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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Dated as of September 10, 2007
among
REDCATS USA, INC.,
BOULEVARD MERGER SUB, INC.
and
UNITED RETAIL GROUP, INC.
TABLE OF CONTENTS
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ARTICLE I
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THE OFFER
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Section 1.1
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The Offer
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2
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Section 1.2
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Company Action
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4
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Section 1.3
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Board of Directors
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6
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ARTICLE II
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THE MERGER
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Section 2.1
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The Merger
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7
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Section 2.2
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Closing
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7
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Section 2.3
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Effective Time
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8
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Section 2.4
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Effects of the Merger
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8
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Section 2.5
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Certificate of Incorporation and By-laws of the Surviving
Corporation
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8
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Section 2.6
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Directors and Officers of the Surviving Corporation
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8
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Section 2.7
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Effect on Capital Stock
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8
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Section 2.8
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Exchange of Certificates
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9
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Section 2.9
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Appraisal Rights
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11
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Section 2.10
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Company Stock Options
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12
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Section 2.11
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Adjustments
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12
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Section 2.12
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Company Stock Appreciation Rights
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12
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Section 2.13
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Company Restricted Shares
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13
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Section 2.14
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Further Assurances
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13
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ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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Section 3.1
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Organization, Standing and Corporate Power
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13
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Section 3.2
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Corporate Authority; Enforceability; Voting
Requirements
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14
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Section 3.3
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Noncontravention
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15
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Section 3.4
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Governmental Approvals
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15
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Section 3.5
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Subsidiaries
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15
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Section 3.6
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Capitalization
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16
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Section 3.7
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Company SEC Documents
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17
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Section 3.8
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Absence of Certain Changes
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19
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Section 3.9
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Undisclosed Liabilities
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20
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Section 3.10
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Legal Proceedings
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20
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Section 3.11
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Compliance With Laws; Permits
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20
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Section 3.12
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Tax Matters
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21
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Section 3.13
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Employee Benefits
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22
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Section 3.14
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Labor Matters
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24
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Section 3.15
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Environmental Matters
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25
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Section 3.16
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Material Contracts
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25
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Section 3.17
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Properties
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27
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Section 3.18
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Intellectual Property
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28
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Section 3.19
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Privacy Policy; Customer Solicitation
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29
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Section 3.20
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Suppliers
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29
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Section 3.21
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Insurance
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30
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Section 3.22
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Anti-Takeover Laws
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30
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Section 3.23
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Company Rights Plan
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30
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Section 3.24
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Opinion of Financial Advisor
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31
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Section 3.25
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Brokers and Other Advisors
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31
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ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB
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Section 4.1
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Organization; Standing
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31
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Section 4.2
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Corporate Authority
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31
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Section 4.3
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Noncontravention
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32
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Section 4.4
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Governmental Approvals
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32
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Section 4.5
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Status of Parent; Ownership and Operations of Merger
Sub
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32
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Section 4.6
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Compliance With Laws
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32
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Section 4.7
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Legal Proceedings
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32
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Section 4.8
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Sufficient Funds
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33
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Section 4.9
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Company Stock
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33
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Section 4.10
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Brokers and Other Advisors
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33
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ARTICLE V
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ADDITIONAL COVENANTS AND AGREEMENTS
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Section 5.1
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Conduct of Business
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33
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Section 5.2
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Stockholders Meeting; Merger Without Meeting of Company
Stockholders
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37
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Section 5.3
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No Solicitation
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38
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Section 5.4
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Reasonable Best Efforts
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41
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Section 5.5
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Public Announcements
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43
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Section 5.6
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Access to Information; Confidentiality
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43
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Section 5.7
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Indemnification and Insurance
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44
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Section 5.8
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[Intentionally Omitted]
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45
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Section 5.9
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Fees and Expenses
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45
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Section 5.10
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Employee Matters
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45
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Section 5.11
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Updated Information
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47
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Section 5.12
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Section 16 Matters
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47
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Section 5.13
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Takeover Laws.
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47
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Section 5.14
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Company Rights Plan.
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47
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ARTICLE VI
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CONDITIONS PRECEDENT TO THE MERGER
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Section 6.1
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Conditions to Each Party's Obligation to Effect the
Merger
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47
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ARTICLE VII
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TERMINATION
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Section 7.1
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Termination
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48
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Section 7.2
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Effect of Termination
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49
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Section 7.3
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Termination Fees
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50
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ARTICLE VIII
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MISCELLANEOUS
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Section 8.1
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No Survival of Representations and Warranties
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51
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Section 8.2
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Amendment or Supplement
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51
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Section 8.3
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Extension of Time, Waiver, Etc.
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51
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Section 8.4
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Assignment
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51
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Section 8.5
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Counterparts
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52
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Section 8.6
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Entire Agreement; No Third-Party Beneficiaries
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52
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Section 8.7
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Governing Law; Jurisdiction; Waiver of Jury Trial
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52
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Section 8.8
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Specific Enforcement
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53
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Section 8.9
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Notices
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53
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Section 8.10
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Severability
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54
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Section 8.11
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Definitions
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55
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Section 8.12
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Interpretation.
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61
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Annex
A Conditions
of the Offer
Annex
B Amendments
to Employment Agreements
Annex
C Share
Tender Agreement
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of September 10, 2007
(this " Agreement "), is among Redcats USA, Inc., a Delaware
corporation (" Parent "), Boulevard Merger Sub, Inc., a
newly formed Delaware corporation and a wholly owned Subsidiary of
Parent (" Merger Sub "), and United Retail Group, Inc., a
Delaware corporation (the " Company "). Certain
capitalized terms used in this Agreement are as defined in Section
8.11.
WHEREAS, it is proposed that, on the terms and subject to the
conditions set forth in this Agreement, Merger Sub shall commence a
cash tender offer (such tender offer, as it may be extended,
amended and supplemented from time to time as permitted by this
Agreement, the " Offer ") to purchase all of the issued and
outstanding shares of common stock, par value $0.001 per share, of
the Company (the " Company Common Stock "), together with
the associated Company Rights, at a price per share equal to
$13.70, net to the sellers in cash (such amount or any greater
amount per share paid pursuant to the Offer, the " Offer
Price ");
WHEREAS, it is proposed that, on the terms and subject to the
conditions set forth in this Agreement, following the consummation
of the Offer, Merger Sub shall merge with and into the Company with
the Company surviving as a wholly owned subsidiary of Parent (the "
Merger "), pursuant to which each outstanding share of
Company Common Stock shall be converted into the right to receive
the Offer Price, except for (i) shares of Company Common Stock
to be canceled pursuant to Section 2.7(b) and (ii) Dissenting
Shares;
WHEREAS, the respective Boards of Directors of the Company, Parent
and Merger Sub deem it advisable and in the best interests of their
respective stockholders that the parties consummate the
transactions contemplated by this Agreement, including the Offer
and the Merger, upon the terms and subject to the conditions set
forth in this Agreement;
WHEREAS, the respective Boards of Directors of the Company, Parent
(on its own behalf and as the sole direct or indirect stockholder
of Merger Sub), and Merger Sub have approved this Agreement and
resolved that the transactions contemplated by this Agreement are
advisable and in the best interests of their respective
stockholders, including the consummation of the Offer and the
Merger, upon the terms and subject to the conditions set forth in
this Agreement and in accordance with the relevant provisions of
the General Corporation Law of the State of Delaware (the "
DGCL ");
WHEREAS, the Board of Directors of the Company resolved to
recommend that the holders of Company Common Stock (the "
Company Stockholders ") accept the Offer, tender their
shares of Company Common Stock in the Offer, and, to the extent
required by applicable Law, approve the Merger and adopt this
Agreement and the transactions contemplated by this Agreement
(including the Offer and the Merger), in each case, upon the terms
and subject to the conditions set forth in this
Agreement;
WHEREAS, concurrently with the execution of this Agreement, the
Company has entered into employment agreement amendments with
certain executive officers of the Company, to be in effect as of
the Acceptance Time (the " Employment Agreements "), a copy
of which Employment Agreements are attached as Annex B to this
Agreement; and
WHEREAS, concurrently with the execution of this Agreement, Parent,
the Company and Raphael Benaroya have entered into a share tender
agreement, dated as of the date of this Agreement (the " Tender
Agreement "), pursuant to which Mr. Benaroya agrees to tender
his shares of Company Common Stock in the Offer, a copy of which
Tender Agreement is attached as Annex C to this
Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement,
the receipt and adequacy of which are acknowledged, and intending
to be legally bound, Parent, Merger Sub and the Company agree as
follows:
ARTICLE I
THE OFFER
Section 1.1 The
Offer .
(a) Provided
that this Agreement shall not have been terminated in accordance
with Article VII and none of the events or conditions set forth in
Annex A (other than clause (e) of Annex A) shall have occurred and
be existing and shall not have been waived in writing by Parent or
Merger Sub (the conditions set forth in Annex A, the " Tender
Offer Conditions "), Merger Sub shall, and Parent shall cause
Merger Sub to, commence (within the meaning of Rule 14d-2 under the
U.S. Securities Exchange Act of 1934, as amended (together with its
rules and regulations, the " Exchange Act ")) the Offer, as
promptly as reasonably practicable after the date of this Agreement
and in any event within 15 Business Days after the date of this
Agreement. Without the prior written consent of the
Company, Merger Sub shall not (i) decrease the Offer Price or
change the form of consideration payable in the Offer, (ii)
decrease the number of shares of Company Common Stock sought to be
purchased in the Offer, (iii) impose conditions to the Offer in
addition to the Tender Offer Conditions or amend any condition
in a manner that is adverse to the holders of Company Common Stock,
(iv) waive or amend the Minimum Condition (v) extend the
Expiration Date (as defined below) except as required or permitted
by this Section 1.1, or (vi) make any other change to the terms of
the Offer in a manner that is materially adverse to the holders of
Company Common Stock; provided that Merger Sub
expressly reserves the right to increase the Offer Price and to
waive any of the Tender Offer Conditions other than the Minimum
Condition. The Company agrees that no shares of Company
Common Stock held by the Company or any of its Subsidiaries
will be tendered in the Offer except for Company Common Stock held
in respect of the Company's Supplemental Retirement Savings
Plan.
(b) Merger Sub
shall file with the U.S. Securities and Exchange Commission (the "
SEC ") a Tender Offer Statement on Schedule TO with respect
to the Offer on the date that the Offer is commenced, which Tender
Offer Statement shall include an offer to purchase, form of
transmittal letter and form of notice of guaranteed delivery
(together with any supplements or amendments thereto, collectively,
the " Offer Documents ") and, subject to the Company's
compliance with Section 1.2(c), cause the Offer Documents to be
disseminated to the Company Stockholders in accordance with the
applicable requirements of the Exchange Act. The Offer Documents
shall comply in all material respects with the Exchange Act and, on
the
date first filed with the SEC and on the date first
published, sent or given to the Company Stockholders and on the
Acceptance Date, shall not 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 were made,
not misleading, except that no covenant, agreement, representation
or warranty is made by Parent or Merger Sub with respect to
information supplied by the Company for inclusion or incorporation
by reference in the Offer Documents. The Company, Parent
and Merger Sub each agree promptly to correct any information
provided by it for use in the Offer Documents if and to the extent
that it shall have become false or misleading in any material
respect, and Parent further agrees to take all steps necessary to
cause the Offer Documents as so corrected to be filed with the SEC
and disseminated to the Company Stockholders to the extent required
by applicable Law. The Company shall promptly furnish to
Parent and Merger Sub all information concerning the Company that
is required or reasonably requested by Parent or Merger Sub in
connection with the obligations relating to the Offer Documents
contained in this Section 1.1(b). The Company and its
counsel shall be given a reasonable opportunity to review and
comment on the Schedule TO and the Offer Documents each time
sufficiently in advance of any such document being filed with the
SEC, and Parent and Merger Sub shall give reasonable and good faith
consideration to any comments made by the Company and its
counsel. Parent and Merger Sub shall provide the Company
and its counsel with (i) any comments or other communications,
whether written or oral, that Parent, Merger Sub or their counsel
may receive from time to time from the SEC or its staff with
respect to the Schedule TO or Offer Documents promptly after
receipt of those comments or other communications and (ii) a
reasonable opportunity to participate in the response of Parent and
Merger Sub to those comments and to provide comments on that
response (to which reasonable and good-faith consideration shall be
given), including by participating with Parent and Merger Sub or
their counsel in any discussions or meetings with the
SEC.
(c) Subject to
the terms and conditions set forth in the Offer Documents, the
Offer shall remain open until midnight, New York City time, at the
end of the twentieth (20th) Business Day after the date that the
Offer is commenced (the " Expiration Date "), unless the
period of time for which the Offer is open shall have been extended
pursuant to, and in accordance with, this Section 1.1(c) or as may
be required by applicable Law, in which event the term "Expiration
Date" shall mean the latest time and date as the Offer, as so
extended may expire. If any of the conditions of the Offer are not
satisfied or waived on any Expiration Date, Merger Sub shall extend
the Offer from time to time for one or more periods of time up to
10 Business Days (or such longer period as the Company may agree in
writing) per extension until such conditions of the Offer have been
satisfied or waived; provided that Merger Sub
shall not be required to extend the Offer after 150
days following the date that the Offer is
commenced. Merger Sub shall extend the Offer for any
period required by any rule, regulation, interpretation or position
of the SEC or its staff applicable to the Offer. Merger
Sub shall not extend the Offer if all of the conditions of the
Offer are satisfied or waived and it is permitted under applicable
Law to accept for payment and pay for tendered
shares. If all of the Tender Offer Conditions are
satisfied but the number of shares of Company Common Stock that
have been validly tendered and not withdrawn in the Offer and
accepted for payment, together with any shares of Company Common
Stock then owned by Parent, is less than 90% of the outstanding
shares of Company Common Stock, Merger Sub may, without the consent
of the Company, commence a subsequent offering period (as
provided in Rule 14d-11 under the Exchange Act) for three (3) to
twenty (20) Business Days to acquire outstanding shares of Company
Common Stock.
(d) Subject to
the terms and conditions set forth in this Agreement and to
satisfaction or waiver of the Tender Offer Conditions, Merger Sub
shall, and Parent shall cause it to, as soon as practicable after
the Expiration Date, accept for payment and pay for all shares of
Company Common Stock that have been validly tendered and not
withdrawn pursuant to the Offer. If Merger Sub shall
commence a subsequent offering period in connection with the
Offer, Merger Sub shall accept for payment and pay for all
additional shares of Company Common Stock validly tendered during
such subsequent offering period.
(e) Merger Sub
shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to the Offer (or in connection with any
subsequent offering period) any such amounts as are required to be
deducted and withheld with respect to the making of such payment
under the Internal Revenue Code of 1986, as amended (the "
Code "), or under any provision of state, local or foreign
tax Law.
Section 1.2
Company Action .
(a) The
Company approves of and consents to the Offer, and represents and
warrants that the Board of Directors of the Company, at a meeting
duly called and held, has, subject to the terms and conditions set
forth in this Agreement, unanimously (i) approved this Agreement,
and deemed this Agreement, the Offer, the Merger and the
transactions contemplated by this Agreement advisable, fair to and
in the best interests of the Company Stockholders; (ii) approved
this Agreement and the transactions contemplated by this Agreement,
including the Offer and the Merger, in all respects, and such
approval constitutes approval of the Offer, the Merger, this
Agreement and the transactions contemplated by this Agreement and
the Tender Agreements for purposes of Section 203 of the DGCL and
the Company's Rights Plan; and (iii) resolved to recommend that the
Company Stockholders accept the Offer, tender their shares of
Company Common Stock in the Offer, and, to the extent required by
applicable Law, approve the Merger and adopt this Agreement (the "
Company Recommendation "). The Company consents
to the inclusion of such approval and the Company Recommendation in
the Offer Documents, subject to Section 5.3(b).
(b) The
Company agrees to file with the SEC, as soon as reasonably
practicable on the day that the Offer is commenced, a
Solicitation/Recommendation Statement on Schedule 14D-9 pertaining
to the Offer (together with any amendments or supplements thereto,
the " Schedule 14D-9 ") that, subject to Section 5.3(b),
contains the Company Recommendation and to promptly mail the
Schedule 14D-9 to the Company Stockholders together with the Offer
Documents and cause the Offer Documents and the Schedule 14D-9 to
be disseminated to the Company Stockholders in accordance with the
applicable requirements of the Exchange Act. The
Schedule 14D-9 shall comply in all material respects with the
Exchange Act and, on the date filed with the SEC and on the date
first published or sent or given to the Company Stockholders and on
the Acceptance Date, shall not 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 were made,
not misleading, except that no covenant, agreement,
representation or warranty is made by the Company with respect to
the information supplied by Parent or Merger Sub for inclusion or
incorporation by reference in the Schedule 14D-9. The Company,
Parent and Merger Sub each agree promptly to correct any
information provided by it for use in the Schedule 14D-9 if and
to
the extent that it shall have become false or misleading in any
material respect, and the Company further agrees to take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed
with the SEC and disseminated to the Company Stockholders to the
extent required by applicable Law. Parent and Merger Sub
shall promptly furnish to the Company all information concerning
Parent and Merger Sub that is required or reasonably requested by
Company in connection with the obligations relating to the Schedule
14D-9 contained in this Section 1.2(b). Parent, Merger
Sub and their counsel shall be given a reasonable opportunity to
review and comment on the Schedule 14D-9 each time sufficiently in
advance of its filing with the SEC, and the Company shall give
reasonable and good faith consideration to any comments made by
Parent, Merger Sub or their counsel. The Company shall
provide Parent and its counsel with (i) any comments or other
communications, whether written or oral, that the Company or its
counsel may receive from time to time from the SEC or its staff
with respect to the Schedule 14D-9 promptly after receipt of
those comments or other communications and (ii) a reasonable
opportunity to participate in the response of the Company to those
comments and to provide comments on that response (to which
reasonable and good-faith consideration shall be given), including
by participating with the Company or its counsel in any discussions
or meetings with the SEC.
(c) In
connection with the Offer, the Company promptly will furnish (or
cause its transfer agent to furnish) Parent and Merger Sub with
mailing labels, security position listings and any available
listing or computer files containing the names and addresses of the
Company Stockholders, each as of a recent date, and shall furnish
Merger Sub with such additional information and assistance
(including updated lists of the Company Stockholders, mailing
labels and lists of securities positions) as Merger Sub or its
agents may reasonably request in communicating the Offer (and the
Offer Documents, including all amendments and supplements to the
Offer Documents) to the record and beneficial holders of shares of
Company Common Stock. Except as required by applicable
Law, and except as necessary to communicate the Offer, the Merger
or the transactions contemplated by this Agreement to the Company
Stockholders, Parent and Merger Sub (and their respective
representatives) shall hold in confidence the information contained
in any such labels, listings and files, shall use such information
solely in connection with the Offer and the Merger, and,
if this Agreement is terminated or the Offer is otherwise
terminated, shall promptly deliver or cause to be delivered to the
Company or destroy all copies of such information, labels, listings
and files then in their possession or in the possession of their
agents or representatives.
(d) The
Company grants to Parent and Merger Sub an irrevocable option (the
" Merger Option ") to purchase up to that number of newly
issued shares of Company Common Stock (the " Merger Option
Shares ") equal to the number of shares of Company Common Stock
that, when added to the number of shares of Company Common Stock
owned by Parent and Merger Sub immediately following consummation
of the Offer, shall constitute one share more than 90% of the
shares of Company Common Stock then outstanding on a fully diluted
basis (after giving effect to the issuance of the Merger Option
Shares) for consideration per Merger Option Share equal to the
Offer Price.
(e) The Merger
Option shall be exercisable only after the purchase of and payment
for shares of Company Common Stock pursuant to the Offer by Parent
or Merger Sub as a result of which Parent and Merger Sub own
beneficially at least 80% of the
outstanding shares of Company Common Stock. The Merger
Option shall not be exercisable if the number
of shares of Company Common Stock subject thereto exceeds the
number of authorized shares of Company Common Stock available for
issuance.
(f) In the
event that Parent or Merger Sub wish to exercise the Merger Option,
Merger Sub shall give the Company one (1) Business Day's prior
written notice specifying the number of shares of Company Common
Stock that are owned by Parent and Merger Sub immediately following
consummation of the Offer and specifying a place and a time for the
closing of the purchase. The Company shall, as soon as
practicable following receipt of such notice, deliver written
notice to Merger Sub specifying the number of Merger Option
Shares. At the closing of the purchase of the Merger
Option Shares, Parent or Merger Sub shall pay to the Company an
amount equal to the product of (i) the number of shares of Company
Common Stock purchased pursuant to the Merger Option, multiplied by
(ii) the Offer Price, which amount shall be paid in cash (by wire
transfer or cashier's check) or, at the election of Parent or
Merger Sub, by delivery of a promissory note having full recourse
to Parent.
Section 1.3
Board of Directors .
(a) Subject to
compliance with applicable Law, promptly upon the acceptance for
payment of shares of Company Common Stock by Parent or Merger Sub
or any of their affiliates pursuant to and in accordance with the
terms of the Offer (the " Acceptance Time ") and from
time to time thereafter, and subject to Section 1.3(c), Merger Sub
shall be entitled to designate up to such number of directors,
rounded to the nearest whole number constituting at least a
majority of the directors, on the Board of Directors of the Company
as will give Merger Sub representation on the Board of Directors of
the Company equal to the product of the number of directors on the
Board of Directors of the Company (giving effect to any increase in
the number of directors pursuant to this Section 1.3) and the
percentage that the number of shares of Company Common Stock
beneficially owned by Parent or its Affiliates bears to the total
number of shares of Company Common Stock then outstanding, and the
Company shall use reasonable best efforts to, upon Parent's
request, promptly, at Parent's election, either increase the size
of the Board of Directors of the Company or seeking and accepting
the resignation of such number of directors as is necessary to
enable Parent's designees to be elected to the Board of Directors
of the Company and to cause Parent's designees to be so
elected. At such times, subject to Section 1.3(c), the
Company will cause individuals designated by Parent to constitute
such number of members of each committee of the Board of Directors
of the Company, rounded up to the next whole number, that
represents the same percentage as such individuals represent on the
Board of Directors of the Company, other than any committee of the
Board of Directors of the Company established to take action under
this Agreement which committee shall be composed only of
Independent Directors (as defined in Section 1.3(c)).
(b) The
Company' obligation to appoint designees to the Board of Directors
of the Company shall be subject to Section 14(f) of the Exchange
Act and Rule 14f-1 under the Exchange Act. The Company
shall promptly take all action required pursuant to Section 14(f)
of the Exchange Act and Rule 14f-1 under the Exchange Act in
order to fulfill its obligations under this Section 1.3, and
shall include in the Schedule 14D-9 such information with respect
to the Company and its officers and directors as is required
pursuant to such Section 14(f) of the Exchange Act and Rule 14f-1
under the Exchange Act in order to fulfill its obligations under
this Section 1.3 and the U.S. federal securities
Laws. Parent shall provide to the Company,
and shall be solely responsible for, the information and consents
with respect to Parent and its designees, officers, directors and
affiliates required by Section 14(f) of the Exchange Act and Rule
14f-1 under the Exchange Act.
(c) In the
event that Parent's designees are elected or designated to the
Board of Directors of the Company, then, until the Effective Time,
the Company shall cause the Board of Directors of the Company to
have at least two (2) directors who are (i) directors on the
date of this Agreement and (ii) independent directors for
purposes of the continued listing requirements of the Nasdaq Global
Market (" NASDAQ ") (such directors, the "
Independent Directors "); provided , however ,
that, if any Independent Director is unable to serve due to death
or disability or any other reason (including as a result of removal
for cause pursuant to the last sentence of this Section 1.3(c)),
the remaining Independent Directors shall be entitled to elect or
designate another individual (or individuals) who serve(s) as a
director (or directors) on the date of this Agreement (
provided that no such individual is an employee of the
Company or its subsidiaries) to fill the vacancy, and such director
(or directors) shall be deemed to be an Independent Director (or
Independent Directors) for purposes of this
Agreement. If no Independent Director remains prior to
the Effective Time, a majority of the members of the Board of
Directors of the Company at the time of the execution of this
Agreement shall be entitled to designate two (2) persons to fill
such vacancies; provided that such individuals shall not be
employees or officers of the Company, Parent or Merger Sub and
shall be reasonably satisfactory to Parent, and such persons shall
be deemed Independent Directors for purposes of this
Agreement. Following the Acceptance Time and prior to
the Effective Time, Parent and Merger Sub shall not cause any
amendment or termination of this Agreement, any extension by the
Company of the time for the performance of any of the obligations
or other acts of Merger Sub or Parent or waiver of any of the
Company's rights under this Agreement or other action adversely
affecting the rights of the Company Stockholders (other than Parent
or Merger Sub), to be effected without the affirmative vote of a
majority of the Independent Directors. Following the
Acceptance Time and prior to the Effective Time, neither Parent nor
Merger Sub shall take any action to remove any Independent Director
unless the removal shall be for cause.
ARTICLE II
THE MERGER
Section 2.1 The
Merger . Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the
DGCL, 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, and the Company shall be the surviving
corporation in the Merger (the " Surviving Corporation
").
Section 2.2
Closing . Subject to the provisions of Article
VI, the closing of the Merger (the " Closing ") shall take
place at 10:00 a.m. (New York City time) as soon as reasonably
practicable but in any event within two (2) Business Days after
satisfaction or waiver of the conditions set forth in Article VI
(other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver
of those conditions at such time), at the offices of Wachtell,
Lipton, Rosen & Katz, 51 West 52 nd Street, New
York, New York
10019, unless another time, date or place is agreed to in writing
by the parties hereto. The date on which the Closing
actually occurs hereinafter is referred to as the " Closing
Date ."
Section 2.3
Effective Time . Subject to the provisions of
this Agreement, as soon as practicable on the Closing Date, the
parties shall file with the Secretary of State of the State of
Delaware a certificate of merger executed in accordance with, and
in such form as is required by, the DGCL (the "Certificate of
Merger"). The Merger shall become effective upon the
filing of the Certificate of Merger or at such later time on the
date of filing as is specified in the Certificate of Merger, or, if
on a date that is later than the date of filing the Certificate of
Merger, at such time as is agreed to by Parent and the Company
(with the concurrence of the Independent Directors) and stated in
the Certificate of Merger (the time at which the Merger becomes
effective is referred to as the "Effective Time").
Section 2.4
Effects of the Merger . The Merger shall have the
effects set forth in this Agreement and in Section 251 of the
DGCL. Without limiting the generality of the foregoing,
at the Effective Time, all the properties, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of
the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
Section 2.5
Certificate of Incorporation and By-laws of the Surviving
Corporation . Unless otherwise agreed by Parent and
the Company, the certificate of incorporation and by-laws of the
Company, as in effect immediately prior to the Effective Time,
shall be the certificate of incorporation and by-laws of the
Surviving Corporation until thereafter amended as provided therein
or by applicable Law and subject to Section 5.7
hereof.
Section 2.6
Directors and Officers of the Surviving Corporation
.
(a) Each of
the parties hereto shall take all necessary action to cause the
directors of Merger Sub immediately prior to the Effective Time to
be the directors of the Surviving Corporation immediately following
the Effective Time, until their respective successors are duly
elected or appointed and qualified or their earlier death,
resignation or removal in accordance with the certificate of
incorporation and by-laws of the Surviving
Corporation.
(b) The
officers of the Company named in Section 2.6(b) of the Company
Disclosure Schedule shall be the officers of the Surviving
Corporation until their respective successors are duly appointed
and qualified, their earlier death, or their resignation
or removal in accordance with the certificate of incorporation
and by-laws of the Surviving Corporation.
Section 2.7
Effect on Capital Stock . At the Effective Time,
by virtue of the Merger and without any action on the part of
Parent, Merger Sub, the Company or the holders of any shares of
Company Common Stock or any shares of capital stock of Merger
Sub:
(a)
Capital Stock of Merger Sub . Each share of
capital stock, par value $0.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and
nonassessable share of
common stock, par value $0.001 per share, of the Surviving
Corporation and shall constitute the only outstanding shares of the
Surviving Corporation. From and after the Effective
Time, all certificates, if any, representing shares of capital
stock of Merger Sub shall be deemed for all purposes to represent
the number of shares of common stock of the Surviving Corporation
into which they were converted in accordance with the immediately
preceding sentence.
(b)
Cancellation of Treasury Stock and Parent-Owned Stock
. Any shares of Company Common Stock that are owned by
the Company as treasury stock, and any shares of Company Common
Stock owned by Parent or Merger Sub, shall be automatically
canceled and shall cease to exist and no consideration shall be
delivered in exchange therefor.
(c)
Conversion of Company Common Stock . Each share
of Company Common Stock issued and outstanding immediately prior to
the Effective Time (other than shares to be canceled in
accordance with Section 2.7(b) and Dissenting Shares), including
any shares held by the trustee for the Company's Retirement Savings
Plan and Supplemental Retirement Savings Plan (the " Retir
ement Plans ") which shall be considered issued and
outstanding, shall be converted into the right to receive an amount
of cash, without interest, equal to the Offer Price (the "
Merger Consideration "). As of the Effective
Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and shall cease to
exist, and each holder of a certificate (or evidence of shares in
book-entry form) which immediately prior to the Effective Time
represented any such shares of Company Common Stock (each, a "
Certificate ") shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration to be
paid in consideration therefor upon surrender of such Certificate
in accordance with Section 2.8(b), without interest.
Section 2.8
Exchange of Certificates .
(a) Paying
Agent . Not less than three (3) Business Days
prior to the Effective Time, Parent shall designate a United States
bank or trust company reasonably acceptable to the Company to act
as agent for the benefit of the holders of shares of Company Common
Stock in connection with the Merger (the " Paying Agent ")
to receive, on terms reasonably acceptable to the Company, for the
benefit of holders of shares of Company Common Stock, the aggregate
Merger Consideration to which holders of shares of Company Common
Stock shall become entitled pursuant to Section
2.7(c). The Paying Agent shall also act as the agent for
the Company Stockholders for the purpose of holding the
Certificates and shall obtain no rights or interests in the shares
represented by such Certificates. Parent shall deposit
the aggregate Merger Consideration with the Paying Agent by wire
transfer of immediately available funds at or prior to the
Effective Time. Such aggregate Merger Consideration
deposited with the Paying Agent shall, pending its disbursement to
such holders, be invested by the Paying Agent in: (i) direct
obligations of the United States of America, (ii) obligations for
which the full faith and credit of the United States of America is
pledged to provide for the payment of principal and interest or
(iii) money market funds investing solely in a combination of the
foregoing. Parent shall promptly replace any funds
deposited with the Paying Agent that are lost through any
investment.
(b)
Payment Procedures . Promptly after the Effective
Time (but in no event more than five (5) Business Days thereafter),
Parent or the Surviving Corporation shall
cause the Paying Agent to mail to each holder of record of a
Certificate whose shares of the Company Common Stock were converted
into the right to receive the Merger Consideration (i) a letter of
transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Paying Agent,
and which shall be in such form and shall have such other customary
provisions (including customary provisions with respect to delivery
of an "agent's message" with respect to shares held in book-entry
form) as Parent may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for
payment of the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent, together with
such letter of transmittal, duly completed and validly executed in
accordance with the instructions (and such other customary
documents as may reasonably be required by the Paying Agent), the
holder of such Certificate shall be entitled to receive in exchange
therefor the Merger Consideration, without interest, for each share
of Company Common Stock formerly represented by such Certificate,
and the Certificate so surrendered shall forthwith be
canceled. If payment of the Merger Consideration is to
be made to a Person other than the Person in whose name the
surrendered Certificate is registered, it shall be a condition of
payment that (x) the Certificate so surrendered shall be properly
endorsed or shall otherwise be in proper form for transfer and (y)
the Person requesting such payment shall have paid any transfer and
other taxes required by reason of the payment of the Merger
Consideration to a Person other than the registered holder of such
Certificate surrendered or shall have established to the reasonable
satisfaction of the Surviving Corporation that such tax either has
been paid or is not applicable. Until surrendered as
contemplated by this Section 2.8, each Certificate shall be deemed
at any time after the Effective Time to represent only the right to
receive the Merger Consideration as contemplated by this Article
II, without interest.
(c)
Transfer Books; No Further Ownership Rights in Company Stock
. The Merger Consideration paid in respect of shares of
Company Common Stock upon the surrender for exchange of
Certificates in accordance with the terms of this Article II shall
be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock previously
represented by such Certificates, and at the Effective Time, the
stock transfer books of the Company shall be closed and thereafter
there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of
Company Common Stock that were outstanding immediately prior to the
Effective Time. From and after the Effective Time, the
holders of Certificates that evidenced ownership of shares of
Company Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such
shares of Company Common Stock, except as otherwise provided for in
this Agreement or by applicable Law. Subject to the last
sentence of Section 2.8(e), if, at any time after the Effective
Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in
this Article II.
(d) Lost,
Stolen or Destroyed Certificates . If any
Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such Person of a bond, in such reasonable
amount as Parent may direct, as indemnity against any claim that
may be made against it with respect to such Certificate, the Paying
Agent will pay, in exchange for such lost, stolen or destroyed
Certificate, the applicable Merger Consideration to be
paid in respect of the shares of Company Common Stock formerly
represented by such Certificate, as contemplated by this Article
II.
(e)
Termination of Fund . At any time following six
months after the Closing Date, the Surviving Corporation shall be
entitled to require the Paying Agent to deliver to it any funds
(including any interest received with respect thereto) that had
been made available to the Paying Agent and which have not been
disbursed to holders of Certificates, and thereafter such holders
shall be entitled to look only to Parent or the Surviving
Corporation (subject to abandoned property, escheat or other
similar Laws) as general creditors thereof with respect to the
payment of any Merger Consideration that may be payable upon
surrender of any Certificates held by such holders, as determined
pursuant to this Agreement, without any interest
paid. Any amounts remaining unclaimed by such holders at
such time at which such amounts would otherwise escheat to or
become property of any Governmental Authority shall become, to
the extent permitted by applicable Law, the property of Parent,
free and clear of all claims or interest of any Person previously
entitled.
(f)
Withholding Taxes . Parent, Merger Sub, the
Surviving Corporation and the Paying Agent shall be entitled to
deduct and withhold from the consideration otherwise payable to a
holder of shares of Company Common Stock, Options, SARs or
Restricted Shares pursuant to this Agreement such amounts as may be
required to be deducted and withheld with respect to the making of
such payment under the Code, or under any provision of state, local
or foreign tax Law. To the extent amounts are so
withheld and paid over to the appropriate taxing authority, such
withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Person in respect of which
such deduction and withholding was made.
Section 2.9
Appraisal Rights . Notwithstanding anything in
this Agreement to the contrary, shares of Company Common Stock that
are issued and outstanding immediately prior to the Effective Time
and which are held by a stockholder who did not vote in favor of
the Merger (or consent to the Merger in writing) and who is
entitled to demand and properly demands appraisal of such shares
pursuant to, and who complies in all respects with, the provisions
of Section 262 of the DGCL (a " Dissenting Stockholder "),
shall not be converted into or be exchangeable for the right to
receive the Merger Consideration (the " Dissenting Shares
"), but instead such holder shall be entitled to payment of the
fair value of such shares in accordance with the provisions of
Section 262 of the DGCL (and at the Effective Time, such Dissenting
Shares shall no longer be outstanding and shall automatically be
canceled and shall cease to exist, and such holder shall cease to
have any rights with respect thereto, except the right to receive
the fair value of such Dissenting Shares in accordance with the
provisions of Section 262 of the DGCL), unless and until such
holder shall have failed to perfect or shall have effectively
withdrawn or lost rights to appraisal under the DGCL or it is
determined that such holder does not have appraisal
rights. If any Dissenting Stockholder shall have failed
to perfect or otherwise shall have effectively withdrawn, waived or
lost such right or it is determined that such holder does not have
appraisal rights, such holder's shares of Company Common Stock
shall thereupon be treated as if they had been converted into and
become exchangeable for the right to receive, as of the Effective
Time, the Merger Consideration for each such share of Company
Common Stock, in accordance with Section 2.7, payable without any
interest thereon. The Company shall give Parent (i)
prompt notice of any demands for appraisal of any shares of Company
Common Stock, attempted withdrawals of such demands and any other
instruments served pursuant to the
DGCL and received by the Company relating to stockholders' rights
of appraisal, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands for appraisal
under the DGCL, except as required by applicable Law. Prior to the
Effective Time, the Company shall not, without 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, or settle or compromise or offer to settle
or compromise, any such demand, or agree to do any of the
foregoing.
Section 2.10 Company Stock
Options . At the Effective Time, all options (other
than Out-of-the-Money Options), whether vested or unvested,
outstanding and unexercised immediately prior to the Effective Time
that represent the right to acquire shares of Company Common Stock
(each, an " Option ") granted under any plan or contract
listed on Section 2.10 of the Company Disclosure Schedule (a "
Company Stock Plan ") shall, without any further action by
the Company or the Surviving Corporation, cease to exist and shall
be converted into the right to receive, in full satisfaction of
such Option, a cash amount equal to the Option Consideration (if
any) for each share of Company Common Stock then subject to the
Option. Notwithstanding the foregoing, Parent and the
Company shall be entitled to deduct and withhold from the Option
Consideration otherwise payable such amounts as may be required to
be deducted and withheld with respect to the making of such payment
under the Code, or any provision of state, local or foreign tax
Law. For purposes of this Agreement, " Option
Consideration " means, with respect to any share of Company
Common Stock issuable under a particular Option, an amount equal to
the excess, if any, of (i) the Merger Consideration per share of
Company Common Stock over (ii) the exercise price payable in
respect of such share of Company Common Stock issuable under such
Option. Cash payments to be made to holders of Options
pursuant to this Section 2.10 shall be made to the extent
practicable through the Company's payroll processing system on the
Closing Date, or if not practicable checks for such payment shall
be drawn by the Surviving Corporation in immediately available
funds and sent by overnight courier to the holders promptly after
the Effective Time (but in no event more than one Business Day
thereafter). In the event that the exercise price per
share of any Option equals or exceeds the Merger Consideration per
share of Company Common Stock (any such Option, an "
Out-of-the-Money Option "), then such Out-of-the-Money
Option shall be cancelled and of no further force and
effect. The Board of Directors of the Company (or, if
appropriate, any committee thereof administering the Company Stock
Plans) shall adopt such resolutions or take such other actions as
may be required to effect the foregoing.
Section 2.11 Adjustments
. Notwithstanding any provision of this Article II to
the contrary, if between the date of this Agreement and the
Effective Time the outstanding shares of Company Common Stock shall
have been changed into a different number of shares or a different
class by reason of the occurrence or record date of any stock
dividend, subdivision, reclassification, recapitalization, stock
split (including a reverse stock split), combination, exchange of
shares or similar transaction, the Merger Consideration shall be
equitably adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, stock split (including a
reverse stock split), combination, exchange of shares or similar
transaction.
Section 2.12 Company Stock
Appreciation Rights . At the Effective Time, all
stock appreciation rights outstanding immediately prior to the
Effective Time granted under any plan listed on Section 2.12 of the
Company Disclosure Schedule (the " SARs ") shall be settled
in
cash (the " SARs Consideration "). Cash payments
to be made to holders of SARs pursuant to this Section 2.12 shall
be made to the extent practicable through the Company's payroll
processing system on the Closing Date, or if not practicable checks
for such payment shall be drawn by the Surviving Corporation in
immediately available funds and sent by overnight courier to the
holders promptly after the Effective Time (but in no event more
than one Business Day thereafter).
Section 2.13 Company
Restricted Shares . Immediately prior to the
Effective Time, all shares of restricted and unvested Company
Common Stock (" Restricted Shares ") granted under any of
the Company Stock Plans or otherwise, which are outstanding and
subject to restriction as of the Effective Time, shall, without any
further action on the part of the holders of such Restricted
Shares, vest and the restrictions thereon shall lapse and such
shares shall be outstanding Company Common Shares and shall be
converted into the right to receive the Merger Consideration in
accordance with Section 2.7(c) of this Agreement.
Section 2.14 Further
Assurances . At and after the Effective Time, the
officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of the
Company or Merger Sub, as the case may be, any documents or
instruments, and to take any other actions and do any other things,
in the name and on behalf of the Company or Merger Sub, reasonably
necessary to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to
and under any of the rights, properties or assets of the Company
acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger and to otherwise accomplish
the purpose and intent of this Agreement and the transactions
contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
Except as disclosed in the disclosure schedule delivered by the
Company to Parent (the " Company Disclosure Schedule ")
simultaneously with the execution of this Agreement (it being
acknowledged and agreed by the parties that (i) disclosure in any
section or subsection of such Company Disclosure Schedule shall be
deemed to be disclosed for all sections or subsections of this
Agreement only to the extent that the applicability of such
disclosure to such section or subsection is readily apparent from
such disclosure, and (ii) the mere inclusion of an item in such
Company Disclosure Schedule as an exception to a representation or
warranty shall not be deemed to constitute an admission by the
Company, or otherwise imply, that such item represents a material
exception or material fact, event or circumstance or that such item
has had or would reasonably be expected to have a Material Adverse
Effect or would have been material if included in the Company SEC
Documents filed prior to the date of this Agreement (or
incorporated by reference therein)), the Company represents and
warrants to Parent and Merger Sub as follows:
Section 3.1
Organization, Standing and Corporate Power .
(a) Each of
the Company and its Subsidiaries is duly organized, validly
existing and in good standing (or equivalent status) under the Laws
of the state of its
incorporation, formation or organization, as the case may be, and
has all requisite corporate or company power and corporate or
company authority necessary to own, lease and operate all of its
properties and assets and to carry on its business as it is now
being conducted, except for such failures to be duly organized,
validly existing or in good standing or to have corporate power or
corporate authority that, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse
Effect. The Company and, except as set forth in Section
3.1(a) of the Company Disclosure Schedule, each of its Subsidiaries
is duly licensed or qualified to do business and is in good
standing (or equivalent status) in each jurisdiction in which the
nature of the business conducted. by it or the character or
location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure
to be so licensed, qualified or in good standing (or equivalent
status) could not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
(b) The
Company has made available to Parent complete and correct copies of
the certificate of incorporation and by-laws of the Company and the
organizational documents of each of its Subsidiaries, in each case,
as amended to the date of this Agreement (the " Company Charter
Documents "). Neither the Company nor any of its
material Subsidiaries is in violation of any of the provisions of
its organizational documents.
Section 3.2
Corporate Authority; Enforceability; Voting Requirements
.
(a) The
Company has all necessary corporate power and authority to execute
and deliver this Agreement and, subject to obtaining the Company
Stockholder Approval if required by applicable Law to consummate
the Merger, to perform its obligations hereunder and to consummate
the Transactions. The execution, delivery and
performance by the Company of this Agreement, and the consummation
by it of the Transactions, have been duly authorized and approved
by all necessary corporate action on the part of the Company
(including by its Board of Directors), and except for the Company
Stockholder Approval, if required by applicable Law to consummate
the Merger, no other corporate action or proceedings on the part of
the Company is necessary to authorize the execution, delivery and
performance by the Company of this Agreement and the consummation
by it of the Transactions. This Agreement has been duly
executed and delivered by the Company and, assuming due
authorization, execution and delivery of this Agreement by the
other parties hereto, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms.
(b) The
Company's Board of Directors, at a meeting duly called and held,
has unanimously (i) approved and declared advisable this Agreement
and declared this Agreement and the Transactions, including the
Offer and the Merger, advisable, fair to and in the best interest
of the Company and the Company Stockholders and (ii) resolved,
subject to Section5.3(b), to recommend that the Company
Stockholders accept the Offer, tender their shares of the Company
Common Stock in the Offer, and, to the extent required by
applicable Law, approve the Merger and adopt this
Agreement.
(c) If
required by applicable Law to approve the Merger, the affirmative
vote (in person or by proxy) of the holders of a majority of the
outstanding shares of Company Common Stock at the Company
Stockholders Meeting, or any adjournment or postponement
of
the Company Stockholders Meeting, in favor of the adoption of this
Agreement (the " Company Stockholder Approval ") is the only
vote or approval of the holders of any class or series of capital
stock of the Company or any of its Subsidiaries which is necessary
to adopt this Agreement and approve the Transactions.
Section 3.3
Noncontravention . Except as disclosed in Section
3.3 of the Company Disclosure Schedule, neither the execution and
delivery of this Agreement by the Company nor the consummation by
the Company of the Transactions, nor compliance by the Company with
any of the provisions of this Agreement, will (i) conflict with or
result in any violation or breach of (with or without notice or
lapse of time, or both) under the Company Charter
Documents, assuming that the authorizations, consents and approvals
referred to in Section 3.4 and the Company Stockholder Approval are
obtained and the filings referred to in Section 3.4 are made, (ii)
violate any material Law, judgment, writ or injunction of any
Governmental Authority applicable to the Company or any of its
Subsidiaries, or (iii) conflict with or result in any violation or
breach of, or default (with or without notice or lapse of time, or
both) under or give rise to a right of, or result in, termination,
modification, cancellation, recapture or acceleration of any
obligation or to the loss of a benefit, or result in the creation
of any Lien in or upon or with respect to, any of the properties or
other assets of the Company or any of its Subsidiaries, under any
of the terms, conditions or provisions of any loan or credit
agreement, debenture, note, bond, mortgage, indenture, deed of
trust, contract or other agreement (each, a " Contract ") to
which the Company or any of its Subsidiaries is a party, except in
the case of clause (iii) for (x) such violations or defaults as
could not reasonably be expected to, individually or in the
aggregate, (A) have a Material Adverse Effect or (B) prevent or
materially delay or materially impede the consummation or the
ability to consummate the Transactions and (y) the provisions of
certain store leases with respect to assignment and change of
control of the tenant.
Section 3.4
Governmental Approvals . Except for (i) filings
required under, and compliance with other applicable requirements
of, (x) the Exchange Act, (y) state securities or "blue sky" laws
and (z) the rules and regulations of the NASDAQ, (ii) the filing of
the Certificate of Merger with the Secretary of State of the State
of Delaware pursuant to the DGCL, and (iii) filings required under,
and compliance with other applicable requirements of, the HSR Act,
no consents or approvals of, or filings, declarations or
registrations with, any Governmental Authority are necessary for
the execution and delivery of this Agreement by the Company and the
consummation by the Company of the Transactions, other than such
other consents, approvals, filings, declarations or registrations
that, if not obtained, made or given, could not reasonably be
expected to have a Material Adverse Effect or prevent or materially
delay the consummation of the Transactions.
Section 3.5
Subsidiaries . Section 3.5 of the Company
Disclosure Schedule lists each Subsidiary of the Company (including
(i) its name and form of organization; (ii) the number and
type of outstanding equity securities and a list of the holders of
such securities; and (iii) the jurisdiction of
organization). Except for the Subsidiaries of the
Company or as listed on Section 3.5 of the Company Disclosure
Schedule, the Company does not own, directly or indirectly, any
capital stock of, or other voting securities or equity or similar
interests in, or investment in or have any obligation to invest in,
any corporation, partnership, joint venture, association, limited
liability company or other entity or Person.
Section 3.6
Capitalization .
(a) The
authorized capital stock of the Company consists of 30,000,000
shares of Company Common Stock, par value $0.001 per share, and
1,000,000 shares of preferred stock, par value $0.001 per share
(the " Company Preferred Stock ").
(b) At the
close of business on September 6, 2007, (i) 13,980,559 shares
of Company Common Stock were issued and outstanding, including
175,000 Restricted Shares and 513,724 shares held by the
trustee under the Company's Retirement Savings Plan and
Supplemental Retirement Savings Plan, (ii) no shares of Company
Preferred Stock were issued and outstanding, (iii) 1,428,641 shares
of Company Common Stock were held by the Company in its treasury
and (iv) 1,273,000 shares of Company Common Stock were reserved for
issuance under the Company Stock Plans (of which 990,500 shares of
Company Common Stock were subject to outstanding
Options, 233,500 shares of Company Common Stock were subject
to outstanding SARs to be settled in stock and 49,000 shares of
Company Common Stock were authorized but unissued under a Company
Stock Plan), and (vii) 150,000 shares of Company Preferred Stock
have been designated as Series A Junior Participating Preferred
Stock and have been reserved for issuance upon the exercise of the
rights distributed to the holders of Company Common Stock pursuant
to the Company Rights Plan. All outstanding shares of
the capital stock of the Company have been duly authorized and
validly issued and are fully paid, nonassessable and free of
preemptive rights. Except as set forth above, as of the
date of this Agreement: (A) there are no outstanding options, stock
appreciation rights or other rights of any kind which obligate the
Company or any of its Subsidiaries to issue or deliver any shares
of capital stock, voting securities or other equity interests of
the Company or any securities or obligations convertible into or
exchangeable into or exercisable for any shares of capital stock,
voting securities or other equity interests of the Company
(collectively, " Company Securities "); (B) there are no
outstanding obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any Company Securities;
and (C) there are no other options, calls, warrants or other
rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of the Company to
which the Company or any of its Subsidiaries is a
party. No Subsidiary of the Company owns any shares of
Company Common Stock.
(c) Each of
the outstanding shares of capital stock, voting securities or other
equity interests of each Subsidiary of the Company is duly
authorized, validly issued, fully paid, nonassessable and free of
any preemptive rights; all such securities have been issued in
compliance with applicable Law; and all such securities are owned
by the Company or another wholly-owned Subsidiary of the Company
and are owned free and clear of all Liens except Permitted
Liens. There are no (i) outstanding options or other
rights of any kind which obligate the Company or any of its
Subsidiaries to issue or deliver any shares of capital stock,
voting securities or other equity interests of any such Subsidiary
or any securities or obligations convertible into or exchangeable
into or exercisable for any shares of capital stock, voting
securities or other equity interest of a Subsidiary of the Company,
(ii) outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any
securities or obligations convertible into or exchangeable into or
exercisable for any shares of capital stock, voting securities or
other equity interests of a Subsidiary of the Company; or (iii)
other options, calls, warrants or other rights, agreements,
arrangements or commitments of any character
relating to the issued or unissued capital stock of any Company
Subsidiary to which the Company or any of its Subsidiaries is a
party.
(d) Section
3.6(d) of the Company Disclosure Schedule sets forth as of
September 1, 2007, the aggregate amounts of (i) the
outstanding indebtedness for borrowed money of the Company and its
Subsidiaries, on a consolidated basis, and (ii) the
outstanding guarantees by the Company and its Subsidiaries, on a
consolidated basis, of indebtedness for borrowed money of any other
Person.
(e) Except as
set forth in Section 3.6(e) of the Company Disclosure Schedule, all
outstanding Options are evidenced by stock option agreements or
other award agreements in the forms previously provided to
Parent. The per share exercise price of each Option is
equal to or greater than the fair market value of the underlying
Company Common Stock determined as prescribed by the applicable
Company Stock Plan on the effective date of the corporate action
effectuating the grant of such Option. From and after
August 4, 2007, neither the Company nor any of its Subsidiaries has
issued any shares of Company Common Stock or any securities
convertible into or exercisable for any shares of Company Common
Stock, other than the issuance of Company Common Stock upon the
exercise of Options or SARs outstanding as of August 4, 2007 in
accordance with their terms as of such date.
Section 3.7
Company SEC Documents .
(a) The
Company has filed all required reports, statements,
schedules, forms and other documents with the SEC since
January 31, 2005 (such documents collectively, and in each case
including all exhibits and schedules thereto and documents
incorporated by reference therein, together with any documents
filed during such period by the Company with the SEC on a voluntary
basis on Current Reports on Form 8-K, the " Company SEC
Documents "). As of their respective filing dates or
the filing dates of amendments prior to the date of this Agreement,
the Company SEC Documents complied in all material respects with
applicable Law, including the U.S. Securities Act of 1933, as
amended (including its rules and regulations, " Securities
Act "), the Exchange Act and the Sarbanes-Oxley Act of 2002
(including its rules and regulations, " SOX "), and none of
the Company SEC Documents as of such respective dates or the
respective filing dates of amendments contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
(b) As of the
dates on which they were filed or amended prior to the date of this
Agreement in the Company SEC Documents, the annual
consolidated financial statements of the Company and the
financial statements of the Company for any quarter of the current
fiscal year (in each case, together with the notes thereto), were
prepared in accordance with GAAP applied on a consistent basis
during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates of such financial statements and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of the financial
statements for any quarter of the current fiscal year, to normal
year-end audit adjustments). None of the Subsidiaries of the
Company are, or have at any
time since January 31, 2005 been, subject to the reporting
requirements of Section 13(a) or 15(d) of the Exchange
Act.
(c) Each of
the principal executive officer of the Company and the principal
financial officer of the Company (or each former principal
executive officer of the Company and each former principal
financial officer of the Company, as applicable) has made all
certifications required by Rule 13a-14 or 15d-14 under the Exchange
Act and Sections 302 and 906 of SOX with respect to the Company SEC
Documents, and the statements contained in such certifications were
complete and correct on the date such certifications were
made. For purposes of this Agreement, "principal
executive officer" and "principal financial officer" shall have the
meanings given to such terms in SOX. Neither the Company
nor any of its Subsidiaries has outstanding (nor has arranged or
modified since the enactment of SOX) any "extensions of credit"
(within the meaning of Section 402 of SOX ) to directors or
executive officers (as defined in Rule 3b-7 under the Exchange Act)
of the Company or any of its Subsidiaries.
(d) The
Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management's general or specific
authorizations; (ii) access to assets is permitted only in
accordance with management's general or specific authorization; and
(iii) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(e) The
Company's "disclosure controls and procedures" (as defined in Rules
13a-15(e) and 15d-15(e) of the Exchange Act) are reasonably
designed to ensure that information required to be disclosed by the
Company in the Company's periodic reports filed or submitted under
the Exchange Act is recorded, processed, summarized and reported
within the required time periods and that all such information is
accumulated and communicated to the Company's management as
appropriate to allow timely decisions regarding required disclosure
and to make the certifications required pursuant to Section 302 and
906 of SOX. The Company has disclosed, based on its most
recent evaluation of such disclosure controls and procedures prior
to the date of this Agreement, 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 (as defined
in Rule 13a-15(f) of the Exchange Act) that are reasonably likely
to adversely affect in any material respect the Company's ability
to record, process, summarize and report financial data and (ii)
any 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.
(f) Except as
set forth in Section 3.7(f) of the Company Disclosure Schedule,
since January 31, 2005 through the date of this Agreement, (i)
neither the Company nor any of its Subsidiaries, nor any director
or executive officer of the Company or any of its Subsidiaries has,
and, to the Knowledge of the Company, no other officer, employee or
accountant of the Company or any of its Subsidiaries has, received
any material complaint, allegation, assertion or claim, in writing
(or, to the Knowledge of the Company, orally) regarding the
accounting or auditing practices, procedures, methodologies or
methods of the Company or any of its Subsidiaries or their
respective internal accounting controls, including any material
complaint, allegation, assertion or claim that the Company or any
of its Subsidiaries has engaged
in questionable accounting or auditing practices, and (ii) 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 material violation of securities Laws,
breach of fiduciary duty or similar violation by the Company or any
of its officers, directors, employees or agents to the Board of
Directors of the Company or any committee thereof or to any
director or officer of the Company.
Section 3.8
Absence of Certain Changes . Except as set forth
in Section 3.8 of the Company Disclosure Schedule or in the Company
SEC Documents:
(a) from May
5, 2007 until the date of this Agreement, each of the Company and
its Subsidiaries has, in all material respects, conducted its
business in the ordinary course consistent with past practice and
there has not occurred:
(i) any
acquisition, sale or transfer of any material asset of the Company
or any of its Subsidiaries other than in the ordinary course of
business (including opening and closing of stores in the ordinary
course of business);
(ii) any
declaration, setting aside, or payment of a dividend or other
distribution (whether in cash, stock or property) with respect to
any capital stock of the Company or any of its Subsidiaries other
than dividends or distributions by a direct or indirect wholly
owned Subsidiary of the Company to its stockholders, or any direct
or indirect redemption, purchase or other acquisition by the
Company or any of its Subsidiaries of any of its shares of capital
stock or any other securities of the Company or any of its
Subsidiaries or any options, warrants, calls or rights to acquire
such shares or other securities, other than in connection with the
exercise of Options and SARs in accordance with their respective
terms;
(iii) any
change in the Company's accounting methods, principles or practices
materially affecting the Company's or any of its Subsidiaries'
assets, liabilities or businesses, except insofar as may have been
required by a change in GAAP;
(iv) (1)
any granting by the Company or any of its Subsidiaries to any
current or former director, officer or employee of the Company or
any of its Subsidiaries, of any increase in compensation, bonus
or fringe or other benefits, except in the ordinary course of
business consistent with past practice or as was required under any
Company Plan or (2) any granting by the Company or any of its
Subsidiaries to any Company personnel of (x) any increase in
severance or termination pay or (y) any right to receive any
severance or termination pay;
(v) any
material damage, destruction or loss, whether or not covered by
insurance, or
(vi) any
other action taken or committed to be taken by the Company or any
of its Subsidiaries that, if taken after the date of this
Agreement, would require the consent of Parent under clauses (iii),
(v) (other than for capital expenditures), (vi), (vii), (viii),
(ix), (x) or (xi) of Section 5.1(a).
(b) since
August 4, 2007, there has not occurred a Material Adverse
Effect.
Section 3.9
Undisclosed Liabilities . Except as disclosed in
Section 3.9 of the Company Disclosure Schedule, since May 5, 2007,
neither the Company nor any of its Subsidiaries has incurred any
liabilities of any nature, whether accrued, contingent or otherwise
(the " Liabilities "), other than Liabilities (a) incurred
in the ordinary course of business consistent with past practice,
(b) that have been discharged or paid in full in the ordinary
course of business, (c) reflected in or reserved against on the
most recent financial statements of the Company prepared in
accordance with GAAP and included in the Company SEC Documents
filed with the SEC prior to the date of this Agreement, (d) that
could not reasonably be expected to have a Material Adverse Effect
or (e) that is contemplated to be incurred under, or that results
from, this Agreement.
Section 3.10 Legal
Proceedings . Except as disclosed in Section 3.10 of
the Company Disclosure Schedule, as of the date of this Agreement,
there is no proceeding, hearing, arbitration, mediation, inquiry,
investigation, claim, suit or action (in each case, whether civil,
criminal, administrative or otherwise) (" Actions ") pending
or, to the Knowledge of the Company, threatened against the Company
or any of its Subsidiaries or any of the executive officers or
directors of the Company in their capacity as such, nor is the
Company, any of its Subsidiaries, or any of their respective
properties or assets subject to any injunction, order, judgment,
settlement, award, ruling or decree, imposed upon the Company or
any of its Subsidiaries in each case, by or before any Governmental
Authority except, in each case, for those that, individually or in
the aggregate, (A) would not reasonably be expected to have a
Material Adverse Effect or (B) would not reasonably be expected to
prevent, materially delay or materially impede the ability of the
Company to consummate the Transactions. Since January
31, 2006, there has not been any material product liability,
manufacturing or design defect, warranty, field repair or other
material product-related claims by any third party (whether based
on contract or tort and whether relating to personal injury,
including death, property damage or economic loss) arising from (A)
services rendered by the Company or any of its Subsidiaries or (B)
the sale, distribution or manufacturing of products by the Company
or any of its Subsidiaries.
Section 3.11 Compliance With
Laws; Permits .
(a) Except as
disclosed in Section 3.11 of the Company Disclosure Schedule, since
January 29, 2005, the Company and its Subsidiaries have been in
compliance with all laws, statutes, ordinances, codes, rules,
regulations, decrees and orders of Governmental Authorities
(collectively, " Laws ") applicable to the Company or any of
its Subsidiaries, except for such non-compliance as would not
reasonably be expected to be material to the Company and its
Subsidiaries, taken as a whole.
(b) Except as
disclosed in Section 3.11(b) of the Company Disclosure Schedule,
the Company and each of its Subsidiaries hold all licenses,
franchises, permits, certificates, consents, orders, approvals and
authorizations from Governmental Authorities necessary for the
lawful conduct of their respective businesses (collectively, "
Permits "), except where the failure to hold the same could
not reasonably be expected to have Material Adverse Effect, and
there is no Action pending, or to the Knowledge of the Company
threatened, regarding any of the Permits that would have or
reasonably be expected to have a Material Adverse
Effect. The Company and its Subsidiaries are in
compliance with the terms of all Permits, except for such
non-compliance as could not reasonably be expected to have a
Material Adverse Effect.
(c) To the
Knowledge of the Company (including for this purpose the members of
the Audit Committee of the Board of Directors of the Company),
there are no formal or informal governmental inquiries or
investigations or internal investigations or whistle-blower
complaints pending or threatened, in each case regarding accounting
or disclosure practices of the Company or any of its Subsidiaries,
compliance by the Company or any of its Subsidiaries with any Law
or any malfeasance by any officer of the Company or any of its
Subsidiaries, other than ordinary course inquiries, investigations
or complaints not material to the Company and its Subsidiaries,
taken as a whole.
Section 3.12 Tax Matters
.
(a) Except as
disclosed in Section 3.12 of the Company Disclosure Schedule and
for those matters that could not reasonably be expected to have a
Material Adverse Effect: (i) each of the Company and its
Subsidiaries has timely filed, or has caused to be timely filed on
its behalf (taking into account any extension of time within which
to file), all Tax Returns (as hereinafter defined) required to be
filed, and all such filed Tax Returns are true, correct and
complete; (ii) each of the Company and its Subsidiaries has timely
paid, or has had paid on its behalf, all Taxes due and owing; (iii)
the Company has made adequate provision, in accordance with GAAP,
in the consolidated financial statements included in the Company
SEC Documents filed prior to the date of this
Agreement for the payment of all Taxes for which the Company
or any of its Subsidiaries may be liable for the periods covered
thereby; (iv) no deficiency with respect to Taxes has been asserted
or assessed in writing against the Company or any of its
Subsidiaries, which has not been fully paid or adequately reserved
(in accordance with GAAP) in the Company SEC Documents filed prior
to the date of this Agreement; (v) no audits or other
administrative or court proceedings are pending with any
Governmental Authority with respect to Taxes of the Company or any
of its Subsidiaries, and no written notice thereof has been
received, (vi) there are no agreements in effect to extend the
period of limitations for assessment or collection of any Tax for
which the Company or any of its Subsidiaries may be
liable; (vii) the Company and each of its Subsidiaries has
withheld from all payments to employees, independent
contractors, creditors, shareholders and any other persons (and
timely paid to the appropriate Governmental Authority) all amounts
required to be withheld with respect to such payments in compliance
with all applicable Laws; and (viii) there are no Liens for Taxes
upon the assets of the Company or any of its Subsidiaries, other
than Liens for Taxes not yet due and payable.
(b) Neither
the Company nor any of its Subsidiaries: (i) joins
or has joined during the past eight years prior to the date of this
Agreement in the filing of any affiliated, consolidated, combined
or unitary federal, state, local or foreign income Tax Return other
than the federal income Tax Return for the consolidated group of
which the Company is the common parent, (ii) has incurred any
liability during the past eight years prior to the date of this
Agreement for Taxes of any Person (other than the Company and
its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or
foreign Law), as a transferee or successor, by contract or
otherwise, (iii) is a party to or bound by any Tax sharing
agreement or Tax indemnity agreement, arrangement or practice
(other than solely among the Company and its Subsidiaries), (iv)
has participated in a “listed transaction” (as
defined in Treasury Regulation Section 1.6011-4), or (v) has
constituted either a "distributing corporation" or a "controlled
corporation" in a distribution of stock qualifying or intended to
qualify for tax-free treatment under Section 355 of the Code in the
two (2) years prior to the date of this Agreement.
Section 3.13 Employee
Benefits .
(a) Section
3.13(a) of the Company Disclosure Schedule contains a true and
complete list of each deferred compensation, incentive
compensation, stock purchase, stock option and other equity
compensation plan, fund or program; each severance or termination
pay, medical, surgical, hospitalization, life insurance and other
"welfare" plan, fund or program (within the meaning of section 3(1)
of the Employee Retirement Income Security Act of 1974, as amended
(" ERISA ")); each profit-sharing, stock bonus or other
"pension" plan, fund or program (within the meaning of section 3(2)
of ERISA); each bonus, employment, termination or severance
agreement; and each other material employee benefit plan, fund,
program or agreement or arrangement, in each case, that is
sponsored, maintained or contributed to or required to be
contributed to by the Company or by any trade or business, whether
or not incorporated (an " ERISA Affiliate "), that together
with the Company would be deemed a "single employer" within the
meaning of section 4001(b) of ERISA, or to which the Company or an
ERISA Affiliate is party, for the benefit of any director, employee
or consultant or former employee or consultant of the Company or
any Subsidiary (the " Company Plans ").
(b) With
respect to each Company Plan, the Company has delivered (or made
available prior to the date of this Agreement in the online data
room created in connection with the Transactions) to Parent true
and complete copies of the Company Plan and any amendments thereto
(or if the Company Plan is not a written Company Plan, a
description of the Company Plan), any related trust or other
funding vehicle, the most recent annual financial report, if any,
the most recent Form 5500, any reports or summaries required under
ERISA or the Code and the most recent determination letter received
from the Internal Revenue Service with respect to each Company Plan
intended to qualify under Section 401 of the Code. Each
Company Plan intended to be "qualified" within the meaning of
section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and the trusts maintained
thereunder have been determined by the Internal Revenue Service to
be exempt from taxation under section 501(a) of the Code;
provided , however , that such Company Plans and the
trusts maintained thereunder may have been amended after such
determinations were made.
(c) Except as
disclosed in Section 3.13(c) of the Company Disclosure Schedule, no
Company Plan is a "Multiemployer Plan," as such term is defined in
Section 3(37) of ERISA, nor is any Company Plan subject to Section
302 or Title IV of ERISA or Section 412 of the
Code. With respect to each Company Plan that is a
Multiemployer Plan, except as set forth in Section 3.13(c) of the
Company Disclosure Schedule: (i) if the Company or any
of its ERISA Affiliates were to experience a withdrawal or partial
withdrawal from such plan, no Withdrawal Liability would be
incurred, except as would not reasonably be expected to have a
Material Adverse Effect; and (ii) none of the Company nor any of
their respective ERISA Affiliates has received any notification,
nor has any reason to believe, that any such plan is in
reorganization, has been terminated, is insolvent, or may
reasonably be expected to be in reorganization, to be insolvent, or
to be terminated. No liability under Title IV or Section 302 of
ERISA has been incurred by the Company or any ERISA Affiliate that
has not been satisfied in full, and no condition exists that
presents a material risk to the Company or any ERISA Affiliate of
incurring any such liability, other than liability for premiums due
the Pension Benefit Guaranty Corporation (which premiums have been
paid when due) and other than liabilities that, individually or in
the aggregate, could not reasonably be expected to have a Material
Adverse Effect. No Company Plan provides, or has any
liability to provide, life insurance or medical insurance following
termination of employment to any employee or former employee of the
Company, except as may be required by Section 4980 of
the Code, other than pursuant to the Employment
Agreements.
(d) Neither
the Company or any Subsidiary, any Company Plan, any trust created
thereunder, nor any trustee or administrator of the foregoing, has
engaged in a transaction in connection with which the Company or
any Subsidiary, any Company Plan, any such trust, or any trustee or
administrator of the foregoing, or any party dealing with any
Company Plan or any such trust could be subject to either a civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a
tax imposed pursuant to Section 4975 or 4976 of the Code, other
than penalties or taxes that, individually or in the aggregate,
would not reasonably be expected to be material.
(e) Each
Company Plan has been operated and administered in accordance with
its terms and applicable Law, including but not limited to ERISA
and the Code, except for instances of noncompliance that,
individually or in the aggregate, would not reasonably be expected
to be material.
(f) Except as
disclosed in Section 3.13(f) of the Company Disclosure Schedule or
the Company SEC Documents, no Company Plan provides medical,
surgical, hospitalization, death or similar benefits (whether or
not insured) for employees or former employees of the Company or
any Subsidiary for periods extending beyond their retirement or
other termination of service, other than (i) coverage mandated by
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