stockholders of Merger Subsidiary and the Company approve and adopt this
Agreement pursuant to which, among other things, Parent would acquire the
Company by means of a merger of Merger Subsidiary with and into the Company on
the terms and subject to the conditions set forth in this Agreement;
WHEREAS, concurrently with the execution and delivery of this Agreement,
and as a condition and inducement to Parent's and Merger Subsidiary's
willingness to enter into this Agreement, Harvey Sanders, the Harvey Sanders
Grantor Retained Income Trust and David Chu are entering into a Voting
Agreement (the "Voting Agreement") with respect to the voting of Common Stock
with respect to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties hereto agree
as follows:
Article 1
DEFINITIONS
Section 1.01. Definitions. (a) The following terms, as used herein, have
the following meanings:
"Acquisition Proposal" means, other than the transactions contemplated by
this Agreement, any offer or proposal by a Third Party relating to (A) any
acquisition or purchase, direct or indirect, of 40% or more of the consolidated
assets of the Company and its Subsidiaries, taken as a whole, or over 40% of
the voting securities of the Company or any of its Subsidiaries whose assets,
individually or in the aggregate, constitute more than 40% of the consolidated
assets of the Company, (B) any tender offer (including a self-tender offer) or
exchange offer that, if consummated, would result in such Third Party's
beneficially owning 40% or more of any class of equity or voting securities of
the Company or any of its Subsidiaries whose assets, individually or in the
aggregate, constitute more than 40% of the consolidated assets of the Company
or (C) a merger, consolidation, share exchange, business combination, sale of
substantially
all the assets, reorganization, recapitalization, liquidation, dissolution or
other similar transaction involving the Company or any of its Subsidiaries
whose assets, individually or in the aggregate, constitute more than 40% of the
consolidated assets of the Company.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person.
"Balance Sheet" means the consolidated balance sheet of the Company and
its Subsidiaries as of March 1, 2003 and the footnotes thereto set forth in the
Company 10-K.
"Balance Sheet Date" means March 1, 2003.
"Business Day" means a day, other than Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"Chu Agreements" means the Chu Purchase Agreement and the Employment and
Consulting Agreement dated as of the date of this Agreement among David Chu,
Merger Subsidiary and Parent, as guarantor and third party beneficiary.
"Chu Purchase Agreement" means the Purchase Agreement dated as of the date
of this Agreement among Parent, David Chu and Company, Inc. and David Chu.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, $0.10 par value, of the Company,
together with the associated Preferred Stock Purchase Rights.
"Company 10-K" means the Company's annual report on Form 10-K for the
fiscal year ended March 1, 2003.
"Company Material Adverse Effect" means a material adverse effect on the
financial condition, business or results of operations of the Company and its
Subsidiaries, taken as a whole, or on the Company's ability to consummate the
transactions contemplated by this Agreement or to perform its obligations under
this Agreement, other than, in the case of any of the foregoing, any such
effect arising out of, resulting from or caused by, (x) the economy, financial
markets or regulatory or political conditions in general and not specifically
relating to, or having the effect of specifically relating to or having a
materially disproportionate effect on, the Company or any of its Subsidiaries,
(y) the industries in which the Company or any of its Subsidiaries operate and
not specifically relating to, or having the effect of specifically relating to
or having a materially disproportionate effect (relative to most other industry
participants) on, the Company or any of its
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Subsidiaries or (z) any loss of employees, labor dispute, employee strikes,
slowdowns, job actions or work stoppages or labor union activities occurring
after execution of this Agreement by all parties hereto or resulting from the
announcement of this Agreement or the Chu Agreements and the transactions
contemplated hereby or thereby.
"Delaware Law" means the General Corporation Law of the State of Delaware.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity means any other entity that, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
"Governmental Authority" means any court, administrative agency or
commission or other federal, state, local or foreign governmental or regulatory
authority, agency, body or instrumentality.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
"Intellectual Property Right" means any (i) trademark, service mark, trade
dress, logo, domain name, trade name and corporate name and all goodwill
associated therewith and (ii) mask work, copyright, patent, software license,
other database, domain name, invention, trade secret, know-how (including any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right.
"International Plan" means any material employment, severance or similar
contract or arrangement (whether or not written) or any plan, policy, fund,
program or arrangement or contract providing for defined benefit, pension or
retirement benefits, unfunded deferred compensation, profit-sharing,
post-retirement health or life insurance benefits, stock options, stock
appreciation rights or other stock-based compensation that (i) is not a
governmental, statutory or mandated plan, (ii) is entered into, maintained,
administered or contributed to by the Company or any of its Subsidiaries and
(iii) covers any employee or former employee of the Company or any of its
Subsidiaries outside the United States.
"knowledge" of any Person that is not an individual means the actual
knowledge (without any inquiry) of such Person's executive officers.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any property or asset that it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale
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agreement, capital lease or other title retention agreement relating to such
property or asset.
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Other Subsidiaries" means the Subsidiaries of the Company that are not
Significant Subsidiaries.
"Parent Material Adverse Effect" means a material adverse effect on either
Parent's or Merger Subsidiary's ability to consummate the transactions
contemplated by this Agreement or to perform its obligations under this
Agreement.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Preferred Stock Purchase Rights" means the rights issued by the Company
pursuant to the Rights Agreement, as adjusted pursuant to the terms thereof.
"Rights Agreement" means the Rights Agreement dated as of November 2,
2001, as amended, between the Company and Mellon Investor Services LLC.
"SEC" means the Securities and Exchange Commission.
"Series A Preferred Stock" means the Series A Junior Participating
Preferred Stock, par value $0.01, of the Company.
"Significant Subsidiary" means (i) the Subsidiaries of the Company listed
in Section 4.06(a) of the Company Disclosure Schedule and (ii) any other
Subsidiary of the Company that would constitute a "significant subsidiary"
within the meaning of Rule 1-02 of Regulation S-X of the SEC.
"Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at any time directly or indirectly owned by such Person.
"Third Party" means any Person as defined in this Agreement or in Section
13(d) of the 1934 Act, other than Parent and its Affiliates and their
respective advisors and agents (acting in such capacity).
Any reference in this Agreement to a statute shall be to such statute, as
amended from time to time, and to the rules and regulations promulgated
thereunder.
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(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Agreement................................................ Preamble
Certificates............................................. 2.04
Company.................................................. Preamble
Company Disclosure Schedule.............................. 6.07
Company Securities....................................... 4.05
Company Stockholder Meeting.............................. 6.02
Company Stock Option..................................... 2.06
Company Stockholder Approval............................. 6.02
Current SEC Documents.................................... 4.10
Dissenting Shares........................................ 2.05
Effective Time........................................... 2.01
e-mail................................................... 11.01
Employee Plans........................................... 4.16
End Date................................................. 10.01
Exchange Agent........................................... 2.04
GAAP..................................................... 4.08
Indemnified Person....................................... 7.03
Merger................................................... 2.01
Merger Consideration..................................... 2.03
Merger Subsidiary........................................ Preamble
Merger Subsidiary Common Stock........................... 2.03
Multiemployer Plan....................................... 4.16
1989 Plan................................................ 2.06
1996 Plan................................................ 2.06
Other Subsidiary Securities.............................. 4.06
Parent................................................... Preamble
Payment Event............................................ 11.04
Preferred Stock.......................................... 4.05
Proceedings Cooperation.................................. 7.03
Proxy Contest............................................ 4.11
Proxy Statement.......................................... 4.09
SEC Documents............................................ 4.07
Significant Subsidiary Securities........................ 4.06
Specified Directors...................................... 7.03
Superior Proposal........................................ 6.03
Superior Proposal Agreement.............................. 10.01
Surviving Corporation.................................... 2.01
Tax...................................................... 4.14
Tax Asset................................................ 4.14
Tax Return............................................... 4.14
Taxing Authority......................................... 4.14
Third Party Beneficiary.................................. 11.05
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Term Section
---- -------
Transferred Employees.................................... 7.04
United States Bank....................................... 2.04
Union Contract........................................... 4.15
Voting Agreement......................................... Recitals
Article 2
THE MERGER
Section 2.01. The Merger. (a) Subject to the terms and conditions of this
Agreement, at the Effective Time, Merger Subsidiary shall be merged (the
"Merger") with and into the Company in accordance with Delaware Law, whereupon
the separate existence of Merger Subsidiary shall cease, and the Company shall
be the surviving corporation and shall continue its corporate existence under
Delaware Law (the "Surviving Corporation").
(b) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger, the Company and Merger
Subsidiary shall file a certificate of merger with the Delaware Secretary of
State and make all other filings or recordings required by Delaware Law in
connection with the Merger. The Merger shall become effective at such time (the
"Effective Time") as the certificate of merger is duly filed with the Delaware
Secretary of State (or at such later time as may be specified in the
certificate of merger).
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, powers, privileges and franchises and be subject to all
of the obligations, liabilities, restrictions and disabilities of the Company
and Merger Subsidiary, all as provided under Delaware Law.
Section 2.02. Consummation. Unless this Agreement shall have been
terminated and the Merger shall have been abandoned pursuant to Section 10.01,
and subject to the satisfaction or waiver of the conditions set forth in
Article 9, the consummation of the Merger shall take place at 10:00 a.m., New
York City time, at the offices of Davis Polk & Wardwell, 450 Lexington Avenue,
New York, New York, as soon as possible, but in no event later than 5 Business
Days, after satisfaction or waiver of the conditions set forth in Sections
9.01(a) and 9.01(c), or at such other time or place as Parent and the Company
may agree.
Section 2.03. Conversion of Shares. At the Effective Time:
(a) each share of Common Stock held as treasury stock or owned by Parent
or any Subsidiary of Parent immediately prior to the Effective Time shall be
canceled, and no payment shall be made with respect thereto;
(b) each share of common stock, par value $.01 per share, of Merger
Subsidiary ("Merger Subsidiary Common Stock") outstanding immediately prior to
the Effective Time shall be converted into and become one share of
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common stock, par value $0.10 per share, of the Surviving Corporation with the
same rights, powers and privileges as the shares so converted; and
(c) each share of Common Stock outstanding immediately prior to the
Effective Time shall, except as otherwise provided in Section 2.03(a) or as
provided in Section 2.05 with respect to shares of Common Stock as to which
appraisal rights have been exercised, be converted into the right to receive in
cash from Parent an amount equal to $17.00 (the "Merger Consideration").
Section 2.04. Surrender and Payment. (a) Prior to the Effective Time,
Parent shall appoint an agent reasonably acceptable to the Company (the
"Exchange Agent") for the purpose of exchanging certificates representing
shares of Common Stock (the "Certificates") for the Merger Consideration, and
Parent and Exchange Agent shall enter into an exchange agreement which shall,
in form and substance, be reasonably acceptable to the Company. Prior to the
Effective Time, Parent shall deposit or cause to be deposited with the Exchange
Agent in a separate fund established for the benefit of the holders of shares
of Common Stock, cash sufficient to pay the aggregate Merger Consideration
required to be paid for all of the Certificates at the Effective Time. For
purposes of determining the Merger Consideration to be so deposited, Parent
shall assume that no holder of shares of Common Stock will perfect appraisal
rights with respect to such shares. Any cash deposited with the Exchange Agent
shall not be used for any purpose other than as set forth in this Article 2 and
shall be invested by the Exchange Agent as directed by Parent or the Surviving
Corporation in: (A) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America with a remaining term at the time of acquisition thereof not in excess
of 90 days, (B) money market accounts or certificates of deposit maturing
within 90 days of the acquisition thereof and issued by a bank or trust company
organized under the laws of the United States of America or a State thereof
having a combined capital surplus in excess of $500,000,000 (a "United States
Bank"), (C) commercial paper issued by a domestic corporation and given a
rating of no lower than A1 by Standard & Poor's Corporation and P1 by Moody's
Investors Service, Inc. with a remaining term at the time of acquisition
thereof not in excess of 90 days or (D) demand deposits with any United States
Bank. The earnings and interest thereon shall be paid to Parent or as Parent
directs. As soon as practicable (but not more than three Business Days) after
the Effective Time, Parent shall send, or shall cause the Exchange Agent to
send, to each holder of record of shares of Common Stock at the Effective Time,
a letter of transmittal and instructions for use in effecting the surrender of
a Certificate in exchange for payment of the Merger Consideration (which shall
(i) be in a form reasonably acceptable to each of Parent and the Company and
(ii) specify that the delivery shall be effected, and risk of loss and title
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) for use in such exchange.
(b) Each holder of shares of Common Stock that have been converted into
the right to receive the Merger Consideration shall be entitled to receive,
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upon surrender to the Exchange Agent of a Certificate, together with a properly
completed letter of transmittal, the Merger Consideration in respect of the
Common Stock represented by a Certificate. Such payment of the Merger
Consideration shall be sent to such holder of shares of Common Stock promptly
after receipt of such Certificate and letter of transmittal by the Exchange
Agent. Until so surrendered or transferred, as the case may be, each such
Certificate shall represent after the Effective Time for all purposes only the
right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the Person in whose name the surrendered Certificate is registered,
it shall be a condition to such payment that (i) either such Certificate shall
be properly endorsed or shall otherwise be in proper form for transfer and (ii)
the Person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a Person other than the
registered holder of such Certificate or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further registration of
transfers of shares of Common Stock. If, after the Effective Time, Certificates
are presented to the Surviving Corporation, they shall be canceled and
exchanged for the Merger Consideration provided for, and in accordance with the
procedures set forth, in this Article 2.
(e) Any portion of the Merger Consideration deposited with the Exchange
Agent pursuant to Section 2.04(a) that remains unclaimed by the holders of
shares of Common Stock twelve months after the Effective Time shall be returned
to Parent, upon demand, and any such holder who has not exchanged shares of
Common Stock for the Merger Consideration in accordance with this Section 2.04
prior to that time shall thereafter look only to Parent for payment of the
Merger Consideration without any interest thereon. Notwithstanding the
foregoing, Parent shall not be liable to any holder of shares of Common Stock
for any amounts paid to a public official pursuant to applicable abandoned
property, escheat or similar laws. Any amounts remaining unclaimed by holders
of shares of Common Stock two years after the Effective Time (or such earlier
date, immediately prior to such time when the amounts would otherwise escheat
to or become property of any Governmental Authority) shall become, to the
extent permitted by applicable law, the property of Parent free and clear of
any claims or interest of any Person previously entitled thereto.
(f) Any portion of the Merger Consideration deposited with the Exchange
Agent pursuant to Section 2.04(a) to pay for shares for which appraisal rights
have been perfected shall be returned to the Surviving Corporation, upon
demand.
Section 2.05. Dissenting Shares. Notwithstanding Section 2.02, shares of
Common Stock which are issued and outstanding immediately prior to the
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Effective Time and which are held by a holder who has not voted such shares of
Common Stock in favor of the Merger, who shall have delivered a written demand
for appraisal of such shares of Common Stock in the manner provided by Delaware
Law and who, as of the Effective Time, shall not have effectively withdrawn or
lost such right to appraisal ("Dissenting Shares") shall not be converted into
a right to receive the Merger Consideration. The holders thereof shall be
entitled only to such rights as are granted by Section 262 of Delaware Law.
Each holder of Dissenting Shares who becomes entitled to payment for such
shares of Common Stock pursuant to Section 262 of Delaware Law shall receive
payment therefor from the Surviving Corporation in accordance with Delaware
Law; provided, however, that (i) if any such holder of Dissenting Shares shall
have failed to establish his entitlement to appraisal rights as provided in
Section 262 of Delaware Law, (ii) if any such holder of Dissenting Shares shall
have effectively withdrawn his demand for appraisal of such Shares or lost his
right to appraisal and payment for his shares of Common Stock under Section 262
of Delaware Law or (iii) if neither any holder of Dissenting Shares nor the
Surviving Corporation shall have filed a petition demanding a determination of
the value of all Dissenting Shares within the time provided in Section 262 of
Delaware Law, such holder shall forfeit the right to appraisal of such shares
of Common Stock and each such share of Common Stock shall be treated as if it
had been converted, as of the Effective Time, into a right to receive the
Merger Consideration, without interest thereon, from Parent as provided in
Section 2.02 hereof. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of shares of Common Stock, and Parent
shall have the right to participate in all negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior written
consent of Parent, make any payment with respect to, or settle or offer to
settle, any such demands.
Section 2.06. Stock Options. (a) At or immediately prior to the Effective
Time, each option to purchase shares of Common Stock granted under any employee
stock option or compensation plan or arrangement of the Company (each, a
"Company Stock Option"), whether or not exercisable or vested, shall be
canceled, and Parent shall pay or shall cause the Surviving Corporation to pay
each holder at or promptly after the Effective Time for each such option
surrendered an amount in cash determined by multiplying (i) the excess of the
Merger Consideration over the applicable exercise price of such option by (ii)
the number of shares of Common Stock such holder could have purchased (assuming
full vesting of all options) had such holder exercised such option in full
immediately prior to the Effective Time; provided, however, that in the case of
any Company Stock Option under the Nautica Enterprises, Inc. 1996 Stock
Incentive Plan (Amended and Restated) (the "1996 Plan"), if the "Change of
Control Price" (as defined under the 1996 Plan) is higher than the Merger
Consideration, such Change of Control Price shall be substituted for the Merger
Consideration in clause (i) above.
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(b) Prior to the Effective Time, the Company shall use its reasonable
efforts (without the expenditure of any funds) to obtain any consents from
holders of options to purchase shares of Common Stock granted under the
Company's stock option or compensation plans or arrangements that the Company
deems reasonably necessary to accomplish the transactions contemplated by
Section 2.06(a). Notwithstanding any other provision of this Section 2.06,
payment may be withheld in respect of any employee stock option until such
necessary consents are obtained.
(c) Prior to the Effective Time, the Company shall take, or shall cause
the plan administrator to take, any actions that the Company deems reasonably
necessary under the State-O-Maine, Inc. 1989 Employee Incentive Stock Plan (the
"1989 Plan") to effect the transactions contemplated by Section 2.06(a) with
respect to Company Stock Options under the 1989 Plan using the Merger
Consideration as provided in clause (i) of Section 2.05(a).
Section 2.07. Adjustments. If, during the period between the date of this
Agreement and the Effective Time, any change in the outstanding shares of
capital stock of the Company shall occur, including by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date during
such period, the Merger Consideration and any other amounts payable pursuant to
this Agreement shall be appropriately adjusted.
Section 2.08. Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration
otherwise payable to any Person pursuant to this Article 2 such amounts as it
is required to deduct and withhold with respect to the making of such payment
under any provision of federal, state, local or foreign tax law. If the
Surviving Corporation or Parent, as the case may be, so withholds amounts, such
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of Common Stock in respect of which the Surviving
Corporation or Parent, as the case may be, made such deduction and withholding.
Section 2.09. Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration to be paid in respect of the shares of
Common Stock represented by such Certificate, as contemplated by this Article 2.
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Article 3
THE SURVIVING CORPORATION
Section 3.01. Restated Certificate of Incorporation. The restated
certificate of incorporation of the Company in effect immediately prior to the
Effective Time shall be the restated certificate of incorporation of the
Surviving Corporation until amended in accordance with Delaware Law.
Section 3.02. Bylaws. The bylaws of the Company in effect immediately
prior to the Effective Time shall be the bylaws of the Surviving Corporation
until amended in accordance with Delaware Law.
Section 3.03. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
Delaware Law, (i) the directors of Merger Subsidiary immediately prior to the
Effective Time shall be the directors of the Surviving Corporation and (ii) the
officers of the Company immediately prior to the Effective Time shall be the
officers of the Surviving Corporation.
Article 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent that:
Section 4.01. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations, permits,
consents and approvals the absence of which would not be reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect. The
Company is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where such qualification is necessary,
except for those jurisdictions where failure to be so qualified would not be
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect. The Company has heretofore made available to Parent true and
complete copies of the restated certificate of incorporation and bylaws of the
Company as currently in effect.
Section 4.02. Corporate Authorization. (a) The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby are within the Company's
corporate powers and, except for the required approval of the Company's
stockholders in connection with the consummation of the Merger, have been duly
authorized by all necessary corporate action on the part of the Company. The
affirmative vote of the holders of a majority of the outstanding shares of
Common
11
Stock is the only vote of the holders of any of the Company's capital stock
necessary in connection with the consummation of the Merger. This Agreement has
been duly executed and delivered by the Company and, assuming due and valid
authorization, execution and delivery of this Agreement by Parent and Merger
Subsidiary, constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to the enforcement of creditors'
rights generally and (ii) is subject to general principles of equity.
(b) At a meeting duly called and held, the Company's Board of Directors
has (i) determined that this Agreement and the transactions contemplated hereby
are advisable to the Company's stockholders, (ii) approved this Agreement and
the transactions contemplated hereby for purposes of Section 203 of Delaware
Law, (iii) approved and adopted an amendment to the Rights Agreement to render
the Preferred Stock Purchase Rights inapplicable to this Agreement and the
transactions contemplated hereby, (iv) approved and adopted this Agreement and
the transactions contemplated hereby and (v) resolved (subject to Section
6.03(b)) to recommend approval and adoption of this Agreement by its
stockholders.
Section 4.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby require no action by or in
respect of, or filing with, any Governmental Authority, other than (i) the
filing of a certificate of merger with respect to the Merger with the Delaware
Secretary of State, (ii) compliance with any applicable requirements of the HSR
Act, (iii) compliance with any applicable requirements of the 1934 Act and the
rules and regulations promulgated thereunder, (iv) as disclosed in Section 4.03
of the Company Disclosure Schedule and (v) actions or filings, the failure of
which to take or make would not be reasonably likely to have, individually or
in the aggregate, a Company Material Adverse Effect.
Section 4.04. Non-contravention. The execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not and will not (i) result in any
violation or breach of any provision of the restated certificate of
incorporation or bylaws of the Company, (ii) assuming compliance with the
matters referred to in Section 4.03 and the receipt of the Company Stockholder
Approval, result in a violation or breach of any provision of any applicable
law, statute, ordinance, rule, regulation, judgment, injunction, order, or
decree, (iii) subject to obtaining the Third Party consents and other approvals
set forth in Section 4.04(iii) of the Company Disclosure Schedule, require any
consent by any Person under, constitute a default, or an event that, with or
without notice or lapse of time or both, would constitute a default under, or
cause or permit the termination, cancellation, acceleration or loss of any
benefit to which the Company or any of its Subsidiaries is entitled under any
provision of any agreement or other
12
instrument binding upon the Company or any of its Subsidiaries that requires
the payment to or from the Company or any of its Subsidiaries of more than
$250,000 per year, or any governmental license, franchise, permit or other
similar authorization relating to the assets or business of the Company and its
Subsidiaries or (iv) result in the creation or imposition of any Lien on any
asset of the Company or any of its Subsidiaries, except for such violations or
breaches referred to in clause (ii) and for such failures to obtain any such
consent, defaults, terminations, cancellations, accelerations, losses or Liens
referred to in clauses (iii) and (iv) that would not be reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect.
Section 4.05. Capitalization. (a) The authorized capital stock of the
Company consists of (i) 100,000,000 shares of Common Stock and (ii) 2,000,000
shares of preferred stock, par value $0.01 per share (the "Preferred Stock") of
which 400,000 shares have been designated Series A Preferred Stock. As of the
close of business on July 3, 2003 there were outstanding 33,595,900 shares of
Common Stock and no shares of Preferred Stock. As of the close of business on
June 10, 2003 there were employee stock options to purchase an aggregate of
4,744,750 shares of Common Stock (of which options to purchase an aggregate of
3,808,800 shares of Common Stock were exercisable). All outstanding shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable. No Subsidiary of the Company owns any shares
of capital stock of the Company.
(b) Except as set forth in this Section 4.05 and for changes since June
10, 2003 resulting from the exercise of employee stock options outstanding on
such date, there are (i) no outstanding shares of capital stock or voting
securities of the Company, (ii) no outstanding securities of the Company
convertible into or exchangeable for shares of capital stock or voting
securities of the Company or (iii) except for the Preferred Stock Purchase
Rights, no outstanding options or other rights to acquire from the Company, or
other obligation of the Company to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of the Company (the items in clauses, (i), (ii), and (iii) being
referred to collectively as the "Company Securities"). Except as set forth in
Section 4.05(b) 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 of the Company Securities.
Section 4.06. Subsidiaries. (a) Except as set forth in Section 4.06(a) of
the Company Disclosure Schedule, each Significant Subsidiary is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted, except for those licenses, authorizations,
permits, consents and approvals the absence of which would not be reasonably
likely to have, individually and in the aggregate, a Company Material Adverse
Effect.
13
Each Other Subsidiary is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation, except
for such failures to be duly incorporated, validly existing and in good
standing which, individually or in the aggregate, would not be reasonably
likely to have a Company Material Adverse Effect. Each Other Subsidiary has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those powers, licenses, authorizations, permits, consents and
approvals the absence of which would not be reasonably likely to have,
individually and in the aggregate, a Company Material Adverse Effect. Each
Subsidiary of the Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not be reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect. As of the date of this Agreement,
all Significant Subsidiaries of the Company and their respective jurisdictions
of incorporation and jurisdictions in which they are qualified to do business
are identified in Section 4.06(a) of the Company Disclosure Schedule.
(b) All of the outstanding capital stock of, or other voting securities or
ownership interests in, each Significant Subsidiary, is owned by the Company,
directly or indirectly, free and clear of any Lien and free of any other
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other voting securities or
ownership interests), other than restrictions imposed by federal and state
securities laws and other than any Lien that is not material in the context of
the Significant Subsidiary in question. There are no outstanding (i) securities
of the Company or any of its Significant Subsidiaries convertible into or
exchangeable for shares of capital stock or other voting securities or
ownership interests in any Significant Subsidiary of the Company or (ii)
options or other rights to acquire from the Company or any Significant
Subsidiary, or other obligation of the Company or any Significant Subsidiary to
issue, any capital stock or other voting securities or ownership interests in,
or any securities convertible into or exchangeable for any capital stock or
other voting securities or ownership interests in, any Significant Subsidiary
(the items in clauses (i) and (ii) being referred to collectively as the
"Significant Subsidiary Securities"). There are no outstanding obligations of
the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any of the Significant Subsidiary Securities.
(c) Except for such exceptions that, individually or in the aggregate,
would not be reasonably likely to have a Company Material Adverse Effect, all
of the outstanding capital stock of, or other voting securities or ownership
interests in, each Other Subsidiary, is owned by the Company, directly or
indirectly, free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other voting securities or ownership
interests), other than restrictions imposed by
14
federal and state securities laws. Except for such exceptions that,
individually or in the aggregate, would not be reasonably likely to have a
Company Material Adverse Effect, there are no outstanding (i) securities of the
Company or any Other Subsidiary convertible into or exchangeable for shares of
capital stock or other voting securities or ownership interests in any Other
Subsidiary or (ii) options or other rights to acquire from the Company or any
Other Subsidiary, or other obligation of the Company or any Other Subsidiary to
issue, any capital stock or other voting securities or ownership interests in,
or any securities convertible into or exchangeable for any capital stock or
other voting securities or ownership interests in, any Other Subsidiary (the
items in clauses (i) and (ii) being referred to collectively as the "Other
Subsidiary Securities"). There are no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the
Other Subsidiary Securities, except for such obligations that, individually or
in the aggregate, would not be reasonably likely to have a Company Material
Adverse Effect.
Section 4.07. SEC Filings. (a) The Company has made available to the
Parent (i) the Company's annual reports on Form 10-K for its fiscal years ended
March 2, 2002 and March 1, 2003, (ii) its proxy or information statements
relating to meetings of, or actions taken without a meeting by, the
stockholders of the Company held or scheduled to be held from March 1, 2003 to
the date of this Agreement, and (iii) all of its other reports, statements,
schedules and registration statements filed with the SEC since March 1, 2003
(the documents referred to in this Section 4.07(a), collectively, the "SEC
Documents").
(b) As of its filing date, each SEC Document complied as to form in all
material respects with the applicable requirements of the 1933 Act and the 1934
Act, as the case may be.
(c) As of its filing date (or, if amended or superseded by a filing prior
to the date of this Agreement, on the date of such filing), each SEC Document
filed pursuant to the 1934 Act did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading.
(d) Each SEC Document that is a registration statement, as amended or
supplemented, if applicable, filed pursuant to the 1933 Act, as of the date
such registration statement or amendment became effective, did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading.
Section 4.08. Financial Statements. The audited consolidated financial
statements of the Company and its Subsidiaries included in the SEC Documents
fairly present in all material respects, in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of the
Company
15
and its Subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended.
Section 4.09. Disclosure Documents. The proxy statement of the Company to
be filed with the SEC in connection with the Merger (the "Proxy Statement") and
any amendments or supplements thereto will, when filed, comply as to form in
all material respects with the applicable requirements of the 1934 Act. At the
time the Proxy Statement or any amendment or supplement thereto is first mailed
to stockholders of the Company, and at the time such stockholders vote on
adoption of this Agreement, the Proxy Statement, as supplemented or amended, if
applicable, will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
The representations and warranties contained in this Section 4.09 will not
apply to statements or omissions included in the Proxy Statement based upon
information furnished to the Company in writing by Parent specifically for use
therein.
Section 4.10. Absence of Certain Changes. Since the Balance Sheet Date,
except as disclosed in the Company 10-K or any SEC Document filed subsequent to
the filing of the Company 10-K but prior to the date of this Agreement
(collectively, the "Current SEC Documents"), as set forth in Section 4.10 of
the Company Disclosure Schedule or as may be affected by actions permitted to
be taken pursuant to Section 6.01 or actions specifically contemplated to be
taken by this Agreement, the business of the Company and its Subsidiaries has
been conducted in the ordinary course consistent with past practices and since
the Balance Sheet Date, except as disclosed in the Current SEC Documents or as
set forth in Section 4.10 of the Company Disclosure Schedule, there has not
been:
(a) any event, occurrence or circumstance that has had or would be
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any of its
Subsidiaries of any outstanding shares of capital stock or other securities of,
or other ownership interests in, the Company or any of its Subsidiaries;
(c) any amendment of any material term of any outstanding security of the
Company or any of its Subsidiaries;
(d) any incurrence, assumption or guarantee by the Company or any of its
Subsidiaries of any indebtedness for borrowed money other than in the ordinary
course of business and in amounts and on terms consistent with past practices;
16
(e) any making of any loan, advance or capital contributions to or
investment in any Person other than loans, advances or capital contributions to
or investments in its wholly-owned Subsidiaries or otherwise in the ordinary
course of business consistent with past practices;
(f) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of the Company or any of its
Subsidiaries that would be reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect;
(g) any change in any method of accounting or accounting principles or
practice by the Company or any of its Subsidiaries, except for any such change
required by reason of a concurrent change in GAAP;
(h) any (i) grant of any severance or termination pay to (or amendment to
any existing arrangement with) any director, officer or employee of the Company
or any of its Subsidiaries (other than pursuant to the terms of existing plans,
policies, agreements or arrangements, including the Company's severance policy
guidelines previously made available to Parent, or in the ordinary course of
business with respect to any non-officer employee whose annual base salary does
not exceed $150,000), (ii) material increase in benefits payable under any
existing severance or termination pay policies or employment agreements, (iii)
entering into any employment, deferred compensation or other similar agreement
(or any amendment to any such existing agreement) with any director, officer or
(other than any such agreement or amendment entered into in the ordinary course
of business, which will not result in liability to the Company upon termination
of employment in an amount in excess of $150,000 per employee) employee of the
Company or any of its Subsidiaries, (iv) establishment, adoption or amendment
(except as required by applicable law or contemplated by this Agreement) of any
collective bargaining (but only through the date of this Agreement), bonus,
profit-sharing, thrift, pension, retirement, deferred compensation, stock
option, restricted stock or other material benefit plan or arrangement covering
any director, officer or employee of the Company or any of its Subsidiaries or
(v) material increase in compensation, bonus or other benefits payable to any
director or officer of the Company or any of its Subsidiaries;
(i) through the date immediately preceding the date of this Agreement, any
organized labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of the Company or any of its Subsidiaries, which employees were
not subject to a collective bargaining agreement at the Balance Sheet Date, or
any lockouts, strikes, slowdowns, work stoppages or, to the knowledge of the
Company, threats thereof by or with respect to such employees; or
(j) as of the date of this Agreement, any Tax election made or changed,
any annual Tax accounting period changed, any method of Tax accounting adopted
or changed, any amended Tax Returns or claims for Tax refunds filed,
17
any closing agreement entered into with a Taxing Authority, or any Tax claim,
audit or assessment settled which would be reasonably likely to have a Company
Material Adverse Effect.
Section 4.11. No Undisclosed Material Liabilities. Except as set forth in
Section 4.11 of the Company Disclosure Schedule, there are no liabilities or
obligations of the Company or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
other than:
(a) liabilities or obligations disclosed and provided for in the Balance
Sheet or the Current SEC Documents;
(b) liabilities or obligations incurred in connection with that certain
proxy contest relating to the annual meeting of the Company's stockholders
currently scheduled for July 8, 2003 (or the election of directors thereat)
(the "Proxy Contest");
(c) liabilities or obligations under this Agreement;
(d) liabilities or obligations incurred in connection with the
transactions contemplated by this Agreement or the Chu Agreements;
(e) liabilities or obligations incurred after the Balance Sheet Date in
the ordinary course of business and consistent with past practice;
(f) liabilities or obligations arising under the terms of (but not from
any breach of default under) any agreement, contract or other instrument
binding upon the Company or any of its Subsidiaries, including any agreement,
contract or other instrument that is entered into after the date of this
Agreement, as long as entering into such agreement, contract or other
instrument does not violate any provision of this Agreement;
(g) liabilities or obligations arising out of, resulting from or caused by
any loss of employees, labor dispute, employee strikes, slowdowns, job actions
or work stoppages or labor union activities that are incurred or arise after
the execution of this Agreement by all parties hereto or result from the
announcement of this Agreement and the Chu Agreements and the transactions
contemplated hereby and thereby;
(h) liabilities or obligations specifically addressed in any of the other
representations or warranties made by the Company herein (disregarding any
thresholds specified therein); and
(i) other liabilities or obligations that, individually or in the
aggregate, would not be reasonably likely to have a Company Material Adverse
Effect.
18
Section 4.12. Compliance with Laws and Court Orders. Except as set forth
in Section 4.12 of the Company Disclosure Schedule or as disclosed in the
Current SEC Documents, the Company and each of its Subsidiaries is and since
January 1, 2001 has been in compliance with, and to the knowledge of the
Company is not under investigation with respect to and has not been threatened
to be charged with or given notice of any violation of, any applicable law,
statute, ordinance, rule, regulation, judgment, injunction, order or decree,
except for failures to comply or violations that would not be reasonably likely
to have, individually or in the aggregate, a Company Material Adverse Effect.
Section 4.13. Litigation. Except (a) as set forth in Section 4.13 of the
Company Disclosure Schedule, (b) as disclosed in the Current SEC Documents, (c)
for any action, suit, investigation or proceeding relating to, arising out of
or resulting from the transactions contemplated by this Agreement or the Chu
Agreements, the announcement of this Agreement or the Chu Agreements, the
announcement of such transactions or the Proxy Contest, there is no action,
suit, investigation or proceeding (or any basis therefor) pending against, or,
to the knowledge of the Company, threatened against, the Company, any of its
Subsidiaries or any present or former officer or director (in such officer's or
director's capacity as such) of the Company or any of its Subsidiaries or any
Person for whom the Company or any of its Subsidiaries is directly liable or
any of the respective properties of the Company or any of its Subsidiaries
before any court or arbitrator or before or by any Governmental Authority that
would be reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect.
Section 4.14. Taxes. Except as set forth in Section 4.14 of the Company
Disclosure Schedule and except for failures, violations, inaccuracies,
omissions or proceedings which would not be reasonably likely to have a Company
Material Adverse Effect:
(a) all Tax Returns required by applicable law to be filed with any Taxing
Authority by, or on behalf of, the Company or any of its Subsidiaries have been
filed when due in accordance with all applicable laws, and all such Tax Returns
were, at the time of filing, true and complete in all material respects;
(b) the Company and each of its Subsidiaries has paid (or has had paid on
its behalf) or has withheld and remitted to the appropriate Taxing Authority
all Taxes due and payable, or, where payment is not yet due, has established
(or has had established on its behalf) in accordance with GAAP an adequate
accrual for all Taxes through the end of the last period for which the Company
and its Subsidiaries ordinarily record items on their respective books;
(c) the income and franchise Tax Returns of the Company and its
Subsidiaries through the Tax year ended February 27, 1999 have been examined
and closed or are Tax Returns with respect to which the applicable period for
19
assessment under applicable law, after giving effect to extensions or waivers,
has expired;
(d) there is no claim, audit, action, suit, proceeding or investigation
now pending or, to the Company's knowledge, threatened in writing against or
with respect to the Company or its Subsidiaries in respect of any Tax;
(e) during the two-year period ending on the date of this Agreement,
neither the Company nor any of its Subsidiaries was a distributing corporation
or a controlled corporation in a transaction intended to be governed by Section
355 of the Code;
(f) neither the Company nor any of its Subsidiaries is a party to any
understanding or arrangement described in Section 6111(d) of the Code, or
participated in a "reportable transaction" as defined in Treasury Regulations
Section 1.6011-4(b), in each case after the applicable effective date; and
(g) Section 4.14 of the Company Disclosure Schedule contains a list, as of
the date of this Agreement, of all jurisdictions (whether foreign or domestic)
in which the Company or any of its Subsidiaries currently files Tax Returns.
(h) "Tax" means (i) any tax, governmental fee or other like assessment or
charge of any kind whatsoever (including, but not limited to, withholding on
amounts paid to or by any Person), together with any interest, penalty,
addition to tax or additional amount imposed by any governmental authority (a
"Taxing Authority") responsible for the imposition of any such tax (domestic or
foreign), and any liability for any of the foregoing as transferee, (ii) in the
case of the Company or any of its Subsidiaries, liability for the payment of
any amount of the type described in clause (i) as a result of being or having
been before the Effective Time a member of an affiliated, consolidated,
combined or unitary group, or a party to any agreement or arrangement, as a
result of which liability of the Company or any of its Subsidiaries to a Taxing
Authority is determined or taken into account with reference to the activities
of any other Person, and (iii) liability of the Company or any of its
Subsidiaries for the payment of any amount as a result of being party to any
Tax Sharing Agreement or with respect to the payment of any amount imposed on
any person of the type described in (i) or (ii) as a result of any existing
express or implied agreement or arrangement (including, but not limited to, an
indemnification agreement or arrangement). "Tax Return" means any report,
return, document, declaration or other information or filing required to be
supplied to any Taxing Authority with respect to Taxes, including information
returns, any documents with respect to or accompanying payments of estimated
Taxes, or with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information. "Tax Asset" means any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any other
credit or tax attribute that could be carried forward or back
20
to reduce Taxes (including without limitation deductions and credits related to
alternative minimum Taxes).
Section 4.15. Labor Matters. Section 4.15 of the Company Disclosure
Schedule contains a complete list as of the date of this Agreement of all
collective bargaining agreements or other contracts with any labor organization
or other representative of the Company's employees in connection with their
employment with the Company (each, a "Union Contract" and collectively, the
"Union Contracts"). Complete copies of each Union Contract have been made
available to Parent.
Section 4.16. Employee Benefit Plans. (a) Excluding International Plans,
Section 4.16 of the Company Disclosure Schedule contains a correct and complete
list identifying each (i) material "employee benefit plan," as defined in
Section 3(3) of ERISA, (ii) material employment, severance or similar contract,
plan, arrangement or policy, (iii) other plan or arrangement providing for
stock option or other stock related rights or (iv) other material plan or
arrangement (written or oral) providing for bonuses or incentive compensation,
profit-sharing, or deferred compensation, which is maintained, administered or
contributed to by the Company or any ERISA Affiliate and covers any employee or
former employee of the Company or any of its Subsidiaries, or with respect to
which the Company or any of its Subsidiaries has any material liability. Except
for those plans filed as part of the SEC Documents, copies of such plans (and,
if applicable, related trust or funding agreements) and all amendments thereto
and any summary plan descriptions have been made available to Parent together
with the most recent annual report (Form 5500 including, if applicable,
Schedule B thereto) and tax return (Form 990) prepared in connection with any
such plan or trust. Such plans are referred to collectively herein as the
"Employee Plans."
(b) Neither the Company nor any ERISA Affiliate nor, to the knowledge of
the Company, any predecessor thereof, sponsors, maintains or contributes to, or
has in the past sponsored, maintained or contributed to, any Employee Plan
subject to Title IV of ERISA (other than a Multiemployer Plan), with such
exceptions as would not be reasonably likely to have a Company Material Adverse
Effect.
(c) Except as set forth in Section 4.16 of the Company Disclosure
Schedule, as of the date of this Agreement, neither the Company nor any ERISA
Affiliate contributes to any multiemployer plan, as defined in Section 3(37) of
ERISA (a "Multiemployer Plan"). The Company has made available to Parent a copy
of the most recent estimate dated prior to the date of this Agreement of the
potential withdrawal liability payable by the Company and any ERISA Affiliate
of the Company if a full or partial withdrawal by the Company and each of its
ERISA Affiliates occurred, to the extent that such estimate has been provided
by the Multiemployer Plan.
21
(d) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter, or has
pending or has time remaining in which to file, an application for such
determination from the Internal Revenue Service, and to the knowledge of the
Company, there is no event or condition which would reasonably be likely to
result in the revocation or non-issuance of any such favorable determination
letter. The Company has made available to Parent copies of the most recent (as
of the date of this Agreement) Internal Revenue Service determination letters
with respect to each such Employee Plan. Except as set forth in Section 4.16 of
the Company Disclosure Schedule, each Employee Plan has been maintained in
material compliance with its terms and with the requirements prescribed by any
and all statutes, orders, rules and regulations, including but not limited to
ERISA and the Code, which are applicable to such Employee Plan, with such
exceptions as would not be reasonably likely, individually or in the aggregate,
to have a Company Material Adverse Effect. Except as set forth in Section 4.16
of the Company Disclosure Schedule, no events have occurred with respect to any
Employee Plan that could result in payment or assessment by or against the
Company of any excise taxes under Sections 4972, 4975, 4976, 4977, 4979, 4980B,
4980D, 4980E or 5000 of the Code, with such exceptions as would not be
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
(e) Except as set forth in Section 4.16 of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not (either alone or together with any other event) entitle any employee
or independent contractor of the Company or any of its Subsidiaries to
severance pay or accelerate the time of payment or vesting or trigger any
payment of funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any Employee Plan.
(f) Except as set forth in Section 4.16 of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has any liability in
respect of post-retirement health, medical or life insurance benefits for
retired, former or current employees of the Company or its Subsidiaries except
as required to avoid excise tax under Section 4980B of the Code or as may be
required under other applicable law.
(g) Except as set forth in Section 4.16 of the Company Disclosure Schedule
or as otherwise contemplated by this Agreement, there has been no amendment to,
written interpretation or announcement (whether or not written) by the Company
or any of its Affiliates relating to, or change in employee participation or
coverage under, an Employee Plan which would increase materially the expense of
maintaining such Employee Plan above the level of the expense incurred in
respect thereof for the fiscal year ended immediately prior to the date of this
Agreement.
22
(h) Except as set forth in Section 4.16 of the Company Disclosure
Schedule, all contributions and payments required to be made under each
Employee Plan have been timely made or accrued in accordance with GAAP.
(i) Except as set forth in Section 4.16 of the Company Disclosure
Schedule, there is no action, suit, investigation, audit or proceeding pending
against or, to the knowledge of the Company, threatened against or involving,
any Employee Plan before any Governmental Authority with such exceptions as
would not be reasonably likely to have a Company Material Adverse Effect.
(j) Section 4.16 of the Company Disclosure Schedule sets forth each
material International Plan that is a defined benefit pension plan, except for
any International Plan that is a governmental, statutory or mandated plan. Each
such International Plan has been maintained in substantial compliance with its
terms and in substantial compliance with applicable laws and the requirements
of any trust deed under which each such International Plan was established,
except for such exceptions to the foregoing which, in the aggregate, would not
be reasonably likely to have a Company Material Adverse Effect.
Section 4.17. Intellectual Property. The Company and its Subsidiaries own
or possess adequate licenses or other rights to use all Intellectual Property
Rights necessary to conduct the business as currently conducted, except where
the failure to own or possess such licenses or rights has not had and would not
be reasonably likely to have a Company Material Adverse Effect. Except as set
forth in Section 4.17 of the Company Disclosure Schedule, to the knowledge of
the Company, none of the Company or any of its Subsidiaries has infringed,
misappropriated or otherwise violated any Intellectual Property Right of any
other Person, except for such infringements, misappropriations or violations
that, individually or in the aggregate, would not be reasonably likely to have
a Company Material Adverse Effect. Except as set forth in Section 4.17 of the
Company Disclosure Schedule or as would not be reasonably likely to have a
Company Material Adverse Effect, to the knowledge of the Company, no Person has
materially infringed, misappropriated or otherwise violated any material
Intellectual Property Right of the Company or its Subsidiaries. Section 4.17 of
the Company Disclosure Schedule contains a list as of the date of this
Agreement of all agreements pursuant to which the Company or any of its
Subsidiaries grants to a Third Party the right to use any of its Intellectual
Property Rights for purposes of manufacturing, distributing or selling products
and pursuant to which (x) the Company and its Subsidiaries reasonably expect to
receive annual payments of more than $500,000 or (y) the Company and its
Subsidiaries received payments of more than $500,000 during the fiscal year
ended March 1, 2003.
Section 4.18. Certain Contracts. Except as disclosed in the Current SEC
Documents, each contract or agreement to which the Company or any of its
Subsidiaries is a party or by which any of them is bound is in full force and
effect, and neither the Company nor any of its Subsidiaries, nor, to the
knowledge of the Company, any other party thereto, is in breach of, or default
under, any such
23
contract or agreement, and no event has occurred that with notice or passage of
time or both would constitute such a breach or default thereunder by the
Company or any of its Subsidiaries, or, to the knowledge of the Company, any
other party thereto, except for such failures to be in full force and effect
and such breaches and defaults which, in the aggregate, would not be reasonably
likely to have a Company Material Adverse Effect.
Section 4.19. Antitakeover Statutes And Rights Agreement. (a) The Company
has taken all action necessary to render the limitations contained in Section
203 of Delaware Law inapplicable to the Merger, this Agreement, the Voting
Agreement and the transactions contemplated hereby and thereby.
(b) The Company has taken all action necessary to render the Preferred
Stock Purchase Rights issued pursuant to the terms of the Rights Agreement
inapplicable to the Merger, this Agreement, the Voting Agreement and the
transactions contemplated hereby and thereby.
Section 4.20. Finder's Fees. Except for Rothschild Inc. and Bear, Stearns
& Co. Inc., copies of whose engagement agreements have been provided to Parent,
there is no investment banker, broker, finder or other intermediary that has
been retained by or is authorized to act on behalf of the Company or any of its
Subsidiaries who is entitled to any fee or commission from the Company or any
of its Subsidiaries in connection with the transactions contemplated by this
Agreement.
Section 4.21. Opinion of Financial Advisors. The Company has received the
opinions of Rothschild Inc. and Bear, Stearns & Co. Inc., financial advisors to
the Company, to the effect that, as of the date of this Agreement, the Merger
Consideration is fair to the Company's stockholders (other than Parent, Merger
Subsidiary, Harvey Sanders, the Harvey Sanders Grantor Retained Income Trust
and David Chu) from a financial point of view.
Section 4.22. Disclaimer of Other Representations and Warranties. EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE 4, THE COMPANY
MAKES NO OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AND THE
COMPANY HEREBY DISCLAIMS ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES, WHETHER
BY THE COMPANY, ANY SUBSIDIARY OF THE COMPANY, OR ANY OF THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OR ANY OTHER PERSON,
WITH RESPECT TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO PARENT, MERGER SUBSIDIARY, OR ANY
OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES,
OR ANY OTHER PERSON, OF ANY DOCUMENTATION OR OTHER INFORMATION BY THE COMPANY,
ANY SUBSIDIARY OF THE COMPANY, OR ANY OF THEIR RESPECTIVE
24
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES, OR ANY OTHER PERSON,
WITH RESPECT TO ANY OF THE FOREGOING.
Article 5
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that:
Section 5.01. Corporate Existence and Power. Each of Parent and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not be reasonably likely to have, individually or in the
aggregate, a Parent Material Adverse Effect. Parent has heretofore made
available to the Company true and complete copies of the certificate of
incorporation and bylaws of Parent and Merger Subsidiary as currently in
effect. Since the date of its incorporation, Merger Subsidiary has not engaged
in any activities other than in connection with or as contemplated by this
Agreement.
Section 5.02. Corporate Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement has been
duly executed and delivered by Parent and Merger Subsidiary and, assuming due
and valid authorization, execution and delivery of this Agreement by the
Company, constitutes a valid and binding obligation of Parent and Merger
Subsidiary enforceable against Parent and Merger Subsidiary in accordance with
its terms, except that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to the
enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
Section 5.03. Governmental Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby require no action by or in respect of, or filing with, any Governmental
Authority other than (i) the filing of a certificate of merger with respect to
the Merger with the Delaware Secretary of State, (ii) compliance with any
applicable requirements of the HSR Act, (iii) compliance with any applicable
requirements of the 1934 Act and the rules and regulations promulgated
thereunder and (iv) actions or filings, the failure of which to take or make
would not be reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect.
25
Section 5.04. Non-contravention. The execution, delivery and performance
by Parent and Merger Subsidiary of this Agreement and the consummation by
Parent and Merger Subsidiary of the transactions contemplated hereby do not and
will not (i) result in any violation or breach of any provision of the
certificate of incorporation or bylaws of Parent or Merger Subsidiary, (ii)
assuming compliance with the matters referred to in Section 5.03, result in a
violation or breach of any provision of any applicable law, statute, ordinance,
rule, regulation, judgment, injunction, order or decree, (iii) require any
consent or other action by any Person under, constitute a default under, or
cause or permit the termination, cancellation, acceleration or the loss of any
benefit to which Parent or any of its Subsidiaries is entitled under any
provision of any agreement or other instrument binding upon Parent or any of
its Subsidiaries or any governmental license, franchise, permit or other
similar authorization relating to, the assets or business of the Parent and its
Subsidiaries or (iv) result in the creation or imposition of any Lien on any
asset of the Parent or any of its Subsidiaries, except for such violations or
breaches referred to in clause (ii) and for such failures to obtain any such
consent or other action, defaults, terminations, cancellations, accelerations,
losses or Liens referred to in clauses (iii) and (iv) that would not be
reasonably likely to have, individually or in the aggregate, a Parent Material
Adverse Effect.
Section 5.05. Disclosure Documents. None of the information provided or to
be provided by Parent for inclusion in the Proxy Statement or any amendment or
supplement thereto, at the time the Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company and at the
time the stockholders vote on adoption of this Agreement, will contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
Section 5.06. Finders' Fees. Except for Citigroup Global Markets Inc. and
Financo, Inc., whose fees will be paid by Parent, there is no investment
banker, broker, finder or other intermediary that has been retained by or is
authorized to act on behalf of Parent who is entitled to any fee or commission
from the Company or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement.
Section 5.07. Financing. Parent will have at the Effective Time sufficient
funds available to enable it to consummate the transactions contemplated
hereby.
Section 5.08. Chu Purchase Agreement. The representations and warranties
of Parent contained in the Chu Purchase Agreement are true and correct in all
material respects. The Chu Purchase Agreement is in full force and effect.
26
Article 6
COVENANTS OF THE COMPANY
The Company agrees that:
Section 6.01. Conduct of the Company. Except as set forth in Section 6.01
of the Company Disclosure Schedule, from the date of this Agreement until the
Effective Time, the Company and its Subsidiaries shall conduct their business
in the ordinary course consistent with past practice and shall use reasonable
efforts to preserve intact their business organizations and relationships with
third parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, from the date of
this Agreement until the Effective Time, except as set forth in Section 6.01 of
the Company Disclosure Schedule or as contemplated by this Agreement:
(a) the Company shall not adopt or propose any change to its restated
certificate of incorporation or bylaws;
(b) the Company shall not, and shall not permit any of its Subsidiaries
to, merge or consolidate with any other Person, acquire a material amount of
assets of any other Person or acquire more than 30% of the outstanding capital
stock or other equity interests of any other Person; provided that in no event
shall the purchase price for any such acquisition of assets, capital stock or
other equity interests exceed $1 million for any such individual acquisition or
$5 million in the aggregate for all such acquisitions;
(c) the Company shall not, and shall not permit any of its Subsidiaries
to, sell, lease, license or otherwise dispose of any Significant Subsidiary or
any material amount of assets, securities or property except either (i)
pursuant to existing contracts or commitments or (ii) in the ordinary course
consistent with past practice;
(d) the Company shall not, and shall not permit any of its Subsidiaries
to, knowingly take any action that would make any representation and warranty
of the Company contained in Section 4.01, 4.04, 4.05, 4.06, 4.08, 4.09,
4.10(b), 4.10(d), 4.10(e), 4.10(h) or 4.19 inaccurate in any material respect
at, or as of any time prior to, the Effective Time; or
(e) the Company shall not, and shall not permit any of its Subsidiaries
to, agree or commit to do any of the foregoing.
Section 6.02. Stockholder Meeting; Proxy Material. The Company shall cause
a meeting of its stockholders (the "Company Stockholder Meeting") to be duly
called and held as soon as reasonably practicable following the clearance of
the Proxy Statement by the SEC for the purpose of voting on the approval and
adoption of this Agreement and the Merger. Subject to Section 6.03(b), the
Board of Directors of the Company shall recommend approval and adoption of this
27
Agreement and the Merger by the Company's stockholders. In connection with such
meeting, the Company shall (i) promptly prepare and file with the SEC, use
reasonable efforts to have cleared by the SEC and thereafter mail to its
stockholders as promptly as practicable the Proxy Statement and all other proxy
materials for such meeting, (ii) subject to Section 6.03(b), use reasonable
efforts to obtain the necessary approvals by its stockholders of this Agreement
and the transactions contemplated hereby (the "Company Stockholder Approval")
and (iii) otherwise comply with all legal requirements applicable to such
meeting.
Section 6.03. No Solicitation; Other Offers. (a) From and after the
execution of this Agreement by all of the parties hereto until the earlier of
the Effective Time and the termination of this Agreement pursuant to Article
10, neither the Company nor any of its Subsidiaries shall, and the Company and
its Subsidiaries shall instruct its or their officers, directors, employees,
investment bankers, attorneys, accountants, consultants or other agents or
advisors not to, directly or indirectly, (i) solicit, initiate or knowingly
take any action designed to facilitate the submission of any Acquisition
Proposal, (ii) engage in any discussions or negotiations with, or furnish any
nonpublic information relating to the Company or any of its Subsidiaries or
knowingly afford access to the business, properties, assets, books or records
of the Company or any of its Subsidiaries (other than such components of such
businesses, properties or assets that are generally accessible to the public)
to, any Third Party that to the knowledge of the Company is seeking to make, or
has made, an Acquisition Proposal, (iii) (A) amend or grant any waiver or
release under any standstill or similar agreement with respect to any class of
equity securities of the Company or any of its Subsidiaries, (B) amend or grant
any waiver or release or approve any transaction or redeem rights under the
Rights Agreement, (C) approve any transaction under Section 203 of Delaware Law
or (D) approve of any Person becoming an "interested stockholder" under Section
203 of Delaware Law and/or (iv) enter into any agreement with respect to an
Acquisition Proposal (other than a confidentiality agreement pursuant to
Section 6.03(b)(ii) or a Superior Proposal Agreement in accordance with Section
10.01(d)(ii)(B)).
(b) Notwithstanding the foregoing, the Board of Directors of the Company,
directly or indirectly through advisors, agents or other intermediaries, may,
in response to a bona fide Acquisition Proposal the Company's Board of
Directors determines in good faith is reasonably likely to result in a Superior
Proposal (provided such Acquisition Proposal is not received in violation of
Section 6.03(a)), (i) engage in negotiations or discussions with the Third
Party making such Acquisition Proposal, (ii) furnish to such Third Party
nonpublic information relating to, and afford access to the business,
properties, assets, books and records of, the Company or any of its
Subsidiaries pursuant to an appropriate confidentiality agreement (a copy of
which shall be provided for informational purposes only to Parent), (iii) fail
to make, withdraw or modify in a manner adverse to Parent its recommendation to
its stockholders referred to in Section 6.02, (iv) amend or grant any waiver
referred to in Section 6.03(a)(iii)(A), (v) take
28
any of the actions referred to in Section 6.03(a)(iii)(B)-(D), but only in
connection with entry into a Superior Proposal Agreement in accordance with
Section 10.01(d)(ii)(B) and/or (vi) enter into a Superior Proposal Agreement in
accordance with Section 10.01(d)(ii)(B). Nothing contained herein shall prevent
the Board of Directors of the Company from (i) taking any action that any court
of competent jurisdiction orders the Company to take, (ii) making with respect
to an Acquisition Proposal a "stop-look-and-listen" communication of the nature
contemplated in, and otherwise in compliance with, Rule 14d-9(f) under the 1934
Act as a result of receiving an Acquisition Proposal or (iii) with regard to an
Acquisition Proposal, complying with Rules 14e-2(a) or 14d-9 under the 1934 Act
or making such disclosure to the Company's stockholders as, in the good faith
judgment of the Company's Board of Directors, is necessary for the Company's
Board of Directors to comply with its fiduciary duties to the Company's
stockholders under applicable law. Unless this Agreement is previously
terminated in accordance with Article 10, the Company shall submit this
Agreement to its stockholders at the Company Stockholder Meeting, even if the
Board of Directors of the Company determines at any time after the date of this
Agreement that it is no longer advisable or recommends that the stockholders of
the Company reject it.
(c) The Board of Directors of the Company shall not take any of the
actions referred to in clauses (i) through (iv) of the first sentence of the
preceding subsection unless the Company delivers to Parent no later than
substantially contemporaneously with the taking of such action a written notice
advising Parent that it is taking (or will take) such action. In addition, the
Company shall notify Parent promptly (but in no event later than 48 hours)
after receipt by the Company (or any of its advisors) of any Acquisition
Proposal or of any request for information relating to the Company or any of
its Subsidiaries or for access to the business, properties, assets, books or
records of the Company or any of its Subsidiaries (other than such components
of such businesses, properties or assets that are generally accessible to the
public) by any Third Party that to the knowledge of the Company is seeking to
make, or has made, an Acquisition Proposal. The Company shall provide such
notice orally and in writing and shall identify the Third Party making, and the
material terms and conditions of, any such Acquisition Proposal, indication or
request. The Company shall keep Parent informed in all material respects, on a
prompt basis, of the status and material details of any such Acquisition
Proposal, indication or request. The Company shall, and shall cause its
Subsidiaries and the advisors, employees and other agents of the Company and
any of its Subsidiaries to, cease immediately and cause to be terminated any
and all existing activities, discussions or negotiations, if any, with any
Third Party conducted prior to the execution of this Agreement by all parties
hereto with respect to any Acquisition Proposal.
"Superior Proposal" means any bona fide, unsolicited written Acquisition
Proposal for at least a majority of the outstanding shares of Common Stock or
50% or more of the consolidated assets of the Company and its
29
Subsidiaries on terms that the Board of Directors of the Company determines in
good faith by a majority vote (excluding absent or abstaining directors), after
taking into account, among other things, all the terms and conditions of the
Acquisition Proposal, including any break-up fees, expense reimbursement
provisions and conditions to consummation, are more favorable and provide
greater value to the Company's stockholders in their capacity as such than as
provided hereunder and which the Board of Directors of the Company believes is
reasonably likely to be able to be consummated.
Section 6.04. Tax Matters. (a) Except as otherwise required by applicable
law or with the consent of Parent (which consent shall not be unreasonably
withheld or delayed), neither the Company nor any of its Subsidiaries shall
make or change any Tax election, change any annual Tax accounting period, adopt
or change any method of tax accounting, file any amended Tax Returns or claims
for Tax refunds, enter into any closing agreement with a Taxing Authority or
settle or compromise any Tax claim, audit or assessment if any such action or
omission, considered in the aggregate, would have the effect of materially
increasing the Tax liability or reducing any material Tax Asset of the Company
or any of its Subsidiaries.
(b) All transfer, documentary, sales, use, stamp, registration, value
added and similar Taxes and fees (including any penalties and interest) imposed
upon the Company or any of its Subsidiaries, or any of its stockholders, in
connection with the Merger (including any real property transfer tax and any
similar Tax) shall be paid by the Company when due, and the Company shall, at
its own expense, file all necessary Tax returns and other documentation with
respect to all such Taxes and fees, and, if required by applicable law, the
Company shall join in the execution of any such Tax returns and other
documentation.
Section 6.05. Access to Information. From the date of this Agreement until
the Effective Time, subject to applicable law, upon reasonable notice and
during normal business hours, the Company shall (i) give to Parent, its
counsel, financial advisors, auditors and other authorized representatives
reasonable access to the offices, properties, employees, books and records of
the Company and its Subsidiaries, (ii) furnish to Parent, its counsel,
financial advisors, auditors and other authorized representatives such
financial and operating data and other information as such Persons may
reasonably request and (iii) instruct its employees, counsel, financial
advisors, auditors and other authorized representatives to cooperate with
Parent in its investigation. Any investigation pursuant to this Section shall
be conducted in such manner as not to interfere unreasonably with the conduct
of the business of the Company and its Subsidiaries. No information or
knowledge obtained in any investigation pursuant to this Section shall affect
or be deemed to modify any representation or warranty made by any party
hereunder. In addition to and not in limitation of the foregoing, the Company
shall make available to Parent copies of each Internal Revenue Service
determination letter received after the date of this Agreement
30
with respect to any Employee Plan referred to in the first sentence of Section
4.16(d).
Section 6.06. Notices of Certain Events. The Company shall promptly notify
Parent of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any material notice or other material communication from any
Governmental Authority in connection with the transactions contemplated by this
Agreement; and
(c) any actions, suits, claims, investigations or proceedings commenced
or, to its knowledge, threatened against, relating to or involving or otherwise
affecting the Company or any of its Subsidiaries, as the case may be, that, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Sections 4.12, 4.13, 4.14 or 4.16, as the case may be, or
that relate to the consummation of the transactions contemplated by this
Agreement.
Section 6.07. Disclosure Schedule. On the date of this Agreement, the
Company has delivered to Parent a schedule (the "Company Disclosure Schedule"),
accompanied by a certificate signed by an authorized officer of the Company
stating the Company Disclosure Schedule is being delivered pursuant to this
Section 6.07. The Company Disclosure Schedule constitutes an integral part of
this Agreement. A matter set forth in one item of the Company Disclosure
Schedule need not be set forth in any other item of the Company Disclosure
Schedule so long as its relevance to the other sections or subsections of the
Company Disclosure Schedule or section of the Agreement is reasonably apparent
on the face of the information disclosed in the Company Disclosure Schedule.
The fact that any item of information is disclosed in the Company Disclosure
Schedule shall not be construed to mean that such information is required to be
disclosed by this Agreement. Such information and the dollar thresholds set
forth herein shall not be used as a basis for interpreting the terms "material"
or "Company Material Adverse Effect" or other similar terms in this Agreement.
Article 7
COVENANTS OF PARENT
Parent agrees that:
Section 7.01. Obligations of Merger Subsidiary. Parent shall take all
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
31
Section 7.02. Voting of Shares. Parent shall vote any shares of Common
Stock beneficially owned by it or any of its Subsidiaries in favor of adoption
of this Agreement at the Company Stockholder Meeting.
Section 7.03. Director and Officer Liability. Parent shall cause the
Surviving Corporation, and the Surviving Corporation hereby agrees, to do the
following:
(a) From and after the Effective Time, the Surviving Corporation shall,
and Parent shall cause the Surviving Corporation to, indemnify and hold
harmless any Person who is now, or has been at any time prior to the date of
this Agreement or who becomes such prior to the Effective Time, an officer or
director of the Company or any of its Subsidiaries (each, an "Indemnified
Person") from and against, and defend any Indemnified Person from and reimburse
any Indemnified Person for, (i) any and all losses, claims, damages, costs,
expenses (including reasonable attorneys' fees), fines, liabilities and
judgments and amounts that are paid in settlement arising out of or in
connection with any claim, action, suit, proceeding or investigation (A) to the
extent based on, or arising out of, the fact that such Person is or was a
director or officer of the Company or any of its Subsidiaries pertaining to any
action or omission existing or occurring at or prior to the Effective Time and
whether asserted or claimed prior to, at or after the Effective Time or (B) to
the extent based on, or arising out of, or pertaining to, (1) this Agreement or
the transactions contemplated hereby (including without limitation the Chu
Agreements) or (2) the Proxy Contest, and (ii) without limitation to clause
(i), to the fullest extent permitted by Delaware Law or any other applicable
laws or provided under the Company's restated certificate of incorporation and
bylaws in effect on the date of this Agreement; provided that such
indemnification shall be subject to any limitation imposed from time to time
under applicable law. The Surviving Corporation will, and the Parent will cause
the Surviving Corporation to, promptly advance all reasonable out-of-pocket
expenses (including reasonable attorneys' fees) of each Indemnified Person in
connection with any such claim, action, suit, investigation or proceeding with
respect to which such Indemnified Person is seeking indemnification hereunder
as such reasonable out-of-pocket expenses are incurred (subject to having
received an undertaking from such Indemnified Person to reimburse such expenses
if it is subsequently determined that the Indemnified Person is not entitled to
indemnification under applicable law). In addition, the Surviving Corporation
shall pay a per diem fee of $3,000 per day to each Specified Director, for each
day spent by such Specified Director in preparing for, traveling to,
cooperating or testifying in connection with, any claim, action, suit,
proceeding or investigation for which such Specified Director is required to be
indemnified pursuant to this Section 7.03(a) ("Proceedings Cooperation") (such
amount to be pro rated for any day on which less than eight hours is so spent),
but only after such Specified Director has engaged in Proceedings Cooperation
for a total of two days (or, if longer, 16 hours) in connection with any
Proceedings Cooperation after the date of this Agreement, provided that the
aggregate amount of per diem
32
fees payable hereunder to all Specified Directors shall not exceed $150,000.
Each of Israel Rosenzweig, Robert B. Banks, and Ronald G. Weiner shall
constitute "Specified Directors".
Parent shall be jointly and severally liable with the Surviving
Corporation for the performance of the Surviving Corporation's obligations
under this Section 7.03(a) and Section 7.03(b).
Upon receipt by an Indemnified Person of actual notice of a claim, action
or proceeding against such Indemnified Person in respect of which indemnity may
be sought pursuant to this Section 7.03(a), such Indemnified Person shall
promptly notify the Surviving Corporation with respect thereto. In addition, an
Indemnified Person shall promptly notify the Surviving Corporation after any
action is commenced (by way of service with a summons or other legal process
giving information as to the nature and basis of the claim) against such
Indemnified Person. In any event, failure so to notify the Surviving
Corporation shall not relieve the Surviving Corporation or Parent from any
liability which the Surviving Corporation or Parent may have on account of this
indemnity or otherwise, except to the extent the Surviving Corporation shall
have been materially prejudiced by such failure. The Surviving Corporation may,
at its election (such election to be made within 30 days of receipt of the
summons or other legal process referred to above), and, if requested by an
Indemnified Person, shall (within 30 days of receipt of a request thereto),
assume the defense of and control any litigation or proceeding in respect of
which indemnity may be sought hereunder (with, in the case of any litigation or
proceeding brought in federal or state court in the State of Delaware or the
State of New York, counsel of international stature having a principal office
in New York, and, in the case of any other litigation or proceeding, with
counsel of national stature), including the employment of counsel reasonably
satisfactory to the Indemnified Person and the payment of the fees and expenses
of such counsel, in which event, except as provided below, the Surviving
Corporation shall not be liable for the fees and expenses of any other counsel
retained by an Indemnified Person in connection with such litigation or
proceeding. The Indemnified Person may assume the defense of and control any
such litigation or proceeding in the event that the Surviving Corporation is
not in good faith pursuing the defense of such matter or if within the
applicable period specified in the immediately preceding sentence the Surviving
Corporation shall not assume the defense of such matter. In the case of any
proceeding or litigation the defense and control of which the Indemnified
Person shall have assumed in accordance with the immediately preceding sentence
(and in the case of clauses (i) and (ii) of the next succeeding sentence), (i)
the Indemnified Party may retain its own counsel, (ii) the Surviving
Corporation shall, and the Parent shall cause the Surviving Corporation to, pay
all reasonable fees and expenses of such counsel promptly after receipt of any
invoices with respect thereto (subject to having received an undertaking from
such Indemnified Person to reimburse such expenses if it is subsequently
determined that the Indemnified Person is not entitled to indemnification under
33
applicable law), and (iii) the Surviving Corporation shall use reasonable
efforts to assist in the defense of any such matter. In any such litigation or
proceeding the defense of which the Surviving Corporation shall have so assumed
and be pursuing in good faith, any Indemnified Person shall have the right to
participate in (but not control) such litigation or proceeding and to retain
its own counsel, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless (i) the Surviving Corporation and
such Indemnified Person shall have mutually agreed in writing to the retention
of such counsel or (ii) the named parties to any such litigation or proceeding
(including any impleaded parties) include the Surviving Corporation and such
Indemnified Person and representation of both parties by the same counsel
would, in the good faith opinion of counsel to the Surviving Corporation, be
inappropriate due to actual or potential differing interests between the
Surviving Corporation and such Indemnified Person. In any litigation or
proceeding of which the Surviving Corporation shall have assumed the defense,
the Surviving Corporation shall not settle such matter without the prior
written consent of the Indemnified Person (which consent shall not be
unreasonably withheld or delayed) and no Indemnified Person shall be required
to agree to settle such matter unless such settlement (x) includes an
unconditional release of such Indemnified Person from all liability arising out
of or in connection with such matter, (y) does not include any admission of
fault, culpability or a failure to act by, or on behalf of, such Indemnified
Person or payment of any money by such Indemnified Person and (z) does not
result in the imposition against such Indemnified Person of injunctive or other
equitable relief. The Surviving Corporation shall not be liable for any
settlement of any litigation or proceeding effected without its written consent
(which consent shall not be unreasonably withheld or delayed), but if settled
with such consent or if there be a final judgment for the plaintiff, the
Surviving Corporation agrees to indemnify the Indemnified Person from and
against any loss or liability by reason of such settlement or judgment;
provided that if the Surviving Corporation shall not have assumed and pursued
in good faith the defense of any litigation or proceeding, the Indemnified
Person may settle any such litigation or proceeding with the consent of the
Surviving Corporation, in which case the Surviving Corporation shall be liable
for such settlement and promptly indemnify the Indemnified Person from and
against any liability by reason of such settlement.
(b) For six years after the Effective Time, the Surviving Corporation
shall provide officers' and directors' liability insurance in respect of acts
or omissions occurring prior to the Effective Time covering each such
Indemnified Person currently covered by the Company's officers' and directors'
liability insurance policy on terms with respect to coverage and amount no less
favorable than those of such policy in effect on the date of this Agreement;
provided that, in satisfying its obligation under this Section 7.03(b), the
Surviving Corporation shall not be obligated to pay premiums in excess of 250%
of the annualized premium for such policy based on the rate thereof as of the
date of this Agreement, which amount Company has disclosed to Parent prior to
the date of
34
this Agreement. If, during such six-year period, such insurance coverage cannot
be obtained at all or can be obtained only for an amount in excess of 250% of
the Company's annual premium therefor, the Parent shall use its reasonable
efforts to cause to be obtained as much directors' and officers' liability
insurance coverage as can be obtained for an amount equal to 250% of the
Company's annual premium therefor in effect at the Effective Time, on terms and
conditions substantially similar to the Company's then existing directors' and
officers' liability insurance.
(c) If Parent, the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent or
the Surviving Corporation, as the case may be, shall assume all of the
obligations set forth in this Section 7.03.
(d) The rights of each Indemnified Person under this Section 7.03 shall be
in addition to any rights to indemnification and exculpation of personal
liability that such Person may have under the restated certificate of
incorporation or bylaws of the Company or the certificate of incorporation or
bylaws of any of its Subsidiaries, or under Delaware Law or any other
applicable laws or under any agreement of any Indemnified Person with the
Company or any of its Subsidiaries. These rights shall survive consummation of
the Merger and are intended to benefit, and shall be enforceable by, each
Indemnified Person, his or her heirs and his or her personal representatives.
Section 7.04. Parent Employee Matters.
(a) Parent shall cause the Surviving Corporation and/or any of its
Subsidiaries, as applicable, effective on and after the Effective Time, to
honor and assume and agree to perform the obligations of the Company or any of
its Subsidiaries under the Employee Plans and all employment, severance,
termination, change of control, consulting and collective bargaining agreements
to which the Company or any Subsidiary is a party, in each case, to the extent
the Company or any of its Subsidiaries would have been required to perform such
plan or agreement.
(b) Parent agrees that, for at least one year following the Effective
Time, subject to applicable law, Parent will provide, or cause to be provided,
to the individuals who are employees of the Company and its Subsidiaries as of
the Effective Time except employees covered by collective bargaining agreements
to which the Company or any Subsidiary of the Company is a party, with respect
to whom Section 7.04(a) shall apply (the "Transferred Employees") benefits
materially no less favorable in the aggregate than those currently provided by
the Company and its Subsidiaries to such employees or, at the election of
Parent,
35
materially no less favorable, in the aggregate than the benefits provided from
time to time to similarly situated employees of Parent and its Subsidiaries
(other than any stock option or other equity based incentive plan currently
provided by the Company), and Parent shall cause to be provided to any
Transferred Employee who is terminated during the one-year period following the
Effective Time, severance benefits no less favorable than those currently
provided to a similarly situated employee under any severance pay plan, policy,
arrangement or guideline of the Company or its Subsidiaries. Notwithstanding
the foregoing, nothing herein shall otherwise limit Parent's right to amend,
modify or terminate any Employee Plan or International Plan.
(c) Parent agrees that each employee of the Company will receive service
credit for all periods of employment with the Company and its Affiliates or any
predecessors thereto prior to the Effective Time for all purposes of
participation eligibility and vesting (other than for benefit accrual purposes)
under any employee benefit plan of Parent or its Affiliates in which such
employee participates after the Effective Time to the extent that such service
was recognized under any analogous plan of the Company or its Affiliates in
effect immediately prior to the Effective Time.
(d) For purposes of each new or existing employee benefit plan of Parent
or its Affiliates providing medical, dental, pharmaceutical or vision benefits
to any employee of the Company or its Subsidiaries, Parent or its Affiliates
shall cause all pre-existing condition exclusions and actively-at-work
requirements of such new or existing employee benefit plan of Parent or its
Affiliates to be waived for such employee and his or her covered dependents, to
the extent such exclusions were not applicable or requirements were waived
under the corresponding Employee Plan, and Parent or its Affiliates shall cause
any eligible expenses incurred by such employee and his or her covered
dependents during the portion of the plan year of the Employee Plan ending on
the date such employee's participation in the corresponding new or existing
employee benefit plan of Parent or its Affiliates begins to be taken into
account under such new or existing employee benefit plan of Parent or its
Affiliates for purposes of satisfying all deductible, coinsurance and maximum
out-of-pocket requirements applicable to such employee and/or his or her
covered dependents for the applicable plan year as if such amounts had been
paid in accordance with such new or existing employee benefit plan.
(e) Nothing in this Section 7.04 will be or be deemed to be for the
benefit of or enforceable by, any person who is not a party hereto, including,
without limitation, any employee of the Company, the Surviving Corporation or
any of their respective Affiliates or shall be deemed to limit the Surviving
Corporation's or its Affiliates' ability to modify or eliminate any Employee
Plan or International Plan.
36
Article 8
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
Section 8.01. Reasonable Efforts. (a) Subject to the terms and conditions
of this Agreement, Company and Parent shall use reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement, including (i)
preparing and filing as promptly as practicable with any Governmental Authority
or other third party all documentation to effect all necessary filings,
notices, petitions, statements, registrations, submissions of information,
applications and other documents, (ii) obtaining and maintaining all approvals,
consents, registrations, permits, authorizations and other confirmations
required to be obtained from any Governmental Authority that are necessary,
proper or advisable to consummate the transactions contemplated by this
Agreement and (iii) using all reasonable efforts to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby and using all
reasonable efforts to defend any litigation seeking to enjoin, prevent or delay
the consummation of the transactions contemplated hereby or seeking material
damages in connection with this Agreement or the transactions contemplated
hereby.
(b) In furtherance and not in limitation of the foregoing, each of (i)
Parent and the Company shall make an appropriate filing of a Notification and
Report Form pursuant to the HSR Act with respect to the transactions
contemplated hereby as promptly as practicable and in any event within ten
Business Days after the date of this Agreement and to supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the HSR Act and to take all other actions necessary to
cause the expiration or termination of the applicable waiting periods under the
HSR Act as soon as practicable and (ii) Parent, Merger Subsidiary and the
Company shall use reasonable efforts to satisfy the conditions to such party's
obligations to consummate the transactions contemplated by this Agreement.
Section 8.02. Certain Filings. The Company and Parent shall cooperate with
one another (i) in connection with the preparation of the Proxy Statement, (ii)
in determining whether any action by or in respect of, or filing with, any
Governmental Authority is required in connection with the consummation of the
transactions contemplated by this Agreement and (iii) in taking such actions or
making any such filings, furnishing information required in connection
therewith or with the Proxy Statement and seeking to timely obtain any consents
and approvals listed in Section 4.04(iii) of the Company Disclosure Schedule.
Section 8.03. Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or making any other
37
public statement with respect to this Agreement or the transactions
contemplated hereby and, except as may be required by applicable law, order of
a court of competent jurisdiction or any listing agreement with or rule of any
national securities exchange or Nasdaq, shall not issue any such press release
or make any such other public statement without the consent of the other party
(which consent shall not be unreasonably withheld or delayed).
Section 8.04. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under
any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
Section 8.05. Confidentiality. Prior to the Effective Time and after any
termination of this Agreement, each of Parent and the Company shall hold, and
shall use its reasonable efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
other party furnished to it or its Affiliates in connection with the
transactions contemplated by this Agreement, except to the extent that such
information can be shown to have been (i) previously known on a
non-confidential basis by such party from a source other than the other party
or its Subsidiaries or their advisors, provided that to such party's knowledge
such source was not prohibited from disclosing such information to such party
by a contractual, legal or fiduciary obligation to the other party or its
Subsidiaries or their advisors, (ii) in the public domain through no fault of
such party or (iii) later lawfully acquired by such party on a non-confidential
basis from sources other than the other party or its Subsidiaries or their
advisors, provided that to such party's knowledge, after due inquiry, such
source is not prohibited from disclosing such information to such party by a
contractual, legal or fiduciary obligation to the other party or its
Subsidiaries or their advisors; provided that each of Parent and the Company
may disclose such information to its officers, directors, employees,
accountants, counsel, consultants, advisors and agents in connection with the
transactions contemplated by this Agreement so long as such party informs such
Persons of the confidential nature of such information and directs them to
treat it confidentially. Notwithstanding any other provision of this Agreement,
each of Parent and the Company may disclose the tax treatment and tax structure
of the transactions contemplated by this Agreement (including any materials,
opinions or analyses relating to such tax treatment or tax structure, but
without disclosure of identifying information or, except to the extent relating
to such tax structure or tax treatment, any nonpublic commercial or financial
information, except as
38
otherwise required by applicable securities laws). Moreover, notwithstanding
any other provision of this Agreement, there shall be no limitation on Parent's
or the Company's ability to consult any tax adviser, whether or not independent
from Parent, Company or their respective Affiliates, regarding the tax
treatment or tax structure of the transactions contemplated by this Agreement.
Each of Parent and the Company shall satisfy its obligation to hold any such
information in confidence if it exercises the same care with respect to such
information as it would take to preserve the confidentiality of its own similar
information. If this Agreement is terminated, each of Parent and the Company
shall, and shall use its reasonable efforts to cause its officers, directors,
employees, accountants, counsel, consultants, advisors and agents to, destroy
or deliver to the other party, upon request, all documents and other materials,
and all copies thereof, that it or its Affiliates obtained, or that were
obtained on their behalf, from the other party in connection with this
Agreement and that are subject to such confidence.
Section 8.06. Chu Purchase Agreement. Prior to the Effective Time, Parent
shall (a) use its reasonable efforts to consummate the "Closing" under and as
defined in the Chu Purchase Agreement (including using reasonable efforts to
seek specific enforcement thereof), (b) perform its obligations (including any
obligation to make payments) under the Chu Purchase Agreement in all respects
in strict compliance therewith, (c) not amend the Chu Purchase Agreement in any
respect, (d) not terminate the Chu Purchase Agreement, (e) promptly send to the
Company a copy of any notice received in connection with the Chu Purchase
Agreement and the transactions contemplated thereby and (f) promptly notify the
Company of any significant developments relating to the Chu Purchase Agreement
and the transactions contemplated thereby.
Article 9
CONDITIONS TO THE MERGER
Section 9.01. Conditions to Obligations of Each Party. The obligations of
the Company, Parent and Merger Subsidiary to consummate the Merger are subject
to the satisfaction or waiver (to the extent permitted by applicable law) of
the following conditions:
(a) this Agreement shall have been approved and adopted by the
stockholders of the Company in accordance with Delaware Law;
(b) no provision of any applicable law or regulation and no judgment,
injunction, order or decree of a court of competent jurisdiction shall prohibit
the consummation of the Merger;
(c) any applicable waiting period under the HSR Act relating to the Merger
shall have expired or been terminated; and
39
(d) all actions by or in respect of, or filings with, any Governmental
Authority required to permit the consummation of the Merger, the failure to
obtain which would be reasonably likely, individually or in the aggregate, to
have a Company Material Adverse Effect or a Parent Material Adverse Effect,
shall have been taken, made or obtained.
Section 9.02. Conditions to the Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction or waiver (to the extent permitted by
applicable law) of the following further conditions:
(a) (i) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) the representations and warranties of the Company
contained in this Agreement and in any certificate or other writing delivered
by the Company pursuant hereto shall be true in all material respects at and as
of the Effective Time as if made at and as of such time (except to the extent a
representation or warranty is expressly made as of a time other than the
Effective Time, in which case such representation or warranty shall be true in
all material respects at and as of such time); provided, however, that any such
representation or warranty that is qualified by any standard of materiality or
Company Material Adverse Effect shall be true in all respects in the form
written and (iii) Parent shall have received a certificate signed by an
executive officer of the Company to the foregoing effect;
(b) there shall not have been instituted or pending any action or
proceeding (or any investigation or other inquiry that is reasonably likely to
result in such action or proceeding) by the United States Federal Trade
Commission or the United States Department of Justice before any court or
Governmental Authority (i) challenging or seeking to make illegal, to delay
materially or otherwise directly or indirectly to restrain or prohibit the
consummation of the Merger or seeking to obtain material damages, (ii) seeking
to restrain or prohibit Parent's ownership or operation (or that of its
respective Subsidiaries or Affiliates) of all or any material portion of the
business or assets of the Company and its Subsidiaries, taken as a whole, or of
Parent and its Subsidiaries, taken as a whole, or to compel Parent or any of
its Subsidiaries or Affiliates to dispose of or hold separate all or any
material portion of the business or assets of the Company and its Subsidiaries,
taken as a whole, or of Parent and its Subsidiaries, taken as a whole, or (iii)
that otherwise is reasonably likely to have a Company Material Adverse Effect
or Parent Material Adverse Effect; provided that Parent shall have used its
reasonable efforts to challenge such action or proceeding (or investigation or
other inquiry);
(c) there shall not have been after the date of this Agreement any federal
or state statute enacted, enforced or promulgated by any government or
governmental authority or agency of the United States or any state in which
either Parent, the Company or their respective Subsidiaries conducts a material
amount
40
of business that, in the reasonable judgment of Parent, is likely, directly or
indirectly, to result in any of the consequences referred to in clauses (i)
through (iii) of paragraph (b) above;
(d) Parent shall have received all documents it may reasonably request
relating to the existence of the Company and its Significant Subsidiaries and
the authority of the Company to enter into and perform this Agreement, all in
form and substance reasonably satisfactory to Parent;
(e) the holders of not more than 12.5% of the outstanding shares of Common
Stock shall have demanded appraisal of their shares in accordance with Delaware
Law; and
(f) the transactions contemplated by the Chu Purchase Agreement to be
consummated at the "Closing" thereunder shall have been consummated or shall be
consummated substantially contemporaneously with the Effective Time; provided
that this clause (f) shall not apply if Parent shall have refused to consummate
such "Closing" in breach of its obligation to do so under the Chu Purchase
Agreement.
Section 9.03. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver (to the extent permitted by applicable law) of the
following further conditions:
(a) (i) each of Parent and Merger Subsidiary shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Effective Time, (ii) the representations and warranties
of Parent and Merger Subsidiary contained in this Agreement and in any
certificate or other writing delivered by Parent or Merger Subsidiary pursuant
hereto, shall be true in all material respects at and as of the Effective Time
as if made at and as of such time (except to the extent a representation or
warranty is expressly made as of a time other than the Effective Time, in which
case such representation or warranty shall be true in all material respects at
and as of such time); provided, however that any such representation or
warranty that is qualified by any standard of materiality or Parent Material
Adverse Effect shall be true in all respects in the form written and (iii) the
Company shall have received a certificate signed by an executive officer of the
Parent and the Merger Subsidiary to the foregoing effect; and
(b) the Company shall have received all documents it may reasonably
request relating to the existence of Parent and Merger Subsidiary and the
authority of Parent and Merger Subsidiary to enter into and perform this
Agreement, all in form and substance reasonably satisfactory to Company.
41
Article 10
TERMINATION
Section 10.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the stockholders of the
Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Merger has not been consummated on or before February 7, 2004
(the "End Date");
(ii) (A) there shall be any United States law or regulation that
makes consummation of the Merger illegal or otherwise prohibited or (B)
any judgment, injunction, order or decree of any court or governmental
body having competent jurisdiction enjoining the Company, Merger
Subsidiary or Parent from consummating the Merger is entered and such
judgment, injunction, judgment or order shall have become final and
nonappealable; provided that the party seeking to terminate this Agreement
pursuant to this clause (b)(ii)(B) shall have used its reasonable efforts
to challenge such judgment, injunction, order or decree; or
(iii) this Agreement shall not have been approved and adopted in
accordance with Delaware Law by the Company's stockholders at the Company
Stockholder Meeting (or any postponement or adjournment thereof);
(c) by Parent, if:
(i) at any time prior to the adoption and approval of this Agreement
by the Company's stockholders, the Board of Directors of the Company shall
have (A) failed to make or withdrawn, or modified in a manner adverse to
Parent, its approval or recommendation of this Agreement or the Merger,
(B) approved, recommended or endorsed any Acquisition Proposal or (C)
failed to call the Company Stockholder Meeting in accordance with Section
6.02;
(ii) a breach of any representation or warranty or failure to perform
any covenant or agreement on the part of the Company set forth in this
Agreement shall have occurred that would cause the condition set forth in
Section 9.02(a) not to be satisfied, and such condition is incapable of
being satisfied by the End Date; or
42
(iii) the Company shall have knowingly, willfully and materially
breached any of its obligations under Section 6.02 or 6.03; or
(d) by the Company, if:
(i) a breach of any representation or warranty or failure to perform
any covenant or agreement on the part of the Parent or Merger Subsidiary
set forth in this Agreement shall have occurred that would cause the
condition set forth in Section 9.03(a) not to be satisfied, and such
condition is incapable of being satisfied by the End Date; or
(ii) (A) the Board of Directors of the Company authorizes the
Company, subject to complying with the terms of this Agreement, to enter
into a binding written agreement concerning a transaction that constitutes
a Superior Proposal (a "Superior Proposal Agreement") and the Company
notifies Parent, in writing and at least 48 hours prior to such
termination (which notice need only be given once with respect to any
Acquisition Proposal or amendment thereto), promptly of its intention to
enter into such a Superior Proposal Agreement, attaching the most current
draft of such Superior Proposal Agreement (or a description of all
material terms and conditions thereof), and (B) Parent does not make,
within 48 hours of receipt of such written notification, an offer that the
Board of Directors of the Company determines in good faith, is at least as
favorable to the stockholders of the Company as such Superior Proposal (it
being understood and agreed that (1) the Company shall not enter into any
such Superior Proposal Agreement during the first 36 hours of such 48-hour
period and (2) the Company may enter into any such Superior Proposal
Agreement during the last 12 hours of such 48-hour period, provided that
any such Superior Proposal Agreement entered into during such 12-hour
period shall provide that it shall terminate upon an offer by Parent that
the Board of Directors of the Company determines in good faith is at least
as favorable to the stockholders of the Company as such Superior Proposal)
and (C) the Company substantially simultaneously with such termination
pursuant to this clause 10.01(d)(ii) pays to Parent in immediately
available funds the amounts required to be paid pursuant to Sections
11.04(b). The Company agrees to notify Parent promptly if its intention to
enter into a written agreement referred to in its notification shall
change at any time after giving such notification.
The party desiring to terminate this Agreement pursuant to this Section 10.01
(other than pursuant to Section 10.01(a)) shall give notice of such termination
to the other party.
Section 10.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 10.01, this Agreement shall become void and of no effect
without liability of any party (or any stockholder, director, officer,
employee, agent, consultant or representative of such party) to the other party
hereto;
43
provided that, if such termination shall result from the willful failure of
either party to perform in all material respects any of its covenants contained
in this Agreement, such party shall be fully liable for any and all liabilities
and damages incurred or suffered by the other party as a result of such
failure. The provisions of this Section 10.02 and Sections 8.05, 11.04, 11.05,
11.06, 11.07, 11.08, 11.09, 11.10 and 11.11 shall survive any termination
hereof pursuant to Section 10.01.
Article 11
MISCELLANEOUS
Section 11.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission and
electronic mail ("e-mail") transmission, so long as a receipt of such e-mail is
requested and received) and shall be given,
if to Parent or Merger Subsidiary, to:
VF Corporation
105 Corporate Center Boulevard
Greensboro, NC 27408
Attention: Candace Cummings
Facsimile No.: (336) 424-7696
E-mail: candace_cummings@vfc.com
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: George R. Bason, Jr.
Facsimile No.: (212) 450-3340
E-mail: bason@dpw.com
if to the Company, to:
Nautica Enterprises, Inc.
40 West 57th Street
7th Floor
New York, NY 10019
Attention: Mr. Harvey Sanders
Facsimile No.: (212) 632-4353
E-mail: harvey.sanders@nautica.com
44
with a copy to:
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, NY 10004
Attention: Kenneth A. Lefkowitz
Facsimile No.: (212) 422-4726
E-mail: lefkowit@hugheshubbard.com
or to 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 5:00 p.m. on a
Business Day in the place of receipt. Otherwise, any such notice, request or
communication shall be deemed to have been received on the next succeeding
Business Day in the place of receipt.
Section 11.02. Nonsurvival of Representations and Warranties. The
representations, warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time, except that the agreements set forth in Article 2 and Article 3
and Sections 7.03, 7.04, 8.04, 11.05, 11.06, 11.07, 11.08, 11.09, 11.10, 11.11
and 11.12 shall survive the Effective Time and remain in effect in accordance
with their respective terms.
Section 11.03. Amendments and Waivers. (a) Subject to applicable law, any
provision of this Agreement may be amended or waived prior to the Effective
Time whether before or after any vote of the stockholders of the Company
contemplated hereby if, but only if, such amendment or waiver is in writing and
is signed, in the case of an amendment, by each party to this Agreement or, in
the case of a waiver, by each party against whom the waiver is to be effective;
provided that, after the adoption of this Agreement by the stockholders of the
Company and without their further approval, no such amendment or waiver shall
reduce the amount or change the kind of consideration to be received in
exchange for the shares of Common Stock or effect any other change not
permitted by Section 251(d) of Delaware Law.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 11.04. Expenses. (a) Except as otherwise provided herein, all
costs and expenses incurred in connection with this Agreement shall be paid by
the party incurring such cost or expense. Notwithstanding the foregoing, Parent
and the Company each shall pay 50% of any fees and expenses, other than
attorneys' and accounting fees and expenses, incurred in respect of the
printing,
45
filing and mailing of the Proxy Statement and any amendments or
supplements thereto.
(b) If a Payment Event (as hereinafter defined) occurs, the Company shall
pay Parent (by wire transfer of immediately available funds) a fee of $18
million (i) if pursuant to (x) or (z) below within two Business Days of the
occurrence of such Payment Event or, (ii) if pursuant to (y) below,
substantially simultaneously with the occurrence of such Payment Event.
"Payment Event" means (x) the termination of this Agreement pursuant to
(1) Section 10.01(c)(i) or (2) Section 10.01(c)(iii) (based on a willful,
knowing and material breach by the Company of its obligations under Section
6.02 or 6.03), (y) the termination of this Agreement pursuant to Section
10.01(d)(ii) or (z) the consummation of any of the transactions described in
clauses (A) through (D) within 8 months of the termination of this Agreement
pursuant to Sections 10.01(b)(i) (except for any such termination following a
refusal by Parent to consummate the Merger based solely on the failure of the
condition specified in Section 9.02(a)(ii) or 9.02(d) to be fulfilled) or
10.01(b)(iii) if prior to such termination (or, in the case of a termination
pursuant to Section 10.01(b)(iii), prior to the Company Stockholder Meeting),
there shall have been made a bona fide Acquisition Proposal pursuant to which
stockholders of the Company would receive cash, securities or other
consideration having an aggregate value, when taken together with the value of
any securities of the Company or its Subsidiaries otherwise held by such
stockholders after such event, in excess of $17.00 per share of Common Stock
and which bona fide Acquisition Proposal shall have been outstanding at the
time of such termination (or, in the case of a termination pursuant to Section
10.01(b)(iii), at the time of the Company Stockholder Meeting): (A) the Company
merges with or into, or is acquired, directly or indirectly, by merger or
otherwise by, a Third Party; (B) a Third Party, directly or indirectly,
acquires more than 50% of the total assets of the Company and its Subsidiaries,
taken as a whole; (C) a Third Party, directly or indirectly, acquires more than
50% of the outstanding shares of Common Stock; or (D) the Company adopts or
implements a plan of liquidation, recapitalization or share repurchase relating
to more than 50% of the outstanding shares of Common Stock or an extraordinary
dividend relating to more than 50% of such outstanding shares or 50% of the
assets of the Company and its Subsidiaries, taken as a whole, provided that no
Payment Event shall be considered to have occurred as described in this clause
(z) unless in connection with the transaction described in clauses (A), (B),
(C) or (D) the stockholders of the Company shall have received, within 8 months
of such termination of this Agreement, cash, securities or other consideration
having an aggregate value, when taken together with the value of any securities
of the Company or its Subsidiaries otherwise held by such stockholders after
such event, in excess of $17.00 per share of Common Stock.
(c) The Company acknowledges that the agreements contained in this Section
11.04 are an integral part of the transactions contemplated by this Agreement
and that, without these agreements, Parent and Merger Subsidiary
46
would not enter into this Agreement. Accordingly, if the Company fails promptly
to pay any amount due to Parent pursuant to this Section 11.04, it shall also
pay any costs and expenses incurred by Parent or Merger Subsidiary in
connection with a legal action to enforce this Agreement that results in a
judgment against the Company for such amount.
(d) Parent and Merger Subsidiary agree that the payment set forth in
Section 11.04(b), if such payment is payable and is actually paid, shall be the
sole and exclusive remedy of Parent and Merger Subsidiary upon a termination of
this Agreement pursuant to Sections 10.01(b)(i), 10.01(b)(iii), 10.01(c)(i),
10.01(c)(iii) or 10.01(d)(ii), and such remedy shall be limited to the sum
stipulated in Section 11.04(b), regardless of the circumstances giving rise to
such termination.
Section 11.05. Binding Effect; Benefit; Assignment. (a) The provisions of
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. No provision of
this Agreement is intended to confer any rights, benefits, remedies,
obligations or liabilities hereunder upon any Person other than the parties
hereto and their respective successors and assigns, except that the parties
hereto agree and acknowledge that the agreements and covenants contained in
Section 7.03 are intended for the direct and irrevocable benefit of the
Indemnified Persons described therein and their respective heirs or legal
representatives (each, a "Third Party Beneficiary"), and that each such Third
Party Beneficiary, although not a party to this Agreement, shall be and is a
direct and irrevocable third party beneficiary of such agreements and covenants
and shall have the right to enforce such agreements and covenants against the
Surviving Corporation and Parent in all respects fully and to the same extent
as if such Third Party Beneficiary were a party hereto.
(b) No party may assign, delegate or otherwise transfer any of its rights
or obligations under this Agreement without the consent of each other party
hereto, except that Parent or Merger Subsidiary may transfer or assign, in
whole or from time to time in part, to one or more of their Affiliates, the
right to enter into the transactions contemplated by this Agreement, but any
such transfer or assignment shall not relieve Parent or Merger Subsidiary of
its obligations hereunder. Any attempted assignment in violation of this
Section shall be null and void and shall have no effect.
Section 11.06. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflicts of law rules of such state.
Section 11.07. Jurisdiction. The parties hereto agree that any suit,
action or proceeding seeking to enforce any provision of, or based on any
matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be exclusively brought in any federal court located
in the State of Delaware or any Delaware state court, and each of the parties
hereby irrevocably
47
consents to the jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and irrevocably
waives, to the fullest extent permitted by law, any objection that it may now
or hereafter have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. Process in
any such suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court. Without
limiting the foregoing, each party agrees that service of process on such party
as provided in Section 11.01 shall be deemed effective service of process on
such party.
Section 11.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 11.09. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by all of the other parties hereto.
Section 11.10. Entire Agreement. This Agreement (including the documents
and instruments referred to herein) and, subject to the immediately following
sentence, the Confidentiality Agreement dated May 27, 2003 between the Company
and Parent constitute the entire agreement between the parties with respect to
the subject matter of this Agreement and supersedes all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter of this Agreement. The Company and Parent hereby agree that
paragraphs 1, 3 (but only the first sentence thereof), 8, 9, 11, 12, 13 and 16
of such Confidentiality Agreement are terminated, and shall be of no further
force and effect, effective immediately.
Section 11.11. Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
Section 11.12. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that
48
the transactions contemplated hereby be consummated as originally contemplated
to the fullest extent possible.
49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
NAUTICA ENTERPRISES, INC.
By: /s/ Harvey Sanders
---------------------------------
Name: Harvey Sanders
Title: President and Chief
Executive Officer
VF CORPORATION
By: /s/ Mackey J. McDonald
---------------------------------
Name: Mackey J. McDonald
Title: Chairman, President & CEO
VOYAGER ACQUISITION CORPORATION
By: /s/ Candace S. Cummings
---------------------------------
Name: Candace S. Cummings
Title: Vice President