AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

 

Execution Version

 

 

AGREEMENT AND PLAN OF MERGER

 

among

 

TOYS “R” US, INC.,

 

GLOBAL TOYS ACQUISITION, LLC,

 

and

 

GLOBAL TOYS ACQUISITION MERGER SUB, INC.

 

Dated as of March 17, 2005

 

TABLE OF CONTENTS

 

 

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AGREEMENT AND PLAN OF MERGER dated as of March 17, 2005 (this “ Agreement ”) among Global Toys Acquisition, LLC, a Delaware limited liability company (“ Parent ”), Global Toys Acquisition Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“ Acquisition Sub ”) and Toys “R” Us, Inc., a Delaware corporation (the “ Company ”).

 

W I T N E S S E T H:

 

WHEREAS, the Board of Directors of the Company (the “ Board of Directors ”) has (i) determined that it is in the best interests of the Company and the stockholders of the Company, and declared it advisable, to enter into this Agreement with Parent and Acquisition Sub providing for the merger (the “ Merger ”) of Acquisition Sub with and into the Company in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”), upon the terms and subject to the conditions set forth herein, (ii) approved this Agreement in accordance with the DGCL, upon the terms and conditions contained herein, and (iii) resolved to recommend adoption of this Agreement by the stockholders of the Company; and

 

WHEREAS, the Boards of Directors of Parent and Acquisition Sub have approved, and the board of directors of Acquisition Sub has declared it advisable for Acquisition Sub to enter into, this Agreement providing for the Merger in accordance with the DGCL, upon the terms and conditions contained herein.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Acquisition Sub and the Company hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

SECTION 1.1. Certain Defined Terms . As used in this Agreement, the following terms have the following meanings:

 

“ ABL Letter ” means that certain letter, dated March 17, 2005, from Bank of America, N.A., Banc of America Securities LLC, Deutsche Bank AG Cayman Islands Branch, and Deutsche Bank Securities Inc. to Parent.

 

“ Action ” means any claim, action, suit, arbitration, mediation, inquiry, proceeding or investigation by or before any Governmental Authority, arbitrator or mediator.

 

“ Affiliate ” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

 

“ Bain Letter ” means that certain letter, dated March 17, 2005 from Bain Capital Fund VIII, LLC to Parent.

“ Bridge Letter ” means that certain letter, dated March 17, 2005, from Banc of America Bridge LLC, Deutsche Bank AG New York Branch and Deutsche Bank AG Cayman Islands Branch, Banc of America Securities LLC, and Deutsche Bank Securities Inc. to Parent.

 

“ Business Day ” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in The City of New York.

 

“ Code ” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

 

“ Company Subsidiaries ” means the Subsidiaries of the Company ( provided , that for the avoidance of doubt, the term “Company Subsidiaries” shall not include Toys “R” Us-Japan, Ltd.).

 

“ Competition Act (Canada) ” means the Canadian Competition Act, R.S.C. 1985, c.C-34, as amended.

 

“ Competition Act Approval ” means:

 

(a) the issuance of an advance ruling certificate (“ ARC ”) pursuant to section 102 of the Competition Act (Canada) (the “ Competition Act ”) by the Commissioner of Competition (the “ Commissioner ”); or

 

(b) (i) the waiting period under section 123 of the Competition Act has expired, been terminated or waived pursuant to section 113(c) of the Competition Act and (ii) the Commissioner shall have advised Parent, in writing, on terms satisfactory to Parent that he or she has no intention to file an application under Part VIII of the Competition Act in connection with the transactions contemplated by this Agreement.

 

“ Confidentiality Agreements ” means, collectively, (a) the confidentiality agreement dated October 8, 2004, between Kohlberg Kravis & Roberts & Co., L.P and the Company, (b) the confidentiality agreement dated October 6, 2004, between Bain Capital and the Company and (c) the confidentiality agreement dated October 30, 2004, between Vornado Realty LLC and the Company.

 

“ Control ” (including the terms “controlled by” and “under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, by contract or otherwise, including, the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person.

 

“ Encumbrance ” means any security interest, pledge, mortgage, lien, charge, hypothecation, option to purchase or lease or otherwise acquire any interest, conditional sales agreement, claim, restriction, covenant, easement, right of way, title defect, adverse claim of ownership or use, transfer restriction, voting agreement, proxy or other limitation on voting rights, or other encumbrance of any kind, other than any obligation to accept returns of inventory in the ordinary course of business and other than those arising by reason of restrictions on transfers under federal, state and foreign securities laws.

 

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“ Equity Interest ” means (a) with respect to a corporation, any and all classes or series of shares of capital stock, (b) with respect to a partnership, limited liability company, trust or similar Person, any and all classes or series of units, interests or other partnership/limited liability company interests and (c) with respect to any other Person, any other security representing any direct equity ownership or participation in such Person.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

 

“ European Letter ” means that certain letter, dated March 17, 2005, from Deutsche Bank AG London to Parent.

 

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“ GAAP ” means United States generally accepted accounting principles consistently applied.

 

“ Governmental Authority ” means any federal, state, provincial, supranational, local or foreign government, governmental, regulatory or administrative authority, self-regulatory organization, agency or commission or any court, tribunal, or judicial or arbitral body (including any political or other subdivision, department or branch of any of the foregoing).

 

“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

 

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

 

“ Indebtedness ” means, with respect to any Person, (i) indebtedness of such Person for borrowed money, (ii) other indebtedness of such Person evidenced by notes, bonds or debentures, (iii) capitalized leases classified as indebtedness of such Person under GAAP, (iv) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) any obligation of such Person for the deferred purchase price of property or services (other than trade payables and other current liabilities), (vi) all obligations of such Person pursuant to or evidenced by hedging, swap or factoring arrangements or contracts or other similar instruments, (vii) all Indebtedness of another Person referred to in clauses (i) through (vi) above guaranteed directly or indirectly, jointly or severally, in any manner by such Person, or in effect guaranteed directly or indirectly, jointly or severally, by such Person through an agreement (a) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (b) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness

 

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against loss, (c) to supply funds to or in any manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (d) otherwise to assure a creditor against loss, (viii) all Indebtedness referred to in clauses (i) through (vi) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Encumbrance on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, (ix) all reimbursement obligations of such Person with respect to letters of credit, bankers’ acceptance or similar facilities issued for the account of such Person, and (x) all obligations under any acquisition agreements pursuant to which such Person is responsible for any earn-out or other contingent payments.

 

“Intellectual Property” means United States or foreign intellectual property, including (i) all inventions, patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, divisions, revisions, extensions and reexaminations thereof, (ii) all trademarks, service marks, logos, trade names, corporate names, domain names, trade dress, including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith, (iii) all copyrights and copyrightable works and all applications, registrations and renewals in connection therewith, (iv) all trade secrets and confidential business information (including research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, methods, schematics, technology, technical data, designs, drawings, flowcharts, block diagrams, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals), (v) all computer software (including databases and related documentation), and (vi) all other proprietary rights whether now known or hereafter recognized in any jurisdiction.

 

“ KKR Letter ” means that certain letter, dated March 17, 2005 from KKR Millennium Fund, Limited Partnership to Parent.

 

“ Knowledge ” means (i) with respect to Parent, the actual knowledge (without independent inquiry or investigation) of the executive officers of Parent and (ii) with respect to the Company, the actual knowledge (without independent inquiry or investigation) of the officers of the Company listed on Schedule I hereto.

 

“ Law ” means any statute, law, ordinance, regulation, rule, code, principle of common law and equity or other requirement of law of a Governmental Authority or any Governmental Order.

 

“ Liabilities ” means any and all Indebtedness and other losses, debts, liabilities, damages, obligations, claims, demands, judgments or settlements of any nature or kind, known or unknown, fixed, accrued, absolute or contingent, liquidated or unliquidated, including all costs and expenses (legal, accounting or otherwise) relating thereto.

 

“ Material Adverse Effect ” means any change, circumstance, event or effect that would be materially adverse to the assets, liabilities, business, financial condition or results of operations of the Company and the Company Subsidiaries taken as a whole, other than any change circumstance, event or effect resulting from (i) changes in general economic conditions,

 

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(ii) the announcement of this Agreement and the transactions contemplated hereby, (iii) general changes or developments in the industries in which the Company and the Company Subsidiaries operate, (iv) any actions required under this Agreement to obtain any approval or authorization under applicable antitrust or competition laws for the consummation of the transactions contemplated by this Agreement or (v) changes in any Laws or applicable accounting regulations or principles, unless, in the case of the foregoing clauses (i) and (iii), such changes or developments referred to therein would reasonably be expected to have a materially disproportionate impact on the business, financial condition or results of operations of the Company and the Company Subsidiaries taken as a whole relative to other industry participants.

 

“ Option ” means each option granted by the Company to purchase shares of Company Common Stock pursuant to any of the Stock Plans.

 

“ Permitted Encumbrances ” means: (i) liens for taxes, assessments and governmental charges or levies imposed upon the Company or a Company Subsidiary not yet due and payable or which are being contested in good faith by appropriate proceedings (provided such contests do not exceed $10 million in the aggregate) or for which reserves have been established on the most recent financial statements included in the SEC Reports filed prior to the date hereof, (ii) Encumbrances imposed by Law which are not yet due and payable and have arisen in the ordinary course of business, (iii) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations, (iv) mechanics’, carriers’, workers’, repairers’ and similar Encumbrances imposed upon the Company or a Company Subsidiary arising or incurred in the ordinary course of business, (v) zoning, entitlement and other land use and environmental regulations by Governmental Authorities, (vi) such other imperfections or irregularities in title, charges, easements, survey exceptions, leases, subleases, license agreements and other occupancy agreements, reciprocal easement agreements, restrictions and other customary encumbrances on title to real property; provided , that in the case of clauses (v) and (vi), none of the foregoing, individually or in the aggregate, materially adversely affect the continued use of the property to which they relate in the conduct of the business currently conducted thereon, (vii) as to any Leased Real Property, any Encumbrance affecting the interest of the lessor thereof, (viii) any matters disclosed in title reports delivered or made available to Parent in the electronic data room prepared by the Company prior to the date of this Agreement or otherwise delivered by the Company to Parent and (ix) liens relating to any Indebtedness described in clauses (i), (ii) and (iii) of the definition of Indebtedness.

 

“ Person ” means any individual, partnership, firm, corporation, association, trust, unincorporated organization, Governmental Authority, joint venture, limited liability company or other entity.

 

“ Purchase Contract ” as defined in the Purchase Contract Agreement.

 

“ Purchase Contract Agreement ” means the Purchase Contract Agreement dated as of May 28, 2002 between the Company and The Bank of New York, as purchase contract agent.

 

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“ Restricted Stock ” means shares of Company Common Stock granted under any of the Stock Plans that are subject to restrictions on transfer and a substantial risk of forfeiture.

 

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“ Site ” each location where the Company or any Company Subsidiary conducts business, including all Owned Real Property and Leased Real Property.

 

“ Stock Plans ” means the following plans: (i) Amended and Restated Toys “R” Us, Inc. 2001 Stock Option and Performance Incentive Plan, (ii) Toys “R” Us, Inc. Amended and Restated 1994 Stock Option and Performance Incentive Plan, (iii) Toys “R” Us, Inc. Amended and Restated 1997 Employee Stock Option Plan, (iv) Toys “R” Us, Inc. Amended and Restated 1995 Employee Stock Option Plan, (v) Toys “R” Us, Inc. (1999) Non-Employee Directors Stock Option Plan, (vi) Toys “R” Us, Inc. 1990 Non-Employee Directors Stock Option Plan, (vii) Toys “R” Us, Inc. (1999) Non-Employee Directors Stock Unit Plan, (viii) Toys “R” Us, Inc. 1997 Non-Employee Directors Stock Unit Plan, (ix) Toys “R” Us, Inc. Amended and Restated Employee Stock Purchase Plan, and (x) Toys “R” Us 1994 UK Executive Share Option Scheme.

 

“ Stock Unit ” means a right to receive Company Common Stock pursuant to a stock unit award under any of the Stock Plans, other than the UK Option Scheme.

 

“ Subsidiaries ” of a Person means any and all corporations, partnerships, limited liability companies and other entities, whether incorporated or unincorporated, with respect to which such Person, directly or indirectly, owns (i) a right to a majority of the profits of such entity or (ii) securities having the power to elect a majority of the board of directors or similar body governing the affairs of such entity.

 

“ Tax or Taxes ” means all federal, state, provincial, local, territorial and foreign income, profits, franchise, license, capital, capital gains, transfer, ad valorem, wage, severance, occupation, import, custom, gross receipts, payroll, sales, employment, use, property, real estate, excise, value added, goods and services, estimated, stamp, alternative or add-on minimum, environmental, withholding and any other taxes, duties, assessments or governmental tax charges of any kind whatsoever, together with all interest, penalties and additions imposed with respect to such amounts.

 

“ Tax Authority ” and “ Taxing Authority ” means any domestic, foreign, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.

 

“ Tax Return or Tax Returns ” means all returns, declarations, reports, claims for refund or information returns or statements relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof filed or to be filed with any Tax Authority in connection with the determination, assessment or collection of Taxes.

 

“ VNO Letter ” means that certain letter, dated March 17, 2005 from Vornado Realty LP to Parent.

 

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“ Warrants ” means those certain warrants to purchase Company Common Stock issued on February 24, 2000 to each of Softbank Capital Advisors Fund LP, Softbank Capital Partners LP, Softbank Technology Ventures V, LP, Softbank Technology Ventures Advisors Fund V, LP and Softbank Technology Ventures Entrepreneurs Fund V, LP.

 

SECTION 1.2. Other Defined Terms . The following terms have the meanings defined for such terms in the Sections set forth below:

 

 

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ARTICLE II

 

MERGER

 

SECTION 2.1. The Merger . Upon the terms and subject to the conditions of this Agreement and in accordance with the DGCL, at the Effective Time (as defined below), Acquisition Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Acquisition Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the “ Surviving Corporation ”).

 

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SECTION 2.2. Closing; Effective Time . Subject to the provisions of Article VII, the closing of the Merger (the “ Closing ”) shall take place at the offices of Latham & Watkins, LLP, 885 Third Avenue, Suite 1000, New York, New York at 10:00 a.m., New York City time, as soon as practicable, but in no event later than the second Business Day after the satisfaction or waiver of the conditions set forth in Article VII (excluding conditions that, by their terms, cannot be satisfied until the Closing, but the Closing shall be subject to the satisfaction or waiver of those conditions), or at such other place or at such other date as Parent and the Company may mutually agree. The date on which the Closing actually occurs is hereinafter referred to as the “ Closing Date ”. At the Closing, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the “ Certificate of Merger ”) with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with, the relevant provisions of the DGCL (the date and time of the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, or such later time as is specified in the Certificate of Merger and as is agreed to by Parent and the Company, being the “ Effective Time ”) and shall make all other filings or recordings required under the DGCL in connection with the Merger.

 

SECTION 2.3. Effects of the Merger . The Merger shall have the effects set forth in the applicable provisions of the DGCL. Without limiting the generality of the foregoing and subject thereto, at the Effective Time, all the property, rights, privileges, immunities, powers and franchises of the Company and Acquisition Sub shall vest in the Surviving Corporation and all debts, liabilities and duties of the Company and Acquisition Sub shall become the debts, liabilities and duties of the Surviving Corporation.

 

SECTION 2.4. Certificate of Incorporation; By-Laws .

 

(a) At the Effective Time, the certificate of incorporation of the Company shall be amended so as to read in its entirety in the form annexed hereto as Exhibit A, and, as so amended, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with its terms and applicable Law.

 

(b) At the Effective Time, the by-laws of the Company shall be amended so as to read in its entirety in the form attached hereto as Exhibit B, and, as so amended shall be the by-laws of the Surviving Corporation until thereafter amended in accordance with their terms, the certificate of incorporation of the Surviving Corporation and applicable Law.

 

SECTION 2.5. Directors and Officers . The directors of the Company immediately prior to the Effective Time shall submit their resignations to be effective as of the Effective Time. Immediately after the Effective Time, Parent shall take the necessary actions to cause the directors of Acquisition Sub immediately prior to the Effective Time to be the directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and by-laws of the Surviving Corporation. The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation, each to hold office until the earlier of his or her resignation or removal.

 

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ARTICLE III

 

EFFECT OF THE MERGER ON CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS

 

SECTION 3.1. Effect on Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Acquisition Sub, the Company or the holders of any of the following securities:

 

(a) Each share of Common Stock, par value $0.10 per share, of the Company (the “ Company Common Stock ”) issued and outstanding immediately prior to the Effective Time (other than any shares of Company Common Stock (“ Shares ”) to be canceled pursuant to Section 3.1(b) (any Shares to be so cancelled, “ Excluded Shares ”) and any Dissenting Shares (as defined in Section 3.4)) shall be converted into the right to receive $26.75 in cash, without interest (the “ Per Share Merger Consideration ”).

 

(b) Each Share held in the treasury of the Company, or owned by Parent, Acquisition Sub or owned by any wholly owned direct or indirect Subsidiary of the Company, Parent or Acquisition Sub, in each case immediately prior to the Effective Time, shall be canceled without any conversion thereof and no consideration shall be paid with respect thereto.

 

(c) Each share of common stock of Acquisition Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Corporation.

 

SECTION 3.2. Treatment of Options and Other Equity Awards . Prior to the Effective Time, the Company shall take all action necessary such that:

 

(a) As of the Effective Time, each Option (other than a UK Option (as defined below)) that is outstanding as of immediately prior to the Effective Time, whether or not vested or exercisable, shall be cancelled and the holder thereof shall be entitled to receive an amount of cash, without interest, equal to the product of (i) the total number of Shares subject to such Option multiplied by (ii) the excess, if any, of the Per Share Merger Consideration over the exercise price per share subject to such Option (with the aggregate amount of such payment to the holder to be rounded to the nearest cent), less applicable Taxes, if any, required to be withheld with respect to such payment.

 

(b) On or shortly after the date of the execution of this Agreement, the Company shall notify the holders of Options outstanding under the Toys “R” Us 1994 UK Executive Share Option Scheme (the “ UK Option Scheme ”) as of immediately prior to the execution of this Agreement (“ UK Options ”) of the proposed Merger. Such notice will remind optionees that their UK Options are fully vested, or will become so as of April 8, 2005, and may be exercised prior to the Merger. At least 70 days prior to the anticipated Effective Time, the Company shall give notice under Rule 7 of the UK Option Scheme that the UK Options will lapse, to the extent not exercised, on the later of 60 days after the date of the notice or the Effective Time. The Company shall take appropriate action to terminate the UK Option Scheme as of the Effective Time and provide that no shares of Company Common Stock will be issued or purchased under

 

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the UK Option Scheme, or upon the purported exercise of any UK Option, from and after the Effective Time. For the avoidance of doubt, where shares of Company Common Stock are issued on the exercise of Options, the Company shall ensure that such shares are issued by the Effective Time.

 

(c) As of the Effective Time, each outstanding share of Restricted Stock the restrictions of which have not lapsed immediately prior to the Effective Time shall become fully vested and, subject to Section 3.4, converted into the right to receive the Per Share Merger Consideration under Section 3.1(a).

 

(d) As of the Effective Time, each outstanding Stock Unit that is outstanding as of immediately prior to the Effective Time, whether or not vested, shall be cancelled and the holder thereof shall be entitled to receive an amount in cash, without interest, equal to the Per Share Merger Consideration, less applicable Taxes, if any, required to be withheld with respect to such payment.

 

(e) The Company shall take all action necessary to terminate the Toys “R” Us, Inc. Amended and Restated Employee Stock Purchase Plan as soon as practicable after the date hereof, and no person shall any rights under such plan from and after such termination.

 

(f) Prior to the Effective Time, the Company shall take or cause to be taken all actions necessary to effectuate the foregoing treatment in this Section 3.2 to the extent such treatment is not expressly provided for by the terms of the applicable Stock Plans and related award agreements, provided that, other than as expressly set forth in this Agreement, no actions shall be taken by the Company that may cause the UK Option Scheme to cease to be approved by the UK Inland Revenue.

 

SECTION 3.3. Adjustment of Merger Consideration . Notwithstanding anything in this Agreement to the contrary, if, between the date of this Agreement and the Effective Time, the issued and outstanding Shares shall have been changed into a different number of shares or a different class by reason of any stock split, reverse stock split, stock dividend, reclassification, redenomination, recapitalization, split-up, combination, exchange of shares or other similar transaction, the Per Share Merger Consideration and any other dependent items shall be appropriately adjusted to provide to the holders of Company Common Stock the same economic effect as contemplated by this Agreement prior to such action and as so adjusted shall, from and after the date of such event, be the Per Share Merger Consideration or other dependent item, subject to further adjustment in accordance with this sentence.

 

SECTION 3.4. Dissenting Shares .

 

(a) Shares that are issued and outstanding immediately prior to the Effective Time and which are held by holders of Shares who have not voted in favor of or consented to the Merger and who have properly demanded and perfected their rights to be paid the fair value of such Shares in accordance with Section 262 of the DGCL (the “ Dissenting Shares ”) shall not be converted into the right to receive the Per Share Merger Consideration, and the holders thereof shall be entitled to only such rights as are granted by Section 262 of the DGCL; provided , however , that if any such stockholder of the Company shall fail to perfect or shall effectively

 

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waive, withdraw or lose such stockholder’s rights under Section 262 of the DGCL, such stockholder’s Shares in respect of which the stockholder would otherwise be entitled to receive fair value under Section 262 of the DGCL shall thereupon be deemed to have been converted, at the Effective Time, into the right to receive the Per Share Merger Consideration without any interest thereon.

 

(b) The Company shall give Parent (i) prompt notice of any notice received by the Company of intent to demand the fair value of any Shares, withdrawals of such notices and any other instruments served pursuant to Section 262 of the DGCL and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to the exercise of dissenters’ rights under Section 262 of the DGCL. The Company shall not, except with the prior written consent of Parent or as otherwise required by an order, decree, ruling or injunction of a court of competent jurisdiction, make any payment with respect to any such exercise of dissenters’ rights or offer to settle or settle any such rights.

 

SECTION 3.5. Payment and Exchange of Certificates.

 

(a) Following the date of this Agreement and in any event not less than three Business Days prior to the mailing of the Proxy Statement to the stockholders of the Company, Parent or Acquisition Sub shall designate a bank or trust company reasonably acceptable to the Company to act as Paying Agent in connection with the Merger (the “ Paying Agent ”). At or prior to the Effective Time, Parent will provide to, or cause the Surviving Corporation to provide to, and shall deposit in trust with, the Paying Agent, the aggregate consideration to which stockholders of the Company become entitled under this Article III. Until used for that purpose, the funds shall be invested by the Paying Agent, as directed by Parent or the Surviving Corporation, in obligations of or guaranteed by the United States of America or obligations of an agency of the United States of America which are backed by the full faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Services Inc. or Standard & Poor’s Corporation, or in deposit accounts, certificates of deposit or banker’s acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from, commercial banks, each of which has capital, surplus and undivided profits aggregating more than $500 million (based on the most recent financial statements of the banks which are then publicly available at the SEC or otherwise); provided that no such investment or losses thereon shall affect the Per Share Merger Consideration payable to former stockholders of the Company, and Parent shall promptly provide, or shall cause the Surviving Corporation to promptly provide, additional funds to the Paying Agent for the benefit of the former stockholders of the Company in the amount of any such losses.

 

(b) Promptly after the Effective Time, the Surviving Corporation shall cause the Paying Agent to mail to each person who was a record holder of Company Common Stock immediately prior to the Effective Time, whose shares were converted pursuant to Article III into the right to receive the Per Share Merger Consideration, (i) a form of letter of transmittal for use in effecting the surrender of stock certificates which immediately prior to the Effective Time represented Company Common Stock (each, a “ Certificate ”) in order to receive payment of the Per Share Merger Consideration (which shall specify that delivery shall be effected, and risk of loss and title to the Certificate shall pass, only upon actual delivery of the Certificates to the

 

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Paying Agent, and shall otherwise be in customary form) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for payment of the Per Share Merger Consideration. When the Paying Agent receives a Certificate, together with a properly completed and executed letter of transmittal and any other required documents, the Paying Agent shall pay to the holder of the Shares represented by the Certificate, or as otherwise directed in the letter of transmittal, the Per Share Merger Consideration with regard to each Share represented by such Certificate, less any required Tax withholdings in accordance with Section 3.5(c) below, and the Certificate shall be cancelled. No interest shall be paid or accrued on the Per Share Merger Consideration payable upon the surrender of Certificates. If payment is to be made to a Person other than the Person in whose name a surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered must be properly endorsed or otherwise be in proper form for transfer, and the Person who surrenders the Certificate must provide funds for payment of any transfer or other Taxes required by reason of the payment to a Person other than the registered holder of the surrendered Certificate or establish to the satisfaction of the Surviving Corporation that the Tax has been paid or is not applicable. After the Effective Time, a Certificate shall represent only the right to receive the Per Share Merger Consideration in respect of the Shares represented by such Certificate, without any interest thereon.

 

(c) The Paying Agent may withhold from the sum payable to any Person as a result of the Merger, and pay to the appropriate Taxing Authorities, any amounts which the Paying Agent or the Surviving Corporation may be required (or may reasonably believe it is required) to withhold under the Code, or any provision of state, local or foreign Tax Law. Any sum which is withheld and paid to a Taxing Authority as permitted by this Section will be deemed to have been paid to the Person with regard to whom it is withheld.

 

(d) In the event that any Certificate shall have been lost, stolen or destroyed, upon the holder’s compliance with the replacement requirements established by the Paying Agent, including, if necessary, the posting by the holder of a bond in customary amount as indemnity against any claim that may be made against it with respect to the Certificate, the Paying Agent shall deliver in exchange for the lost, stolen or destroyed Certificate the applicable Per Share Merger Consideration payable in respect of the Shares represented by the Certificate pursuant to this Article III.

 

(e) At any time which is more than 180 days after the Effective Time, Parent shall be entitled to require the Paying Agent to deliver to it any funds which had been deposited with the Paying Agent and have not been disbursed in accordance with this Article III (including, without limitation, interest and other income received by the Paying Agent in respect of the funds made available to it), and after the funds have been delivered to Parent, Persons entitled to payment in accordance with this Article III shall be entitled to look solely to Parent (subject to abandoned property, escheat or other similar Laws) for payment of the Per Share Merger Consideration upon surrender of the Certificates held by them, without any interest thereon. Any Per Share Merger Consideration remaining unclaimed as of a date which is immediately prior to such time as such amounts would otherwise escheat to or become property of any government entity shall, to the extent permitted by applicable Law, become the property of Parent free and clear of any claims or interest of any Person previously entitled thereto. Neither the Surviving Corporation, Parent nor the Paying Agent will be liable to any Person entitled to payment under this Article III for any consideration which is delivered to a public official pursuant to any abandoned property, escheat or similar Law.

 

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(f) At the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of Shares that were outstanding prior to the Effective Time. After the Effective Time, Certificates presented to the Surviving Corporation for transfer shall be canceled and exchanged for the Per Share Merger Consideration in respect of the Shares represented thereby.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth on the disclosure letter delivered by the Company to Parent on or prior to the execution of this Agreement (the “ Company Disclosure Letter ”) and except as disclosed in the Form 10-K of the Company for the fiscal period ended January 31, 2004 (“ Form 10-K ”) and the Form 10-Qs and Form 8-Ks filed from the date of the filing of the Form 10-K to the date of this Agreement (other than disclosures in “Opportunities, Challenges and Risks” and “Forward Looking Statements” sections of such SEC reports and except as expressly provided in Section 4.7 of the Company Disclosure Letter), the Company hereby represents and warrants to Parent and Acquisition Sub that:

 

SECTION 4.1. Organization . Each of the Company and the Company Subsidiaries is duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization, and has the requisite corporate or similar power and authority to own its properties and to carry on its business as presently conducted and is duly qualified to do business and is in good standing (where such concept exists) as a foreign corporation in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except where the failure to be so organized, qualified or in good standing or have such power or authority would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Complete and correct copies of the certificate of incorporation and by-laws of the Company as currently in effect, have been made available to Parent, and as so made available, are in full force and effect and no other organizational documents are applicable to or binding upon the Company. The Company is not in violation of the provisions of its governing documents.

 

SECTION 4.2. Authority; Enforceability . The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary pursuant to its governing documents or DGCL to authorize this Agreement or to consummate the transactions contemplated hereby (other than the adoption of this Agreement by the holders of a majority of the outstanding shares of the Company Common Stock (the “ Requisite Stockholder Vote ”)). The Board of Directors, at a meeting duly called and held, duly adopted resolutions (i) approving this Agreement and the transactions

 

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contemplated hereby, (ii) determining that the terms of this Agreement are fair to and in the best interests of the Company’s stockholders and (iii) declaring the advisability of this Agreement, which, subject to Sections 6.2 and 6.5(b), resolutions have not been subsequently rescinded, modified or withdrawn in any way. This Agreement has been duly executed and delivered by the Company and assuming due authorization, execution and delivery by the other parties hereto, constitutes a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law). The approval of the transactions contemplated by this Agreement by the Requisite Stockholder Vote is the only votes of the holders of any class or series of capital stock or other Equity Interests of the Company or any Company Subsidiary necessary to adopt this Agreement or approve the transactions contemplated hereby.

 

SECTION 4.3. Non-Contravention . The execution, delivery and performance of this Agreement by the Company does not and will not (a) conflict with or violate its governing documents, (b) conflict with or violate the governing documents of any Company Subsidiary, (c) assuming that all consents, approvals and authorizations contemplated by clauses (a), (b), (c), (d), (e), (f) and (g) of Section 4.4 have been obtained and all filings described in such clauses have been made, conflict with or violate any Law applicable to the Company or any of the Company Subsidiaries or by which its or any of their respective properties are bound or (d) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both would become a default) or result in the loss of a benefit under, or give rise to any right of termination, cancellation, amendment or acceleration of, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit or other instrument or obligation to which the Company or any of the Company Subsidiaries is a party or by which the Company or any of the Company Subsidiaries or its or any of their respective properties are bound, except, in the case of clauses (b), (c) and (d) of this Section 4.3, for any such conflict, violation, breach, default, loss, right or other occurrence which would not (i) prevent or materially delay the Company from performing its obligations under this Agreement in any material respect or (ii) reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

SECTION 4.4. Governmental Consents . The execution, delivery and performance of this Agreement by the Company and the consummation by it of the transactions contemplated hereby does not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any Governmental Authority, except as required under or pursuant to (a) the HSR Act, (b) the Exchange Act, (c) state securities, takeover and “blue sky” laws, (d) the rules and regulations of the NYSE, (e) DGCL, (f) the applicable requirements of antitrust or other competition laws of other jurisdictions or investment laws relating to foreign ownership and (g) any other consent, approval, authorization, permit, action, filing or notification the failure of which to make or obtain would not (i) prevent or materially delay the Company from performing its obligations under this Agreement in any material respect or (ii) reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

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SECTION 4.5. Capitalization of the Company .

 

(a) The authorized capital stock of the Company consists of 650,000,000 shares of Company Common Stock. As of the close of business on March 14, 2005 (the “ Capitalization Date ”), (i) 216,937,183 Shares were issued and outstanding, (ii) 83,507,613 Shares were held in the treasury of Company or by any of the Company Subsidiaries, (iii) an aggregate of 1,200,000 Shares were reserved for issuance upon or otherwise deliverable in connection with the exercise of the Warrants, (iv) an aggregate of 29,631,117 Shares were reserved for issuance upon or otherwise deliverable in connection with the grant of equity-based awards or the exercise of outstanding Options issued pursuant to the Benefit Plans and Foreign Plans and (v) 22,804,533 Shares were reserved for issuance pursuant to the Purchase Contracts that are a part of the Company’s Equity Security Units. Annex A attached to Section 4.5 of the Company Disclosure Schedule sets forth, as of the date specified thereon, a complete and accurate list of the Options granted under each Stock Plan and the exercise price of each such Option. As of the Capitalization Date, the Company has outstanding (i) Options to purchase 27,601,304 Shares, (ii) Warrants to purchase 1,200,000 Shares and (iii) Purchase Contracts to purchase 18,677,494 Shares. From the close of business on the Capitalization Date until the date of this Agreement, no Shares, Options, Warrants or Purchase Contracts have been issued except for Shares issued pursuant to the exercise of Options in accordance with their terms. All outstanding shares of Company Common Stock are duly authorized, validly issued, fully paid and nonassessable, and are not subject to and were not issued in violation of any preemptive or similar rights, purchase option, call, or right of first refusal or similar rights. Except for the Amended and Restated Rights Agreement, dated as of April 16, 1999, between the Company and American Stock Transfer & Trust Company, as amended by the Amendment, dated as of June 3, 2002 (as so amended, the “ Rights Plan ”) and the Rights (as defined in the Rights Plan) and except as set forth above, there are no outstanding shares, options, warrants, calls, stock appreciation rights, or other Equity Interests, rights or commitments or any other agreements of any character relating to dividend rights or to the sale, issuance or voting of, or the granting of rights to acquire, any shares of capital stock or voting securities of the Company, or any securities or obligations convertible into, exchangeable for or evidencing the right to purchase any shares of capital stock or voting securities of the Company.

 

(b) Except as set forth in Section 4.5(a), (i) there are no preemptive rights of any kind which obligate the Company or any Company Subsidiary to issue or deliver any shares of capital stock or voting securities of the Company or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire from the Company or any Company Subsidiary, any shares of capital stock or voting securities of the Company and (ii) there is no agreement, contract, commitment or arrangement pursuant to which the Company or any Company Subsidiary is or may become obligated to repurchase or redeem any shares of capital stock or voting securities of the Company or any securities or obligations convertible or exchangeable into or exercisable for, any shares of capital stock or voting securities of the Company. Except for the Purchase Contracts, the Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible, exchangeable or exercisable for or into securities having the right to vote) with the stockholders of the Company on any matter.

 

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SECTION 4.6. Company Subsidiaries . All of the outstanding Equity Interests, as applicable, of each Company Subsidiary are validly issued, fully paid and nonassessable and are owned, directly or indirectly by the Company free and clear of any Encumbrances, and none of such outstanding Equity Interests have been issued in violation of any preemptive or similar rights, purchase option, call or right of first refusal,. There are no outstanding options, warrants, calls, stock appreciation rights, or other rights or commitments or any other agreements of any character relating to the sale, issuance or voting of, or the granting of rights to acquire any Equity Interests of any such Company Subsidiary, or any securities or other instruments convertible into, exchangeable for or evidencing the right to purchase any Equity Interests of any such Company Subsidiary. All options in any Company Subsidiary were issued in compliance with all federal and state corporate and securities laws. Section 4.6 of the Company Disclosure Letter sets forth each direct and indirect Company Subsidiary.

 

SECTION 4.7. SEC Reports; Financial Information The Company has timely filed or otherwise transmitted all forms, reports, statements, certifications and other documents (including all exhibits, supplements and amendments thereto) required to be filed by it with the Securities and Exchange Commission (“ SEC ”) since January 31, 2002 (collectively, with any amendments thereto, the “ SEC Reports ”), each of which, including any financial statements or schedules included therein, as finally amended prior to the date hereof, has complied as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act, each as in effect on the date so filed. None of the SEC Reports contained, when filed as finally amended prior to the date hereof, any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of the date hereof, there are no outstanding or unresolved comments in comment letters received from the SEC staff with respect to any of the SEC Reports. Each of (i) the consolidated balance sheets included in the SEC Reports (including the related notes and schedules) was prepared in accordance with GAAP in all material respects applied on a consistent basis throughout the periods covered and fairly presents, in all material respects, the consolidated financial position of the Company and the Company Subsidiaries at the respective dates thereof and (ii) the related consolidated statements of earnings, cash flows and stockholders’ equity included in the SEC Reports (including any related notes and schedules) was prepared in accordance with GAAP in all material respects applied on a consistent basis throughout the periods covered and fairly presents, in all material respects, the results of operations and cash flows of the Company and the Company Subsidiaries for the periods indicated (subject, in the case of each of clause (i) and (ii), to normal year-end audit adjustments and the absence of full footnote disclosure in the case of unaudited financial statements).

 

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SECTION 4.8. No Undisclosed Liabilities . Neither the Company nor any of the Company Subsidiaries has any Liabilities of a nature required by GAAP to be reflected in a consolidated balance sheet or the notes thereto, except Liabilities that (i) are accrued or reserved against in the most recent financial statements included in the SEC Reports filed prior to the date hereof or are reflected in the notes thereto, (ii) were incurred in the ordinary course of business since the October 30, 2004, (iii) are incurred pursuant to the transactions contemplated by this Agreement, (iv) have been discharged or paid in full prior to the date of this Agreement in the ordinary course of business or (v) would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

SECTION 4.9. Absence of Certain Changes or Events . Since October 30, 2004, except as contemplated by this Agreement, the Company and the Company Subsidiaries have conducted their businesses in the ordinary course, and, since such date, there has not been any change, event or occurrence which has had or would reasonably be likely to have, individually or in the aggregate, a Material Adverse Effect, and, except as otherwise contemplated by this Agreement, neither the Company nor any Company Subsidiary has:

 

(a) issued, delivered, sold, pledged, transferred, conveyed, disposed of or encumbered any Equity Interests of any class or securities convertible into or exchangeable for any such Equity Interests of the Company or any Company Subsidiary, or any options, warrants, convertible securities or other rights of any kind to acquire any Equity Interests of the Company or any Company Subsidiary, or any other ownership interest or voting security, of the Company or any Company Subsidiary (other than (i) the issuance of the Company’s common stock (and the associated Rights) upon the exercise of stock options or in connection with other stock-based Benefits Plans outstanding on the date hereof, in each case in accordance with their present terms, (ii) issuances by a wholly owned Company Subsidiary of capital stock to such Company Subsidiary’s parent or another wholly owned Company Subsidiary, (iii) the granting of stock options or other stock based awards to acquire shares of the Company’s common stock granted under stock-based Benefit Plans outstanding on the date hereof in the ordinary course of business not in excess of the amounts set forth in Section 4.9(a) of the Company Disclosure Letter, (iv) issuances in accordance with the Rights Plan and (v) issuances in accordance with the Purchase Contract Agreement;

 

(b) declared, set aside, made or paid any dividend or other distribution payable in cash, stock, property or otherwise with respect to any Equity Interests or any options, warrants, convertible securities or other rights to acquire any Equity Interest (except for any dividend or distribution by a Company Subsidiary of the Company and interests payments made by the Company in respect of its Equity Security Units in accordance with their terms);

 

(c) (i) reclassified, combined, split, subdivided, redeemed, purchased or otherwise acquired any Equity Interests of the Company or any Company Subsidiary or any options, warrants, convertible securities or other rights to acquire any Equity Interest of the Company or any Company Subsidiary (other than the acquisition of shares tendered by employees or former employees in order to pay taxes in connection with the exercise of Options or the lapse of restrictions on Restricted Stock or Stock Units pursuant to the terms of any of the Stock Plans) or (ii) redeemed, repurchased, prepaid, defeased or otherwise acquired any of the Company’s 6.875% Notes due 2006, 6.25% Senior Notes due 2007, 7.625% Notes due 2011, 7.875% Notes due 2013, 7.375% Notes due 2018 and 8.75% Debentures due 2021;

 

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(d) (i) acquired, leased or licensed from any Person (by merger, consolidation, acquisition of stock or assets or otherwise) or sold, disposed of, encumbered, leased or licensed (by merger, consolidation, sale of stock or assets or otherwise) any corporation, partnership or other business organization or division thereof, any Equity Interests therein or any assets, in each case, which are material to the Company and the Company Subsidiaries, including the Intellectual Property (other than licenses to third parties to use Intellectual Property entered into in the ordinary course), taken as a whole, other than purchases and sales of inventory, non-merchandise supplies, media and advertising and other assets in the ordinary course of business, (ii) incurred or guaranteed, or modified in any material respect, any Indebtedness or made any loans, advances or capital contributions to, or investments in, any other Person (other than a Company Subsidiary), in each case, other than (but only to the extent such Indebtedness can be repaid without prepayment or other penalties) (A) in the ordinary course of business or (B) any letter of credit entered into in the ordinary course of business and for an amount in excess of $20,000,000 in any single transaction or series of related transactions, or (iii) authorized any material new capital expenditures which are, in the aggregate, excess of the Company’s capital expenditure budget set forth on Section 6.1 of the Company Disclosure Letter;

 

(e) made any changes in accounting policies or procedures other than in the ordinary course of business and other than as required by GAAP or a Governmental Authority; or

 

(f) agreed to take any of the actions described in Sections 4.9(a) through 4.9(e).

 

Between October 30, 2004 and the date of this Agreement, there has been no corporate directive or authorization from the Company or, to the Knowledge of the Company, any Company Subsidiary to increase compensation payable or which could become payable to any employee of the Company or any Company Subsidiary that has been made as a result of or in contemplation of a change of control of the Company or any Company Subsidiary, and between October 30, 2004 and the date of this Agreement, there have not been any material alterations or changes in overall compensation and benefit practices of the Company or the Company Subsidiaries.

 

SECTION 4.10. Contracts .

 

(a) As of the date hereof, none of the Company nor any Company Subsidiary is a party to or bound by any: (i) contract that would be required to be filed by the Company as a material contract pursuant to Item 601(b)(10) of Regulation S-K of the SEC; (ii) except as contemplated by this Agreement, written material contract containing covenants of the Company or any Company Subsidiary not to compete in any line of business, industry or geographical area (other than agreements with respect to real property); (iii) written contract which creates a partnership or joint venture or similar arrangement with respect to any material business of the Company, (iv) written contract (other than purchase orders) with the top ten suppliers of non-merchandise or service providers and vendors of product or merchandise with the greatest dollar volume during the fiscal year ended January 29, 2005 (other than contracts entered into by TRU

 

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(HK) Limited and contracts with respect to operations outside the United States); (v) contract that, individually or in the aggregate, would or would reasonably be expected to prevent, materially delay or materially impede the Company’s ability to consummate the transactions contemplated by this Agreement; (vi) indenture, credit agreement, loan agreement, security agreement, guarantee, note, mortgage or other evidence of Indebtedness or agreement providing for Indebtedness in excess of $5,000,000; (vii) written contract (other than this Agreement) for the sale of any of its assets after the date hereof in excess of $25,000,000 (other than in the ordinary course of business); (viii) any collective bargaining or employee association agreement; (ix) written contract that contains a put, call, right of first refusal or similar right pursuant to which the Company or any Company Subsidiary would be required to purchase or sell, as applicable, any Equity Interests of any Person; (x) each settlement or conciliation agreement or similar agreement with a Governmental Authority or order or consent of a Governmental Authority to which the Company or any of the Company Subsidiaries is a party involving future performance by the Company or any Company Subsidiary which is material to the Company and Company Subsidiaries taken as a whole; and (xi) any other contract (other than this Agreement, purchase orders for the purchase of inventory or real property leases) under which the Company and the Company Subsidiaries have made payments in excess of $25,000,000 (other than in the ordinary course of business). Each such contract described in clauses (i)-(xi) is referred to herein as a “ Material Contract ”.

 

(b) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) neither the Company nor any Company Subsidiary is (and, to the Company’s Knowledge, no other party is) in breach of or default under any Material Contract, (ii) neither the Company nor any Company Subsidiary has received any written notice or claim of default under any Material Contract or any written notice of an intention to, and to the Knowledge of the Company, no other party to any Material Contract intends to terminate, not renew or challenge the validity or enforceability of any Material Contract (including as a result of the execution and performance of this Agreement), (iii) to the Company’s Knowledge, no event has occurred that, with or without notice or lapse of time or both, would result in a breach or a default under any Material Contract, (iv) each of the Material Contracts is in full force and effect, and is the valid, binding and enforceable obligation of the Company and the Company Subsidiaries, and to the Company’s Knowledge, of the other parties thereto, and (v) the Company and the Company Subsidiaries have performed all respective material obligations required to be performed by them to date under the Material Contracts and are not (with or without the lapse of time or the giving of notice, or both) in material breach thereunder. The Company has made available to Parent true and complete copies of each Material Contract, including all material amendments thereto.

 

SECTION 4.11. Compliance with Law and Reporting Requirements .

 

(a) The Company and the Company Subsidiaries are not (and have not been since October 30, 2004) in violation of any Law, and have not received any written notice of any violation of Law, in each case except for any violation or possible violation that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Company and the Company Subsidiaries have, and are (and have been since October 30, 2004) in compliance with, all permits, licenses, authorizations, exemptions, orders, consents, approvals and franchises from Governmental Authorities required to conduct their respective businesses as

 

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now being conducted, except for any such permit, license, authorization, exemption, order, consent, approval or franchise the absence of, or the non-compliance, with which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(b) Since the enactment of the Sarbanes-Oxley Act of 2002, the Company has been and is in compliance in all material respects with (i) the applicable provisions of the Sarbanes-Oxley Act of 2002 and (ii) the applicable listing and corporate governance rules and regulations of the NYSE.

 

(c) The Company has designed disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated Company Subsidiaries, is made known to the chief executive officer and the chief financial officer of the Company by others within those entities.

 

(d) The Company has disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s auditors and the audit committee of the Board of Directors of the Company (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud or allegation of fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

 

(e) As of the date hereof, to the Company’s Knowledge, the Company has not identified any material weaknesses in the design or operation of internal controls over financial reporting other than as disclosed in Section 4.11 of the Company Disclosure Letter. To the Company’s Knowledge, there is no reason to believe that its auditors and its chief executive officer and chief financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 when next due.

 

(f) None of the Company Subsidiaries is, or has at any time since January 31, 2002 been, subject to the reporting requirements of Sections 13(a) or 15(d) under the Exchange Act.

 

SECTION 4.12. Litigation . There are no Actions pending or, to the Knowledge of the Company, threatened against the Company or any Company Subsidiary or, to the Knowledge of the Company, any officer, director or employee of the Company or any Company Subsidiary in such capacity, which would (i) reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (ii) prevent or materially delay the Company from performing its obligations under this Agreement in any material respect. Neither the Company nor any Company Subsidiary is a party or subject to or in default under any Governmental Order which would (i) reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (ii) prevent or materially delay the Company from performing its obligations under this Agreement in any material respect. To the Knowledge of the Company, there are no SEC inquiries or investigations, other governmental inquiries or investigations or internal investigations pending or threatened in each case regarding any accounting practices of the Company or any malfeasance by any executive officer of the Company.

 

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SECTION 4.13. Employee Compensation and Benefit Plans; ERISA.

 

(a) Section 4.13(a) of the Company Disclosure Letter sets forth a correct and complete list of all employee benefit plans, programs, agreements or arrangements, including pension, retirement, profit sharing, deferred compensation, stock option, change in control, retention, equity or equity-based compensation, stock purchase, employee stock ownership, severance pay, vacation, bonus or other incentive plans, all medical, vision, dental or other health plans, all life insurance plans, and all other employee benefit plans or fringe benefit plans, including “employee benefit plans” as that term is defined in Section 3(3) of ERISA, in each case, whether oral or written, funded or unfunded, or insured or self-insured, maintained by the Company or any Company Subsidiary, or to which the Company or any Company Subsidiary contributed or is obligated to contribute thereunder, or with respect to which the Company or any Company Subsidiary has or may have any liability (contingent or otherwise), in each case, for or to (i) any current or former employees, directors, officers or consultants of the Company or any Company Subsidiary located primarily in the United States and/or their dependents (collectively, the “ Benefit Plans ”), or (ii) to the extent material, any current or former employees, directors, officers or consultants of the Company or any Company Subsidiary not located primarily in the United States and/or their dependents (collectively, the “ Foreign Plans ”). For purposes of this Agreement, the term “plan,” when used with respect to Foreign Plans, shall mean a “scheme” or other employee benefit program or arrangement in accordance with specific country usage.

 

(b) All Benefit Plans that are intended to be subject to Code Section 401(a) and any trust agreement that is intended to be tax exempt under Code Section 501(a) have been determined by the Internal Revenue Service to be qualified under Code Section 401(a) and exempt from taxation under Code Section 501(a), and, to the Knowledge of the Company, nothing has occurred that would adversely affect the qualification of any such plan. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect: (i) each Benefit Plan and any related trust subject to ERISA complies in all material respects with and has been administered in substantial compliance with, (A) the provisions of ERISA, (B) all provisions of the Code, (C) all other applicable Laws, and (D) its terms and the terms of any collective bargaining or collective labor agreements; (ii) neither the Company nor any Company Subsidiary has received any written notice from any Governmental Authority questioning or challenging such compliance; and (iii) there are no unresolved claims or disputes under the terms of, or in connection with, the Benefit Plans other than claims for benefits which are payable in the ordinary course; (iv) there has not been any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Benefit Plan; (v) no litigation has been commenced with respect to any Benefit Plan and, to the Knowledge of the Company, no such litigation is threatened (other than routine claims for benefits in the normal course); (vi) there are no governmental audits or investigations pending or, to the Knowledge of the Company, threatened in connection with any Benefit Plan; and (vii) to the Knowledge of the Company, there are not any facts that could give rise to any liability in the event of any governmental audit or investigation.

 

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(c) Neither the Company nor any ERISA Affiliate of the Company (as defined below) (i) sponsors or contributes to a Benefit Plan that is a “defined benefit plan” (as defined in ERISA Section 3(35)); (ii) has an “obligation to contribute” (as defined in ERISA Section 4212) to a Benefit Plan that is a “multiemployer plan” (as defined in ERISA Sections 4001(a)(3) and 3(37)(A)); (iii) has any liability, contingent or otherwise, under Title IV of ERISA with respect to a Benefit Plan, either directly or through any ERISA Affiliate; (iv) sponsors, maintains or contributes to any plan, program or arrangement that provides for post-retirement or other post-employment welfare benefits (other than health care continuation coverage as required by Law); and (v) sponsors a Foreign Plan that is or is intended to be a pension plan subject to any Canadian federal or provincial pension standards legislation or to the Income Tax Act (Canada) or, sponsors a Foreign Plan that is a defined benefit pension plan intended to be registered or approved by any Governmental Authority. For purposes of this Section 4.13, “ ERISA Affiliate ” shall mean any trade or business, whether or not incorporated, that together with the Company would be deemed to be a single employer for purposes of Section 4001 of ERISA or Sections 414(b), (c), (m), (n) or (o) of the Code.

 

(d) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) each Foreign Plan complies in all material respects with and has been administered in substantial compliance with the Laws of the applicable foreign country, (ii) each Foreign Plan which, under the Laws of the applicable foreign country, is required to be registered or approved by any Governmental Authority, has been so registered or approved, (iii) all contributions to each Foreign Plan required to be made by the Company or the Company Subsidiaries through the Closing Date have been or shall be made or, if applicable, shall be accrued in accordance with country-specific accounting practices, (iv) no litigation has been commenced with respect to any Foreign Plan and, to the Knowledge of the Company, no such litigation is threatened (other than routine claims for benefits in the normal course), and (v) there are no governmental audits or investigations pending or, to the Knowledge of the Company, threatened in connection with any Foreign Plan.

 

(e) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, all reports, returns and similar documents with respect to all Benefit Plans or Foreign Plans required to be filed by the Company or any Company Subsidiary with any Governmental Authority or distributed to any Benefit Plan or Foreign Plan participant have been duly and timely filed or distributed.

 

(f) Section 4.13(f) of the Company Disclosure Letter discloses whether each Benefit Plan that is an employee welfare benefit plan is (i) unfunded or self-insured, (ii) funded through a “welfare benefit fund”, as such term is defined in Code Section 419(e) or other funding mechanism or (iii) insured. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, each such employee welfare benefit plan may be amended or terminated (including with respect to benefits provided to retirees and other former employees) without liability (other than benefits then payable under such plan without regard to such amendment or termination) to the Company or any Company Subsidiary at any time. Each of the Company and the Company Subsidiaries complies in all material respects with the applicable requirements of Section 4980B(f) of the Code or any similar state statute with respect to each Benefit Plan that is a group health plan within the meaning of Section 5000(b)(1) of the Code or such state statute. Neither the Company nor any Company Subsidiary has any material obligations for retiree health or life insurance benefits under any Benefit Plan (other than for continuation coverage under Section 4980B(f) of the Code).

 

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(g) Except as may be required by Law, or as contemplated under this Agreement, neither the Company nor any Company Subsidiary has any plan or commitment to create any additional Benefit Plans or Foreign Plans, or to amend or modify any existing Benefit Plan or Foreign Plan in such a manner as to materially increase the cost of such Benefit Plan or Foreign Plan to the Company or any Company Subsidiary.

 

(h) Section 4.13(h) of the Company Disclosure Letter discloses: (i) each material payment (including any bonus, severance, unemployment compensation, deferred compensation, forgiveness of indebtedness or golden parachute payment) becoming due to any current or former employee under any Benefit Plan or Foreign Plan; (ii) any increase in any material respect any benefit otherwise payable under any Benefit Plan or Foreign Plan; (iii) any acceleration in any material respect of the time of payment or vesting of any such benefits under any Benefit Plan or Foreign Plan; or (iv) any material obligation to fund any trust or other arrangement with respect to compensation or benefits under a Benefit Plan or Foreign Plan in each case caused or triggered by the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, no payment or benefit which has been, will or may be made by the Company or any Company Subsidiary with respect to any current or former employee located in the United States in connection with the execution and delivery of this Agreement or the