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AGREEMENT AND PLAN OF MERGER
by and among
VARSITY GROUP INC.,
VGI HOLDINGS CORP.
and
VGI ACQUISITION CORP.
Dated as of February 22, 2008
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1.1 The Offer 1
1.2 Company Actions 3
1.3 Company Directors 5
1.4 The Top-Up Option 6
1.5 The Merger 7
1.6 Closing 8
1.7 Effective Time 8
2.1 The Certificate of Incorporation 8
2.2 The Bylaws 9
3.1 Directors 9
4.1 Effect on Capital Stock 9
4.2 Exchange of Certificates 10
4.3 Treatment of Stock Plans 12
4.4 Adjustments to Prevent Dilution 13
5.1 Representations and Warranties of the Company 13
5.2 Representations and Warranties of Parent and Merger Sub
33
6.1 Interim Operations 35
6.2 Acquisition Proposals 39
6.3 Proxy Statement 42
6.4 Stockholders Meeting 42
6.5 Filings; Other Actions; Notification 43
6.6 Access and Reports 44
6.7 Stock Exchange De-listing 44
6.8 Publicity 45
6.9 Employee Benefits 45
6.10 Expenses 45
6.11 Indemnification; Directors' and Officers' Insurance 45
6.12 Other Actions by the Company 47
7.1 Conditions to Each Party's Obligation to Effect the Merger
48
7.2 Conditions to Obligations of Parent and Merger Sub 49
8.1 Termination 49
8.2 Effect of Termination and Abandonment 50
9.1 Survival 51
9.2 Modification or Amendment 51
9.3 Waiver of Conditions 52
9.4 Counterparts 52
9.5 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL; SPECIFIC
PERFORMANCE. 52
9.6 Notices 53
9.7 Entire Agreement 54
9.8 No Third Party Beneficiaries 54
9.9 Obligations of Parent and of the Company 54
9.10 Definitions 55
9.11 Severability 55
9.12 Interpretation; Construction 55
9.13 Assignment 56
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "
Agreement "), dated as of February 22, 2008, by and among
Varsity Group Inc., a Delaware corporation (the " Company
"), VGI Holdings Corp., a Delaware corporation (" Parent "),
and VGI Acquisition Corp., a Delaware corporation and a
wholly-owned direct subsidiary of Parent (" Merger Sub
").
RECITALS
WHEREAS, the respective boards of directors of each of Parent,
Merger Sub and the Company have approved the merger of Merger Sub
with and into the Company (the " Merger ") upon the terms
and subject to the conditions set forth in this Agreement and have
approved and declared advisable this Agreement; and
WHEREAS, the Company, Parent and Merger Sub desire to make
certain representations, warranties, covenants and agreements in
connection with this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained
herein, the parties hereto agree as follows:
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THE OFFER AND THE MERGER; CLOSING; EFFECTIVE
TIME
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- The Offer .
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- Subject to the conditions set forth in Exhibit 1 ,
Merger Sub shall, as promptly as practicable and in no event later
than ten (10) Business Days after the date hereof, commence (within
the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the " Exchange Act ")) a tender offer to
purchase all of the outstanding shares of common stock, par value
$0.0001 per share of the Company (the " Shares ") at a price
of $0.20 per Share in cash, net to the seller but subject to any
required withholding of Taxes (as required by Section 4.2(g)
) (such tender offer and price, the " Offer " and the "
Offer Price ," respectively). The obligations of Merger Sub
to, and of Parent to cause Merger Sub to, commence the Offer and
accept for payment, and pay for, any Shares tendered pursuant to
the Offer are subject only to the conditions set forth in
Exhibit 1 . The initial expiration date of the Offer shall
be midnight (New York City time) on the date which is 20 Business
Days from the date on which the Offer was commenced (determined as
provided in Rule 14d-1(g)(3) under the Exchange Act) (the initial "
Expiration Date " and any expiration time and date
established pursuant to an extension of the Offer as so extended in
accordance with this Agreement, also an " Expiration Date
"). Merger Sub expressly reserves the right (i) if the Minimum
Tender Condition (as defined in Exhibit 1 ) has not been
satisfied or if a Change of Recommendation has been made, to
increase the Offer Price and (ii) to waive any condition to the
Offer or modify the terms of the Offer, except that, without the
prior written consent of the Company, Merger Sub shall not (u)
reduce the number of Shares subject to the Offer, (v) reduce the
Offer Price, (w) modify or amend the Minimum Tender Condition, (x)
add to the conditions set forth in Exhibit 1 or modify or
amend any condition set forth in Exhibit 1 in any manner
adverse to the holders of Shares or which would reasonably be
expected to, individually or in the aggregate, prevent or
materially delay the consummation of the Offer by Parent or Merger
Sub, (y) except as otherwise provided in this Section 1.1(a)
, extend the Offer or (z) change the form of consideration payable
in the Offer. Notwithstanding the foregoing, Merger Sub may, in its
discretion, without the consent of the Company, (A) extend the
Offer for one or more consecutive increments of not more than ten
Business Days each, if at any otherwise scheduled Expiration Date
of the Offer any of the conditions to Merger Sub's obligation to
purchase Shares are not satisfied or waived, (B) extend the Offer
for the minimum period required by any rule, regulation,
interpretation or position of the Securities and Exchange
Commission (the " SEC ") or the staff thereof applicable to
the Offer or (C) make available a "subsequent offering period" in
accordance with Exchange Act Rule 14d-11. In addition, if at any
otherwise scheduled Expiration Date of the Offer any condition to
the Offer is not satisfied or waived, Merger Sub shall, and Parent
shall cause Merger Sub to, extend the Offer at the request of the
Company for one or more consecutive increments of not more than ten
Business Days each until the earlier of the termination of this
Agreement in accordance with its terms and the date that is the
thirtieth (30 th ) Business Day after the commencement
of the Offer (the initial " Outside Date ," provided that
Parent may, in its sole discretion, extend the Outside Date by
providing written notice to the Company, provided further that
Parent may not extend such date beyond May 30, 2008, also an "
Outside Date "). In addition, Merger Sub shall, if requested
by the Company, make available a subsequent offering period in
accordance with Exchange Act Rule 14d-11 of not less than ten
Business Days; provided, that Merger Sub shall not be required to
make available such a subsequent offering period in the event that,
prior to the commencement of such subsequent offering period,
Parent and Merger Sub, directly or indirectly, own more than 90% of
the outstanding Shares. On the terms and subject to the conditions
of the Offer and this Agreement, Merger Sub shall, and Parent shall
cause Merger Sub to, accept and pay for all Shares validly tendered
and not withdrawn pursuant to the Offer that Merger Sub becomes
obligated to purchase pursuant to the Offer as soon as practicable
after the expiration of the Offer, and, in any event, in compliance
with Rule 14e-1 under the Exchange Act (the date of acceptance and
payment for Shares validly tendered and not withdrawn pursuant to
the Offer, the " Purchase Date "). Without the prior written
consent of the Company (which it may withhold in its sole
discretion), Parent shall cause Merger Sub not to, and Merger Sub
shall not, accept for payment or pay for any Shares in the Offer
if, as a result, Merger Sub would acquire 50% or less of the
aggregate number of Shares outstanding at the time of the
expiration of the Offer.
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For purposes of this Agreement, the term " Business Day "
shall have the meaning assigned to such term in Rule 14d-1(g)(3)
under the Exchange Act.
- On the date of commencement of the Offer, Parent and Merger Sub
shall file with the SEC, pursuant to and in accordance with Rule
14d-3 and Regulation M-A under the Exchange Act , a Tender Offer
Statement on Schedule TO with respect to the Offer, which shall
contain an offer to purchase the Shares and a related letter of
transmittal (such Schedule TO and the documents included therein
pursuant to which the Offer will be made, together with any
supplements or amendments thereto, the " Offer Documents ")
and shall cause the Offer Documents to be disseminated to holders
of Shares as and to the extent required by the applicable federal
securities Laws and the rules and regulations of the SEC thereunder
(collectively, the " Securities Laws "). The Offer Documents
shall comply in all material respects with the Securities Laws.
Each of Parent, Merger Sub and the Company agrees to use all
reasonable best efforts to respond promptly to any comments of the
SEC or its staff with respect to the Offer Documents or the Offer
and to promptly correct any information provided by it for use in
the Offer Documents if and to the extent that such information is
or shall become false or misleading in any material respect or as
otherwise required by the Securities Laws. Parent and Merger Sub
shall take all steps necessary to amend or supplement the Offer
Documents and to cause the Offer Documents, as so amended or
supplemented, to be filed with the SEC and to be disseminated to
the holders of Shares, in each case as and to the extent required
by the Securities Laws. Parent and Merger Sub shall deliver copies
of the proposed form of the Offer Documents to the Company, and the
Company and its counsel shall be given an opportunity to review and
comment on the Offer Documents (including any amendments or
supplements thereto), in each case, within a reasonable time before
they are filed with the SEC or disseminated to the holders of
Shares. Parent and Merger Sub shall provide the Company and its
counsel with copies of any written comments, and shall inform them
of any oral comments, that Parent, Merger Sub or their counsel
receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments and shall
give the Company a reasonable opportunity to review and comment on
any written or oral responses to such comments. Parent and Merger
Sub agree to use all reasonable best efforts to respond promptly to
any comments of the SEC or its staff with respect to the Offer
Documents. In connection with the Offer, Parent shall at its
expense engage an information agent of national reputation
reasonably acceptable to the Company. The Company hereby consents
to the inclusion in the Offer Documents of the recommendations of
the board of directors of the Company (the " Company Board
") described in Section 5.1(c)(ii) , as such recommendations
may be amended and until such recommendations may be withdrawn, in
each case as permitted by this Agreement.
- Company Actions .
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- On the date the Offer Documents are first filed with the SEC,
the Company shall file with the SEC a Tender Offer
Solicitation/Recommendation Statement on Schedule 14D-9 with
respect to the Offer, which shall contain the Company
Recommendation, as such Company Recommendation may be amended
(together with all amendments, supplements and exhibits thereto,
the " Schedule 14D-9 "), and shall cause the Schedule 14D-9
to be released to Parent and Merger Sub to be disseminated to the
holders of Shares with the Offer Documents, in each case in a
manner that complies with Rule 14d-9 under the Exchange Act and the
Securities Laws. The Schedule 14D-9 will comply as to form in all
material respects with the Securities Laws. The Company shall
deliver copies of the proposed form of the Schedule 14D-9 to
Parent, and Parent and its counsel shall be given an opportunity to
review and comment on the Schedule 14D-9 (including any amendments
or supplements thereto), in each case, within a reasonable time
before it is filed with the SEC or disseminated to holders of
Shares. Each of the Company, Parent and Merger Sub shall use all
reasonable best efforts to promptly correct any information
provided by it for use in the Schedule 14D-9 if and to the extent
that such information is or shall have become false or misleading
in any material respect or as otherwise required by the Securities
Laws. The Company shall take all steps necessary to amend or
supplement the Schedule 14D-9 and to cause the Schedule 14D-9, as
so amended or supplemented, to be filed with the SEC and to be
disseminated to the holders of Shares, in each case as and to the
extent required by the Securities Laws. The Company shall provide
Parent and its counsel with copies of any written comments, and
shall inform them of any oral comments, that the Company or its
counsel receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt of such comments and
shall give Parent a reasonable opportunity to review and comment on
any written or oral responses to such comments. The Company agrees
to use all reasonable best efforts to respond promptly to any
comments of the SEC or its staff with respect to the Schedule
14D-9.
- In connection with the Offer, the Company shall promptly after
execution of this Agreement furnish or cause to be furnished to
Merger Sub (i) a list of the names and addresses of the record
holders of Shares as of the most recent practicable date, as well
as mailing labels containing such names and addresses and (ii)
security position lists, computer files and any other information
identifying the beneficial owners of Shares as of the most recent
practicable date which the Company or its transfer agent have in
its possession or control or can obtain without unreasonable effort
or expense. The Company will furnish or cause to be furnished to
Merger Sub such additional information (including updates of the
items provided pursuant to the preceding sentence) and such other
assistance as Parent may reasonably request in communicating the
Offer to the record and beneficial owners of Shares. Subject to the
requirements of applicable Law and the Confidentiality Agreement,
and except for such steps as are necessary to disseminate the Offer
Documents and any other documents necessary to consummate the
Offer, the Merger and the Transactions, Parent and Merger Sub and
their agents shall hold in confidence the information contained in
any such labels, listings and files, will use such information only
in connection with the Transactions and, if this Agreement shall be
terminated, will, upon request, deliver, and will use their
reasonable best efforts to cause their agents to deliver, to the
Company all copies of such information then in their possession or
control. For purposes of this Agreement the term "
Transactions " shall mean collectively, (x) the Offer, the
Merger and the other transactions contemplated by this Agreement,
(y) the transactions contemplated by the Amended and Restated Loan
Agreement (the " Loan Agreement ") between VGI Financial
Corp., a Delaware corporation (" Finance Corp. "), and the
Company, and (z) the transactions contemplated by the Warrant,
including the issuance of shares of Common Stock upon exercise of
the Warrant
- Company Directors .
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- Promptly upon the purchase of, and payment for, any Shares by
Merger Sub pursuant to the Offer which represent at least such
number of Shares as shall satisfy the Minimum Tender Condition and
at all times thereafter, Merger Sub shall be entitled to elect or
designate to the Company Board such number of directors, rounded up
to the next whole number, as is equal to the product of the total
number of directors on the Company Board (giving effect to the
directors elected or designated by Merger Sub pursuant to this
sentence) multiplied by the percentage of the outstanding Shares
that are then beneficially owned by Merger Sub and its affiliates
including all Shares purchased in the Offer (but excluding Shares
held by the Company or any of its Subsidiaries) bears to the number
of Shares outstanding (determined on a fully diluted basis). As
used in this Agreement, the terms " beneficial ownership "
(and its correlative terms) and " affiliate " shall have the
meanings assigned to such terms in Rule 13d-3 and Rule 12b-2 under
the Exchange Act, respectively. Upon any exercise of such right by
Merger Sub and so long as Merger Sub shall comply with its
obligations set forth in the penultimate sentence of this
Section 1.3(a) , the Company shall use its best efforts to
take all such actions as are necessary to (i) elect or designate to
the Company Board the individuals designated by Merger Sub and
permitted to be so elected or designated by the preceding sentence,
including but not limited to promptly filling vacancies or newly
created directorships on the Company Board, increasing the size of
the Company Board (including by amending the bylaws of the Company,
if necessary, so as to increase the size of the Company Board)
and/or securing the resignations of such number of its incumbent
directors, and (ii) cause the directors so elected or designated to
constitute the same percentage (rounded up to the next whole
number) of the members of each committee of the Company Board as
such directors represent of the Company Board, in each case to the
fullest extent permitted by applicable Law and the rules of the
Nasdaq Global Market (" Nasdaq "). The Company's obligations
under this Section 1.3(a) shall be subject to Section 14(f)
of the Exchange Act and Rule 14f-1 promulgated thereunder. The
Company shall promptly upon execution of this Agreement take all
actions required pursuant to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder in order to fulfill its
obligations under this Section 1.3(a) , including mailing to
stockholders (together with the Schedule 14D-9) the information
required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder as is necessary to enable Merger Sub's
designees to be elected or designated to the Company Board. Merger
Sub shall supply on a timely basis the Company with, and be solely
responsible for, information and consents with respect to Merger
Sub's designees and Parent's and Merger Sub's respective officers,
directors and affiliates to the extent required by Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder. The
provisions of this Section 1.3(a) are in addition to and
shall not limit any rights that any of Merger Sub, Parent or any of
their respective affiliates may have as a holder or beneficial
owner of Shares as a matter of applicable Law with respect to the
election of directors or otherwise.
- In the event that Merger Sub's designees are elected or
designated to the Company Board pursuant to Section 1.3(a) ,
then, until the Effective Time, the Company and Parent shall use
reasonable best efforts to cause (i) the members of the Company
Board on the date of this Agreement (the " Existing
Directors ") to remain as directors on the Company Board, (ii)
the Existing Directors to remain as members of the audit committee
of the Company Board and (iii) such audit committee to comply with
all requirements of the Securities Laws and Nasdaq applicable
thereto (collectively, the " Audit Committee Requirements
"). If any Existing Director is unable to serve due to death,
disability or resignation, then the remaining Existing Director(s)
(or, if none of the Existing Directors are then in office, the
members of the Company Board) shall be entitled to elect or
designate another Person (or Persons) who, to the extent such
person shall be a member of the audit committee of the Company
Board, will satisfy the Audit Committee Requirements to fill such
vacancy and each such Person shall be deemed to be an Existing
Director for purposes of this Agreement. Notwithstanding anything
in this Agreement to the contrary, following the time the directors
designated by Merger Sub are elected or appointed to the Company
Board and prior to the Effective Time, the affirmative vote of a
majority of the Existing Directors shall be required to (w) amend
or terminate this Agreement on behalf of the Company, (x) exercise
or waive any of the Company's rights or remedies hereunder or any
term of the Guarantee, (y) extend the time for performance of
Parent's or Merger Sub's obligations hereunder or those under the
Guarantee or (z) take any other action by the Company in connection
with this Agreement and the Transactions (including with respect to
the Guarantee) required to be taken by the Company Board. Prior to
the Effective Time, the Existing Directors as a group shall be
entitled to retain one firm of legal counsel at the Company's
expense if determined to be appropriate by the Existing Directors
for the purpose of fulfilling their obligations hereunder, and
shall have authority after the Purchase Date and prior to the
Effective Time to institute and maintain any action on behalf of
the Company to enforce the performance of this Agreement in
accordance with its terms; provided , however , that
Parent shall have received at least five (5) Business Days' prior
notice of the commencement of any such action. For purposes of this
Agreement, the term " Guarantee " shall mean the guarantee
dated as of the date hereof executed by Follett Corporation, an
Illinois corporation (" Guarantor "), and delivered to the
Company.
- The Top-Up Option .
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- The Company hereby grants to Merger Sub an irrevocable option
(the " Top-Up Option ") to purchase that number of Shares
(the " Top-Up Option Shares ") equal to the lowest number of
Shares that, when added to the number of Shares owned by Parent,
Merger Sub and their respective affiliates at the time of such
exercise, shall constitute one Share more than the number of Shares
necessary for Merger Sub to be merged into the Company pursuant to
Section 253 of the Delaware General Corporation Law (the "
DGCL "), at a price per Share equal to the Offer Price ( a "
Short Form Merger ").
- The Top-Up Option shall only be exercisable once in whole and
not in part within ten (10) Business Days after the Purchase Date;
provided, however, that notwithstanding anything in this Agreement
to the contrary the Top-Up Option shall not be exercisable and
shall terminate on the Purchase Date if (i) the number of Top-Up
Option Shares would exceed the number of authorized but unissued
Shares or (ii) after issuance of Shares pursuant to the Top-Up
Option, it will be insufficient to allow Merger Sub to effect the
Short Form Merger; and, provided, further, that the Top-Up Option
shall terminate concurrently with the termination of this Agreement
in accordance with its terms.
- Merger Sub shall be required to exercise the Top-Up Option if
the sum of the maximum number of Top-Up Option Shares issuable in
accordance with Sections 1.4(a) and (b) plus the
number of Shares then owned by Parent, Merger Sub and their
respective affiliates is at least 90% of the aggregate number of
Shares outstanding at such time. In such event, Merger Sub shall
notify the Company in writing that Merger Sub is exercising the
Top-Up Option and shall set forth in such notice (i) the number of
Shares owned by Parent, Merger Sub and their respective affiliates
immediately preceding the purchase of the Top-Up Option Shares and
(ii) the place and time for the closing of the purchase of the
Top-Up Option Shares (the " Top-Up Closing "). The Company
shall, as soon as practicable following receipt of such notice,
notify Parent and Merger Sub in writing of the number of Shares
then outstanding and the number of Top-Up Option Shares. At the
Top-Up Closing, Merger Sub shall pay the Company the aggregate
price required to be paid for the Top-Up Option Shares, at Merger
Sub's option, by either (x) wire transfer of immediately available
funds or (y) delivery of a full-recourse non-negotiable junior
unsecured subordinated promissory note bearing interest at the rate
of 6% per annum, compounding annually. At the Top-Up Closing, the
Company shall cause to be issued to Merger Sub a certificate
representing the Top-Up Option Shares.
- Parent and Merger Sub acknowledge that the Shares which Merger
Sub may acquire upon exercise of the Top-Up Option will not be
registered under the Securities Laws and will be issued in reliance
upon an exemption thereunder for transactions not involving a
public offering. Parent and Merger Sub represent and warrant to the
Company that Merger Sub is, or will be upon the purchase of the
Top-Up Option Shares, an "accredited investor," as defined in Rule
501 of Regulation D under the Securities Act. Merger Sub agrees
that the Top-Up Option and the Top-Up Options Shares to be acquired
upon exercise of the Top-Up Option are being and will be acquired
by Merger Sub for the purpose of investment and not with a view to,
or for resale in connection with, any distribution thereof (within
the meaning of the Securities Act).
- The Merger . Upon the terms and
subject to the conditions set forth in this Agreement, at the
Effective Time, Merger Sub shall be merged with and into the
Company and the separate corporate existence of Merger Sub shall
thereupon cease. The Company shall be the surviving corporation in
the Merger (sometimes hereinafter referred to as the " Surviving
Corporation "), and the separate corporate existence of the
Company, with all its rights, privileges, immunities, powers and
franchises, shall continue unaffected by the Merger, except as set
forth in Article II . The Merger shall have the effects
specified in the DGCL. Notwithstanding anything in this
Agreement to the contrary, but subject to Article VII , if,
at any time following the Purchase Date, Parent or Merger Sub or
any wholly-owned Subsidiary of Parent or Merger Sub shall own at
least 90% of the outstanding Shares, pursuant to the Offer or
otherwise, the parties hereto shall, subject to Article VII
, take all necessary and appropriate action to cause the Merger to
become effective as promptly as practicable after the satisfaction
of such threshold, without a meeting of stockholders of the
Company, pursuant to a Short Form Merger.
- Closing . Unless otherwise
mutually agreed in writing between the Company and Parent, the
closing for the Merger (the " Closing ") shall take place at
the offices of McDermott Will & Emery LLP, 227 West Monroe
Street, Chicago, Illinois, at 9:00 a.m. on the second Business
Day (the " Closing Date ") following the day on which the
last to be satisfied or waived of the conditions set forth in
Article VII shall be satisfied or waived in accordance with
this Agreement.
- Effective Time . As soon as
practicable following the Closing, the Company and Parent will
cause a Certificate of Merger (the " Delaware Certificate of
Merger ") to be executed, acknowledged and filed with the
Secretary of State of the State of Delaware as provided in Section
251 of the DGCL. The Merger shall become effective at the time when
the Delaware Certificate of Merger has been duly filed with the
Secretary of State of the State of Delaware or at such later time
as may be agreed by the parties in writing and specified in the
Delaware Certificate of Merger (the " Effective Time ").
Notwithstanding the foregoing, if Parent and Merger Sub own at
least 90% of the outstanding Shares after consummation of the Offer
and, if applicable, exercise of the Top-Up Option, then the parties
agree to effect the Merger without a meeting of stockholders of the
Company pursuant to Section 253 of the DGCL.
CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION-
- The Certificate of Incorporation .
The certificate of incorporation of the Company as in effect
immediately prior to the Effective Time shall, from and after the
Effective Time, be the certificate of incorporation of the
Surviving Corporation (the " Charter "), until duly amended
as provided therein or by applicable Laws, except that Article IV
of the Charter shall be amended to read in its entirety as follows:
"The total number of shares which the Corporation shall have the
authority to issue is 1,000 shares of common stock, par value $1.00
per share."
- The Bylaws . The parties hereto
shall take all actions necessary so that the bylaws of Merger Sub
in effect immediately prior to the Effective Time shall, from and
after the Effective Time, be the bylaws of the Surviving
Corporation (the " Bylaws "), until thereafter amended as
provided therein or by applicable Law.
DIRECTORS OF THE SURVIVING CORPORATION-
- Directors . The parties hereto shall
take all actions necessary so that the board of directors of Merger
Sub at the Effective Time shall, from and after the Effective Time,
be the directors of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance
with the Charter and the Bylaws.
- Officers . At and after the Effective Time, the officers
of the Company immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, except as Parent shall
otherwise provide in writing, until their successors are elected or
appointed and qualified or until their earlier death, resignation
or removal in accordance with the Charter and Bylaws.
EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES-
- Effect on Capital Stock . At the
Effective Time, as a result of the Merger and without any action on
the part of the holder of any capital stock of the
Company:
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- Merger Consideration . Each Share issued and outstanding
immediately prior to the Effective Time other than (i) Shares owned
by Parent, Merger Sub, any other direct or indirect wholly owned
Subsidiary of Parent or any affiliate of Parent or Merger Sub and
Shares owned by the Company or any direct or indirect wholly owned
Subsidiary of the Company, and in each case not held on behalf of
third parties, and (ii) Shares that are owned by stockholders ("
Dissenting Stockholders ") who have perfected and not
withdrawn a demand for appraisal rights pursuant to Section 262 of
the DGCL (each, a " Dissenting Share ," and collectively
with the Shares described in clause (i) of this Section
4.1(a) , the " Excluded Shares ")) shall be converted
into the right to receive an amount in cash equal to the Offer
Price (the " Per Share Merger Consideration "). At the
Effective Time, all of the Shares shall cease to be outstanding,
shall be cancelled and shall cease to exist, and each certificate
(a " Certificate ") formerly representing any of the Shares
(other than Excluded Shares) shall thereafter represent only the
right to receive the Per Share Merger Consideration, without
interest.
- Cancellation of Excluded Shares . Each Excluded Share
shall, by virtue of the Merger and without any action on the part
of the holder thereof, cease to be outstanding, shall be cancelled
without payment of any consideration therefor and shall cease to
exist, subject to any rights that Dissenting Stockholders who are
holders thereof may have under Section 4.2(f) .
- Merger Sub . At the Effective Time, each share of common
stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into one share of common stock of
the Surviving Corporation.
- Exchange of Certificates
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- Paying Agent . At or prior to the Effective Time, Parent
shall deposit or cause to be deposited to an independent paying
agent selected by Parent with the Company's prior written approval,
which shall not be unreasonably withheld (the " Paying Agent
"), an amount in cash equal to the aggregate Per Share Merger
Consideration payable pursuant to Section 4.1(a) (such cash
being hereinafter referred to as the " Exchange Fund "). The
Paying Agent agreement pursuant to which Parent shall appoint the
Paying Agent shall be in form and substance reasonably acceptable
to the Company.
- Exchange Procedures . Promptly after the Effective Time
(and in any event within three Business Days), the Surviving
Corporation shall cause the Paying Agent to mail to each holder of
record of Shares (other than holders of Excluded Shares) (i) a
letter of transmittal in customary form specifying that delivery
shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates (or affidavits
of loss in lieu thereof as provided in Section 4.2(e) ) to
the Paying Agent, such letter of transmittal to be in such form and
have such other provisions as Parent and the Company may reasonably
agree, and (ii) instructions for use in effecting the
surrender of the Certificates (or affidavits of loss in lieu
thereof as provided in Section 4.2(e) ) in exchange for the
aggregate Per Share Merger Consideration for the number of Shares
represented by such Certificates. Upon surrender of a Certificate
(or affidavit of loss in lieu thereof as provided in Section
4.2(e) ) to the Paying Agent in accordance with the terms of
such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a
cash amount in immediately available funds (after giving effect to
any required Tax withholdings as provided in Section 4.2(g)
) equal to (x) the number of Shares represented by such Certificate
(or affidavit of loss in lieu thereof as provided in Section
4.2(e) ) multiplied by (y) the Per Share Merger Consideration,
and the Certificate so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on any amount payable upon due
surrender of the Certificates. In the event of a transfer of
ownership of Shares that is not registered in the transfer records
of the Company, a check for any cash to be exchanged upon due
surrender of the Certificate may be issued to such transferee if
the Certificate formerly representing such Shares is presented to
the Paying Agent, accompanied by all documents required to evidence
and effect such transfer and to evidence that any applicable stock
transfer Taxes have been paid or are not applicable.
- Transfers . From and after the Effective Time, there
shall be no transfers on the stock transfer books of the Company of
the Shares that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, any Certificate is presented to
the Surviving Corporation, Parent or the Paying Agent for transfer,
it shall be cancelled and exchanged for the cash amount in
immediately available funds to which the holder thereof is entitled
pursuant to this Article IV .
- Termination of Exchange Fund . Any portion of the
Exchange Fund (including the proceeds of any investments thereof)
that remains unclaimed by the stockholders of the Company for 180
days after the Effective Time shall be delivered to the Surviving
Corporation. Any holder of Shares (other than Excluded Shares) who
has not theretofore complied with this Article IV shall
thereafter look only to the Surviving Corporation for payment of
the Per Share Merger Consideration (after giving effect to any
required Tax withholdings as provided in Section 4.2(g) )
upon due surrender of its Certificates (or affidavits of loss in
lieu thereof), without any interest thereon. Notwithstanding the
foregoing, none of the Surviving Corporation, Parent, the Paying
Agent or any other Person shall be liable to any former holder of
Shares for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar Laws.
For the purposes of this Agreement, the term " Person "
shall mean any individual, corporation (including not-for-profit),
general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, Governmental
Entity or other entity of any kind or nature.
- Lost, Stolen or Destroyed Certificates . In the event
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 reasonably
required by Parent, the posting by such Person of a bond in
customary amount and upon such terms as may be reasonably required
by Parent as indemnity against any claim that may be made against
it or the Surviving Corporation with respect to such Certificate,
the Paying Agent will issue a check in the amount (after giving
effect to any required Tax withholdings) equal to the number of
Shares represented by such lost, stolen or destroyed Certificate
multiplied by the Per Share Merger Consideration.
- Appraisal Rights . No Person who has perfected a demand
for appraisal rights pursuant to Section 262 of the DGCL shall be
entitled to receive the Per Share Merger Consideration with respect
to the Shares owned by such Person unless and until such Person
shall have effectively withdrawn or lost such Person's right to
appraisal under the DGCL. Each Dissenting Stockholder shall be
entitled to receive only the payment provided by Section 262 of the
DGCL with respect to Shares owned by such Dissenting Stockholder.
The Company shall give Parent (i) prompt notice of any demand for
appraisal, any attempted withdrawal of such demands, any other
instruments served pursuant to applicable Law and any other
communications that are received by the Company relating to
stockholders' rights of appraisal and (ii) the right to participate
in and direct all negotiations, discussions and proceedings with
respect to such demands for appraisal under the DGCL. The Company
shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demands for
appraisal, offer to settle or settle any such demands, approve any
withdrawal of any such demands or agree to do any of the
foregoing.
- Withholding Rights . Each of Parent, the Surviving
Corporation and the Paying Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Shares such amounts as it is required to
deduct and withhold with respect to the making of such payment
under the Internal Revenue Code of 1986, as amended (the "
Code "), or any other applicable state, local or foreign Tax
Law. To the extent that amounts are so withheld by the Surviving
Corporation, Parent or the Paying Agent, as the case may be, such
withheld amounts (i) shall be remitted by Parent, the
Surviving Corporation or the Paying Agent, as applicable, to the
applicable Governmental Entity, and (ii) shall be treated for all
purposes of this Agreement as having been paid to the holder of
Shares in respect of which such deduction and withholding was made
by the Surviving Corporation, Parent or the Paying Agent, as the
case may be.
- Treatment of Stock Plans
.
-
-
- Treatment of Options . At the Effective Time each
outstanding option to purchase Shares (a " Company Option ")
under the Stock Plans, vested or unvested, shall be cancelled and
shall only entitle the holder of such Company Option to receive, as
soon as reasonably practicable after the Effective Time (and in any
event within five Business Days), an amount in cash equal to the
product of (i) the total number of Shares subject to the Company
Option (without regard to any vesting provisions thereof) times
(ii) the excess, if any, of the Per Share Merger Consideration over
the exercise price per Share under such Company Option less
applicable Taxes required to be withheld with respect to such
payment.
- Corporate Actions . At or prior to the date hereof, the
Company, the Company Board and the compensation committee of the
Company Board, as applicable, shall adopt any resolutions and take
any actions which are reasonably required by Parent to effectuate
the provisions of Section 4.3(a) , including any action to
approve the disposition of the Company Options in connection with
the Transactions to the extent necessary to exempt such disposition
under Rule 16b-3 of the Exchange Act. The Company shall take all
actions reasonably required by Parent to terminate the Stock Plans
as of the Effective Time and to ensure that after the Effective
Time neither Parent nor the Surviving Corporation will be required
to deliver Shares or other capital stock of the Company, Parent,
the Surviving Corporation or any of their respective affiliates to
any Person pursuant to or in settlement of Company Options.
- Amounts Withheld . To the extent that amounts are so
withheld in respect of Taxes by the Paying Agent, the Surviving
Corporation or Parent, as the case may be, pursuant to Section
4.3(a) , such withheld amounts (i) shall be remitted by the
Paying Agent, Parent or the Surviving Corporation, as applicable,
to the applicable Governmental Entity, and (ii) shall be treated
for all purposes of this Agreement as having been paid to the
holder of Company Options in respect of which such deduction and
withholding was made by the Paying Agent, the Surviving Corporation
or Parent, as the case may be.
- Notice . As soon as practicable following the execution
of this Agreement, the Company shall mail to each person who is a
holder of Company Options a letter approved in advance by Parent
describing the treatment of and payment for such Company Options
pursuant to this Section 4.3 and providing instructions for
use in obtaining payment for such Company Options.
- Adjustments to Prevent Dilution
. In the event that the Company changes the number of Shares or
securities convertible or exchangeable into or exercisable for
Shares issued and outstanding prior to the Effective Time as a
result of a reclassification, stock split (including a reverse
stock split), stock dividend or distribution, recapitalization,
merger, issuer tender or exchange offer, or other similar
transaction, the Offer Price and the Per Share Merger Consideration
shall be equitably adjusted.
REPRESENTATIONS AND WARRANTIES-
- Representations and Warranties of
the Company . Except as disclosed or incorporated by
reference in the Company Reports filed with the SEC on or prior to
the date hereof (excluding, in each case, any disclosures set forth
in any risk factor section and in any section included pursuant to
the Private Securities Litigation Reform Act of 1995, except to the
extent such disclosures in the risk factor sections or in the
sections included pursuant to the Private Securities Litigation
Reform Act of 1995 consist of factual historical statements (e.g.,
factual descriptions of the performance, results of operations,
assets, liabilities or financial condition of the Company and its
Subsidiaries)) or in the corresponding sections or subsections of
the disclosure letter delivered to Parent by the Company prior to
entering into this Agreement (the " Company Disclosure
Letter ") (it being agreed that disclosure of any item in any
section of the Company Disclosure Letter shall provide an exception
to or otherwise qualify the representations and warranties of the
Company specifically referred to in such disclosure and such other
representations and warranties to the extent such disclosure shall
readily appear from the substance of such disclosure to be
applicable to such other representations and warranties), the
Company hereby represents and warrants to Parent and Merger Sub
that:
-
-
- Organization, Good Standing and Qualification . Each of
the Company and its Subsidiaries is a legal entity duly organized,
validly existing and (to the extent such concept is applicable) in
good standing under the Laws of its respective jurisdiction of
organization and has all requisite corporate or similar power and
authority to own, lease and operate its properties and assets and
to carry on its business as presently conducted and is qualified to
do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership, leasing or operation of its
assets or properties or conduct of its business requires such
qualification, except where the failure to be so organized,
qualified or in good standing, or to have such power or authority,
could not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect. The Company has made
available to Parent complete and correct copies of the Company's
and its Subsidiaries' certificates of incorporation and bylaws or
comparable governing documents, each as amended to the date hereof,
and each as so delivered is in full force and effect. Section
5.1(a) of the Company Disclosure Letter contains a correct and
complete list of each jurisdiction where the Company and its
Subsidiaries are organized and qualified to do business.
-
As used in this Agreement, the term (i) " Subsidiary "
means, with respect to any Person, any other Person of which at
least a majority of the securities or ownership interests having by
their terms ordinary voting power to elect a majority of the board
of directors or other persons performing similar functions is
directly or indirectly owned or controlled by such Person and/or by
one or more of its Subsidiaries, (ii) " Significant
Subsidiary " is as defined in Rule 1-02(w) of Regulation S-X
promulgated pursuant to the Exchange Act, (iii) " School
Customer " means any school, college or other educational
entity set forth or required to be set forth on Section
5.1(k)(i)(B) of the Company Disclosure Letter that has
authorized the Company or any of its Subsidiaries to sell new or
used books to the students, faculty or parents of such school,
college or other educational entity, (iv) " Material School
Customer " means (A) any two of the five School Customers with
respect to which the Company or any of its Subsidiaries generated
the largest amount of revenue during the fiscal year ended December
31, 2007 or (B) any group of School Customers with respect to which
the Company or any of its Subsidiaries generated at least
$3,500,000, in the aggregate, of revenue during the fiscal year
ended December 31, 2007, and (v) " Material Adverse Effect "
means (A) a material adverse effect on the financial condition,
properties, assets, liabilities, business, or results of operations
of the Company and its Subsidiaries taken as a whole;
provided , however , that none of the following, in
and of itself or themselves, shall constitute a Material Adverse
Effect:
(1) changes in the United States economy or the securities,
credit or financial markets in general or changes affecting the
industries in which the Company and its Subsidiaries conduct their
business, so long as such changes do not disproportionately affect
the Company or its Subsidiaries relative to other companies of
similar size operating in the same industry in which the Company
and its Subsidiaries operate;
(2) any change in United States generally accepted accounting
principles (" GAAP ") or interpretation thereof, in each
case, applicable to the Company and its Subsidiaries after the date
of this Agreement;
(3) any changes directly resulting from acts of terrorism or
war, so long as such changes do not disproportionately affect the
Company or its Subsidiaries relative to other companies of similar
size operating in the same industry in which the Company and its
Subsidiaries operate;
(4) a decline in the price or trading value of the Shares on
Nasdaq, provided that the exception in this clause shall not
prevent or otherwise affect a determination that any change,
effect, circumstance or development underlying such decline has
resulted in, or contributed to, a Material Adverse Effect;
(5) any failure of the Company to meet internal or published
projections, forecasts or revenue or earning predictions for any
period, provided, that the exception in this clause shall not
prevent or otherwise affect a determination that any change,
effect, circumstance or development underlying such failure has
resulted in, or contributed to, a Material Adverse Effect;
(6) any event, circumstance, development, change or effect
directly resulting from an announcement that the Company's auditors
have delivered or indicated that they will deliver a "going
concern" exception to the Company's financial statements;
(7) any event, circumstance, development, change or effect
directly resulting from a refusal by Finance Corp. to advance funds
to the Company in breach of Finance Corp.'s obligations under the
Loan Agreement; or
(8) the sale, shut-down or liquidation of Campus Outfitters,
L.L.C. so long as the net cash flow generated from such sale,
shut-down or liquidation (including any cash needed to pay any
liabilities or obligations incurred in connection with or arising
as a result of such sale, shut-down or liquidation) is not less
than negative $300,000; provided, that in the case of a sale of the
membership interests or material assets of Campus Outfitters,
L.L.C., for purposes of calculating the net cash flow, if the
purchaser forgives any amounts owed by the Company to such
purchaser, then the amount forgiven shall be deemed a receipt of
cash in such amount;
or (B) any Material School Customer or Material School Customers
shall have ceased or threatened to cease or materially reduce the
amount of business that such Material School Customer or Material
School Customers do with the Company or any of its Subsidiaries (on
a consolidated basis); or (C) any Material School Customer or
Material School Customers shall have modified or threatened to
modify any terms of such Material School Customer's or Material
School Customers' existing Contracts with the Company or any of its
Subsidiaries which modification would reasonably be expected to
materially and adversely affect the relationship between such
Material School Customer or Material School Customers and the
Company or its Subsidiaries or the benefit to the Company or such
Subsidiary of such Contract, in each case which is not cured to the
reasonable satisfaction of Merger Sub prior to the Purchase Date;
or (D) any supplier or group of suppliers of new or used books that
were paid at least $500,000 by the Company and its Subsidiaries
during the fiscal year ended December 31, 2007 shall have ceased or
threatened to cease or materially reduce the amount of business
that such supplier or suppliers do with the Company or any of its
Subsidiaries (on a consolidated basis), or materially and adversely
modified or threatened to materially and adversely modify any term
of such supplier or suppliers' existing Contracts with the Company
or any of its Subsidiaries; provided , however , that
items disclosed on Section 5.1(a) of the Company Disclosure
Letter will not be considered in determining whether any
change, event, circumstance or development has occurred that has
had, or is reasonably expected to result in, a Material Adverse
Effect pursuant to Sections 5.1(a)(v)(B) , (C) or
(D) .
- Capital Structure .
-
- The authorized capital stock of the Company consists of
60,000,000 Shares and 20,000,000 shares of Preferred Stock, par
value $0.0001 per share (the " Preferred Stock "), of which
18,960,655 Shares and no shares of Preferred Stock were outstanding
as of the close of business on the date hereof. All of the
outstanding Shares have been duly authorized and are validly
issued, fully paid and nonassessable. Other than 3,112,646 Shares
reserved for issuance under the Company's plans disclosed in
Section 5.1(b)(i) of the Company Disclosure Letter (the "
Stock Plans "), the Top-Up Option, and that certain Warrant
dated as of the date hereof issued by the Company to Finance Corp.
(the " Warrant "), the Company has no Shares reserved for
issuance. Section 5.1(b)(i) of the Company Disclosure Letter
contains a correct and complete list of options, restricted stock,
and other stock under the Stock Plans, including the holder, date
of grant, number of Shares and exercise price. Each of the
outstanding shares of capital stock or other securities of each of
the Company's Subsidiaries is duly authorized, validly issued,
fully paid and nonassessable and owned by the Company or by a
direct or indirect wholly-owned Subsidiary of the Company, free and
clear of any liens, charges, pledges, security interests, claims or
other encumbrances, except any encumbrances for Taxes or other
governmental charges that are not yet due and payable and liens
under the Loan Agreement (each, a " Lien "). Except as set
forth above, for the Top-Up Option and the Warrant, or as set forth
in Section 5.1(b)(i) of the Company Disclosure Letter ,
there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption
rights, repurchase rights, agreements, arrangements, calls,
commitments or rights of any kind that obligate the Company or any
of its Subsidiaries to issue or sell any shares of capital stock or
other securities of the Company or any of its Subsidiaries or any
securities or obligations convertible or exchangeable into or
exercisable for, or giving any Person a right to subscribe for or
acquire, any securities of the Company or any of its Subsidiaries,
and no securities or obligations evidencing such rights are
authorized, issued or outstanding. Upon any issuance of any Shares
in accordance with the terms of the Stock Plans, such Shares will
be duly authorized, validly issued, fully paid and nonassessable
and free and clear of any Liens. Upon any issuance of Shares
pursuant to the Top-Up Option and the Warrant, such Shares will be
duly authorized, validly issued fully paid and nonassessable and
free and clear of any Liens. The Company does not have outstanding
any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or convertible into or exercisable
for securities having the right to vote) with the stockholders of
the Company on any matter. The Company does not have any rights
agreement or similar agreement with respect to its Preferred
Stock.
- Section 5.1(b)(ii) of the Company Disclosure Letter sets
forth (A) each of the Company's Subsidiaries and the ownership
interest of the Company in each such Subsidiary, as well as the
ownership interest of any other Person or Persons in each such
Subsidiary and (B) the Company's or its Subsidiaries' capital
stock, equity interest or other direct or indirect ownership
interest in any other Person other than securities in a publicly
traded company held for investment by the Company or any of its
Subsidiaries and consisting of less than 1% of the outstanding
capital stock of such company. The Company does not own, directly
or indirectly, any voting interest in any Person, the acquisition
of which would require an additional filing by Parent under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the " HSR Act ").
- Each Company Option, in all material respects, (A) was granted
in compliance with all applicable Laws and all of the terms and
conditions of the Company Stock Plan pursuant to which it was
issued, (B) qualifies for the tax and accounting treatment afforded
to such Company Option in the Company's Tax returns and the Company
Reports, respectively, (C) was otherwise properly disclosed in the
Company Reports filed on or prior to the date of this Agreement and
(D) has an exercise price at least equal to the fair market value
of a Share on a date no earlier than the date of the corporate
action authorizing the grant and has a grant date identical to the
date of the corporate action authorizing the grant. The Company has
provided to the Parent correct and complete copies of the Stock
Plans and the forms of all agreements evidencing the Company
Options. Except for the consents contemplated by clause (m) of
Exhibit 1 , no consent of the holder of any Company Option
is required in connection with the actions contemplated by
Section 4.3(a) , and such actions so contemplated comport
with the Stock Plans and the underlying agreements evidencing the
Company Options.
- Corporate Authority; Approval and Fairness .
-
- The Company has all requisite corporate power and authority and
has taken all corporate action necessary in order to execute,
deliver and perform its obligations under this Agreement to
consummate the Transactions, in each case subject only, if the
parties are unable to effect the Merger pursuant to Section 253 of
the DGCL, to adoption of this Agreement by the holders of a
majority of the outstanding Shares entitled to vote on such matter
at a stockholders' meeting duly called and held for such purpose
(the " Company Requisite Vote "). This Agreement has been
duly executed and delivered by the Company and, assuming due
authorization, execution and delivery by Parent and Merger Sub,
constitutes a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar Laws of general
applicability relating to or affecting creditors' rights and to
general equity principles (the " Bankruptcy and Equity
Exception ").
- Unless the Company has notified Parent and Merger Sub of a
Change of Recommendation in accordance with Section 6.2 ,
the Company Board has unanimously adopted resolutions (A)
approving, adopting and declaring advisable this Agreement and the
Transactions and determining that the terms of the Transactions are
fair to and in the best interests of the holders of the Shares and
(B) recommending that the holders of Shares accept the Offer,
tender their Shares to Merger Sub pursuant to the Offer, and adopt
this Agreement (the resolutions described in clauses (A) and (B)
are hereinafter referred to as the " Company Recommendation
"). The Company Board has taken all action so that each of Parent
and Merger Sub will not be an "interested stockholder" or
prohibited from entering into or consummating a "business
combination" with the Company (in each case as such term is used in
Section 203 of the DGCL) as a result of the execution of this
Agreement or the consummation of the Transactions.
- Governmental Filings; No Violations; Certain Contracts
.
-
- Other than (A) the filings, approvals and/or notices pursuant
to Section 1.1 , Section 1.2 , Section 1.7 and
Section 6.3 or (B) the filing and recordation of appropriate
documents for the Transactions as required by the relevant
authorities of the jurisdictions in which the Company is qualified
to do business, no material notices, reports or other filings are
required to be made by the Company with, nor are any material
consents, registrations, approvals, permits or authorizations
required to be obtained by the Company from, any domestic or
foreign governmental or regulatory authority, agency, commission,
body, court or other legislative, executive or judicial
governmental entity (each a " Governmental Entity "), in
connection with the execution, delivery and performance of this
Agreement by the Company and the consummation of the Transactions,
or to permit the continuing operation of the business of the
Company and its Subsidiaries following the Effective Time.
- The execution, delivery and performance of this Agreement by
the Company do not, and the consummation of the Transactions will
not, conflict with, or result in any violation of or default (with
or without notice or lapse of time, or both) under, or give rise to
a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or to increased,
additional, accelerated or guaranteed rights or entitlements of any
person under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries
under, any provision of (A) the certificate of incorporation or
bylaws of the Company or the comparable governing documents of any
of its Subsidiaries, (B) any Material Contract or (C) assuming
(solely with respect to performance of this Agreement and
consummation of the Transactions) compliance with the matters
referred to in Section 5.1(d)(i) , any Law to which the
Company or any of its Subsidiaries is subject.
Section 5.1(d)(ii) of the Company Disclosure Letter
sets forth a correct and complete list of Material Contracts
pursuant to which consents or waivers are or may be required prior
to consummation of the Transactions (whether or not subject to the
exception set forth with respect to clause (B) above).
- The Company and its Subsidiaries are not creditors or claimants
with respect to any debtor or debtor-in-possession subject to
proceedings under chapter 11 of title 11 of the United States Code
with respect to claims that, in the aggregate, constitute more than
5% of the gross assets of the Company and its Subsidiaries
(excluding cash and cash equivalents).
- Company Reports; Financial Statements .
-
- The Company has filed or furnished, as applicable, on a timely
basis all forms, statements, certifications, reports and documents
required to be filed or furnished by it with the SEC under the
Exchange Act since December 31, 2004 (the " Applicable Date
") (the forms, statements, reports and documents filed or furnished
since the Applicable Date and those filed or furnished subsequent
to the date hereof and prior to the Closing, including any
amendments thereto, the " Company Reports "). Each of the
Company Reports, at the time of its filing or being furnished
complied or, if not yet filed or furnished, will comply in all
material respects with the applicable requirements of the Exchange
Act, and any rules and regulations promulgated thereunder
applicable to the Company Reports. As of their respective dates
(or, if amended or superseded prior to the date hereof, as of the
date of such amendment or subsequently filed Company Report), the
Company Reports did not, and any Company Reports filed with or
furnished to the SEC subsequent to the date hereof will not,
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances in which
they were made, not misleading.
- Except as permitted by the Exchange Act, including Sections
13(k)(2) and (3) or rules of the SEC, since the enactment of the
Sarbanes-Oxley Act of 2002 (the " Sarbanes-Oxley Act "),
neither the Company nor any of its affiliates has made, arranged or
modified (in any material way) any extensions of credit in the form
of a personal loan to any executive officer or director of the
Company.
- To the knowledge of the Company, since December 31, 2004, (A)
neither the Company nor any of its Subsidiaries nor any current or
former director, officer, employee or auditor of the Company or
such Subsidiary has received or otherwise had or obtained knowledge
of any complaint, allegation, assertion or claim, whether written
or oral, alleging (x) a material deficiency or weakness in the
accounting or auditing practices, procedures, methodologies or
methods of the Company or any of its Subsidiaries or their
respective internal accounting controls or (y) any fraud, whether
or not material, that involves management or other employees who
have a significant role in the Company's internal control over
financial reporting, and (B) no attorney representing the Company
or any of its Subsidiaries, whether or not employed by the Company
or any of its Subsidiaries, has reported evidence of a violation of
the Securities Laws, breach of fiduciary duty or similar violation
by the Company or any of its officers, directors, employees or
agents to the Company's chief legal officer, audit committee (or
other committee designated for the purpose) of the Company Board or
the Company Board pursuant to the rules adopted pursuant to Section
307 of the Sarbanes-Oxley Act or any Company policy contemplating
such reporting, including in instances not required by those rules.
The Company has made available to Parent a summary of all
complaints, allegations, assertions or claims made since December
31, 2004 through the Company's whistleblower hot line or equivalent
system for receipt of employee concerns regarding possible
violations of Law.
- The consolidated balance sheets included in or incorporated by
reference into the Company Reports (including the related notes and
schedules) and the unaudited consolidated balance sheets,
statements of income, stockholders' equity and cash flows as of and
for the twelve month period ended December 31, 2007 that is
attached to Section 5.1(e)(iv) of the Company Disclosure
Letter (the " Unaudited 2007 Financials ") each fairly
presents, or, in the case of Company Reports filed after the date
hereof, will fairly present in all material respects the
consolidated financial position of the Company and its consolidated
Subsidiaries as of its date, and each of the consolidated
statements of income, stockholders' equity and cash flows included
in or incorporated by reference into the Company Reports (including
any related notes and schedules) and the Unaudited 2007 Financials
fairly presents, or in the case of Company Reports filed after the
date hereof, will fairly present in all material respects the
results of operations, retained earnings (loss) and changes in
financial position, as the case may be, of such companies for the
periods set forth therein (subject, in the case of unaudited
statements, to the absence of footnotes and to normal year-end
audit adjustments that will not be material in amount or effect),
in each case in accordance with GAAP consistently applied during
the periods involved, except as may be noted therein.
- All notes and accounts receivable reflected on the Unaudited
2007 Financials, and all accounts receivable of the Company and its
Subsidiaries generated since December 31, 2007 (the "
Receivables "), constitute bona fide receivables resulting
from the sale of inventory, services or other obligations in favor
of the Company and its Subsidiaries as to which full performance
has been fully rendered, and are valid and enforceable claims. The
Receivables are not subject to any material pending or, to the
knowledge of the Company, threatened defense, counterclaim, right
of offset, returns, allowances or credits, except to the extent
reserved against the accounts receivable. The reserves against the
accounts receivable for returns, allowances, chargebacks and bad
debts have been determined in accordance with GAAP in all material
respects, consistently applied in accordance with past custom and
practice.
- The accounts payable of the Company and its Subsidiaries
reflected on the Unaudited 2007 Financials arose from bona fide
transactions in the Ordinary Course of Business. Section
5.1(e)(iv) of the Company Disclosure Letter sets forth the
aggregate amount payable by the Company and its Subsidiaries to
Baker & Taylor, Inc.
- The Company and its Subsidiaries have good and marketable title
to, or a valid leasehold interest or license in, the properties and
assets (tangible and intangible) used by them, located on their
premises, or shown on the Unaudited 2007 Financials or acquired
after the date thereof, other than inventory sold in the Ordinary
Course of Business free and clear of all Liens. The assets,
properties and rights owned by the Company and its Subsidiaries are
all the assets, properties and rights used by the Company and its
Subsidiaries in the operation of the businesses, or necessary to
operate the businesses, of the Company and its Subsidiaries,
consistent with past practice.
- Information Supplied . None of the information supplied
or to be supplied by the Company for inclusion or incorporation by
reference in (A) the Offer Documents or the Schedule 14D-9 will, at
the time such document is filed with the SEC, at any time it is
amended or supplemented or at the time it is first published, sent
or given to the Company's stockholders, 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, or (B) the Proxy Statement will, at the
date it is first mailed to the Company's stockholders or at the
time of the Company Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
are made, not misleading. The Schedule 14D-9 and the Proxy
Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation or warranty
is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied by
or on behalf of Parent or any of its Subsidiaries for inclusion or
incorporation by reference in the Schedule 14D-9 and the Proxy
Statement.
- Absence of Certain Changes . Since December 31, 2007,
the Company and its Subsidiaries have conducted their respective
businesses only in, and have not engaged in any material
transaction other than in accordance with, the ordinary course of
such businesses consistent with past practices and there has not
been:
-
- any Material Adverse Effect (including any Material Adverse
Effect with respect to any circumstance, occurrence or development
existing on or prior to December 31, 2007);
- any material damage, destruction or other casualty loss with
respect to any material asset or property owned, leased or
otherwise used by the Company or any of its Subsidiaries, whether
or not covered by insurance;
- 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 of its Subsidiaries (except for dividends or
other distributions by any direct or indirect wholly owned
Subsidiary to the Company or to any wholly owned Subsidiary 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 the Company or any of its
Subsidiaries;
- any material change in any method of accounting or accounting
practice by the Company or any of its Subsidiaries, except as
required by GAAP and disclosed in the Company Reports filed on or
prior to the date hereof;
- (A) any increase in the compensation payable or to become
payable to its directors, officers or employees (except for
increases for employees who are not officers in the ordinary course
of business and consistent with past practices) or (B) any
establishment, adoption, entry into or amendment of any collective
bargaining, bonus, profit sharing, thrift, compensation,
employment, termination, severance or other plan, agreement, trust,
fund, policy or arrangement for the benefit of any director,
officer or employee, except to the extent required by applicable
Laws or as disclosed in the Company Reports filed on or prior to
the date hereof; or
- any agreement to do any of the foregoing.
- Litigation and Liabilities . There are no (i) civil,
criminal or administrative actions, suits, claims, hearings,
arbitrations, investigations or other proceedings pending or, to
the knowledge of the Company, threatened against the Company or any
of its Subsidiaries or (ii) except as reflected or reserved against
in the Company's consolidated balance sheets (and the notes
thereto) included in the Company Reports filed on or prior to the
date hereof and for obligations or liabilities incurred in the
ordinary course of business since December 31, 2007, obligations or
liabilities of the Company or any of its Subsidiaries, whether or
not accrued, contingent or otherwise and whether or not required to
be disclosed, or any other facts or circumstances that could
reasonably be expected to result in any material claims against, or
obligations or liabilities of, the Company or any of its
Subsidiaries, including those relating to matters involving any
Environmental Law. Neither the Company nor any of its Subsidiaries
is a party to or subject to the provisions of any material
judgment, order, writ, injunction, decree or award of any
Governmental Entity.
- Employee Benefits .
-
- All benefit and compensation plans, contracts, policies or
arrangements covering current or former employees or other service
providers of the Company and its Subsidiaries and current or former
directors of the Company (or their dependents, spouses or
beneficiaries), including, but not limited to, "employee benefit
plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (" ERISA
"), deferred compensation, severance, stock option, stock purchase,
stock appreciation rights, stock based, incentive and bonus plans
(the " Benefit Plans ") are listed on Section 5.1(i)(i)
of the Company Disclosure Letter , and each Benefit Plan which
has received a favorable determination or opinion letter from the
Internal Revenue Service National Office, including any master or
prototype plan, has been separately identified. With respect to
each Benefit Plan listed on Section 5.1(i)(i) of the Company
Disclosure Letter , the Company has made available to Parent
correct and complete copies of (A) the current plan document or, in
the case of an unwritten Benefit Plan, a written description of
such Benefit Plan, (B) any current determination or opinion letter
from the Internal Revenue Service (" IRS "), (C) the current
summary plan description and subsequent summaries of material
modifications, (D) the most recent annual report (Form 5500 series)
and summary annual report, (E) any trust instruments or insurance
contracts forming a part of such Benefit Plan, and (F) all
amendments thereto.
- Neither the Company nor any entity that is considered one
employer with the Company under Section 4001 of ERISA or Section
414 of the Code (an " ERISA Affiliate ") nor any predecessor
thereof sponsors, maintains or contributes to, or has in the past
sponsored, maintained or contributed to, any Benefit Plan subject
to Section 302 or Title IV of ERISA or Section 412 of the Code or
any multiemployer plan within the meaning of Section 4001(a)(3) or
3(37) of ERISA.
- All Benefit Plans comply in form, and have been operated in
compliance, in all material respects with their terms and the
requirements of ERISA, the Code and other applicable Laws. Each
Benefit
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