EXHIBIT 2.0
AGREEMENT AND PLAN OF MERGER
AMONG
WOOLWORTH CORPORATION,
East Acquisition Corporation
AND
EASTBAY, INC.
DATED AS OF NOVEMBER 30, 1996
Table of Contents
Heading Page
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ARTICLE I
THE MERGER
1.1 The Merger............................................ 1
1.2 Effective Time of the Merger.......................... 1
1.3 Effects of the Merger................................. 2
1.4 Articles of Incorporation............................. 2
1.5 By-Laws............................................... 2
1.6 Directors............................................. 2
1.7 Officers.............................................. 2
ARTICLE II
CONVERSION OF SHARES
2.1 Conversion of Shares.................................. 3
2.2 Exchange of Certificates.............................. 3
2.3 Closing of Company Transfer Books..................... 4
2.4 Dissenting Shares..................................... 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
3.1 (a) Corporate Organization........................... 5
3.2 Authorization......................................... 5
3.3 Consents and Approvals; No Violations................. 6
3.4 Capitalization........................................ 7
3.5 Subsidiaries.......................................... 8
3.6 SEC Reports........................................... 8
3.7 Financial Statements.................................. 8
3.8 Absence of Undisclosed Liabilities.................... 9
3.9 Absence of Material Adverse Change.................... 10
3.10 Legal Proceedings, etc. .............................. 10
3.11 Compliance with Applicable Law........................ 10
3.12 Proxy Statement....................................... 11
3.13 Intellectual Property................................. 11
3.14 Brokers and Finders................................... 11
3.15 Contracts and Leases.................................. 12
3.16 Inventory............................................. 12
3.17 Taxes................................................. 13
3.18 Employee Benefit Plans; ERISA......................... 14
3.19 Certain Interests..................................... 17
3.20 Employees............................................. 17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
4.1 Corporate Organization................................ 17
4.2 Authorization......................................... 18
4.3 Consents and Approvals; No Violations................. 18
4.4 Proxy Statement....................................... 19
4.5 Brokers and Finders................................... 19
ARTICLE V
CONDUCT OF THE COMPANY'S BUSINESS
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Properties and Records...................... 22
6.2 Proxy Statement....................................... 23
6.3 Stockholder Approval.................................. 23
6.4 Stock Option and Other Plans.......................... 24
6.5 Reasonable Best Efforts; etc. ........................ 25
6.6 HSR Act............................................... 25
6.7 Material Events....................................... 25
6.8 Public Announcements.................................. 26
6.9 Indemnification....................................... 26
6.10 Update Disclosure..................................... 26
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ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 Conditions to Each Party's Obligation
to Effect the Merger................................. 27
7.2 Conditions to the Obligation of the
Company to Effect the Merger......................... 27
7.3 Conditions to Obligations of Parent
and Sub to Effect the Merger......................... 28
ARTICLE VIII
CLOSING
8.1 Time and Place........................................ 29
8.2 Deliveries at the Closing............................. 29
ARTICLE IX
TERMINATION AND ABANDONMENT
9.1 Termination............................................ 29
9.2 Effect of Termination.................................. 30
ARTICLE X
MISCELLANEOUS
10.1 Expenses; Fees....................................... 31
10.2 No Survival of Representations and
Warranties.......................................... 31
10.3 Headings............................................. 32
10.4 Notices.............................................. 32
10.5 Assignment........................................... 33
10.6 Complete Agreement................................... 33
10.7 Modifications, Amendments and Waivers................ 33
10.8 Counterparts......................................... 34
10.9 Governing Law........................................ 34
10.10 Accounting Terms..................................... 34
10.11 Parties in Interest.................................. 34
10.12 Severability......................................... 34
10.13 Definitions.......................................... 34
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of November
30, 1996, among Woolworth Corporation, a New York corporation ("Parent"), East
Acquisition Corporation, a Wisconsin corporation and an indirect wholly owned
subsidiary of Parent ("Sub"), and Eastbay, Inc., a Wisconsin corporation (the
"Company").
WHEREAS, the Boards of Directors of Parent, Sub and the Company have
approved the acquisition of the Company by Parent pursuant to this Agreement;
and
WHEREAS, the Boards of Directors of the Parent, Sub and the Company
have approved the merger of Sub with and into the Company (the "Merger"), upon
the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements, herein contained, and intending to
be legally bound hereby, Parent, Sub and the Company agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2),
Sub shall be merged with and into the Company (the "Merger") and the separate
existence of Sub shall thereupon cease, with the Company being the surviving
corporation in the Merger (the "Surviving Corporation").
1.2 Effective Time of the Merger. The Merger shall become effective
on the later of (a) the date the Department of Financial Institutions of the
State of Wisconsin (the "Department of State") receives for filing the articles
of merger in accordance with Section 180.0120 of the Business Corporation Law of
the State of Wisconsin (the "Wisconsin Corporation Law") or (b) the effective
date specified in such articles of merger. The articles of merger shall be
delivered by the Company and Sub to the Department of State as soon as
practicable
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before the closing of the Merger contemplated by this Agreement in accordance
with Section 8.1. As used in this Agreement, the term "Effective Time" shall
mean the date and time at which such articles become effective as specified
above.
1.3 Effects of the Merger. The Merger shall have the effects set
forth in Section 180.1106 of the Wisconsin Corporation Law. As of the Effective
Time, the Company shall be an indirect wholly owned subsidiary of the Parent.
1.4 Articles of Incorporation. The Articles of Incorporation of Sub,
as in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation, except that Article First thereof
shall be amended to read as follows:
"FIRST: The name of the Corporation is Eastbay, Inc."
and thereafter may be amended in accordance with its terms and as provided by
law.
1.5 By-Laws. The By-Laws of Sub as in effect immediately prior to
the Effective Time shall be the By-Laws of the Surviving Corporation.
1.6 Directors. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, who shall
serve until their respective successors are duly elected and qualified in the
manner provided in the Articles of Incorporation and By-Laws of the Surviving
Corporation, or as otherwise provided by law.
1.7 Officers. The officers of the Surviving Corporation shall
initially consist of the officers of the Company immediately prior to the
Effective Time, until their successors are duly elected and qualified in the
manner provided in the Articles of Incorporation and By-Laws of the Surviving
Corporation, or as otherwise provided by law.
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ARTICLE II
CONVERSION OF SHARES
2.1 Conversion of Shares. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder thereof:
(a) All Shares (as defined below) which are held by the Company,
any subsidiary of the Company, Parent, Sub or any other subsidiary of Parent,
shall be cancelled and retired and shall cease to exist.
(b) All issued and outstanding shares of capital stock of Sub
shall be converted into an aggregate of 1,000 validly issued, fully paid and
nonassessable shares of Common Stock of the Surviving Corporation.
(c) Except as provided in the next sentence, each remaining
outstanding share of Common Stock, $.01 par value ("Shares"), of the Company,
other than Dissenting Shares (as hereinafter defined), if applicable, shall be
converted into the right to receive $24.00 in cash, without any interest
thereon. Each Share held by Arthur H. Juedes, Richard C. Gering and Harry H.
Colcord shall be entitled to receive $22.00 in cash and, if certain earnings (as
defined in the applicable agreements with such shareholders) are achieved,
contingent consideration of up to an additional $1.75 in cash.
2.2 Exchange of Certificates. (a) After the Effective Time, a bank
or trust company designated by Parent shall act as paying agent (the "Paying
Agent") in effecting the exchange of cash for certificates which, prior to the
Effective Time, represented Shares entitled to payment pursuant to Section
2.1(c). Upon the surrender and exchange of such a certificate the holder
thereof shall be paid, without interest thereon, the amount of cash to which he
is entitled hereunder and such certificate shall forthwith be cancelled. All
holders of Shares other than Arthur H. Juedes, Richard C. Gering and Harry H.
Colcord shall be entitled to receive $24.00 for each Share. Messrs. Juedes,
Gering and Colcord shall be entitled to receive $22.00 per Share and contingent
consideration of up to $1.75 per Share payable in accordance with the terms of
certain agreements, of even date herewith, between Parent and each of Messrs.
Juedes,
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Gering and Colcord. Until so surrendered and exchanged, each such certificate
shall represent solely the right to receive the cash into which the Shares it
theretofore represented shall have been converted pursuant to Section 2.1(c) and
become entitled to receive pursuant to this Section 2.2(a).
(b) At or prior to the Effective Time, Parent will provide the
Paying Agent with the funds necessary to make the payments contemplated by
Sections 2.1(c) and 2.2(a).
(c) Promptly after the Effective Time, the Paying Agent shall
mail to each record holder of certificates, which immediately prior to the
Effective Time represented Shares, a form letter of transmittal and instructions
for use in surrendering certificates and receiving payment therefor.
2.3 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Shares
shall thereafter be made. If, after the Effective Time, certificates
representing Shares are presented to the Surviving Corporation or the Paying
Agent, they shall be cancelled and exchanged for cash as provided herein.
2.4 Dissenting Shares. If dissenter's rights are available to
holders of Shares pursuant to the Wisconsin Corporation Law, then,
notwithstanding anything in this Agreement to the contrary, Shares which are
issued and outstanding immediately prior to the Effective Time and which are
held by stockholders who have delivered a written objection to the Merger in the
manner provided in Section 180.1321 of the Wisconsin Corporation Law (the
"Dissenting Shares") shall not be converted into the right to receive or be
exchangeable for the consideration provided in Section 2.1(c) of this Agreement,
unless and until such holder shall have failed to perfect or shall have
effectively withdrawn or lost his right to fair value or appraisal and payment
under the Wisconsin Corporation Law, as the case may be. If such holder shall
have so failed to perfect or shall have effectively withdrawn or lost such
right, his Shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, at the Effective Time, the right to
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receive the consideration set forth in Section 2.1(c) hereof, without any
interest thereon.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent and Sub that, except as
previously disclosed to Parent in writing:
3.1 (a) Corporate Organization. Each of the Company and the Company
Subsidiaries (as defined in Section 3.5 hereof) (i) is a corporation duly
organized, validly existing and in active status under the laws of the
jurisdiction of its incorporation, (ii) has all requisite corporate power and
authority to own, operate and lease the properties and assets it now owns,
operates and leases and to carry on its business as now being conducted and
(iii) is qualified or licensed to do business and in good standing in every
jurisdiction in which the ownership, operation or lease of property by it or the
conduct of its business requires such qualification or licensing, except for
such failures, if any, to be so qualified and in good standing, which, when
taken together with all such other failures, would not in the aggregate have a
Material Adverse Effect (as defined in section 10.13) on the Company.
(b) Articles of Incorporation and By-Laws. The Company has
previously delivered to Parent complete and correct copies of the Articles of
Incorporation and all amendments and restatements thereto to the date hereof and
By-laws (or comparable governing documents), as presently in effect, of the
Company and the Company Subsidiaries, and none of the Company and the Company
Subsidiaries is in default in the performance, observation or fulfillment of
either of its Articles of Incorporation or By-Laws (or comparable governing
documents).
3.2 Authorization. The Company has full corporate power and
authority to execute and deliver this Agreement and, subject to the conditions
specified herein, to consummate the transactions contemplated hereby. The Board
of Directors of the Company has duly approved
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this Agreement and has duly authorized the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and as of
the date of this Agreement has resolved to recommend that its stockholders adopt
this Agreement and approve the Merger, and no other corporate proceedings (other
than the adoption of this Agreement by the holders of a majority of the issued
and outstanding Shares in order to consummate the Merger) on the part of the
Company or any Company Subsidiary are necessary to approve and authorize the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and constitutes (assuming due authorization, execution
and delivery of this Agreement by the other parties hereto), the valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms. The Company hereby represents and warrants that the Merger has
been approved by the Board of Directors pursuant to Section 180.1141(1) of the
Wisconsin Corporation Law.
3.3 Consents and Approvals; No Violations. Except as set forth in
Schedule 3.3 hereto and for (a) the applicable requirements of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), (b) the requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
relating to the Proxy Statement (as defined in Section 3.12 hereof) and (c) the
filing of the articles of merger and other appropriate merger documents and such
other actions, if any, as required by the laws of the State of Wisconsin, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not: (i) violate any provision of the
Articles or Certificate of Incorporation or By-Laws (or comparable governing
documents) of the Company or any Company Subsidiary; (ii) violate any statute,
ordinance, rule, regulation, order or decree of any court or of any public,
governmental or regulatory body, agency or authority applicable to the Company
or any Company Subsidiary or by which any of their respective property or assets
may be bound; (iii) require any filing with, or permit, consent, or approval of,
or the giving of any notice to, any public, government or regulatory body,
agency or authority; or (iv) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default
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(or give rise to any right of termination, cancellation or acceleration) under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement or other instrument or
obligation to which the Company or any Company Subsidiary is a party, or by
which any of them or any of their respective properties or assets may be bound,
excluding from the foregoing clauses (ii), (iii) and (iv) violations, breaches
and defaults which, and filings, notices, permits, consents and approvals the
absence of which, in the aggregate, would not have a Material Adverse Effect on
the Company and would not prevent or delay in any material respect the
consummation of the transactions contemplated hereby.
3.4 Capitalization. The authorized capital stock of the Company
consists of 20,000,000 Shares and 500,000 shares of Class B Common Stock, par
value $0.01, ("Class B Shares"). As of the date hereof, no Shares are held by
the Company in its treasury, and no Shares are held by any of the Company
Subsidiaries. As of the date hereof, (i) 6,071,028 Shares are issued and
outstanding and no Class B Shares are issued and outstanding, (ii) no more than
174,747 Shares are reserved for issuance pursuant to the 1994 Stock Incentive
Plan (the "Plan Options") of which options to purchase Shares 63,847 were issued
during 1994 (the "1994 Plan Options") and options to purchase no more than
110,900 Shares were issued during 1995 and 1996 (the "1996 Plan Options"), and
(iii) no more than 15,000 Shares are reserved for issuance pursuant to the
Outside Director Stock Option Plan (the "Outside Director Stock Options"). All
shares of capital stock of the Company which are outstanding as of the date
hereof are duly authorized, validly issued, fully paid and non-assessable,
except as set forth in section 180.0622(2)(b) of the Wisconsin Corporation Law,
as interpreted, and are not subject to, nor were they issued in violation of,
any preemptive rights. Except as set forth above, there are no shares of
capital stock of the Company authorized or outstanding. Except as set forth
above, there are not any, and at the Effective Time there will not be any,
subscriptions, options, conversion or exchange rights, warrants or other
agreements, claims or commitments of any nature whatsoever obligating the
Company or any Company Subsidiary to issue, transfer, deliver or sell, or cause
to be issued, transferred, delivered or sold, additional shares of the capital
stock
7
of the Company or any Company Subsidiary or obligating the Company or any
Company Subsidiary to grant, extend or enter into any such agreement or
commitment.
3.5 Subsidiaries. All the outstanding shares of capital stock of
each corporation of which the Company owns, directly or indirectly, 50 percent
or more of the outstanding capital stock (a "Company Subsidiary") have been
validly issued and are fully paid, nonassessable and are not subject to, nor
were they issued in violation of, any preemptive rights. The name and
jurisdiction and ownership of each such Company Subsidiary is set forth on
Schedule 3.5 hereto. All outstanding shares of capital stock of the Company
Subsidiaries are owned, directly or indirectly, by the Company, free and clear
of all liens, charges, encumbrances, security interests, equities, options,
restrictions on voting rights or rights of disposition, and claims or third
party rights of whatever nature. Except for Company Subsidiaries, the Company
does not own, directly or indirectly, any capital stock or other equity
securities of any corporation or have any direct or indirect equity or ownership
interest in any business and neither the Company nor any Company Subsidiary is
subject to any obligation or requirement to provide funds for or to make any
investment (in the form of a loan, capital contribution or otherwise) in any
entity.
3.6 SEC Reports. The Company has previously delivered to Parent all
reports, registration statements, proxy statements and other documents filed by
the Company with the SEC since September 28, 1995. The Company has filed all
reports, registration statements, proxy statements and other documents with the
SEC required to be filed since September 28, 1995, all of which complied, as of
their respective dates, in all material respects, with all applicable
requirements of the Exchange Act and the Securities Act of 1933, and none of
which, as of their respective dates, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.7 Financial Statements. The Company has previously delivered to
Parent (i) the audited consolidated balance sheets of the Company and its
subsidiaries
8
as of June 30, 1996, June 30, 1995 and June 30, 1994 and its audited
consolidated statements of income, changes in shareholders' equity and changes
in financial position for the respective fiscal years then ended, including the
notes thereto, in each case examined by and accompanied by the report of Wipfli
Ullrich Bertelson, independent certified public accountants and (ii) the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
September 30, 1996 and its unaudited consolidated statements of income, changes
in shareholders' equity and changes in financial position for the period then
ended (all of the financial statements referred to above in this Section are
hereinafter collectively referred to as the "Company Financial Statements").
The Company Financial Statements have been prepared from, and are in accordance
with, the books and records of the Company and its consolidated subsidiaries and
present fairly the consolidated financial position, consolidated results of
operations and changes in financial position of the Company and its consolidated
subsidiaries as of the dates and for the periods indicated, in each case in
conformity with generally accepted accounting principles, consistently applied
during such periods, except as otherwise stated in such financial statements or
in the notes thereto or in the auditor's certifying report thereon or in the
case of interim financial statements, subject to normal year-end adjustments
which in the aggregate will not be material.
3.8 Absence of Undisclosed Liabilities. Except as and to the extent
reflected in the balance sheet dated as of September 30, 1996 included in the
Company Financial Statements (the "Balance Sheet"), or in the notes thereto, and
except for obligations pursuant to purchase orders, neither the Company nor any
Company Subsidiary had at that date any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise and whether due or to become
due), which individually exceed $75,000. Since the date of the Balance Sheet,
except as set forth in Schedule 3.8 hereto or for liabilities incurred in the
ordinary course of business and which have been reported to Parent pursuant to
an Update Schedule (as defined in Section 6.10), neither the Company nor any
Company Subsidiary has incurred any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise, and whether due or to
become due) which individually exceed $75,000.
9
3.9 Absence of Material Adverse Change. Since September 30, 1996,
there has not been, occurred or arisen any Material Adverse Effect on the
Company.
3.10 Legal Proceedings, etc. Except as set forth in Schedule 3.10
hereto, there are no suits, actions, claims, proceedings or investigations
(collectively, "claims") pending, or, to the knowledge of the Company, are there
any material claims threatened, against, relating to or involving the Company or
any Company Subsidiary (or any of their respective officers or directors in
connection with the business or affairs of the Company and the Company
Subsidiaries) or any properties or rights of the Company or any Company
Subsidiary, before any court, arbitrator or administrative or governmental body,
United States or foreign. As of the date hereof, there are no such suits,
actions, claims, proceedings or investigations pending or, to the knowledge of
the Company, threatened challenging the validity or propriety of the
transactions contemplated by this Agreement. Neither the Company nor any
Company Subsidiary is subject to any judgment, decree, injunction, rule or order
of any court or, to the knowledge of the Company, any governmental restriction
applicable to the Company or any Company Subsidiary, which is reasonably likely
to have a Material Adverse Effect on the Company, or which materially adversely
affects the ability of the Company or any Company Subsidiary to acquire any
property or conduct business in any geographical area other than any such items
applicable to companies generally.
3.11 Compliance with Applicable Law. The Company and each Company
Subsidiary currently holds and is in compliance in all material respects with
the terms of all licenses, permits and authorizations necessary for the lawful
conduct of their respective businesses, and has complied with, and neither the
Company nor any Company Subsidiary is in violation of, or in default in any
respect under, the applicable statutes, ordinances, rules, regulations, orders
or decrees of all federal, state, local and foreign governmental bodies,
agencies and authorities having jurisdiction over it or any part of its
operations or assets, except for such failures of compliance, violations and
defaults which in the aggregate would not have a Material Adverse Effect on the
Company.
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3.12 Proxy Statement. The definitive proxy statement and related
materials to be furnished to the stockholders of the Company in connection with
the Merger pursuant to Section 6.2 hereof (the "Proxy Statement") will comply in
all material respects with the Exchange Act and the rules and regulations
thereunder. If at any time prior to the Effective Time any event occurs which
would be required to be described in a supplement or amendment to the Proxy
Statement or any supplement or amendment thereto, any supplement or amendment
required pursuant to the provisions of the Exchange Act will comply in all
material respects with the Exchange Act and the rules and regulations
thereunder. Notwithstanding the foregoing, no representation or warranty is
made with respect to any information with respect to Parent or Sub or their
officers, directors or affiliates provided to the Company by Parent in writing
for inclusion in the Proxy Statement or the supplements or amendments thereto.
3.13 Intellectual Property. Except as previously disclosed to Parent
in writing, the Company and each of the Company Subsidiaries owns, or is
licensed to use, or otherwise has the full right to use, all copyrights,
trademarks, tradenames, patents, technology, know-how, formulae and processes
currently utilized by it and necessary to operate the business of the Company
and Company Subsidiaries taken as a whole ("Intellectual Property"). Without
limiting the generality of the foregoing, the Company has full right, title, and
interest to the service mark EASTBAY in the United States and each of the
countries outside of the United States in which it is presently being used for
use on retail catalog services for the sale of footwear and clothing, and is the
owner of United States Service Mark Registration Nos. 1304300 and 1962110 for
such mark. To the knowledge of the Company (i) no claim is being asserted by
any person with respect to the use of any such Intellectual Property, and (ii)
the use of such Intellectual Property does not infringe on the rights of any
person, except for any such claims or infringements which are not material to
the Company.
3.14 Brokers and Finders. Except for Robert W. Baird & Co.,
Incorporated, neither the Company nor any Company Subsidiary nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions,
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finders' fees or similar fees or expenses and no broker or finder has acted
directly or indirectly for the Company or any Company Subsidiary in connection
with this Agreement or the transactions contemplated hereby and thereby. Except
for the fees and expenses of Robert W. Baird & Co. Incorporated (a copy of the
agreement providing for which has been delivered to Parent), no investment
banking, financial advisory or similar fees have been incurred or are or will be
payable by the Company or any Company Subsidiary in connection with this
Agreement or the transactions contemplated hereby.
3.15 Contracts and Leases. Neither the Company nor any Company
Subsidiary is in default, and no event has occurred which (whether with or
without notice or lapse of time) would constitute a default, under any material
contract or lease, except for any immaterial defaults. To the knowledge of the
Company, no other party to any such material contract or lease is in default,
and no event has occurred which (whether with or without notice or lapse of
time) would constitute a default, under any such material contract or lease,
except for any immaterial defaults. Except as set forth in Schedule 3.15
hereto, neither the execution or delivery of this Agreement nor the consummation
of the transactions contemplated hereby will constitute (whether with or without
notice or lapse of time) a material default or a cause for termination or
material modification of any lease of real property to which the Company or any
Company Subsidiary is a party. The Company is not now and for the past three
years has not been party to any agreement which provided for or contemplated a
transaction which would constitute a Business Combination (as defined herein).
The Company is not party to or bound by any collective bargaining or similar
agreement with any labor organization.
3.16 Inventory. All inventory of the Company and the Company
Subsidiaries reflected on the Balance Sheet consisted only of goods useable and
saleable in the ordinary course of business of the Company and the Company
Subsidiaries in accordance with past practices. Items of inventory which were,
as of June 30, 1996, soiled, damaged or otherwise physically defective were
written down on the Balance Sheet to the lower of cost or market value. From
June 30, 1996 to the date hereof, the inventory of the Company and the Company
Subsidiaries has
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increased or decreased in a manner consistent with the seasonal nature of the
business of the Company and the Company Subsidiaries and their historic business
practices and, at all times during such period, has consisted of goods useable
and saleable in the ordinary course of business of the Company and the Company
Subsidiaries in accordance with past practices. The present quality, quantity
and mix of all inventory of the Company and the Company Subsidiaries is
reasonable and warranted by the present circumstances of the business of the
Company and the Company Subsidiaries as construed in accordance with past
practices.
3.17 Taxes. Each of the Company and each Company Subsidiary has duly
filed all Tax Returns (as hereinafter defined) required to be filed by any of
them. Each of the Company and each Company Subsidiary has duly paid (or the
Company has paid on its behalf), or has set up a reserve which is adequate for
the payment of, all Taxes (as hereinafter defined) required to be paid in
respect of the periods covered by such Tax Returns except for failures to pay
amounts which are not material. Neither the Company nor any of the Company
Subsidiaries is delinquent in the payment of any amount of Taxes which would
have a Material Adverse Effect on the Company. No material deficiencies for any
Taxes have been proposed, asserted or assessed against the Company or any of the
Company Subsidiaries, and, with respect to United States federal and state
taxes, no waivers of the time to assess any Taxes have been given or requested
except to the extent previously disclosed to Parent in writing. All income tax
returns of the Company and the Company Subsidiaries have been audited for all
years ended on or before June 30, 1992, or the statutes of limitations with
respect to the periods covered by such returns have expired. No issues have
been raised (and are currently pending) by the Internal Revenue Service (the
"IRS") or any other taxing authority in connection with any of the Tax Returns
referred to above for which adequate reserves have not been established on the
books of the Company and the Company Subsidiaries and which, individually or in
the aggregate, are likely to have a Material Adverse Effect on the Company.
There are no liens with respect to Taxes (except for liens with respect to real
property taxes not yet due) upon any of the properties or assets of the Company
or any of the Company Subsidiaries. Neither the Company nor any of the Company
Subsidiaries,
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with regard to any property or assets held or acquired by them at any time, has
filed a consent pursuant to Section 341(f) of the Internal Revenue Code of 1986,
as amended (the "Code"). For purposes of this Section 3.17, (i) the term
"Taxes" shall include all taxes, assessments and governmental charges
(including, without limitation, sales taxes) imposed by the United States or any
state, local and foreign government or subdivision or agency thereof, including
any interest, penalties or additions thereto, and (ii) the term "Tax Return"
shall include any return, report or other information required to be supplied to
a taxing authority with respect to Taxes.
3.18 Employee Benefit Plans; ERISA.
-----------------------------
(a) Schedule 3.18(a) hereto contains a true and complete list of
each bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension, or
retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement or arrangement, maintained or contributed to or
required to be contributed to by the Company or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), that together with the
Company would be deemed a "single employer" within the meaning of Section 4001
of the Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder ("ERISA"), for the benefit of any
employee or terminated employee of the Company or any ERISA Affiliate, whether
or not written (the "Plans"). Schedule 3.18 indicates each plan which is an
"employee benefit plan," as that term is defined in section 3(3) of ERISA
("ERISA Plans"). Neither the Company nor any ERISA Affiliate has any formal plan
or commitment to create any additional Plan or modify or change any existing
Plan (other than changes of general applicability as required by law) that would
affect any employee or terminated employee of the Company or any ERISA
Affiliate. None of the Plans is a "multiemployer pension plan," as such term is
defined in section 3(37) of ERISA nor has the Company ever been a party to any
such "multiemployer pension plan."
(b) With respect to each of the Plans, the Company has heretofore
delivered or made available to
14
Parent true and complete copies of each of the following documents:
(i) a copy of the Plan (including all amendments
thereto);
(ii) a copy of the annual report, if required under ERISA,
with respect to each such Plan for the last two years;
(iii) a copy of the actuarial report, if required under
ERISA, with respect to each such Plan for the last two years;
(iv) a copy of the most recent Summary Plan Description,
together with each Summary of Material Modifications, required under ERISA
with respect to such Plan, and all material employee communications
relating to such Plan;
(v) if the Plan is funded through a trust or any third
party funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements
thereof; and
(vi) the most recent determination letter received from the
IRS with respect to each Plan that is intended to be qualified under
section 401 of the Code.
(c) No liability under Title IV of ERISA has been incurred by the
Company or any ERISA Affiliate since the effective date of ERISA that has not
been satisfied in full, and no condition exists that presents a material risk to
the Company or an ERISA Affiliate of incurring a liability under such Title,
other than liability for premiums due the Pension Benefit Guaranty Corporation
("PBGC"). To the extent this representation applies to sections 4064, 4069 or
4204 of Title IV of ERISA, it is made with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA to which the
Company or an ERISA Affiliate made, or was required to make, contributions
during the
15
five (5) year period ending on the last day of the last plan year.
(d) Neither the Company nor any ERISA Affiliate, nor any ERISA
Plan, nor any trust created thereunder, nor any trustee or administrator thereof
has engaged in a transaction in connection with which the Company or any ERISA
Affiliate, any ERISA Plan, any such trust, or any trustee or administrator
thereof, or any party dealing with any ERISA Plan or any such trust could be
subject to either a civil penalty assessed pursuant to section 409 or 502(i) of
ERISA or a tax imposed pursuant to section 4975 or 4976 of the Code.
(e) Each of the Plans has been operated and administered in all
material respects in accordance with applicable laws, including but not limited
to ERISA and the Code.
(f) No amounts payable under the Plans or any other agreement by
reason of the transactions contemplated by this Agreement will fail to be
deductible for federal income tax purposes by virtue of section 280G of the
Code.
(g) No Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees of the Company or any ERISA Affiliate beyond their retirement
or other termination of service (other than (i) coverage mandated by applicable
law, (ii) death benefits or retirement benefits under any "employee pension
plan," as that term is defined in section 3(2) of ERISA, (iii) deferred
compensation benefits accrued as liabilities on the books of the Company or the
ERISA Affiliates, or (iv) benefits the full cost of which is borne by the
current or former employee (or his beneficiary).
(h) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or officer of the
Company or any ERISA Affiliate to severance pay, unemployment compensation or
any other payment, except as expressly provided in this Agreement or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer.
16
(i) There are no pending claims or, to the Company's knowledge,
threatened or anticipated claims by or on behalf of any of the Plans, by any
employee or beneficiary covered under any such Plan, or otherwise involving any
such Plan (other than routine claims for benefits).
3.19 Certain Interests. To the knowledge of the Company, since the
date of the Company's Proxy Statement dated September 16, 1996 relating to the
Company's 1996 Annual Meeting or as otherwise disclosed to the Parent in
writing, no officer or director of the Company, or any relative of such officer
or director, has acquired any interest in any property of the Company or any of
the Company Subsidiaries (except as a stockholder of the Company) or has entered
into any business relationship with the Company or any of the Company
Subsidiaries (except as an officer, director or stockholder thereof), in any
such case, of a nature which would be required to be disclosed in a proxy
statement relating to the election of directors filed under the Exchange Act.
3.20 Employees. The Company has provided to the Parent a true and
complete schedule of all employees who earned (including base pay and any
bonuses) in the fiscal year ended June 30, 1996 or have the right to earn in the
fiscal year ending June 30, 1997, more than $50,000 per annum. For each such
employee, the aforementioned schedule shall have included true, correct and
complete information as to the following: (i) current annual base pay; (ii)
current bonus eligibility, (iii) total compensation during the last fiscal year,
(iv) date of last base pay increase and prior base pay; and (v) date of hire.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the
Company that:
4.1 Corporate Organization. Each of Parent and Sub is a corporation
duly organized, validly existing
17
and in good standing under the laws of the jurisdiction of its incorporation.
4.2 Authorization. Each of Parent and Sub has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Board of Directors of each of Parent and
Sub, and Parent as the sole stockholder of Sub, have duly authorized the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and no other corporate proceedings on the part
of Parent or Sub are necessary to approve and authorize the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Parent and Sub
and constitutes (assuming due authorization, execution and delivery of this
Agreement by the Company), the valid and binding agreement of Parent and Sub,
enforceable against each of them in accordance with its terms.
4.3 Consents and Approvals; No Violations. Except for (a) the
applicable requirements of the HSR Act, (b) the requirements of the Exchange Act
relating to the Proxy Statement and (c) the filing of articles of merger and
other appropriate merger documents, if any, as required by the laws of the State
of Wisconsin, the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, will not: (i) violate any provision of
the Articles or Certificate of Incorporation or By-Laws (or other comparable
governing documents) of Parent or Sub; (ii) violate any statute, ordinance,
rule, regulation, order or decree of any court or of any public, governmental or
regulatory body, agency or authority applicable to Parent or Sub or by which any
of their respective properties or assets may be bound; (iii) require any filing
with or permit, consent or approval of, or the giving of any notice to, any
public, governmental or regulatory body or authority; or (iv) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, franchise, permit, agreement or other
instrument or obligation to which Parent or Sub is a party, or by which either
of them or any of their respec-
18
tive properties or assets may be bound, excluding from the foregoing clauses
(ii), (iii) and (iv) violations, breaches and defaults which, and filings,
notices, permits, consents and approvals the absence of which, in the aggregate,
would not have a Material Adverse Effect on Parent and its subsidiaries taken as
a whole and would not prevent or delay the consummation of the transactions
contemplated hereby.
4.4 Proxy Statement. The information supplied by Parent and Sub for
inclusion in the Proxy Statement of the Company filed in connection with the
Merger will be true and correct in all material respects and will not omit to
state any material facts.
4.5 Brokers and Finders. Neither Parent nor any of its subsidiaries
nor any of their respective officers, directors or employees, has employed any
broker or finder or incurred any liability for any brokerage fees, commissions,
finders' fees or similar fees or expenses and no broker or finder has acted
directly or indirectly for Parent or Sub or any of their respective subsidiaries
in connection with this Agreement or the transactions contemplated hereby. No
investment banking, financial advisory or similar fees have been incurred or are
or will be payable by Parent or any of its subsidiaries in connection with this
Agreement or the transactions contemplated hereby.
ARTICLE V
CONDUCT OF THE COMPANY'S BUSINESS
During the period commencing on the date hereof and continuing until
the Effective Time, the Company agrees (except as expressly contemplated by this
Agreement or to the extent that Parent shall otherwise consent in writing; such
consent, in the case of clause (b) of this Article V not to be unreasonably
withheld) that:
(a) The Company and each Company Subsidiary will carry on its
business in, and only in, the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and, to the extent
consistent with such business, use its reasonable best efforts to preserve
intact its present business organiza-
19
tion, keep available the services of its present officers and employees and
preserve its relationships with customers, consultants, suppliers and others
having material business dealings with it.
(b) The Company will not, and will not permit any Company Subsidiary
to, enter into purchase orders other than in the ordinary course of business in
accordance with the Company's budget.
(c) The Company will not, and will not permit any Company Subsidiary
to, dispose of or encumber any of its properties and assets, other than sales of
inventory and collections of receivables or other actions in the ordinary course
of business.
(d) The Company will not split, combine or reclassify any Shares or
declare any dividends on or make other distributions in respect of the Shares.
Neither the Company nor any Company Subsidiary will amend its Articles or
Certificate of Incorporation or By-laws or similar governing documents.
(e) Neither the Company nor any Company Subsidiary will issue, sell,
authorize, grant or propose the sale or issuance of, or purchase, acquire or
propose the purchase or acquisition of, any shares of the capital stock of the
Company or any Company Subsidiary or securities convertible into, or rights,
warrants or options (including employee stock options, restricted stock or other
equity-based compensation) to acquire, any such shares or other convertible
securities (other than the issuance of Shares upon the exercise, in accordance
with the present terms thereof, of stock options outstanding on the date of this
Agreement).
(f) Neither the Company, nor any Company Subsidiary, officer,
director or employee of (or any investment banker, attorney, accountant or other
representative retained by) the Company or any Company Subsidiary shall,
directly or indirectly, solicit, initiate or encourage (including by way of
furnishing information) any inquiries or proposals by, or engage in any
discussions or negotiations with, any corporation, partnership, person or other
entity or group which it is reasonably expected may lead to, or which relates
to, any takeover proposal; provided that the Company and its Board of
20
Directors, officers or employees (or any investment banker, attorney, accountant
or other representative retained by the Company) shall not be prohibited from
(i) taking and disclosing to the Company's stockholders a position with respect
to a tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act, (ii) making such disclosure to the Company's
stockholders which, in the judgment of the Board of Directors with the advice of
counsel, may be required under applicable law or (iii) taking any action that
the Board of Directors determines, after consultation with counsel of recognized
experience in the Wisconsin Corporation Law (which may be Reinhart, Boerner, Van
Deuren, Norris & Rieselbach, s.c.) is reasonably necessary under the Wisconsin
Corporation Law, as interpreted, or is reasonably necessary in order for the
Board of Directors to comply with their fiduciary duties under applicable law.
The Company will promptly advise Parent orally and in writing of the receipt and
content of any such inquiries or proposals. As used in this subsection (f),
"takeover proposal" shall mean any proposal for a merger or other business
combination involving the Company or any Company Subsidiary or for the
acquisition of a substantial equity interest in the Company or any Company
Subsidiary or a substantial portion of the assets of the Company or any Company
Subsidiary other than the one contemplated by this Agreement (a "Business
Combination").
(g) Except as disclosed to Parent prior to the date hereof, the
Company will not and will not permit any Company Subsidiary to acquire or agree
to acquire by merging or consolidating with or into, purchasing substantially
all of the assets or stock of or otherwise, (i) any assets which would be
material to the Company and the Company Subsidiaries taken as a whole, (ii) any
assets outside of the ordinary course of business or (iii) any business or any
corporation, partnership, association or other business organization or division
thereof.
(h) The Company will not and will not permit any Company
Subsidiary to adopt, enter into, extend the term of, or amend in any material
respect any collective bargaining, employee pension, profit-sharing, retirement,
insurance, incentive compensation, severance, vacation, employment agreement or
other plan, agreement,
21
trust, fund or arrangement for the benefit of any director, officer or employee
(whether or not legally binding) or make any changes in compensation, severance
or termination, bonuses or fringe benefits payable or to become payable to any
director, officer or employee; provided, that, the Company shall forgive the
loan to Harry H. Colcord in the amount of $366,000, and will provide Colcord
with a payment representing the tax liability to be incurred by him in respect
of such forgiveness and such payments.
(i) The Company will not and will not permit any Company
Subsidiary to pay any bonus or other extraordinary compensation to any officer,
director or employee and, except as otherwise contemplated by this agreement,
accelerate or vest any employee options, restricted stock or other equity-based
compensation.
(j) Neither the Company nor any of the Company Subsidiaries will
(i) incur, assume or prepay any long-term debt or, except in the ordinary course
of business under existing lines of credit, incur or assume any short-term debt,
(ii) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person except wholly owned subsidiaries of the Company in the ordinary course of
business and consistent with past practices or (iii) make any loans, advances or
capital contributions to, or investments in, any other person (other than
customary loans or advances to employees).
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Properties and Records. Between the date of this
Agreement and the Effective Time, the Company will, and will cause each Company
Subsidiary to, provide Parent and its accountants, counsel, advisors and other
authorized representatives full access, during reasonable business hours and
under reasonable circumstances, to any and all premises, properties, contracts,
commitments, books, records and other information (including Tax Returns filed
and those in preparation) of the Company and each Company Subsidiary and will
cause
22
their officers to furnish to Parent and its authorized representatives any and
all financial, technical and operating data and other information pertaining to
the business of the Company and the Company Subsidiaries, as Parent shall from
time to time reasonably request; provided, however, that neither the Company nor
any Company Subsidiary shall be required to produce or provide any information
which is not readily available to such entity or capable of production without
undue disruption to the entity's business.
6.2 Proxy Statement. The Company will prepare and file a preliminary
Proxy Statement with the SEC as soon as practicable after the date hereof and
will use reasonable best efforts to respond to the comments of the SEC in
connection therewith. Parent and Sub will cooperate in such preparation and
response to the extent reasonably requested by the Company and will furnish all
information required to prepare the definitive Proxy Statement (including,
without limitation, financial statements and supporting schedules and
certificates and reports of independent public accountants). The Company will
cause the definitive Proxy Statement to be mailed to the stockholders of the
Company and, if after the definitive Proxy Statement shall have been so mailed
but prior to the date of the stockholders' meeting, it is required by law, the
Company will, promptly circulate amended, supplemental or supplemented proxy
material. The Company will not use any proxy material in connection with the
meeting of stockholders without Parent's prior approval which shall not be
unreasonably withheld. Parent and the Company will furnish each other with all
information concerning themselves, their subsidiaries, directors, officers and
stockholders and such other matters as may be necessary or advisable for the
Proxy Statement and any other statement or applications made by or on behalf of
Parent or the Company to any public, governmental or regulatory body in
connection with the Merger and the other transactions contemplated by this
Agreement.
6.3 Stockholder Approval. The Company shall call a meeting of its
stockholders for the purpose of voting upon this Agreement and the Merger and
the Company agrees that this Agreement and the Merger shall be submitted at a
meeting of the stockholders of the Company and the Company shall take all steps
reasonably necessary to duly call, give notice of, convene and hold such
23
meeting as promptly as reasonably practicable. The Company agrees that its
Board of Directors will recommend that its stockholders approve and adopt this
Agreement and approve the Merger unless the Board of Directors determines, after
consultation with counsel of recognized experience in the Wisconsin Corporation
Law (which counsel may be Reinhart, Boerner, Van Deuren, Norris & Rieselbach,
s.c.) that such recommendation would be inconsistent with its fiduciary duties
to stockholders. Parent will cause all Shares owned by Parent and its
subsidiaries (if any) to be voted in favor of the Merger.
6.4 Stock Option and Other Plans. (a) Prior to the Effective Time,
the Company and Parent shall take all actions necessary such that all 1996 Plan
Options shall become and represent options for shares of Common Stock of Parent
("Substitute Options"). Such Substitute Options shall have the same expiration
date and vesting schedule as the Plan Options for which they were substituted
and shall otherwise be exercisable on the same terms and conditions as were
applicable to the related Plan Option immediately prior to the Effective Time.
Without limiting the foregoing, Parent shall take all action necessary to
register the sale of the shares underlying such options on a Form S-8
Registration Statement. The Substitute Option will be exercisable for a number
of Shares of Common Stock and have an exercise price computed pursuant to
Section 424(a) of the Code. Each vested 1994 Plan Option shall, at the
Effective Time, become entitled to receive $18.78 in cash per option. The
holder of each unvested 1994 Plan Option shall have the right to elect (prior to
the Effective Time) to receive (i) Substitute Options for such 1994 Plan Option
or (unless it would cause excess parachute payments under Section 280G of the
Code) (ii) an amount of cash per option as computed in the prior sentence. Each
Outside Director Stock Option shall, at the Effective Time, become entitled to
receive $9.75 in cash per option. The Company will take all such actions as are
necessary to ensure that neither the Company nor any of its subsidiaries is or
will be bound by any options, warrants, rights or agreements which would entitle
any person, other than Parent or its affiliates, to own any capital stock of the
Surviving Corporation or to receive any payment in respect thereof.
24
(b) Promptly after determination of results of the Company's
operations for the six month period ended December 31, 1996, the Company shall
make interim payments (unless it would cause excess parachute payments under
Section 280G of the Code) under its bonus plan in amounts consistent with such
plan, such payments to be subject to approval of Parent, such approval not to be
unreasonably withheld.
6.5 Reasonable Best Efforts; etc. Subject to the terms and
conditions herein provided and subject to the provisory clause in the first
sentence of subsection (f) of Article V, each of the parties hereto agrees to
use its reasonable best efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including obtaining any consents,
authorizations, exemptions and approvals from, and making filings with, any
governmental, regulatory or public body or authority which are necessary or, in
the judgment of Parent and the Company, desirable in connection with the
transactions contemplated by this Agreement. Parent and the Company shall each
have the right to review and approve in advance all characterizations of the
information relating to Parent or the Company, as the case may be, and any of
their respective subsidiaries, which appear in any filings made in connection
with the transactions contemplated by this Agreement with any governmental body.
6.6 HSR Act. The Company and Parent shall, as soon as practicable,
file Notification and Report Forms under the HSR Act with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") and shall use reasonable best efforts to respond as
promptly as practicable to all inquiries received from the FTC or the Antitrust
Division for additional information or documentation.
6.7 Material Events. At all times prior to the Effective Time, each
party shall promptly notify the other in writing of the occurrence of any event
which will or is reasonably likely to result in the failure to satisfy any of
the conditions specified in Article VII hereof.
25
6.8 Public Announcements. At all times until the Effective Time,
each party shall promptly advise and cooperate with the other prior to issuing,
or permitting any of its subsidiaries, directors, officers, employees or agents
to issue, any press release or other information to the press or any third party
with respect to this Agreement or the transactions contemplated hereby.
6.9 Indemnification. Prior to the Effective Time Parent shall cause
Sub to adopt, and for a period of six years following the Effective Time Parent
shall cause the Surviving Corporation to adopt and retain, the same provisions
contained in the Articles of Incorporation and By-laws relating to
indemnification as are contained in the Articles of Incorporation and By-laws of
the Company on the date of this Agreement, which provisions shall indemnify
those persons presently indemnified therein on the date hereof pursuant to the
terms of such provisions, and Parent shall cause the Surviving Corporation to
honor the indemnities in such provisions, and make prompt reimbursements, to the
fullest extent provided therein and to the fullest extent provided in the
Wisconsin Corporation Law. Parent shall cause the Surviving Corporation to
maintain in full force and effect for a period of at least three years the
fiduciary liability, professional liability, and directors and officers
liability insurance policies currently covering the Company or any Company
Subsidiary or any of the Company's directors, officers, employees or agents,
provided (i) the Surviving Corporation shall not be required to expend more than
$60,000 per year for such coverage, (ii) the expense of such coverage shall be
included in the budget of such Surviving Corporation as an operating cost and
(iii) the Parent may elect to substitute an alternative policy or carrier for
the existing policy or carrier provided that comparable coverage is maintained.
6.10 Update Disclosure. From and after the date of this Agreement
until the Effective Time, the Company may notify Parent by written update to the
Company's disclosure schedules (an "Update Schedule") of any changes to the
information contained in its disclosure schedule (including any change to any
representations or warranties in this Agreement as to which no schedule has been
created as of the date of this Agreement but as to which a schedule would have
been required under this
26
Agreement to have been created on or before the date hereof if such change had
existed as of the date hereof).
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions:
(a) This Agreement shall have been approved and adopted by the
affirmative vote of the stockholders of the Company by the requisite vote in
accordance with applicable law.
(b) No statute, rule, regulation, executive order, decree, order
or injunction shall have been enacted, entered, promulgated or enforced by any
court or governmental authority which prohibits or materially and adversely
restricts the consummation of the Merger.
(c) Any waiting period applicable to the Merger under the HSR
Act shall have terminated or expired.
7.2 Conditions to the Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger is further subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) The representations and warranties of Parent and Sub
contained in this Agreement shall be true and correct in all material respects
at and as of the Effective Time as if made at and as of such time, except as
affected by the transactions contemplated hereby.
(b) Each of Parent and Sub shall have performed in all material
respects its obligations under this Agreement required to be performed by it at
or prior to the Effective Time pursuant to the terms hereof.
27
Parent and Sub will furnish the Company with such certificates and other
documents to evidence the fulfillment of the conditions set forth in this
Section 7.2 as the Company may reasonably request.
7.3 Conditions to Obligations of Parent and Sub to Effect the Merger.
The obligations of Parent and Sub to effect the Merger are further subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) The representations and warranties of the Company contained
in this Agreement shall have been true and correct in all material respects when
made and such representations and warranties, as updated by any Update Schedule
or subsequent written disclosure made by the Company to Parent, be true and
correct in all material respects at and as of the Effective Time as if made at
and as of such time, except as affected by the transactions contemplated hereby
and except that any representation or warranty that speaks as of a specific date
shall be true and correct only as of such date.
(b) No state of fact shall have been disclosed to Parent in an
Update Schedule which shall constitute a material adverse change in the value of
the Company.
(c) The Company shall have performed in all material respects
each of its obligations under this Agreement required to be performed by it at
or prior to the Effective Time pursuant to the terms hereof.
(d) No suit, action, claim, proceeding or investigation
challenging the validity or propriety of the transactions contemplated by this
Agreement shall be pending which is reasonably likely to result in a judgment
materially adverse to Parent or the Company (including, with respect thereto,
amounts payable to any person subject to indemnification by the Company).
(e) The Company shall have entered into employment agreements
with Arthur H. Juedes, Richard C. Gering and Harry H. Colcord, in a form
attached hereto as an Exhibit, which among other things shall modify and
supersede any pre-existing employment agreements with such persons.
28
The Company will furnish Parent and Sub with such certificates and other
documents to evidence the fulfillment of the conditions set forth in this
Section 7.3 as Parent or Sub may reasonably request.
ARTICLE VIII
CLOSING
8.1 Time and Place. Subject to the provisions of Articles VII and IX
hereof, the closing (herein sometimes referred to as the "Closing") of the
Merger contemplated hereby shall take place at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York, at 10:00 a.m.,
local time, on a date (the "Closing Date") which is the third business day after
the satisfaction or waiver of the conditions set forth in Article VII hereof or
such other place, at such other time, or on such other date as Parent, Sub and
the Company may mutually agree upon for the Closing to take place.
8.2 Deliveries at the Closing. At the Closing:
(a) There shall be delivered to Parent, Sub and the Company the
certificates and other documents and instruments, if any, required to be
delivered under Article VII hereof.
(b) Sub and the Company shall cause the articles of merger to be
filed in accordance with the provisions of Wisconsin Corporation Law and shall
take any and all other lawful actions and do any and all other lawful things
necessary to effect the Merger and to enable the Merger to become effective.
ARTICLE IX
TERMINATION AND ABANDONMENT
9.1 Termination. Notwithstanding approval and adoption of this
Agreement by the stockholders of the Company, this Agreement may be terminated,
and the Merger abandoned, at any time prior to the Effective Time of the Merger:
29
(a) by the consent of Parent, Sub and the Company;
(b) by either Parent or the Company if, the Merger shall not have
been consummated on or before March 31, 1997; provided, however, that the right
to terminate this Agreement pursuant to this Section 9.1(b) shall not be
available to any party whose failure to fulfill materially any covenant or
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Merger to occur on or before such date;
(c) by either Parent or the Company, if any court of competent
jurisdiction or other governmental body in the United States shall have issued
an order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the Merger and such order,
judgment or decree shall have become final and nonappealable;
(d) by either Parent or the Company if the shareholders of the
Company fail to approve this Agreement and the Merger by the requisite vote
required by law at the shareholders' meeting referred to in section 6.1 (and any
adjournments thereof); or
(e) by the Company if the Company's Board of Directors, in
exercise of its judgment as to its fiduciary duties to the Company's
shareholders after consultation with counsel, determines that such termination
is required by reason of any "takeover proposal" (as defined in Article V,
paragraph (f)).
9.2 Effect of Termination. In the event of the termination of this
Agreement and the Merger for any reason, this Agreement shall become void, all
rights of each party hereto shall cease and there shall be no liability
hereunder on the part of Parent, Sub or the Company or any of their respective
officers, directors, shareholders, agents or advisors except, in the case of
Parent, Sub or the Company, for a material and intentional breach by any such
party of its covenants and agreements contained in this Agreement and except as
provided in the Confidentiality Agreement dated August 20, 1996 and Section 10.1
hereof, which confidentiality agreement and Section shall survive any such
termination and continue in effect thereafter.
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ARTICLE X
MISCELLANEOUS
10.1 Expenses; Fees. (a) Except as provided in paragraphs (b) and
(c) hereof, all costs and expenses incurred in connection with this Agreement,
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses.
(b) If this Agreement is terminated by the Company pursuant to
Section 9.1(b), 9.1(d) or 9.1(e) after a bona fide takeover proposal has been
received by the Company and, within one year after the date of such termination,
the Company enters into an agreement for a Business Combination which is
subsequently consummated, then, unless (x) the Parent was in material breach of
its obligations hereunder at the time of such termination, (y) the condition in
Section 7.1(c) shall not have been satisfied at the time of such termination and
60 days shall have passed since the HSR Act filing or (z) the condition in
Section 7.2 shall not have been satisfied at the time of such termination, the
Company shall promptly pay to Parent (in cash by wire transfer of federal funds
to an account designated by Parent) $4,000,000 at the time of consummation of
such Business Combination as the sole and exclusive remedy for such termination.
(c) If this Agreement is terminated pursuant to Section 9.1(d) at
a time when no bona fide takeover proposal has been received by the Company,
then, unless (x) the Parent is in material breach of its obligations hereunder,
(y) the condition in Section 7.1(c) shall not have been satisfied and 60 days
shall have passed since the HSR Act filing or (z) the condition in Section 7.2
shall not have been satisfied, the Company shall promptly pay to Parent (in cash
by wire transfer of federal funds to an account designated by Parent) $4,000,000
as the sole and exclusive remedy for such termination.
10.2 No Survival of Representations and Warranties. The respective
representations and warranties of the Company, Parent and Sub contained in
Articles III and IV or in any schedule, certificate or letter delivered pursuant
hereto shall expire with, and be terminated
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and extinguished by, the effectiveness of the Merger or the termination of this
Agreement (whichever is earlier) and shall not survive the Effective Time or
such termination.
10.3 Headings. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
10.4 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if sent by certified or
registered mail, postage prepaid, addressed as follows:
(a) If to Parent or Sub, to:
Woolworth Corporation
233 Broadway
New York, New York 10279
Attention: General Counsel
Copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Thomas H. Kennedy, Esq.
(b) if to the Company, to:
Eastbay Inc.
427 Third Street
Wausau, Wisconsin 54403
Attention: President and Chief Executive
Officer
Copy to:
Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c.
1000 N. Water Street
Milwaukee, Wisconsin 53202
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Attention: Michael T. Pepke, Esq.
James M. Bedore, Esq.
or such other address as shall be furnished in writing by either party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed, except a notice of change of address which shall be effective only
upon receipt.
10.5 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests, or obligations hereunder, shall be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that Sub may assign all of its rights, interests and obligations
hereunder to Parent or another wholly owned subsidiary of Parent, provided that
such subsidiary agrees in writing to be bound by all of the terms, conditions
and provisions contained herein.
10.6 Complete Agreement. This Agreement, including the schedules,
exhibits and other writings referred to herein or delivered pursuant hereto and
the Confidentiality Agreement dated August 20, 1996 between Parent and the
Company, together contain the entire understanding of the parties with respect
to the Merger and the related transactions and supersede all prior arrangements
or understandings with respect thereto.
10.7 Modifications, Amendments and Waivers. At any time prior to the
Effective Time of the Merger (notwithstanding any stockholder approval), if
authorized by Parent, Sub and the Company and to the extent permitted by law,
(i) the parties hereto may, by written agreement, modify, amend or supplement
any term or provision of this Agreement and (ii) any term or provision of this
Agreement may be waived by the party which is entitled to the benefits thereof,
provided that after such stockholder approval, no amendment shall be made which
decreases the Merger Amount or otherwise materially affects the rights of the
Company's shareholders without stockholder approval. Any written instrument or
agreement referred to in this paragraph shall be validly and sufficiently
authorized for the purposes of this Agreement if signed
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on behalf of Parent, the Company and Sub by a person authorized to sign this
Agreement.
10.8 Counterparts. This Agreement may be executed in two or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
10.9 Governing Law. This Agreement shall be governed by the laws of
the State of Wisconsin (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters, including but not limited to
matters of validity, construction, effect, performance and remedies.
10.10 Accounting Terms. All accounting terms used herein which are
not expressly defined in this Agreement shall have the respective meanings given
to them in accordance with generally accepted accounting principles.
10.11 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Notwithstanding the foregoing, (a) any shareholder of the Company shall have the
right to enforce the provisions of Section 2.2 hereof with respect to amounts
due such shareholder and (b) any indemnified party under Section 6.9 shall have
the right to enforce the provisions thereof.
10.12 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, unenforceable or against its regulatory policy,
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.
10.13 Definitions. (a) "Material Adverse Effect" means any change
in or effect on the business of the referenced corporation or any of its
subsidiaries, taken as a whole, that is or will be materially adverse to the
business, operations, prospects, properties,
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condition (financial or otherwise), assets or liabilities of such referenced
corporation and its subsidiaries taken as a whole, but shall not include the
effects of changes that are generally applicable in (i) the United States or
world economy, or (ii) the United States securities markets.
(b) "Knowledge," "known," "know" or terms with like meaning,
means the actual knowledge of, the executive officers (in the case of the
Company, Messrs. Colcord, Gering, Juedes, Schaefer and Johnson) of the
referenced party. The Company represents that Messrs. Colcord, Gering, Juedes,
Johnson and Schaefer have made reasonable inquiry with respect to the
representations and warranties of the Company prior to the execution hereof by
an officer of the Company.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
WOOLWORTH CORPORATION
By:______________________________
EAST ACQUISITION CORPORATION
By:______________________________
EASTBAY, INC.
By:______________________________
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