Preliminary Proxy Statement
SCHEDULE
14A INFORMATION
PROXY
STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE
ACT OF 1934
Filed
by the Registrant [X]
Filed
by a Party other than the Registrant [ ]
Check
the
appropriate box:
[X]
Preliminary Proxy Statement
[
]
Confidential, for Use of the Commission Only
(as
permitted by Rule 14a-6(e)(2))
[
]
Definitive Proxy Statement
[
]
Definitive Additional Materials
[
]
Soliciting Material Pursuant to Section 240.14a-12
BURLINGTON
COAT FACTORY WAREHOUSE CORPORATION
_____________________________________________________________________________________________
(Name
of
Registrant as Specified In Its Charter)
N/A
_____________________________________________________________________________________________
(Name
of
Person(s) Filing Proxy Statement, if other than Registrant)
Payment
of Filing Fee (Check the appropriate box):
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[X]
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
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Title
of each class of securities to which transaction applies: Common
Stock, par value $1.00 per share, of Burlington Coat Factory Warehouse
Corporation (“Common
Stock”)
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2)
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Aggregate
number of securities to which transaction applies: 44,770,513
shares of Common Stock and 508,420 options to purchase shares
of Common
Stock with exercise prices below
$45.50.
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3)
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Per
unit price or other underlying value of transaction computed
pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined): The
filing fee was determined based upon the sum of (A) 44,770,513
shares of
Common Stock multiplied by $45.50 per share and (B) options
to purchase
508,420 shares of Common Stock with exercise prices below $45.50,
multiplied by $27.21 per share (which is the difference between
$45.50 and
the weighted average exercise price per share). In accordance
with Section
14(g) of the Securities Exchange Act of
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1934,
as amended, the filing fee was determined by multiplying
0.000107 by the
sum of the preceding
sentence.
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4)
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Proposed
maximum aggregate value of transaction: $2,050,892,450
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[
]
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Fee
paid previously with preliminary
materials.
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[
]
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement
No.:
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PRELIMINARY
COPY - SUBJECT TO COMPLETION
[LOGO]
BURLINGTON
COAT FACTORY WAREHOUSE CORPORATION
1830
ROUTE 130
BURLINGTON,
NEW JERSEY 08016
________________________________
[_____],
2006
Dear
Stockholder:
You
are
cordially invited to attend the special meeting of stockholders of Burlington
Coat Factory Warehouse Corporation (the “Company”) to be held at [_____],
Eastern Time, on [day of week], [________], 2006 at the offices of the Company,
1830 Route 130, Burlington, New Jersey 08016.
At
the
special meeting you will be asked to consider and vote upon a proposal to
adopt
an Agreement and Plan of Merger, dated as of January 18, 2006 (as it may
be
amended from time to time, the “Merger Agreement”), pursuant to which BCFWC
Acquisition, Inc., a Delaware corporation, has agreed to acquire the Company
in
a cash merger. BCFWC Acquisition, Inc. is a new corporation formed for this
purpose by Bain Capital Partners, LLC. If the Company’s stockholders adopt the
Merger Agreement and the merger is completed, you will receive $45.50 in
cash,
without interest, for each share of the Company’s common stock you own (unless
you have properly exercised your appraisal rights with respect to the merger).
Your
Board of Directors has unanimously determined that the Merger Agreement is
advisable, has approved and adopted the Merger Agreement and recommends that
you
vote “FOR” the adoption of the Merger Agreement.
The
accompanying proxy statement provides you with detailed information about
the
proposed merger and the special meeting. Please give this material your careful
attention. You may also obtain more information about the Company from documents
we have filed with the Securities and Exchange Commission.
Your
Board of Directors has fixed the close of business on [_________], 2006 as
the
record date for the determination of stockholders entitled to notice of,
and to
vote at, the special meeting. Whether or not you plan to attend the special
meeting, please fill in, date, sign and return the enclosed proxy which is
solicited by, and on behalf of, the Board of Directors. The failure to vote
has
the same effect as a vote against the adoption of the Merger
Agreement.
Thank
you
for your cooperation and continued support.
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Sincerely,
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/s/
Monroe G. Milstein
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Chairman
of the Board, Chief Executive Officer and
President
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Burlington,
New Jersey
[_________],
2006
THIS
PROXY STATEMENT IS DATED [__________], 2006
AND
IS
FIRST BEING MAILED TO STOCKHOLDERS ON OR ABOUT [_________], 2006.
BURLINGTON
COAT FACTORY WAREHOUSE CORPORATION
1830
ROUTE 130
BURLINGTON,
NEW JERSEY 08016
___________________________________
NOTICE
OF
SPECIAL MEETING OF STOCKHOLDERS
___________________________________
Burlington,
New Jersey
[_________],
2006
To
the
Stockholders of
BURLINGTON
COAT FACTORY WAREHOUSE CORPORATION
NOTICE
IS
HEREBY GIVEN that a special meeting of stockholders of Burlington Coat Factory
Warehouse Corporation, a Delaware corporation (the “Company”), will be held at
[_____], Eastern Time, on [day of week], [_______], 2006 at the offices of
the
Company, 1830 Route 130, Burlington, New Jersey 08016 for the following
purposes:
1. To
consider and vote upon a proposal to adopt the Agreement and Plan of Merger,
dated as of January 18, 2006 (as it may be amended from time to time, the
“Merger Agreement”), by and among the Company, BCFWC Acquisition, Inc., a
Delaware corporation (“Parent”), and BCFWC Mergersub, Inc., a Delaware
corporation and a wholly-owned subsidiary of Parent (“Merger Sub”). A copy of
the Merger Agreement is attached as Appendix A to the accompanying proxy
statement. Pursuant to the terms of the Merger Agreement, Merger Sub will
merge
with and into the Company, with the Company continuing as the surviving
corporation and becoming a wholly-owned subsidiary of Parent, and each share
of
common stock of the Company, other than those shares held by stockholders,
if
any, who properly exercise their appraisal rights under Delaware law, will
be
converted into the right to receive $45.50 in cash without
interest.
2. To
transact such other business as may properly come before the special meeting
or
any adjournment or postponement of the meeting.
Only
stockholders of record at the close of business on [______], 2006 are entitled
to notice of and to vote at the special meeting and at any adjournment or
postponement of the special meeting. All stockholders of record are cordially
invited to attend the special meeting in person. Whether or not you plan
to
attend the special meeting, you are urged to vote your shares by marking,
signing, dating and returning the proxy card as promptly as possible in the
postage prepaid envelope enclosed for that purpose. The failure to vote has
the
same effect as a vote against the adoption of the Merger Agreement. Any
stockholder attending the special meeting may vote in person even if he or
she
has returned a proxy card.
The
Company’s stockholders have the right to dissent from the merger and obtain
payment in cash of the fair value of their shares of common stock under
applicable provisions of Delaware law. In order to perfect and exercise
appraisal rights, stockholders must give written demand for appraisal of
their
shares before the taking of the vote on the merger at the special meeting
and
must not vote in favor of the merger. A copy of the applicable Delaware
statutory provisions is included as Appendix D to the accompanying proxy
statement, and a summary of these provisions can be found under “Dissenters’
Rights of Appraisal” in the accompanying proxy statement.
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By
Order of the Board of Directors
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/s/
Paul C. Tang
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Secretary
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Please
do
not send your stock certificates at this time. If the Merger Agreement is
adopted, you will be sent instructions regarding the surrender of your stock
certificates.
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TABLE
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(Continued)
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TABLE
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(Continued)
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TABLE
OF
CONTENTS
(Continued)
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The
following questions and answers address briefly some questions you may have
regarding the special meeting and the proposed merger. These questions and
answers may not address all questions that may be important to you as a
stockholder of Burlington Coat Factory Warehouse Corporation. Please refer
to
the more detailed information contained elsewhere in this proxy statement,
the
appendices to this proxy statement and the documents referred to or incorporated
by reference in this proxy statement. In this proxy statement, the terms
“Company,” “we,” “our,” “ours,” and “us” refer to Burlington Coat Factory
Warehouse Corporation.
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Q:
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What
is the proposed transaction?
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A:
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The
proposed transaction is the acquisition of the Company pursuant
to an
Agreement and Plan of Merger (as it may be amended from time
to time, the
“Merger Agreement”), dated as of January 18, 2006, by and among the
Company, BCFWC Acquisition, Inc. (“Parent”), and BCFWC Mergersub, a
wholly-owned subsidiary of Parent (“Merger Sub”). Parent and Merger Sub
are newly-formed affiliates of Bain Capital Partners, LLC.
If the Merger
Agreement is adopted by the Company’s stockholders and the other closing
conditions under the Merger Agreement have been satisfied or
waived,
Merger Sub will merge with and into the Company (the “Merger”). The
Company will be the surviving corporation in the Merger (the
“surviving
corporation”) and will become a wholly-owned subsidiary of Parent.
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Q:
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What
will I receive in the Merger?
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A:
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Upon
completion of the Merger, you will receive $45.50 in cash,
without
interest, for each share of our common stock that you own.
For example, if
you own 100 shares of our common stock, you will receive $4,550
in cash in
exchange for your Company shares.
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Q:
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Where
and when is the special meeting?
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A:
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The
special meeting will be held at [______], Eastern Time, on
[day of week],
[____], 2006 at the offices of the Company, 1830 Route 130,
Burlington,
New Jersey 08016.
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Q:
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What
vote of our stockholders is required to adopt the Merger Agreement?
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A:
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For
us to complete the Merger, stockholders holding at least a
majority of the
shares of our common stock outstanding at the close of business
on the
record date must vote “FOR” the adoption of the Merger Agreement.
Accordingly, failure to vote or an abstention will have the
same effect as
a vote against adoption of the Merger Agreement. Members of
the Milstein
family and affiliated entities, representing approximately
61.0% of the
outstanding shares of our common stock, have entered into a
voting
agreement with Parent pursuant to which they have agreed to
vote (and have
granted Parent a proxy to vote) all their shares in favor of
the adoption
of the Merger Agreement, unless the Merger Agreement is terminated
in
accordance with its terms.
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Q:
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How
does the Company’s Board of Directors recommend that I vote?
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A:
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Our
Board of Directors unanimously recommends that our stockholders
vote “FOR”
the adoption of the Merger Agreement. You should read “The Merger—Reasons
for the Merger” for a discussion of the factors that our Board of
Directors considered in deciding to recommend the adoption
of the Merger
Agreement.
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Q:
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What
do I need to do now?
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A:
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We
urge you to read this proxy statement carefully, including
its appendices,
and to consider how the Merger affects you. If you are a
stockholder of
record, then you can ensure that your shares are voted at
the special
meeting by submitting your proxy via the mail, by marking,
signing, dating
and mailing each proxy card and returning it in the envelope
provided.
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Q:
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If
my shares are held in “street name” by my broker, will my broker vote my
shares for me?
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A:
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Yes,
but only if you provide instructions to your broker on how
to vote. You
should follow the directions provided by your broker regarding
how to
instruct your broker to vote your shares. Without those instructions,
your
shares will not be voted, which will have the same effect as
voting
against the Merger.
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Q:
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How
do I revoke or change my vote?
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A:
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You
can change your vote at any time before your proxy is voted
at the special
meeting. You may revoke your proxy by notifying the Secretary
of the
Company in writing or by submitting a new proxy by mail, in
each case,
dated after the date of the proxy being revoked. In addition,
your proxy
may be revoked by attending the special meeting and voting
in person.
However, simply attending the special meeting will not revoke
your proxy.
If you have instructed a broker to vote your shares, the above-described
options for changing your vote do not apply, and instead you
must follow
the instructions received from your broker to change your vote.
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Q:
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What
does it mean if I get more than one proxy card?
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A:
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If
your shares are registered differently and are in more than
one account,
you will receive more than one card. Please complete and return
all of the
proxy cards you receive to ensure that all of your shares are
voted.
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Q:
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When
do you expect the Merger to be completed?
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A:
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We
are working to complete the Merger as soon as possible, subject
to receipt
of stockholder approval and satisfaction of the other closing
conditions
under the Merger Agreement. See “The Merger Agreement—Conditions to the
Merger.”
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Q:
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Should
I send in my stock certificates now?
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A:
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No.
Shortly after the Merger is completed, you will receive a letter
of
transmittal with instructions informing you how to send in
your stock
certificates to the paying agent in order to receive the Merger
consideration. You should use the letter of transmittal to
exchange stock
certificates for the Merger consideration to which you are
entitled as a
result of the Merger. DO NOT SEND ANY STOCK CERTIFICATES WITH
YOUR PROXY.
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Q:
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Who
can help answer my other questions?
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A:
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If
you have more questions about the Merger, need assistance in
submitting
your proxy or voting your shares or need additional copies
of the proxy
statement or the enclosed proxy card, you should contact the
Secretary of
the Company, telephone: (609) 387-7800. If your broker holds
your shares,
you should also call your broker for additional information.
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This
summary highlights selected information from the proxy statement and may
not
contain all of the information that is important to you. You should carefully
read the entire proxy statement to fully understand the Merger. The Merger
Agreement is attached as Appendix A to this proxy statement. We encourage
you to
read the Merger Agreement because it is the legal document that governs the
Merger. Each item in this summary includes a page reference directing you
to a
more complete description of that item.
PARTIES
TO THE MERGER (PAGE 12)
Burlington
Coat Factory Warehouse Corporation
1830
Route 130
Burlington,
New Jersey 08016
Telephone:
(609) 387-7800
The
Company offers a broad selection of branded apparel and other merchandise at
everyday low pricing across many product divisions, including coats, ladies
sportswear, menswear, family footwear, baby furniture and accessories, and
home
decor and gifts. Burlington Coat Factory, founded in 1972 by the Milstein
family, has expanded from a single store selling coats to a multi-department
retail chain with 367 stores in 42 states, predominantly under the “Burlington
Coat Factory” name. The Company also offers merchandise for sale through its
Internet subsidiary, Burlington Coat Factory Direct Corporation, on the
worldwide web (www.burlingtoncoatfactory.com
and www.babydepot.com). The Company’s policy of buying significant quantities of
merchandise throughout the year, maintaining inventory control and using a
“no-frills” merchandising approach, allows it to offer merchandise at prices
below traditional full retail prices. The Company is incorporated in the state
of Delaware.
BCFWC
Acquisition, Inc.
111
Huntington Avenue
Boston,
Massachusetts 02199
Telephone:
(617) 516-2000
Parent
is
a Delaware corporation formed by Bain Capital Partners, LLC (“Bain Capital”).
Parent was organized solely for the purpose of entering into the Merger
Agreement and consummating the transactions contemplated by the Merger
Agreement. It has not conducted any activities to date other than activities
incidental to its formation and in connection with the transactions contemplated
by the Merger Agreement.
BCFWC
Mergersub, Inc.
111
Huntington Avenue
Boston,
Massachusetts 02199
Telephone:
(617) 516-2000
Merger
Sub is a Delaware corporation wholly-owned by Parent. Merger Sub was organized
solely for the purpose of entering into the Merger Agreement and consummating
the transactions contemplated by the Merger Agreement. It has not conducted
any
activities to date other than activities incidental to its formation and in
connection with the transactions contemplated by the Merger
Agreement.
THE
MERGER (PAGES 14 AND 42)
You
are
being asked to vote to adopt the Merger Agreement. The Merger Agreement provides
that Merger Sub will be merged with and into the Company, and each outstanding
share of the common stock, par value $1.00 per share, of the Company (“Company
common stock”) (other than shares held in the treasury of the Company and other
than shares held by a stockholder who properly demands statutory appraisal
rights), will be converted into the right to receive $45.50 in cash, without
interest.
THE
SPECIAL MEETING OF STOCKHOLDERS (PAGE 13)
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Place,
Date and Time.
The special meeting will be held at [_____], Eastern Time, on [day
of
week], [_______], 2006 at the offices of the Company, 1830 Route
130,
Burlington, New Jersey 08016.
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What
Vote is Required for Adoption of the Merger Agreement.
The
adoption of the Merger Agreement requires the approval of the holders
of a
majority of the outstanding shares of Company common stock entitled
to
vote thereon. The failure to vote has the same effect as a vote against
adoption of the Merger Agreement. Stockholders who together own
approximately 61.0% of the outstanding shares of Company common stock
have
agreed to vote (and have granted Parent a proxy to vote) all their
shares
in favor of the adoption of the Merger Agreement. See “The Voting
Agreement.”
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Who
Can Vote at the Meeting. You
can vote at the special meeting all of the shares of Company common
stock
you own of record as of [record date], which is
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the
record date for the special meeting. If you own shares that are
registered
in someone else’s name (for example, a broker), you need to direct that
person to vote those shares or obtain an authorization from them
and vote
the shares yourself at the meeting. As of the close of business
on [record
date], there were [___________] shares of Company common stock
outstanding
held by approximately [___] holders of
record.
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Procedure
for Voting. You
can vote your shares by attending the special meeting and voting
in person
or by mailing the enclosed proxy card. You may revoke your proxy
at any
time before the vote is taken at the meeting. To revoke your proxy,
you
must either advise the Secretary of the Company in writing, or deliver
a
new proxy dated after the date of the proxy being revoked, before
your
Company common stock has been voted at the special meeting, or attend
the
meeting and vote your shares in person. Merely attending the special
meeting will not constitute revocation of your
proxy.
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If
your
shares are held in “street name” by your broker, you should instruct your broker
on how to vote your shares using the instructions provided by your broker.
If
you do not instruct your broker to vote your shares, it has the same effect
as a
vote “AGAINST” adoption of the Merger Agreement.
EFFECTIVE
TIME OF THE MERGER (PAGE 42)
We
are working to complete the Merger as soon as possible, subject to receipt
of
stockholder approval and satisfaction of the closing conditions under the Merger
Agreement, including the conditions described below under “The Merger Agreement
- Conditions to the Merger.”
BOARD
RECOMMENDATION (PAGE 22)
After
careful consideration, the Company’s Board of Directors (the “Board of
Directors”), by unanimous vote:
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has
determined that the Merger Agreement is
advisable;
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has
approved the Merger Agreement, the Merger and the other transactions
contemplated by the Merger Agreement;
and
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recommends
that the Company’s stockholders vote “FOR” the adoption of the Merger
Agreement.
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FAIRNESS
OPINION (PAGE 28)
Goldman,
Sachs & Co. (“Goldman Sachs”) delivered its opinion to the Board of
Directors that, as of January 18, 2006 and based upon and subject to the factors
and assumptions set forth therein, the $45.50 per share in cash to be received
by the holders of the outstanding shares of Company common stock pursuant to
the
Merger Agreement was fair from a financial point of view to those
holders.
The
full
text of the written opinion of Goldman Sachs, dated January 18, 2006, which
sets
forth assumptions made, procedures followed, matters considered and limitations
on the review undertaken in connection with the opinion, is attached as Appendix
C to this proxy statement. Goldman Sachs provided its opinion for the
information and assistance of the Board of Directors in connection with its
consideration of the Merger. The Goldman Sachs opinion is not a recommendation
as to how any holder of Company common stock should vote with respect to the
Merger.
FINANCING
(PAGE 25)
In
connection with the execution and delivery of the Merger Agreement, Parent
obtained commitments to provide approximately $2.075 billion in debt financing,
not all of which is expected to be drawn at the closing of the Merger,
consisting of (a) an $800 million senior secured revolving credit facility,
(b)
a $775 million senior secured term loan facility and (c) either (i) a
combination of $200 million in gross proceeds from the issuance and sale of
senior unsecured notes and $300 million in gross proceeds from the issuance
and
sale of senior subordinated unsecured notes or (ii) if such notes are not
issued, then $200 million of senior unsecured bridge loans under a senior bridge
facility and $300 million of senior subordinated unsecured bridge loans under
a
subordinated bridge facility. In addition, Parent has obtained an aggregate
of
up to $500 million in equity commitments from affiliates of Bain
Capital.
VOTING
AGREEMENT (PAGE 62)
In
connection with the Merger, Samgray, L.P., Article Sixth Trust, MM 2005
Intangibles Trust, MHLAS Limited Partnership No. 1, MH Family LLC, Andrew
Milstein, Stephen Milstein and Lazer Milstein (the “Milstein Stockholders”) have
entered into a voting agreement with Parent, dated as of January 18, 2006
(as it may be amended from time to time, the “Voting Agreement”). Pursuant to
the Voting Agreement, the Milstein Stockholders have agreed to vote (and have
granted to Parent a proxy to vote) all their shares of Company common stock
in
favor of the adoption of the Merger Agreement, unless the Merger Agreement
is
terminated in accordance with its terms. As of February 9, 2006, 27,326,340
shares
of
Company common stock, or approximately 61.0% of the outstanding shares, were
subject to the Voting Agreement. A copy of the Voting Agreement is attached
as
Appendix B to this proxy statement.
TREATMENT
OF STOCK OPTIONS (PAGE 43)
The
Merger Agreement provides that each outstanding stock option that remains
unexercised as of the completion of the Merger, whether or not the option is
vested and exercisable, will be canceled, and the holder of such stock option
will be entitled to receive a cash payment, without interest and less applicable
withholding taxes, equal to the product of:
| · |
the
number of shares of Company common stock subject to the option as
of the
effective time of the Merger, multiplied by
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the
excess, if any, of the
greater of (A) $45.50 or (B) in the case of any nonqualified stock
option,
the Adjusted Fair Market Value (as defined in the applicable Company
option plan) of each share of Company common stock
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subject
to such option, over
the
exercise price per share of Company common stock subject to such option.
If
the
amount of such product is zero, no payment will be made.
INTERESTS
OF DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER (PAGE
22)
In
considering the recommendation of the Board of Directors with respect to the
Merger, you should be aware that some of the Company’s directors and executive
officers have interests in the Merger that may be different from, or in addition
to, the interests of our stockholders generally. These interests, to the extent
material, are described below under “The Merger - Interests of the Company’s
Directors and Executive Officers in the Merger.” The Board of Directors was
aware of these interests and considered them, among other matters, in approving
the Merger Agreement and the Merger.
SHARES
HELD BY DIRECTORS AND EXECUTIVE OFFICERS (PAGES 62
AND 64)
As
of
February 9, 2006, the directors and executive officers of the Company owned
approximately 61.2% of the shares of Company common stock entitled to vote
at
the special meeting. Each of them has advised us that they plan to vote all
of
their shares in favor of the adoption of the Merger Agreement. Certain directors
and executive officers are also parties to the Voting Agreement.
MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
(PAGE 40)
The
Merger will be a taxable transaction to you. For United States federal income
tax purposes, your receipt of cash in exchange for your shares of Company common
stock generally will result in your recognizing gain or loss measured by the
difference, if any, between the cash you receive in the Merger and your tax
basis in your shares of Company common stock. You should consult your own tax
advisor for a full understanding of the Merger’s tax consequences that are
particular to you.
PROCEDURE
FOR RECEIVING MERGER CONSIDERATION (PAGE 44)
Parent
will appoint a paying agent reasonably acceptable to us to coordinate the
payment of the cash Merger consideration following the Merger.
Promptly after the effective time of the Merger, the paying agent will mail
a
letter of transmittal and instructions to you and the other stockholders. The
letter of transmittal and instructions will tell you how to surrender your
Company common stock certificates in exchange for the Merger consideration.
Please do
not send in your share certificates now.
NO
SOLICITATION OF ALTERNATIVE PROPOSALS (PAGE 50)
The
Merger Agreement contains certain restrictions on our ability to solicit or
engage in discussions or negotiations with a third party regarding specified
transactions involving the Company. Notwithstanding these restrictions, under
certain circumstances, the Board of
Directors
may (i) respond to an unsolicited bona fide written proposal for an alternative
acquisition or terminate the Merger Agreement and (ii) enter into an agreement
with respect to a superior proposal (in which case the Company will be required
to pay a $70 million termination fee to Parent). If the Merger Agreement
terminates, the Voting Agreement will also terminate.
CONDITIONS
TO COMPLETING THE MERGER (PAGE 56)
Before
we
can complete the Merger, a number of conditions must be satisfied. These
conditions include:
| · |
adoption
of the Merger Agreement by our stockholders;
|
| · |
no
governmental entity having enacted any law or regulation, or issued
any
judgment, order, writ, decree or injunction, that prohibits the completion
of the Merger;
|
| · |
the
performance, in all material respects, by all parties to the Merger
Agreement of their respective agreements and covenants in the Merger
Agreement, and the representations and warranties of the Company,
Parent
and Merger Sub in the Merger Agreement being true and correct, subject
to
various materiality qualifications;
|
| · |
the
expiration or termination of any applicable waiting period under
the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the “HSR
Act”) (this condition was satisfied on February 10,
2006);
|
| · |
Monroe
Milstein, Andrew Milstein and Stephen Milstein having entered into
non-competition and non-solicitation agreements with Parent;
|
| · |
no
governmental entity having initiated any proceeding or investigation
seeking to prevent the completion of the Merger;
and
|
| · |
holders
of no more than 5% of the outstanding shares of Company common stock
having exercised (and not withdrawn or failed to perfect) appraisal
rights
under Delaware law.
|
TERMINATION
OF THE MERGER AGREEMENT (PAGE 59)
The
Company and Parent can agree to terminate the Merger Agreement without
completing the Merger, even if our stockholders have adopted the Merger
Agreement. The Merger Agreement may also be terminated in certain other
circumstances, including:
| · |
by
either Parent or the Company, if:
|
| · |
any
governmental entity has issued an order, decree or ruling or taken
any
other action permanently restraining, enjoining or otherwise prohibiting
the Merger and such order or other action is final and non-appealable;
|
| · |
the
closing has not occurred on or before June 30, 2006, except that
under certain conditions such date will be extended to August 14,
2006 (the “Outside Date”);
|
| · |
any
state or federal law, order, rule or regulation is adopted or issued
which
has the effect of prohibiting the
Merger;
|
| · |
our
stockholders do not adopt the Merger Agreement at the special meeting
or
any postponement or adjournment thereof;
|
| · |
there
is a material breach by the non-terminating party of any of its
representations, warranties, covenants or agreements in the Merger
Agreement such that the closing conditions would not be satisfied
and such
breach has not been cured within 45 days following notice by the
terminating party or cannot be cured by the Outside Date;
|
| · |
by
the Company, if the Company’s Board of Directors approves a superior
proposal in accordance with the terms of the Merger Agreement; and
|
| · |
by
Parent, if the Company’s Board of Directors withdraws or modifies in a
manner adverse to Parent its recommendation that the Company’s
stockholders adopt the Merger Agreement or recommends to stockholders
an
alternative proposal or superior proposal, or the Company enters
into a
definitive agreement with respect
thereto.
|
TERMINATION
FEES (PAGE 60)
We
will be required to pay a termination fee of $70 million to Parent if the Merger
Agreement is terminated under certain circumstances, and Parent will be required
to pay a termination fee of $70 million to us if the Merger Agreement is
terminated under certain other circumstances.
THE
COMPANY’S STOCK PRICE (PAGE 63)
The
Company common stock is listed on the New York Stock Exchange (“NYSE”) under the
trading symbol “BCF.” On June 24, 2005, which was the trading day immediately
prior to the date on which we announced that the Board of Directors was
exploring possible strategic alternatives for the Company to enhance stockholder
value, the Company common stock closed at $36.04 per share. On January 17,
2006,
which was the last trading day before we announced the Merger Agreement, the
Company common stock closed at $44.58
per
share. On [______], 2006, which was the last trading day before this proxy
statement was printed, the Company common stock closed at $[____] per share.
DISSENTERS’
RIGHTS OF APPRAISAL (PAGE 68)
The
Delaware General Corporation Law (“DGCL”) provides you with appraisal rights in
the Merger. This means that if you are not satisfied with the amount you are
receiving in the Merger, you are entitled to have the value of your shares
determined by the Delaware Court of
Chancery
and to receive payment based on that valuation. The ultimate amount you receive
as a dissenting stockholder in an appraisal proceeding may be more or less
than,
or the same as, the amount you would have received in the Merger. To exercise
your appraisal rights, you must deliver a written demand for appraisal to the
Company before the Merger Agreement is voted on at the special meeting and
you
must not vote in favor of the adoption of the Merger Agreement. Your failure
to
follow exactly the procedures specified under Delaware law will result in the
loss of your appraisal rights.
QUESTIONS
If
you
have additional questions about the Merger or other matters discussed in this
proxy statement after reading this proxy statement, you should
contact:
Burlington
Coat Factory Warehouse Corporation
1830
Route 130
Burlington,
NJ 08016
Attention:
Secretary of the Company
Telephone:
(609) 387-7800
This
proxy statement, and the documents to which we refer you in this proxy
statement, contain “forward looking” statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), which are intended to be covered by the safe harbors created thereby.
There are “forward looking” statements throughout this proxy statement,
including, among others, under the headings “Questions and Answers About the
Special Meeting and the Merger,” “Summary,” “The Merger,” “Opinion of the
Company’s Financial Advisor,” “Regulatory Approvals” and “Litigation,” and in
statements containing the words “believes,” “expects,” “anticipates,” “intends,”
“estimates” or other similar expressions.
You
should be aware that forward-looking statements involve known and unknown risks
and uncertainties. Although we believe that the expectations reflected in these
forward-looking statements are reasonable, we cannot assure you that the actual
results or developments we anticipate will be realized, or even if realized,
that they will have the expected effects on the business or operations of the
Company. These forward-looking statements speak only as of the date on which
the
statements were made.
In
addition to other factors and matters contained or incorporated in this
document, we believe the following factors could cause actual results to differ
materially from those discussed in the forward-looking statements:
| · |
the
timing of, and regulatory and other conditions associated with, the
completion of the Merger;
|
| · |
volatility
in the stock markets;
|
| · |
proposed
store openings and closings;
|
| · |
proposed
capital expenditures;
|
| · |
projected
financing requirements;
|
| · |
proposed
developmental projects;
|
| · |
projected
sales and earnings, and the Company’s ability to maintain selling
margins;
|
| · |
general
economic conditions;
|
| · |
competitive
factors, including pricing and promotional activities of major
competitors;
|
| · |
the
availability of desirable store locations on suitable terms;
|
| · |
the
availability, selection and purchasing of attractive merchandise
on
favorable terms;
|
| · |
the
Company’s ability to control costs and
expenses;
|
| · |
unforeseen
computer related problems;
|
| · |
any
unforeseen material loss or
casualty;
|
| · |
the
effect of inflation; and
|
| · |
other
factors that may be described in the Company’s filings with the Securities
and Exchange Commission (the
“SEC”).
|
The
internal financial information that the Company provided to Goldman Sachs in
connection with its opinion described below under “Opinion of the Company's
Financial Advisor” was prepared by the Company's management. As a matter of
policy, the Company does not publicly disclose internal management forecasts,
projections or estimates of the type furnished to Goldman Sachs in connection
with its opinion, and such forecasts, projections and estimates were not
prepared with a view towards public disclosure. These forecasts, projections
and
estimates were based on numerous variables and assumptions which are inherently
uncertain and many of which are beyond the control of the Company, including,
without limitation, factors related to general economic, business, regulatory,
and competitive conditions. They involve significant elements of subjective
judgment which may or may not be correct. Accordingly, actual results can be
expected to vary from those set forth in or implied by such forecasts,
projections and estimates, and such variations may be material.
The
Company offers a broad selection of branded apparel and other merchandise at
everyday low pricing across many product divisions, including coats, ladies
sportswear, menswear, family footwear, baby furniture and accessories, and
home
decor and gifts. Burlington Coat Factory, founded in 1972 by the Milstein
family, has expanded from a single store selling coats to a multi-department
retail chain with 367 stores in 42 states, predominantly under the “Burlington
Coat Factory” name. The Company also offers merchandise for sale through its
Internet subsidiary, Burlington Coat Factory Direct Corporation, on the
worldwide web (www.burlingtoncoatfactory.com
and www.babydepot.com). The Company’s policy of buying significant quantities of
merchandise throughout the year, maintaining inventory control and using a
“no-frills” merchandising approach, allows it to offer merchandise at prices
below traditional full retail prices. The Company is a Delaware corporation
with
its principal executive offices at 1830 Route 130, Burlington, New Jersey 08016.
The Company’s telephone number is (609) 387-7800.
Parent
is
a Delaware corporation with its principal executive offices at 111 Huntington
Avenue, Boston, Massachusetts 02199. Parent’s telephone number is (617)
516-2000. Parent was formed solely for the purpose of entering into the Merger
Agreement and consummating the transactions contemplated by the Merger
Agreement. It has not conducted any activities to date other than activities
incidental to its formation and in connection with the transactions contemplated
by the Merger Agreement.
Merger
Sub is a Delaware corporation and a wholly-owned subsidiary of Parent. Merger
Sub’s principal executive offices are located at 111 Huntington Avenue, Boston,
Massachusetts 02199 and its telephone number is (617) 516-2000. Merger Sub
was
formed solely for the purpose of entering into the Merger Agreement and
consummating the transactions contemplated by the Merger Agreement. It has
not
conducted any activities to date other than activities incidental to its
formation and in connection with the transactions contemplated by the Merger
Agreement. Under the terms of the Merger Agreement, Merger Sub will merge with
and into the Company. The Company will survive the Merger and Merger Sub will
cease to exist.
Parent
and Merger Sub were formed by Bain Capital Partners, LLC (“Bain Capital”). Bain
Capital is a global private investment firm that manages several pools of
capital including private equity, venture capital, public equity and leveraged
debt assets with more than $27 billion in assets under management. Since its
inception in 1984, Bain Capital has made private equity investments and add-on
acquisitions in over 230 companies around the world, including such leading
retailers and consumer companies as Toys “R” Us, Burger King, Staples, Shopper’s
Drug
Mart, Brookstone, Domino’s Pizza, Scaly Corp., Sports Authority, Duane Reade and
Dollarama. Headquartered in Boston, Bain Capital has offices in New York,
London, Munich, Hong Kong, Shanghai and Tokyo.
The
special meeting will be held at [_____], Eastern Time, on [day of week],
[___________], 2006 at the offices of the Company, 1830 Route 130, Burlington,
New Jersey 08016. The purpose of the special meeting is to consider and vote
on
the proposal to adopt the Merger Agreement.
The
holders of record of Company common stock as of the close of business on [record
date], which is the record date for the special meeting, are entitled to receive
notice of and to vote at the special meeting. If you own shares that are
registered in someone else’s name (for example, a broker), you need to direct
that person to vote those shares or obtain an authorization from them and vote
the shares yourself at the meeting. On the record date, there were [________]
shares of Company common stock outstanding held by approximately [___] holders
of record.
The
adoption of the Merger Agreement requires the affirmative vote of the holders
of
a majority of the outstanding shares of Company common stock entitled to vote.
Each share of Company common stock is entitled to one vote. Failure to return
a
properly executed proxy card or to vote in person will have the same effect
as a
vote “AGAINST” the adoption of the Merger Agreement. Stockholders who together
own approximately 61.0% of the outstanding shares of Company common stock have
agreed to vote in favor of the adoption of the Merger Agreement. See “The Voting
Agreement.”
Under
the
rules of the NYSE, brokers who hold shares in street name for customers have
the
authority to vote on “routine” proposals when they have not received
instructions from beneficial owners. However, brokers are precluded from
exercising their voting discretion with respect to the approval of non-routine
matters such as the adoption of the Merger Agreement and, as a result, absent
specific instructions from the beneficial owner of such shares, brokers are
not
empowered to vote those shares, referred to generally as “broker non-votes.”
Abstentions and broker non-votes will be treated as shares that are present
and
entitled to vote at the special meeting for purposes of determining whether
a
quorum exists and will have the same effect as votes “AGAINST” adoption of the
Merger Agreement.
The
holders of a majority of the outstanding shares of Company common stock entitled
to be cast as of the record date, represented in person or by proxy, will
constitute a quorum for purposes of the special meeting. A quorum is necessary
to hold the special meeting. Once a share is represented at the special meeting,
it will be counted for the purpose of determining a quorum and any adjournment
of the special meeting, unless the holder is present solely to object
to
the
special meeting. However, if a new record date is set for an adjourned meeting,
then a new quorum will have to be established.
This
proxy statement is being sent to you on behalf of the Board of Directors for
the
purpose of requesting that you allow your shares of Company common stock to
be
represented at the special meeting by the persons named in the enclosed proxy
card. All shares of Company common stock represented at the meeting by proxies
voted by properly executed proxy cards will be voted in accordance with the
instructions indicated on that proxy. If you sign and return a proxy card
without giving voting instructions, your shares will be voted as recommended
by
the Board of Directors. The
Board recommends a vote “FOR” adoption of the Merger
Agreement.
The
persons named in the proxy card will use their own judgment to determine how
to
vote your shares regarding any matters not described in this proxy statement
that are properly presented at the special meeting. The Company does not know
of
any matter to be presented at the meeting other than the proposal to adopt
the
Merger Agreement.
You
may
revoke your proxy at any time before the vote is taken at the meeting. To revoke
your proxy, you must either advise the Secretary of the Company in writing,
deliver a proxy dated after the date of the proxy you wish to revoke or attend
the meeting and vote your shares in person. Merely attending the special meeting
will not constitute revocation of your proxy.
If
your
Company common stock is held in street name, you will receive instructions
from
your broker, bank or other nominee that you must follow to have your shares
voted. If
you do not instruct your broker to vote your shares, it has the same effect
as a
vote “AGAINST” adoption of the Merger Agreement.
The
Company will pay the cost of this proxy solicitation. In addition to soliciting
proxies by mail, directors, officers and employees of the Company may solicit
proxies personally and by telephone. None of these persons will receive
additional or special compensation for soliciting proxies. The Company will,
upon request, reimburse brokers, banks and other nominees for their expenses
in
sending proxy materials to their customers who are beneficial owners and
obtaining their voting instructions.
The
discussion of the Merger in this proxy statement is qualified by reference
to
the Merger Agreement and the Voting Agreement, which are attached to this proxy
statement as Appendices A and B, respectively. You should read each
agreement carefully.
On
February 10, 2005, in response to a request by the Company’s principal
stockholders that the Company consider paying a special cash dividend to the
holders of Company common stock (a “Special Dividend”) of up to $6.00 per share,
the Board of Directors appointed a special
committee
of three independent directors, Messrs. Harvey Morgan, Irving Drillings and
Roman Ferber (the “Special Committee”), to consider such dividend.
While
the
study of a potential Special Dividend was pending, at a meeting of the Board
of
Directors on May 25, 2005, the Board of Directors discussed and unanimously
approved a proposal to explore possible strategic alternatives for the Company
to enhance stockholder value. The Board of Directors also determined that the
Special Committee’s study of a potential Special Dividend should proceed
simultaneously with the entire Board of Directors’ consideration of strategic
alternatives. The Company retained Goldman Sachs as the Company’s financial
advisor, and Hughes Hubbard & Reed LLP (“Hughes Hubbard”) as the Company’s
legal counsel, to assist in that process.
On
June
27, 2005, the Company announced to the public that its Board of Directors was
exploring possible strategic alternatives for the Company to enhance stockholder
value and had retained Goldman Sachs as its financial advisor to assist in
that
process. The Company stated that no decision had been made to engage in a
transaction or transactions resulting from the Board’s exploration of strategic
alternatives, and that there could be no assurance that any transaction would
occur or, if undertaken, the terms or timing thereof.
The
Special Committee continued its study of a potential Special Dividend with
the
assistance of special legal counsel and a financial advisor retained by it.
Hughes Hubbard did not serve as legal counsel to the Special Committee. Goldman
Sachs did not serve as financial advisor to Special Committee and did not
provide advice to the Special Committee with respect to the advisability of
a
Special Dividend but did generally discuss the potential impact, or lack
thereof, of a possible Special Dividend on the possible strategic alternative
process.
At
a
meeting of the Board of Directors on July 28, 2005, the Special Committee
reported that it had considered a Special Dividend of $5.00 per share and did
not recommend the payment of a dividend in such amount, but would consider
a
modified proposal to pay a Special Dividend of $4.20 per share. After further
deliberation and meetings with its counsel and financial advisor, the Special
Committee reported that it could recommend to the Board of Directors that the
Board of Directors declare a Special Dividend in the amount of $4.20 per share.
The Board of Directors decided to defer consideration of the declaration of
such
Special Dividend pending the determination of full fiscal year net earnings
and
the completion of the audit of the Company’s financial statements for the fiscal
year ended May 28, 2005. On November 14, 2005, the Board of Directors declared
a
regular annual cash dividend to stockholders in the amount of $0.04 per share,
which dividend was paid on January 9, 2006. Pursuant to the Merger Agreement,
the Board of Directors may not declare any further dividends without Parent’s
consent. See “The Merger Agreement - Conduct of the Company’s Business Pending
the Merger.”
Throughout
the summer of 2005, the Company consulted with Goldman Sachs and Hughes Hubbard
concerning the Board of Directors’ exploration of strategic alternatives.
Beginning in August 2005, Goldman Sachs, at the direction of the Board of
Directors, contacted on behalf of the Company and on a confidential basis more
than 40 prospective bidders, 30 of whom expressed interest in participating
in
the process and were provided with materials containing publicly available
information concerning the Company. At the direction of the
Board
of
Directors, two possible corporate bidders were not invited into the process
because they were competitors of the Company and their inclusion in the process
and access to competitive information could, in management’s view, among other
things, have a very damaging effect on the Company and stockholder value, but
other possible corporate bidders were contacted. Of the prospective bidders
contacted by Goldman Sachs, 22 negotiated and entered into confidentiality
agreements with the Company for the purpose of facilitating the delivery of
confidential information. Following execution of their respective
confidentiality agreements, beginning in mid-September 2005, each of the 22
prospective bidders (including Bain Capital) received a confidential memorandum
from Goldman Sachs on behalf of the Company.
On
September 23, 2005, the Board of Directors appointed Alan Silverglat as a new
independent director. On November 8, 2005, the Company held its annual meeting
of stockholders, at which the following directors were elected: Irving
Drillings, Roman Ferber, Andrew Milstein, Monroe G. Milstein, Stephen Milstein,
Mark A. Nesci, and Alan Silverglat.
On
or
about September 27, 2005, Goldman Sachs, at the direction of the Company, sent
letters to the 22 prospective bidders inviting preliminary indications of
interest by October 17, 2005.
On
or
about October 17, 2005, the Company received four preliminary indications of
interest. Of the 22 prospective bidders, two parties (Bain Capital and a second
party referred to below as “Bidder 2”) submitted indications of interest
individually and four parties formed two groups, consisting of two parties
each.
Each group (referred to below as “Bidder 3” and “Bidder 4”) submitted an
indication of interest. All of the preliminary indications of interest
contemplated the acquisition of the Company in a cash transaction.
At
a
meeting of the Board of Directors on October 20, 2005, management, Goldman
Sachs
and Hughes Hubbard provided the Board of Directors with an update regarding
the
potential sale process and the preliminary indications of interest that had
been
received. Goldman Sachs reviewed the details of each of the four preliminary
indications of interest and, among other things, provided the directors with
a
discussion of certain financial information and information regarding the
preliminary bidders, and Goldman Sachs’ preliminary assessment, based on current
market conditions and other factors, of the ability of each of the preliminary
bidders to finance a potential acquisition of the Company. Goldman Sachs
recommended that the Company invite all the preliminary bidders to move to
the
next round of the Board’s process of exploring strategic alternatives and
proceed with due diligence. The Board unanimously approved Goldman Sachs’
recommendation.
Representatives
of the parties that had submitted preliminary indications of interest were
then
invited to conduct due diligence investigations of the Company, which continued
until the submission of definitive proposals on January 10, 2006. In addition,
beginning in late October 2005, the Company made management presentations to
such parties.
In
early
November 2005, Bidder 4 informed Goldman Sachs that it had determined not to
proceed further in the process. On November 22, 2005, at the direction of the
Company, Goldman Sachs sent to Bain Capital, Bidder 2 and Bidder 3 a letter
setting forth instructions for submitting definitive proposals, along with
a
draft merger agreement prepared by Hughes
Hubbard.
Recipients were requested (i) to submit a copy of the draft merger agreement
marked with any proposed changes to the Company in care of Hughes Hubbard on
or
before December 28, 2005 and (ii) to submit their definitive proposal to the
Company in care of Goldman Sachs on or before the bidding deadline of January
10, 2006, with such proposal to include confirmation of fully committed
financing, including copies of commitment letters with any external financing
sources.
On
or
about December 28, 2005, Bain Capital and Bidder 2 submitted their comments
on
the draft merger agreement. Bidder 3 did not submit comments and did not
participate further in the process.
At
the
request of the Company, based on the markups received and discussions with
management, Hughes Hubbard prepared a revised draft of the merger agreement
for
Bain Capital, and a revised draft of the merger agreement for Bidder 2, which
it
delivered to each of them on January 4, 2006 and offered to discuss with them
prior to the January 10, 2006 bidding deadline. Thereafter, Hughes Hubbard
was
contacted by counsel to Bain Capital, Kirkland & Ellis LLP (“Kirkland”),
and, following discussions with such counsel, prepared a revised draft of the
merger agreement for Bain Capital, which it delivered to Kirkland on January
9,
2006. Kirkland, Hughes Hubbard and Phillips Nizer LLP (counsel to Messrs.
Monroe, Andrew and Stephen Milstein and the other “Milstein Stockholders”
referred to below under “The Voting Agreement”) also commenced discussions on
the draft voting agreement prepared by Kirkland and contemplated by Bain
Capital’s markup of the draft merger agreement as a condition to its willingness
to enter into a merger agreement with the Company. Counsel for Bidder 2 did
not
contact Hughes Hubbard to engage in discussions on the draft merger agreement
delivered to them on January 4, 2006.
On
January 10, 2006, Bain Capital submitted a definitive proposal to acquire the
Company in a cash merger for a price of $43.65 per share. Bidder 2 (together
with a real estate partner) submitted a definitive proposal to acquire the
Company in a cash merger for a price of $42.00 per share. Each proposal included
copies of executed equity and debt commitment letters and a markup reflecting
the bidder’s comments on the most recent draft of the merger agreement that the
bidder had received from Hughes Hubbard. The Company had informed the bidders
that it was contemplating possible sale bonus payments to employees, and each
bidder communicated that the cash merger consideration would be reduced by
up to the amount of any such bonuses paid.
At
a
meeting of the Board of Directors on January 12, 2006, management, Goldman
Sachs
and Hughes Hubbard discussed the two proposals with the Board of Directors.
Goldman Sachs reviewed with the Board of Directors, among other things, the
financial aspects of the proposals, the financing commitments submitted by
the
bidders and certain preliminary financial analyses undertaken by Goldman Sachs.
Hughes Hubbard discussed, among other things, the legal aspects of the proposals
(including the Board of Directors’ fiduciary duties under Delaware law), the
status of the negotiations with respect to the merger documentation, and the
current drafts of such documentation. Management and the advisors responded
to
numerous questions from the Board of Directors. Following additional discussion
and deliberation, the Board of Directors instructed Goldman Sachs to inform
each
bidder that the Board of Directors would not consider its proposal further
unless the bidder increased its proposed merger price.
On
January 13, 2006, Bidder 2 withdrew from the negotiations after informing
Goldman Sachs that it was prepared to pay only up to, but not more than, $43.00
per share in cash to acquire the Company. Negotiations with Bain Capital and
its
counsel continued with respect to the merger consideration and merger
documentation, including negotiations between Kirkland and Phillips Nizer with
respect to a draft form of non-competition and non-solicitation agreement
prepared by Kirkland and contemplated by Bain Capital’s markup of the draft
merger agreement to be entered into between the Company and each of Monroe
Milstein, Andrew Milstein and Stephen Milstein at or prior to the closing of
the
proposed merger as a condition to Bain Capital’s obligations to consummate the
merger (the “Non-Competition Agreements”). Bain Capital’s willingness to enter
into a merger agreement with the Company was conditioned on the negotiation
of
the proposed Non-Competition Agreements to its satisfaction. (For a discussion
of the Non-Competition Agreements as finally negotiated, see “The Merger
Agreement—Conditions to the Merger.”)
On
January 14, 2006, Bain Capital informed Goldman Sachs that it was prepared
(i)
to increase the proposed merger price to $44.50 per share in cash, provided
that
Monroe, Andrew and Stephen Milstein purchased $25 million of preferred stock
of
the Company, Parent or an affiliate of Parent in connection with the closing
of
the Merger, (ii) to provide aggregate payments to Monroe Milstein, Andrew
Milstein and Stephen Milstein under the proposed Non-Competition Agreements
of
$15 million over a three-year non-competition period, and (iii) to refrain
from
reducing the cash merger consideration if sale bonuses were paid in an amount
not to exceed $20 million. Bain Capital’s proposal was rejected and negotiations
continued.
During
the ensuing negotiations, Bain Capital proposed an increase in the merger price
to $45.25 per share in cash, without any requirement for the Milsteins to
purchase preferred stock and without any payments being made for the
Non-Competition Agreements or sale bonuses. That proposal was also rejected.
Shortly
thereafter, representatives of Bain Capital informed Goldman Sachs that Bain
Capital was prepared to increase the proposed merger price to $45.50 per share
in cash, provided that all remaining contractual issues were resolved to its
satisfaction. The parties then continued their negotiations through the night
of
January 16, 2006 and into January 17, 2006.
At
a
meeting of the Board of Directors in the evening on January 17, 2006, Goldman
Sachs discussed with the Board of Directors, among other things, the financial
aspects of Bain Capital’s merger proposal, the financing commitments submitted
by Bain Capital and certain financial analyses undertaken by Goldman Sachs
in
connection with its fairness opinion referred to below. Goldman Sachs delivered
to the Board of Directors its oral opinion, confirmed by delivery of a written
opinion dated January 18, 2006, to the effect that, as of such date and based
upon and subject to the factors and assumptions set forth in such opinion,
the
$45.50 per share in cash to be received by the holders of the outstanding shares
of Company common stock pursuant to the proposed merger agreement was fair
from
a financial point of view to such holders. Hughes Hubbard discussed with the
Board of Directors, among other things, the legal aspects of Bain Capital’s
merger proposal (including the directors’ fiduciary duties under Delaware law),
the terms of the proposed merger documentation (including, if a party other
than
Bain Capital were to make an alternative proposal to acquire the Company, the
Company’s ability under certain circumstances to engage in substantive
discussions and negotiations with such party and
to
terminate the merger agreement, and pay a $70 million termination fee, in order
to accept a superior offer), changes in the documentation since the review
by
the Board of Directors on January 12, 2006, and the financing commitments
submitted by Bain Capital. With respect to the proposed Non-Competition
Agreements, the Board of Directors was advised that Bain Capital’s willingness
to enter into the proposed merger agreement was conditioned upon the entry
into
the Non-Competition Agreements being a condition to the merger, and that Monroe
Milstein, Andrew Milstein and Stephen Milstein would not receive any payment
from the Company, Bain Capital or any of their affiliates under or in respect
of
such agreements. Management and the advisors responded to numerous questions
from the Board of Directors. Following additional discussion and deliberation,
the Board of Directors unanimously approved the Merger Agreement, the Merger
and
the other transactions contemplated by the Merger Agreement and unanimously
resolved to recommend that the stockholders of the Company vote to adopt the
Merger Agreement.
On
January 18, 2006, prior to the opening of trading on the NYSE, (i) the Company,
Parent and Merger Sub executed the Merger Agreement and (ii) Parent and the
Milstein Stockholders executed the Voting Agreement. The Company and Parent
thereupon issued a joint press release announcing the execution of the Merger
Agreement and the Voting Agreement.
The
Board
of Directors consulted with senior management and the Company’s financial and
legal advisors and considered a number of factors in reaching its decision
to
approve the Merger Agreement and the transactions contemplated by the Merger
Agreement, and to recommend that the Company’s stockholders vote “FOR” the
adoption of the Merger Agreement. These factors included, without limitation,
the following:
| · |
the
price being paid for each share of Company common stock in the Merger
(1) represented a substantial premium to historic trading prices, for
example, a premium of over 26% over the closing price of $36.04 on
the
NYSE on June 24, 2005 (the trading day immediately prior to the date
on which the Company announced that the Board of Directors was exploring
possible strategic alternatives for the Company to enhance stockholder
value) and a premium of over 96% over the average closing price of
$23.16
on the NYSE for the one year ended May 20, 2005 (the last trading
day
prior to an unexplained increase in trading volume of Company common
stock), and (2) was higher than the highest price at which our shares
had ever traded;
|
| · |
the
presentations made by Goldman Sachs, the Company’s financial advisor, and
Goldman Sachs’ oral opinion (subsequently confirmed by delivery of a
written opinion dated January 18, 2006), to the effect that, as of
such date and based upon and subject to the matters described in
its
opinion, the $45.50 per share in cash to be received by the holders
of
Company common stock pursuant to the Merger Agreement was fair from
a
financial point of view to such holders (the full text of the written
opinion of Goldman Sachs is attached as Appendix C to this proxy
statement);
|
| · |
the
financial aspects and other terms of the final bids received from
Bain
Capital and from a second bidding party with respect to the sale
of the
Company, including the superiority of the price proposed by Bain
Capital
compared with the price proposed by the second
bidder;
|
| · |
the
possible alternatives to the sale of the Company, including continuing
to
operate the Company on a stand-alone basis and the possible payment
of a
Special Dividend, and the risks associated with such alternatives,
each of
which the Board of Directors determined not to pursue in light of
its
belief that the sale of the Company to Parent maximized stockholder
value
and represented the best transaction reasonably available to
stockholders;
|
| · |
the
Company’s business, current financial condition and results of operations
and future prospects;
|
| · |
the
fact that the Merger consideration is all cash, which provides certainty
of value to our stockholders, and treats all stockholders on the
same
basis;
|
| · |
the
fact that the Company, in connection with the Board of Directors’
consideration of strategic alternatives, conducted an extensive process
for the acquisition of the Company involving more than 40 parties
and
entered into confidentiality agreements and sent confidential information
to 22 parties that resulted in two definitive proposals to acquire
the
Company;
|
| · |
the
limited number and nature of the conditions to Parent’s obligation to
consummate the Merger and the limited risk of non-satisfaction of
these
conditions, including the likelihood that the Merger would be approved
by
the requisite regulatory
authorities;
|
| · |
the
absence of a financing condition to the Merger Agreement and Goldman
Sachs’ observations that the debt and equity commitment letters obtained
by Parent, in their experience, contained generally customary
conditions;
|
| · |
the
inclusion in the Merger Agreement of a provision obligating Parent
to pay
a $70 million termination fee to the Company if the Merger Agreement
is
terminated by Parent or the Company under certain
circumstances;
|
| · |
the
provisions of the Merger Agreement that allow the Company, under
certain
circumstances, to furnish information to and conduct negotiations
with
third parties;
|
| · |
the
provisions of the Merger Agreement that allow the Board of Directors,
under certain circumstances, to change its recommendation that the
Company’s stockholders vote in favor of the adoption of the Merger
Agreement;
|
| · |
the
other terms of the Merger Agreement, including the ability of the
Board of
Directors to terminate the Merger Agreement in order to accept a
superior
proposal (subject to the Company paying Parent a $70 million termination
fee);
|
| · |
the
Board of Directors’ understanding that such $70 million termination fee,
and the circumstances when such fee is payable, are reasonable in
light of
the benefits of the Merger, the auction process conducted by the
Company,
with the assistance of Goldman Sachs, and commercial practice;
|
| · |
the
terms of the Voting Agreement, including the fact that the Voting
Agreement will terminate if the Merger Agreement terminates;
and
|
| · |
the
ability of the Company’s stockholders to exercise appraisal rights under
Section 262 of the DGCL.
|
The
Board
of Directors also took into account a number of potentially adverse factors
concerning the Merger including, without limitation, the following:
| · |
the
risk that the Merger might not be completed in a timely manner or
at all,
including the risk that the Merger will not occur if Parent does
not
obtain the requisite financing notwithstanding the absence of a financing
condition to the Merger Agreement;
|
| · |
the
fact that Parent and Merger Sub are newly-formed corporations with
essentially no assets, and the $70 million termination fee payable
by
Parent to the Company under certain circumstances serves as a contractual
limitation on our ability to recover damages in connection with an
uncured
breach of the Merger Agreement by Parent or Merger
Sub;
|
| · |
the
opportunities for growth and the potential for increased stockholder
value
if the Company were to remain
independent;
|
| · |
the
Merger consideration consists of cash and will therefore be taxable
to our
stockholders for U.S. federal income tax purposes, and because
stockholders are receiving cash for their stock, they will not participate
in the future growth of the
Company;
|
| · |
the
requirement that the Company pay Parent a $70 million termination
fee in
order for the Board of Directors to accept a superior proposal (or
under
certain other circumstances);
|
| · |
the
inclusion in the Merger Agreement of a condition to Parent’s obligations
that holders of no more than 5% of the outstanding shares of Company
common stock exercise (and do not withdraw or fail to perfect) appraisal
rights in accordance with Section 262 of the DGCL;
|
| · |
the
interests of the Company’s directors and executive officers in the Merger
(see “Interests of the Company’s Directors and Executive Officers in the
Merger”); and
|
| · |
diverting
management focus and resources from other strategic opportunities
and from
operational matters while working to implement the Merger, and the
possibility of management and employee disruption associated with
the
Merger.
|
The
foregoing discussion of the information and factors considered by the Board
of
Directors, while not exhaustive, includes the material factors considered by
the
Board of Directors. In view of the variety of factors considered in connection
with its evaluation of the Merger, the Board of Directors did not find it
practicable to, and did not, quantify or otherwise assign relative or specific
weight or values to any of these factors, and individual directors may have
given different weights to different factors.
After
careful consideration, the Board of Directors, by unanimous vote:
| · |
has
determined that the Merger Agreement is
advisable;
|
| · |
has
approved the Merger Agreement, the Merger and the other transactions
contemplated by the Merger Agreement;
and
|
| · |
recommends
that the Company’s stockholders vote “FOR” the adoption of the Merger
Agreement.
|
In
considering the recommendation of the Board of Directors with respect to the
Merger, you should be aware that some of the Company’s directors and executive
officers have interests in the Merger that may be different from, or in addition
to, the interests of our stockholders generally. These interests, to the extent
material, are described below. The Board of Directors was aware of these
interests and considered them, among other matters, in approving the Merger
Agreement and the Merger.
As
of the
record date, there were approximately [________] shares of Company common stock
subject to stock options granted to our executive officers under the Company’s
stock option plans. (No stock options are held by our non-employee directors.)
All such stock options are vested and exercisable. Each outstanding stock option
that remains unexercised as of the effective time of the Merger will be
canceled, and the holder of such stock option will be entitled to receive a
cash
payment, without interest and less applicable withholding taxes, equal to the
product of:
| · |
the
number of shares of Company common stock subject to the option as
of the
effective time of the Merger, multiplied by
|
| · |
the
excess, if any, of the
greater of (A) $45.50 or (B) in the case of any nonqualified stock
option,
the Adjusted Fair Market Value (as defined in the applicable Company
option plan) of each share of Company common stock
|
subject
to such option, over
the
exercise price per share of Company common stock subject to such option.
If
the
amount of such product is zero, no payment will be made.
The
following table summarizes the options, all of which have exercise prices of
less than $45.50 per share, held by our executive officers as of February 9,
2006 and the approximate consideration that each of them will receive pursuant
to the Merger Agreement in connection with the cancellation of their options,
based on the weighted average exercise prices of the options:
| |
No.
of Shares
Underlying Vested
Options
|
|
Weighted
Average Exercise
Price
of Vested
Options
|
|
Resulting
Approximate
Consideration
|
|
Executive
Officers:
|
|
|
|
|
|
|
Mark
A. Nesci
|
152,000
|
|
$ 17.59
|
|
$4,242,320
|
|
Andrew
R. Milstein
|
67,200
|
|
$ 17.11
|
|
$1,907,808
|
|
Stephen
E. Milstein
|
67,200
|
|
$ 17.11
|
|
$1,907,808
|
|
Steve
Koster
|
25,000
|
|
$ 17.14
|
|
$709,000
|
|
Robert
Grapski
|
23,600
|
|
$ 18.49
|
|
$637,436
|
|
Paul
C. Tang
|
17,400
|
|
$ 18.83
|
|
$464,058
|
|
Robert
LaPenta
|
12,000
|
|
$ 20.21
|
|
$303,480
|
The
Merger Agreement provides that, after the Merger, Parent and the surviving
corporation will, jointly and severally, and Parent will cause the surviving
corporation to, indemnify and hold harmless the individuals who are now, or
have
been at any time prior to the execution of the Merger Agreement or who become
such prior to the effective time of the Merger, a director or officer of the
Company or any of the Company’s subsidiaries, or an employee of the Company or
any of its subsidiaries providing services to or for such a director or officer
in connection with the Merger Agreement or any of the transactions contemplated
by the Merger Agreement, against costs and liabilities incurred in connection
with any pending, threatened or completed claim, action, suit, proceeding or
investigation arising out of or pertaining to (i) the fact that such individual
is or was an officer, director, employee, fiduciary or agent of the Company
or
any of its subsidiaries, or (ii) matters occurring or existing at or prior
to
the effective time of the Merger (including acts or omissions occurring in
connection with the Merger Agreement and the transactions contemplated thereby),
whether asserted or claimed prior to, at or after the effective time of the
Merger.
The
Merger Agreement provides that the surviving corporation will provide, for
a
period of six years after the Merger becomes effective, directors’ and officers’
liability insurance for the benefit of those persons covered under our officers’
and directors’ liability insurance policy on terms with respect to coverage and
amounts no less favorable than those of the policy in effect as
of
the
execution of the Merger Agreement, provided that, subject to certain exceptions,
the surviving corporation will not be obligated to pay premiums in excess of
300% of the annualized policy premium based on a rate as of the execution of
the
Merger Agreement. Notwithstanding the foregoing, prior to the effective time
of
the Merger the Company is permitted to purchase prepaid “tail” policies in favor
of such indemnified persons with respect to the matters referred to above
(provided that the annual premium for such tail policy may not exceed 300%
of
the annualized policy premium based on a rate as of the execution of the Merger
Agreement), in which case Parent has agreed to maintain such tail policies
in
effect and continue to honor the obligations under such policies.
Parent
and Merger Sub have also agreed (i) to continue in effect for at least six
years
after the effective time of the Merger all rights to indemnification existing
in
favor of, and all exculpations and limitations of the personal liability of,
the
directors, officers, employees, fiduciaries and agents of the Company and its
subsidiaries in the Company’s certificate of incorporation as of the effective
time of the Merger with respect to matters occurring at or prior to the
effective time of the Merger and (ii) to honor the Company’s indemnification
agreements with the Company’s directors (including one former director, Harvey
Morgan) and with certain officers, including Messrs. Tang, Grapski, Koster
and
LaPenta. Each such indemnification agreement provides, among other things,
that
the Company will indemnify such indemnified person to the fullest extent
permitted by the DGCL, including advancement of legal fees and other expenses
incurred by the indemnified person in connection with any legal proceedings
arising out the indemnified person’s service as director and/or officer, subject
to certain exclusions and procedures set forth in the indemnification agreement.
The
Company typically issues, after the end of each fiscal year, up to 100 shares
of
Company common stock to each of the three members of the Audit Committee of
the
Board of Directors as payment for services rendered during such fiscal year.
With respect to the current fiscal year (ending June 3, 2006), the Company
plans
to issue such shares prior to the effective time of the Merger, for an aggregate
issuance of up to 300 shares to Messrs. Silverglat, Drillings and
Ferber.
As
of the
date of this proxy statement, none of the Company’s executive officers has
entered into any employment or separation agreements with the Company or any
of
its subsidiaries in anticipation of the Merger. Although no such agreements
currently exist, the Merger Agreement permits the Company to enter into
agreements with certain employees (including each of Messrs. Nesci, Tang,
Grapski, Koster and LaPenta) on terms and conditions agreed to by the Company
and Parent. The Merger Agreement also prohibits the Company from adopting any
benefit plans for its directors, officers or employees without Parent’s consent.
Such agreements or plans, if entered into or adopted, may provide for bonus
and/or separation payments to the individuals named above. See “The Merger
Agreement - Conduct of the Company’s Business Pending the Merger.”
On
November 8, 2005, the Company entered into death benefit agreements with each
of
Mark Nesci, Andrew Milstein and Stephen Milstein. Each such agreement provides
that, subject to certain conditions set forth in the agreement, the Company
will
pay to the executive’s estate or designated beneficiary a death benefit in the
amount of $1,000,000 (less applicable withholding taxes) payable at the election
of the payee in either (i) a single lump sum, (ii) five equal annual
installments (together, in the case of each installment after the first, with
interest on the unpaid balance) or (iii) the form of an annuity selected by
the
payee to be purchased by the Company. Each death benefit agreement also provides
that, in the event that the applicable executive is terminated without “cause”
(as defined in such agreement), the death benefit will continue to be payable.
Accordingly, if any of the executives named above are terminated without cause
following the Merger, the death benefit would continue to be payable to
them.
In
connection with the Merger, Parent will cause approximately $2.06 billion to
be
paid to the Company’s stockholders and holders of Company stock options. See
“The Merger Agreement - Treatment of Stock and Options.” These payments are
expected to be funded by a combination of equity contributions by affiliates
of
Bain Capital to Parent and debt financing (the “Financing”). Bain Capital Fund
VIII, L.P., an affiliate of Bain Capital, has agreed to contribute, subject
to
the satisfaction of certain conditions, up to $500 million of equity to Parent
and the remaining funds necessary to finance the Merger are expected to be
obtained through Parent’s and its subsidiaries’ debt financing.
Parent
has obtained equity and debt financing commitments for the transactions
contemplated by the Merger Agreement, which commitments are subject to customary
conditions. After giving effect to contemplated draws by the subsidiaries of
the
Company or Parent and its affiliates under the new debt commitments, Parent
currently expects total existing and new debt outstanding at the closing of
the
Merger will be approximately $1.5 billion.
In
its
equity commitment letter with Parent (the “Equity Commitment”), Bain Capital
Fund VIII, L.P. has agreed that the Company is entitled to enforce the equity
commitment in the event that the Company or Parent purports to, and is entitled
to, terminate the Merger Agreement under circumstances giving rise to Parent’s
obligation to pay to the Company a $70 million termination fee as described
below under “The Merger Agreement - Termination Fees” (provided that the maximum
amount that the Company may recover thereunder is $70
million).
In
connection with the execution and delivery of the Merger Agreement, Parent
obtained commitments to provide approximately $2.075 billion in debt financing
(the “Debt Commitments” and, together with the Equity Commitment, the “Financing
Commitments”), not all of which is expected to be drawn at the closing of the
Merger, consisting of (a) an $800 million senior secured revolving credit
facility (the “ABL Facility”), (b) a $775 million senior secured term loan
facility (the “Term Loan Facility”) and (c) either (i) a combination of $200
million in gross proceeds from the issuance and sale of senior unsecured notes
(the “Senior Notes”) and $300 million in gross proceeds from the issuance and
sale of senior subordinated unsecured notes (the “Senior Subordinated Notes”
and, together with the Senior Notes, the
“Notes”)
or (ii) if the Notes are not issued, then $200 million of senior unsecured
bridge loans under a senior bridge facility (the “Senior Bridge Facility”) and
$300 million of senior subordinated unsecured bridge loans under a subordinated
bridge facility (the “Subordinated Bridge Facility” and, together with the
Senior Bridge Facility, the “Bridge Facilities”). Parent expects to use these
facilities and existing debt to finance the Merger.
The
commitments to provide the ABL Facility were issued by Bank of America, N.A.
and
Bear Stearns Corporate Lending Inc. Banc of America Securities LLC and Bear,
Stearns & Co. Inc. have agreed to act as joint lead arrangers and joint
bookrunners for the ABL Facility. Borrowings under the ABL Facility are limited
by a borrowing base which is calculated periodically based on specified
percentages of the value of eligible inventory and eligible credit card
receivables, subject to certain reserves and other adjustments. The ABL Facility
will be an obligation of the Company and will be guaranteed by certain U.S.
subsidiaries of the Company and secured by (a) a perfected first priority lien
on all inventory and accounts of the Company and such subsidiaries and (b)
a
perfected second priority lien on substantially all other real and personal
property of the Company and such subsidiaries, in each case subject to various
limitations and exceptions. The ABL Facility commitments are conditioned on
the
Merger being consummated by June 30, 2006 (which date may be extended 45 days
under certain conditions in accordance with the terms of the Merger Agreement),
as well as other customary conditions including:
| · |
the
absence of a Company Material Adverse Effect (as defined in the Merger
Agreement);
|
| · |
the
creation of security interests;
|
| · |
the
execution of satisfactory definitive documentation;
|
| · |
receipt
of at least 20% of the total capitalization of Parent and its subsidiaries
in equity from equity investors, including affiliates of Bain Capital;
|
| · |
receipt
of certain proceeds from the Term Loan Facility;
|
| · |
receipt
of certain proceeds from either the issuance and sale of the Notes
or from
the Bridge Facilities or alternate financing sources;
|
| · |
receipt
of all consents and approvals that, individually or in the aggregate,
are
material to the Company and its subsidiaries, taken as a whole;
and
|
| · |
the
absence of any material amendments or waivers to the Merger Agreement
to
the extent materially adverse to the lenders which have not been
approved
by the lenders and the absence of any event of
default.
|
The
commitments to provide the Term Loan Facility were issued by Bear Stearns
Corporate Lending Inc. and Bank of America, N.A. Bear, Stearns & Co. Inc.
and Banc of America Securities LLC have agreed to act as joint lead arrangers
and joint bookrunners for the Term Loan Facility. Borrowings under the Term
Loan
Facility will be available in a single drawing on the closing date of the
Financing. The Term Loan Facility will be an obligation of the Company and
will
be guaranteed by certain U.S. subsidiaries of the Company and secured by (a)
a
perfected first priority lien on substantially all real and personal property
(other than inventory and accounts) of the Company and such subsidiaries and
(b)
a perfected second priority lien on all inventory and accounts of the Company
and such subsidiaries, in each case subject to various limitations and
exceptions. Bain Capital has informed the Company that up to $100 million of
the
Term Loan Facility may be transferred to the Notes and/or the Bridge Facilities
at or prior to the closing of the Financing; provided, that if Banc of America
Securities LLC and Bear, Stearns & Co. have not been afforded at least 20
days following the completion of the confidential information memorandum
relating to the Financing to syndicate the ABL Facility, Term Loan Facility
and
Bridge Facilities, then such option shall survive until the earlier of
completion of a successful bank syndication or 20 days after the closing of
the
Financing. The Term Loan Facility commitments are subject to the same conditions
as the ABL Facility commitments, as well as receipt of certain proceeds from
the
ABL Facility.
Banc
of
America Securities LLC and Bear, Stearns & Co. Inc. have agreed to act as
co-underwriters, co-initial purchasers, joint arrangers and co-placements agents
for the Notes or, if any Bridge Facility is funded, the unsecured senior notes,
senior subordinated notes or any other debt securities or combination of debt
securities of the Company or any of its subsidiaries that may be issued
thereafter to refinance any loans made under the Bridge Facilities. The Notes
will be obligations of the Company and will be guaranteed by certain U.S.
subsidiaries of the Company, and are subject to the same conditions as the
ABL
Facility commitments, as well as receipt of certain proceeds from the ABL
Facility.
The
commitments to provide the Bridge Facilities were issued by Banc of America
Bridge LLC and Bear Stearns Corporate Lending Inc. Banc of America Securities
LLC and Bear, Stearns & Co. Inc. have agreed to act as joint lead arrangers
and joint bookrunners for each Bridge Facility. In the absence of the
consummation of the issuance and sale of the Notes, the Bridge Facilities will
be obligations of the Company and will be guaranteed by certain U.S.
subsidiaries of the Company, and are subject to the same conditions as the
ABL
Facility commitments, as well as receipt of certain proceeds from the ABL
Facility and the requirements to provide Banc of America Securities LLC and
Bear, Stearns & Co. Inc. with a completed printed preliminary prospectus or
preliminary offering memorandum or preliminary private placement memorandum
at
least 30 days prior to the closing of the Financing and with at least a 20-day
marketing period for the Notes following the receipt of such completed printed
preliminary prospectus or preliminary offering memorandum or preliminary private
placement memorandum.
On
January 17, 2006, Goldman Sachs rendered its oral opinion, subsequently
confirmed by delivery of its written opinion, dated January 18, 2006, to the
Board of Directors that, as of January 18, 2006 and based upon and subject
to
the factors and assumptions set forth in the opinion, the $45.50 per share
in
cash to be received by the holders of the outstanding shares of Company common
stock pursuant to the Merger Agreement was fair from a financial point of view
to those holders.
The
full text of the written opinion of Goldman Sachs, dated January 18, 2006,
which
sets forth the assumptions made, procedures followed, matters considered, and
limitations on the review undertaken in connection with the opinion, is attached
as Appendix C to this proxy statement. Goldman Sachs provided its opinion for
the information and assistance of the Board of Directors in connection with
its
consideration of the Merger. Goldman Sachs’ opinion is not a recommendation as
to how any holder of Company common stock should vote with respect to the
Merger.
In
connection with rendering the opinion described above and performing its related
financial analyses, Goldman Sachs reviewed, among other things:
| · |
annual
reports to stockholders and Annual Reports on Form 10-K of the Company
for
the five fiscal years ended May 28, 2005;
|
| · |
certain
interim reports to stockholders and Quarterly Reports on Form 10-Q
of the
Company;
|
| · |
certain
other communications from the Company to its stockholders;
and
|
| · |
certain
internal financial analyses and forecasts for the Company prepared
by its
management.
|
Goldman
Sachs also held discussions with members of the senior management of the Company
regarding their assessment of the past and current business operations,
financial condition and future prospects of the Company.
In
addition, Goldman Sachs:
| · |
reviewed
the reported price and trading activity for Company common stock;
|
| · |
compared
certain financial and stock market information for the Company with
similar information for certain other companies the securities of
which
are publicly traded;
|
| · |
reviewed
the financial terms of certain recent business combinations in the
retail
industry specifically and in other industries generally; and
|
| · |
performed
such other studies and analyses, and considered such other factors,
as
Goldman Sachs considered
appropriate.
|
Goldman
Sachs relied upon the accuracy and completeness of all of the financial,
accounting, legal, tax and other information discussed with or reviewed by
it
and assumed such accuracy and completeness for purposes of rendering its
opinion. In that regard, Goldman Sachs assumed, with the consent of the Board
of
Directors, that the internal financial forecasts prepared by the management
of
the Company were reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the Company. In addition, Goldman Sachs
did
not make an independent evaluation or appraisal of the assets and liabilities
(including any contingent, derivative or off-balance sheet assets and
liabilities) of the Company or any of its subsidiaries and Goldman Sachs was
not
furnished with any such evaluation or appraisal. Goldman Sachs’ opinion does not
address the underlying business decision of the Company to engage in the Merger.
The
following is a summary of the material financial analyses presented by Goldman
Sachs to the Board of Directors in connection with rendering its opinion. The
following summary, however, does not purport to be a complete description of
the
financial analyses performed by Goldman Sachs. The order of analyses described
does not represent the relative importance or weight given to those analyses
by
Goldman Sachs. Some of the summaries of the financial analyses include
information presented in tabular format. The tables must be read together with
the full text of each summary and are alone not a complete description of
Goldman Sachs’ financial analyses. Except as otherwise noted, the following
quantitative information, to the extent that it is based on market data, is
based on market data as it existed on or before January 17, 2006, and is not
necessarily indicative of current market conditions.
Goldman
Sachs calculated the implied premia represented by the $45.50 per share purchase
price to be received by the holders of Company common stock pursuant to the
Merger Agreement based on the following trading prices for Company common
stock:
| · |
the
closing price on January 13, 2006, the latest practicable trading
day
before Goldman Sachs made its presentation of its financial analyses
to
the Board of Directors;
|
| · |
the
trading price prior to the Company’s announcement on June 27, 2005 that
the Board of Directors was considering possible strategic alternatives
for
the Company to enhance stockholder value;
|
| · |
the
closing price on May 20, 2005, the last trading day prior to an
unexplained increase in trading volume of Company common stock; and
|
| · |
the
average of closing prices for the one year period ended May 20, 2005.
|
The
results of Goldman Sachs’ calculations are reflected below:
|
|
Stock
Price or Average of
Closing
Prices
|
|
Implied
Premium
|
|
January
13, 2006
|
$ |
44.14
|
|
3.1%
|
|
Pre-June
27, 2005 announcement
|
$ |
36.04
|
|
26.2%
|
|
May
20, 2005
|
$ |
29.92
|
|
52.1%
|
|
One
year ended May 20, 2005
|
$ |
23.16
|
|
96.5%
|
Goldman
Sachs calculated and compared various implied transaction multiples based on
the
fully diluted equity consideration to be received by the holders of the
outstanding shares of Company common stock, giving effect to stock options
that
are or would become exercisable based on the Merger Agreement, or equity value,
and the enterprise value of the Company, which is equity value, plus book value
of net debt (which is total debt and estimated transaction expenses less cash
and cash equivalents). Goldman Sachs calculated equity value, enterprise value
and the various multiples referred to below based on the Company’s latest
publicly available information for historical results and projections prepared
by the Company’s management for estimated future results. The following
multiples were calculated for the Company:
| · |
enterprise
value as a multiple of net sales and earnings before interest, taxes,
depreciation and amortization, or EBITDA;
|
| · |
adjusted
enterprise value, which is the enterprise value of the Company adjusted
to
include capitalized operating lease obligations, as a multiple of
earnings
before interest, taxes, depreciation, amortization and rent, or EBITDAR;
and
|
| · |
equity
value as a multiple of net income.
|
Each
of
the multiples was calculated for the latest 12 months, or LTM, ended November
30, 2005 and for each of fiscal years 2006 and 2007. The following table sets
forth the results of this analysis:
| |
Enterprise
Value as a Multiple of
|
|
Adjusted
Enterprise
Value
as a
Multiple
of
|
|
Equity
Value as a
Multiple
of
|
| |
Net
Sales
|
|
EBITDA
|
|
EBITDAR
|
|
Net
Income
|
| |
|
|
|
|
|
|
|
|
LTM,
November 30, 2005
|
0.6x
|
|
6.8x
|
|
7.2x
|
|
18.5x
|
|
FY
2006E
|
0.5x
|
|
6.8x
|
|
7.1x
|
|
18.7x
|
|
FY
2007E
|
0.5x
|
|
6.4x
|
|
6.6x
|
|
17.4x
|
| |
|
|
|
|
|
|
|
Goldman
Sachs calculated and compared LTM EBITDA as a multiple of historical trading
price for the Company against LTM EBITDA as a multiple of trading price for
a
composite average of two selected comparable companies, Ross Stores and TJX
Companies, or the Average Comparable Multiple, over the five-year period between
January 12, 2001 and January 12, 2006. Historical financial results utilized
by
Goldman Sachs for purposes of this analysis were based upon information provided
by FactSet Research Systems (a data service that compiles historical and
estimated financial data), or FactSet, and historical trading price information
was based upon publicly available information. The results of this analysis
indicated that the average value of the ratio of the Company’s LTM EBITDA as a
multiple of trading price to the Average Comparable Multiple during the
five-year period was 0.55.
Goldman
Sachs also calculated and compared the ratio of the trading price per share
to
estimated earnings per share for the next company fiscal year, or the One Year
Forward P/E Multiple, for the Company to the One Year Forward P/E Multiple
for a
composite average of two selected comparable companies, Ross Stores and TJX
Companies, or the Average Comparable One Year Forward P/E Multiple, over the
five-year period between January 12, 2001 and January 12, 2006. Historical
financial results utilized by Goldman Sachs for purposes of this analysis were
based upon information provided by FactSet, estimates of one year forward
earnings were based on median estimates provided by FactSet and historical
trading price information was based upon publicly available information. The
results of this analysis indicated that the average value of the Company’s One
Year Forward P/E Multiple to the Average Comparable One Year Forward P/E
Multiple during the five-year period was 0.75.
Goldman
Sachs compared selected publicly available financial information, ratios and
multiples for the Company and the following selected publicly traded retail
companies, certain of which companies were designated “Off-Price” retailers
because these companies generally sell branded merchandise at prices
significantly below full retail prices, others of which were designated “Mass
Market” retailers because these companies maintain larger footprint retail
locations in which they sell a broad range of hardlines and softlines
merchandise typically at reduced prices and
others of which were designated “Department Stores” because these companies sell
a broad range of apparel for men, women and children in a larger-footprint
format.
| · |
The
TJX Companies, Inc.
|
| · |
J.C.
Penney Corporation, Inc.
|
| · |
The
Bon-Ton Stores, Inc.
|
| · |
Federated
Department Stores, Inc.
|
Although
none of the selected companies are directly comparable to the Company, the
companies included were chosen because they are publicly traded companies with
operations that for purposes of analysis may be considered similar to certain
operations of the Company.
Goldman
Sachs calculated and compared various public market multiples and ratios of
the
selected companies based on information it obtained from SEC filings and median
estimates provided by the Institutional Brokerage Estimate System (a data
service that compiles estimates issued by securities analysts), or IBES.
Historical financial results utilized by Goldman Sachs for purposes of this
analysis were based upon information contained in the applicable company’s
latest publicly available financial statements prior to January 13, 2006. The
LTM period for this analysis refers to the LTM period from the most recent
publicly available information for the Company and the selected companies as
of
January 13, 2006. Estimates of future results used by Goldman Sachs in this
analysis, for the selected companies and the Company, were based on median
estimates provided by IBES and calendarized to year-end December 31. With
respect to the Company and the selected companies, Goldman Sachs
calculated:
| · |
the
enterprise value, which is equity market capitalization for each
company,
calculated using the per share closing trading price as of January
13,
2006 and fully diluted shares outstanding based on each company’s latest
publicly available information, plus book value of net debt, which
is
total debt less cash and cash equivalents, as a multiple of LTM sales,
LTM
EBITDA, estimated 2006 and 2007 EBITDA, LTM EBITDAR and LTM earnings
before interest and taxes, or EBIT;
|
| · |
the
ratio of the price per share to the estimated 2006 and 2007 earnings
per
share, or P/E multiple;
|
| · |
the
ratio of the estimated 2006 P/E multiple to the five-year earnings
per
share estimated compound annual growth rate, or CAGR;
|
| · |
LTM
EBITDA and EBIT margins, calculated by dividing each company’s LTM EBITDA
and EBIT by its LTM sales; and
|
| · |
the
dividend yield as of January 13, 2006.
|
The
results of these analyses are summarized in the following tables:
|
|
|
Enterprise
Value Multiples
EBITDA
|
Calendarized
P/E
Multiples
|
|
|
|
|
Sales
LTM
|
|
|
LTM
|
|
|
2006E
|
|
|
2007E
|
|
|
EBITDAR
LTM
|
|
|
EBIT
LTM
|
|
|
2006E
|
|
|
2007E
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-Price
Retailers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
0.9x
|
|
|
20.1x
|
|
|
8.8x
|
|
|
7.9x
|
|
|
10.3x
|
|
|
15.0x
|
|
|
50.4x
|
|
|
36.6x
|
|
|
Mean
|
|
|
0.6x
|
|
|
11.8x
|
|
|
7.1x
|
|
|
6.3x
|
|
|
9.1x
|
|
|
11.7x
|
|
|
24.4x
|
|
|
19.1x
|
|
|
Median
|
|
|
0.6x
|
|
|
10.1x
|
|
|
7.1x
|
|
|
6.2x
|
|
|
9.4x
|
|
|
11.8x
|
|
|
16.9x
|
|
|
14.2x
|
|
|
Low
|
|
|
0.3x
|
|
|
6.9x
|
|
|
5.3x
|
|
|
5.0x
|
|
|
7.3x
|
|
|
8.4x
|
|
|
13.4x
|
|
|
11.4x
|
|
|
Mass-Market
Retailers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
1.3x
|
|
|
10.2x
|
|
|
8.6x
|
|
|
7.2x
|
|
|
9.9x
|
|
|
12.7x
|
|
|
17.0x
|
|
|
13.8x
|
|
|
Mean
|
|
|
0.9x
|
|
|
8.4x
|
|
|
7.7x
|
|
|
6.7x
|
|
|
8.9x
|
|
|
10.6x
|
|
|
15.8x
|
|
|
13.0x
|
|
|
Median
|
|
|
0.8x
|
|
|
7.8x
|
|
|
7.4x
|
|
|
6.7x
|
|
|
8.9x
|
|
|
9.8x
|
|
|
16.3x
|
|
|
12.6x
|
|
|
Low
|
|
|
0.5x
|
|
|
7.1x
|
|
|
7.1x
|
|
|
6.4x
|
|
|
7.8x
|
|
|
9.5x
|
|
|
14.0x
|
|
|
12.4x
|
|
|
Department
Stores
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
1.0x
|
|
|
9.9x
|
|
|
8.3x
|
|
|
7.4x
|
|
|
8.0x
|
|
|
22.3x
|
|
|
20.0x
|
|
|
19.1x
|
|
|
Mean
|
|
|
0.5x
|
|
|
7.1x
|
|
|
7.4x
|
|
|
6.8x
|
|
|
6.8x
|
|
|
14.1x
|
|
|
15.8x
|
|
|
14.2x
|
|
|
Median
|
|
|
0.4x
|
|
|
7.2x
|
|
|
7.4x
|
|
|
6.8x
|
|
|
6.4x
|
|
|
13.4x
|
|
|
15.1x
|
|
|
12.1x
|
|
|
Low
|
|
|
0.2x
|
|
|
4.2x
|
|
|
6.5x
|
|
|
6.1x
|
|
|
6.0x
|
|
|
7.5x
|
|
|
12.4x
|
|
|
11.3x
|
|
|
Burlington
Coat Factory Warehouse Corporation
|
|
|
0.5x
|
|
|
6.5x
|
|
|
6.3x
|
|
|
5.5x
|
|
|
7.0x
|
|
|
9.6x
|
|
|
15.6x
|
|
|
14.0x
|
|
|
|
|
|
2007
PE/
5-Year
EPS
|
|
LTM
Margins
|
|
Dividend
Yield
|
|
|
|
|
|
CAGR
|
|
|
EBITDA
|
|
|
EBIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-Price
Retailers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
1.0x
|
|
|
8.8%
|
|
|
6.8%
|
|
|
1.4%
|
|
|
Mean
|
|
|
0.9x
|
|
|
6.3%
|
|
|
4.5%
|
|
|
0.8%
|
|
|
Median
|
|
|
1.0x
|
|
|
7.6%
|
|
|
5.9%
|
|
|
0.9%
|
|
|
Low
|
|
|
0.7x
|
|
|
1.3%
|
|
|
(0.8)%
|
|
|
0.0%
|
|
|
Mass-Market
Retailers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
1.3x
|
|
|
13.2%
|
|
|
10.6%
|
|
|
0.9%
|
|
|
Mean
|
|
|
1.0x
|
|
|
10.1%
|
|
|
8.0%
|
|
|
0.3%
|
|
|
Median
|
|
|
0.8x
|
|
|
10.1%
|
|
|
8.1%
|
|
|
0.0%
|
|
|
Low
|
|
|
0.8x
|
|
|
7.1%
|
|
|
5.3%
|
|
|
0.0%
|
|
|
Department
Stores
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
3.5x
|
|
|
12.9%
|
|
|
8.3%
|
|
|
1.3%
|
|
|
Mean
|
|
|
2.2x
|
|
|
7.2%
|
|
|
4.0%
|
|
|
0.6%
|
|
|
Median
|
|
|
2.2x
|
|
|
5.9%
|
|
|
2.9%
|
|
|
0.5%
|
|
|
Low
|
|
|
1.0x
|
|
|
4.0%
|
|
|
1.8%
|
|
|
0.0%
|
|
|
Burlington
Coat Factory Warehouse Corporation
|
|
|
1.4x
|
|
|
8.3%
|
|
|
5.6%
|
|
|
0.1%
|
|
Goldman
Sachs reviewed available information for the following announced merger or
acquisition transactions in the U.S. involving companies in the retail industry,
with certain of these companies being classified as “General Department Stores”
because of the generally lower to moderate price points at which these companies
sell their merchandise and
certain other of these companies being classified as “High-End Department
Stores” because of the higher typical price points at which these companies sell
their merchandise. These transactions (listed by acquirer/target and month
and
year announced) included:
| · |
Apollo
Management & Silver Point Capital/Linens ‘N Things, Inc. (November
2005)
|
| · |
Maple
Leaf Heritage Investments (Hostile Bid)/Hudson’s Bay Company (October
2005)
|
| · |
Prentice
Capital Management & GMM Capital/Goody’s Family Clothing, Inc.
(October 2005)
|
| · |
Sun
Capital Partners /Shopko Stores, Inc. (October
2005)
|
| · |
Trimaran
Capital & Kier Group/Fortunoff Fine Jewelry & Silverware, Inc.
(November 2004)
|
| · |
K-Mart
Holding Corp./Sears, Roebuck & Co. (November
2004)
|
| · |
Investor
Group/Mervyn’s LLC (July 2004)
|
| · |
The
Bon-Ton Stores, Inc./Northern Department Store Group (Saks Incorporated)
(October 2005)
|
| · |
Warburg
Pincus & Texas Pacific Group/The Neiman Marcus Group, Inc. (May
2005)
|
| · |
Belk,
Inc./Profitt’s & McRae’s (Saks Incorporated) (April
2005)
|
| · |
Federated
Department Stores, Inc./The May Department Stores Company (February
2005)
|
| · |
Jones
Apparel Group, Inc./Barney’s New York, Inc. (November
2004)
|
| · |
The
May Department Stores Company/Marshall Field’s (Target Corporation) (June
2004)
|
| · |
The
May Department Stores Company / Saks Incorporated (9 stores) (January
2001)
|
Goldman
Sachs calculated and compared the transaction value as a multiple of the target
company’s publicly reported LTM sales, LTM EBITDA and LTM EBITDAR prior to
announcement of the applicable transaction. For purposes of this analysis,
the
transaction value of each target company was calculated by adding the announced
transaction price for the equity of the target company to the book value of
the
company’s net debt as disclosed in the company’s most recent SEC filings prior
to the announcement of the applicable transaction. Goldman Sachs also calculated
and compared the EBITDA margin, which is LTM EBITDA divided by LTM sales, for
each of the selected target companies. The following table sets forth the
results of this analysis:
|
|
|
Transaction
Value as a Multiple of
|
|
|
|
|
|
LTM
Sales
|
|
|
LTM
EBITDA
|
|
|
EBITDAR
|
|
|
EBITDA
Margin
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
Department Stores
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mean
|
|
|
0.4x
|
|
|
7.1x
|
|
|
7.1x
|
|
|
5.6%
|
|
|
Median
|
|
|
0.4x
|
|
|
6.5x
|
|
|
6.7x
|
|
|
5.6%
|
|
|
High
|
|
|
0.5x
|
|
|
9.6x
|
|
|
8.4x
|
|
|
7.9%
|
|
|
Low
|
|
|
0.2x
|
|
|
5.5x
|
|
|
6.1x
|
|
|
2.0%
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High-End
Department Stores
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mean
|
|
|
1.1x
|
|
|
10.1x
|
|
|
10.1x
|
|
|
11.5%
|
|
|
Median
|
|
|
1.1x
|
|
|
9.4x
|
|
|
9.3x
|
|
|
11.9%
|
|
|
High
|
|
|
1.5x
|
|
|
14.4x
|
|
|
14.4x
|
|
|
13.6%
|
|
|
Low
|
|
|
0.5x
|
|
|
7.3x
|
|
|
7.5x
|
|
|
8.6%
|
|
Goldman
Sachs performed an illustrative discounted cash flow analysis to determine
a
range of implied present values per share of Company common stock. All cash
flows were discounted to the end of February 2006 and terminal values were
based
upon estimated fiscal year 2010 EBITDA multiples. Forecasted financial
information used in this analysis was based on projections provided by the
management of the Company, which consisted of a higher growth case and a lower
growth case. The differentials between the higher growth case and the lower
growth case were based on different rates for annual same store sales growth.
Goldman Sachs used discount rates ranging from 8.5% to 10.5%, reflecting
estimates of the weighted average cost of capital of the Company, forecasts
of
the Company’s EBITDA through December 31, 2010 provided by the Company’s
management and terminal EBITDA multiples ranging from 4.5x to 6.5x. This
analysis resulted in a range of implied present values of $38.92 to $53.29
per
share of Company common stock under the higher growth case and a range of
implied present values of $34.06 to $46.43 per share of Company common stock
under the lower growth case. The results of these analyses were as
follows:
|
Higher
Growth Case
|
|
Discount
Rate
|
|
Implied
Per Share Present Value Indications
Terminal
Multiple of 2010E EBITDA
|
|
|
|
|
4.5x
|
|
|
5.0x
|
|
|
5.5x
|
|
|
6.0x
|
|
|
6.5x
|
|
|
10.5%
|
|
|
38.92
|
|
|
41.68
|
|
|
44.45
|
|
|
47.22
|
|
|
49.99
|
|
|
10.0%
|
|
|
39.50
|
|
|
42.32
|
|
|
45.14
|
|
|
47.96
|
|
|
50.78
|
|
|
9.5%
|
|
|
40.09
|
|
|
42.97
|
|
|
45.85
|
|
|
48.72
|
|
|
51.60
|
|
|
9.0%
|
|
|
40.70
|
|
|
43.63
|
|
|
46.57
|
|
|
49.50
|
|
|
52.43
|
|
|
8.5%
|
|
|
41.32
|
|
|
44.31
|
|
|
47.30
|
|
|
50.30
|
|
|
53.29
|
|
|
Lower
Growth Case
|
|
Discount
Rate
|
|
Implied
Per Share Present Value Indications
Terminal
Multiple of 2010E EBITDA
|
|
|
|
|
4.5x
|
|
|
5.0x
|
|
|
5.5x
|
|
|
6.0x
|
|
|
6.5x
|
|
|
10.5%
|
|
|
34.06
|
|
|
36.45
|
|
|
38.83
|
|
|
41.21
|
|
|
43.60
|
|
|
10.0%
|
|
|
34.56
|
|
|
36.99
|
|
|
39.42
|
|
|
41.85
|
|
|
44.28
|
|
|
9.5%
|
|
|
35.07
|
|
|
37.55
|
|
|
40.02
|
|
|
42.50
|
|
|
44.98
|
|
|
9.0%
|
|
|
35.59
|
|
|
38.12
|
|
|
40.64
|
|
|
43.17
|
|
|
45.70
|
|
|
8.5%
|
|
|
36.12
|
|
|
38.70
|
|
|
41.28
|
|
|
43.85
|
|
|
46.43
|
|
Using
the
same set of projections, Goldman Sachs also performed a sensitivity analysis
to
analyze the effect of increases or decreases in net sales growth and EBIT
margin. The analysis utilized a 9.5% discount rate and a terminal EBITDA
multiple of 5.5x, and used a range in sales growth from -1.0% to 1.0% and a
range of EBIT margin from -2.0% to 2.0%. This resulted in a range of implied
present values of $32.67 to $60.06 per share of Company common stock under
the
higher growth case and a range of implied present values of $28.14 to $52.87
per
share of Company common stock under the lower growth case. The results of these
analyses were as follows:
|
Higher
Growth Case
|
|
Change
in
EBIT
Margin
|
|
Implied
Per Share Present Value Indications
Change
in Net Sales Growth
|
| |
|
|
(1.0)%
|
|
|
(0.5)%
|
|
|
0.0%
|
|
|
0.5%
|
|
|
1.0%
|
|
|
(2.0)%
|
|
|
32.67
|
|
|
33.21
|
|
|
33.75
|
|
|
34.31
|
|
|
34.87
|
|
|
(1.0)%
|
|
|
38.47
|
|
|
39.13
|
|
|
39.80
|
|
|
40.48
|
|
|
41.17
|
|
|
0.0%
|
|
|
44.28
|
|
|
45.05
|
|
|
45.85
|
|
|
46.65
|
|
|
47.47
|
|
|
1.0%
|
|
|
50.08
|
|
|
50.98
|
|
|
51.89
|
|
|
52.82
|
|
|
53.76
|
|
|
2.0%
|
|
|
55.89
|
|
|
56.90
|
|
|
57.94
|
|
|
58.99
|
|
|
60.06
|
|
|
Lower
Growth Case
|
|
Change
in
EBIT
Margin
|
|
Implied
Per Share Present Value Indications
Change
in Net Sales Growth
|
| |
|
|
(1.0)%
|
|
|
(0.5)%
|
|
|
0.0%
|
|
|
0.5%
|
|
|
1.0%
|
|
|
(2.0)%
|
|
|
28.14
|
|
|
28.59
|
|
|
29.04
|
|
|
29.51
|
|
|
29.98
|
|
|
(1.0)%
|
|
|
33.41
|
|
|
33.97
|
|
|
34.53
|
|
|
35.11
|
|
|
35.70
|
|
|
0.0%
|
|
|
38.68
|
|
|
39.34
|
|
|
40.02
|
|
|
40.72
|
|
|
41.42
|
|
|
1.0%
|
|
|
43.94
|
|
|
44.72
|
|
|
45.52
|
|
|
46.32
|
|
|
47.14
|
|
|
2.0%
|
|
|
49.21
|
|
|
50.10
|
|
|
51.01
|
|
|
51.93
|
|
|
52.87
|
|
Goldman
Sachs performed an illustrative present value of future stock price analysis,
which is designed to provide an indication of the potential future value of
a
company’s equity as a function of the company’s estimated future earnings and
its assumed price to forward earnings per share multiple. For this analysis,
Goldman Sachs used the financial projections for the Company prepared by the
management of the Company, which consisted of a higher growth case and a lower
growth case. The differentials between the higher growth case and the lower
growth case were based on different rates for annual same store sales growth.
Goldman Sachs first calculated implied per share equity values for Company
common stock for the end of each of fiscal years 2006 and 2007 by applying
price
to forward earnings per share multiples ranging from 13.0x to 17.0x to estimates
prepared by the Company’s management of fiscal year 2006 and 2007 earnings per
share in the higher growth case and the lower growth case. Goldman Sachs then
calculated present values of those implied per share equity values for Company
common stock using discount rates ranging from 8.5% to 10.5% based on estimates
relating to the Company’s cost of equity capital. The results of this analysis
were as follows:
|
2006E
Higher Growth Case
|
|
Discount
Rate
|
|
Implied
Per Share Present Value Indications
Forward
P/E Multiple
|
|
|
|
|
|
|
|
14.0x
|
|
|
15.0x
|
|
|
16.0x
|
|
|
17.0x
|
|
|
8.5%
|
|
|
31.18
|
|
|
33.57
|
|
|
35.97
|
|
|
38.37
|
|
|
40.77
|
|
|
9.0%
|
|
|
31.13
|
|
|
33.52
|
|
|
35.92
|
|
|
38.31
|
|
|
40.71
|
|
|
9.5%
|
|
|
31.08
|
|
|
33.47
|
|
|
35.86
|
|
|
38.25
|
|
|
40.64
|
|
|
10.0%
|
|
|
31.03
|
|
|
33.42
|
|
|
35.81
|
|
|
38.20
|
|
|
40.58
|
|
|
10.5%
|
|
|
30.99
|
|
|
33.37
|
|
|
35.75
|
|
|
38.14
|
|
|
40.52
|
|
|
2006E
Lower Growth Case
|
|
Discount
Rate
|
|
Implied
Per Share Present Value Indications
Forward
P/E Multiple
|
|
|
|
|
|
|
|
14.0x
|
|
|
15.0x
|
|
|
16.0x
|
|
|
17.0x
|
|
|
8.5%
|
|
|
29.62
|
|
|
31.90
|
|
|
34.18
|
|
|
36.46
|
|
|
38.73
|
|
|
9.0%
|
|
|
29.57
|
|
|
31.85
|
|
|
34.12
|
|
|
36.40
|
|
|
38.67
|
|
|
9.5%
|
|
|
29.53
|
|
|
31.80
|
|
|
34.07
|
|
|
36.34
|
|
|
38.62
|
|
|
10.0%
|
|
|
29.48
|
|
|
31.75
|
|
|
34.02
|
|
|
36.29
|
|
|
38.56
|
|
|
10.5%
|
|
|
29.44
|
|
|
31.70
|
|
|
33.97
|
|
|
36.23
|
|
|
38.50
|
|
|
2007E
Higher Growth Case
|
|
Discount
Rate
|
|
Implied
Per Share Present Value Indications
Forward
P/E Multiple
|
|
|
|
|
|
|
|
14.0x
|
|
|
15.0x
|
|
|
16.0x
|
|
|
17.0x
|
|
|
8.5%
|
|
|
30.96
|
|
|
33.34
|
|
|
35.72
|
|
|
38.10
|
|
|
40.48
|
|
|
9.0%
|
|
|
30.77
|
|
|
33.13
|
|
|
35.50
|
|
|
37.87
|
|
|
40.23
|
|
|
9.5%
|
|
|
30.58
|
|
|
32.93
|
|
|
35.28
|
|
|
37.64
|
|
|
39.99
|
|
|
10.0%
|
|
|
30.39
|
|
|
32.73
|
|
|
35.07
|
|
|
37.41
|
|
|
39.75
|
|
|
10.5%
|
|
|
30.21
|
|
|
32.54
|
|
|
34.86
|
|
|
37.18
|
|
|
39.51
|
|
|
2007E
Lower Growth Case
|
|
Discount
Rate
|
|
Implied
Per Share Present Value Indications
|
|
|
|
|
|
|
|
14.0x
|
|
|
15.0x
|
|
|
16.0x
|
|
|
17.0x
|
|
|
8.5%
|
|
|
28.37
|
|
|
30.56
|
|
|
32.74
|
|
|
34.92
|
|
|
37.10
|
|
|
9.0%
|
|
|
28.20
|
|
|
30.37
|
|
|
32.54
|
|
|
34.71
|
|
|
36.88
|
|
|
9.5%
|
|
|
28.03
|
|
|
30.18
|
|
|
32.34
|
|
|
34.50
|
|
|
36.65
|
|
|
10.0%
|
|
|
27.86
|
|
|
30.00
|
|
|
32.14
|
|
|
34.29
|
|
|
36.43
|
|
|
10.5%
|
|
|
27.69
|
|
|
29.82
|
|
|
31.95
|
|
|
34.08
|
|
|
36.21
|
|
Goldman
Sachs performed an analysis of the range of equity returns that could
theoretically be realized if the Company were acquired as of January 13, 2006,
in a leveraged buyout at a price per share of Company common stock of $45.50
and
resold by the acquirer at the end of fiscal year 2008, 2009 or 2010, based
on
exit multiples of the Company’s management’s estimated EBITDA ranging from 5.5x
to 7.5x. The following tables set forth the results of this
analysis:
| |
|
Higher
Growth Case
|
|
|
Lower
Growth Case
|
|
Exit
Year
|
|
Trailing
EBITDA Exit Multiple
|
|
|
Trailing
EBITDA Exit Multiple
|
|
|
|
|
|
|
|
6.5x
|
|
|
7.5x
|
|
|
5.5x
|
|
|
6.5x
|
|
|
7.5x
|
|
|
FY2008E
|
|
|
0.5%
|
|
|
19.8%
|
|
|
34.4%
|
|
|
-14.1%
|
|
|
8.7%
|
|
|
24.6%
|
|
|
FY2009E
|
|
|
10.6%
|
|
|
22.6%
|
|
|
31.9%
|
|
|
-2.0%
|
|
|
12.6%
|
|
|
23.0%
|
|
|
FY2010E
|
|
|
15.6%
|
|
|
23.7%
|
|
|
30.1%
|
|
|
4.2%
|
|
|
14.3%
|
|
|
21.7%
|
|
The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial analysis or summary description. Selecting portions
of
the analyses or of the summary set forth above, without considering the analyses
as a whole, could create an incomplete view of the processes underlying Goldman
Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs
considered the results of all the analyses and did not attribute any particular
weight to any factor or analysis considered by it. Rather, Goldman Sachs made
its determination as to fairness on the basis of its experience and professional
judgment after considering the results of all the analyses. No company or
transaction used in the above analyses as a comparison is directly comparable
to
the Company or the Merger.
Goldman
Sachs prepared these analyses for purposes of Goldman Sachs providing its
opinion to the Board of Directors as to the fairness from a financial point
of
view of the $45.50 per share in cash to be received by the holders of the
outstanding shares of Company common stock pursuant to the Merger Agreement.
These analyses do not purport to be appraisals nor do they necessarily reflect
the prices at which businesses or securities actually may be sold. Analyses
based upon forecasts of future results are not necessarily indicative of actual
future results, which may be significantly more or less favorable than suggested
by these analyses. Because these analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties
or
their respective advisors, none of the Company, Goldman Sachs or any other
person assumes responsibility if future results are materially
different
from those forecast. As described above, Goldman Sachs’ opinion to the Board of
Directors was one of many factors taken into consideration by the Board of
Directors in making its determination to approve the Merger Agreement.
The
Merger consideration was determined through arms’-length negotiations between
the Company and Bain Capital and was approved by the Board of Directors. Goldman
Sachs provided advice to the Company during these negotiations. Goldman Sachs
did not, however, recommend any specific amount of consideration to the Company
or its Board of Directors or that any specific amount of consideration
constituted the only appropriate consideration for the Merger.
Goldman
Sachs and its affiliates, as part of their investment banking business, are
continually engaged in performing financial analyses with respect to businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and other transactions as well as for
estate, corporate and other purposes. Goldman Sachs has acted as financial
advisor to the Company in connection with, and has participated in certain
of
the negotiations leading to, the proposed Merger.
In
addition, Goldman Sachs has provided and is currently providing certain
investment banking services to Bain Capital and its affiliates,
including
having acted as joint lead manager with respect to a high yield offering by
Houghton Mifflin Company, a portfolio company of Bain Capital, or Houghton
Mifflin, of its 8.250% Senior Notes due 2011 (aggregate principal amount
$1,000,000,000) in January 2003; having acted as lead manager with respect
to a
high yield offering by Sealy Corporation, a former portfolio company of Bain
Capital, or Sealy, of its 9.875% Senior Sub Notes due 2007 (aggregate principal
amount $50,000,000) in April 2003; having acted as co-manager with respect
to a
high-yield offering by Domino’s Pizza LLC, a wholly-owned subsidiary of Domino’s
Pizza Inc., an affiliate of Bain Capital, of its 8 1/4% Senior Subordinated
Notes due 2011 (aggregate principal amount $403,000,000) in June 2003; having
acted as co-manager with respect to a high-yield offering by Houghton Mifflin
of
its 11 1/2% Senior Discount Notes due 2013 (aggregate principal amount
$265,000,000) in September 2003; having acted as co-financial advisor to Sealy
in connection with its sale in April 2004; having extended a bank loan
(aggregate principal amount $70,000,000) to Maxim Crane Works, a portfolio
company of Bain Capital, in July 2004; and having acted as financial advisor
to
Modus Media International Holdings, a former portfolio company of Bain Capital,
in connection with its sale in August 2004. Goldman Sachs also may provide
investment banking services to the Company and Bain
Capital
and its affiliates in
the
future. In connection with the above-described investment banking services
Goldman Sachs has received, and may receive, compensation. Affiliates of Goldman
Sachs have co-invested with Bain Capital or its affiliates from time to time
and
may do so in the future
The
Company selected Goldman Sachs as its financial advisor because it is an
internationally recognized investment banking firm that has substantial
experience in transactions similar to the Merger. Pursuant to a letter
agreement, dated June 10, 2005, the Company engaged Goldman Sachs to act as
its
financial advisor in connection with the exploration of possible strategic
alternatives, including the possible merger or sale of all or a portion of
the
Company. Pursuant to the terms of this letter agreement, Goldman Sachs is
entitled
to receive a transaction fee of approximately $11.7 million. The entire
transaction fee is subject to and payable only upon the completion of the
Merger. Goldman Sachs may also receive, upon completion of the Merger, an
additional fee of up to 0.30% of the aggregate consideration paid to the holders
of Company common stock in the Merger, which additional fee is payable in the
sole discretion of the Company. In addition, Goldman Sachs received a fee of
$1,000,000 upon delivery of its fairness opinion, which is creditable against
the transaction fee. The Company has also agreed to reimburse Goldman Sachs
for
its reasonable expenses, including attorneys’ fees and disbursements, and to
indemnify Goldman Sachs against various liabilities, including certain
liabilities under the federal securities laws.
The
following is a summary of United States federal income tax consequences of
the
Merger relevant to beneficial holders of Company common stock whose shares
are
converted to cash in the Merger. The discussion is for general information
only
and does not purport to consider all aspects of federal income taxation that
might be relevant to beneficial holders of Company common stock. The discussion
is based on current provisions of the Internal Revenue Code of 1986, as amended
(the “Code”), existing, proposed and temporary regulations promulgated
thereunder, rulings, administrative pronouncements and judicial decisions,
changes to which could materially affect the tax consequences described herein
and could be made on a retroactive basis. The discussion applies only to
beneficial holders of Company common stock in whose hands shares are capital
assets within the meaning of Section 1221 of the Code and may not apply to
beneficial holders who acquired their shares pursuant to the exercise of
employee stock options or other compensation arrangements with the Company
or
hold their shares as part of a hedge, straddle or conversion transaction or
who
are subject to special tax treatment under the Code (such as dealers in
securities or foreign currency, insurance companies, other financial
institutions, regulated investment companies, tax-exempt entities, S
corporations, partnerships and taxpayers subject to the alternative minimum
tax). In addition, this discussion does not discuss the federal income tax
consequences to a beneficial holder of Company common stock who, for United
States federal income tax purposes, is a non-resident alien individual, a
foreign corporation, a foreign partnership or a foreign estate or trust, nor
does it consider the effect of any state, local or foreign tax
laws.
The
receipt of cash for Company common stock pursuant to the Merger will be a
taxable transaction for United States federal income tax purposes. In general,
a
beneficial holder who receives cash in exchange for shares pursuant to the
Merger will recognize gain or loss for federal income tax purposes equal to
the
difference, if any, between the amount of cash received and the beneficial
holder’s adjusted tax basis in the shares surrendered for cash pursuant to the
Merger. Gain or loss will be determined separately for each block of shares
(i.e., shares acquired at the same price per share in a single transaction)
surrendered for cash pursuant to the Merger. Such gain or loss will be capital
gain or loss, and will be long-term capital gain or loss if the beneficial
holder’s holding period for such shares is more than one year at the time of
consummation of the Merger. The maximum federal income tax rate on net long-term
capital gain recognized by individuals is 15% under current law.
Backup
withholding at a 28% rate may apply to cash payments a beneficial holder of
shares receives pursuant to the Merger. Backup withholding generally will apply
only if the
beneficial
holder fails to furnish a correct taxpayer identification number or otherwise
fails to comply with applicable backup withholding rules and certification
requirements. Each beneficial holder should complete and sign the substitute
Form W-9 that will be part of the letter of transmittal to be returned to the
exchange agent in order to provide the information and certification necessary
to avoid backup withholding, unless an applicable exemption exists and is
otherwise proved in a manner acceptable to the exchange agent. Backup
withholding is not an additional tax. Any amounts withheld under the backup
withholding rules will be allowable as a refund or credit against a beneficial
holder’s United States federal income tax liability provided the required
information is furnished to the Internal Revenue Service.
Because
individual circumstances may differ, each beneficial holder of shares is urged
to consult such beneficial holder’s own tax advisor as to the particular tax
consequences to such beneficial holder of the Merger, including the application
and effect of state, local, foreign and other tax laws.
REGULATORY
APPROVALS
Under
the
HSR Act and the rules promulgated thereunder, the Company cannot complete
the
Merger until it notifies and furnishes information to the Federal Trade
Commission (the “FTC”) and the Antitrust Division of the U.S. Department of
Justice, and specified waiting period requirements are satisfied. The Company
filed notification and report forms under the HSR Act with the FTC and the
Antitrust Division on February 1, 2006, and requested early termination of
the
waiting period. The FTC granted early termination of the waiting period on
February 10, 2006.
On
January 27, 2006 a purported class action complaint (the “Complaint”) was filed
by putative stockholders of the Company in the Superior Court of New Jersey
in
and for Burlington County against the Company and its directors (the “Individual
Defendants”) challenging the proposed Merger. Lemon
Bay Partners v. Burlington Coat Factory Warehouse Corporation et al. (CA
No.
Bur. C-000014-06).
The
Complaint asserts on behalf of a purported class of Company stockholders a
claim
against the Individual Defendants for alleged breaches of fiduciary duties
in
connection with the proposed Merger. The Complaint alleges, among other things,
that the consideration to be paid to holders of Company common stock in the
Merger is inadequate. The Complaint also asserts a claim against Bain Capital
for aiding and abetting the alleged breaches of fiduciary duties by the
Individual Defendants.
The
Complaint seeks, among other things, to enjoin the consummation of the Merger,
that the transaction be rescinded if it is not enjoined, and an award of
compensatory and recissory damages as well as attorneys’ fees. The Company and
the Individual Defendants believe that the Complaint is without merit and intend
to defend the lawsuit vigorously.
This
section describes the material terms of the Merger Agreement. The description
in
this section and elsewhere in this proxy statement is qualified in its entirety
by reference to the Merger Agreement, a copy of which is attached to this proxy
statement as Appendix A and which we incorporate by reference into this
document. This summary does not purport to be complete and may not contain
all
of the information about the Merger Agreement that is important to you. We
encourage you to read carefully the Merger Agreement in its entirety.
The
Merger Agreement has been included to provide you with information regarding
its
terms and is not intended to provide any other factual information about the
Company, Parent, Merger Sub, Bain Capital or their affiliates. The Merger
Agreement contains representations and warranties the parties thereto made
to
and solely for the benefit of each other. The assertions embodied in those
representations and warranties are qualified by information in a confidential
disclosure schedule that the parties have exchanged in connection with signing
the Merger Agreement and that modifies, qualifies and creates exceptions to
the
representations and warranties contained in the Merger Agreement. Accordingly,
you should not rely on the representations and warranties as characterizations
of the actual state of facts, since (i) they were made only as of the date
of the Merger Agreement or a prior, specified date, (ii) in some cases they
are subject to qualifications with respect to materiality, knowledge and/or
other matters, and (iii) they are modified in important part by the
underlying disclosure schedule. This disclosure schedule contains information
that has been included in the Company’s prior public disclosures, as well as
non-public information. Moreover, information concerning the subject matter
of
the representations and warranties may have changed since the date of the Merger
Agreement, which subsequent information may or may not be fully reflected in
the
Company’s public disclosures.
The
effective time of the Merger will occur at the time that the Company files
a
Certificate of Merger with the Secretary of State of the State of Delaware
on
the closing date of the Merger or such later time as provided in the Certificate
of Merger and agreed to by Parent and the Company. The closing date will occur
as soon as practicable, but in no event later than
on
the
second business day, after all of the conditions to the Merger set forth in
the
Merger Agreement have been satisfied or waived, or such other date as Parent
and
the Company may agree.
At
the
effective time of the Merger, Merger Sub will merge with and into the Company.
The Company will survive the Merger and continue to exist after the Merger
as a
wholly-owned subsidiary of Parent. All of the Company’s and Merger Sub’s
properties, assets, rights, privileges, immunities, powers and franchises,
and
all of their debts, liabilities, and duties, will become those of the surviving
corporation.
At
the
effective time of the Merger, each share of Company common stock issued and
outstanding immediately prior to the effective time of the Merger will
automatically be converted into the right to receive $45.50 in cash, without
interest, other than shares of Company common stock:
| · |
held
in the Company’s treasury immediately prior to the effective time of the
Merger, which shares will be canceled without conversion or consideration;
and
|
| · |
held
by stockholders who have properly demanded and perfected their appraisal
rights in accordance with Delaware law, which shares will be entitled
to
only such rights as are granted by Delaware law.
|
All
such
shares, when so converted, will automatically be cancelled and retired and
cease
to exist. After the effective time of the Merger, each outstanding stock
certificate representing shares of Company common stock converted in the Merger
will represent only the right to receive the Merger consideration.
At
the
effective time of the Merger, each outstanding option to buy shares of Company
common stock granted under the Company’s stock option plans, whether or not
vested and exercisable, will be canceled, and the holder of each stock option
will be entitled to receive from the surviving corporation as promptly as
practicable thereafter an amount in cash, without interest and less applicable
withholding taxes, equal to the product of:
| · |
the
number of shares of Company common stock subject to each option as
of the
effective time of the Merger, multiplied by
|
| · |
the
excess, if any, of the greater of (A) $45.50 or (B) in the case
of any nonqualified
stock option,
the Adjusted Fair Market Value (as defined in the applicable Company
option plan) of each share of Company common stock
|
subject
to
such option, over the exercise price per share of Company common stock subject
to such option.
If
the
amount of such product is zero, no payment will be made.
At
or
prior to the effective time of the Merger, Parent will, or will cause the
surviving corporation to, deposit in trust an amount of cash sufficient to
pay
the Merger consideration to each holder of shares of Company common stock with
a
bank or trust company (the “paying agent”) reasonably acceptable to us. Promptly
after the effective time of the Merger, the paying agent will mail a letter
of
transmittal and instructions to you and the other stockholders. The letter
of
transmittal and instructions will tell you how to surrender your common stock
certificates in exchange for the Merger consideration.
You
should not return your stock certificates with the enclosed proxy card, and
you
should not forward your stock certificates to the paying agent without a letter
of transmittal.
You
will
not be entitled to receive the Merger consideration until you surrender your
stock certificate or certificates to the paying agent, together with a duly
completed and executed letter of transmittal and any other documents as the
paying agent may reasonably require. The Merger consideration may be paid to
a
person other than the person in whose name the corresponding certificate is
registered if the certificate is properly endorsed or is otherwise in the proper
form for transfer. In addition, the person who surrenders such certificate
must
either pay any transfer or other applicable taxes or establish to the
satisfaction of the surviving corporation that such taxes have been paid or
are
not applicable.
The
paying agent, Parent and/or the surviving corporation will be entitled to deduct
and withhold, and pay to the appropriate taxing authorities, any applicable
taxes from the Merger consideration. Any sum which is withheld and paid to
a
taxing authority by the paying agent, Parent and/or the surviving corporation
will be deemed to have been paid to the person with regard to whom it is
withheld.
At
the
effective time of the Merger, our stock transfer books will be closed, and
there
will be no further registration of transfers of shares of Company common stock
outstanding prior to the Merger. If, after the effective time of the Merger,
certificates are presented to the surviving corporation for transfer, they
will
be canceled and exchanged for the Merger consideration.
The
paying agent and the surviving corporation will not be liable to any person
for
any cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. Any portion of the Merger consideration
deposited with the paying agent that remains undistributed to the holders of
certificates evidencing shares of our common stock for six months after the
effective time of the Merger will be delivered, upon demand, to the surviving
corporation. Holders of certificates who have not surrendered their certificates
prior to the delivery of such funds to the surviving corporation may only look
to the surviving corporation, as general creditors, for the payment of the
Merger consideration. Any portion of the Merger consideration that remains
unclaimed as of a date that is immediately prior to such
time
as
such amounts would otherwise escheat to or become property of any governmental
entity will, to the extent permitted by applicable law, become the property
of
the surviving corporation free and clear of any claims or interest of any person
previously entitled to the Merger consideration.
If
your certificates have been lost, stolen or destroyed, upon making an affidavit
of that fact, and if required by Parent or the surviving corporation, posting
a
bond as indemnity against any claim with respect to the certificates, the
exchange agent will issue Merger consideration in exchange for your lost,
stolen, or destroyed stock certificates.
For
information with respect to dissenters’ rights of appraisal under the DGCL, see
“Dissenters’ Rights of Appraisal.”
The
Company makes various representations and warranties in the Merger Agreement
that are subject, in some cases, to exceptions and qualifications. Our
representations and warranties relate to, among other things:
| · |
the
Company and its subsidiaries’ due incorporation, valid existence, good
standing and qualification to do business;
|
| · |
our
certificate of incorporation and bylaws;
|
| · |
our
capitalization, including in particular the number of shares of Company
common stock and stock options;
|
| · |
our
corporate power and authority to enter into the Merger Agreement
and to
consummate the transactions contemplated by the Merger Agreement;
|
| · |
the
required vote of our stockholders in connection with the adoption
of the
Merger Agreement;
|
| · |
the
approval and recommendation by the Board of Directors of the Merger
Agreement, the Merger and the other transactions contemplated by
the
Merger Agreement;
|
| · |
the
required consents and approvals of governmental entities in connection
with the transactions contemplated by the Merger Agreement;
|
| · |
the
absence of certain specified violations of, or conflicts with, our
governing documents, applicable law or certain agreements as a result
of
entering into the Merger Agreement and consummating the Merger;
|
| · |
our
SEC periodic reports for the fiscal year ended May 29, 2004 and each
fiscal period thereafter, including the financial statements contained
therein;
|
| · |
our
disclosure controls and procedures and internal controls over financial
reporting;
|
| · |
our
compliance with the Sarbanes-Oxley Act of
2002;
|
| · |
the
absence of certain undisclosed liabilities;
|
| · |
the
absence of a “Company Material Adverse Effect” and certain other changes
or events related to the Company or its subsidiaries since
November 26, 2005;
|
| · |
legal
proceedings and governmental orders;
|
| · |
tangible
personal property and real property;
|
| · |
compliance
with applicable laws and permits;
|
| · |
employment
and labor matters affecting the Company or its subsidiaries, including
matters relating to the Company or its subsidiaries’ employee benefit
plans;
|
| · |
affiliate
transactions;
|
| · |
the
receipt by the Board of Directors of a fairness opinion from Goldman
Sachs;
|
| · |
the
inapplicability to the Merger Agreement and the Merger of restrictions
imposed on business combinations by Section 203 of the DGCL;
and
|
| · |
the
absence of undisclosed broker’s fees.
|
For
purposes of the Merger Agreement, “Company Material Adverse Effect” means
a
material adverse effect on the assets and liabilities (taken as a whole),
business, results of operations or financial condition, in each case, of the
Company and its subsidiaries, taken as a whole, or on the Company’s ability to
perform its obligations under the Merger Agreement. However, any adverse effect
arising out of, resulting from or attributable to any one or more of the
following matters will not be taken into account in determining whether there
has been a Company Material Adverse Effect and will not constitute a Company
Material Adverse Effect:
| · |
general
changes in economic, regulatory or political conditions or financial
or
securities markets, unless such changes would reasonably be expected
to
have a materially disproportionate impact on the Company and its
subsidiaries’ (taken as
|
a
whole)
assets and liabilities (taken as a whole), business, results of operations
or
financial condition, relative to other industry participants;
| · |
general
changes in conditions affecting any of the industries or markets
in which
we operate, unless such changes would reasonably be expected to have
a
materially disproportionate impact on the Company and its subsidiaries’
(taken as a whole) assets and liabilities (taken as a whole), business,
results of operations or financial condition, relative to other industry
participants;
|
| · |
the
announcement or execution of the Merger Agreement or the consummation
of
any of the transactions contemplated by it;
|
| · |
any
change in the market price or trading volume of the Company’s securities;
|
| · |
any
change in any laws or generally accepted accounting principles or
their
interpretation;
|
| · |
any
fluctuation in sales or earnings that is consistent with the Company’s
past operating history;
|
| · |
the
failure of the Company to meet analysts’ expectations; or
|
| · |
any
failures of the Company to take any action described in the section
below
headed “—Conduct of the Company’s Business Pending the Merger” due to
Parent’s withholding of consent to such action following written notice
from the Company that the withholding of such consent would reasonably
be
expected to have a Company Material Adverse Effect.
|
The
Merger Agreement also contains various representations and warranties made
by
Parent and Merger Sub that are subject, in some cases, to exceptions and
qualifications. The representations and warranties relate to, among other
things:
| · |
their
due incorporation, valid existence and good standing;
|
| · |
their
corporate power and authority to enter into the Merger Agreement
and to
consummate the transactions contemplated by the Merger Agreement;
|
| · |
the
required consents and approvals of governmental entities in connection
with the transactions contemplated by the Merger Agreement;
|
| · |
the
absence of any certain specified violations of, or conflicts with,
their
governing documents, applicable law or certain agreements as a result
of
entering into the Merger Agreement and consummating the Merger;
|
| · |
purpose
and capitalization of Merger Sub;
|
| · |
Parent’s
financing for the Merger;
|
| · |
their
lack of ownership of Company common stock;
|
| · |
the
absence of any undisclosed agreements between Parent or Merger Sub
and any
officer or director of the Company;
|
| · |
the
absence of undisclosed broker’s fees;
and
|
| · |
the
solvency of Parent and the surviving corporation as of the effective
time
of the Merger (and giving effect to the consummation of the Merger
and the
other transactions contemplated by the Merger Agreement).
|
The
representations and warranties in the Merger Agreement of each of the Company,
Parent and Merger Sub will expire upon the effective time of the Merger.
Under
the
Merger Agreement, the Company has agreed that, subject to certain exceptions,
between January 18, 2006 and the completion of the Merger, unless Parent
gives its prior consent:
| · |
the
Company and its subsidiaries will conduct business in all material
respects in the ordinary course of business; and
|
| · |
the
Company will use reasonable best efforts to preserve substantially
intact
their business organizations and the goodwill of those having business
relationships with them and retain the services of their present
officers
and key employees.
|
The
Company has also agreed that, during the same time period, subject to certain
exceptions, neither the Company nor any of its subsidiaries will take any of
the
following actions, unless Parent gives its prior written consent:
| · |
issue
additional shares of, grant options or rights to acquire, or take
certain
other actions that would encumber, its capital stock;
|
| · |
redeem
outstanding shares of its capital
stock;
|
| · |
split,
combine, subdivide or reclassify any shares of its capital stock
or
declare, or pay any dividend
distribution;
|
| · |
incur
indebtedness, or guarantee any indebtedness, in excess of $2,500,000
in
the aggregate (other than borrowings under the Company’s existing letter
of credit and line of credit facilities and guaranties of real property
leases in the ordinary course of business) or make certain loans,
advances
or capital contributions;
|
| · |
sell
or otherwise transfer or dispose of any of its properties or assets
with a
value in excess of $3,000,000 other than to the Company or a wholly-owned
subsidiary of the Company, or cancel or assign any indebtedness in
excess
of $3,000,000 (subject to certain exceptions);
|
| · |
grant
a license to any material intellectual
property;
|
| · |
enter
into any contract containing any non-competition covenant (other
than real
property leases in the ordinary course of
business);
|
| · |
make
any material acquisition or investment
other than
|
| · |
purchases
of inventory, supplies and other assets in the ordinary course of
business
and investments made in accordance with the Company’s cash management
policies in the ordinary course of business consistent with past
practice,
or
|
| · |
to
the extent contemplated by the Company’s capital expenditure budget for
fiscal years 2006 or 2007;
|
| · |
increase
the rate or terms of compensation payable by it to any of its directors,
officers or employees;
|
| · |
enter
into any employment or severance agreement with or grant or increase
the
rate or terms of any bonus, pension, severance or other employee
benefit
plan or arrangement with, for or in respect of any of its directors,
officers or employees or make any severance or termination payment
to any
such person, except that we may enter into employment agreements
with
certain specified persons (see “The Merger—Interests of the Company’s
Directors and Executive Officers in the Merger—Potential Employment
Arrangements”);
|
| · |
enter
into, terminate, amend or waive provisions under any collective bargaining
agreement or benefit plan;
|
| · |
amend
the Company’s certificate of incorporation or bylaws;
|
| · |
make
any change in accounting policies or procedures, except as required
by
generally accepted accounting principles or by a governmental
entity;
|
| · |
except
as required by applicable law, make or change any election in respect
of
taxes or adopt or change any material accounting method in respect
of
taxes; enter into any tax allocation agreement, tax sharing agreement
or
closing agreement; or settle or compromise any claim, notice, audit
report
or assessment in respect of taxes individually in excess of $500,000
or in
the aggregate in excess of $2,000,000;
|
| · |
write
up, write down or write off the book value of any assets, individually
or
in the aggregate, in excess of $1,000,000, except in accordance with
generally accepted accounting principles;
|
| · |
except
as permitted by the non-solicitation provisions of the Merger Agreement
(described below in the section headed “—No Solicitation of Alternative
Proposals”), take any action to exempt any person (other than Parent or
Merger
|
Sub)
from
state laws that purport to limit or restrict business combinations or the
ability to acquire or vote shares;
| · |
implement
any layoff of employees that would implicate the Worker Adjustment
and
Retraining Notification Act of 1988, as amended;
|
| · |
settle
any litigation that is not covered by insurance for an amount in
excess of
$1,000,000 per litigation;
|
| · |
amend,
modify in any material respect or terminate (other than in accordance
with
its terms) any contract pursuant to which it has expended in fiscal
year
2005, or expects to expend in fiscal year 2006, in excess of
$1,500,000;
|
| · |
enter
into any contract under which it expects to expend in excess of $1,500,000
during fiscal year 2006, other than
|
| · |
purchases
of inventory, supplies and assets in the ordinary course of
business;
|
| · |
to
the extent contemplated by the Company’s budget for fiscal year 2006;
and
|
| · |
contracts
contemplated and not prohibited by other specific provisions of such
covenant; or
|
| · |
commit
to take any of the actions described
above.
|
We
have
agreed that the Company and its subsidiaries, and their respective officers,
directors, agents and representatives, will not, and we are required to use
our
reasonable best efforts to cause the Company and its subsidiaries’ other
employees not to:
| · |
initiate
or solicit (including by furnishing non-public information) or knowingly
take any other action to facilitate the making of any proposal or
offer
that constitutes, or is reasonably expected to lead to, an Alternative
Proposal (described below); or
|
| · |
engage
in any substantive discussions or any negotiations concerning, or
provide
any non-public information with respect to, an Alternative Proposal.
|
For
purposes of the Merger Agreement, an “Alternative Proposal” is any offer,
proposal or indication of interest that relates to
| · |
a
transaction or series of transactions (including any merger,
consolidation, recapitalization, liquidation or other direct or indirect
business combination) involving the Company or the issuance or acquisition
of shares of Company common stock or other equity securities of the
Company representing 15% (in
|
number
or
voting power) or more of the outstanding capital stock of the Company;
| · |
any
tender offer or exchange offer that, if consummated, would result
in any
person, together with all affiliates of such person, becoming the
beneficial owner of shares of Company common stock or other equity
securities of the Company representing 15% (in number or voting power)
or
more of the outstanding capital stock of the Company; or
|
| · |
the
acquisition, license, purchase or other disposition of 15% or more
of the
consolidated assets of the Company or of a business that constitutes
15%
or more of the consolidated revenues or consolidated net income of
the
Company.
|
Prior
to
adoption of the Merger Agreement by our stockholders, we may engage in
substantive discussions or negotiations with a person that makes a bona fide
written Alternative Proposal (under circumstances in which the Company has
complied with its non-solicitation obligations described above) and may furnish
such person information concerning, and may afford it access to, the Company,
its subsidiaries and their businesses, properties, assets, books and records
if:
| · |
the
Board of Directors determines in its good faith judgment, after
consultation with the Company’s financial advisor and outside counsel,
that such Alternative Proposal is, or is reasonably likely to lead
to, a
Superior Proposal (described below),
and
|
| · |
prior
to furnishing such information or access to, or entering into substantive
discussions or negotiations with, such person,
|
| · |
we
receive a confidentiality agreement from such person that is not
less
restrictive than the confidentiality agreement we have entered into
with
Bain Capital, and
|
| · |
we
notify Parent of our intent to furnish information to, or intent
to enter
into substantive discussions or negotiations with, such
person.
|
For
purposes of the Merger Agreement, “Superior Proposal” means any bona fide
written Alternative Proposal (provided, that for purposes of this definition,
the applicable percentages in the definition of Alternative Proposal are 50%
rather than 15%) which the Board of Directors determines in good faith, after
consultation with the Company’s outside counsel and financial advisor,
| · |
is
reasonably capable of being consummated,
and
|
| · |
if
consummated, would result in a transaction that is more favorable
to the
Company’s stockholders (other than Parent, Merger Sub and their respective
affiliates), from a financial point of view, than the
Merger
|
taking
into account, in each case, among other things, the terms of such Alternative
Proposal and such legal, financial, regulatory, timing and other aspects of
such
Alternative Proposal, including the person making such Alternative Proposal,
which the Board of Directors deems relevant.
Additionally,
we may:
| · |
comply
with Rules 14e-2 and 14d-9 under the Exchange Act with regard to
a tender
or exchange offer, and make a “stop-look-and-listen” communication to the
Company’s stockholders of the nature contemplated by Rule 14d-9 under the
Exchange Act; and
|
| · |
make
such other disclosures to the Company’s stockholders, and take such other
actions, as are required by law.
|
Except
as
required in order to comply with its fiduciary duties under applicable law
(see
“—Additional Covenants—Stockholders’ Meeting”) or as set forth below, the Board
of Directors may not withdraw or modify its approval or recommendation of the
Merger and the Merger Agreement. The Board of Directors also may not approve
or
recommend an Alternative Proposal or cause the Company or any of its
subsidiaries to enter into any agreement (other than a confidentiality agreement
described above) related to any Alternative Proposal. Notwithstanding the
foregoing, at any time prior to the adoption of the Merger Agreement by the
Company’s stockholders, if the Board of Directors determines in its good faith
judgment, after consultation with the Company’s financial advisor and outside
counsel, that any unsolicited Alternative Proposal is a Superior Proposal,
the
Board of Directors may:
| · |
withdraw
or modify its approval or recommendation of the Merger and the Merger
Agreement;
|
| · |
approve
or recommend such Superior Proposal;
|
| · |
cause
the Company or any of its subsidiaries to enter into an agreement
with
respect to such Superior Proposal;
and
|
| · |
terminate
the Merger Agreement, in which case the Company will be required
to pay
Parent a $70 million termination fee. See “—Termination” and “—Termination
Fees” below.
|
Prior
to
terminating the Merger Agreement,
| · |
we
must give Parent two business days’ notice, attaching the executed
copy (or latest draft) of the Superior Proposal agreement (which
notice
must only be given once unless the Superior Proposal is modified
in any
material respect); and
|
| · |
if
within those two business days, Parent makes an offer that the Board
of Directors determines in good faith is at least as favorable to
the
Company’s stockholders (other than Parent, Merger Sub and their respective
affiliates), from a financial point of view, as the Superior Proposal,
and
Parent agrees in writing to all adjustments in the terms and conditions
of
the Merger Agreement necessary to
|
| |
reflect
its offer, then our notice of termination will be rescinded and,
if we
have entered into a Superior Proposal agreement, we must promptly
terminate the Superior Proposal
agreement.
|
We
have
also agreed:
| · |
to
cease any solicitation, discussions or negotiations by or on behalf
of us
with any person conducted prior to the execution of the Merger Agreement
with respect to any Alternative Proposal;
and
|
| · |
to
promptly advise Parent in writing of any Alternative Proposal, specifying
in writing the material terms of and the identity of the person making
such Alternative Proposal.
|
Under
the
Merger Agreement, Parent has agreed that it will, and will cause the surviving
corporation to:
| · |
honor
the terms of all of the Company’s and its subsidiaries’ benefit plans;
|
| · |
for
two years following the closing of the Merger, provide the surviving
corporation and its subsidiaries’ employees compensation and employee
benefits (other than any equity-based benefits) that, in the aggregate,
are no less favorable than the compensation and employee benefits
for such
employees immediately prior to the closing of the Merger;
|
| · |
credit
all service with the Company and its subsidiaries for all purposes
under
any employee benefit plan applicable to employees of the surviving
corporation or its subsidiaries after the closing of the Merger to
the
extent recognized by us under a corresponding benefit
plan;
|
| · |
in
the plan year in which the closing of the Merger occurs, use reasonable
best efforts to waive any pre-existing condition or limitation or
exclusion with respect to the Company’s and its subsidiaries’ employees
under any group health plan or other welfare benefit plan to the
extent
waived or satisfied under an analogous plan of the Company and its
subsidiaries; and
|
| · |
in
the plan year in which the closing of the Merger occurs, use reasonable
best efforts to recognize the dollar amount of all expenses incurred
by
the Company’s and its subsidiaries’ employees and their dependents for
purposes of deductibles, co-payments and maximum out-of-pocket limits
under any group health plan to the extent recognized under an analogous
plan of the Company and its
subsidiaries.
|
The
foregoing will not be deemed for the benefit of, or enforceable by, or give
any
legal rights to, any person not a party to the Merger Agreement, including
any
employee of the surviving corporation.
The
Merger Agreement provides that, after the Merger, Parent and the surviving
corporation will, jointly and severally, and Parent will cause the surviving
corporation to, undertake certain indemnification obligations with respect
to
individuals who are now, or have been at any time prior to the execution of
the
Merger Agreement, a director or officer of the Company or any of its
subsidiaries, or an employee of the Company or any of its subsidiaries providing
services to or for such a director or officer in connection with the Merger
Agreement or any of the transactions contemplated by the Merger Agreement.
Additionally, the Merger Agreement provides that the surviving corporation
will
provide for a period of six years after the Merger becomes effective, directors’
and officers’ liability insurance covering certain persons. See “The
Merger—Interests of the Company’s Directors and Executive Officers in the
Merger—Indemnification and Insurance” for a more detailed discussion of these
obligations.
Until
the
Merger is effective, on reasonable notice and subject to applicable law, the
terms of the confidentiality agreement with Bain Capital and certain exceptions,
we have agreed to afford Parent and its representatives, including its debt
financing sources, reasonable access to our properties, books, contracts,
commitments and records, and to our officers, directors, employees and
representatives and to provide Parent or its representatives with certain
documentation and information.
Parent
and Merger Sub have agreed to use reasonable best efforts to obtain the
Financing, including entering into definitive agreements on terms and conditions
set forth in the Financing Commitments, or on the same or more favorable terms
than those set forth in the Financing Commitments or other terms acceptable
to
Parent in its sole discretion. In the event that any portion of the Financing
becomes unavailable, Parent and Merger Sub have agreed to use their reasonable
best efforts to arrange to obtain alternate financing as promptly as practicable
from alternative sources on the same or more favorable terms than those set
forth in the Financing Commitments or other terms and conditions acceptable
to
Parent in its sole discretion. However, in no event will Bain Capital be
required to provide a greater amount of equity financing than is contemplated
by
the Equity Commitment. See “Financing.”
Parent
and Merger Sub have agreed to comply, and to cause their affiliates to, and
to
use reasonable best efforts to cause their representatives to, comply with
the
terms of the Financing Commitments, the definitive financing agreements, any
alternate financing commitment and any related fee and engagement letters.
Parent has also agreed to:
| · |
furnish
complete, correct and executed copies of the definitive financing
agreements to us promptly upon their execution;
|
| · |
give
us prompt notice of any breach by any party of any of the Financing
Commitments, any alternate financing commitment or the definitive
financing agreements of which Parent or Merger Sub becomes aware
or any
termination thereof; and
|
| · |
otherwise
at our reasonable request inform us of the status of its efforts
to
arrange the Financing.
|
We
have
agreed, and have agreed to cause our subsidiaries, to reasonably cooperate
with
Parent and its affiliates in connection with the Financing, including:
| · |
participation
in due diligence sessions, meetings, drafting sessions, management
preparation sessions, “road shows” and sessions with rating agencies;
|
| · |
assisting
Parent in obtaining any title insurance, lien waivers, estoppels,
affidavits, non-disturbance agreements, memoranda of leases, legal
opinions, surveys or other documents or
deliveries;
|
| · |
using
reasonable best efforts to prepare certain business projections,
financial
statements, pro forma statements and other financial data;
|
| · |
the
execution and delivery of underwriting or placement agreements, loan
agreements, note purchase agreements, registration rights agreements,
indentures and related documents (which will only be effective upon
closing of the Merger), and using reasonable best efforts to obtain
accountants’ comfort letters and consents, all as reasonably requested by
Parent;
|
| · |
reasonably
facilitating the pledging of collateral;
|
| · |
providing
the financial information necessary for the satisfaction of the
obligations and conditions set forth in the Debt Commitments (see
“Financing”); and
|
| · |
reasonably
cooperating with Parent’s financing sources and their representatives in
connection with an inventory appraisal and a field examination.
|
Parent
has agreed that the requested financing cooperation will not unreasonably
interfere with our ongoing operations and neither
the Company nor its subsidiaries will be required to make any payment or
expenditure in connection with the financing cooperation described above in
excess of $250,000 in the aggregate. Parent has agreed to reimburse us for
all
reasonable out of pocket costs in excess of $250,000 promptly upon our request,
and if the Merger Agreement is terminated by the Company due to Parent’s or
Merger Sub’s uncured breach or by Parent because the Outside Date (as defined
below under “—Termination”) has been reached (see “—Termination”), Parent will
promptly reimburse us for all of our financing cooperation costs, including
amounts below $250,000.
The
Merger Agreement contains additional covenants regarding the conduct of the
parties prior to the Merger, some of which are described below.
The
Merger Agreement requires us to give notice of and hold the special meeting
to
consider the proposal to adopt the Merger Agreement. The Board of Directors
is
required to recommend that the Company’s stockholders vote in favor of the
adoption of the Merger Agreement, except that:
| · |
The
Board of Directors may withdraw, modify or amend its recommendation
in
connection with the Board of Director’s approval of a Superior Proposal.
See “—No Solicitation of Alternative Proposals.”
|
| · |
The
Board of Directors may withdraw, modify or amend its recommendation
other
than in connection with an Alternative Proposal, if the Board of
Directors
determines in good faith (after consultation with the Company’s outside
counsel) that such action is required for the Board of Directors
to comply
with its fiduciary duties under applicable law. In such case, the
Company
is still required to hold the special meeting and the Voting Agreement
will remain in effect. See “The Voting
Agreement.”
|
The
Company, Parent and Merger Sub have agreed to use all reasonable best efforts
to
take all actions necessary to comply with legal requirements, prepare and file
all necessary documentation to obtain permits, consents, approvals and
authorizations of all governmental entities necessary or advisable in connection
with consummating the transactions contemplated in the Merger
Agreement.
Prior
to
the effectiveness of the Merger or the termination of the Merger Agreement,
Parent and Merger Sub have agreed that:
| · |
Merger
Sub will not, and Parent will cause Merger Sub not to, undertake
any
businesses activities other than in connection with the Merger Agreement
and the Merger;
|
| · |
Parent
will take all actions necessary to cause Merger Sub to perform its
obligations under the Merger Agreement and to consummate the Merger;
and
|
| · |
Parent
and Merger Sub will not engage in any action or enter into any transaction
or permit any action to be taken or transaction to be entered into
that
could reasonably be expected to delay the consummation or adversely
affect
the Merger or any of the other transactions contemplated by the Merger
Agreement.
|
The
obligations of the parties to complete the Merger are subject to the
satisfaction or waiver of the following mutual conditions:
| · |
Stockholder
Approval.
The adoption of the Merger Agreement by our stockholders.
|
| · |
Statutes.
No statute, rule or regulation having been enacted or promulgated
by a
governmental entity that prohibits the completion of the Merger.
|
| · |
Injunctions.
No judgment, order, writ, decree or injunction of any governmental
entity
being in effect that precludes, restrains, enjoins or prohibits the
completion of the Merger.
|
| · |
HSR
Act.
Any applicable waiting period under the HSR Act having expired or
been
terminated (this condition was satisfied on February 10,
2006).
|
The
obligations of Parent and Merger Sub to complete the Merger are subject to
the
satisfaction or waiver of the following additional conditions:
| · |
Performance
and Obligations.
The performance, in all material respects, by the Company of its
agreements and covenants in the Merger Agreement.
|
| · |
Representations
and Warranties.
|
The
truth
and correctness of the Company’s representations and warranties on the day of
the closing of the Merger (except for representations and warranties that
expressly speak only as of a specific date or time, which need only be true
and
correct as of such date or time), subject to the following qualifications:
| · |
Our
representations and warranties regarding certain matters relating
to our
due incorporation, existence, good standing and qualification to
do
business, certificate of incorporation and bylaws, capitalization,
subsidiaries, power and authority, required vote of our stockholders
in
connection with the adoption of the Merger Agreement, affiliate
transactions, receipt of Goldman Sachs’ fairness opinion, Section 203 of
the DGCL and the absence of undisclosed broker’s fees must be true and
correct in all material respects;
|
| · |
our
representations and warranties qualified with respect to a Company
Material Adverse Effect must be true and correct in all respects
(giving
effect to that qualification); and
|
| · |
all
of our other representations and warranties must be true and correct
except where the failure of such representations and warranties to
be so
true and correct would not reasonably be expected to have, individually
or
in the aggregate, a Company Material Adverse Effect (disregarding
any
materiality qualifications, other than provisions that expressly
require
the listing of material items on the Company’s disclosure schedules or
that expressly permit the exclusion of immaterial items from any
such
list).
|
| · |
Closing
Certificate.
Our delivery to Parent at the closing of a certificate with respect
to the
satisfaction of the conditions relating to our representations,
warranties, covenants and agreements.
|
| · |
Non-Competition
Agreements.
Monroe Milstein, Andrew Milstein and Stephen Milstein having entered
into
Non-Competition Agreements with the Company, which agreements provide,
among other things and subject to certain exceptions, that for one
year
after the Merger the Milsteins and their affiliates will not compete
with
the Company, and for three years after the Merger they will not disclose
certain confidential information of the Company or solicit for employment
or hire any employees of the Company. These agreements do not provide
for
any payments to the Milsteins. Monroe Milstein, Andrew Milstein and
Stephen Milstein have indicated to the Company that they intend to
enter
into these agreements at the closing of the Merger. The form of
Non-Competition Agreement is attached as Exhibit A to the Merger
Agreement, which is attached to this proxy statement as Appendix
A.
|
| · |
No
Governmental Proceedings.
No governmental entity having initiated any suit, proceeding, hearing
or
investigation involving the Company, Parent or Merger Sub where an
unfavorable judgment, order, writ, decree or injunction would prevent
the
consummation of the transactions contemplated by the Merger Agreement,
cause any of such transactions to be rescinded following consummation
or
affect adversely the right of Parent to own the capital stock of
the
surviving corporation and to operate its business.
|
| · |
Dissenting
Shares.
Holders of no more than 5% of the outstanding shares of Company common
stock having exercised (and not withdrawn or failed to perfect) appraisal
rights under Section 262 of the DGCL. See “Dissenters’ Rights of
Appraisal.”
|
Our
obligation to complete the Merger is subject to the following additional
conditions:
| · |
Representations
and Warranties.
The truth and correctness in all material respects of Parent’s and Merger
Sub’s representations and warranties on the day of the closing of the
Merger (except for representations and warranties that expressly
speak
only as of a specific date or time, which need only be true and correct
in
all material respects as of such date or time), except that
representations and warranties that contain qualifications with respect
to
materiality must be true and correct in all respects (giving effect
to
that qualification).
|
| · |
Performance
and Obligations.
The performance, in all material respects, by Parent and Merger Sub
of
their agreements and covenants in the Merger Agreement.
|
| · |
Closing
Certificate.
The delivery by Parent at the closing of the Merger of a certificate
with
respect to the satisfaction of the conditions relating to Parent’s and
Merger Sub’s representations, warranties, covenants and agreements.
|
The
Merger Agreement may be terminated and the Merger may be abandoned at any time
prior to the effective time of the Merger, whether before or after stockholder
approval has been obtained, as follows:
| · |
by
mutual written consent of the parties;
|
| · |
by
either the Company or Parent, if:
|
| · |
any
governmental entity has issued an order, decree or ruling or taken
any
other action permanently restraining, enjoining or otherwise prohibiting
the Merger and such order or other action is final and non-appealable;
|
| · |
the
closing has not occurred on or before June 30, 2006, except that
under certain conditions such date will be extended to August 14,
2006 (the “Outside Date”);
|
| · |
any
state or federal law, order, rule or regulation is adopted or issued
which
has the effect of prohibiting the
Merger;
|
| · |
the
Company’s stockholders do not adopt the Merger Agreement at the special
meeting (or any postponement or adjournment thereof);
|
| · |
there
is a material breach by the non-terminating party of any of its
representations, warranties, covenants or agreements in the Merger
Agreement such that the closing conditions with respect thereto would
not
be satisfied and such breach has not been cured within 45 days
following notice by the terminating party or cannot be cured by the
Outside Date;
|
| · |
by
the Company, if the Board of Directors approves a Superior Proposal
in
accordance with the terms of the Merger Agreement described above
under
“—No Solicitation of Alternative Proposals”; and
|
| · |
by
Parent, if the Board of Directors withdraws or modifies in a manner
adverse to Parent its recommendation that the Company’s stockholders adopt
the Merger Agreement or recommends to stockholders an Alternative
Proposal
or Superior Proposal, or the Company enters into a definitive agreement
with respect thereto.
|
In
some
cases, termination of the Merger Agreement may require us to pay a termination
fee to Parent, or require Parent to pay a termination fee to us, as described
below under “—Termination Fees.”
We
have
agreed to pay to Parent a termination fee of $70 million at or prior to
termination of the Merger Agreement by the Company or within two business days
of termination of the Merger Agreement by Parent if:
| · |
the
Company terminates the Merger Agreement because the Board of Directors
approves a Superior Proposal in accordance with the terms of the
Merger
Agreement described above under “—No Solicitation of Alternative
Proposals”; or
|
| · |
Parent
terminates the Merger Agreement because the Board of Directors withdraws
or modifies in a manner adverse to Parent its recommendation that
the
Company’s stockholders adopt the Merger Agreement or recommends to
stockholders an Alternative Proposal or Superior Proposal, or the
Company
enters into a definitive agreement with respect
thereto.
|
We
have
agreed to pay Parent a termination fee of $70 million within two business days
after the consummation of the Alternative Proposal described below
if:
| · |
(i)
Parent or the Company terminates the Merger Agreement because the
Merger
has not been effected by the Outside Date (unless Parent is required
to
pay the Company a termination fee as described below) or (ii) Parent
terminates the Merger Agreement because the Company’s stockholders do not
adopt the Merger Agreement at the special meeting (or any postponement
or
adjournment thereof), and
|
| · |
at
the time of termination an Alternative Proposal is outstanding (provided
that, in this case, the applicable percentages in the definition
of
“Alternative Proposal” are 50% rather than 15%);
and
|
| · |
the
Company consummates a transaction agreement with respect to that
Alternative Proposal within 12 months of the date of termination;
or
|
| · |
Parent
terminates the Merger Agreement due to a material, knowing breach
by the
Company of its representations, warranties, covenants or agreements
in the
Merger Agreement such that the closing conditions with respect thereto
would not be satisfied (subject to the applicable cure period),
and
|
| · |
at
the time of termination an Alternative Proposal is outstanding (provided
that, in this case, the applicable percentages in the definition
of
“Alternative Proposal” are 50% rather than 15%) ;
and
|
| · |
the
Company consummates a transaction agreement with respect to that
Alternative Proposal within 12 months of the date of
termination.
|
Parent
has agreed to pay us a termination fee of $70 million within two business days
of termination of the Merger Agreement if:
| · |
Parent
terminates the Merger Agreement because the Merger has not been effected
by the Outside Date and at the time of termination Parent or Merger
Sub
has breached its representations, warranties, covenants or agreements
in
the Merger Agreement such that the closing conditions with respect
thereto
would not be satisfied (subject to the applicable cure
period);
|
| · |
the
Company terminates the Merger Agreement because the Merger has not
been
effected by the Outside Date and at the time of such
termination
|
| · |
the
Merger Agreement has been adopted by the Company’s
stockholders;
|
| · |
no
statue, rule or regulation has been enacted that prohibits the completion
of the Merger;
|
| · |
no
judgment, order, writ, decree or injunction is in effect that precludes
the completion of the Merger;
|
| · |
we
have not breached our representations, warranties, covenants or agreements
under the Merger Agreement such that the closing conditions with
respect
thereto would not be satisfied;
|
| · |
we
have obtained all governmental approvals we are required to obtain
by the
closing of the Merger;
|
| · |
Monroe
Milstein, Andrew Milstein and Stephen Milstein have indicated in
writing
their willingness to enter into their Non-Competition Agreements;
and
|
| · |
holders
of no more than 5% of the outstanding shares of Company common stock
shall
have exercised (and not withdrawn or failed to perfect) appraisal
rights
under Section 262 of the DGCL; or
|
| · |
the
Company terminates the Merger Agreement due to a breach by Parent
or
Merger Sub of any of its representations, warranties, covenants or
agreements under the Merger Agreement such that the closing conditions
with respect thereto would not be satisfied (subject to the applicable
cure period).
|
Subject
to applicable law, the Merger Agreement may be amended by the written agreement
of the parties at any time prior to the effective time of the Merger, whether
before or after the adoption of the Merger Agreement by our stockholders.
The
Merger Agreement also provides that, at any time prior to the effective time
of
the Merger, any party may, by written agreement:
| · |
extend
the time for the performance of any of the obligations or other acts
of
the other parties to the Merger Agreement;
|
| · |
waive
any inaccuracies in the representations and warranties contained
in the
Merger Agreement or in any document delivered pursuant to the Merger
Agreement; or
|
| · |
waive
compliance with any of the agreements or conditions contained in
the
Merger Agreement which may be legally
waived.
|
This
section describes the Voting Agreement among Parent and the Milstein
Stockholders. The description is not complete, and you should read the Voting
Agreement for a more complete understanding of its terms. The complete text
of
the Voting Agreement is attached to this proxy statement as Appendix B and
is
incorporated by reference into this proxy statement.
Pursuant
to the Voting Agreement, the Milstein Stockholders have agreed to vote or cause
to be voted all of their shares of Company common stock in favor of the adoption
of the Merger Agreement and, except with the written consent of Parent, against
any Alternative Proposal. As of February 9, 2006, 27,326,340
shares
of
Company common stock, or approximately 61.0% of the outstanding shares, were
subject to the Voting Agreement. The Voting Agreement will terminate on the
earlier of the effective time of the Merger or the termination of the Merger
Agreement.
Each
Milstein Stockholder has irrevocably appointed Parent as his or its proxy to
vote such stockholder’s shares of Company common stock for the matters described
above. In addition, each Milstein Stockholder has agreed generally that he
or it
will not:
| · |
directly
or indirectly transfer any shares of Company common stock other than
(i) pursuant to the Merger Agreement, (ii) to any other Milstein
Stockholder or (iii) to any third party that agrees to enter into
a voting
agreement with Parent that is identical to the Voting Agreement (provided,
that prior to the date of this proxy statement, Parent consented
to
charitable donations by Andrew Milstein of 110,000 shares of Company
common stock, by Stephen Milstein of 250,000 shares of Company common
stock and by the MM 2005 Intangibles Trust of 115,000 shares of Company
common stock, in each case without requiring that the transferees
enter
into a voting agreement);
|
| · |
directly
or indirectly grant any proxies, deposit any shares of Company common
stock into a voting trust or enter into a voting arrangement that
would be
inconsistent with or violate the terms of the Voting
Agreement;
|
| · |
take
certain actions intended to facilitate any Alternative Proposal or
to
cause stockholders of the Company not to vote to adopt the Merger
Agreement;
|
| · |
initiate
or solicit (including by way of furnishing non-public information)
or
knowingly take any other action that constitutes, or is reasonably
expected to lead to, an Alternative Proposal;
or
|
| · |
engage
in any substantive discussions or negotiations concerning, or provide
any
non-public information with respect to, an Alternative Proposal.
|
Notwithstanding
the foregoing, if and to the extent that the Company is permitted under the
terms of the Merger Agreement to provide information to and engage in
substantive discussions and negotiations with any person regarding an
Alternative Proposal, then the Milstein Stockholders may provide information
to
and engage in substantive discussions and negotiations with such person and
its
representatives. See “The Merger Agreement - No Solicitation of Alternative
Proposals.”
Pursuant
to the Voting Agreement, the Milstein Stockholders have waived their dissenters’
rights of appraisal under the DGCL. See “Dissenters’ Rights of
Appraisal.”
Company
common stock is listed on the NYSE under the trading symbol “BCF.” The following
table sets forth, for the periods indicated, the high and low sales prices
per
share for Company common stock as reported on NYSE:
| |
HIGH
|
|
LOW
|
|
Fiscal
2004
|
|
|
|
|
First
Quarter Ended August 30, 2003
|
$20.87
|
|
$17.22
|
|
Second
Quarter Ended November 29, 2003
|
$22.26
|
|
$18.70
|
|
Third
Quarter Ended February 28, 2004
|
$21.68
|
|
$18.55
|
|
Fourth
Quarter Ended May 29, 2004
|
$20.48
|
|
$17.52
|
| |
|
|
|
|
Fiscal
2005
|
|
|
|
|
First
Quarter Ended August 28, 2004
|
$19.59
|
|
$17.50
|
|
Second
Quarter Ended November 27, 2004
|
$24.12
|
|
$19.21
|
|
Third
Quarter Ended February 26, 2005
|
$28.00
|
|
$21.36
|
|
Fourth
Quarter Ended May 28, 2005
|
$32.85
|
|
$26.37
|
| |
|
|
|
|
Fiscal
2006
|
|
|
|
|
First
Quarter Ended August 27, 2005
|
$44.08
|
|
$
32.30
|
|
Second
Quarter Ended November 26, 2005
|
$41.61
|
|
$34.32
|
|
Third
Quarter (through [ ], 2006)
|
$[___]
|
|
$[___]
|
On
June
24, 2005, which was the trading day immediately prior to the date on which
we
announced that the Board of Directors was exploring possible strategic
alternatives for the Company to enhance stockholder value, the closing price
per
share of Company common stock on the NYSE was $36.04 per share. On January
17,
2006, which was the last full trading day
immediately
preceding the public announcement of the proposed Merger, the closing price
per
share of Company common stock on the NYSE was $44.58. On [_______], 2006, which
was the latest trading day prior to the printing of this proxy statement, the
closing price per share of Company common stock on the NYSE was $[____]. You
are
encouraged to obtain current market quotations for Company common stock in
connection with voting your shares.
As
of
[record date], there were [_________] shares of Company common stock outstanding
held by approximately [___] holders of record.
On
November 14, 2005, the Board of Directors declared an annual cash dividend
of $0.04 per share, which was paid on January 9, 2006 to stockholders of
record on November 28, 2005. On August 5, 2004, the Board of Directors
declared an annual cash dividend of $0.04 per share, which was paid on
December 15, 2004 to stockholders of record on November 22, 2004. On
August 14, 2003, the Board of Directors declared an annual cash dividend of
$0.03 per share, which was paid on December 8, 2003 to stockholders of
record on November 14, 2003. In addition, on January 10, 2005, the
Board of Directors declared a special cash dividend of $0.56 per share, which
was paid on February 21, 2005 to stockholders of record on January 20,
2005.
As
of
[record date], the Company had outstanding and entitled to vote (exclusive
of
treasury shares) [_________] shares of Company common stock. The holders of
Company common stock are entitled to vote as a single class and to one vote
per
share, exercisable in person or by proxy, at all meetings of
stockholders.
To
the
knowledge of the Company, as of February 9, 2006, the following table sets
forth
the ownership of Company common stock by (i) each person owning more than 5%
of
the outstanding shares of Company common stock, (ii) each director, (iii) our
Chief Executive Officer and the next four most highly compensated executive
officers, and (iv) all directors and executive officers as a group. Each of
the
Company’s directors and executive officers has advised the Company that they
plan to vote all of their shares of Company common stock in favor of the
adoption of the Merger Agreement. Certain directors and executive officers
are
also parties to the Voting Agreement. See “The Voting Agreement.”
|
Name
and Business Address
of
Beneficial Owner
|
|
Number
of Shares
of
Common Stock Beneficially
Owned
(1)
|
|
Percent
of
Class
|
|
Samgray,
L.P. (2)(3)(21)
|
|
12,000,000
|
(4)
|
|
26.8%
|
|
Article
Sixth Trust (5)(21)
|
|
6,743,984
|
(4)
|
|
15.1%
|
|
Monroe
G. Milstein (2)(6)(7)
|
|
882
|
(8)(9)(20)(23)
|
|
*
|
|
Andrew
R. Milstein (2)(3)(6)(7)(21)
|
|
25,557,321
|
(4)(10)(19) (20)(22)
|
|
57.0%
|
|
Stephen
E. Milstein (2)(3)(6)(7)(21)
|
|
25,825,979
|
(4)(11)(19) (20)(22)(23)
|
|
57.6%
|
|
Mark
A. Nesci (2)(7)
|
|
188,867
|
(12)(13)(20)
|
|
*
|
|
Irving
Drillings (7)
4740
South Ocean Blvd.
Highland
Beach, Florida 33487
|
|
1,300
|
|
|
*
|
|
Roman
Ferber (7)
27
Harwood Road
Monroe
Township, NJ 08831
|
|
400
|
|
|
*
|
|
Alan
G. Silverglat (7)
39
Briarcliff
St.
Louis, Missouri 63124
|
|
-
|
|
|
*
|
|
Paul
C. Tang (2)
|
|
1,507,652
|
(14)(20)
|
|
3.4%
|
|
Steven
Koster (2)
|
|
25,839
|
(15)(20)
|
|
*
|
|
Robert
Grapski (2)
|
|
25,359
|
(16)(20)
|
|
*
|
|
Dimensional
Fund Advisors Inc. (17)
1299
Ocean Avenue, 11th Floor
Santa
Monica, CA 90401
|
|
2,763,740
|
|
|
6.2%
|
|
All
directors and executive officers as group (10 persons)
|
|
27,766,661
|
(18)(20)(22)(23)
|
|
61.5%
|
*
Less
than 1%.
|
(1)
|
Except
as otherwise indicated, the persons named in the table have sole
voting
and investment power with respect to all shares of Company common
stock
shown as beneficially owned by them.
|
|
(2)
|
Business
address is 1830 Route 130, Burlington, New Jersey
08016.
|
|
(3)
|
Samgray,
L.P. (“Samgray”) is a Delaware limited partnership whose general partner
is Latzim Family LLC (“Latzim”), a Delaware limited liability company.
Latzim is controlled by its members, Messrs. Andrew R. Milstein,
Stephen
E. Milstein and Lazer Milstein who may be deemed to share beneficial
ownership of the shares of Company common stock owned by
Samgray.
|
|
(4)
|
Samgray,
L.P., Andrew R. Milstein, Stephen E. Milstein, Lazer Milstein and
the
Article Sixth Trust under the last will and testament of the late
Henrietta Milstein have entered into a Voting Agreement dated as
of
September 23, 2004 (the “2004 Voting Agreement”), pursuant to which the
parties to the Voting Agreement have granted an irrevocable proxy
to
Andrew R. Milstein and Stephen E. Milstein, acting singly, but only
in
accordance with their unanimous determination, to vote the shares
of
Company
common stock owned
by such parties. In case of a deadlock as to how the shares will
be voted,
Lazer Milstein has the power to decide which position shall prevail.
Lazer
Milstein will be substituted as one of the proxy holders in case
either
Andrew R. Milstein or Stephen E. Milstein dies, becomes incapacitated
or
|
| |
resigns.
As of February 9, 2006, there were an aggregate of 25,330,938 shares
of
Company common stock subject to the 2004 Voting Agreement representing
56.6% of the issued and outstanding shares of Company
common stock.
|
|
(5)
|
Trust
established under Article Sixth of the last will and testament of
the late
Henrietta Milstein to receive shares of Company common stock owned
by
Henrietta Milstein. Lazer Milstein is the trustee of the trust and
has
voting and dispositive power over the shares, subject to the 2004
Voting
Agreement.
|
|
(6)
|
Monroe
G. Milstein is the father of Andrew, Lazer and Stephen Milstein.
Each
member of the Milstein family disclaims beneficial ownership of each
other’s shares of Company common stock.
|
|
(7)
|
A
director of the Company.
|
|
(8)
|
Excludes
(a) 308,014 shares of Company common stock representing Monroe G.
Milstein’s proportionate interest in 1,400,000 shares of Company common
stock owned by MHLAS Limited Partnership Number One (“MHLAS”), of which
Monroe G. Milstein is a limited partner, (b) 11,772,216 shares of
Company
common stock representing Monroe G. Milstein’s proportionate interest in
12,000,000 shares of Company common stock owned by Samgray, L.P.,
of which
Monroe G. Milstein is a limited partner, and (c) 352,001 shares owned
by the MM 2005 Intangibles Trust, of which Monroe G. Milstein is
settlor
and beneficiary.
|
|
(9)
|
Does
not include 6,743,984 shares of Company common stock owned by the
Article
Sixth Trust, of which Monroe G. Milstein is a beneficiary. Monroe
G.
Milstein has certain limited dispositive rights with respect to the
shares
of Company common stock owned by the Article Sixth Trust as to which
he
disclaims beneficial ownership. Also does not include 2,000 shares
of
Company common stock held by the wife of Monroe G. Milstein, as to
which
shares Monroe G. Milstein disclaims beneficial ownership. Also excludes
1,430 shares of Company common stock held by The Estate of Henrietta
Milstein. As executor of the Estate of Henrietta Milstein, Monroe
G.
Milstein has voting and dispositive power over such shares, but Monroe
G.
Milstein disclaims beneficial ownership of such shares, except to
the
extent of his pecuniary interest therein.
|
|
(10)
|
Includes
(a) 79,379 shares of Company common stock held by Andrew R. Milstein
as
trustee of the Stephen Milstein 1994 Trust, and (b) 13,032 shares
of
Company common stock held by Andrew R. Milstein as Trustee of the
SGM 1995
Trust, trusts established for the benefit of the children of Stephen
E.
Milstein. Andrew R. Milstein holds voting and dispositive power with
respect to the shares but disclaims any pecuniary interest in such
shares.
Also includes 67,200 shares of Company common stock underlying options
granted to Andrew R. Milstein. Excludes 67,475 shares in which Andrew
R.
Milstein’s spouse and Andrew R. Milstein may be deemed to have an indirect
interest. Excludes 150,393 shares of Company common stock donated
by
Andrew R. Milstein to various trusts established for the benefit
of the
children of Andrew R. Milstein, as to which shares Andrew R. Milstein
disclaims beneficial ownership.
|
|
(11)
|
Includes
(a) 16,068 shares of Company common stock held by Stephen E. Milstein
as
trustee under the trust agreement dated December 31, 1984 for the
benefit
of the niece of Stephen E. Milstein and daughter of Andrew R. Milstein,
(b) 22,922 shares of Company common stock held by Stephen E. Milstein
as
trustee under the trust agreement dated November 4, 1988 for the
benefit
of the nephew of Stephen Milstein and son of Andrew R. Milstein,
and (c)
352,001 shares held by Stephen E. Milstein as trustee of the MM 2005
Intangibles Trust for the benefit of Monroe G. Milstein. Stephen
E.
Milstein holds voting and dispositive power with respect to the shares
but
disclaims any pecuniary interest in such shares. Also includes 67,200
shares of Company common stock underlying options granted to Stephen
E.
Milstein. Excludes 126,976 shares of Company common stock donated
by
Stephen E. Milstein to a trust established for the benefit of his
children, as to which shares Stephen E. Milstein disclaims beneficial
ownership.
|
|
(12)
|
Includes
152,000 shares of Company common stock underlying options granted
to Mark
A. Nesci.
|
|
(13)
|
Includes
3,600 shares of Company common stock held by the minor children of
Mark A.
Nesci. Excludes 1,800 shares of Company common stock held by the
wife of
Mark A. Nesci, as to which shares Mark
A.
|
| |
Nesci
disclaims beneficial ownership.
|
|
(14)
|
Includes
17,400 shares of Company common stock underlying options granted
to Paul
C. Tang. Also includes (a) 43,928 shares held by Paul C. Tang as
trustee
of the Andrew Milstein 1994 Trust, a trust established for the benefit
of
Andrew R. Milstein’s children, and (b) 34,565 shares held by Paul C. Tang
as trustee of the Stephen E. Milstein 1999 Trust, a trust established
for
the benefit of Stephen E. Milstein’s children. As trustee of these two
trusts, Paul C. Tang has voting and dispositive power over the shares
of
Company common stock held in trust but disclaims any pecuniary interest
in
such shares. Also includes 1,400,000 shares of Company common stock
held
by MHLAS and 10,000 shares of Company common stock held by MH Family
LLC
(“MHLLC”). MHLAS is a Delaware limited partnership whose general partner
is MHLLC, a Delaware limited liability company. MHLLC is controlled
by the
Henrietta Milstein 2000 Revocable Trust. Paul C. Tang is the trustee
of
such trust and in such capacity has voting and dispositive power
over the
shares of Company common stock owned by MHLLC and by MHLAS but disclaims
any pecuniary interest in such shares.
|
|
(15)
|
Includes
25,000 shares of Company common stock underlying options granted
to Steven
Koster.
|
|
(16)
|
Includes
23,600 shares of Company common stock underlying options granted
to Robert
Grapski.
|
|
(17)
|
Based
on information contained in the Amendment to Schedule 13G filed with
the
United States Securities and Exchange Commission by Dimensional Fund
Advisors Inc. on February 6, 2006.
|
|
(18)
|
Includes
12,000,000 shares of Company common stock owned by Samgray, L.P.,
6,743,984 shares owned by the Article Sixth Trust and 1,901,901 shares
owned by Lazer Milstein with respect to which Andrew R. Milstein
and
Stephen E. Milstein may be deemed to share beneficial ownership.
See
footnote 4 above. Also includes an aggregate of 290,800 shares of
Company
common stock underlying options granted to certain officers and directors.
Also includes 43,928 shares held by an officer of the Company as
trustee
of the Andrew Milstein 1994 Trust, a trust established for the benefit
of
Andrew R. Milstein’s children, and 34,565 shares held by an officer of the
Company as trustee of the Stephen E. Milstein 1999 Trust, a trust
established for the benefit of Stephen E. Milstein’s children. Also
includes 1,400,000 shares of Company common stock held by MHLAS and
10,000
shares of Company common stock held by MHLLC. MHLAS is a Delaware
limited
partnership whose general partner is MHLLC, a Delaware limited liability
company. MHLLC is controlled by the Henrietta Milstein 2000 Revocable
Trust. Paul C. Tang, the general counsel of the Company, is the trustee
of
such trust and in such capacity has voting and dispositive power
over the
shares of Company common stock owned by MHLLC and by MHLAS but disclaims
any pecuniary interest in such shares.
|
|
(19)
|
Includes
36,000 shares of Company common stock owned by 1989 Milstein Holdings
Co.,
of which Andrew R. Milstein and Stephen E. Milstein are co-trustees.
As
co-trustees, Andrew R. Milstein and Stephen E. Milstein have voting
and
dispositive power over these shares of Company common stock but disclaim
any pecuniary interest in such shares.
|
|
(20)
|
Includes
shares of Company common stock attributable as of January 17, 2006
to the
executive officer indicated by virtue of his participation in the
Company’s 401(k) and profit sharing plan (the “Plan”). Participants in the
Plan own a portion of the Company Stock Fund, a Plan investment fund
option which invests in Company common stock. The shares of Company
common
stock included are based upon the number of units in the Company
Stock
Fund owned by the participant on that date, and is subject to change
daily
based on a number of factors including, without limitation, fluctuation
in
the market value of the underlying shares, investment gains and losses
of
the cash portion of the Company Stock Fund and reinvestment of
dividends.
|
|
(21)
|
These
shares of Company common stock are subject to the Voting Agreement,
which
includes a proxy given to Parent to vote such shares to approve the
Merger
Agreement during the term of the Voting Agreement. While, as a result,
Parent may be deemed the beneficial owner of such shares of Company
common
stock (and the other shares of Company common stock owned by the
other
parties to the Voting Agreement), Parent disclaims any such beneficial
ownership.
|
|
(22)
|
Excludes
an aggregate of 360,000 shares of Company common stock being donated
to
charity by Andrew R. Milstein and Stephen E. Milstein. See “The Voting
Agreement.”
|
|
(23)
|
Excludes
115,000 shares of Company common stock being gifted to Monroe G.
Milstein
by the MM 2005 Intangibles Trust for ultimate donation to charity
by
Monroe G. Milstein.
|
Under
the
DGCL, you have the right to demand appraisal in connection with the Merger
and
to receive, in lieu of the Merger consideration, payment in cash for the fair
value of your common stock of the Company as determined by the Delaware Court
of
Chancery. The Company’s stockholders electing to exercise appraisal rights must
comply with the provisions of Section 262 of the DGCL in order to perfect their
rights. The Company will require strict compliance with the statutory
procedures.
The
following is intended as a brief summary of the material provisions of the
Delaware statutory procedures required to be followed by a stockholder in order
to demand and perfect appraisal rights. This summary, however, is not a complete
statement of all applicable requirements and is qualified in its entirety by
reference to Section 262 of the DGCL, the full text of which appears in Appendix
D to this proxy statement.
Section
262 requires that stockholders be notified that appraisal rights will be
available not less than 20 days before the special meeting to vote on the
adoption of the Merger Agreement. A copy of Section 262 must be included with
such notice. This proxy statement constitutes the Company’s notice to its
stockholders of the availability of appraisal rights in connection with the
Merger in compliance with the requirements of Section 262. If you wish to
consider exercising your appraisal rights, you should carefully review the
text
of Section 262 contained in Appendix D since failure to timely and properly
comply with the requirements of Section 262 will result in the loss of your
appraisal rights under Delaware law.
If
you
elect to demand appraisal of your shares, you must satisfy each of the following
conditions:
| · |
You
must deliver to the Company a written demand for appraisal of your
shares
before the vote with respect to the Merger Agreement is taken at
the
special meeting. This written demand for appraisal must be in addition
to
and separate from any proxy or vote abstaining from or voting against
the
adoption of the Merger Agreement. Voting against or failing to vote
for
the adoption of the Merger Agreement by itself does not constitute
a
demand for appraisal within the meaning of Section
262.
|
| · |
You
must not vote in favor of the adoption of the Merger Agreement. A
vote in
favor of the adoption of the Merger Agreement, by proxy or in person,
will
constitute a waiver of your appraisal rights in respect of the shares
so
voted and will nullify any previously filed written demands for
appraisal.
|
| · |
You
must continuously hold your shares through the effective time of
the
Merger.
|
If
you
fail to comply with any of these conditions and the Merger is completed, you
will be entitled to receive the cash payment for your shares of Company common
stock as provided for in the Merger Agreement if you are the holder of record
at
the effective time of the Merger, but you will have no appraisal rights with
respect to your shares of Company common stock. A proxy card which is signed
and
does not contain voting instructions will, unless revoked, be voted “FOR” the
adoption of the Merger Agreement and will constitute a waiver of your right
of
appraisal and will nullify any previous written demand for
appraisal.
All
demands for appraisal should be addressed to the Secretary of the Company at
Burlington Coat Factory Warehouse Corporation, 1830 Route 130, Burlington,
New
Jersey 08016, and should be executed by, or on behalf of, the record holder
of
the shares in respect of which appraisal is being demanded. The demand must
reasonably inform the Company of the identity of the stockholder and the
intention of the stockholder to demand appraisal of his, her or its
shares.
To
be
effective, a demand for appraisal by a holder of Company common stock must
be
made by, or on behalf of, such registered stockholder. The demand should set
forth, fully and correctly, the registered stockholder’s name as it appears on
his or her stock certificate(s) and should specify the holder’s mailing address
and the number of shares registered in the holder’s name. The demand must state
that the person intends thereby to demand appraisal of the holder’s shares in
connection with the Merger. Beneficial owners who do not also hold the shares
of
record may not directly make appraisal demands to the Company. The beneficial
holder must, in such cases, have the registered owner submit the required demand
in respect of those shares. If shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of a demand
for
appraisal should be made in that capacity; and if the shares are owned of record
by more than one person, as in a joint tenancy or tenancy in common, the demand
should be executed by or for all joint owners. An authorized agent, including
an
authorized agent for two or more joint owners, may execute the demand for
appraisal for a stockholder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, he or she is acting as agent for the record owner. A record owner,
such
as a broker, who holds shares as a nominee for others, may exercise his or
her
right of appraisal with respect to the shares held for one or more beneficial
owners, while not exercising this right for other beneficial owners. In that
case, the written demand should state the number of shares as to which appraisal
is sought. Where no number of shares is expressly mentioned, the demand will
be
presumed to cover all shares held in the name of the record owner.
If
you
hold your shares of Company common stock in a brokerage account or in other
nominee form and you wish to exercise appraisal rights, you should consult
with
your broker or the other nominee to determine the appropriate procedures for
the
making of a demand for appraisal by the nominee.
Within
10
days after the effective time of the Merger, the surviving corporation must
give
written notice that the Merger has become effective to each Company stockholder
who has properly filed a written demand for appraisal and who did not vote
in
favor of the Merger Agreement. At any time within 60 days after the effective
time, any stockholder who has demanded an appraisal has the right to withdraw
the demand and to accept the cash payment specified by the Merger Agreement
for
such stockholder’s shares of Company common stock.
Within
120 days after the effective time, either the surviving corporation or any
stockholder who has complied with the requirements of Section 262 may file
a
petition in the Delaware Court of Chancery, with a copy served on the surviving
corporation in the case of a petition filed by a stockholder, demanding a
determination of the fair value of the shares held by all stockholders entitled
to appraisal. The surviving corporation has no obligation and has no present
intention to file such a petition in the event there are dissenting
stockholders. Accordingly, it is the obligation of the Company’s stockholders to
initiate all necessary action to perfect their appraisal rights in respect
of
shares of Company common stock within the time prescribed in Section 262. The
failure of a stockholder to file such a petition within the period specified
could nullify the stockholder’s previously written demand for appraisal.
If
a
petition for appraisal is duly filed by a stockholder and a copy of the petition
is delivered to the surviving corporation, the surviving corporation will then
be obligated, within 20 days after receiving service of a copy of the petition,
to provide the Chancery Court with a duly verified list containing the names
and
addresses of all stockholders who have demanded an appraisal of their shares
and
with whom agreements as to the value of their shares have not been reached.
Within
120 days after the effective time of the Merger, any stockholder who has
theretofore complied with the applicable provisions of Section 262 will be
entitled, upon written request, to receive from the surviving corporation a
statement setting forth the aggregate number of shares of common stock not
voting in favor of the Merger and with respect to which demands for appraisal
were received by the Company and the number of holders of such shares. Such
statement must be mailed within 10 days after the written request therefor
has
been received by the surviving corporation.
After
notice to dissenting stockholders, the Chancery Court will conduct a hearing
upon the petition, and determine those stockholders who have complied with
Section 262 and who have become entitled to the appraisal rights provided
thereby. The Chancery Court may require the stockholders who have demanded
payment for their shares to submit their stock certificates to the Register
in
Chancery for notation thereon of the pendency of the appraisal proceedings;
and
if any stockholder fails to comply with that direction, the Chancery Court
may
dismiss the proceedings as to that stockholder.
After
determination of the stockholders entitled to appraisal of their shares of
Company common stock, the Chancery Court will appraise the shares, determining
their fair value exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
When the value is determined, the Chancery Court will direct the payment of
such
value, with interest thereon accrued during the pendency of the proceeding,
if
the Chancery Court so determines, to the stockholders entitled to receive the
same, upon surrender by such holders of the certificates representing those
shares.
In
determining fair value and, if applicable, a fair rate of interest, the Chancery
Court is required to take into account all relevant factors. In Weinberger
v. UOP, Inc.,
the
Supreme Court of Delaware discussed the factors that could be considered in
determining fair value in an appraisal proceeding, stating that “proof of value
by any techniques or methods that are generally considered acceptable in the
financial community and otherwise admissible in court” should be considered, and
that “fair price obviously requires consideration of all relevant factors
involving
the
value
of a company.” The Delaware Supreme Court stated that, in making this
determination of fair value, the court must consider market value, asset value,
dividends, earnings prospects, the nature of the enterprise and any other facts
that could be ascertained as of the date of the merger that throw any light
on
future prospects of the merged corporation. Section 262 provides that fair
value
is to be “exclusive of any element of value arising from the accomplishment or
expectation of the merger.” In Cede
& Co. v. Technicolor, Inc.,
the
Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that]
does not encompass known elements of value,” but which rather applies only to
the speculative elements of value arising from such accomplishment or
expectation. In Weinberger,
the
Supreme Court of Delaware also stated that “elements of future value, including
the nature of the enterprise, which are known or susceptible of proof as of
the
date of the merger and not the product of speculation, may be considered.” In
determining fair value for appraisal purposes under Section 262 of the DGCL,
the
Chancery Court might, or might not, employ some or all of the valuation analyses
utilized by the Company’s financial advisors as described in summary fashion
under the heading “Opinion of the Company’s Financial Advisor.” You should be
aware that the fair value of your shares as determined under Section 262 could
be more, the same, or less than the value that you are entitled to receive
under
the terms of the Merger Agreement.
Costs
of
the appraisal proceeding may be imposed upon the surviving corporation and
the
stockholders participating in the appraisal proceeding by the Chancery Court
as
the Chancery Court deems equitable in the circumstances. Upon the application
of
a stockholder, the Chancery Court may order all or a portion of the expenses
incurred by any stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys’ fees and the fees and
expenses of experts, to be charged pro rata against the value of all shares
entitled to appraisal. Any stockholder who had demanded appraisal rights will
not, after the effective time, be entitled to vote shares subject to that demand
for any purpose or to receive payments of dividends or any other distribution
with respect to those shares, other than with respect to payment as of a record
date prior to the effective time; however, if no petition for appraisal is
filed
within 120 days after the effective time of the Merger, or if the stockholder
delivers a written withdrawal of such stockholder’s demand for appraisal and an
acceptance of the terms of the Merger within 60 days after the effective time
of
the Merger, then the right of that stockholder to appraisal will cease and
that
stockholder will be entitled to receive the cash payment for shares of his,
her
or its Company common stock pursuant to the Merger Agreement. Any withdrawal
of
a demand for appraisal made more than 60 days after the effective time of the
Merger may only be made with the written approval of the surviving corporation.
Once a petition for appraisal has been filed, the appraisal proceeding may
not
be dismissed as to any stockholder without the approval of the Chancery Court
and such approval may be conditioned upon such terms as the Chancery Court
deems
just.
Failure
to comply with all of the procedures set forth in Section 262 will result in
the
loss of a stockholder’s statutory appraisal rights. In view of the complexity of
Section 262, the Company’s stockholders who may wish to dissent from the Merger
and pursue appraisal rights should consult their legal advisors.
If
the
Merger is completed, we will not hold a 2006 annual meeting of stockholders.
If
the Merger is not completed, you will continue to be entitled to attend and
participate in our stockholder meetings and we will hold a 2006 annual meeting
of stockholders, in which case stockholder proposals will be eligible for
consideration for inclusion in the proxy statement and form of proxy for our
2006 annual meeting of stockholders in accordance with Rule 14a-8 under the
Securities Exchange Act of 1934, as amended.
Proposals
of stockholders to be presented at the 2006 Annual Meeting of Stockholders
must
be received by the Company at its principal executive offices, 1830 Route 130,
Burlington, New Jersey 08016, no later than May 29, 2006 in order to be included
in the proxy statement and form of proxy relating to that meeting. Any proposal
by a stockholder to be presented at the 2006 Annual Meeting of Stockholders
and
NOT to be included in the Company’s proxy statement must be received at the
Company’s executive offices, 1830 Route 130, Burlington, New Jersey 08016, no
later than the close of business August 10, 2006. Proposals shall be sent to
the
attention of the Secretary.
Management
is not aware of any matters to be presented for action at the meeting other
than
those set forth in this proxy statement. However, should any other business
properly come before the meeting, or any adjournment thereof, the enclosed
proxy
confers upon the persons entitled to vote the shares represented by such proxy,
discretionary authority to vote the same in respect of any such other business
in accordance with their best judgment in the interest of the
Company.
In
accordance with Rule 14a-3(e)(1) under the Exchange Act, one proxy statement
will be delivered to two or more stockholders who share an address, unless
the
Company has received contrary instructions from one or more of the stockholders.
The Company will deliver promptly upon written or oral request a separate copy
of the proxy statement to a stockholder at a shared address to which a single
copy of the proxy statement was delivered. Requests for additional copies of
the
proxy statement, and requests that in the future separate proxy statements
be
sent to stockholders who share an address, should be directed to the Secretary
of the Company at Burlington Coat Factory Warehouse Corporation, 1830 Route
130,
Burlington, New Jersey 08016, telephone: (609) 387-7800. In addition,
stockholders who share a single address but receive multiple copies of the
proxy
statement may request that in the future they receive a single copy by
contacting the Company at the address and phone number set forth in the prior
sentence.
The
Company files annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any reports, proxy statements
or
other information that we file with the SEC at the following location of the
SEC:
Public
Reference Room
100
F
Street, N.E.
Washington,
D.C. 20549
Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at
prescribed rates. The Company’s public filings are also available to the public
from document retrieval services and the Internet website maintained by the
SEC
at www.sec.gov.
Reports,
proxy statements or other information concerning us may also be inspected at
the
offices of the New York Stock Exchange at:
20
Broad
Street
New
York,
NY 10005
Any
person, including any beneficial owner, to whom this proxy statement is
delivered may request copies of reports, proxy statements or other information
concerning us, without charge, by written or telephonic request directed to
us
to the Secretary of the Company at Burlington Coat Factory Warehouse
Corporation, 1830 Route 130, Burlington, New Jersey 08016, telephone: (609)
387-7800. If you would like to request documents, please do so by [______],
2006, in order to receive them before the special meeting.
The
SEC
allows us to “incorporate by reference” into this proxy statement documents we
file with the SEC. This means that we can disclose important information to
you
by referring you to those documents. The information incorporated by reference
is considered to be a part of this proxy statement, and later information that
we file with the SEC will update and supersede that information. We incorporate
by reference the documents listed below and any documents filed by us pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this
proxy statement and prior to the date of the special meeting:
|
Company
Filings:
|
|
Periods:
|
|
Annual
Report on Form 10-K
|
|
Year ended May
28, 2005
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Proxy
Statement
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2005
Annual Meeting of Stockholders (held on November 8,
2005)
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Quarterly
Reports on Form 10-Q
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Quarter
ended August 27, 2005 and Quarter ended November 26,
2005
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Current
Reports on Form 8-K
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Filed
June 17, 2005, June 27, 2005, August 23, 2005, September 26, 2005,
October
6, 2005, October 24, 2005, November 14, 2005, and January 20, 2006
|
For
the convenience of stockholders, included in the mailing of this proxy statement
are copies of the Company’s Annual Report to Stockholders for the fiscal year
ended May 28, 2005 and the Company’s Quarterly Report on Form 10-Q for the
quarter ended November 26, 2005.
No
persons have been authorized to give any information or to make any
representations other than those contained in this proxy statement and, if
given
or made, such information or representations must not be relied upon as having
been authorized by us or any other person. This proxy statement is dated
[_______], 2006. You should not assume that the information contained in this
proxy statement is accurate as of any date other than that date, and the mailing
of this proxy statement to stockholders shall not create any implication to
the
contrary.
AGREEMENT
AND PLAN OF MERGER
AGREEMENT
AND PLAN OF MERGER
by
and
among
BURLINGTON
COAT FACTORY WAREHOUSE CORPORATION
BCFWC
ACQUISITION, INC.
and
BCFWC
MERGERSUB, INC.
Dated
as
of January 18, 2006
Page
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Section
1.1.
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1
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Section
2.1.
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9
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Section
2.2.
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9
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Section
2.3.
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9
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Section
2.4.
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9
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Section
2.5.
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9
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Section
2.6.
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10
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Section
3.1.
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11
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(a)
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12
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(b)
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12
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(c)
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12
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Section
3.2.
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12
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(a)
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12
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(b)
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13
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(c)
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13
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(d)
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13
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(e)
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14
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(f)
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14
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Section
3.3.
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14
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Section
3.4.
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15
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TABLE
OF CONTENTS
(Continued)
Page
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Section
4.1.
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15
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Section
4.2.
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16
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Section
4.3.
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16
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Section
4.4.
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17
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Section
4.5.
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17
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Section
4.6.
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19
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Section
4.7.
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21
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Section
4.8.
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22
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Section
4.9.
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22
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Section
4.10.
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23
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Section
4.11.
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23
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Section
4.12.
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24
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Section
4.13.
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25
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Section
4.14.
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26
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Section
4.15.
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27
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Section
4.16.
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28
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Section
4.17.
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28
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Section
4.18.
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28
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Section
4.19.
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28
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Section
4.20.
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28
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Section
4.21.
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29
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TABLE
OF CONTENTS
(Continued)
Page
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Section
5.1.
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29
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Section
5.2.
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30
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Section
5.3.
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30
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Section
5.4.
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30
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Section
5.5.
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31
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Section
5.6.
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31
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Section
5.7.
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31
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Section
5.8.
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31
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Section
5.9.
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31
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Section
6.1.
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32
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Section
6.2.
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35
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Section
6.3.
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36
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Section
6.4.
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37
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Section
6.5.
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37
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Section
6.6.
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39
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Section
6.7.
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39
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Section
6.8.
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42
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Section
6.9.
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42
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TABLE
OF CONTENTS
(Continued)
Page
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Section
7.1.
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44
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(a)
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45
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(b)
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45
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(c)
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45
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Section
7.2.
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45
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(a)
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45
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(b)
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45
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(c)
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45
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(d)
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45
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(e)
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46
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(f)
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46
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(g)
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46
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Section
7.3.
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46
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(a)
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46
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(b)
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46
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(c)
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46
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(d)
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47
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Section
8.1.
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46
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Section
8.2.
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48
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Section
8.3.
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48
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Section
9.1.
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50
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TABLE
OF CONTENTS
(Continued)
Page
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Section
9.2.
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50
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Section
9.3.
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50
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Section
9.4.
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50
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Section
9.5.
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51
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Section
9.6.
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51
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Section
9.7.
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52
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Section
9.8.
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52
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Section
9.9.
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52
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Section
9.10.
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52
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Section
9.11.
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52
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Section
9.12.
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53
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Section
9.13.
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53
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Section
9.14.
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53
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GLOSSARY
OF DEFINED TERMS
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Page |
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Affiliate
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Section
1.1
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Agreement
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Preamble
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Alternative
Proposal
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Section
1.1
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Approved
Communications
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Section
6.3
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Bain
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Section
5.5
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Benefit
Plan.
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Section
4.12(b)
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Benefit
Plans
|
Section
4.12(b)
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Business
Day
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Section
1.1
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Certificate
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Section
3.1(c)
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Certificate
of Merger
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Section
1.1
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Closing
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Section
2.2
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Closing
Date
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Section
2.2
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COBRA
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Section
1.1
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Code
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Section
1.1
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Company
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Preamble
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Company
By-Laws
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Section
4.1(b)
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Company
Certificate
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Section
4.1(b)
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Company
Disclosure Schedule
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Article
IV
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Company
Intellectual Property
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Section
4.14(b)
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Company
Material Adverse Effect
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Section
1.1
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Company
Option
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Section
3.4
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Company
Option Plans
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Section
1.1
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Company
Preferred Stock
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Section
4.2(a)
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Company
Stockholder Approval
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Section
4.3(a)
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Company
Subsidiary
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Section
1.1
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Company’s
Knowledge
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Section
1.1
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Company-Owned
Intellectual Property
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Section
4.14(a)
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Confidentiality
Agreement
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Section
1.1
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Contract
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Section
1.1
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Debt
Commitments
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Section
5.5
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Definitive
Financing Agreements
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Section
6.9(a)
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DGCL
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Section
1.1
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Dissenting
Shares
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Section
3.3
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Effective
Time
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Section
2.3
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Environmental
Laws
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Section
1.1
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Environmental
Licenses
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Section
1.1
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Environmental
Report
|
Section
1.1
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Equity
Commitment
|
Section
5.5
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ERISA
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Section
1.1
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ERISA
Affiliate
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Section
1.1
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Exchange
Act
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Section
1.1
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Exchange
Act Rules
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Section
1.1
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Financing
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Section
5.5
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Financing
Commitments
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Section
5.5
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Financing
Cooperation Expense Cap
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Section
6.9(b)
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Fiscal
Year 2005
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Section
1.1
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Fiscal
Year 2006
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Section
1.1
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GAAP
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Section
1.1
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Governmental
Entity
|
Section
1.1
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GLOSSARY
OF DEFINED TERMS
(Continued)
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Page |
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HSR
Act
|
Section
1.1
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Indemnified
Liabilities
|
Section
6.7(a)
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Indemnified
Parties
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Section
6.7(a)
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Indemnified
Party
|
Section
6.7(a)
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Intellectual
Property
|
Section
1.1
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Law
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Section
1.1
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Leased
Real Property
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Section
4.9(b)
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Liabilities
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Section
1.1
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Liens
|
Section
4.2(b)
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Material
Contract
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Section
1.1
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Merger
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Recitals
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Merger
Consideration
|
Section
3.1(c)
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Merger
Sub
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Preamble
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Multiemployer
Plan.
|
Section
1.1
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Other
Company Approvals
|
Section
4.4(a)
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Owned
Real Property
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Section
4.9(a)
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Parent
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Preamble
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Parent
Approvals
|
Section
5.3(a)
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Parent
Material Adverse Effect
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Section
5.1
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Parent
Termination Fee
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Section
8.3(d)
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Paying
Agent
|
Section
3.2(a)
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Permitted
Liens
|
Section
1.1
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Person
|
Section
1.1
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Proceeding
|
Section
6.7(a)
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Proxy
Statement
|
Section
2.6(a)(i)
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|
Real
Property Lease
|
Section
1.1
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|
Representatives
|
Section
6.2(a)
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Returns
|
Section
4.10
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|
SEC
|
Section
1.1
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|
SEC
Documents
|
Section
4.5(a)
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|
SEC
Financial Statements
|
Section
4.5(b)
|
|
Secretary
of State
|
Section
1.1
|
|
Securities
Act
|
Section
1.1
|
|
Shares
|
Section
4.2(a)
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Solvent
|
Section
5.9
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|
Special
Meeting
|
Section
2.6(a)(iii)
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|
Subsidiary
|
Section
1.1
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|
Superior
Proposal
|
Section
1.1
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|
Superior
Proposal Agreement
|
Section
6.2(c)
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|
Surviving
Corporation
|
Section
2.1
|
|
Tax
|
Section
1.1
|
|
Termination
Fee
|
Section
8.3(a)
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|
Transactions
|
Recitals
|
|
Voting
Agreement
|
Recitals
|
AGREEMENT
AND PLAN OF MERGER
AGREEMENT
AND PLAN OF MERGER (this “Agreement”),
dated
as of January 18, 2006, by and among Burlington Coat Factory Warehouse
Corporation, a Delaware corporation (the “Company”),
BCFWC
Acquisition, Inc., a Delaware corporation (“Parent”),
and
BCFWC Mergersub, Inc., a Delaware corporation and a wholly owned subsidiary
of
Parent (“Merger
Sub”).
RECITALS
WHEREAS,
the respective Boards of Directors of the Company, Parent and Merger Sub have
determined it to be advisable and in the best interests of their respective
stockholders for Parent to acquire the Company by means of the merger of Merger
Sub with and into the Company (the “Merger”),
on
the terms and subject to the conditions set forth in this
Agreement;
WHEREAS,
the Board of Directors of each of the Company, Parent and Merger Sub has
approved and declared advisable this Agreement, including all the terms and
conditions set forth herein, and all the transactions contemplated hereby,
including the Merger (collectively, the “Transactions”);
WHEREAS,
concurrently with the execution and delivery of this Agreement and as a
condition to Parent and Merger Sub’s willingness to enter into this Agreement,
Parent and certain stockholders of the Company have entered into a voting
agreement (the “Voting
Agreement”);
and
WHEREAS,
each of the Company, Parent and Merger Sub desires to make certain
representations, warranties, covenants and agreements in connection with the
Transactions and also to prescribe various conditions to the consummation
thereof.
NOW,
THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth herein, the parties hereto,
intending to be legally bound, agree as follows:
DEFINITIONS
Section
1.1. Certain
Definitions.
As used
in this Agreement, the following terms have the following meanings:
“Affiliate”
has
the
meaning assigned to that term in Rule 12b-2 of the Exchange Act
Rules.
“Agreement”
has
the
meaning assigned to that term in the Preamble.
“Alternative
Proposal”
means
any offer, proposal or indication of interest (other than the Transactions),
as
the case may be, by any Person (or group of Persons) that relates to (i) a
transaction or series of transactions (including any merger, consolidation,
recapitalization,
reorganization,
liquidation or other direct or indirect business combination) involving the
Company or the issuance or acquisition of Shares or other equity securities
of
the Company representing fifteen percent (15%) (in number or voting power)
or
more of the outstanding capital stock of the Company, (ii) any tender offer
(including a self-tender offer) or exchange offer that, if consummated, would
result in any Person, together with all Affiliates thereof, becoming the
beneficial owner of Shares or other equity securities of the Company
representing fifteen percent (15%) (in number or voting power) or more of the
outstanding capital stock of the Company, or (iii) the acquisition, license,
purchase or other disposition of fifteen percent (15%) or more of the
consolidated assets (including the capital stock or assets of any Subsidiary)
of
the Company or of a business that constitutes fifteen percent (15%) or more
of
the consolidated revenues or consolidated net income of the Company.
“Benefit
Plan”
and
“Benefit
Plans”
have
the respective meanings assigned to those terms in Section 4.12(b).
“Business
Day”
means
a
day other than Saturday or Sunday or any other day on which banks in New York
City are required to or may be closed.
“Certificate”
has
the
meaning assigned to that term in Section 3.1(c).
“Certificate
of Merger”
means
a
certificate of merger to be filed with the Secretary of State.
“Closing”
has
the
meaning assigned to that term in Section 2.2.
“Closing
Date”
has
the
meaning assigned to that term in Section 2.2.
“COBRA”
means
Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the Code, and any
similar state Law.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Company”
has
the
meaning assigned to that term in the Preamble.
“Company
By-Laws”
has
the
meaning assigned to that term in Section 4.1(b).
“Company
Certificate”
has
the
meaning assigned to that term in Section 4.1(b).
“Company
Disclosure Schedule”
has
the
meaning assigned to that term in Section 4.
“Company
Intellectual Property”
has
the
meaning assigned to that term in Section 4.14(b).
“Company
Material Adverse Effect”
means
a
material adverse effect on (i) the assets and Liabilities (taken as a whole),
business, results of operations or financial condition, in each case, of the
Company and the Company Subsidiaries, taken as a whole, or (ii) the Company’s
ability to perform its obligations under this Agreement; provided,
however,
that
any adverse effect arising out of, resulting from or attributable to any one
or
more of the following matters shall not be
taken
into account in determining whether there has been a Company Material Adverse
Effect and shall not be deemed to constitute a Company Material Adverse Effect:
(1) general changes in economic, regulatory or political conditions or financial
or securities markets, including the outbreak or escalation of hostilities,
whether or not pursuant to the declaration of a national emergency or war,
or
the occurrence of any military or terrorist attack, (2) general changes in
conditions affecting any of the industries or markets in which the Company
or
any of the Company Subsidiaries operates, (3) any change, occurrence,
development, event, series of events or circumstances arising out of, resulting
from or attributable to the execution and delivery of this Agreement or the
consummation of any of the Transactions, or the public announcement of this
Agreement, (4) any change in the market price or trading volume of the
Company’s securities, (5) any change in Law, GAAP or interpretations thereof
that apply to the Company or any of the Company Subsidiaries, including the
proposal or adoption of any new Law or any change in the interpretation or
enforcement of any existing Law, (6) any fluctuation in sales or earnings that
is consistent with the Company’s past operating history, (7) the failure of the
Company to meet analysts’ expectations, or (8) any failures of the Company to
take any action referred to in Section 6.1 due to Parent’s withholding of
consent following written notice from the Company that the withholding of such
consent would reasonably be expected to have, individually in the aggregate,
a
Company Material Adverse Effect (determined in accordance in accordance with
the
balance of this definition), unless,
in the
case of the foregoing clauses (1) and (2), such changes referred to therein
would reasonably be expected to have a materially disproportionate impact on
the
matters set forth in clause (i) above relative to other industry
participants.
“Company
Option”
has
the
meaning assigned to that term in Section 3.4.
“Company
Option Plans”
means
the Company’s 1993 Stock Incentive Plan, 1998 Stock Incentive Plan, 2002 Stock
Incentive Plan and 2005 Stock Incentive Plan.
“Company-Owned
Intellectual Property”
has
the
meaning assigned to that term in Section 4.14(a).
“Company
Preferred Stock”
has
the
meaning assigned to that term in Section 4.2(a).
“Company
Stockholder Approval”
has
the
meaning assigned to that term in Section 4.3(a).
“Company
Subsidiary”
means
any Subsidiary of the Company.
“Company’s
Knowledge”
means
the actual knowledge of (i) the Company’s President, Executive Vice Presidents,
General Counsel, Chief Accounting Officer, and Vice President - Real Estate,
in
each case after reasonable inquiry of such officer’s direct reports, and (ii)
each other member of the Board of Directors of the Company without
investigation.
“Confidentiality
Agreement”
means
the confidentiality agreement dated as of September 15, 2005 between the Company
and Bain Capital Partners, LLC.
“Contract”
means
any contract, indenture, note, bond, lease, commitment or other agreement,
whether written or oral.
“Definitive
Financing Agreements”
has
the
meaning assigned to that term in Section 6.9(a).
“DGCL”
means
the Delaware General Corporation Law, as amended.
“Dissenting
Shares”
has
the
meaning assigned to that term in Section 3.3.
“Effective
Time”
has
the
meaning assigned to that term in Section 2.3.
“Environmental
Laws” means
all
applicable Laws and all common law as in effect on or prior to the date of
this
Agreement relating
to workplace health and safety, the control of any pollutant or hazardous
material, substance or waste, the protection of the environment or the effect
of
the environment or environmental hazards on human health, including the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
§ 9601 et. seq.), the Hazardous Materials Transportation Act (49 U.S.C. App.
§
1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et
seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act
(42 U.S.C. § 7401 et seq.), the Toxic Substance Control Act (15 U.S.C. § 2601 et
seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136
et seq.), and the Occupational Safety and Health Act (29 U.S.C. § 651 et
seq.)
“Environmental
Licenses”
means
all licenses
and permits required under
applicable Environmental Laws
for the
operation of the businesses of the Company and the Company Subsidiaries as
currently conducted.
“Environmental
Report “ means
any
report, study, assessment, audit or other similar document that addresses any
issue of noncompliance in any material respect with, or material Liability
or
contamination under, any Environmental Law.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
“ERISA
Affiliate”
means
any trade or business at any relevant time considered a single employer with
the
Company or any Company Subsidiary under Section 414 of the Code.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Exchange
Act Rules”
means
the rules promulgated under the Exchange Act.
“Financing”
has
the
meaning assigned to that term in Section 5.5.
“Financing
Commitments”
has
the
meaning assigned to that term in Section 5.5.
“Fiscal
Year 2005”
means
the Company’s fiscal year beginning on May 30, 2004 and ending on May 28,
2005.
“Fiscal
Year 2006”
means
the Company’s fiscal year beginning on May 29, 2005 and ending on June 3, 2006.
“GAAP”
means
United States generally accepted accounting principles.
“Governmental
Entity”
means
any federal, state, provincial, supra-national, foreign or local government,
court, tribunal, judicial or arbitral body, administrative or regulatory agency
or commission or any other governmental authority or instrumentality (including
any political or other subdivision, department or branch of any of the
foregoing).
“HSR
Act”
means
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
“Indemnified
Liabilities”
has
the
meaning assigned to that term in Section 6.7(a).
“Indemnified
Parties”
has
the
meaning assigned to that term in Section 6.7(a).
“Indemnified
Party”
has
the
meaning assigned to that term in Section 6.7(a).
“Intellectual
Property”
means
any and all of the following in any jurisdiction throughout the world: trade
secrets, know-how, inventions (whether or not patentable or reduced to
practice), improvements, patents and patent applications, together with all
reissuances, continuations, continuations-in-part, revisions, divisions,
extensions and reexaminations thereof; all registered trademarks, service marks,
trade dress, logos, designs, slogans, trade names, corporate names and other
indicia of origin, together with all translations, adaptations, derivations,
and
combinations thereof and all goodwill associated with any of the foregoing,
and
applications for registration, registrations, and renewals in connection
therewith; copyrightable works, all registered copyrights and applications
for
registration thereof, and renewals in connection therewith; all Internet domain
names; all computer software (including source code, executable code, data,
databases and related documentation and programs) other than computer software
programs that are generally available in “off the shelf” commercial packages or
by Internet distribution having a replacement cost and/or annual license fee
of
less than $25,000); confidential business information (including all ideas,
marketing, technical and other data, patterns, designs, drawings,
specifications, research and development, formulas, compositions, processes,
methods and techniques, customer and supplier lists, pricing and cost
information, business and marketing plans, studies and proposals); all copies
and tangible embodiments of any of the foregoing (in whatever form or medium);
and together with all income, royalties, damages and payments due or payable
at
the Closing or thereafter (including damages and payments for infringements,
misappropriations or other conflicts with any intellectual property), and the
right to sue and recover for infringements, misappropriations or other conflict
with any Intellectual Property.
“Law”
means
any law, statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction of any Governmental Entity.
“Leased
Real Property”
has
the
meaning assigned to that term in Section 4.9(b).
“Liabilities”
means
any indebtedness and any other liabilities and obligations whether accrued
or
fixed, absolute or contingent, known or unknown.
“Liens”
has
the
meaning assigned to that term in Section 4.2(b).
“Material
Contract”
means
each (i) Contract (including all amendments thereto) that has been filed as
a
“material contract” by the Company with the SEC as an exhibit to the SEC
Documents as of the date of this Agreement (other than Benefit Plans), (ii)
Contract under which the Company or any of the Company Subsidiaries expended
in
excess of $1,000,000 during Fiscal Year 2005 or expects to expend in excess
of
$1,000,000 during Fiscal Year 2006 (other than Real Property Leases and purchase
orders for the purchase of inventory in the ordinary course of business),
including leases of personal property and Contracts for the construction or
modification of any building structure or other capital expenditure or
acquisition of assets (by way of merger, consolidation, purchase or otherwise),
(iii) Contract containing any non-competition covenant binding upon the Company
or any Company Subsidiary (other than Real Property Leases), (iv) Real Property
Lease under which the Company or any of the Company Subsidiaries expended in
excess of $750,000 during Fiscal Year 2005 or expects to expend in excess of
$750,000 during Fiscal Year 2006, (v) standby letter of credit obtained by
the
Company or any of the Company Subsidiaries in an amount exceeding $500,000
individually or $2,000,000 in the aggregate for all such items, (vi) loan
or credit agreement, indenture, note, debenture, mortgage, pledge, security
agreement, or guarantee entered into by the Company or any of the Company
Subsidiaries in an amount exceeding $1,000,000 individually or $5,000,000 in
the
aggregate for all such items (other than items referred to in the preceding
clauses of this definition, intercompany items, guarantees of the Company
Subsidiaries’ leases, deposits in the ordinary course of business and any item
constituting a portion of the restricted cash and cash equivalents as reflected
in the SEC Financial Statements or the notes thereto) and (vii) written
Contract that contains a put, call, right of first refusal or similar right
pursuant to which the Company or any Company Subsidiary would be required to
purchase or sell, as applicable, any securities of any Person. For the avoidance
of doubt, only those Contracts referred to in the preceding sentence that remain
in effect, or pursuant to which the Company or any of its Subsidiaries has
any
outstanding obligations, as of the date of this Agreement shall be taken into
account in determining the Company’s Material Contracts.
“Merger”
has
the
meaning assigned to that term in the Recitals.
“Merger
Consideration”
has
the
meaning assigned to that term in Section 3.1(c).
“Merger
Sub”
has
the
meaning assigned to that term in the Preamble.
“Multiemployer
Plan”
means
any “multiemployer plan” within the meaning of Section 3(37) of ERISA.
“Non-Competition
Agreement”
shall
mean a non-competition agreement substantially in the form of Exhibit
A
attached
hereto.
“Other
Company Approvals”
has
the
meaning assigned to that term in Section 4.4(a).
“Owned
Real Property”
has
the
meaning assigned to that term in Section 4.9(a).
“Parent”
has
the
meaning assigned to that term in the Preamble.
“Parent
Approvals”
has
the
meaning assigned to that term in Section 5.3(a).
“Parent
Material Adverse Effect”
has
the
meaning assigned to that term in Section 5.1.
“Paying
Agent”
has
the
meaning assigned to that term in Section 3.2(a).
“Permitted
Liens”
means
(i) Liens for Taxes or other governmental charges not yet delinquent, or the
amount or validity of which is being contested in good faith and for which
the
Company has established adequate reserves in its financial statements in
accordance with GAAP, (ii) mechanics’, carriers’, workers’, repairers’, and
similar Liens arising or incurred in the ordinary course of business,
(iii)
pledges or deposits to secure obligations under workers’ compensation laws or
similar legislation or to secure public or statutory obligations, (iv)
purchase money Liens arising in the ordinary course of business, (v)
zoning, entitlement and other land use and environmental regulations by
Governmental Entities, (vi) with respect to Owned Real Property, any matters
disclosed in title reports delivered or made available to Parent in the
electronic data room prepared by the Company prior to the date of this Agreement
or otherwise delivered by the Company to Parent and all Liens of record,
(vii)
with respect to leasehold interests, Liens incurred, created, assumed or
permitted to exist and arising by, through or under a landlord or owner of
the
leased property, with or without the consent of the lessee, (viii) with respect
to securities, Liens created as a result of federal or state securities laws,
(ix) Liens in favor of the Company or any Company Subsidiary securing
intercompany borrowing by any Company Subsidiary, and (x) Liens set forth on
Section 1.1 of the Company Disclosure Schedule.
“Person”
shall
be construed as broadly as possible and includes an individual or natural
person, a partnership, a corporation, an association, a joint stock company,
a
limited liability company, a trust, a joint venture, an unincorporated
organization and a Governmental Entity.
“Proxy
Statement”
has
the
meaning assigned to that term in Section 2.6(a)(i).
“Real
Property Lease”
means
any agreement (including all amendments and guaranties thereto), written or
oral, under which the Company or any Company Subsidiary is the landlord,
sublandlord, tenant, subtenant or occupant.
“Representatives”
has
the
meaning assigned to that term in Section 6.2(a).
“Returns”
has
the
meaning assigned to that term in Section 4.10.
“SEC”
means
the U.S. Securities and Exchange Commission.
“SEC
Documents”
has
the
meaning assigned to that term in Section 4.5(a).
“SEC
Financial Statements”
has
the
meaning assigned to that term in Section 4.5(b).
“Secretary
of State”
means
the Secretary of State of the State of Delaware.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Shares”
has
the
meaning assigned to that term in Section 4.2(a).
“Solvent”
has
the
meaning assigned to that term in Section 5.9.
“Special
Meeting”
has
the
meaning assigned to that term in Section 2.6(a)(iii).
“Subsidiary”,
when
used with respect to any Person, means any corporation, limited liability
company, partnership or other organization or entity, whether incorporated
or
unincorporated, of which at least a majority of the securities or other
ownership interests having by their terms voting power to elect a majority
of
the board of directors or others performing similar functions with respect
to
such corporation or other organization, is beneficially owned or controlled
directly or indirectly by such Person or by one or more of its Subsidiaries
(as
defined in the preceding clause), or by such Person and one or more of its
Subsidiaries.
“Superior
Proposal”
means
any bona fide written Alternative Proposal (provided,
that
for purposes of this definition, the applicable percentages in clauses (i),
(ii)
and (iii) of the definition of Alternative Proposal shall be fifty percent
(50%)
rather than fifteen percent (15%)), which (on its most recently amended or
modified terms, if amended or modified) the Board of Directors of the Company
determines in good faith (after consultation with outside counsel and a
financial advisor of nationally recognized reputation) (i) is reasonably capable
of being consummated and (ii) if consummated, would result in a transaction
that
is more favorable to the Company’s stockholders (other than Parent, Merger Sub
and their respective Affiliates), from a financial point of view, than the
Merger, taking into account in each case, among other things, the terms of
such
Alternative Proposal and such legal, financial, regulatory, timing and other
aspects of such Alternative Proposal, including the Person making such
Alternative Proposal, which the Board of Directors deems relevant.
“Superior
Proposal Agreement”
has
the
meaning assigned to that term in Section 6.2(c).
“Surviving
Corporation”
has
the
meaning assigned to that term in Section 2.1.
“Tax”
means
(i) any United States federal, state or local or any non-United States net
or
gross income, gross receipts, net proceeds, corporation, capital gains, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Section 59A of the Code), customs,
capital stock, franchise, profits, withholding, national insurance, social
security (or similar), unemployment, disability, real property, personal
property, sales, inheritance, use, transfer, registration, value added,
alternative or add-on minimum, estimated or other taxes, assessments, duties,
fees, levies or other governmental charges of any kind whatever, whether
disputed or not, including any interest, penalty or additional amount related
thereto; (ii) any Liability for or in respect of the payment of any amount
of a
type described in clause (i) of this definition as a result of being a member
of
an affiliated, combined, consolidated, unitary or other group for Tax purposes;
or (iii) any Liability for or in respect of the payment of any amount described
in clauses (i) or (ii) of this definition as a transferee or successor, by
Contract or otherwise.
“Termination
Fee”
has
the
meaning assigned to that term in Section 8.3.
“Transactions”
has
the
meaning assigned to that term in the Recitals.
“Voting
Agreement”
has
the
meaning assigned to that term in the Recitals.
THE
MERGER
Section
2.1. The
Merger.
Subject
to the terms and conditions of this Agreement, at the Effective Time, (i) Merger
Sub shall be merged with and into the Company in accordance with the provisions
of Section 251 of the DGCL, and the separate existence of Merger Sub shall
cease and (ii) the Company shall be the surviving corporation in the Merger
(the
“Surviving
Corporation”)
and
shall continue its corporate existence under the DGCL. The Merger shall have
the
effects set forth in this Agreement and the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all property, rights, powers, privileges and franchises of
Merger Sub shall vest in the Company as the Surviving Corporation, and all
debts, Liabilities and duties of the Company shall become the debts, Liabilities
and duties of the Surviving Corporation. The Surviving Corporation may, at
any
time after the Effective Time, take any action (including executing and
delivering any document) in the name and on behalf of either the Company or
Merger Sub in order to carry out and effectuate the transactions contemplated
by
this Agreement. The Surviving Corporation shall thereafter be responsible and
liable for all the Liabilities and obligations of the Company and Merger
Sub.
Section
2.2. Closing.
The
closing of the Merger (the “Closing”)
shall
take place at the offices of Hughes Hubbard & Reed LLP, One Battery Park
Plaza, New York, New York 10004, at 10:00 a.m., local time, on a date not later
than two (2) Business Days, after satisfaction or waiver of all of the
conditions set forth in Article VII (other than those conditions that by their
nature must be satisfied on the Closing Date), or at such other place, date
and
time as the parties hereto shall agree (such date on which the Closing occurs
being hereinafter referred to as the “Closing
Date”).
Section
2.3. Effective
Time.
Subject
to the terms and conditions of this Agreement, as soon as practicable on the
Closing Date, Merger Sub and the Company shall cause the Merger to be
consummated by filing all necessary documentation, including a Certificate
of
Merger, with the Secretary of State as provided in Section 251 of the DGCL.
The Merger shall become effective at the time that the Certificate of Merger
is
duly filed with the Secretary of State, or such later time as is agreed upon
by
the parties hereto and specified in the Certificate of Merger, such time being
hereinafter referred to as the “Effective
Time.”
Section
2.4. Certificate
of Incorporation and By-Laws.
At the
Effective Time the Company Certificate and Company By-Laws, as in effect
immediately prior to the Effective Time, shall be amended in their entirety
to
read as set forth on Exhibit B and Exhibit C hereto, respectively, and as so
amended shall be the Certificate of Incorporation and By-Laws of the Surviving
Corporation until thereafter amended in compliance with the DGCL.
Section
2.5. Directors
and Officers of the Surviving Corporation.
The
directors of Merger Sub and the officers of the Company immediately prior to
the
Effective Time shall, from and after the Effective Time, be the directors and
officers, respectively, of the Surviving Corporation until their successors
shall have been duly elected or appointed and qualified or until their earlier
death, resignation or removal in accordance with the DGCL and the Surviving
Corporation’s Certificate of Incorporation and By-Laws.
(a) Subject
to the terms and conditions of this Agreement (including the rights of the
Company under Sections 6.2(c) and 8.1(c)), the Company, acting through its
Board
of Directors, shall:
(i) as
promptly as practicable following the date of this Agreement, prepare and file
with the SEC a preliminary proxy statement (such proxy statement, as amended
and
supplemented, the “Proxy
Statement”)
relating to the Merger and this Agreement and use its reasonable best efforts
to
(x) obtain and furnish the information required to be included by applicable
federal securities laws (and the rules and regulations thereunder) in the Proxy
Statement and, after consultation with Parent, Merger Sub and their counsel,
to
respond promptly to any comments received from the SEC with respect to the
preliminary Proxy Statement and promptly cause to be mailed to the Company’s
stockholders a definitive Proxy Statement, a copy of this Agreement or a summary
thereof and a copy of Section 262 of the DGCL (relating to dissenters rights)
and (y) subject to the proviso in Section 2.6(a)(ii), obtain the necessary
approval by its stockholders of this Agreement and the consummation of the
Merger;
(ii) include
in the Proxy Statement the recommendations referred to in Section 4.3(b);
provided,
however,
that
such recommendations may be withdrawn, modified or amended, in each case (x)
in
accordance with the provisions of Section 6.2(c) or (y) other than in connection
with an Alternative Proposal, if the Company’s Board of Directors shall have
determined in good faith (after consultation with the Company’s outside counsel)
that such action is required in order for the Board of Directors to comply
with
its fiduciary duties under applicable Law; provided,
that
notwithstanding any withdrawal, modification or amendment made pursuant to
clause (y), the Company shall still be required to take all actions required
pursuant to Section 2.6(a)(i) (in accordance with Sections 2.6(b) and (c))
and
hold the Special Meeting pursuant to Section 2.6(a)(iii); and
(iii) as
promptly as practicable following the clearance of the Proxy Statement by the
SEC, duly call, give notice of, convene and hold a special meeting of its
stockholders (the “Special
Meeting”)
for
the purpose of considering and taking action upon this Agreement.
(b) The
Company, Parent and Merger Sub shall cooperate with each other in the
preparation of the Proxy Statement. Parent, Merger Sub and their counsel shall
be given a reasonable opportunity to review and comment upon the Proxy Statement
(and shall provide any comments thereon as soon as practicable, but in no event
later than three (3) Business Days after being asked to comment) prior to the
filing thereof with the SEC. The Company shall use its reasonable best efforts
to cause the Proxy Statement to comply as to form in all material respects
with
the applicable requirements of (i) the Exchange Act and (ii) the rules and
regulations of the New York Stock Exchange. The Company shall provide Parent,
Merger Sub and their counsel with copies of any written comments or other
material communications the Company or its counsel receives from time to time
from the SEC or its staff with respect to the Proxy Statement promptly after
receipt of such comments or other material communications, and with copies
of
any written responses to and telephonic notification of any material verbal
responses received
from
the
SEC or its staff by the Company or its counsel with respect to the Proxy
Statement. Each of Parent and the Company agrees to correct any information
provided by it for use in the Proxy Statement which, to the Company’s Knowledge
(in the case of information provided by the Company) or to Parent’s knowledge
(in the case of information provided by Parent), shall have become false or
misleading in any material respect. The Company shall use its reasonable best
efforts, after consultation with Parent, to resolve all SEC comments with
respect to the Proxy Statement as promptly as practicable after receipt thereof.
If at any time prior to the approval and adoption of this Agreement by the
Company’s stockholders there shall occur any event that is required to be set
forth in an amendment or supplement to the Proxy Statement, the Company shall
promptly prepare and file with the SEC such amendment or supplement. The Company
shall not mail the Proxy Statement, or any amendment or supplement thereto,
without reasonable advance consultation with Parent, Merger Sub and their
counsel.
(c) The
Company agrees that the information relating to the Company and the Company
Subsidiaries contained in the Proxy Statement, or in any other document filed
in
connection with this Agreement or the Transactions with any other Governmental
Entity (to the extent such information was provided by the Company for inclusion
therein), at the respective times that the applicable document is filed with
the
SEC or such other Governmental Entity and first published, sent or given to
stockholders of the Company and, in addition, in the case of the Proxy
Statement, at the date it or any amendment or supplement thereto is mailed
to
the Company’s stockholders and at the time of the Special Meeting, will not
contain any untrue statement of a material fact or omit to state a material
fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(d) Parent
shall provide the Company with the information concerning Parent and Merger
Sub
required to be included in the Proxy Statement. Parent agrees that the
information relating to Parent and Merger Sub contained in the Proxy Statement,
or in any other document filed in connection with this Agreement or the
Transactions with any other Governmental Entity (to the extent such information
was provided by Parent or Merger Sub for inclusion therein), at the respective
times that the applicable document is filed with the SEC or such other
Governmental Entity and first published, sent or given to stockholders of the
Company and, in addition, in the case of the Proxy Statement, at the date it
or
any amendment or supplement thereto is mailed to the Company’s stockholders and
at the time of the Special Meeting, will not contain any untrue statement of
a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(e) Parent
and Merger Sub shall, at the Special Meeting, vote, or cause to be voted, all
Shares owned by any of Parent, Merger Sub and any other Affiliate of Parent
in
favor of the approval and adoption of this Agreement and the consummation of
the
Merger.
CONVERSION
OF SECURITIES; TREATMENT OF COMPANY OPTIONS
Section
3.1. Conversion
of Capital Stock.
At the
Effective Time, by virtue of the Merger and without any action on the part
of
the Company, Parent, Merger Sub or any holders of shares of capital stock of
the
Company or Merger Sub:
(a) Common
Stock of Merger Sub.
Each
share of common stock, par value $.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into
and
become one (1) validly issued, fully paid and nonassessable share of common
stock, par value $1.00 per
share, of the Surviving Corporation.
(b) Cancellation
of Certain Shares.
All
Shares that are issued and outstanding immediately prior to the Effective Time
and owned by any of Parent, Merger Sub and any other Subsidiary of Parent,
and
all Shares held in the treasury of the Company or owned by any Company
Subsidiary, shall automatically be canceled and retired and shall cease to
exist
and no consideration shall be delivered in exchange therefor.
(c) Conversion
of Shares.
Each
Share issued and outstanding immediately prior to the Effective Time (other
than
Shares to be canceled and retired in accordance with Section 3.1(b) and any
Dissenting Shares) shall be converted into the right to receive $45.50 in cash,
payable to the holder thereof, without any interest thereon (the “Merger
Consideration”),
less
any required withholding taxes, upon surrender and exchange of a Certificate
(as
defined below). All such Shares when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to
exist, and each holder of a certificate (a “Certificate”)
that
immediately prior to the Effective Time represented any such outstanding Share
(other than any Dissenting Share) shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration therefor upon
the
surrender of such Certificate in accordance with Section 3.2.
(a) Paying
Agent.
Prior
to the Effective Time, Parent shall designate a bank or trust company (the
“Paying
Agent”)
reasonably acceptable to the Company to act as paying agent for the holders
of
Shares in connection with the Merger, pursuant to an agreement providing for
the
matters set forth in this Section 3.2 and such other matters as may be
appropriate and the terms of which shall be reasonably satisfactory to the
Company and Parent. Prior to or concurrent with the Effective Time, Parent
shall
deposit or cause to be deposited with the Paying Agent funds sufficient to
pay
the aggregate Merger Consideration payable upon conversion of Shares pursuant
to
Section 3.1(c). For purposes of determining the aggregate amount to be so
deposited, Parent shall assume that no stockholder of the Company shall perfect
any right to appraisal of his, her or its Shares. Such funds shall not be used
for any purpose other than as set forth in this Article III, and shall be
invested by the Paying Agent as directed by Parent or the Surviving Corporation
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, (iii) commercial paper rated
the highest quality by either Moody’s Investors Service, Inc. or Standard and
Poor’s Ratings Services or (iv) investments in any money market funds investing
solely in any of the foregoing; provided,
however,
that no
such investment or losses therefrom shall affect the Merger Consideration,
and
Parent shall promptly deposit or cause the Surviving Corporation promptly to
deposit additional cash with the Paying Agent for the benefit of the former
stockholders of the Company in the amount of any such losses. Any net profit
resulting from, or interest or income produced by, such investments will be
payable to Merger Sub or Parent, as Parent directs.
(b) Exchange
Procedures.
As
promptly as practicable after the Effective Time, but in no event more than
five
(5) Business Days after the Effective Time, Parent shall cause the Paying Agent
to mail to each holder of record of a Certificate representing Shares which
were
converted pursuant to Section 3.1(c) 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 each Certificate shall pass,
only upon delivery of such Certificate to the Paying Agent and shall be in
such
form and have such other provisions as Parent and the Company may reasonably
specify) and (ii) instructions for use in effecting the surrender of each such
Certificate in exchange for payment of the Merger Consideration. Upon surrender
of a Certificate to the Paying Agent, together with such letter of transmittal,
duly executed, and such other documents as the Paying Agent may reasonably
require, the holder of such Certificate shall be entitled to receive in exchange
therefor the Merger Consideration (subject to subsection (e) of this Section
3.2) for each Share formerly represented by such Certificate, to be mailed
within ten (10) Business Days of receipt of such Certificate and letter of
transmittal by the Paying Agent, 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 of the Merger Consideration
that
the Certificate so surrendered shall be properly endorsed or shall be otherwise
in proper form for transfer and that the Person requesting such payment shall
have paid any Tax required by reason of the payment of the Merger Consideration
to a Person other than the registered holder of the Certificate surrendered
or
shall have established to the satisfaction of the Surviving Corporation that
such Tax either has been paid or is not applicable. Until surrendered as
contemplated by this Section 3.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive the Merger
Consideration in cash as contemplated by this Section 3.2.
(c) Transfer
Books; No Further Ownership Rights in Shares.
After
the Effective Time, the stock transfer books of the Company shall be closed
and
there shall be no further registration of transfers of Shares on the records
of
the Company. After the Effective Time, the holders of Certificates evidencing
ownership of Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares, except as otherwise
provided for herein or by applicable Law. If, 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 III.
(d) Termination
of Fund; No Liability.
At any
time following six (6) months after the Effective Time, the Surviving
Corporation shall be entitled to require the Paying Agent to deliver to it
any
funds (including any interest received with respect thereto) which had been
made
available to the Paying Agent for the payment of the Merger Consideration and
which have not been disbursed to holders of Certificates, and thereafter such
holders shall be entitled to look only to the Surviving Corporation, which
shall
thereafter act as the Paying Agent (subject to abandoned property, escheat
or
other similar Law), as general creditors of the Surviving Corporation with
respect to the payment of any Merger Consideration that may be payable upon
surrender of any Certificate, as determined pursuant to this Agreement, without
any interest thereon. Any portion of the funds made available to the Paying
Agent for the payment of the Merger Consideration remaining unclaimed as of
a
date which is immediately prior to such time as such amounts would otherwise
escheat to or become property of any Governmental Entity shall, to the extent
permitted by applicable Law, become the property of the Surviving
Corporation,
free and clear of any claims or interest of any Person previously entitled
thereto. Notwithstanding the foregoing, neither the Surviving Corporation nor
the Paying Agent shall be liable to any holder of a Certificate for Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
(e) Withholding
Taxes.
The
right of any Person to receive payment or consideration payable upon surrender
of a Certificate pursuant to the Merger will be subject to any applicable
requirements with respect to the withholding of any Tax. To the extent amounts
are so withheld by Parent, the Surviving Corporation or the Paying Agent, (i)
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of Shares or Certificates, as applicable, in
respect of which the deduction and withholding was made and (ii) Parent shall,
or shall cause the Surviving Corporation or the Paying Agent, as the case may
be, to, promptly pay over such withheld amounts to the appropriate Governmental
Entity.
(f) Lost,
Stolen or Destroyed Certificates.
In the
event any Certificate shall have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the Person claiming such Certificate to be
lost,
stolen or destroyed and, if requested by Parent or the Surviving Corporation,
the delivery by such Person of a bond (in such amount as Parent or the Surviving
Corporation may reasonably direct) as indemnity against any claim that may
be
made against the Paying Agent, Parent or the Surviving Corporation on account
of
the alleged loss, theft or destruction of such Certificate, the Paying Agent
will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof as determined in accordance with
this Article III.
Section
3.3. Dissenting
Shares.
Notwithstanding any provision of this Agreement to the contrary, Shares which
are issued and outstanding immediately prior to the Effective Time and which
are
held by holders who shall have complied with the provisions of Section 262
of
the DGCL (the “Dissenting
Shares”)
shall
not be converted into the right to receive the Merger Consideration, and holders
of such Dissenting Shares shall be entitled to receive payment of the fair
value
of such Dissenting Shares in accordance with the provisions of Section 262
of
the DGCL, unless and until the applicable holder fails to comply with the
provisions of Section 262 of the DGCL or effectively withdraws or otherwise
loses such holder’s rights to receive payment of the fair value of such holder’s
Shares under Section 262 of the DGCL. If, after the Effective Time, any such
holder fails to comply with the provisions of Section 262 of the DGCL or
effectively withdraws or loses such right, such Dissenting Shares shall
thereupon be treated as if they had been converted at the Effective Time into
the right to receive the Merger Consideration. Notwithstanding anything to
the
contrary contained in this Section 3.3, if this Agreement is terminated prior
to
the Effective Time, then the right of any holder of Shares to be paid the fair
value of such holder’s Dissenting Shares pursuant to Section 262 of the DGCL
shall cease. The Company shall give Parent notice of any written demands for
appraisal of Shares received by the Company under Section 262 of the DGCL,
and
shall give Parent the opportunity to participate in negotiations and proceedings
with respect to such demands. The Company shall not, except with the prior
written consent of Parent, (i) make any payment with respect to any such demands
for appraisal, (ii) offer to settle or settle any such demands, (iii) waive
any
failure to timely deliver a written demand for appraisal in accordance with
the
DGCL or (iv) agree to do any of the foregoing.
Section
3.4. Termination
and Satisfaction of Company Options.
As of
the Effective Time, the Company’s 2005 Stock Incentive Plan and 2002 Stock
Incentive Plan shall
terminate. Parent and the Company shall take all actions necessary to provide
that, effective as of the Effective Time: (i) each outstanding option to
buy Shares granted under the Company Option Plans (“Company
Option”),
whether or not such Company Options are then exercisable and vested, shall
be
cancelled; and (ii) in consideration of such cancellation, Parent shall, or
shall cause the Surviving Corporation to, pay to each holder of Company Options,
whether or not such Company Options are then exercisable and vested, an amount
in respect thereof equal to the product of (x) the excess, if any, of the
greater of (A) the Merger Consideration or (B) in the case of any Nonqualified
Stock Option,
the
Adjusted Fair Market Value (the terms “Nonqualified Stock Option” and “Adjusted
Fair Market Value” having the meanings assigned thereto in the applicable
Company Option Plan) of each Share subject to such Company Option over the
exercise price of each Company Option held by such holder and (y) the number
of
Shares subject thereto (such payment, if any, to be net of applicable
withholding and excise taxes). The Surviving Corporation shall (and Parent
shall
cause the Surviving Corporation to) pay such amounts under this Section 3.4
as
soon as practicable following (but in no event more than three (3) Business
Days
after) the Effective Time to the holder of each such Company
Option.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except
as
set forth in the disclosure schedule delivered by the Company to Parent and
Merger Sub simultaneously with the execution and delivery of this Agreement
(the
“Company
Disclosure Schedule”),
and
except as disclosed in the Company’s Annual Report on Form 10-K for Fiscal Year
2005 or in the Company’s proxy statement, any Quarterly Report on Form 10-Q or
any Form 8-K, in each case filed with the SEC from August 25, 2005 to the date
of this Agreement, the Company represents and warrants to Parent and Merger
Sub
as follows:
(a) Each
of
the Company and the Company Subsidiaries is, in the case of the Company, a
corporation, duly incorporated, validly existing and in good standing under
the
laws of the State of Delaware or, in the case of each Company Subsidiary, a
corporation duly incorporated, validly existing and in good standing under
the
laws of the state of its incorporation, and each has the requisite corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, except, in the case of
the
Company Subsidiaries, for the failure to be so incorporated, existing and in
good standing or to have such corporate power and authority which would not
be
reasonably expected to have, when aggregated with all such other failures,
a
Company Material Adverse Effect. Each of the Company and the Company
Subsidiaries is duly licensed or qualified to do business 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 or qualified
would not reasonably be expected to have, when aggregated with all other such
failures, a Company Material Adverse Effect.
(b) The
copies of the Company’s Certificate of Incorporation, as amended (the
“Company
Certificate”),
and
By-Laws, as amended (the “Company
By-Laws”),
most
recently
filed
with the Company’s SEC Documents are complete and correct copies of such
documents as in effect as of the date of this Agreement. The Company is not
in
violation of the provisions of the Company Certificate or the Company
By-Laws.
(a) The
authorized capital stock of the Company consists of (i) 100,000,000 shares
of
common stock, par value $1.00 per share (“Shares”),
and
(ii) 5,000,000 shares of Preferred Stock, par value $1.00 per share
(“Company
Preferred Stock”).
At
the close of business on the Business Day immediately preceding the date of
this
Agreement, 44,770,213 Shares were issued and outstanding and no shares of
Company Preferred Stock were issued and outstanding. At the close of business
on
the Business Day immediately preceding the date of this Agreement, Company
Options to acquire 508,420 Shares were outstanding. All of the issued and
outstanding Shares have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights. As of the date of this
Agreement, except as provided by this Agreement and except for the Company
Options, there are not any subscriptions, options, warrants, calls, stock
appreciation rights or other commitments, rights or agreements of any character
relating to dividend rights or the purchase, sale, issuance or voting of any
security of the Company to which the Company or any Company Subsidiary is a
party, including any securities convertible into, exchangeable for or
representing the right to purchase or otherwise receive, any
Shares.
(b) The
Company owns, directly or indirectly, all of the outstanding shares of capital
stock of the Company Subsidiaries, free and clear of any pledges, rights of
first refusal, options, liens, encumbrances, mortgages, claims, security
interests or charge of any kind (collectively, “Liens”),
other
than Permitted Liens, and all of such shares of capital stock are fully paid,
nonassessable and free of preemptive rights. Neither the Company nor any of
the
Company Subsidiaries has any outstanding subscriptions, options, warrants,
calls, stock appreciation rights or other commitments or agreements of any
character calling for the purchase, sale, issuance or voting of any security
of
any Company Subsidiary, including any securities convertible into, exchangeable
for or representing the right to purchase or otherwise receive any security
of
any Company Subsidiary.
(a) The
Company has all necessary corporate power and authority to execute and deliver
this Agreement and to consummate the Transactions to be consummated by it,
subject to obtaining the vote of holders of a majority of the issued and
outstanding Shares in favor of the approval and adoption of this Agreement
prior
to the consummation of the Merger in accordance with Section 251 of the DGCL
(the “Company
Stockholder Approval”).
The
execution, delivery and performance by the Company of this Agreement, and the
consummation by the Company of the Transactions to be consummated by it, have
been duly authorized and approved by the Company and, except for the receipt
of
the Company Stockholder Approval, no other corporate action on the part of
the
Company is necessary to authorize the execution and delivery by the Company
of
this Agreement and the consummation by the Company of the Transactions to be
consummated by it. This Agreement has been duly executed and delivered by the
Company and, assuming due and valid authorization, execution and delivery by
Parent and Merger Sub of this Agreement, constitutes a valid and binding
obligation of the Company, enforceable against the
Company
in accordance with its terms, except that such enforceability (i) may be limited
by bankruptcy, insolvency, moratorium or other similar Laws affecting or
relating to the enforcement of creditor’s rights generally and (ii) is subject
to general principles of equity.
(b) At
a
meeting duly called and held, the Board of Directors of the Company has approved
this Agreement, the Merger and the other Transactions and, subject to Section
6.2, has resolved to recommend that the Company’s stockholders vote in favor of
the adoption of this Agreement at the Special Meeting.
(a) Except
for (i) the consents and approvals set forth in Section 4.4(a) of the Company
Disclosure Schedule, (ii) the filing with the SEC of the Proxy Statement, (iii)
the filing of the Certificate of Merger with the Secretary of State, and (iv)
such other filings, permits, authorizations, consents and approvals as may
be
required under the Exchange Act, the Exchange Act Rules, the HSR Act, and the
applicable requirements of the New York Stock Exchange (all of the foregoing,
collectively, the “Other
Company Approvals”),
no
consent or approval of, or filing, notice to, declaration or registration with,
any Governmental Entity, which has not been obtained or made, is required to
be
obtained or made by the Company for the execution and delivery by the Company
of
this Agreement or the consummation by the Company or the Company Subsidiaries
of
the Transactions to be consummated by it or them.
(b) None
of
the execution and delivery by the Company of this Agreement or the consummation
by the Company or the Company Subsidiaries of the Transactions to be consummated
by it or them, or compliance by the Company or the Company Subsidiaries with
any
of the terms and provisions of this Agreement, will (i) violate any provision
of
the Company Certificate or Company By-Laws or any of the similar organizational
documents of any Company Subsidiary or (ii) assuming that the Company
Stockholder Approval and the Other Company Approvals are obtained or made,
as
the case may be, (x) violate any Law applicable to the Company or any of the
Company Subsidiaries or any of their respective properties or assets or (y)
violate, result in the loss of any material benefit under, constitute a default
(or an event which, with notice or lapse of time, or both, would constitute
a
default) under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by, require the consent
of or notice to any Person under, or result in the creation of any Lien upon
any
of the respective properties or assets of the Company or any of the Company
Subsidiaries under, any Material Contract, except, in the case of clause (ii)
above, for such violations, losses of benefits, defaults, events, terminations,
rights of termination or cancellation, accelerations or Lien creations which
would not reasonably be expected to have, individually or in the aggregate,
a
Company Material Adverse Effect.
Section
4.5. SEC
Documents; Financial Statements; Undisclosed Liabilities.
(a) The
Company has filed all reports, schedules, forms and registration statements
with
the SEC required to be filed pursuant to the Securities Act or the Exchange
Act
and the rules and regulations of the SEC promulgated thereunder from May 29,
2004 through the date of this Agreement (collectively, the “SEC
Documents”).
As of
their respective dates (or if subsequently amended or superseded by a filing
prior to the date of this Agreement, on the date
of
such
filing), the SEC Documents, including any financial statements or schedules
included therein, as finally amended, complied as to form in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents (as the Securities Act or the
Exchange Act and the rules and regulation promulgated thereunder were in effect
on the date so filed), and none of the SEC Documents, when finally amended
prior
to the date hereof, 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. As of the date of this Agreement, there are no outstanding
or unresolved comments in comment letters received by the Company from the
SEC
staff with respect to any of the SEC Documents. No Company Subsidiary is
required to file any forms, reports or other documents with the
SEC.
(b) The
consolidated financial statements (including the related notes and schedules)
of
the Company included in the SEC Documents (the “SEC
Financial Statements”)
have
been prepared in accordance with GAAP (except as may be otherwise indicated
therein or in the notes thereto and except, in the case of unaudited
consolidated quarterly statements, as permitted by Form 10-Q of the Exchange
Act), applied on a consistent basis during the periods involved, and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the respective dates thereof
and
the consolidated statements of operations, stockholders’ equity and cash flows
for the respective periods then ended (subject, in the case of unaudited
quarterly statements, to normal year-end audit adjustments and the absence
of
footnotes).
(c) The
Company has designed disclosure controls and procedures to ensure that material
information relating to the Company, including its consolidated Company
Subsidiaries, is made known to the chief executive officer and the chief
accounting officer of the Company by others within those entities. The Company
has disclosed, based on its most recent evaluation prior to the date hereof,
to
the Company’s auditors and the audit committee of the Board of Directors of the
Company, (x) any significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are reasonably
likely to adversely effect in any material respect the Company’s ability to
record, process, summarize and report financial information and (y) 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. To
the Company’s Knowledge, there is no reason to believe, after completion of all
remediation set forth on Section 4.5(c) of the Company Disclosure Schedule
and
any other remediation the costs of which would not be material to the Company
and the Company Subsidiaries taken as a whole, that its auditors and its chief
executive officer will not be able to give the certifications and attestations
required pursuant to the rules and regulations adopted pursuant to Section
404
of the Sarbanes-Oxley Act of 2002 when next due. Since May 28, 2005,
(i) neither the Company nor any Company Subsidiary nor, to the Company’s
Knowledge, any director, officer, employee, auditor, accountant or
representative of the Company or any of the Company Subsidiaries has received
any written complaint, allegation, assertion or claim that the Company or any
of
the Company Subsidiaries has engaged in improper or illegal accounting or
auditing practices or maintains improper or inadequate internal accounting
controls relating to the Company and the Company Subsidiaries taken as a whole
and (ii) no attorney representing the Company or any Company Subsidiary has
made a report to the Company’s chief legal
officer,
chief executive officer or Board of Directors (or any committee thereof)
pursuant to the SEC’s Standards of Professional Conduct for Attorneys (17 CFR
Part 205).
(d) Since
the
enactment of the Sarbanes-Oxley Act of 2002, the Company has been and is in
compliance in all material respects with (i) the applicable provisions of the
Sarbanes-Oxley Act of 2002 and (ii) the applicable listing and corporate
governance rules and regulations of the New York Stock Exchange.
(e) Neither
the Company nor any of the Company Subsidiaries has any Liabilities that would
be required by GAAP to be reflected in the consolidated balance sheet of the
Company, except (a) for such Liabilities (i) reflected, reserved against or
otherwise disclosed in the consolidated balance sheet of the Company as of
November 26, 2005 or May 28, 2005 (in each case including the notes thereto),
which is included in the SEC Financial Statements, (ii) incurred in the ordinary
course of business consistent with past practice, (iii) arising under the terms
of (but not from any breach of default under) any Contract or Permit binding
upon the Company or any of the Company Subsidiaries that is either (x) disclosed
in the Company Disclosure Schedule or (y) not required to be so disclosed by
the
terms of this Agreement, and including any such Contract that is entered into,
or such Permit that is obtained, after the date of this Agreement, as long
as
entering into such Contract or obtaining such Permit does not violate any
provision of this Agreement, or (iv) incurred pursuant to or in connection
with
this Agreement or the Transactions and (b) for such other Liabilities as would
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
Section
4.6. Absence
of Certain Changes or Events.
Since
November 26, 2005, no events, changes, conditions or developments have occurred
which have had or would reasonably be expected to have, individually or in
the
aggregate, a Company Material Adverse Effect. From November 26, 2005 to the
date
of this Agreement, (i) the Company and the Company Subsidiaries have
carried on and operated their respective businesses in all material respects
in
the ordinary course of business, and (ii) there has been no:
(a) (i)
declaration, setting aside or payment of any dividend or other distribution
in
respect of the capital stock of the Company (other than a regular annual cash
dividend on the Shares and dividends declared or paid by any Company Subsidiary
to any other Company Subsidiary or to the Company) or (ii) issuance, sale,
grant, disposal of, pledge or other encumbrance by the Company or any Company
Subsidiary, or any authorized or proposed issuance, sale, grant, disposition
or
pledge or other encumbrance by the Company or any Company Subsidiary of, any
shares of the Company’s capital stock or any securities or rights convertible
into, exchangeable for, or evidencing the right to subscribe for any shares
of
the Company’s capital stock, or the grant by the Company or any Company
Subsidiary of any rights, warrants, options, calls, commitments or any other
agreements of any character to purchase or acquire any shares of the Company’s
capital stock or any securities or rights convertible into, exchangeable for,
or
evidencing the right to subscribe for, any shares of the Company’s capital
stock, other than upon exercise of Company Options and to fund the Company’s
matching contribution to the Company’s 401(k) plan in the ordinary course of
business,
(b) redemption
or other acquisition by the Company of any of its capital stock,
(c) stock
split, reverse stock split, combination or reclassification of the Shares,
(d) creation,
incurrence or assumption of any indebtedness for borrowed money, issuance of
any
note, bond or other debt security, or guarantee of any indebtedness (other
than
borrowings under the Company’s existing letter of credit and line of credit
facilities and guarantees of Real Property Leases in the ordinary course of
business), in such cases in excess of $2,500,000 in the aggregate or any loans,
advances (other than advances to employees of the Company or any Company
Subsidiary in the ordinary course of business) or capital contributions by
the
Company or any Company Subsidiary to any other Person other than to any of
the
Company and the Company Subsidiaries,
(e) sale,
transfer, license, mortgage, encumbrance or other disposal of any of the
Company’s properties or assets with a value in excess of $3,000,000 to any
Person other than the Company or a wholly-owned Company Subsidiary, or
cancellation, release or assignment of any indebtedness for borrowed money
in
excess of $3,000,000 to any such Person;
(f) grant
of
a license (whether written or oral) to, or any other rights with respect to,
any
Company Intellectual Property to any Person that would be material to the
Company and its Subsidiaries when taken as a whole;
(g) any
material acquisition or investment by the Company or any Company Subsidiary
(other
than purchases of inventory, supplies and other assets in the ordinary course
of
business and investments made in accordance with the Company’s cash management
policies in the ordinary course of business consistent with past
practice),
whether
by purchase of stock or securities, merger or consolidation, contributions
to
capital, property transfers, or purchase or exclusive license of any property
or
assets, of or in any Person other than a wholly-owned Company Subsidiary or
to
the extent contemplated by the Company’s capital expenditure budget for Fiscal
Year 2006 (as most recently updated if applicable), a copy of which has been
provided to Parent prior to the date of this Agreement, or for the following
fiscal year of the Company, if and to the extent applicable;
(h) (i)
increase in the rate or terms of compensation payable by the Company or any
of
the Company Subsidiaries to any of their respective directors, officers or
employees whose annual base salary exceeds $150,000, (ii) employment or
severance agreement entered into, or grant or increase by the Company or any
Company Subsidiary in the rate or terms of any bonus, pension, severance or
other employee benefit plan, policy, agreement or arrangement with, for or
in
respect of any of their respective directors, officers or employees whose annual
base salary exceeds $150,000 or any severance or termination payment to any
such
Person or (iii) establishment, adoption, entrance into or termination by the
Company or any Company Subsidiary of any collective bargaining agreement or
Benefit Plan or any employee benefit plan, policy or arrangement or
amendment or waiver of any performance or vesting criteria or any acceleration
of vesting, exercisability or funding of any of the foregoing, except
in
any such case (x) as required pursuant to the terms of plans or agreements
in
effect on the date of this Agreement, (y) occurring in the ordinary course
of
business and, in the aggregate, consistent with past practice or (z) required
by
Law;
(i) amendment
to the Company Certificate or Company By-Laws;
(j) material
change by the Company in accounting methods, principles or practices except
as
required by GAAP;
(k) (i)
except as required by applicable Law, change by the Company or any Company
Subsidiary in election in respect of Taxes or any material accounting method
in
respect of Taxes, (ii) entry by the Company or any Company Subsidiary into
any
tax allocation agreement, tax sharing agreement, closing agreement, or (iii)
settlement or compromise by the Company or any Company Subsidiary of any claim,
notice, audit report or assessment in respect of Taxes individually in excess
of
$500,000 or in the aggregate in excess of $2,000,000;
(l) write
up,
write down or write off the book value by
the
Company or any Company Subsidiary
of any
assets, individually or in the aggregate, for the Company and the Subsidiaries
taken as a whole, in excess of $1,000,000, except in accordance with GAAP
consistently applied;
(m) subject
to Section 6.2(c), any action taken by the Company or any Company Subsidiary
to
exempt any Person (other than Parent or Merger Sub) or any action taken by
such
Person from, or make such Person or action not subject to, (i) the
provisions of Section 203 of the DGCL, if applicable, or (ii) any other
state takeover law or state law that purports to limit or restrict business
combinations or the ability to acquire or vote shares;
(n) any
layoff by the Company or any Company Subsidiary of employees that would
implicate the Worker Adjustment and Retraining Notification Act of 1988, as
amended;
(o)
any
settlement of litigation by the Company or any Company Subsidiary that is not
covered by insurance for an amount in excess of $1,000,000 per litigation;
or
(p) any
agreement or commitment, whether in writing or otherwise, to take any action
described in clauses (a) through (o) above.
Section
4.7. Litigation.
Except
for any litigation (or threatened litigation) concerning this Agreement or
the
Merger, there is no action, suit, proceeding, charge or complaint pending or,
to
the Company’s Knowledge, threatened against the Company or any of the Company
Subsidiaries or any of their respective properties or assets (including the
Owned Real Property) or any of their respective officers or directors (in their
capacity as officers or directors of the Company or any Company Subsidiary)
by
or before (or, in the case of any such threatened matter, that would come
before) any Governmental Entity that is reasonably expected to result in a
Liability to the Company or any Company Subsidiaries in excess of $2,000,000
(net of insurance proceeds) or have a material and adverse effect on the
business of the Company and the Company Subsidiaries, taken as a whole. Neither
the Company nor any Company Subsidiary is a party or subject to or in default
under any judgment, order, writ, decree or injunction of any Governmental
Entity, or
is in
default under any settlement agreement to which the Company or any Company
Subsidiary is
a
party,
(i) as
of the date of this Agreement, that is material to the Company and the Company
Subsidiaries, taken as a whole, or that would otherwise prevent or materially
delay the Company from performing its obligations under this Agreement in any
material respect or (ii) as of the Closing Date, except as would not reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect. To the Company’s
Knowledge,
there are no SEC inquiries or investigations, other governmental inquiries
or
investigations or internal investigations pending or threatened, in each case
regarding any accounting practices of the Company or any Company Subsidiary
or
any malfeasance by any director, officer or employee of the Company or any
Company Subsidiary.
Section
4.8. Personal
Property.
The
Company and the Company Subsidiaries have legal and valid title to, or in the
case of leased assets and properties, valid and subsisting leasehold interests
in, all of the material tangible personal assets and properties used or held
for
use by the Company and the Company Subsidiaries in connection with the conduct
of the business of the Company and Company Subsidiaries, free and clear of
all
material Liens other than Permitted Liens. All tangible personal property owned
or leased by the Company or any Company Subsidiary is in good condition,
ordinary wear and tear excepted and except for such failures to be in good
condition as would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(a) Section
4.9(a) of the Company Disclosure Schedule sets forth a complete and correct
list
as of the date of this Agreement of all real property owned by the Company
or
any Company Subsidiary (collectively, the “Owned
Real Property”)
and,
for each parcel of Owned Real Property, identifies the street address of such
Owned Real Property.
(b) Section
4.9(b) of the Company Disclosure Schedule sets forth a complete and correct
list
as of the date of this Agreement of all real property leased, subleased,
licensed or otherwise occupied (whether as tenant, subtenant or pursuant to
other occupancy arrangements) by the Company or any Company Subsidiary
(collectively, including the improvements thereon, the “Leased
Real Property”)
and,
for each Leased Real Property, identifies the street address of such Leased
Real
Property.
(c) The
Company or a Company Subsidiary has good and marketable fee simple title to
all
Owned Real Property, and, to the Company’s Knowledge, enjoys
peaceful and undisturbed possession of all Leased Real Property,
free and
clear of all material Liens, except Permitted Liens. For the purposes of this
Section 4.9(c), “marketable” title shall mean title that a reasonable buyer
would accept from a reasonable seller.
(d) The
Company has made available to Parent and Merger Sub a true and complete copy
of
each Real Property Lease, and in the case of any oral Real Property Lease,
a
written summary of the material terms of such Real Property Lease. Except with
respect to the Company’s industrial development bonds described in the Company’s
SEC Documents, neither the Company nor any Company Subsidiary has collaterally
assigned or granted any other security interest in any Real Property Lease
or
any interest therein.
(e) Except
(i) as would not be reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect, (ii) for licenses from the Company
to Persons other than the Company or Company Subsidiaries of certain departments
within the Company’s stores in the ordinary course of business, (iii) for the
Real Property Leases and (iv) for Permitted Liens, as of the date of this
Agreement, none of the Owned Real Properties or the Leased Real
Properties
is subject to any lease, sublease, license or other agreement granting to any
other Person any right to the use or occupancy of such Owned Real Property
or
Leased Real Property or any part thereof, and other than the right of Parent
and
Merger Sub pursuant to this Agreement, as of the date of this Agreement there
are no outstanding options, rights of first offer or rights of first refusal
to
purchase the Owned Real Property or any portion thereof or interest therein.
As
of the date of this Agreement, neither the Company nor any Company Subsidiary
is
a party to any agreement or option to purchase any real property or interest
therein.
(f) To
the
Company’s Knowledge, there does not exist any condemnation or eminent domain
proceedings that affect any material Owned Real Property or material Leased
Real
Property.
(g) As
of the
date of this Agreement, the Owned Real Property and the Leased Real Property
comprise all the real property used in the respective businesses of the Company
and the Company Subsidiaries.
(h) All
material buildings, structures, improvements, fixtures, building systems and
equipment, and all components thereof, included in the Owned Real Property
and
the Leased Real Property are in good condition, ordinary wear and tear excepted
and except for such failures to be in good condition as would not reasonably
be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
Section
4.10. Taxes.
Except
as would not reasonably be expected to have, in the aggregate, a Company
Material Adverse Effect, (i) all Tax returns, reports and similar statements,
including information returns and reports, claims for refund, and amended or
substituted returns and reports (including any schedules attached thereto)
required to be filed by or on behalf of the Company or any of the Company
Subsidiaries (collectively, the “Returns”),
have
been timely filed (taking into account any extensions), (ii) as of the times
of
filing, the Returns were correct, (iii) as of the date of this Agreement, all
Taxes required to be paid by the Company and the Company Subsidiaries have
been
timely paid or adequately provided for on the most recent SEC Financial
Statements filed prior to the date hereof, (iv) to the Company’s Knowledge, as
of the date of this Agreement, there are no pending claims or claims threatened
in writing against the Company or any of the Company Subsidiaries in respect
of
any Tax, (v) the Company and each Company Subsidiary have withheld and paid
all
Taxes required to have been withheld and paid in connection with amounts paid
or
owing to any employee, independent contractor, creditor, stockholder, or other
third party, (vi) neither the Company nor any Company Subsidiary (A) has been
a
member of an affiliated group filing a consolidated federal income tax return
(other than a group the common parent of which was the Company) or (B) has
any
liability for the Taxes of any Person (other than the Company or any present
or
former Company Subsidiary) under Treasury regulation section 1.1502-6 (or any
similar provision of state, local or foreign Law), (vii) neither the Company
nor
any Company Subsidiary has distributed the stock of another company in a
transaction that was purported or intended to governed by section 355 or section
361 of the Code, and (viii) neither the Company nor any Company Subsidiary
has
engaged in any “listed transaction” described in Treasury regulation section
1.6011-4(b)(2).
Section
4.11. Compliance
with Laws; Permits.
Except
as would not reasonably be expected to have, individually or in the aggregate,
a
material adverse effect on the Company and
the
Company Subsidiaries, taken as a whole, neither the Company nor any of the
Company Subsidiaries is in violation of any Law applicable to the Company or
any
of the Company Subsidiaries. Except as would not reasonably be expected to
have,
individually or in the aggregate, a Company Material Adverse Effect, the Company
and the Company Subsidiaries each hold all permits, licenses, consents,
authorizations, certificates, variances, exemptions, orders and approvals of
and
from all, and has made all material declarations and filings with, Governmental
Entities necessary for the lawful conduct of their respective businesses, as
presently conducted, and to own, lease, license and use their respective
properties and assets. All of such permits, licenses, consents, authorizations,
certificates, variances, exemptions, orders and approvals are valid, and in
full
force and effect, except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(a) Set
forth
in Section 4.12(a) of the Company Disclosure Schedule is a complete and correct
list as of the date of this Agreement of each “employee benefit plan” (within
the meaning of Section 3(3) of ERISA), each stock purchase, severance,
retention, employment, change-in-control, deferred compensation or supplemental
retirement agreement, program, policy or arrangement, and each material bonus,
incentive vacation or other material benefit plan, agreement, program, policy
or
arrangement, any of which is maintained, administered or sponsored by the
Company or any of the Company Subsidiaries or with respect to which the Company
or any of the Company Subsidiaries has or would reasonably be expected to have
any material Liability. All such plans, agreements, programs, policies and
arrangements are hereinafter referred to collectively as the “Benefit
Plans”
and
individually as a “Benefit
Plan.”
(b) With
respect to each Benefit Plan (other than any Multiemployer Plan), the Company
has made available to Parent (i) a complete and correct copy of such plan or
a
summary of such plan, (ii) any summary plan description, and (iii) the most
recent actuarial valuation report, if applicable.
(c) Each
Benefit Plan (other than any Multiemployer Plan) has been operated, funded
and
administered, in all material respects, in accordance with its terms, the terms
of any applicable collective bargaining agreement and the requirements of ERISA
and the Code and any other applicable Laws. All contributions and premium
payments that are due with respect to any Benefit Plan have been made and all
contributions for any period ending on or before the Closing Date that are
not
yet due shall have been made or properly accrued.
(d) Any
Benefit Plan that is (i) a “single-employer plan” within the meaning of Section
4001(15) of ERISA or (ii) a Multiemployer Plan is set forth in Section 4.12(a)
of the Company Disclosure Schedule. Each Benefit Plan that is intended to meet
the requirements of a “qualified plan” under Section 401(a) of the Code has
received a determination from the Internal Revenue Service that such Benefit
Plan is so qualified (taking into account the legislation commonly referred
to
as “GUST”) or is a prototype plan which is the subject of an opinion letter from
the Internal Revenue Service, and, to the Company’s Knowledge, there are no
facts or circumstances that would be reasonably likely to adversely affect
the
qualified status of any such Benefit Plan.
(e) There
have been no prohibited transactions (as defined in Section 406 of ERISA or
Section 4975 of the Code) with respect to any Benefit Plan, and no fiduciary
(as
defined in Section 3(21) of ERISA) has any Liability for breach of fiduciary
duty or any other failure to act or comply in connection with the administration
or investment of the assets of any Benefit Plan that, in either case, would
reasonably be expected to result in a material Liability to the Company or
the
Company Subsidiaries. There are no actions, suits, proceedings, hearings, (to
the Company’s Knowledge) investigations, claims (other than routine claims for
benefits in the ordinary course) pending or, to the Company’s Knowledge,
threatened in writing with respect to any Benefit Plan, other than any such
matters that would not be reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(f) None
of
the Company, any Company Subsidiary, or any ERISA Affiliate contributes to,
has
any obligation to contribute to, or has any current or potential Liability
or
obligations under or with respect to any “defined benefit plan” (as defined in
Section 3(35) of ERISA) or any Multiemployer Plan. None of the Company, any
Company Subsidiary, or any ERISA Affiliate has incurred any Liability or
obligation on account of a “partial withdrawal” or a “complete withdrawal”
(within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer
Plan, no such Liability or obligation has been asserted, and there are no events
or circumstances that would reasonably be expected to result in the incurrence
by the Company or any Company Subsidiary of any such Liability or obligation;
and none of the Company, any Company Subsidiary or any ERISA Affiliate has
any
Liability or obligation described in Section 4204 of ERISA.
(g) Neither
the Company nor any Company Subsidiary maintains, contributes to or has an
obligation to contribute to, or has any Liability with respect to, the provision
of any health or life insurance or other welfare-type benefits for current
or
future retires or terminated directors, officers, employees or contractors
(or
any spouse or other dependant thereof) other than in accordance with COBRA.
The
Company, the Company Subsidiaries and the ERISA Affiliates are in compliance
in
all material respects with the requirements of COBRA.
(h) Those
individuals performing services for the Company and the Company Subsidiaries
have been correctly classified as common law employees, leased employees,
independent contractors or agents of the Company or the Company Subsidiaries
for
the purposes of each Benefit Plan. The Transactions will not cause the
acceleration of vesting in, or payment of, any benefits under any Benefit Plan
and shall not otherwise accelerate or increase any Liability under any Benefit
Plan.
Section
4.13. Material
Contracts.
Section
4.13 of the Company Disclosure Schedule sets forth a complete and correct list
as of the date of this Agreement of all Material Contracts. The Company has
made
available to Parent complete and correct copies of each such Material
Contract.
With
respect to each Contract to which the Company or any of the Company Subsidiaries
is a party (and, for purposes of this Section 4.13, without giving effect to
the
execution and delivery of this Agreement or the consummation of any of the
Transactions), (i) neither the Company nor any of the Company Subsidiaries
has breached, or is in default under, nor has any of them received written
notice of breach or default under (or of any condition which with the passage
of
time or the giving of notice would cause a violation or default under), such
Contract, (ii) to the Company’s Knowledge, no other party to such Contract has
breached or
is
in
default of any of its obligations thereunder, and (iii) such Contract is in
full
force and effect and the Company or the applicable Company Subsidiary party
thereto, as the case may be, has performed all obligations required to be
performed by it under such Contract as of the date of this Agreement or as
of
the date of the Closing, as the case may be, except in any such case for
breaches, defaults or failures to be in full force and effect or to perform
obligations that would not reasonably be expected to have, individually or
in
the aggregate, a Company Material Adverse Effect.
(a) Section
4.14(a) of the Company Disclosure Schedule sets forth a complete and correct
list as of the date of this Agreement of all of the following that are owned
by
the Company or any of the Company Subsidiaries (which, together with all other
Intellectual Property owned by the Company or any of the Company Subsidiaries,
are hereinafter referred to as the “Company-Owned
Intellectual Property”):
(i) trademark and service mark registrations and pending applications,
copyright registrations and pending applications; and (ii) trade or corporate
names, Internet domain names, material unregistered logos, slogans and other
trademarks and service marks. The Company and the Company Subsidiaries as
applicable are the sole and exclusive owners (including, as applicable, record
owners) of all such Company-Owned Intellectual Property, including those
registrations and applications and other Intellectual Property set forth (or
required to be set forth) on Section 4.14(a) of the Company Disclosure Schedule.
Neither the Company nor any of the Company Subsidiaries owns, licenses or has
any interest in any patents or patent applications.
(b) The
Company and the Company Subsidiaries own, or possess the right to use pursuant
to a valid and enforceable license agreement, free and clear of all Liens (other
than Permitted Liens), all Intellectual Property used in or necessary to conduct
their respective businesses as currently conducted (together with the
Company-Owned Intellectual Property, the “Company
Intellectual Property”),
except where the failure to own or possess such rights would not reasonably
be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. No loss or expiration of any material Company-Owned Intellectual
Property is pending or, to the Company’s Knowledge, threatened in writing and
all material Company-Owned Intellectual Property will be owned and available
for
use by the Company and/or one or more of the Company Subsidiaries, as
applicable, on identical terms and conditions immediately following the Closing
as such material Company-Owned Intellectual Property was owned and available
for
use by the Company and/or the Company Subsidiaries immediately prior to the
Closing. There are no claims made in writing against the Company or any Company
Subsidiary that were either made during the three (3) years immediately
preceding the date of this Agreement or are pending as of the date of this
Agreement contesting the validity, use, ownership or enforceability of any
Company-Owned Intellectual Property. Except as would not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect,
neither the Company nor any of the Company Subsidiaries is infringing,
misappropriating or otherwise violating, and the operation of the business
of
the Company or any of the Company Subsidiaries as currently conducted does
not,
to the Company’s Knowledge, infringe, misappropriate, or otherwise violate any
Intellectual Property of any other Person. Except as would not reasonably be
expected to have, individually or in the aggregate, a Company Material
Adverse
Effect, to the Company’s Knowledge, no Person is infringing, misappropriating or
otherwise violating any Company-Owned Intellectual Property.
(c) The
computer systems, including the software, hardware, networks and interfaces
currently used in the conduct of the businesses of the Company and the Company
Subsidiaries are sufficient in all material respects for (i) the current needs
of such businesses and (ii) immediately following the Effective Time, the
continued use of such computer systems as currently used in such
businesses.
(a) Except
as
would not reasonably be expected to have, individually or in the aggregate,
a
Company Material Adverse Effect, (i) the Company and the Company Subsidiaries
are in compliance with, all applicable Environmental Laws and have been in
compliance with all applicable Environmental Laws since December 31, 2000,
and
(ii) the Company and the Company Subsidiaries possess, have complied with since
December 31, 2000, and are in compliance with all applicable Environmental
Licenses.
(b) The
Company has provided or made available to Parent complete and correct copies
of
all Environmental Reports and other documents materially bearing on
environmental Liabilities that are in its possession or control and relate
to
the past or current properties, facilities or operations of the Company or
any
Company Subsidiary.
(c) Since
December 31, 2000, neither the Company nor any Company Subsidiary has received
any written notice from any Governmental Entity or any other Person regarding
any actual or alleged material violation of Environmental Laws or any material
Liabilities or potential material Liabilities relating to the business or
facilities of the Company or any Company Subsidiary and arising under
Environmental Laws.
(d) Except
as
would not reasonably be expected to have, individually or in the aggregate,
a
Company Material Adverse Effect, neither the Company nor any Company Subsidiary
nor any of their respective controlled Affiliates has treated, stored, disposed
of, arranged for or permitted the disposal of,
transported, handled, released or exposed any Person to, any substance, or
owned
or operated its business or any property or facility (and no such property
or
facility is contaminated by any such substance) in a manner that has given
or
would give rise to any Liabilities (including any investigative, corrective
or
remedial obligations) pursuant to any Environmental Laws.
(e) Neither
this Agreement nor the consummation of the Transactions will result in any
obligations for site investigation or cleanup, or notification to or consent
of
Government Agencies or other Persons, pursuant to any of the so-called
“transaction-triggered” or “responsible property transfer” Environmental
Laws.
(f) Except
as
would not reasonably be expected, individually or in the aggregate, to have
a
Company Material Adverse Effect, neither the Company nor any Company Subsidiary
has assumed, undertaken or otherwise become subject to any Liability, including
any obligation for corrective or remedial action, of any other Person relating
to Environmental Laws.
(g) Notwithstanding
any other representations and warranties in this Agreement, the representations
and warranties in this Section 4.15 are the only representations and warranties
in this Agreement with respect to Environmental Laws and Environmental
Licenses.
Section
4.16. Affiliate
Transactions.
There
are no transactions, agreements, arrangements or understandings between the
Company or any of the Company Subsidiaries, on the one hand, and any Affiliate
of the Company (other than the Company Subsidiaries), on the other hand, of
the
type that would be required to be disclosed under Item 404 of Regulation S-K
under the Securities Act.
Section
4.17. Opinion
of Financial Advisor.
The
Board of Directors of the Company has received the opinion of Goldman, Sachs
& Co., the Company’s financial advisor, to the effect that, as of the date
of this Agreement, the Merger Consideration is fair from a financial point
of
view to the holders of Shares (other than Parent, Merger Sub and their
respective Affiliates).
Section
4.18. Section
203 of the DGCL.
The
Board of Directors of the Company has taken all necessary action such that
the
restrictions imposed on business combinations by Section 203 of the DGCL are
inapplicable to this Agreement and the Merger.
Section
4.19. Broker’s
Fees.
Except
for Goldman, Sachs & Co. and fees payable to it, neither the Company nor any
of the Company Subsidiaries nor any of their respective officers or directors
on
behalf of the Company or any of the Company Subsidiaries has employed any
financial advisor, broker or finder or incurred any Liability for any broker’s
fees, commissions or finder’s fees in connection with any of the Transactions.
(a) The
Company and each of the Company Subsidiaries are, and for the past three years
have remained, in compliance with all applicable Laws relating to the employment
of labor, including Laws relating to wages and hours, equal employment
opportunity, affirmative action, layoffs, workplace safety, immigration and
the
withholding and payment of taxes, except for any failure to so comply which
would not reasonably be expected to have, individually or in the aggregate,
a
Company Material Adverse Effect.
(b) With
respect to the Company and the Company Subsidiaries, (i)
as of
the date of this Agreement there is no collective bargaining agreement with
any
labor organization; (ii) as of the date of this Agreement, to the Company’s
Knowledge (provided that for purposes of this Section 4.20(b), “Company’s
Knowledge” shall not require any duty of investigation otherwise included in the
definition thereof), no senior executive has any present intention to terminate
their employment, (iii) no labor organization or group of employees has filed
any representation petition or made any written or oral demand for recognition;
(iv) no union organizing or decertification efforts are underway or, to the
Company’s Knowledge, threatened; (v) no labor strike, work stoppage, slowdown,
or other material labor dispute exists or, to the Company’s Knowledge, is
threatened in writing; and (vi) there is no employment-related charge,
complaint, grievance, (to the Company’s Knowledge) investigation, or obligation
of any kind, pending or, to the Company’s Knowledge, threatened in writing in
any forum, relating to an alleged violation or breach by the Company or any
Company Subsidiary (or its or their officers or directors) of any
law,
regulation or Contract, which violation or breach which would reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
Section
4.21. No
Other Representations or Warranties.
EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED IN THIS ARTICLE
IV,
NEITHER THE COMPANY NOR ANY OTHER PERSON MAKES ANY EXPRESS OR IMPLIED
REPRESENTATION OR WARRANTY ON BEHALF OF THE COMPANY. THE COMPANY HEREBY
DISCLAIMS ANY SUCH OTHER REPRESENTATION OR WARRANTY, WHETHER BY THE COMPANY,
ANY
COMPANY SUBSIDIARY, OR ANY OF THEIR RESPECTIVE REPRESENTATIVES OR ANY OTHER
PERSON, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO PARENT, MERGER SUB OR
ANY
OTHER PERSON OF ANY DOCUMENTATION OR OTHER WRITTEN OR ORAL INFORMATION BY THE
COMPANY, ANY COMPANY SUBSIDIARY OR ANY OF THEIR RESPECTIVE REPRESENTATIVES
OR
ANY OTHER PERSON, AND NEITHER THE COMPANY NOR ANY OTHER PERSON WILL HAVE OR
BE
SUBJECT TO ANY LIABILITY OR INDEMNIFICATION OBLIGATION TO PARENT, MERGER SUB
OR
ANY OTHER PERSON RESULTING FROM SUCH DELIVERY OR DISCLOSURE, OR PARENT’S OR
MERGER SUB’S OR ANY OF THEIR RESPECTIVE REPRESENTATIVE’S USE, OF ANY SUCH
DOCUMENTATION OR OTHER INFORMATION (INCLUDING ANY INFORMATION, DOCUMENTS,
PROJECTIONS, FORECASTS OR OTHER MATERIAL MADE AVAILABLE TO PARENT OR MERGER
SUB
OR ANY OF THEIR RESPECTIVE REPRESENTATIVES IN CERTAIN “DATA ROOMS” OR MANAGEMENT
PRESENTATIONS IN EXPECTATION OF THE TRANSACTIONS).
REPRESENTATIONS
AND WARRANTIES
OF
PARENT AND MERGER SUB
Parent
and Merger Sub jointly and severally represent and warrant to the Company as
follows:
Section
5.1. Corporate
Organization.
Each of
Parent and Merger Sub is a corporation duly incorporated, validly existing
and
in good standing under the laws of the jurisdiction of its incorporation and
has
the requisite corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted.
Each of Parent and Merger Sub is duly licensed or qualified to do business
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 or qualified would not, when aggregated with all other such failures,
be reasonably be expected to have a material adverse effect on Parent’s or
Merger Sub’s ability to perform its obligations under this Agreement or prevent
or delay the consummation of the Transactions (a “Parent
Material Adverse Effect”).
Section
5.2. Authority.
Each of
Parent and Merger Sub has all necessary corporate power and authority to execute
and deliver this Agreement and to consummate the Transactions to be consummated
by it. The execution, delivery and performance by Parent and Merger Sub of
this
Agreement, and the consummation by each of Parent and Merger Sub of the
Transactions to be consummated by it, have been duly authorized and approved
by
Parent and Merger Sub, and no other corporate action on the part of Parent
or
Merger Sub is necessary to authorize the execution and delivery by Parent and
Merger Sub of this Agreement and the consummation by
each
of
Parent and Merger Sub of the Transactions to be consummated by it. This
Agreement has been duly executed and delivered by Parent and Merger Sub, and,
assuming due and valid authorization, execution and delivery by the Company
of
this Agreement, constitutes a valid and binding obligation of each of Parent
and
Merger Sub, enforceable against each of them in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy, insolvency,
moratorium or other similar Laws affecting or relating to the enforcement of
creditor’s rights generally and (ii) is subject to general principles of
equity.
(a) Except
for (i) the filing of the Certificate of Merger with the Secretary of State
and
(ii) such other filings, permits, authorizations, consents and approvals as
may
be required under, and other applicable requirements of, the Exchange Act,
the
Exchange Act Rules and the HSR Act (all of the foregoing collectively, the
“Parent
Approvals”),
no
consent or approval of, or filing, declaration or registration with, any
Governmental Entity which has not been received or made is required to be
obtained by or made by Parent or Merger Sub for the consummation by each of
Parent and Merger Sub of the Transactions to be consummated by it.
(b) None
of
the execution and delivery by Parent and Merger Sub of this Agreement or the
consummation by each of Parent and Merger Sub of the Transactions to be
consummated by it, or compliance by Parent and Merger Sub with any of the terms
and provisions of this Agreement, will (i) violate any provision of the
Certificate of Incorporation or By-Laws (or similar organizational documents
with different names) of Parent or Merger Sub or (ii) assuming that the Parent
Approvals are obtained or made, as the case may be, (x) violate any Law
applicable to Parent or Merger Sub or any of their respective properties or
assets or (y) violate, result in the loss of any material benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right
of
termination or cancellation under, accelerate the performance required by,
require the consent of or notice to any Person under or result in the creation
of any Lien upon any of the respective properties or assets of Parent or Merger
Sub under any Contract to which Parent or Merger Sub is a party, or by which
either of them or any of their respective properties or assets may be bound
or
affected, except, in the case of clause (ii) above, for such violations, losses
of benefits, defaults, events, terminations, rights of termination or
cancellation, accelerations or Lien creations which, in the aggregate, would
not
reasonably be expected to have a Parent Material Adverse Effect.
(a) Merger
Sub was formed solely for the purpose of engaging in the Merger and the other
Transactions and has not engaged in any business activities or conducted any
operations, in each case since the date of its incorporation other than in
connection with the Merger and the other Transactions.
(b) The
authorized capital stock of Merger Sub consists of 1,000 shares of common stock,
par value $0.01 per share, of which 1,000 shares are issued and outstanding.
All
such issued and outstanding shares are owned beneficially and of record by
Parent.
Section
5.5. Sufficient
Funds.
Prior
to
the date of this Agreement, Parent has delivered to the Company complete,
correct and executed copies of (i) the letter dated January
18, 2006,
from
Banc
of
America Securities LLC, Banc of America Bridge LLC, Bank of America, N.A.,
Bear
Stearns & Co. Inc. and Bear Stearns Corporate Lending Inc., pursuant
to which the parties thereto have committed, subject to the terms and conditions
set forth therein, to provide or cause to be provided debt financing of up
to
$2,075,000,000 in connection with the Transactions (the “Debt
Commitments”
)
and (ii)
the letter dated January
18,
2006,
from Bain
Capital Fund VIII, L.P. (“Bain”)
pursuant to which Bain and or its Affiliates have committed, subject to the
terms and conditions set forth therein, to provide or cause to be provided
equity financing of up to $500,000,000 in connection with the Transactions
(the
“Equity
Commitment” and,
together with the Debt Commitments, the “Financing
Commitments”),
with
respect to the financing of the Transactions (the
“Financing”),
including all exhibits, schedules or amendments thereto. The Financing
Commitments are in full force and effect, and there are no conditions precedent
related to the funding of the full amount of the Financing, other than as set
forth in or expressly contemplated by the Financing Commitments. The aggregate
proceeds contemplated by the Financing Commitments will be sufficient for Parent
and Merger Sub to pay for all outstanding Shares converted into cash pursuant
to
the Merger, to make all payments in respect of all Company Options, to perform
Parent’s and Merger Sub’s other obligations under this Agreement and to pay all
fees and expenses related to the Transactions payable by either of them.
Assuming the accuracy of the representations and warranties of the Company
set
forth in Article IV, as of the date of this Agreement Parent and Merger Sub
have
no reason to believe that any of the conditions precedent to the Financing
will
not be satisfied in connection with the consummation of the Transactions or
that
the Financing will not be available to Parent
and/or Merger
Sub on the Closing Date.
Section
5.6. Ownership
of Shares.
Each of
Parent and Merger Sub is not, nor at any time during the last three (3) years
has been, an “interested stockholder” (as defined in Section 203 of the DGCL) of
the Company. None of Parent, Merger Sub and the other Affiliates of Parent
beneficially owns any Shares.
Section
5.7. Other
Agreements.
Except
as disclosed by Parent to the Company in writing prior to the date of this
Agreement, neither Parent nor Merger Sub has entered into any Contract with
any
officer or director of the Company in connection with the
Transactions.
Section
5.8. Broker’s
Fees.
Neither
Parent nor Merger Sub nor any of their Affiliates, nor any of their respective
officers or directors on behalf of Parent or Merger Sub or any of their
Affiliates, has employed any financial advisor, broker or finder in a manner
that would result in any Liability for any broker’s fees, commissions or
finder’s fees in connection with any of the Transactions.
Section
5.9. Solvency.
As
of the
Effective Time, assuming satisfaction of the conditions to the obligation of
Parent and Merger Sub to consummate the Merger, or waiver of such conditions,
and after giving effect to all of the Transactions, including without limitation
the Financing, any alternative financing, the payment of the aggregate Merger
Consideration and
payment in respect of the Company Options contemplated by Section
3.4,
and
payment of all related fees and expenses, each of Parent and the Surviving
Corporation will be Solvent. For the purposes of this Section 5.9 the term
“Solvent”
when
used with respect to any Person, means
that,
as
of any date of determination, (a) the amount of the “fair saleable value” of the
assets of such Person will, as of such date, exceed (i) the value of all
“liabilities of such Person, including contingent and other liabilities”, as of
such date, as such quoted terms are generally determined in accordance with
applicable federal laws governing determinations of the insolvency of debtors,
and (ii) the amount that will be required to pay the probable liabilities of
such Person on its existing debts (including contingent liabilities) as such
debts become absolute and matured, (b) such Person will not have, as of such
date, an unreasonably small amount of capital for the operation of the
businesses in which it is engaged or proposed to be engaged following such
date,
and (c) such Person will be able to pay its liabilities, including contingent
and other liabilities, as they mature. For purposes of this definition, (i)
“not
have an unreasonably small amount of capital for the operation of the businesses
in which it is engaged or proposed to be engaged” and “able to pay its
liabilities, including contingent and other liabilities, as they mature” means
that such Person will be able to generate enough cash from operations, asset
dispositions or refinancing, or a combination thereof, to meet its obligations
as they become due.
COVENANTS
Section
6.1. Conduct
of Businesses Prior to the Effective Time.
Except
as (x) set forth in Section 6.1 of the Company Disclosure Schedule, (y)
expressly contemplated or permitted by this Agreement, or (z) required by Law,
during the period from the date of this Agreement to the earlier of the
Effective Time or the termination of this Agreement in accordance with Section
8.1, unless Parent otherwise agrees in writing, the Company shall, and shall
cause each of the Company Subsidiaries to, (i) conduct its business in all
material respects in the ordinary course of business consistent with past
practice and (ii) use its reasonable best efforts to maintain and preserve
substantially intact its business organization and the goodwill of those having
business relationships with it and retain the services of its present officers
and key employees. Without limiting the generality of the foregoing, and except
as (x) set forth in Section 6.1 of the Company Disclosure Schedule, (y)
expressly contemplated or permitted by this Agreement, or (z) required by Law,
during the period from the date of this Agreement to the earlier of the
Effective Time or the termination of this Agreement in accordance with Section
8.1, the Company shall not, and shall not permit any of the Company Subsidiaries
to, without the prior written consent of Parent:
(a) (i) issue,
sell, grant, dispose of, pledge or otherwise encumber, or authorize or propose
the issuance, sale, grant, disposition or pledge or other encumbrance of, (x)
any additional shares of its capital stock or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for
any
shares of its capital stock, or any rights, warrants, options, calls,
commitments or any other agreements of any character to purchase or acquire
any
shares of its capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of its
capital stock, other than upon exercise of Company Options and to fund the
Company’s matching contribution to the Company’s 401(k) plan in the ordinary
course of business, or (y) any other securities in respect of, in lieu of,
or in
substitution for, any shares of its capital stock outstanding on the date of
this Agreement, (ii) redeem, purchase or otherwise acquire, or propose to
redeem, purchase or otherwise acquire, any of its outstanding shares of capital
stock or (iii) split, combine, subdivide or reclassify any shares of its capital
stock or declare, set aside for payment or pay any dividend, or make any other
distribution in respect of any Shares, or otherwise make any payments to
stockholders in their
capacity
as such, other than dividends declared or paid by any Company Subsidiary to
any
other Company Subsidiary or to the Company;
(b) other
than borrowings under the Company’s existing letter of credit and line of credit
facilities and guaranties of Real Property Leases in the ordinary course of
business, create, incur, assume any indebtedness for borrowed money, issue
any
note, bond or other debt security, or guarantee any indebtedness, in such cases
in excess of $2,500,000 in the aggregate or make any loans, advances (other
than
advances to employees of the Company or any Company Subsidiary in the ordinary
course of business) or capital contributions to any other Person other than
to
any of the Company and the Company Subsidiaries;
(c) sell,
transfer, license, mortgage, encumber or otherwise dispose of any of its
properties or assets with a value in excess of $3,000,000 to any Person other
than the Company or a wholly-owned Company Subsidiary, or cancel, release or
assign any indebtedness in excess of $3,000,000 to any such Person, except
(i)
pursuant to contracts and agreements in force at the date of this Agreement
or
renewals of any such contract or agreement, (ii) pursuant to plans disclosed
in
the Company Disclosure Schedule, (iii) the disposition of property identified
as
“excess property” on Schedule 6.1 or (iv) sales of inventory in the ordinary
course of business;
(d) grant
a
license (whether written or oral) to, or any other rights with respect to,
any
material Company Intellectual Property to any Person;
(e) enter
into any Contract containing any non-competition covenant (other than Real
Property Leases in the ordinary course of business);
(f) make
any
material acquisition or investment (other
than purchases
of inventory, supplies and other assets in
the
ordinary course of business
and
investments made in accordance with the Company’s cash management policies in
the ordinary course of business consistent with past practice),
whether by purchase of stock or securities, merger or consolidation,
contributions to capital, property transfers, or purchases or exclusive licenses
of any property or assets, of or in any Person other than a wholly-owned Company
Subsidiary or to the extent contemplated by the Company’s capital expenditure
budget for Fiscal Year 2006 (as most recently updated if applicable), a copy
of
which has been provided to Parent prior to the date of this Agreement, or for
the following fiscal year of the Company, if and to the extent
applicable;
(g) (i)
increase the rate or terms of compensation payable by the Company or any of
the
Company Subsidiaries to any of their respective directors, officers or
employees, (ii) enter into any employment or severance agreement with or
grant or increase the rate or terms of any bonus, pension, severance or other
employee benefit plan, policy, agreement or arrangement with, for or in respect
of any of their respective directors, officers or employees or make any
severance or termination payment to any such Person or (iii) establish, adopt,
enter into or terminate any collective bargaining agreement or Benefit Plan
or
any employee benefit plan, policy or arrangement that, if it were in effect
on
the date of this Agreement, would be a Benefit Plan, or take any affirmative
action to amend or waive any performance or vesting criteria or accelerate
vesting, exercisability or funding of any of the foregoing, except in any such
case for grants, increases or other actions (x) required pursuant to the terms
of plans or agreements in effect on the date of this Agreement, (y) occurring
in
the ordinary course of business consistent
with
past
practice or (z) required by Law; provided,
however, that notwithstanding this Section 6.1(g) or anything else to the
contrary in this Agreement, the Company shall be permitted to enter into
employment agreements with the persons set forth on Section 6.1(g) of the
Company Disclosure Schedule for the purpose of assuring continuity of management
on such terms as the Company and Parent shall mutually agree on or prior to
the
Effective Date (in which case all applicable Sections of the Company Disclosure
Schedule shall be deemed amended as of the date of this Agreement to reflect
disclosure of, and the Company’s entry into, such employment agreements);
(h) amend
the
Company Certificate or Company By-Laws;
(i) make
any
change in accounting policies or procedures, except as required by GAAP or
by a
Governmental Entity;
(j) (i)
except as required by applicable Law, make or change any election in respect
of
Taxes or adopt or change any material accounting method in respect of Taxes,
(ii) enter into any tax allocation agreement, tax sharing agreement, closing
agreement, or (iii) settle or compromise any claim, notice, audit report or
assessment in respect of Taxes individually in excess of $500,000 or in the
aggregate in excess of $2,000,000;
(k) write
up,
write down or write off the book value of any assets, individually or in the
aggregate, for the Company and the Subsidiaries taken as a whole, in excess
of
$1,000,000, except in accordance with GAAP consistently applied;
(l) subject
to Section 6.2(c), take any action to exempt any Person (other than Parent
or
Merger Sub) or any action taken by such Person from, or make such Person or
action not subject to, (i) the provisions of Section 203 of the DGCL, if
applicable, or (ii) any other state takeover law or state law that purports
to limit or restrict business combinations or the ability to acquire or vote
shares;
(m) implement
any layoff of employees that would implicate the Worker Adjustment and
Retraining Notification Act of 1988, as amended;
(n) settle
any litigation that is not covered by insurance for an amount in excess of
$1,000,000 per litigation;
(o)
(x)
amend, modify in any material respect or terminate (other than in accordance
with its terms) any Contract pursuant to which the Company or any Company
Subsidiary has expended in Fiscal Year 2005, or expects to expend in Fiscal
Year
2006, in excess of $1,500,000 or (y) enter into any Contract under which the
Company or any of the Company Subsidiaries expects to expend in excess of
$1,500,000 during Fiscal Year 2006 (other than (i) purchases of inventory,
supplies and assets in the ordinary course of business, (ii) to the extent
contemplated by the Company’s budget for Fiscal Year 2006 (as most recently
updated if applicable), a copy of which has been provided to Parent prior to
the
date of this Agreement, and (iii) with respect to the other subsections of
this
Section 6.1, Contracts not prohibited thereby); or
(p) make
any
commitment to take any of the actions prohibited by this
Section 6.1.
(a) From
and
after the date of this Agreement until the earlier of the Effective Time or
the
termination of this Agreement in accordance with Section 8.1, the Company agrees
that (x) the Company and the Company Subsidiaries shall not, and the Company
and
the Company Subsidiaries shall cause each of their respective officers,
directors, agents and representatives (including any investment banker,
financial advisor, attorney or accountant retained by the Company or any of
the
Company Subsidiaries or any of the foregoing), and shall use reasonable best
efforts to cause their other employees (such officers, directors, agents,
representatives and employees, collectively, “Representatives”),
not
to, initiate or solicit (including by way of furnishing non-public information)
or knowingly take any other action to facilitate the making of any proposal
or
offer that constitutes, or is reasonably expected to lead to, an Alternative
Proposal or engage in any substantive discussions or any negotiations
concerning, or provide any non-public information with respect to, an
Alternative Proposal, and (y) the Company and the Company Subsidiaries shall
immediately cease, and cause their respective Representatives (other than
non-officer employees, for whom they shall use reasonable best efforts) to
cease, any existing solicitation, discussions or negotiations by or on behalf
of
the Company with any Person conducted heretofore with respect to any Alternative
Proposal. Without limiting the foregoing, it is agreed that any violation of
the
foregoing by a Representative (other than a non-officer employee) or a Company
Subsidiary shall be a violation of this Section 6.2(a) by the
Company.
(b) Notwithstanding
anything in this Agreement to the contrary, the Company (directly or through
its
Representatives) may (i) until receipt of the Company Stockholder Approval,
engage in substantive discussions or in negotiations with a Person that makes
a
bona fide written Alternative Proposal (under circumstances in which the Company
has complied in all respects with its non-solicitation obligations under Section
6.2(a)) and may furnish such Person and its representatives information
concerning, and may afford such Person and its representatives access to, the
Company and the Company Subsidiaries and their businesses, properties, assets,
books and records, if (A) in the good faith judgment of the Company’s Board of
Directors (after consultation with the Company’s financial advisor and outside
counsel) such Alternative Proposal constitutes, or is reasonably likely to
lead
to, a Superior Proposal, and (B) prior to furnishing such information or access
to, or entering into substantive discussions (except as to the existence of
this
Section 6.2) or negotiations with, such Person, (x) the Company receives from
such Person an executed confidentiality agreement not less restrictive of such
Person than the Confidentiality Agreement and (y) the Company notifies Parent
to
the effect that it intends to furnish information or access to, or intends
to
enter into substantive discussions or negotiations with, such Person, (ii)
comply with Rules 14e-2 and 14d-9 of the Exchange Act Rules with regard to
a
tender or exchange offer, (iii) make a “stop-look-and-listen” communication to
its stockholders of the nature contemplated by Rule 14d-9 of the Exchange Act
Rules and (iv) make such other disclosures to the Company’s stockholders, and
take such other actions, as are required by Law. In addition to the obligations
of the Company and the Company Subsidiaries set forth in clause (i) of this
Section 6.2(b), the Company shall promptly advise Parent in writing of any
Alternative Proposal, and any notice shall specify in writing the material
terms
and conditions of any such Alternative Proposal and the identity of the person
making such Alternative Proposal.
(c) The
Board
of Directors of the Company may not (i) withdraw or modify the approval or
recommendation by the Board of Directors of the Company of the Merger or this
Agreement (except as set forth in clause (y) of the proviso to Section
2.6(a)(ii) or as set forth below in this Section 6.2(c)), (ii) approve or
recommend an Alternative Proposal or (iii) cause the Company or any of the
Company Subsidiaries to enter into any letter of intent, agreement in principle,
merger agreement, acquisition agreement, option agreement, joint venture
agreement, partnership agreement or other similar agreement related to any
Alternative Proposal (other than a confidentiality agreement in accordance
with
Section 6.2(b)). Notwithstanding the foregoing, at any time prior to receipt
of
the Company Stockholder Approval, if the Board of Directors of the Company
(after consultation with the Company’s financial advisor and outside counsel)
determines in good faith that any Alternative Proposal which was not solicited
in violation of Section 6.2(a) constitutes a Superior Proposal, the Board of
Directors of the Company may, if it has fully complied with Section 6.2(b):
(w)
withdraw or modify its approval or recommendation of the Merger and this
Agreement, (x) approve or recommend such Superior Proposal, (y) cause the
Company or any of the Company Subsidiaries to enter into a binding written
agreement (other than a confidentiality agreement as aforesaid) with respect
to,
and containing the terms of, such Superior Proposal (a “Superior
Proposal Agreement”)
and
(z) terminate this Agreement in accordance with Section 8.1(c); provided,
however,
that
(A) prior to terminating this Agreement, the Company shall give Parent at least
two (2) Business Days’ notice thereof, attaching the Superior Proposal Agreement
or, if applicable, the latest draft thereof (which notice need only be given
once with respect to any Superior Proposal, unless such Superior Proposal is
modified in any material respect), and (B) if, within such two (2) Business
Day
period, Parent makes an offer that the Board of Directors of the Company
determines in good faith is at least as favorable to the stockholders of the
Company (other than Parent, Merger Sub and their respective Affiliates), from
a
financial point of view, as such Superior Proposal and agrees in writing to
all
adjustments in the terms and conditions of this Agreement as are necessary
to
reflect such offer, the Company’s notice of termination with respect to such
Superior Proposal shall be deemed to be rescinded and of no further force and
effect and, if the Company or any Company Subsidiary has entered into a Superior
Proposal Agreement, it shall promptly terminate such agreement (it being agreed
that the Company will cause any Superior Proposal Agreement entered into prior
to the expiration of such two (2) Business Day period to include a provision
permitting such termination).
Section
6.3. Publicity.
The
initial press release with respect to the execution of this Agreement shall
be a
joint press release reasonably acceptable to Parent and the Company. Thereafter,
so long as this Agreement is in effect, none of the Company, Parent or any
of
their respective Affiliates shall issue or cause the publication of any press
release or other announcement with respect to the Merger, this Agreement or
the
other Transactions without the prior approval of the Company and Parent, except
as may be required by Law or by any listing agreement with a securities exchange
or Nasdaq as determined in the good faith judgment, upon advice of counsel,
of
the party wanting to make such release or announcement (in which case the party
shall use its commercially reasonable efforts to receive the approval of the
other party prior to issuing such release). In addition, promptly following
the
date of this Agreement, the Company and Parent shall establish mutually
agreeable talking points that may be made to any supplier, vendor or other
material business relation of the Company and the Company Subsidiaries regarding
the Transactions and the impact of Transactions on the business of the Company
and the Company Subsidiaries (the “Approved
Communications”).
The Company
shall
inform its directors, officers and any direct reports to officers who
communicate with the Company’s suppliers, vendors or other material business
relations in the ordinary course of their employment that all communications
made to such suppliers, vendors or other material business relations regarding
the Transactions and the impact of Transactions on the business of the Company
and the Company Subsidiaries must comply with the Approved Communications,
and
the Company shall use its reasonable best efforts to ensure such compliance.
Furthermore, the Company shall use its reasonable best efforts to ensure
that all communications made by directors and executive officers of the Company
and any of the Company Subsidiaries to non-executive employees of the Company
and any of the Company Subsidiaries regarding the Transactions, and the impact
of the Transactions on the business of the Company and the Company Subsidiaries,
comply in all material respects with the Approved Communications. For the
avoidance of doubt, nothing in this Section 6.3 shall prohibit any communication
to any supplier, vendor or other material business relation made in the ordinary
course of business.
(a) Upon
reasonable notice and subject to applicable Law, the Company shall, and shall
cause each of the Company Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of Parent and, subject to the
terms of the Confidentiality Agreement, its debt financing sources, during
normal business hours during the period prior to the Effective Time, reasonable
access to all its properties, books, contracts, commitments and records, and
to
its officers, employees, accountants, counsel and other representatives and,
during such period, the Company shall, and shall cause the Company Subsidiaries
to, make available to Parent and the appropriate representatives of Parent
(i) a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of federal
securities Laws (other than reports or documents which the Company is not
permitted to disclose under applicable Law) and (ii) all other information
concerning its business, properties and personnel as Parent may reasonably
request. Notwithstanding any provision of this Agreement to the contrary,
neither the Company nor any of the Company Subsidiaries shall be required to
provide access to or to disclose information if such access or disclosure would
jeopardize the work product privilege or the attorney-client privilege of the
institution in possession or control of such information or violate any Law
or
any binding agreement entered into prior to the date of this Agreement.
(b) The
Company makes no representation or warranty as to the accuracy of any
information provided pursuant to Section 6.4(a), and neither Merger Sub nor
Parent may rely on the accuracy of any such information, in each case other
than
as expressly set forth in the Company’s representations and warranties contained
in Article IV.
(c) The
information provided pursuant to Section 6.4(a) will be used solely for the
purpose of effecting the Transactions and will be governed by all the terms
and
conditions of the Confidentiality Agreement.
Section
6.5. Further
Assurances; Regulatory Matters; Notification of Certain Matters.
(a) Subject
to the terms and conditions of this Agreement, each of Parent, Merger Sub and
the Company shall, and Parent shall cause Merger Sub to, use all reasonable
best
efforts
(i)
to
take, or cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed on such party with
respect to the Merger or the other Transactions and, subject to the conditions
set forth in Article VII, to consummate the Transactions as promptly as
practicable and (ii) promptly to prepare and file all necessary documentation,
to effect all necessary applications, notices, petitions, filings and other
documents, and to use all reasonable best efforts to obtain, all necessary
permits, consents, approvals and authorizations of all Governmental Entities
necessary or advisable in connection with consummating the Transactions,
including the Other Company Approvals and Parent Approvals. Without limiting
the
generality of this Section 6.5(a), each party shall, within ten (10) Business
Days after the execution of this Agreement, file all necessary documentation
required to obtain all requisite approvals or termination of applicable waiting
periods for the Transactions under the HSR Act.
(b) In
furtherance and not in limitation of the covenants of the parties contained
in
Section 6.5(a), each of the parties hereto shall use its reasonable best efforts
to resolve such objections, if any, as may be asserted with respect to any
of
the Transactions by or under the HSR Act, the Federal Trade Commission or the
Department of Justice, including taking all reasonable actions to obtain
clearance, or if such clearance cannot be obtained, to reach an agreement,
settlement or consent providing for divestiture, a “hold separate” agreement,
contractual undertakings with third Persons or any other relief with the
Governmental Entity investigating the Transactions; provided,
however,
that
the foregoing shall not require any party to agree to any asset divestiture
or
restriction on its or its Subsidiaries’ business operations that would be
reasonably expected to have a material adverse effect on the business, results
of operations or financial condition of such party and its Subsidiaries taken
as
a whole. In connection with the foregoing, if any administrative or judicial
action or proceeding, including any proceeding by a private Person, is
instituted (or threatened to be instituted) challenging any of the Transactions
as violative of the HSR Act or any other antitrust or other Law in any
jurisdiction, the parties hereto shall cooperate in all respects with each
other
and use their respective reasonable best efforts to contest and resist any
such
action or proceeding and to have vacated, lifted, reversed or overturned any
judgment or other order, whether temporary, preliminary or permanent, that
is in
effect and that prohibits, prevents or restricts consummation of the
Transactions, including defending through litigation on the merits any claim
asserted in any such action or proceeding by any Person.
(c) Each
party hereto shall give prompt notice (or in the case of clause (iii), use
its
reasonable best efforts to give prompt notice) to the other party hereto if
any
of the following occur after the date of this Agreement: (i) receipt of any
notice or other communication in writing from any Person alleging that the
consent or approval of such third party is or may be required in connection
with
the transactions contemplated by this Agreement; (ii) receipt of any notice
or
other communication from any Governmental Entity or any securities market or
securities regulator in connection with the Transactions; or (iii) the
occurrence of an event which individually has had or would be reasonably likely
in the future to (A) have a Company Material Adverse Effect or a Parent Material
Adverse Effect, as applicable, or prevent or delay the consummation of the
Merger or (B) cause any condition to the obligations of any party hereto to
consummate the Merger to be unsatisfied; provided,
however,
that no
disclosure by any party hereto pursuant to this Section 6.5(c) shall be deemed
to amend or supplement this Agreement or
the
schedules hereto or to prevent or cure any breach of any representation,
warranty, or covenant contained herein.
(a) Parent
shall, and shall cause the Surviving Corporation to, honor in accordance with
their terms all the Benefit Plans.
(b) Notwithstanding
any provision of this Agreement to the contrary, for at least two (2) years
following the Closing, Parent shall, and shall cause the Surviving Corporation
to, provide employees of the Surviving Corporation and its Subsidiaries with
compensation and employee benefits (other than any equity-based benefits) which,
in the aggregate, are no less favorable to such employees than the compensation
and employee benefits (including any equity-based benefits) in effect for such
employees immediately prior to the Closing. Notwithstanding the foregoing,
nothing in this Agreement shall be construed to (i) require Parent or the
Surviving Corporation or its Subsidiaries to provide equity-based benefits
or
otherwise issue equity to any employee or (ii) restrict the ability of the
Company, the Company Subsidiaries, Parent, the Surviving Corporation or any
of
their Affiliates to terminate the employment of any employee at any time and
for
any or no reason.
(c) Parent
shall, and shall cause the Surviving Corporation and its Subsidiaries to, (i)
credit all service with the Company and any of the Company Subsidiaries
(including service recognized by the Company or any of the Company Subsidiaries
for service with other Persons) for all purposes (other than benefit accrual
under a “defined benefit plan” within the meaning of Section 3(35) of
ERISA) under any employee benefit plan, policy or program (other than any
equity-based plan, policy or program) applicable to employees of the Surviving
Corporation or any of its Subsidiaries after the Closing to the extent
recognized by the Company under a corresponding Benefit Plan, (ii) in the plan
year in which the Closing occurs, use reasonable best efforts to waive any
pre-existing condition or limitation or exclusion with respect to employees
of
the Company or any of the Company Subsidiaries under any group health plan
or
other welfare benefit plan to the extent waived or satisfied under an analogous
Benefit Plan as of the Closing Date, and (iii) in the plan year in which the
Closing occurs use reasonable best efforts to recognize the dollar amount of
all
expenses incurred by employees of the Company or any of the Company Subsidiaries
and their dependents for purposes of deductibles, co-payments and maximum out-of
pocket limits under any group health plan to the extent recognized under an
analogues Benefit Plan as of the Closing Date.
(d) The
provisions of this Section 6.6 are for the sole benefit of the parties to this
Agreement and their permitted successors and assigns, and nothing herein,
expressed or implied, shall give or be construed to give any Person, other
than
the parties hereto and such permitted successors and assigns, any legal or
equitable rights hereunder.
(a) Without
limiting any additional rights that any director, officer or other employee
of
the Company may have under any indemnification or other agreement, any Benefit
Plan or
the
Company Certificate or Company By-laws,
from and
after the Effective Time, Parent and the
Surviving
Corporation shall, jointly and severally (and Parent shall cause the Surviving
Corporation to), indemnify, defend and hold harmless, to the fullest extent
authorized or permitted under the DGCL or other applicable Law, each Person
who
is now, or has been at any time prior to the date of this Agreement or who
becomes such prior to the Effective Time, (i) an officer or director of the
Company or any of the Company Subsidiaries or (ii) an employee of the Company
or
any of the Company Subsidiaries providing services to or for such director
or
officer in connection with this Agreement or any of the Transactions (such
officers, directors and employees, individually, an “Indemnified
Party,”
and
collectively, the “Indemnified
Parties”)
(in
such Person’s capacity as such and not as stockholders or optionholders of the
Company) against any and all losses, claims, damages, costs, expenses (including
attorneys’ fees and disbursements), fines, liabilities and judgments and amounts
that are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld or delayed) (collectively,
“Indemnified
Liabilities”)
incurred
in connection with any pending, threatened or completed claim, action, suit,
proceeding or investigation (each, a “Proceeding”)
arising out of or pertaining to (i) the fact that such Person is or was an
officer, director, employee, fiduciary or agent of the Company or any of the
Company Subsidiaries or (ii) matters occurring or existing at or prior to the
Effective Time (including acts or omissions occurring in connection with this
Agreement and the Transactions), whether asserted or claimed prior to, at or
after, the Effective Time. In the event any claim for Indemnified Liabilities
is
asserted or made by an Indemnified Party, any determination required to be
made
with respect to whether such Indemnified Party’s conduct complies with the
standards set forth under the DGCL or other applicable Law shall be made by
independent legal counsel selected by such Indemnified Party and reasonably
acceptable to the Surviving Corporation. Parent shall, or shall cause the
Surviving Corporation to, promptly advance all reasonable out-of-pocket expenses
of each Indemnified Party in connection with any Proceeding as such expenses
(including attorneys’ fees and disbursements) are incurred upon receipt from
such Indemnified Party of a request therefor (accompanied by invoices or other
relevant documentation), provided
(if and
to the extent required by the DGCL or other applicable Law) that such
Indemnified Party undertakes to repay such amount if it is ultimately determined
that such Indemnified Party is not entitled to be indemnified under the DGCL
or
other applicable Law with respect to such Proceeding. In the event any
Proceeding is brought against any Indemnified Party, Parent and the Surviving
Corporation shall each use all reasonable best efforts to assist in the vigorous
defense of such matter, provided
that
neither Parent nor the Surviving Corporation shall settle, compromise or consent
to the entry of any judgment in any Proceeding
(and in
which indemnification could be sought by such Indemnified Party hereunder)
without
the prior written consent of such Indemnified Party if
and to
the extent the claimant seeks any non-monetary relief from such Indemnified
Party.
(b) All
rights to indemnification existing in favor of, and all exculpations and
limitations of the personal Liability of, the directors, officers, employees,
fiduciaries and agents of any of the Company and the Company Subsidiaries in
the
Company Certificate or Company By-Laws (or comparable organizational documents
of the Company Subsidiaries) as in effect as of the Effective Time with respect
to matters occurring at or prior to the Effective Time, including the Merger
and
the other Transactions, shall continue in full force and effect for a period
of
not less than six (6) years from the Effective Time; provided,
however,
that
all rights to indemnification in respect of any claims asserted or made within
such period shall continue until the final disposition of such
claim.
(c) For
a
period of six (6) years after the Effective Time, the Surviving Corporation
shall, and shall cause its Subsidiaries to, and Parent shall cause the Surviving
Corporation and its Subsidiaries to, maintain in effect the current directors’
and officers’ liability insurance policies maintained by any of the Company and
the Company Subsidiaries for the benefit of those Persons who are covered by
such policies at the date of this Agreement or the Effective Time with respect
to claims arising in whole or in part from matters occurring or allegedly
occurring prior to the Effective Time (provided that the Surviving Corporation
and its Subsidiaries may substitute therefor policies of at least the same
coverage containing terms and conditions that are at least as beneficial to
the
beneficiaries of the current policies and with reputable carriers having a
rating comparable to the Company’s current carrier); provided,
however,
that
each of Parent and the Surviving Corporation and its Subsidiaries shall, and
Parent shall cause the Surviving Corporation and its Subsidiaries to, first
use
its reasonable best efforts to obtain a “tail” policy on substantially the same
terms and conditions for claims arising out of acts or conduct occurring on
or
prior to the Effective Time and effective for claims asserted during the full
six (6)-year period referred to above, and only if Parent and the Surviving
Corporation and its Subsidiaries are unable, after exerting their reasonable
best efforts, to obtain such a “tail” policy, then Parent or the Surviving
Corporation and its Subsidiaries will be required to obtain such coverage from
such carriers in annual policies; and, provided,
further
that (i)
if the existing policies expire or are terminated or canceled during such six
(6)- year period, each of Parent and the Surviving Corporation and its
Subsidiaries shall, and Parent shall cause the Surviving Corporation and its
Subsidiaries to, use its reasonable best efforts to obtain substantially similar
policies with reputable carriers having a rating comparable to the Company’s
current carrier, (ii) Parent or the Surviving Corporation and its Subsidiaries,
as the case may be, shall not be required to spend as an annual premium therefor
an amount in excess of three hundred percent (300%) of the annual premium
therefor as of the date of this Agreement and (iii) if, during such six (6)-year
period, such insurance coverage cannot be obtained at all or can be obtained
only for an amount in excess of three hundred percent (300%) of the current
annual premium therefor, Parent or the Surviving Corporation and its
Subsidiaries, as the case may be, shall use all reasonable best efforts to
cause
to be obtained as much directors’ and officers’ liability insurance coverage as
can be obtained for an amount equal to three hundred percent (300%) of the
current annual premium therefor, on terms and conditions substantially similar
to the Company’s and the Company Subsidiaries’ existing directors’ and officers’
liability insurance.
(d) Notwithstanding
the foregoing, prior to the Effective Time the Company shall be permitted to
purchase prepaid “tail” policies in favor of the individuals referred to in
Section 6.7(c) with respect to the matters described therein (provided that
the
annual premium therefor shall not exceed three hundred percent (300%) of the
annual premium therefor as of the date of this Agreement). If and to the extent
such policies have been obtained prior to the Effective Time, Parent shall,
and
shall cause the Surviving Corporation to, maintain such policies in effect
and
continue to honor the obligations thereunder.
(e) Parent
shall, and shall cause the Surviving Corporation to, honor and perform in
accordance with their terms all indemnification agreements identified on Section
4.13 of the Company Disclosure Schedule and in effect as of the date of this
Agreement between the Company, on the one hand, and any director or officer
of
the Company, on the other hand.
(f) The
provisions of this Section 6.7 (x) are intended to be for the benefit of, and
shall be enforceable by, each Indemnified Party, his or her heirs and his or
her
personal representatives, (y) shall be binding on Parent and the Surviving
Corporation and their respective successors and assigns and (z) are in addition
to, and not in substitution for, any other rights to indemnification or
contribution that any such Person may have by Contract or
otherwise.
(g) In
the
event that Parent or the Surviving Corporation or any of their respective
successors or assigns (i) consolidates with or merges into any other Person
and
shall not be the continuing or surviving corporation or entity in such
consolidation or merger, or (ii) transfers all or a majority of its properties
and assets to any Person, then, and in each such case, proper provision shall
be
made so that the successors and assigns of Parent or the Surviving Corporation,
as the case may be (and such Person’s ultimate parent entity, if applicable),
assume the obligations thereof set forth in this Section 6.7.
Section
6.8. Obligations
of Merger Sub.
Prior
to the earlier of the Effective Time or the termination of this Agreement in
accordance with Section 8.1:
(a) Merger
Sub shall not, and Parent shall cause Merger Sub not to, undertake any business
or activities other than in connection with this Agreement and engaging in
the
Merger and the other Transactions.
(b) Parent
shall take all action necessary to cause Merger Sub to perform its obligations
under this Agreement and to consummate the Merger and the other Transactions
on
the terms and conditions set forth in this Agreement.
(c) Parent
and Merger Sub shall not engage in any action or enter into any transaction
or
permit any action to be taken or transaction to be entered into that could
reasonably be expected to delay the consummation of, or otherwise adversely
affect, the Merger or any of the other Transactions. Without limiting the
generality of the foregoing, Parent shall not, and shall cause its Subsidiaries
not to, acquire (whether via merger, consolidation, stock or asset purchase
or
otherwise), or agree to so acquire, any material amounts of assets of or any
equity in any Person or any business or division thereof, unless that
acquisition or agreement would not (i) impose any delay in the obtaining of,
or
increase the risk of not obtaining, any authorizations, consents, orders,
declarations or approvals of any Governmental Entity necessary to consummate
the
Merger or the other Transactions or the expiration or termination of any waiting
period under applicable Law, or (ii) increase the risk of any Governmental
Entity entering an order prohibiting the consummation of the Merger, or the
other Transactions or increase the risk of not being able to remove any such
order on appeal or otherwise.
(a) Prior
to
the Closing, Parent and Merger Sub shall use their reasonable best efforts
to
obtain the Financing, including entering into definitive agreements with respect
thereto on the terms and conditions set forth in the Financing Commitments
or
such other terms as may be acceptable to Parent in its sole discretion (provided
that the same or more favorable terms than those set forth in the Financing
Commitments shall be deemed acceptable to Parent). In the event that any portion
of the Financing becomes unavailable so as not to enable Parent and
Merger
Sub to proceed with the Transactions in a timely manner, Parent and Merger
Sub
shall use their reasonable best efforts to arrange to obtain alternate financing
from alternative sources on terms and conditions acceptable to Parent in its
sole discretion (provided that the same or more favorable terms than those
set
forth in the Financing Commitments shall be deemed acceptable to Parent) as
promptly as practicable following the occurrence of such event, including
entering into definitive agreements with respect thereto (such definitive
agreements entered into pursuant to the first or second sentence of this Section
6.9(a) being referred to as the “Definitive
Financing Agreements”);
provided that nothing in this Section 6.9(a) shall be deemed to require Bain
to
provide a greater amount of equity financing than is contemplated by the Equity
Commitment. Parent and Merger Sub shall, shall cause their Affiliates to, and
shall use their reasonable best efforts to cause their Representatives to,
comply with the terms and satisfy on a timely basis the conditions of the
Financing Commitments, the Definitive Financing Agreements, any alternate
financing commitment and any related fee and engagement letters. Parent shall
(i) furnish complete, correct and executed copies of the Definitive Financing
Agreements to the Company promptly upon their execution, (ii) give the Company
prompt notice of any breach by any party of any of the Financing Commitments,
any alternate financing commitment or the Definitive Financing Agreements of
which Parent or Merger Sub becomes aware or any termination thereof and (iii)
otherwise at the reasonable request of the Company inform the Company of the
status of its efforts to arrange the Financing (or any replacements
thereof).
(b) From
and
after the date of this Agreement until the earlier of the Effective Time or
the
termination of this Agreement in accordance with Section 8.1, the Company shall,
and shall cause the Company Subsidiaries to, at Parent’s sole expense (except as
provided in the fourth sentence of this Section 6.9(b)), reasonably cooperate
with Parent and Parent’s Affiliates in connection with the arrangement of the
Financing (or any replacements thereof),
including (i) participation in due diligence
sessions, meetings, drafting sessions, management presentation sessions, “road
shows”, and sessions with rating agencies by Company
officers
and
employees, (ii) assisting Parent in obtaining any title insurance lien waivers,
estoppels, affidavits, non-disturbance agreements, memoranda of leases, legal
opinions, surveys or other documents or deliveries, (iii) using reasonable
best
efforts to prepare business projections, financial statements, pro forma
statements and other financial data of the type required by Regulation S-X
and
Regulation S-K under the Securities Act of the type and form consistently
included in offering memoranda, private placement memoranda, prospectuses and
similar documents, all as may be reasonably requested by Parent, (iv)
the
execution and delivery of underwriting or placement agreements, loan agreements,
note purchase agreements, registration rights agreements, indentures and related
documents, including a certificate of the chief accounting officer of the
Company with respect to solvency matters, and using reasonable best efforts
to
obtain accountants’ comfort letters and consents of accountants for use of their
reports in any materials relating to the Debt Commitment, all as may be
reasonably requested by Parent, (v) reasonably facilitating the pledging of
collateral and (vi) providing the financial information necessary for the
satisfaction of the obligations and conditions set forth in the Debt Commitments
within the time periods required thereby in order to permit a Closing Date
on or
prior to the date set forth in Section 8.1(b)(2), which obligation shall
include, in all events, providing the financial information required pursuant
to
the terms of the Debt Commitments; provided,
however,
that
(x) such
requested cooperation shall not unreasonably interfere with the ongoing
operations of the Company and the Company Subsidiaries and (y) neither
the Company nor any Company
Subsidiary
shall be required to make any payment or expenditure in connection with the
financing cooperation described in this Section 6.9(b) in excess of $250,000
in
the aggregate (the “Financing
Cooperation Expense Cap”).
The
parties agree that the effectiveness of any documents referred to in the
preceding sentence shall be subject to the consummation of the Closing. Without
limiting the foregoing provisions of this Section 6.9(b), (i) the Company
shall, and shall cause each of the Company Subsidiaries to, reasonably cooperate
with Parent’s financing sources and their representatives in connection with the
completion of an inventory appraisal and a field examination customary for
inventory and receivables financings (each of which shall be conducted during
normal business hours (so long as not disruptive to the Company’s operations)
and after reasonable prior notice, and (ii) (x) the Company and its counsel
shall be given reasonable opportunity to review and comment upon any offering
memorandum that includes information about the Company prepared in connection
with the Financing (and the Parent shall not disseminate any offering memorandum
relating to any offering of the Company’s or any Company Subsidiary’s securities
under Rule 144A of the Securities Act without the prior consent of the Company,
which consent shall not be unreasonably withheld), and (y) Parent and Merger
Sub
and their counsel shall be given reasonable opportunity to review and comment
upon any offering memorandum prepared in connection with any financing
undertaken by the Company to finance the Dividend. In the event that this
Agreement is terminated by the Company pursuant to Section 8.1(c)(ii) or Parent
terminates this Agreement pursuant to Section 8.1(b)(ii), Parent shall, promptly
upon request by the Company, reimburse the Company for all reasonable
out-of-pocket costs incurred by the Company or the Company Subsidiaries in
connection with such financing cooperation, including all amounts up to and
including the Financing Cooperation Expense Cap, and provided further,
that if
this Agreement is terminated for any reason, Parent shall use its best efforts
to cause the voiding, termination and/or destruction of all documents executed
by the Company in connection with such financing cooperation, and shall
reimburse the Company for all costs and expenses incurred by the Company in
connection therewith. Notwithstanding anything in this Agreement to the
contrary, neither the Company nor any of the Company Subsidiaries shall be
required to pay any commitment or other similar fee or incur any other Liability
in connection with the Financing (or any replacements thereof) prior to the
Effective Time (except as expressly set forth above with respect to the
Financing Cooperation Expense Cap). Furthermore, notwithstanding the foregoing,
neither the Company or any of the Company Subsidiaries, nor any of their
respective officers or directors shall be required to execute any certificate,
representation letter or other certification, or to deliver, or cause to be
delivered, any legal opinion to the extent the Company determines in good faith
that, under the circumstances, the execution of such certificate, letter or
other certification, or delivery of such opinion is not customary or would
be
unreasonable.
CONDITIONS
Section
7.1. Conditions
to Each Party’s Obligation to Effect the Merger.
The
respective obligation of each party to effect the Merger shall be subject to
the
satisfaction on or prior to the Closing Date of each of the following conditions
(which may be waived in whole or in part by such party):
(a) Stockholder
Approval.
The
Company Stockholder Approval shall have been obtained.
(b) Statutes.
No
statute, rule or regulation shall have been enacted or promulgated by any
Governmental Entity of competent jurisdiction which prohibits the consummation
of the Merger.
(c) Injunctions.
There
shall be no judgment, order, writ, decree or injunction of any Governmental
Entity of competent jurisdiction in effect precluding, restraining, enjoining
or
prohibiting consummation of the Merger.
Section
7.2. Additional
Conditions to Obligation of Parent and Merger Sub to Effect the Merger in
Certain Cases.
The
obligation of Parent and Merger Sub to effect the Merger shall be further
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions (which may be waived in whole or in part by Parent and
Merger Sub):
(a) Performance
of Obligations of the Company.
The
Company shall have performed in all material respects its agreements and
covenants contained in this Agreement to be performed by the Company at or
prior
to the Effective Time pursuant to the terms of this Agreement.
(b) Representations
and Warranties.
The
representations and warranties of the Company set forth in Article IV shall
be
true and correct on the Closing Date as if made on and as of the Closing Date
(except for representations and warranties that expressly speak only as of
a
specific date or time other than the Closing Date, which need only be true
and
correct as of such date or time), (i) except that representations and warranties
that contain qualifications with respect to Company Material Adverse Effect
shall be true and correct in all respects (giving effect to such qualifications)
and (ii) except, in the case of all other representations and warranties (other
than the representations and warranties specified in the proviso to this clause
(ii)), where the failure of such representations and warranties to be so true
and correct would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect (disregarding any qualifications
with respect to materiality contained therein, other than provisions that
expressly require the listing of material items on the Company Disclosure
Schedule or expressly permit the exclusion of immaterial items from any such
list); provided,
however, notwithstanding this clause (ii), the representations and warranties
contained in Sections 4.1 (as to the Company), 4.2, 4.3, 4.16, 4.17, 4.18 and
4.19 shall be true and correct in all material respects.
(c) Closing
Certificates.
Parent
shall have received a certificate signed by an authorized executive officer
of
the Company, dated the Closing Date, to the effect that the conditions set
forth
in Section 7.2(a) and Section 7.2(b) have been satisfied.
(d) Other
Company Approvals.
(i) Any
applicable waiting period under the HSR Act relating to the Merger shall have
expired or been terminated and (ii) the Company shall have obtained all other
Company Approvals that, individually or in the aggregate, are material to the
Company and the Company Subsidiaries, taken as a whole.
(e) Non-Competition
Agreement.
The
Non-Competition Agreement shall have been executed and delivered by each of
the
Persons set forth on Schedule
7.2(e).
(f) No
Governmental Proceedings.
No
Governmental Entity shall have initiated any suit, proceeding, hearing or
investigation involving the Company, Parent or Merger Sub wherein an unfavorable
judgment, order, writ, decree or injunction would (i) prevent the
Transactions, (ii) cause any of the Transactions to be rescinded following
consummation or (iii) affect adversely the right of Parent to own the
capital stock of the Surviving Corporation and to operate its
business.
(g) Dissenting
Shares.
Holders
of no more than five percent (5%) of the Shares shall have exercised appraisal
rights in accordance with Section 262 of the DGCL (which such appraisal rights
have not been withdrawn or failed to be perfected by the holders of such
Shares).
Section
7.3. Additional
Conditions to Obligation of the Company to Effect the Merger in Certain
Cases.
The
obligation of the Company to effect the Merger shall be further subject to
the
satisfaction on or prior to the Closing Date of each of the following conditions
(which may be waived in whole or in part by the Company):
(a) Performance
of Obligations of Parent.
Parent
and Merger Sub each shall have performed in all material respects its agreements
and covenants contained in this Agreement to be performed by Parent and Merger
Sub, respectively, at or prior to the Effective Time pursuant to the terms
of
this Agreement.
(b) Representations
and Warranties.
The
representations and warranties of Parent and Merger Sub set forth in Article
V
shall be true and correct in all material respects on the Closing Date as if
made on and as of the Closing Date (except for representations and warranties
that expressly speak only as of a specific date or time other than the Closing
Date, which need only be true and correct in all material respects as of such
date or time), except that representations and warranties that contain
qualifications with respect to materiality or Parent Material Adverse Effect
shall be true and correct in all respects (giving effect to such
qualifications).
(c) Closing
Certificates.
The
Company shall have received a certificate signed by an authorized executive
officer of Parent, dated the Closing Date, to the effect that the conditions
set
forth in Section 7.3(a) and Section 7.3(b) have been satisfied.
(d) Parent
Approvals.
(i) Any
applicable waiting period under the HSR Act relating to the Merger shall have
expired or been terminated and (ii) Parent and Merger Sub shall have obtained
the other Parent Approvals except for those the failure of which to obtain
would
not reasonably be expected to have a Parent Material Adverse
Effect.
TERMINATION
Section
8.1. Termination.
Anything herein or elsewhere to the contrary notwithstanding, this Agreement
may
be terminated and the Merger contemplated herein may be abandoned at any
time
prior to the Effective Time, whether before or after the approval and adoption
of this Agreement by the stockholders of the Company:
(a) By
the
mutual written consent of the Company and Parent;
(b) By
either
the Company or Parent:
(i) if
any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action in each case permanently restraining, enjoining or otherwise
prohibiting any of the Transactions and such order, decree, ruling or other
action shall have become final and non-appealable; provided,
however,
that
the party seeking to terminate this Agreement shall have used its reasonable
best efforts to challenge such order, decree, ruling or other
action;
(ii) if
the
Merger has not been consummated by June 30, 2006; provided,
however, that if at such time all conditions of each party hereunder to effect
the Merger have been satisfied or waived in writing except the condition set
forth in Section 7.1(a) and if at such time the Company has not held the Special
Meeting as a result of the Proxy Statement not having been cleared by the SEC,
such date shall be extended forty-five (45) days;
(iii) if
any
state or federal law, order, rule or regulation is adopted or issued which
has
the effect of prohibiting the Merger; or
(iv) if
upon a
vote thereon taken at the Special Meeting (including any adjournment or
postponement thereof) the Company Stockholder Approval shall not have been
obtained.
(c) By
the
Company, if:
(i) the
Board
of Directors of the Company approves a Superior Proposal as provided in Section
6.2(c), provided
that the
provisions of Section 6.2(c) have been complied with by the Company;
or
(ii) (x)
Parent or Merger Sub has breached or failed to perform any of its covenants
or
other agreements contained in this Agreement such that the closing condition
set
forth in Section 7.3(a) would not be satisfied or (y) there exists a
breach of any representation or warranty of Parent or Merger Sub contained
in
this Agreement such that the closing condition set forth in Section 7.3(b)
would not be satisfied and, in the case of both (x) and (y), such breach or
failure to perform (A) is not cured within forty-five (45) days after
receipt of written notice thereof specifically referencing this
Section 8.1(c)(ii) or (B) is incapable of being cured by Parent or
Merger Sub by the date set forth in Section 8.1(b)(ii).
(d) By
Parent, if:
(i) the
Board
of Directors of the Company (x) withdraws or modifies, in a manner adverse
to
Parent, the Company’s recommendation referred to in Section 4.3(b)
(unless
Section 2.6(a)(ii)(y) applies) (it being understood and agreed that any
“stop-look-and-listen” communication to the Company’s stockholders of the nature
contemplated by Rule 14d-9 of the Exchange Act Rules shall not be deemed to
constitute a withdrawal or modification of such recommendation) or (y)
recommends an Alternative Proposal or Superior Proposal to the stockholders
of
the Company or enters into any letter of intent, agreement in principle, merger
agreement, acquisition agreement, option agreement, joint venture agreement,
partnership agreement or other similar agreement (other than a confidentiality
agreement in accordance with Section 6.2(b)) with respect thereto; or
(ii) (x)
the
Company has breached or failed to perform any of its covenants or other
agreements contained in this Agreement such that the closing condition set
forth
in Section 7.2(a) would not be satisfied or (y) there exists a breach
of any representation or warranty of the Company contained in this Agreement
such that the closing condition set forth in Section 7.2(b) would not be
satisfied and, in the case of both (x) and (y), such breach or failure to
perform (A) is not cured within forty-five (45) days after receipt of
written notice thereof specifically referencing this Section 8.1(d)(ii) or
(B) is incapable of being cured by the Company by the date set forth in
Section 8.1(b)(ii).
Section
8.2. Effect
of Termination.
In the
event of the termination of this Agreement as provided in Section 8.1, written
notice thereof shall forthwith be given to the other party or parties specifying
the provision of this Agreement pursuant to which such termination is made,
and
this Agreement (other than Section 6.9(b) (regarding Company expenses),
this Section 8.2, Section 8.3 (if applicable) and Article IX, which shall
survive any termination of this Agreement) shall forthwith become null and
void,
and there shall be no Liability on the part of Parent, Merger Sub or the Company
under this Agreement, except as provided in this Section 8.2; provided,
however,
that
none of the parties shall be relieved from Liability for fraud or for any
willful breach of any of its covenants contained in this Agreement.
(a) If
(i)
the Company terminates this Agreement pursuant to Section 8.1(c)(i), or (ii)
Parent terminates this Agreement pursuant to Section 8.1(d)(i), then the Company
shall pay to Parent $70,000,000 (such amount, the “Termination
Fee”),
at or
prior to the time of termination in the case of such termination by the Company
or as promptly as reasonably practicable (and in any event within two (2)
Business Days) after termination in the case of such termination by Parent,
payable by wire transfer of same day funds.
(b) If
(i)
either party terminates this Agreement pursuant to Section 8.1(b)(ii) and
Section 8.3(d) below does not apply or Parent terminates this Agreement pursuant
to Section 8.1(b)(iv), and if at the time of such termination an Alternative
Proposal remains outstanding and (ii) the Company consummates a transaction
agreement with respect to such Alternative Proposal within twelve (12) months
of
the date of such termination, then the Company shall pay to Parent the
Termination Fee as promptly as reasonably practicable (and in any event within
two (2) Business Days) after such consummation, payable by wire transfer of
same
day funds. Notwithstanding anything in this Agreement to the contrary, for
purposes of this Section 8.3(b) and Section 8.3(c), the term “Alternative
Proposal” shall have the meaning assigned to such term
in
Section 1.1, except that the applicable percentages in clauses (i), (ii) and
(iii) of such definition shall be fifty percent (50%) rather than fifteen
percent (15%).
(c) If
Parent
terminates this Agreement pursuant to Section 8.1(d)(ii) and the breach or
failure to perform referred to therein is a knowing breach or failure to
perform, as the case may be, and (i) at the time of such breach an Alternative
Proposal remains outstanding and (ii) the Company consummates a transaction
agreement with respect to such Alternative Proposal within twelve (12) months
of
the date of such termination, then the Company shall pay to Parent the
Termination Fee as promptly as reasonably practicable (and in any event within
two (2) Business Days) after such consummation, payable by wire transfer of
same
day funds.
(d) If
(i)
Parent terminates this Agreement pursuant to Section 8.1(b)(ii) and at the
time
of such termination, (x) Parent or Merger Sub has breached or failed to perform
any of its covenants or other agreements contained in this Agreement such that
the closing condition set forth in Section 7.3(a) would not be satisfied or
(y) there exists a breach of any representation or warranty of Parent or
Merger Sub contained in this Agreement such that the closing condition set
forth
in Section 7.3(b) would not be satisfied, (ii) the Company terminates this
Agreement pursuant to Section 8.1(b)(ii) and at the time of such termination
the
conditions in set forth Sections 7.1, 7.2(a), 7.2(b), 7.2(d), 7.2(e), 7.2(f)
and
7.2(g) would be satisfied (provided that for purposes of this Section 8.3(d),
the condition set forth in Section 7.2(e) shall be deemed to have been satisfied
if the Persons set forth on Schedule 7.2(e) have indicated in writing their
willingness to execute the Non-Competition Agreement simultaneously with the
consummation of the Closing; provided further that such writing shall in no
way
be construed to give any operative effect to the Non-Competition Agreement),
or
(iii) the Company terminates this Agreement pursuant to Section 8.1(c)(ii)
then,
in any such case, Parent shall pay to the Company $70,000,000 (such amount,
the
“Parent
Termination Fee”)
as
promptly as reasonably practicable (and in any event within two (2) Business
Days) after termination, payable by wire transfer of same day funds.
(e) Except
to
the extent required by applicable Law, neither the Company nor Parent shall
withhold any withholding taxes from any payment under this Section 8.3.
Notwithstanding
anything in this Agreement to the contrary, (i) Parent and Merger Sub agree
that
payment of the Termination Fee, if such payment is payable and actually paid,
shall be the sole and exclusive remedy of Parent and Merger Sub upon the
termination of this Agreement in the circumstances described in Sections 8.1(b),
8.1(c) and 8.1(d), and (ii) the Company agrees that payment of the Parent
Termination Fee, if such payment is payable and actually paid, shall be the
sole
and exclusive monetary remedy of the Company upon the termination of this
Agreement in the circumstances described in Sections 8.1(b) and 8.1(c). Under
no
circumstances shall the Termination Fee or the Parent Termination Fee be payable
more than once pursuant to this Section 8.3.
(f) Each
of
the Company, Parent and Merger Sub acknowledges and agrees that the agreements
contained in this Section 8.3 are an integral part of the transactions
contemplated by this Agreement. In the event that the Company shall fail to
pay
the Termination Fee when due, or Parent shall fail to pay the Parent Termination
Fee when due, the Company or Parent, as the case may be, shall reimburse the
other party for all reasonable costs and expenses incurred or
accrued
by such other party (including reasonable fees and expenses of counsel) in
connection with the collection under and enforcement of this Section 8.3.
MISCELLANEOUS
Section
9.1. Amendment
and Modification.
Subject
to applicable Law, this Agreement may be amended, modified or supplemented
in
any and all respects, whether before or after any vote of the stockholders
of
the Company contemplated hereby, by written agreement of the parties hereto
by
action of their respective Boards of Directors at any time prior to the
Effective Time.
Section
9.2. Extension;
Waiver.
At any
time prior to the Effective Time, the parties may (i) extend the time for the
performance of any of the obligations or other acts of any party, (ii) waive
any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement and (iii) waive
compliance with any of the agreements or conditions contained in this Agreement.
Any agreement on the part of a party to any such extension or waiver shall
be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such
rights.
Section
9.3. Nonsurvival
of Representations and Warranties.
None of
the representations and warranties contained in this Agreement or in any
schedule, instrument or other document delivered pursuant to this Agreement
shall survive the Effective Time.
Section
9.4. Notices.
Any
and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section 9.4, and confirmation of such transmission is received
prior to 5:00 p.m. (New York time) on a Business Day, (ii) the Business Day
after the date of transmission, if such notice or communication is delivered
via
facsimile at the facsimile telephone number specified in this Agreement, and
confirmation of such transmission is received (x) later than 5:00 p.m. (New
York
time) on a Business Day and earlier than 11:59 p.m. (New York time) on such
Business Day or (y) on a day that is not a Business Day, (iii) when
received, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications (unless changed by the
applicable party by like notice) shall be as follows:
(a) if
to the
Company, to:
Burlington
Coat Factory Warehouse Corporation
1830
Route 130
Burlington,
New Jersey 08016
Attention:
Chief Operating Officer
Telephone
No.: (609) 387-7800
Facsimile
No.: (609) 239-8242
with
copies to:
Burlington
Coat Factory Warehouse Corporation
1830
Route 130
Burlington,
New Jersey 08016
Attention:
General Counsel
Telephone
No.: (609) 387-7800
Facsimile
No.: (609) 239-9675
and
Hughes
Hubbard & Reed LLP
One
Battery Park Plaza
New
York,
NY 10004-1482
Attention:
Ellen S. Friedenberg, Esq.
Telephone
No.: (212) 837-6465
Facsimile
No.: (212) 422-4726
(b) if
to
Parent or Merger Sub, to:
Bain
Capital Partners, LLC
111
Huntington Avenue
Boston,
Massachusetts 02199
Attention:
Jordan Hitch
Telephone
No.: (617) 516-2000
Facsimile
No.: (617) 516-2010
with
a
copy to:
Kirkland
& Ellis LLP
153
East
53rd
Street
New
York,
New York 10022
Attention:
Lance Balk, Esq. and Christopher Neumann, Esq.
Telephone
No.: (212) 446-4800
Facsimile
No: (212) 446-6460
Section
9.5. Counterparts.
This
Agreement may be executed in two (2) or more counterparts, all of which shall
be
considered one and the same agreement, and shall become effective when each
party has received counterparts signed by each of the other parties, it being
understood that one (1) or more parties may sign separate counterparts and
such
counterparts may be delivered by facsimile.
Section
9.6. Entire
Agreement; Third Party Beneficiaries.
This
Agreement (including the documents and the instruments referred to herein)
and
the Confidentiality Agreement: (i) constitute the entire agreement and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter of this Agreement, and (ii)
except
with respect to Article III and Section 6.7 (which shall inure to the Persons
benefiting therefrom who are intended to be third party beneficiaries thereof),
and the right
of
the
Company,
acting on behalf of its stockholders, to pursue any remedies on behalf of its
stockholders pursuant to the proviso set forth in Section 8.2, are not intended
to confer upon any Person other than the parties hereto any rights or remedies
whatsoever.
Section
9.7. Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
(or other authority) of competent jurisdiction to be invalid, void,
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated.
Section
9.8. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the Laws of
the
State of Delaware that apply to agreements made and performed entirely within
the State of Delaware, without regard to the conflicts of laws provisions
thereof or of any other jurisdiction.
Section
9.9. Assignment.
Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties; provided,
however
that, Parent and Merger Sub may assign this Agreement to (a) any of their
respective Affiliates that is directly or indirectly controlled by Bain Capital
Partners, LLC (provided that such Affiliates shall assume the obligations of
Parent and Merger Sub pursuant to the Equity Commitment and no such assumption
shall release Parent or Merger Sub from any such obligations or affect the
Company’s rights as third party beneficiary thereunder) and (b) after the
Effective Time, to any Person or Persons who (i) purchase all or substantially
all of the capital stock or assets of the Surviving Corporation (whether by
merger, consolidation or otherwise) or (ii) provide the financing to the
Surviving Corporation, Merger Sub or Parent, without the consent of any Person
(provided that, in either case, such assignment shall comply with Section 6.7(g)
and no such assignment shall relieve Parent or Merger Sub from its obligations
hereunder). Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and permitted assigns. Any purported assignment in
violation of the provisions of this Agreement shall be null and void
ab initio.
Section
9.10. Schedules.
Disclosure set forth under one Section of the Company Disclosure Schedule shall
be deemed to be disclosed in any other Section or Sections of the Company
Disclosure Schedule where such disclosure is reasonably apparent on the face
of
such disclosure and would be relevant or applicable. The fact that any
information is disclosed in the Company Disclosure Schedule shall not be
construed to mean that such information is required to be disclosed by this
Agreement. Without limiting the foregoing, the information set forth in the
Company Disclosure Schedule, and the dollar thresholds set forth in this
Agreement, shall not be used as a basis for interpreting the terms “material” or
“Company Material Adverse Effect” or other similar terms in this
Agreement.
Section
9.11. Expenses.
Except
as otherwise expressly set forth in this Agreement, all fees and expenses
incurred by the parties hereto shall be borne solely and entirely by the party
that has incurred such fees and expenses.
(a) Each
of
the Company, Parent and Merger Sub irrevocably agrees that any legal action
or
proceeding arising out of or relating to this Agreement or any of the
Transactions shall be brought and determined in any federal court located in
the
State of Delaware or any Delaware state court, and each of the Company, Parent
and Merger Sub hereby irrevocably submits with regard to any such action or
proceeding for itself and in respect to its property, generally and
unconditionally, to the exclusive jurisdiction of the aforesaid court. Each
of
the Company, Parent and Merger Sub hereby irrevocably waives, and agrees not
to
assert, by way of motion, as a defense, counterclaim or otherwise, in any such
action or proceeding, (i) any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure
to
lawfully serve process, (ii) that it or its property is exempt or immune from
jurisdiction of such court or from any legal process commenced in such court
(whether through service of notice, attachment prior to judgment, attachment
in
aid of execution of judgment, execution of judgment or otherwise), and (iii)
that (x) such action or proceeding in such court is brought in an inconvenient
forum, (y) the venue of such action or proceeding is improper or (z) this
Agreement, the Transactions or the subject matter hereof or thereof, may not
be
enforced in or by such court.
(b) EACH
OF
THE COMPANY, PARENT AND MERGER SUB HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS.
Section
9.13. Specific
Performance.
The
parties agree that irreparable damage would occur in the event that any of
the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in addition to any other remedy to which such party is entitled at
law
or in equity. Each party agrees that it shall not oppose the granting of such
relief and hereby irrevocably waives any requirement for the security or posting
of any bond in connection with such relief.
(a) The
terms
and provisions of this Agreement represent the results of negotiations among
the
parties, each of which has been represented by counsel of its own choosing,
and
none of which has acted under duress or compulsion, whether legal, economic
or
otherwise. Accordingly, the terms and provisions of this Agreement shall be
interpreted and construed in accordance with their usual and customary meanings,
and each of the parties hereto hereby waives the application in connection
with
the interpretation and construction of this Agreement of any Law to the effect
that ambiguous or conflicting terms or provisions contained in this Agreement
shall be interpreted or construed against the party whose attorney prepared
the
executed draft or any earlier draft of this Agreement.
(b) All
references in this Agreement to Sections and Articles without further
specification are to Sections of, and Articles of, this
Agreement.
(c) The
Table
of Contents and the captions in this Agreement are for convenience only and
shall not in any way affect the meaning or construction of any provisions of
this Agreement.
(d) Unless
the context otherwise requires, “or” is not exclusive.
(e) Unless
the context otherwise requires, “including” means “including but not limited
to.”
(f) The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term.
IN
WITNESS WHEREOF, the Company, Parent and Merger Sub have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
| |
BURLINGTON
COAT FACTORY WAREHOUSE CORPORATION
|
| |
|
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By:
|
/s/
Stephen E. Milstein
|
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|
Name:
Stephen E. Milstein
|
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|
Title:
Executive Vice President
|
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|
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BCFWC
ACQUISITION, INC.
|
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By:
|
/s/
Jordan Hitch
|
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Name:
Jordan Hitch
|
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|
Title: Vice
President
|
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|
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BCFWC
MERGERSUB, INC.
|
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|
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|
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By:
|
/s/
Jordan Hitch
|
| |
|
Name:
Jordan Hitch
|
| |
|
Title:
Vice President
|
BCFWC
ACQUISITION, INC.
NON-COMPETITION
AND CONFIDENTIALITY AGREEMENT
THIS
AGREEMENT is made as of ________, 2006 between BCFWC Acquisition, Inc., a
Delaware corporation (the “Company”),
and
___________ (“Seller”).
For
purposes of this Agreement, unless the context requires otherwise, the term
“Company”
shall
include all subsidiaries of the Company, including, without limitation,
Burlington Coat Factory Warehouse Corporation, a Delaware corporation
(“BlueBlazer”)
and
its subsidiaries.
WHEREAS,
Seller pursuant to that certain Agreement and Plan of Merger by and among the
Company, BCFWC Mergersub, Inc., a Delaware corporation (the “Merger
Sub”)
and
BlueBlazer, dated as of January 18, 2006 (the “Merger
Agreement”)
has
received from the Company the right to receive certain cash consideration in
exchange for certain securities of BlueBlazer.
WHEREAS,
at the Effective Time (as defined in the Merger Agreement) MergerSub will merge
with and into BlueBlazer pursuant to the Merger Agreement, with BlueBlazer
being
the surviving corporation of such merger, and the Company will own all issued
and outstanding shares of capital stock of BlueBlazer.
WHEREAS,
the Company and Seller desire to enter into an agreement setting forth the
obligation of Seller to refrain from competing with the Company for a period
of
time after the consummation of the transactions contemplated by the Merger
Agreement as provided herein.
WHEREAS,
the execution and delivery of this Agreement by Seller is a condition to the
consummation of the transactions contemplated by the Merger Agreement, and
Seller is entering into this Agreement to induce the Company and the Merger
Sub
to consummate the transactions contemplated by the Merger
Agreement.
NOW,
THEREFORE, in consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Seller hereby agree as follows:
1. Nondisclosure
and Nonuse of Confidential Information.
For a
period of three (3) years following the date hereof, Seller shall keep secret
and hold in confidence, and shall not use for its benefit, any and all
information relating to the Company that is proprietary to the Company, other
than the following: (i) information that has become generally available to
the
public other than as a result of a disclosure by Seller in breach of this
Agreement and (ii) information that is required to be disclosed by any
applicable law. In connection with disclosure of confidential information under
clause (ii) above, Seller shall give the Company timely prior notice of the
anticipated disclosure and the parties shall cooperate in designing reasonable
procedural and other safeguards to preserve, to the maximum extent possible,
the
confidentiality of such material.
2. Noncompetition.
(a) Seller
agrees that, for a period of one (1) year following the date hereof (the
“Non-Compete
Period”),
neither Seller nor any of Seller’s Affiliates shall without the prior written
consent of the Company, directly or indirectly, anywhere in the United States
(the “Territory”)
(i)
form, acquire, operate, control, make a financial investment in, enter into
any
agreement pertaining to, publicly announce the launch of, or otherwise finance,
manage, participate in, consult with, become employed by or render advisory
services to, any business or otherwise become associated with an enterprise,
the
business of which is the same as, substantially similar to or otherwise
competitive with the business of the Company as now conducted (i.e., the
business of BlueBlazer and its subsidiaries conducted or proposed to be
conducted immediately prior to the closing of the Merger) (a “Competing
Business”),
or
(ii) for the purpose of conducting or engaging in a Competing Business, call
upon, solicit, advise or otherwise do, or attempt to do, business with any
suppliers, vendors or other material business relationships of the Company.
As
used in this Section
2
and
Section
3
below,
“Affiliate”
of
any
particular person means any other person controlling, controlled by or under
common control with such particular person, where “control” means the
possession, directly or indirectly, of the power to direct the management and
policies of a person whether through the ownership of voting securities,
contract or otherwise. Nothing herein shall prohibit Seller or any of Seller’s
Affiliates from being a passive owner of not more than 3% of the outstanding
stock of a corporation which is publicly traded, so long as neither Seller
nor
any of Seller’s Affiliate have an active participation in the business of such
corporation.
(b) Seller
agrees that (i) the covenants set forth in this Section
2
are
reasonable in temporal and geographical scope and in all other respects, and
(ii) the covenants contained herein have been made in order to induce the
Company to enter into this Agreement and the Merger Agreement.
(c) The
Company and Seller intend that the covenants of this Section
2
shall be
deemed to be a series of separate covenants, one for each county or province
of
each and every state within the Territory and one for each month of the
Non-Compete Period.
(d) If,
at
the time of enforcement of this Section
2,
a court
shall hold that the duration or scope stated herein are unreasonable under
circumstances then existing, the parties agree that the maximum duration or
scope under such circumstances shall be substituted for the stated duration
or
scope and that the court shall be allowed to revise the restrictions contained
herein to cover the maximum period and scope permitted by law.
(e) Seller
recognizes and affirms that in the event of its breach of any provision of
this
Section
2,
money
damages would be inadequate and the Company would not have an adequate remedy
at
law. Accordingly, Seller agrees that in the event of a breach or a threatened
breach by Seller of any of the provisions of this Section
2,
the
Company, in addition and supplementary to other rights and remedies existing
in
its favor, may apply to any court of law or equity of competent jurisdiction
for
specific performance and/or injunctive or other relief in order to enforce
or
prevent any violations of the provisions hereof (without posting a bond or
other
security). In addition, in the event of a breach or violation by Seller of
this
Section
2,
the
Non-Compete Period shall be tolled until such breach or violation has been
duly
cured.
3. Nonsolicitation.
For a
period of three (3) years following the date hereof, Seller and each of Seller’s
Affiliates shall not:
(a) induce
or
attempt to induce any employee of the Company to leave the employ of the
Company, or in any way interfere with the relationship between the Company
and
any employee thereof; provided
that the
placement of any general advertisement or general solicitation to the public
at
large shall not constitute “interference” under this clause (a);
(b) hire
directly or through another entity any person who was an employee of the Company
or any of its subsidiaries as of the date hereof; provided
that,
with the Company’s prior written consent (which consent shall not unreasonably
be withheld), Seller and Seller’s Affiliates can hire any person who was an
employee of the Company or any of its subsidiaries who has been fired by the
Company or any of its subsidiaries; provided further
that
(i) for
the
avoidance of doubt, the Company’s withholding of consent with respect to
Seller’s or Seller’s Affiliate’s hiring of any person shall be deemed reasonable
if the Company determines in good faith that (x) the hiring of such person
by
Seller or Seller’s Affiliates would be detrimental to the business of the
Company or (y) such person has caused such firing to occur in order to
circumvent the restrictions of this Section 3(b),
(ii) if
Seller
or any of Seller’s Affiliates wishes to hire any such person or persons, it
shall so notify the Company (the “Notice”),
which
Notice shall set forth the identity of the former employee or employees and
request the consent of the Company to such hiring, and, if the Company fails
to
notify the Seller or the notifying Affiliate within ten (10) days of the
Company’s receipt of the Notice to it that it is withholding its consent, the
Company shall be deemed to have granted such consent and the Seller or the
notifying Affiliate may proceed to hire such former employee or employees;
and
(iii) nothing
herein shall prevent a member of the Milstein family from hiring any other
member of the Milstein family; or
(c) induce
or
attempt to induce any supplier, vendor or other business relation of the Company
to cease doing business with the Company, or in any way interfere with the
relationship between any such supplier, vendor, or other business relation
and
the Company (including, without limitation, making any negative statements
or
communications concerning the Company); provided
that (x)
the hiring of any legal counsel, accountant or financial advisor, and (y)
following the end of the Non-Compete Period, the operation of any competitive
business in the ordinary course of business, in each case, in and of itself,
shall not constitute “interference” under this Section 3(c).
4. Notices.
Any
notice provided for in this Agreement must be in writing and must be either
personally delivered, sent via facsimile, mailed by first class mail (postage
prepaid and return receipt requested) or sent by reputable overnight courier
service (charges prepaid) to the recipient at the address below
indicated:
To
the
Company:
BCFWC
Acquisition, Inc.
Bain
Capital Partners, LLC
111
Huntington Avenue
Boston,
Massachusetts 02199
Attention:
Jordan Hitch
Facsimile
No.: (617) 516-2010
with
copies (which shall not constitute notice to the Company) to:
Kirkland
& Ellis
Citicorp
Center
153
East
53rd Street
New
York,
NY 10022-4675
Attention:
Lance Balk, Esq.
Facsimile:
(212) 446-4900
To
Seller:
[Name
of Seller]
Attention:
Facsimile:
with
copies (which shall not constitute notice to the Seller) to:
Phillips
Nizer LLP
666
fifth
Avenue
28th
Floor
New
York,
NY 10103
Attention:
Tiberio Schwartz
Facsimile:
(212) 262-5152
or
such
other address or to the attention of such other person as the recipient party
shall have specified by prior written notice to the sending party. Any notice
under this Agreement shall be deemed to have been given when received by the
intended recipient thereof.
5. General
Provisions.
(a) Absence
of Conflicting Agreements.
Seller
hereby warrants and covenants that (i) Seller’s execution, delivery and
performance of this Agreement do not and shall not result in a breach of the
terms, conditions or provisions of any agreement, instrument, order, judgment
or
decree to which Seller is subject and (ii) upon the execution and delivery
of
this Agreement by the Company, this Agreement shall be the valid and binding
obligation of Seller, enforceable in accordance with its terms.
(b) Severability.
Whenever possible, each provision of this Agreement shall be interpreted in
such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision or any
other
jurisdiction, and this Agreement shall be reformed, construed and enforced
in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein. The parties agree that a court of competent
jurisdiction making a determination of the invalidity or unenforceability of
any
term or provision of Section
2
of this
Agreement shall have the power to reduce the scope, duration or area of any
such
term or provision, to delete specific words or phrases or to replace any invalid
or unenforceable term or provision in Section
2
with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision,
and
this Agreement shall be enforceable as so modified.
(c) Complete
Agreement.
This
Agreement, those documents expressly referred to herein and other documents
of
even date herewith embody the complete agreement and understanding among the
parties and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
(d) Counterparts.
This
Agreement may be executed in separate counterparts, each of which is deemed
to
be an original and all of which taken together constitute one and the same
agreement.
(e) Successors
and Assigns.
Except
as otherwise provided herein, this Agreement shall bind and inure to the benefit
of and be enforceable by the Company and Seller and their respective successors
and assigns; provided, that the rights and obligations of Seller under this
Agreement may not be assigned (except in connection with a liquidation or
dissolution of Seller) or delegated without the prior written consent of the
Company.
(f) Choice
of Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by, and construed in accordance with, the
internal law, and not the law of conflicts, of the State of New York, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York.
(g) Waiver
of Jury Trial.
EACH
OF THE COMPANY AND SELLER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT.
(h) Jurisdiction.
Each of
the parties hereto submits to the jurisdiction of any state or federal court
sitting in New York, New York, in any action or proceeding arising out of or
relating to this Agreement and agrees that all claims in respect of the action
or proceeding may be heard and determined in any such court and hereby expressly
submits to the personal
jurisdiction
and venue of such court for the purposes hereof and expressly waives any claim
of improper venue and any claim that such courts are an inconvenient forum.
Each
of the parties hereby irrevocably consent to the service of process of any
of
the aforementioned courts in any such suit, action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid and return
receipt requested, to its address set forth in Section 4, such service to become
effective 10 days after such mailing.
(i) Descriptive
Headings; Construction.
The
descriptive headings of this Agreement are inserted for convenience only and
do
not constitute a part of this Agreement. The parties to this Agreement have
participated jointly in the negotiation and drafting of this Agreement. In
the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party
by
virtue of the authorship of any of the provisions of this Agreement. The word
“including” shall mean including without limitation.
(j) No
Third-Party Beneficiaries.
This
Agreement is for the sole benefit of the parties hereto and their permitted
successors and assigns and nothing herein expressed or implied shall give or
be
construed to give any person, other than the parties hereto and such permitted
successors and assigns, any legal or equitable rights hereunder.
(k) Remedies.
Each of
the parties to this Agreement shall be entitled to enforce its rights under
this
Agreement specifically, to recover damages and costs (including reasonable
attorneys fees) caused by any breach of any provision of this Agreement and
to
exercise all other rights existing in its favor. The parties hereto agree and
acknowledge that Seller’s breach of any term or provision of this Agreement
shall materially and irreparably harm the Company, that money damages shall
accordingly not be an adequate remedy for any breach of the provisions of this
Agreement by Seller and that the Company in its sole discretion and in addition
to any other remedies it may have at law or in equity may apply to any court
of
law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce
or
prevent any violations of the provisions of this Agreement. Nothing herein
is
intended to entitle any party hereto to money damages without proving such
damages.
(l) Amendment
and Waiver.
The
provisions of this Agreement may be amended and waived only with the prior
written consent of the Company and Seller.
*
* * *
*
IN
WITNESS WHEREOF, the parties hereto have executed this Non-Competition and
Confidentiality Agreement on the date first written above.
| |
BCFWC
ACQUISITION, INC.
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|
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By:
|
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|
Name:
|
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Title:
|
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[Seller]
|
RESTATED
CERTIFICATE OF INCORPORATION
OF
BURLINGTON
COAT FACTORY WAREHOUSE CORPORATION
ARTICLE
ONE
The
name
of the Corporation is Burlington Coat Factory Warehouse Corporation. (the
“Corporation”).
ARTICLE
TWO
The
address of the Corporation’s registered office in the state of Delaware is 2711
Centerville Road, Suite 400, Wilmington, Delaware 19808, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is Corporation Service Company.
ARTICLE
THREE
The
purpose of the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation Law.
ARTICLE
FOUR
Section
1. Authorized
Shares.
The
total number of shares of capital stock which the Corporation has authority
to
issue is [______] shares, consisting of:
(a) [_________]
shares of Preferred Stock, par value $0.01 per share (“Preferred
Stock”);
and
(b) [_________]
shares of Common Stock, par value $1.00 per share (“Common
Stock”).
The
Preferred Stock and the Common Stock shall have the rights, preferences and
limitations set forth below.
Section
2. Preferred
Stock.
The
Preferred Stock may be issued from time to time and in one or more series.
The
Board of Directors of the Corporation is authorized to determine or alter the
powers, preferences and rights (including voting rights), and the
qualifications, limitations and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock, and within the limitations or
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series of Preferred
Stock, to increase or decrease (but not below the number of shares of any such
series of Preferred Stock then outstanding) the number of shares of any such
series of Preferred Stock, and to fix the number of shares of any series of
Preferred Stock. In the event that the number of shares of any series of
Preferred Stock shall be so decreased, the shares constituting such decrease
shall
resume
the status which such shares had prior to the adoption of the resolution
originally fixing the number of shares of such series of Preferred Stock subject
to the requirements of applicable law.
Section
3. Common
Stock.
(a) Dividends.
Except
as otherwise provided by the Delaware General Corporation Law or this Restated
Certificate of Incorporation (this “Certificate
of Incorporation”),
the
holders of Common Stock: (i) subject to the rights of holders of any series
of
Preferred Stock, shall share ratably, on a per share basis, in all dividends
and
other distributions payable in cash, securities or other property of the
Corporation as may be declared thereon by the Board of Directors from time
to
time out of assets or funds of the Corporation legally available therefor;
and
(ii) are subject to all the powers, rights, privileges, preferences and
priorities of any series of Preferred Stock as provided herein or in any
resolution or resolutions adopted by the Board of Directors pursuant to
authority expressly vested in it by the provisions of Section 2 of this Article
Four.
(b) Conversion
Rights.
The
Common Stock shall not be convertible into, or exchangeable for, shares of
any
other class or classes or of any other series of the same class of the
Corporation’s capital stock.
(c) Voting
Rights.
Except
as otherwise provided by the Delaware General Corporation Law or this
Certificate of Incorporation and subject to the rights of holders of any series
of Preferred Stock, all of the voting power of the stockholders of the
Corporation shall be vested in the holders of the Common Stock, and each holder
of Common Stock shall have one vote for each share held by such holder on all
matters voted upon by the stockholders of the Corporation.
(d) Liquidation
Rights.
In the
event of any liquidation, dissolution or winding up of the affairs of the
Corporation, whether voluntary or involuntary, after payment or provision for
payment of the Corporation’s debts and subject to the rights of the holders of
shares of Preferred Stock upon such dissolution, liquidation or winding up,
the
remaining net assets of the Corporation shall be distributed among holders
of
shares of Common Stock ratably on a per share basis. A merger or consolidation
of the Corporation with or into any other corporation or other entity, or a
sale
or conveyance of all or any part of the assets of the Corporation (which shall
not in fact result in the liquidation of the Corporation and the distribution
of
assets to its stockholders) shall not be deemed to be a voluntary or involuntary
liquidation or dissolution or winding up of the Corporation within the meaning
of this Section 3(d).
(e) Registration
or Transfer.
The
Corporation shall keep or cause to be kept at its principal office (or such
other place as the Corporation reasonably designates) a register for the
registration of Common Stock. Upon the surrender of any certificate representing
shares of any class of Common Stock at such place, the Corporation shall, at
the
request of the registered holder of such certificate, execute and deliver a
new
certificate or certificates in exchange therefor representing in the aggregate
the number of shares of such class represented by the surrendered certificate,
and the Corporation forthwith shall cancel such surrendered certificate. Each
such new certificate will be registered in such name and will represent such
number of shares of such class as is requested by the holder of the surrendered
certificate and shall be
substantially
identical in form to the surrendered certificate. The issuance of new
certificates shall be made without charge to the holders of the surrendered
certificates for any issuance tax in respect thereof or other cost incurred
by
the Corporation in connection with such issuance.
(f) Replacement.
Upon
receipt of evidence reasonably satisfactory to the Corporation (an affidavit
of
the registered holder will be satisfactory) of the ownership and the loss,
theft, destruction or mutilation of any certificate evidencing one or more
shares of any class of Common Stock, and in the case of any such loss, theft
or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor, its own agreement will be satisfactory), or, in the
case
of any such mutilation upon surrender of such certificate, the Corporation
shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
(g) Notices.
All
notices referred to herein shall be in writing, shall be delivered personally
or
by first class mail, postage prepaid, and shall be deemed to have been given
when so delivered or mailed to the Corporation at its principal executive
offices and to any stockholder at such holder’s address as it appears in the
stock records of the Corporation (unless otherwise specified in a written notice
to the Corporation by such holder).
(h) Fractional
Shares.
In no
event will holders of fractional shares be required to accept any consideration
in exchange for such shares other than consideration which all holders of Common
Stock are required to accept.
ARTICLE
FIVE
The
Corporation is to have perpetual existence.
ARTICLE
SIX
In
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, alter, amend or repeal the By-Laws
of the Corporation.
ARTICLE
SEVEN
Section
1. Limitation
of Liability.
(a) To
the
fullest extent permitted by the Delaware General Corporation Law as it now
exists or may hereafter be amended (but, in the case of any such amendment,
only
to the extent that such amendment permits the Corporation to provide broader
indemnification or exculpation rights than permitted prior thereto), and except
as otherwise provided in the Corporation’s By-laws, no current Director of the
Corporation or any Director of the Corporation prior to the date of this
Restated Certificate of Incorporation shall be liable to the Corporation or
its
stockholders for monetary damages arising from a breach of fiduciary duty owed
to the Corporation or its stockholders.
(b) Any
repeal or modification of the foregoing paragraph by the stockholders of the
Corporation shall not adversely affect any right or protection of a Director
of
the Corporation existing at the time of such repeal or
modification.
Section
2. Right
to Indemnification.
Each
person who was or is made a party or is threatened to be made a party to or
is
otherwise involved (including involvement as a witness) in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (a “proceeding”),
by
reason of the fact that he or she, or a person of whom he or she was the legal
representative, is or was a Director or officer of the Corporation or is or
was
serving at the request of the Corporation as a Director, officer, employee
or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan (an
“indemnitee”),
whether the basis of such proceeding is alleged action in an official capacity
as a Director, officer, employee or agent or in any other capacity while serving
as a Director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but,
in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than permitted prior
thereto), against all expense, liability and loss (including attorneys’ fees,
judgments, fines, excise taxes or penalties and amounts paid or to be paid
in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a Director, officer, employee or agent and shall inure to the
benefit of the indemnitee’s heirs, executors and administrators; provided,
however, that, except as provided in Section 3 of this Article Seven with
respect to proceedings to enforce rights to indemnification, the Corporation
shall indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section 2 of this Article Seven shall be
a
contract right and shall include the obligation of the Corporation to pay the
expenses incurred in defending any such proceeding in advance of its final
disposition. The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same or
lesser scope and effect as the foregoing indemnification of Directors and
officers.
Section
3. Procedure
for Indemnification.
Any
indemnification of a Director or officer of the Corporation or advance of
expenses under Section 2 of this Article Seven shall be made promptly, and
in
any event within thirty days, upon the written request of the Director or
officer. If a determination by the Corporation that the Director or officer
is
entitled to indemnification pursuant to this Article Seven is required, and
the
Corporation fails to respond within sixty days to a written request for
indemnity, the Corporation shall be deemed to have approved the request. If
the
Corporation denies a written request for indemnification or advance of expenses,
in whole or in part, or if payment in full pursuant to such request is not
made
within thirty days, the right to indemnification or advances as granted by
this
Article Seven shall be enforceable by the Director or officer in any court
of
competent jurisdiction. Such person’s costs and expenses incurred in connection
with successfully establishing his or her right to indemnification, in whole
or
in part, in any such action shall also be indemnified by the Corporation. It
shall be a defense to any such action that the claimant has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the
Corporation
to indemnify the claimant for the amount claimed, but the burden of such defense
shall be on the Corporation. Neither the failure of the Corporation (including
its Board of Directors, independent legal counsel or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or
she
has met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation (including
its
Board of Directors, independent legal counsel or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense
to
the action or create a presumption that the claimant has not met the applicable
standard of conduct. The procedure for indemnification of other employees and
agents for whom indemnification is provided pursuant to Section 2 of this
Article Seven shall be the same procedure set forth in this Section 3 for
Directors or officers, unless otherwise set forth in the action of the Board
of
Directors providing indemnification for such employee or agent.
Section
4. Insurance.
The
Corporation may purchase and maintain insurance on its own behalf and on behalf
of any person who is or was a Director, officer, employee or agent of the
Corporation or was serving at the request of the Corporation as a Director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan, against any expense, liability or loss asserted against him or her and
incurred by him or her in any such capacity, whether or not the Corporation
would have the power to indemnify such person against such expenses, liability
or loss under the Delaware General Corporation Law.
Section
5. Service
for Subsidiaries.
Any
person serving as a Director, officer, employee or agent of another corporation,
partnership, limited liability company, joint venture or other enterprise,
at
least 50% of whose equity interests are owned by the Corporation (a
“subsidiary”
for
this Article Seven) shall be conclusively presumed to be serving in such
capacity at the request of the Corporation.
Section
6. Reliance.
Persons
who after the date of the adoption of this provision become or remain Directors
or officers of the Corporation or who, while a Director, officer or other
employee of the Corporation, become or remain a Director, officer, employee
or
agent of a subsidiary, shall be conclusively presumed to have relied on the
rights to indemnity, advance of expenses and other rights contained in this
Article Seven in entering into or continuing such service. The rights to
indemnification and to the advance of expenses conferred in this Article Seven
shall apply to claims made against an indemnitee arising out of acts or
omissions which occurred or occur both prior and subsequent to the adoption
hereof.
Section
7. Non-Exclusivity
of Rights.
The
rights to indemnification and to the advance of expenses conferred in this
Article Seven shall not be exclusive of any other right which any person may
have or hereafter acquire under this Restated Certificate or under any statute,
by-law, agreement, vote of stockholders or disinterested Directors or
otherwise.
Section
8. Merger
or Consolidation.
For
purposes of this Article Seven, references to the “Corporation” shall include,
in addition to the resulting Corporation, any constituent Corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority
to
indemnify
its
Directors, officers and employees or agents, so that any person who is or was
a
Director, officer, employee or agent of such constituent Corporation, or is
or
was serving at the request of such constituent Corporation as a Director,
officer, employee or agent of another Corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article
Seven with respect to the resulting or surviving Corporation as he or she would
have with respect to such constituent Corporation if its separate existence
had
continued.
Section
9. Savings
Clause.
If this
Article Seven or any portion hereof shall be invalidated on any ground by any
court of competent jurisdiction, then the Corporation shall nevertheless
indemnify each person entitled to indemnification under Section 2 of this
Article Seven as to all expense, liability and loss (including attorneys’ fees
and related disbursements, judgments, fines, Employment Retirement Income
Security Act of 1974 excise taxes and penalties, penalties and amounts paid
or
to be paid in settlement) actually and reasonably incurred or suffered by such
person and for which indemnification is available to such person pursuant to
this Article Seven to the full extent permitted by any applicable portion of
this Article Seven that shall not have been invalidated and to the full extent
permitted by applicable law.
ARTICLE
EIGHT
Section
1. Certain
Acknowledgments.
In
recognition and anticipation that: (i) the partners, principals, directors,
officers, members, managers and/or employees of Bain Capital Fund VIII, L.P.
(“Bain”)
may
serve as directors and/or officers of the Corporation, (ii) Bain may engage
in
the same or similar activities or related lines of business as those in which
the Corporation, directly or indirectly, may engage and/or other business
activities that overlap with or compete with those in which the Corporation,
directly or indirectly, may engage, and (iii) that the Corporation and its
subsidiaries may engage in material business transactions with Bain and that
the
Corporation is expected to benefit therefrom, the provisions of this Article
Eight are set forth to regulate and define the conduct of certain affairs of
the
Corporation as they may involve Bain and its partners, principals, directors,
officers, members, managers and/or employees, and the powers, rights, duties
and
liabilities of the Corporation and its officers, directors and stockholders
in
connection therewith.
Section
2. Competition
and Corporate Opportunities.
Bain
shall not have any duty to refrain from engaging directly or indirectly in
the
same or similar business activities or lines of business as the Corporation
or
any of its subsidiaries. In the event that Bain acquires knowledge of a
potential transaction or matter which may be a corporate opportunity for itself
and the Corporation or any of its subsidiaries, neither the Corporation nor
any
of its subsidiaries shall have any expectancy in such corporate opportunity,
and
Bain shall not have any duty to communicate or offer such corporate opportunity
to the Corporation or any of its subsidiaries and may pursue or acquire such
corporate opportunity for itself or direct such corporate opportunity to another
person.
Section
3. Allocation
of Corporate Opportunities.
In the
event that a Director or officer of the Corporation who is also a partner,
principal, Director, officer, member, manager and/or employee of Bain acquires
knowledge of a potential transaction or matter which may be a corporate
opportunity for the Corporation or any of its subsidiaries and Bain, neither
the
Corporation
nor any of its subsidiaries shall have any expectancy in such corporate
opportunity unless such corporate opportunity is expressly offered to such
person in his or her capacity as a Director or officer of the
Corporation.
Section
4. Certain
Matters Deemed Not Corporate Opportunities.
In
addition to and notwithstanding the foregoing provisions of this Article Eight,
a corporate opportunity shall not be deemed to belong to the Corporation if
it
is a business opportunity that the Corporation is not financially able or
contractually permitted or legally able to undertake, or that is, from its
nature, not in the line of the Corporation’s business or is of no practical
advantage to it or that is one in which the Corporation has no interest or
reasonable expectancy.
Section
5. Agreements
and Transactions with Bain.
In the
event that Bain enters into an agreement or transaction with the Corporation
or
any of its subsidiaries, a Director or officer of the Corporation who is also
a
partner, principal, Director, officer, member, manager and/or employee of Bain,
as applicable, shall have fully satisfied and fulfilled the fiduciary duty
of
such Director or officer to the Corporation and its stockholders with respect
to
such agreement or transaction, if:
(a) At
the
time the parties entered into the transaction, such agreement or transaction
was
fair to the Corporation of subsidiary thereof, and was made on terms that were
no less favorable to the Corporation than could have been obtained from a
bona-fide third party; and either
(b) (i) The
agreement or transaction was approved, after being made aware of the material
facts of the relationship between each of the Corporation or subsidiary thereof
and Bain and the material terms and facts of the agreement or transaction,
by
(A) an affirmative vote of a majority of the members of the Board of Directors
of the Corporation who are not persons or entities with a material financial
interest in the agreement or transaction (“Interested Persons”) or (B) an
affirmative vote of a majority of the members of a committee of the Board of
Directors of the Corporation consisting of members who are not Interested
Persons; or
(ii) The
agreement or transaction was approved by an affirmative vote of a majority
of
the shares of the Corporation’s Common Stock entitled to vote, excluding Bain
and any Interested Person; provided that if no Common Stock is then outstanding
a majority of the voting power of the Corporation’s capital stock entitled to
vote, excluding Bain and any other Interested Person, as applicable.
Section
6. Amendment
of this Article.
Notwithstanding anything to the contrary elsewhere contained in this Certificate
of Incorporation, the affirmative vote of the holders of at least 662/3% of
the
voting power of all shares of Common Stock then outstanding, voting together
as
a single class, shall be required to alter, amend or repeal, or to adopt any
provision inconsistent with, this Article Eight.
Section
7. Deemed
Notice.
Any
person or entity purchasing or otherwise acquiring any interest in any shares
of
the Corporation shall be deemed to have notice or and to have consented to
the
provisions of this Article Eight.
ARTICLE
NINE
The
Corporation reserves the right to amend, alter, change or repeal any provision
contained in this Certificate, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation.
ARTICLE
TEN
The
Corporation expressly elects not to be governed by Section 203 of the Delaware
General Corporation Law.
ARTICLE
ELEVEN
Whenever
a compromise or arrangement is proposed between the Corporation and its
creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or any creditor or stockholder thereof or on the application of
a
receiver or receivers appointed for the Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees
in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting
of the creditors, and/or the shareholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said
court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise
or
arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the
said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or
on
all the stockholders, or class of stockholders, of the Corporation, as the
case
may be, and also on this Corporation.
*
* * * *
*
BY-LAWS
OF
BURLINGTON
COAT FACTORY WAREHOUSE CORPORATION
A
Delaware Corporation
ARTICLE
I
OFFICES
Section
1. Registered
Office.
The
registered office of the corporation in the State of Delaware shall be located
at 2711 Centerville Road, Suite 400, in the City of Wilmington. The name of
the
corporation’s registered agent at such address shall be Corporation Service
Company. The registered office and/or registered agent of the corporation may
be
changed from time to time by action of the Board of Directors.
Section
2. Other
Offices.
The
corporation may also have offices at such other places, both within and without
the State of Delaware, as the Board of Directors may from time to time determine
or the business of the corporation may require.
ARTICLE
II
MEETINGS
OF STOCKHOLDERS
Section
1. Place
and Time of Meetings.
An
annual meeting of the stockholders shall be held each year for the purpose
of
electing Directors and conducting such other proper business as may come before
the meeting. The date, time and place of the annual meeting may be determined
by
resolution of the Board of Directors or as set by the president of the
corporation.
Section
2. Special
Meetings.
Special
meetings of stockholders may be called for any purpose (including, without
limitation, the filling of board vacancies and newly created directorships),
and
may be held at such time and place, within or without the State of Delaware,
as
shall be stated in a notice of meeting or in a duly executed waiver of notice
thereof. Such meetings may be called at any time by two or more members of
the
Board of Directors or the president and shall be called by the president upon
the written request of holders of shares entitled to cast not less than fifty
percent (50%) of the outstanding shares of the corporation’s voting common
stock.
Section
3. Place
of Meetings.
The
Board of Directors may designate any place, either within or without the State
of Delaware, as the place of meeting for any annual meeting or for any special
meeting called by the Board of Directors. If no designation is made, or if
a
special meeting be otherwise called, the place of meeting shall be the principal
executive office of the corporation.
Section
4. Notice.
Whenever stockholders are required or permitted to take action at a meeting,
written or printed notice stating the place, date, time, and, in the case of
special meetings, the purpose or purposes, of such meeting, shall be given
to
each stockholder entitled to vote at such meeting not less than 10 nor more
than
60 days before the date of the meeting. All such notices shall be delivered,
either personally or by mail, by or at the direction of the Board of Directors,
the president or the secretary, and if mailed, such notice shall be deemed
to be
delivered when deposited in the United States mail, postage prepaid, addressed
to the stockholder at his, her or its address as the same appears on the records
of the corporation. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends for the express
purpose of objecting at the beginning of the meeting to the transaction of
any
business because the meeting is not lawfully called or convened.
Section
5. Stockholders
List.
The
officer having charge of the stock ledger of the corporation shall make, at
least 10 days before every meeting of the stockholders, a complete list of
the
stockholders entitled to vote at such meeting arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered
in
the name of each stockholder. Such list shall be open to the examination of
any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and
place of the meeting during the whole time thereof, and may be inspected by
any
stockholder who is present.
Section
6. Quorum.
Except
as otherwise provided by applicable law or by the corporation’s certificate of
incorporation, a majority of the outstanding shares of the corporation entitled
to vote, represented in person or by proxy, shall constitute a quorum at a
meeting of stockholders. If less than a majority of the outstanding shares
are
represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time in accordance with Section 7 of this Article
II,
until a quorum shall be present or represented.
Section
7. Adjourned
Meetings.
When a
meeting is adjourned to another time and place, notice need not be given of
the
adjourned meeting if the time and place thereof are announced at the meeting
at
which the adjournment is taken. At the adjourned meeting the corporation may
transact any business which might have been transacted at the original meeting.
If the adjournment is for more than thirty days, or if after the adjournment
a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section
8. Vote
Required.
When a
quorum is present, the affirmative vote of the majority of shares present in
person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless the question is
one
upon which by express provisions of an applicable law or of the corporation’s
certificate of incorporation a different vote is required, in which case such
express provision shall govern and control the decision of such question. Where
a separate vote by class is required, the affirmative vote of the majority
of
shares of such class present in person or represented by proxy at the meeting
shall be the act of such class.
Section
9. Voting
Rights.
Except
as otherwise provided by the General Corporation Law of the State of Delaware
or
by the corporation’s certificate of incorporation and subject to Section 3 of
Article V hereof, every stockholder shall at every meeting of the stockholders
be entitled to one vote in person or by proxy for each share of common stock
held by such stockholder.
Section
10. Proxies.
Each
stockholder entitled to vote at a meeting of stockholders or to express consent
or dissent to corporate action in writing without a meeting may authorize
another person or persons to act for him, her or it by proxy. Every proxy must
be signed by the stockholder granting the proxy or by his, her or its
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally.
Section
11. Action
by Written Consent.
Unless
otherwise provided in the corporation’s certificate of incorporation, any action
required to be taken at any annual or special meeting of stockholders of the
corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice
and
without a vote, if a consent or consents in writing, setting forth the action
so
taken and bearing the dates of signature of the stockholders who signed the
consent or consents, shall be signed by the holders of outstanding stock having
not less than a majority of the shares entitled to vote, or, if greater, not
less than the minimum number of votes that would be necessary to authorize
or
take such action at a meeting at which all shares entitled to vote thereon
were
present and voted and shall be delivered to the corporation by delivery to
its
registered office in the state of Delaware, or the corporation’s principal place
of business, or an officer or agent of the corporation having custody of the
book or books in which proceedings of meetings of the stockholders are recorded.
Delivery made to the corporation’s registered office shall be by hand or by
certified or registered mail, return receipt requested provided, however, that
no consent or consents delivered by certified or registered mail shall be deemed
delivered until such consent or consents are actually received at the registered
office. All consents properly delivered in accordance with this section shall
be
deemed to be recorded when so delivered. No written consent shall be effective
to take the corporate action referred to therein unless, within sixty days
of
the earliest dated consent delivered to the corporation as required by this
section, written consents signed by the holders of a sufficient number of shares
to take such corporate action are so recorded. Prompt notice of the taking
of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing. Any
action taken pursuant to such written consent or consents of the stockholders
shall have the same force and effect as if taken by the stockholders at a
meeting thereof.
ARTICLE
III
DIRECTORS
Section
1. General
Powers.
The
business and affairs of the corporation shall be managed by or under the
direction of the Board of Directors.
Section
2. Number,
Election, Voting Rights and Term of Office.
The
number of Directors which shall constitute the board as of the effective date
of
these by-laws shall be three (3). Thereafter, the number of Directors shall
be
established from time to time by resolution of the board. The Directors shall
be
elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote in the election of
Directors. The Directors shall be elected in this manner at the annual meeting
of the stockholders, except as provided in Section 4 of this Article III. Each
Director elected shall hold office until a successor is duly elected and
qualified or until his or her earlier death, resignation or removal as
hereinafter provided.
Section
3. Removal
and Resignation.
Any
Director or the entire Board of Directors may be removed at any time, with
or
without cause, by the holders of a majority of the shares then entitled to
vote
at an election of Directors; provided that such removal is in accordance with
the terms of the Members Agreement. Whenever the holders of any class or series
are entitled to elect one or more Directors by the provisions of the
corporation’s certificate of incorporation, the provisions of this section shall
apply, in respect to the removal without cause or a Director or Directors so
elected, to the vote of the holders of the outstanding shares of that class
or
series and not to the vote of the outstanding shares as a whole. Any Director
may resign at any time upon written notice to the corporation.
Section
4. Vacancies.
Except
as otherwise provided by the corporation’s certificate of incorporation,
vacancies and newly created directorships resulting from any increase in the
authorized number of Directors may be filled by a majority vote of the holders
of the corporation’s outstanding stock entitled to vote thereon or by the
remaining members of the Board of Directors then in office, provided that such
election is in accordance with the terms of the Members Agreement; provided
that
such removal is in accordance with the terms of the Members Agreement (for
so
long as the provisions governing the composition of the Board of Directors
are
in effect). Each Director so chosen shall hold office until a successor is
duly
elected and qualified or until his or her earlier death, resignation or removal
as herein provided.
Section
5. Annual
Meetings.
The
annual meeting of each newly elected Board of Directors shall be held without
other notice than this by-law immediately after, and at the same place as,
the
annual meeting of stockholders.
Section
6. Other
Meetings and Notice.
Regular
meetings, other than the annual meeting, of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by resolution of the board. Special meetings of the Board of
Directors may be called by or at the request of the chairman or president on
notice to each Director, either personally, by telephone, by mail, by e-mail,
or
by telegraph with a sufficient time for the convenient assembly (including,
without limitation, in accordance with Section 10 of this Article III) of the
Directors thereat; in like manner and on like notice the president must call
a
special meeting on the written request of at least a majority of the
Directors.
Section
7. Quorum,
Required Vote and Adjournment.
A
majority of the total number of Directors shall constitute a quorum for the
transaction of business. The vote of a majority of Directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.
If a quorum shall not be present at any meeting of the Board of Directors,
the
Directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
Section
8. Committees.
The
Board of Directors may, by resolution passed by a majority of the whole board,
designate one or more committees, each committee to consist of one or more
of
the Directors of the corporation, which to the extent provided in such
resolution or these by-laws shall have and may exercise the powers of the Board
of Directors in the management and affairs of the corporation except as
otherwise limited by law. The Board of Directors may designate one or more
Directors as alternate members of any committee, who may replace any absent
or
disqualified member at any meeting of the committee. Such committee or
committees shall have such name or names as may be determined from time to
time
by resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section
9. Committee
Rules.
Each
committee of the Board of Directors may fix its own rules of procedure and
shall
hold its meetings as provided by such rules, except as may otherwise be provided
by a resolution of the Board of Directors designating such committee. Unless
otherwise provided in such a resolution, the presence of at least a majority
of
the members of the committee shall be necessary to constitute a quorum. In
the
event that a member and that member’s alternate, if alternates are designated by
the Board of Directors as provided in Section 8 of this Article III, of such
committee is or are absent or disqualified, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member
of
the Board of Directors to act at the meeting in place of any such absent or
disqualified member.
Section
10. Communications
Equipment.
Members
of the Board of Directors or any committee thereof may participate in and act
at
any meeting of such board or committee through the use of a conference telephone
or other communications equipment by means of which all persons participating
in
the meeting can hear each other, and participation in the meeting pursuant
to
this section shall constitute presence in person at the meeting.
Section
11. Waiver
of Notice and Presumption of Assent.
Any
member of the Board of Directors or any committee thereof who is present at
a
meeting shall be conclusively presumed to have waived notice of such meeting
except when such member attends for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Such member shall be conclusively presumed
to have assented to any action taken unless his or her dissent shall be entered
in the minutes of the meeting or unless his or her written dissent to such
action shall be filed with the person acting as the secretary of the meeting
before the adjournment thereof or shall be forwarded by registered mail to
the
secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to any member who voted in favor of such
action.
Section
12. Action
by Written Consent.
Unless
otherwise restricted by the corporation’s certificate of incorporation, any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the board or committee.
ARTICLE
IV
OFFICERS
Section
1. Number.
The
officers of the corporation shall be elected by the Board of Directors and
shall
consist of a chairman, if any is elected, a president, one or more vice
presidents, a secretary, a chief financial officer and such other officers
and
assistant officers as may be deemed necessary or desirable by the Board of
Directors. Any number of offices may be held by the same person, except that
no
person may simultaneously hold the office of president and secretary. In its
discretion, the Board of Directors may choose not to fill any office for any
period as it may deem advisable.
Section
2. Election
and Term of Office.
The
officers of the corporation shall be elected annually by the Board of Directors
at its first meeting held after each annual meeting of stockholders or as soon
thereafter as conveniently may be. The president shall appoint other officers
to
serve for such terms as he or she deems desirable. Vacancies may be filled
or
new offices created and filled at any meeting of the Board of Directors. Each
officer shall hold office until a successor is duly elected and qualified or
until his or her earlier death, resignation or removal as hereinafter provided.
Section
3. Removal.
Any
officer or agent elected by the Board of Directors may be removed by the Board
of Directors whenever in its judgment the best interests of the corporation
would be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.
Section
4. Vacancies.
Any
vacancy occurring in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the Board of Directors for
the
unexpired portion of the term by the Board of Directors then in office.
Section
5. Compensation.
Compensation of all officers shall be fixed by the Board of Directors, and
no
officer shall be prevented from receiving such compensation by virtue of his
or
her also being a Director of the corporation.
Section
6. The
Chairman of the Board.
The
Chairman of the Board, if one shall have been elected, shall be a member of
the
board, an officer of the corporation, and, if present, shall preside at each
meeting of the Board of Directors or shareholders. The Chairman of the Board
shall, in the absence or disability of the president, act with all of the powers
and be subject to all the restrictions of the president. He shall advise the
president, and in the president’s absence, other officers of the corporation,
and shall perform such other duties as may from time to time be assigned to
him
by the Board of Directors.
Section
7. The
President.
The
president shall be the chief executive officer of the corporation. In the
absence of the Chairman of the Board or if a Chairman of the Board shall have
not been elected, the president shall preside at all meetings of the
stockholders and Board of Directors at which he or she is present; subject
to
the powers of the Board of Directors, shall have general charge of the business,
affairs and property of the corporation, and control over its officers, agents
and employees; and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The president shall have such other powers
and perform such
other
duties as may be prescribed by the Board of Directors or as may be provided
in
these by-laws.
Section
8. Vice-presidents.
The
vice-president, if any, or if there shall be more than one, the vice-presidents
in the order determined by the Board of Directors shall, in the absence or
disability of the president, act with all of the powers and be subject to all
the restrictions of the president. The vice-presidents shall also perform such
other duties and have such other powers as the Board of Directors, the president
or these by-laws may, from time to time, prescribe.
Section
9. The
Secretary and Assistant Secretaries.
The
secretary shall attend all meetings of the Board of Directors, all meetings
of
the committees thereof and all meetings of the stockholders and record all
the
proceedings of the meetings in a book or books to be kept for that purpose.
Under the president’s supervision, the secretary shall give, or cause to be
given, all notices required to be given by these by-laws or by law; shall have
such powers and perform such duties as the Board of Directors, the president
or
these by-laws may, from time to time, prescribe; and shall have custody of
the
corporate seal of the corporation. The secretary, or an assistant secretary,
shall have authority to affix the corporate seal to any instrument requiring
it
and when so affixed, it may be attested by his or her signature or by the
signature of such assistant secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his or her signature. The assistant secretary, or if
there be more than one, the assistant secretaries in the order determined by
the
Board of Directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the Board of Directors, the
president, or secretary may, from time to time, prescribe.
Section
10. The
Chief Financial Officer and Assistant Treasurer.
The
chief financial officer shall have the custody of the corporate funds and
securities; shall keep full and accurate accounts of receipts and disbursements
in books belonging to the corporation; shall deposit all monies and other
valuable effects in the name and to the credit of the corporation as may be
ordered by the Board of Directors; shall cause the funds of the corporation
to
be disbursed when such disbursements have been duly authorized, taking proper
vouchers for such disbursements; and shall render to the president and the
Board
of Directors, at its regular meeting or when the Board of Directors so requires,
an account of the corporation; shall have such powers and perform such duties
as
the Board of Directors, the president or these by-laws may, from time to time,
prescribe. If required by the Board of Directors, the chief financial officer
shall give the corporation a bond (which shall be rendered every six years)
in
such sums and with such surety or sureties as shall be satisfactory to the
Board
of Directors for the faithful performance of the duties of the office of
treasurer and for the restoration to the corporation, in case of death,
resignation, retirement, or removal from office, of all books, papers, vouchers,
money, and other property of whatever kind in the possession or under the
control of the treasurer belonging to the corporation. The assistant treasurer,
or if there shall be more than one, the assistant treasurers in the order
determined by the Board of Directors, shall in the absence or disability of
the
chief financial officer, perform the duties and exercise the powers of the
chief
financial officer. The assistant treasurers shall perform such other duties
and
have such other powers as the Board of Directors, the president or chief
financial officer may, from time to time, prescribe.
Section
11. Other
Officers, Assistant Officers and Agents.
Officers, assistant officers and agents, if any, other than those whose duties
are provided for in these by-laws, shall have such authority and perform such
duties as may from time to time be prescribed by resolution of the Board of
Directors.
Section
12. Absence
or Disability of Officers.
In the
case of the absence or disability of any officer of the corporation and of
any
person hereby authorized to act in such officer’s place during such officer’s
absence or disability, the Board of Directors may by resolution delegate the
powers and duties of such officer to any other officer or to any Director,
or to
any other person whom it may select.
ARTICLE
V
CERTIFICATES
OF STOCK
Section
1. Form.
Every
holder of stock in the corporation shall be entitled to have a certificate,
signed by, or in the name of the corporation by the chairman of the board,
the
president or a vice-president and the secretary or an assistant secretary of
the
corporation, certifying the number of shares owned by such holder in the
corporation. If such a certificate is countersigned (1) by a transfer agent
or
an assistant transfer agent other than the corporation or its employee or (2)
by
a registrar, other than the corporation or its employee, the signature of any
such chairman of the board, president, vice-president, secretary, or assistant
secretary may be facsimiles. In case any officer or officers who have signed,
or
whose facsimile signature or signatures have been used on, any such certificate
or certificates shall cease to be such officer or officers of the corporation
whether because of death, resignation or otherwise before such certificate
or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person
or
persons who signed such certificate or certificates or whose facsimile signature
or signatures have been used thereon had not ceased to be such officer or
officers of the corporation. All certificates for shares shall be consecutively
numbered or otherwise identified. The name of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the books of the corporation. Shares of stock of the
corporation shall only be transferred on the books of the corporation by the
holder of record thereof or by such holder’s attorney duly authorized in
writing, upon surrender to the corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization,
and
other matters as the corporation may reasonably require, and accompanied by
all
necessary stock transfer stamps. In that event, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The Board of Directors may appoint a bank or trust company organized under
the
laws of the United States or any state thereof to act as its transfer agent
or
registrar, or both in connection with the transfer of any class or series of
securities of the corporation.
Section
2. Lost
Certificates.
The
Board of Directors may direct a new certificate or certificates to be issued
in
place of any certificate or certificates previously issued by the corporation
alleged to have been lost, stolen, or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen,
or destroyed. When
authorizing
such issue of a new certificate or certificates, the Board of Directors may,
in
its discretion and as a condition precedent to the issuance thereof, require
the
owner of such lost, stolen, or destroyed certificate or certificates, or his
or
her legal representative, to give the corporation a bond sufficient to indemnify
the corporation against any claim that may be made against the corporation
on
account of the loss, theft or destruction of any such certificate or the
issuance of such new certificate.
Section
3. Fixing
a Record Date for Stockholder Meetings.
In
order that the corporation may determine the stockholders entitled to notice
of
or to vote at any meeting of stockholders or any adjournment thereof, the Board
of Directors may fix a record date, which record date shall not precede the
date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than sixty nor less than
ten
days before the date of such meeting. If no record date is fixed by the Board
of
Directors, the record date for determining stockholders entitled to notice
of or
to vote at a meeting of stockholders shall be the close of business on the
next
day preceding the day on which notice is given, or if notice is waived, at
the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to
vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the
adjourned meeting.
Section
4. Fixing
a Record Date for Action by Written Consent.
In
order that the corporation may determine the stockholders entitled to consent
to
corporate action in writing without a meeting, the Board of Directors may fix
a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If
no
record date has been fixed by the Board of Directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required
by
statute, shall be the first date on which a signed written consent setting
forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation’s registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed
by
the Board of Directors and prior action by the Board of Directors is required
by
statute, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the Board of Directors adopts the resolution taking such
prior action.
Section
5. Fixing
a Record Date for Other Purposes.
In
order that the corporation may determine the stockholders entitled to receive
payment of any dividend or other distribution or allotment or any rights or
the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purposes of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action.
If
no record date is fixed, the record date for determining
stockholders
for any such purpose shall be at the close of business on the day on which
the
Board of Directors adopts the resolution relating thereto.
Section
6. Subscriptions
for Stock.
Unless
otherwise provided for in the subscription agreement, subscriptions for shares
shall be paid in full at such time, or in such installments and at such times,
as shall be determined by the Board of Directors. Any call made by the Board
of
Directors for payment on subscriptions shall be uniform as to all shares of
the
same class or as to all shares of the same series. In case of default in the
payment of any installment or call when such payment is due, the corporation
may
proceed to collect the amount due in the same manner as any debt due the
corporation.
ARTICLE
VI
GENERAL
PROVISIONS
Section
1. Dividends.
Dividends upon the capital stock of the corporation, subject to the provisions
of the corporation’s certificate of incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the corporation’s certificate of incorporation.
Before payment of any dividend, there may be set aside out of any funds of
the
corporation available for dividends such sum or sums as the Directors from
time
to time, in their absolute discretion, think proper as a reserve or reserves
to
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the corporation, or any other purpose and the Directors may
modify or abolish any such reserve in the manner in which it was created.
Section
2. Checks,
Drafts or Orders.
All
checks, drafts, or other orders for the payment of money by or to the
corporation and all notes and other evidences of indebtedness issued in the
name
of the corporation shall be signed by such officer or officers, agent or agents
of the corporation, and in such manner, as shall be determined by resolution
of
the Board of Directors or a duly authorized committee thereof.
Section
3. Contracts.
The
Board of Directors may authorize any officer or officers, or any agent or
agents, of the corporation to enter into any contract or to execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section
4. Loans.
The
corporation may lend money to, or guarantee any obligation of, or otherwise
assist any officer or other employee of the corporation or of its subsidiary,
including any officer or employee who is a Director of the corporation or its
subsidiary, whenever, in the judgment of the Directors, such loan, guaranty
or
assistance may reasonably be expected to benefit the corporation. The loan,
guaranty or other assistance may be with or without interest, and may be
unsecured, or secured in such manner as the Board of Directors shall approve,
including, without limitation, a pledge of shares of stock of the corporation.
Nothing in this section contained shall be deemed to deny, limit or restrict
the
powers of guaranty or warranty of the corporation at common law or under any
statute.
Section
5. Fiscal
Year.
The
fiscal year of the corporation shall be fixed by resolution of the Board of
Directors.
Section
6. Corporate
Seal.
The
Board of Directors may provide a corporate seal which shall be in the form
of a
circle and shall have inscribed thereon the name of the corporation and the
words “Corporate Seal, Delaware”. The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or
otherwise.
Section
7. Voting
Securities Owned By Corporation.
Voting
securities in any other corporation held by the corporation shall be voted
by
the chairman or president, unless the Board of Directors confers other authority
to vote with respect thereto, which authority may be general or confined to
specific instances, upon some other person or officer. Any person authorized
to
vote securities shall have the power to appoint proxies, with general power
of
substitution.
Section
8. Inspection
of Books and Records.
Any
stockholder of record, in person or by attorney or other agent, shall, upon
written demand under oath stating the purpose thereof, have the right during
the
usual hours for business to inspect for any proper purpose the corporation’s
stock ledger, a list of its stockholders, and its other books and records,
and
to make copies or extracts therefrom. A proper purpose shall mean any purpose
reasonably related to such person’s interest as a stockholder. In every instance
where an attorney or other agent shall be the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney
or
such other writing which authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in the State of Delaware or at its
principal place of business.
Section
9. Section
Headings.
Section
headings in these by-laws are for convenience of reference only and shall not
be
given any substantive effect in limiting or otherwise construing any provision
herein.
Section
10. Inconsistent
Provisions.
In the
event that any provision of these by-laws is or becomes inconsistent with any
provision of the corporation’s certificate of incorporation, the General
Corporation Law of the State of Delaware or any other applicable law, the
provision of these by-laws shall not be given any effect to the extent of such
inconsistency but shall otherwise be given full force and effect.
ARTICLE
VII
AMENDMENTS
These
by-laws may be amended, altered, or repealed and new by-laws adopted at any
meeting of the Board of Directors by a majority vote. The fact that the power
to
adopt, amend, alter, or repeal the by-laws has been conferred upon the Board
of
Directors shall not divest the stockholders of the same powers.
VOTING
AGREEMENT
VOTING
AGREEMENT
VOTING
AGREEMENT (this “Agreement”) dated as of January 18, 2006, is by and among
BCFWC Acquisition, Inc., a Delaware corporation (“Parent”), and each Person (as
defined in the Merger Agreement (as defined below)) listed on the signature
page
hereof as a stockholder (each, a “Stockholder” and, collectively, the
“Stockholders”). For purposes of this Agreement, capitalized terms used and not
defined herein shall have the respective meanings ascribed to them in the
Agreement and Plan of Merger, dated as of the date hereof (the “Merger
Agreement”), by and between Parent, BCFWC Mergersub, Inc., a Delaware
corporation (“Merger Sub”) and Burlington Coat Factory Warehouse Corporation, a
Delaware corporation (the “Company”).
RECITALS
A. Each
Stockholder “beneficially owns” (as such term is defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended) and (subject,
in the case of the Stockholders that are parties thereto, to the 2004 Voting
Agreement (as defined below)) is entitled to dispose of (or to direct the
disposition of) and to vote (or to direct the voting of) the number of shares
of
common stock, par value $1.00 per share, of the Company (the “Common Stock”) set
forth opposite such Stockholder’s name on Schedule A
hereto
(such shares of Common Stock, together with all other shares of capital stock
of
the Company acquired by any Stockholder after the date hereof and during
the
term of this Agreement, being collectively referred to herein as the “Subject
Shares”). As used herein, the “2004 Voting Agreement” means that certain Voting
Agreement, dated September 23, 2004, by and among the Stockholders (other
than
the MM 2005 Intangibles Trust, MHLAS Limited Partnership No. 1 and MH Family
LLC).
B. Concurrently
with the execution and delivery of this Agreement, Parent, Merger Sub and
the
Company are entering into the Merger Agreement providing for the merger of
Merger Sub with and into the Company, with the Company surviving the Merger
(the
“Merger”) upon the terms and subject to the conditions set forth
therein.
C. As
a
condition to entering into the Merger Agreement, Parent has required that
the
Stockholders enter into this Agreement, and the Stockholders desire to enter
into this Agreement to induce Parent to enter into the Merger
Agreement.
D. The
Board
of Directors of the Company has taken all actions so that the restrictions
imposed on business combinations by Section 203 of the General Corporation
Law
of the State of Delaware (the “DGCL”) are inapplicable to this Agreement, the
Merger Agreement and the Merger.
NOW,
THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Representations
and Warranties of Each Stockholder.
Each
Stockholder severally (and not jointly) represents and warrants to Parent
as
follows:
(a) Due
Authorization and Organization.
To the
extent such Stockholder is not a natural person, such Stockholder is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Such Stockholder has all requisite legal power
and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby to be consummated by such Stockholder. This
Agreement has been duly authorized, executed and delivered by such Stockholder
and, assuming the due and valid authorization, execution and delivery by
Parent
of this Agreement, constitutes a valid and binding obligation of such
Stockholder enforceable against such Stockholder in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium and other similar laws relating to or affecting
creditors’ rights generally, and (ii) is subject to general principles of
equity.
(b) No
Conflicts.
(i)
Except for such filings as may be required under the Exchange Act, the Exchange
Act Rules and the applicable requirements of the New York Stock Exchange,
no
filing by such Stockholder with any governmental body or authority, and no
authorization, consent or approval of any other Person is necessary for the
execution of this Agreement by such Stockholder and the consummation by such
Stockholder of the transactions contemplated hereby to be consummated by
such
Stockholder and (ii) none of the execution and delivery of this Agreement
by
such Stockholder or the consummation by such Stockholder of the transactions
contemplated hereby to be consummated by such Stockholder, or compliance
by such
Stockholder with any of the provisions hereof shall (A) in the case any
Stockholder that is not a natural person, violate any provision of the
organizational documents of such Stockholder, (B) giving effect to Section
20
hereof, violate or constitute a breach of or a default under (or which, with
notice or lapse of time, or both, would constitute a default under) any of
the
terms of any material contract, trust agreement, loan or credit agreement,
note,
bond, mortgage, indenture, lease, permit, understanding, agreement or other
instrument or obligation to which such Stockholder is a party or by which
such
Stockholder or any of its Subject Shares or assets may be bound, or (C)
(assuming the filings referred to in the preceding clause (i) are made),
violate
any applicable order, writ, injunction, decree, judgment, statute, rule or
regulation, except for any of the foregoing as would not reasonably be expected
to prevent such Stockholder from performing its obligations under this
Agreement.
(c) The
Subject Shares.
Schedule
A
sets
forth, opposite such Stockholder’s name (and, if applicable, in the footnotes
thereto), the number of Subject Shares over which such Stockholder has record
or
beneficial ownership as of the date hereof (subject, in the case of the
Stockholders that are parties thereto, to the 2004 Voting Agreement). As
of the
date hereof, such Stockholder is the record or beneficial owner of the Subject
Shares denoted as being owned by such Stockholder on Schedule
A
and,
except as set forth on Schedule
A,
has the
power to vote (or cause to be voted) such Subject Shares (subject, in the
case
of the Stockholders that are parties thereto, to the 2004 Voting Agreement).
Except as set forth on such Schedule
A,
neither
such Stockholder nor any controlled affiliate of such Stockholder owns or
holds
any right to acquire any additional shares of any class of capital stock
of the
Company or other securities of the Company or any interest therein or any
voting
rights with respect to any securities of the
Company.
Except for shares that are beneficially owned in a fiduciary capacity, such
Stockholder has legal and valid title to the Subject Shares denoted as being
owned by such Stockholder on Schedule
A,
free
and clear of any pledges, mortgages, liens, voting agreements, options,
encumbrances, adverse claims, security interests and charges of any kind,
other
than (i) those created by this Agreement or the 2004 Voting Agreement, (ii)
as
disclosed on Schedule
A,
(iii)
those created as a result of federal or state securities laws, or (iv) as
would
not prevent such Stockholder from performing its obligations under this
Agreement.
(d) Reliance
By Parent.
Such
Stockholder understands and acknowledges that Parent is entering into the
Merger
Agreement in reliance upon such Stockholder’s execution and delivery of this
Agreement.
(e) Litigation.
As of
the date hereof, there is no action, proceeding or investigation pending
or, to
such Stockholder’s knowledge, threatened against such Stockholder that questions
the validity of this Agreement or any action taken or to be taken by such
Stockholder in connection with this Agreement.
(f) No
Other Representations or Warranties.
EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED IN THIS SECTION
1 AND
IN THE FINAL SENTENCE OF SECTION 3(C) HEREOF, SUCH STOCKHOLDER MAKES NO EXPRESS
OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO SUCH STOCKHOLDER, THE
SUBJECT SHARES, OR OTHERWISE. SUCH STOCKHOLDER HEREBY DISCLAIMS ANY SUCH
OTHER
REPRESENTATION OR WARRANTY, WHETHER BY SUCH STOCKHOLDER OR ANY OTHER PERSON,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO PARENT, MERGER SUB OR ANY OTHER
PERSON OF ANY DOCUMENTATION OR OTHER WRITTEN OR ORAL INFORMATION BY SUCH
STOCKHOLDER, THE COMPANY, ANY OF THEIR RESPECTIVE REPRESENTATIVES OR ANY
OTHER
PERSON, AND NEITHER SUCH STOCKHOLDER NOR ANY OTHER PERSON WILL HAVE OR BE
SUBJECT TO ANY LIABILITY OR INDEMNIFICATION OBLIGATION TO PARENT, MERGER
SUB OR
ANY OTHER PERSON RESULTING FROM SUCH DELIVERY OR DISCLOSURE, OR PARENT’S, MERGER
SUB’S OR ANY OF THEIR RESPECTIVE REPRESENTATIVE’S USE, OF ANY SUCH DOCUMENTATION
OR OTHER INFORMATION ( INCLUDING ANY INFORMATION, DOCUMENTS, PROJECTIONS,
FORECASTS OR OTHER MATERIAL MADE AVAILABLE TO PARENT, MERGER SUB ANY OF THEIR
RESPECTIVE REPRESENTATIVES IN CERTAIN “DATA ROOMS” OR MANAGEMENT PRESENTATIONS
IN EXPECTATION OF THE TRANSACTIONS).
2. Representations
and Warranties of Parent.
Parent
hereby represents and warrants to the Stockholders as follows:
(a) Due
Authorization and Organization.
Parent
is duly incorporated, validly existing and in good standing under the laws
of
the State of Delaware. Parent has all requisite corporate power and authority
to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby to be consummated by Parent. This Agreement has been
duly
authorized, executed and delivered by Parent and, assuming the due and valid
authorization, execution and delivery by each Stockholder of this Agreement,
constitutes a valid and binding obligation of Parent enforceable against
Parent
in accordance with its terms, except that such enforceability (i) may be
limited by bankruptcy, insolvency, moratorium and other similar laws relating
to
or affecting creditors’ rights generally, and (ii) is subject to general
principles of equity.
(b) Conflicts.
(i)
Except for such filings as may be required under the Exchange Act or the
Exchange Act Rules, no consent or approval of any other Person is necessary
for
the execution of this Agreement by Parent and the consummation by Parent
of the
transactions contemplated hereby to be consummated by Parent and (ii) none
of
the execution and delivery of this Agreement by Parent, the consummation
by
Parent of the transactions contemplated hereby to be consummated by Parent,
or
compliance by Parent with any of the provisions hereof shall (A) violate
any
provision of the certificate of incorporation or by-laws of Parent, (B) violate
or constitute a breach of or a default under (or which, with notice or lapse
of
time, or both, would constitute a default under) any of the terms of any
material contract, loan or credit agreement, note, bond, mortgage, indenture,
lease, permit, understanding, agreement or other instrument or obligation
to
which Parent is a party or by which Parent or any of its assets may be bound,
or
(C) (assuming the filings referred to in the preceding clause (i) are made)
violate any applicable order, writ, injunction, decree, judgment, statute,
rule
or regulation, except for any of the foregoing as would not prevent Parent
from
performing its obligations under this Agreement.
(c) Reliance
by the Stockholders.
Parent
understands and acknowledges that the Stockholders are entering into this
Agreement in reliance upon the execution and delivery of the Merger Agreement
by
Parent.
3. Covenants
of Each Stockholder.
Until
the
termination of this Agreement in accordance with Section 5, each Stockholder,
in
its capacity as such, agrees as follows:
(a) At
the
Special Meeting or at any adjournment, postponement or continuation thereof
or
in any other circumstances occurring prior to the Special Meeting upon which
a
vote or other approval with respect to the Merger and the Merger Agreement
is
sought by the Company from the Company’s stockholders, each Stockholder shall
vote (or cause to be voted) the Subject Shares held by such Stockholder (i)
in
favor of the approval of the Merger and the approval and adoption of the
Merger
Agreement; and (ii) except with the written consent of Parent, against any
Alternative Proposal. Any such vote shall be cast in accordance with such
procedures relating thereto so as to ensure that it is duly counted for purposes
of determining that a quorum is present and for purposes of recording the
results of such vote. Each Stockholder agrees not to enter into any agreement
or
commitment with any Person the effect of which would be inconsistent with
or
violative of the provisions and agreements contained in this Section
3(a).
(b) Each
Stockholder hereby appoints Parent and any designee of Parent, and each of
them
individually, its proxies and attorneys-in-fact, with full power of substitution
and resubstitution, to vote during the term of this Agreement with respect
to
the Subject Shares in accordance with Section 3(a). This proxy is given to
secure the performance of the duties of each Stockholder under this Agreement.
Each Stockholder shall take such further action or execute such other
instruments as may be necessary to effectuate the intent of this proxy and
power
of attorney. The proxy and power of attorney granted hereunder by each
Stockholder shall be irrevocable during the term of this Agreement, shall
be
deemed to be coupled with an interest sufficient in law to support an
irrevocable proxy and shall revoke any and all prior proxies granted by each
Stockholder with respect to the matters contemplated by Section 3(a). The
power
of attorney granted by each Stockholder herein is a durable power of attorney
and
shall
survive the dissolution, bankruptcy, death or incapacity of such Stockholder.
The proxies and powers of attorney granted hereunder shall cease to be
irrevocable and shall terminate upon the termination of this
Agreement.
(c) Each
Stockholder agrees not
to,
directly or indirectly, (i) sell, transfer, tender, pledge, encumber, assign
or
otherwise dispose of (collectively, a “Transfer”) or enter into any agreement,
option or other arrangement with respect to, or consent to a Transfer of,
or
convert or agree to convert, any or all of the Subject Shares to any Person,
other than in accordance with the Merger Agreement, except in each case for
Transfers (x) to any other Stockholder or (y) to any Person who executes
and
delivers to Parent and Merger Sub a voting agreement identical in form to
this
Agreement (except for the identity of the Stockholder) prior to or concurrently
with the consummation of such Transfer or (ii) grant any proxies (other than
the
Company proxy card in connection with the Special Meeting if and to the extent
such proxy is consistent with the Stockholder’s obligations under Section 3(a)
hereof), deposit any Subject Shares into any voting trust or enter into any
voting arrangement, whether by proxy, voting agreement or otherwise, with
respect to any of the Subject Shares, in any case where such action would
be
inconsistent with or violative of the provisions and agreements contained
in
Section 3(a) hereof. Such Stockholder further agrees (A) not to commit or
agree
to take any of the actions that are prohibited by clause (i) or (ii) of the
preceding sentence and (B) not to take any action that would have the effect
of
preventing, impeding, interfering with or adversely affecting its ability
to
perform its obligations under this Agreement.
(d) Such
Stockholder shall not, nor shall such Stockholder permit any controlled
affiliate of such Stockholder to, nor shall such Stockholder act in concert
with
or permit any controlled affiliate to act in concert with any Person to make,
or
in any manner participate in, directly or indirectly, a “solicitation” (as such
term is used in the rules of the Securities and Exchange Commission) of proxies
or powers of attorney or similar rights to vote, or seek to advise or influence
any Person with respect to the voting of, any shares of Common Stock intended
to
facilitate any Alternative Proposal or to cause stockholders of the Company
not
to vote to approve and adopt the Merger Agreement. Such Stockholder shall
not,
and shall direct any investment banker, attorney, agent or other adviser
or
representative of such Stockholder not to, initiate or solicit (including
by way
of furnishing non-public information) or knowingly take any other action
that
constitutes, or is reasonably expected to lead to, an Alternative Proposal
or
engage in any substantive discussions or negotiations concerning, or provide
any
non-public information with respect to, an Alternative Proposal. Each
Stockholder hereby represents that, as of the date hereof, it is not engaged
in
substantive discussions or negotiations with any party with respect to any
Alternative Proposal.
(e) Notwithstanding
anything to the contrary in this Section 3, if and to the extent that, pursuant
to the terms of the Merger Agreement, the Company is permitted to provide
information to and engage in substantive discussions and negotiations with
any
Person regarding an Alternative Proposal, then the Stockholders may provide
information to and engage in substantive discussions and negotiations with
such
Person and its representatives.
4. Stockholder
Capacity.
No
Person
executing this Agreement, or any officer, director, partner, employee, agent
or
representative of such Person, who is or becomes during the term of this
Agreement a director or officer of the Company shall be deemed to make any
agreement or understanding in this Agreement in such Person’s capacity as a
director or officer. Each Stockholder is entering into this Agreement solely
in
his capacity as the record holder or beneficial owner of, or the trustee
of a
trust whose beneficiaries are the beneficial owners of, such Stockholder’s
Subject Shares and nothing herein shall limit or affect any actions taken
by a
Stockholder in his capacity as a director or officer of the
Company.
5. Termination.
This
Agreement shall terminate (i) upon the earlier of (A) the approval and adoption
of the Merger Agreement at the Special Meeting and (B) the termination of
the
Merger Agreement in accordance with its terms by any party thereto for any
reason, or (ii) at any time upon notice by Parent to the Stockholders. No
party
hereto shall be relieved from any liability for fraud or any willful breach
of
any covenant contained in this Agreement by reason of any such termination.
Notwithstanding the foregoing, the final two sentences of this Section 5,
Section 6 and Sections 8 through 19, inclusive, of this Agreement shall
survive the termination of this Agreement.
6. Appraisal
Rights.
To
the
extent permitted by applicable law, each Stockholder hereby waives any rights
of
appraisal or rights to dissent from the Merger that it may have under applicable
law.
7. Publication.
Each
Stockholder hereby authorizes Parent and the Company to publish and disclose
in
the Proxy Statement (including any and all documents and schedules filed
with
the Securities and Exchange Commission relating thereto) its identity and
ownership of shares of Common Stock and the nature of its commitments,
arrangements and understandings pursuant to this Agreement.
8. Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Delaware that apply to agreements made and performed entirely
within the State of Delaware, without giving effect to the conflicts of law
principles thereof or any other jurisdiction.
9. Submission
to Jurisdiction; Waiver of Jury Trial.
(a) Each
of
the parties hereto irrevocably agrees that any legal action or proceeding
arising out of or relating to this Agreement or any of the transactions
contemplated hereby shall be brought and determined in any federal court
located
in the State of Delaware or any Delaware state court, and each of the parties
hereto hereby irrevocably submits with regard to any such action or proceeding
for itself and in respect to its property, generally and unconditionally,
to the
exclusive
jurisdiction of the aforesaid court. Each of the parties hereto hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any such action or proceeding, (i) any claim
that
it is not personally subject to the jurisdiction of the above-named courts
for
any reason other than the failure to lawfully serve process, (ii) that it
or its
property is exempt or immune from jurisdiction of such court or from any
legal
process commenced in such court (whether through service of notice, attachment
prior to judgment, attachment in aid of execution of judgment, execution
of
judgment or otherwise), and (iii) that (x) such action or proceeding in such
court is brought in an inconvenient forum, (y) the venue of such action or
proceeding is improper or (z) this Agreement, the transactions contemplated
hereby or the subject matter hereof or thereof, may not be enforced in or
by
such court.
(b) EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL
BY
JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
10. Specific
Performance.
The
parties agree that irreparable damage would occur in the event that any of
the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that
the
parties shall be entitled to an injunction or injunctions to prevent breaches
of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in addition to any other remedy to which they are entitled at law
or
in equity.
11. Amendment,
Waivers, Etc.
Subject
to applicable law, this Agreement may be amended by Parent and the Stockholders
at any time before or after adoption of the Merger Agreement by the stockholders
of the Company. This Agreement may not be amended except by an instrument
in
writing signed by Parent and the Stockholders. At any time prior to the
Effective Time, Parent and the Stockholders may, to the extent legally allowed,
(i) extend the time for the performance of any of the obligations or acts
of the
other party; (ii) waive any inaccuracies in the representations and warranties
of the other party contained herein or in any document delivered pursuant
to
this Agreement; and (iii) waive compliance with any of the agreements or
conditions of the other party contained herein; provided, however, that no
failure or delay by Parent or any Stockholder in exercising any right hereunder
shall constitute a waiver thereof. Any agreement on the part of Parent or
the
Stockholders to any such extension or waiver shall be valid only if set forth
in
an instrument in writing signed on behalf of such party.
12. Assignment;
No Third Party Beneficiaries.
Except
in
connection with a Transfer of Subject Shares permitted hereunder, neither
this
Agreement nor any of the rights, benefits or obligations hereunder may be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of all of the other parties. Subject to
the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of
and be enforceable by the parties hereto and their respective successors
and
permitted assigns. Any purported assignment in violation of the provisions
of
this Agreement shall be null and void ab
initio.
This
Agreement is not intended to confer upon any Person other than the parties
hereto any rights or remedies whatsoever.
13. Notices.
Any
and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
upon the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section 13 and confirmation of such transmission is received
prior to 5:00 p.m. (New York time) on a Business Day, (ii) the Business Day
after the date of transmission, if such notice or communication is delivered
via
facsimile at the facsimile telephone number specified in this Section 13
and
confirmation of such transmission is received (x) later than 5:00 p.m. (New
York
time) on a Business Day and earlier than 11:59 p.m. (New York time) on such
Business Day or (y) on a day that is not a Business Day, (iii) when received,
if
sent by nationally recognized overnight courier service or (iv) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications (unless changed by the applicable party
by
like notice) shall be as follows:
If
to
Parent, to:
Bain
Capital Partners, LLC
111
Huntington Avenue
Boston,
Massachusetts 02199
Attention:
Jordan Hitch
Telephone
No.: (617) 516-2000
Facsimile
No.: (617) 516-2010
with
a
copy (which shall not constitute notice) to:
Kirkland
& Ellis LLP
153
East
53rd
Street
New
York,
New York 10022
Attention:
Lance Balk, Esq. and Christopher Neumann, Esq.
Telephone
No.: (212) 446-4800
Facsimile
No: (212) 446-6460
If
to any
Stockholder, at the address set forth under such Stockholder’s name on
Schedule A
hereto
or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith.
14. Severability.
If
any
provision of this Agreement is held by a court (or other authority) of competent
jurisdiction to be invalid, void unenforceable or against its regulatory
policy,
the remainder of the provisions of this Agreement shall remain in full force
and
effect and shall in no way be affected, impaired or
invalidated.
15. Integration.
This
Agreement (together with the Merger Agreement to the extent referenced herein),
including Schedule A
hereto,
constitutes the full and entire understanding and agreement of the parties
with
respect to the subject matter hereof and thereof and supersedes any and all
prior understandings or agreements relating to the subject matter hereof
and
thereof.
16. Mutual
Drafting.
Each
party hereto has participated in the drafting of this Agreement, which each
party acknowledges is the result of extensive negotiations between the parties.
17. Section
Headings.
The
section headings of this Agreement are for convenience of reference only
and are
not to be considered in construing this Agreement.
18. Counterparts.
This
Agreement may be executed in one or more counterparts (including by facsimile),
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
19. Definitions.
References
in this Agreement (except as specifically otherwise defined) to “affiliates”
shall mean, as to any Person, any other Person which, directly or indirectly,
controls, or is controlled by, or is under common control with, such Person.
As
used in this definition, “control” (including, with its correlative meanings,
“controlled by” and “under common control with”) shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of
management or policies of a Person, whether through the ownership of securities
or partnership or other ownership interests, by contract or
otherwise.
20. 2004
Voting Agreement.
Notwithstanding
anything in the 2004 Voting Agreement to the contrary, each Stockholder that
is
a party thereto hereby waives any and all provisions of the 2004 Voting
Agreement that are inconsistent with, or that in the absence of such waiver
would be breached by, such Stockholder’s execution and delivery of this
Agreement or the consummation by such Stockholder of the transactions
contemplated hereby to be consummated by such Stockholder.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the parties hereto have executed this Voting Agreement as
of
the day and date first above written.
| |
BCFWC
Acquisition, Inc.
|
| |
|
| |
|
| |
By:
|
/s/
Jordan Hitch
|
| |
|
Name:
Jordan Hitch
|
| |
|
Title:
Vice President
|
| |
|
| |
|
| |
STOCKHOLDERS:
|
| |
|
| |
|
| |
SAMGRAY,
L.P.
|
| |
|
| |
By:
Latzim Family LLC, its general partner
|
| |
|
| |
By:
|
/s/
Stephen E. Milstein
|
| |
|
Name:
Stephen E. Milstein
|
| |
|
Title:
Member
|
| |
|
| |
|
| |
Article
Sixth Trust
|
| |
|
| |
|
| |
By:
|
/s/
Lazer Milstein
|
| |
|
Name:
Lazer Milstein
|
| |
|
Title:
Trustee
|
| |
|
| |
|
| |
MM
2005 Intangibles Trust
|
| |
|
| |
|
| |
By:
|
/s/
Stephen E. Milstein
|
| |
|
Name:
Stephen E. Milstein
|
| |
|
Title:
Trustee
|
| |
|
| |
|
| |
MHLAS
Limited Partnership No. 1
|
| |
|
| |
By:
MH Family LLC, its general partner Henrietta Milstein 2000 Revocable
Trust
|
| |
|
| |
|
| |
By:
|
/s/
Paul Tang
|
| |
|
Name:
Paul Tang
|
| |
|
Title:
Trustee
|
| |
MH
Family LLC
|
| |
|
| |
Henrietta
Milstein 2000 Revocable Trust
|
| |
|
| |
|
| |
By:
|
/s/
Paul Tang
|
| |
|
Name:
Paul Tang
|
| |
|
Title:
Trustee
|
(Signature
Page to Voting Agreement)
| |
|
| |
|
| |
/s/
Andrew R. Milstein
|
| |
Andrew
R. Milstein
|
| |
|
| |
|
| |
/s/
Stephen E. Milstein
|
| |
Stephen
E. Milstein
|
| |
|
| |
|
| |
/s/
Lazer Milstein
|
| |
Lazer
Milstein
|
(Signature
Page to Voting Agreement)
Schedule
A
STOCKHOLDERS
|
Stockholder‡
|
Shares
of
Common
Stock
|
|
Percentage
(9)
|
|
Samgray,
L.P.*
|
12,000,000
|
(1)(2)
|
26.8%
|
|
Trust
Established under Article Sixth of the Last Will and Testament
of
Henrietta Milstein**
|
6,743,984
|
(1)(3)
|
15.1%
|
|
MM
2005 Intangibles Trust***
|
467,001
|
(4)
|
1.0%
|
|
Andrew
R. Milstein*
|
2,700,719
|
(1)(2)(5)(6)(7)
|
6.0%
|
|
Stephen
E. Milstein***
|
2,577,735
|
(1)(2)(6)(7)
|
5.8%
|
|
Lazer
Milstein**
|
1,901,901
|
(1)
|
4.2%
|
|
MHLAS
Limited Partnership No. 1****
|
1,400,000
|
(8)
|
3.1%
|
|
MH
Family LLC****
|
10,000
|
(8)
|
-
|
|
Total:
|
27,801,340
|
|
62.1%
|
|
*
|
The
address for such Stockholder is c/o Burlington Coat Factory Warehouse
Corporation, 1830 Route 130, Burlington, NJ 08016, Attn. Andrew
R.
Milstein.
|
|
**
|
The
address for such Stockholder is PO Box 546781, Surfside, FL, 33154,
Attn.
Lazer Milstein.
|
|
***
|
The
address for such Stockholder is c/o Burlington Coat Factory Warehouse
Corporation, 1830 Route 130, Burlington, NJ 08016, Attn. Stephen
E.
Milstein.
|
|
****
|
The
address for such Stockholder is c/o Burlington Coat Factory Warehouse
Corporation, 1830 Route 130, Burlington, NJ 08016, Attn. Paul C.
Tang.
|
|
‡
|
A
copy of any notice or communication to any Stockholder should be
sent to
(but shall not constitute notice to such Stockholder): Phillips
Nizer LLP,
666 Fifth Avenue, New York, New York 10103, Attn: Tiberio Schwartz,
Facsimile: 1 (212) 262-5152.
|
| |
1)
|
Samgray,
Andrew Milstein (“AM”), Stephen Milstein (“SM”), Lazer Milstein (“LM”) and
the Trust Established under Article Sixth of the Last Will and
Testament
of Henrietta Milstein (“Article Sixth Trust”) have entered into the 2004
Voting Agreement, pursuant to which the parties to the 2004 Voting
Agreement have granted AM and SM (and LM, should either of AM or
SM die,
suffer incapacity or resign), an irrevocable proxy to vote the
shares of
Common Stock owned by such parties. In case of a deadlock as to
how the
shares will be voted, LM has the power to decide which position
shall
prevail; except if such deadlock occurs while LM is serving, the
deadlock
will be broken by an individual designated by LM and the other
proxy then
serving with him. As of December 26, 2005, there were an aggregate
of
25,690,938 shares of Common Stock subject to the 2004 Voting Agreement
representing 57.4% of the issued and outstanding shares of Common
Stock of
Blue Blazer.
|
| |
2)
|
The
general partner of Samgray LP is Latzim LLC and the managing members
of
Latzim are AM, SM and LM. Latzim, AM, SM and LM may be deemed to
have
voting and dispositive power over the shares owned by Samgray,
subject to
the 2004 Voting Agreement.
|
| |
3)
|
The
Trustee of the Article Sixth Trust is LM who may be deemed to have
voting
and dispositive power over the shares owned by the Trust, subject
to the
2004 Voting Agreement. Monroe G. Milstein is a beneficiary of the
Article
Sixth Trust and has certain limited dispositive rights over the
shares
owned by this Trust.
|
| |
4)
|
The
Trustee of the MM 2005 Intangible Trust is SM who may be deemed
to have
voting and dispositive power over the shares owned by the
Trust.
|
| |
5)
|
Includes
13,032 shares owned by the SGM 1995 Trust, of which AM is co-trustee
and
as to which he may be deemed to have voting and dispositive
power.
|
| |
6)
|
Includes
36,000 shares owned by 1989 Milstein Holdings Co., of which AM
and SM are
co-trustees and as to which they may be deemed to have voting and
dispositive power.
|
| |
7)
|
Excludes
67,200 shares of common stock that are issuable upon the exercise
of stock
options.
|
| |
8)
|
MHLAS
Limited Partnership No. 1 (“MHLAS”) is a Delaware limited partnership
whose general partner is MH Family LLC (“MHLLC”), a Delaware limited
liability company. MHLLC is controlled by the Henrietta Milstein
2000
Revocable Trust. Mr. Paul Tang is the trustee of such trust and
in such
capacity may be deemed to have voting and dispositive power over
the
shares owned by MHLAS and MHLLC.
|
| |
9)
|
Based
on 44,769,513 shares outstanding as of January 9,
2006.
|
FAIRNESS
OPINION
|
Goldman,
Sachs & Co. |
|
85
Broad Street |
|
New York, New York 10004
|
Tel:
212-902-1000
PERSONAL
AND CONFIDENTIAL
January
18, 2006
Board
of
Directors
Burlington
Coat Factory Warehouse Corporation
1830
Route 130
Burlington,
NJ 08016
Gentlemen:
You
have
requested our opinion as to the fairness from a financial point of
view to the
holders of the outstanding shares of common stock, par value $1.00
per share
(the “Shares”), of Burlington Coat Factory Warehouse Corporation (the “Company”)
of the $45.50 per Share in cash to be received by such holders pursuant
to the
Agreement and Plan of Merger, dated as of January 18, 2006 (the “Agreement”),
among BCFWC Acquisition, Inc. (“Parent”), an affiliate of Bain Capital Partners,
LLC (“Bain Capital”), BCFWC Mergersub, Inc., a wholly owned subsidiary of
Parent, and the Company.
Goldman,
Sachs & Co. and its affiliates, as part of their investment banking
business, are continually engaged in performing financial analyses
with respect
to businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions
of
listed and unlisted securities, private placements and other transactions
as
well as for estate, corporate and other purposes. We have acted as
financial
advisor to the Company in connection with, and have participated in
certain of
the negotiations leading to, the transaction contemplated by the Agreement
(the
“Transaction”). We expect to receive fees for our services in connection with
the Transaction, the principal portion of which is contingent upon
consummation
of the Transaction, and the Company has agreed to reimburse our expenses
and
indemnify us against certain liabilities arising out of our engagement.
In
addition, we have provided and are currently providing certain investment
banking services to Bain Capital and its affiliates, including having
acted as
joint lead manager with respect to a high yield
Board
of
Directors
Burlington
Coat Factory Warehouse Corporation
January
18, 2006
Page
Two
offering
by Houghton Mifflin Company, a portfolio company of Bain Capital (“Houghton
Mifflin”), of its 8.250% Senior Notes due 2011 (aggregate principal amount
$1,000,000,000) in January 2003; having acted as lead manager with respect
to a
high yield offering by Sealy Corporation, a former portfolio company
of Bain
Capital (“Sealy”), of its 9.875% Senior Sub Notes due 2007 (aggregate principal
amount $50,000,000) in April 2003; having acted as co-manager with respect
to a
high-yield offering by Domino's Pizza LLC, a wholly owned subsidiary
of Domino’s
Pizza Inc., an affiliate of Bain Capital, of its 8 1/4% Senior Subordinated
Notes due 2011 (aggregate principal amount $403,000,000) in June 2003;
having
acted as co-manager with respect to a high-yield offering by Houghton
Mifflin of
its 11 1/2% Senior Discount Notes due 2013 (aggregate principal amount
$265,000,000) in September 2003; having acted as co-financial advisor
to Sealy
in connection with its sale in April 2004; having extended a bank loan
(aggregate principal amount $70,000,000) to Maxim Crane Works, a portfolio
company of Bain Capital, in July 2004; and having acted as financial
advisor to
Modus Media International Holdings, a former portfolio company of Bain
Capital,
in connection with its sale in August 2004. We also may provide investment
banking services to the Company and Bain Capital
and its
affiliates in
the
future. In connection with the above-described investment banking services
we
have received, and may receive, compensation. Affiliates of Goldman,
Sachs &
Co. have co-invested with Bain Capital or its affiliates from time to
time and
may do so in the future.
Goldman,
Sachs & Co. is a full service securities firm engaged, either directly or
through its affiliates, in securities trading, investment management,
financial
planning and benefits counseling, risk management, hedging, financing
and
brokerage activities for both companies and individuals. In the ordinary
course
of these activities, Goldman, Sachs & Co. and its affiliates may provide
such services to the Company, Bain Capital and their respective affiliates,
may
actively trade the debt and equity securities (or related derivative
securities)
of the Company and affiliates of Bain Capital for their own account
and for the
accounts of their customers and may at any time hold long and short
positions of
such securities.
In
connection with this opinion, we have reviewed, among other things, the
Agreement; annual reports to stockholders and Annual Reports on Form 10-K
of the Company for the five fiscal years ended May 28, 2005; certain
interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company;
certain other communications from the Company to its stockholders; and
certain
internal financial analyses and forecasts for the Company prepared by
its
management (the “Forecasts”). We also have held discussions with members of the
senior management of the Company regarding their assessment of the past
and
current business operations, financial condition and future prospects
of the
Company. In addition, we have reviewed the reported price and trading
activity
for the Shares, compared certain financial and stock market information
for the
Company with similar information for certain other companies the securities
of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the retail industry specifically and in other
industries generally and performed such other studies and analyses, and
considered such other factors, as we considered appropriate.
Board
of
Directors
Burlington
Coat Factory Warehouse Corporation
January
18, 2006
Page
Three
We have relied upon the accuracy and
completeness of all of the financial, accounting, legal, tax and other
information discussed with or reviewed by us and have assumed
such
accuracy and completeness for purposes of rendering this opinion. In
that
regard, we have assumed with your consent that the Forecasts have been
reasonably prepared on a basis reflecting the best currently available
estimates
and judgments of the Company. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities (including any
contingent,
derivative or off-balance-sheet assets and liabilities) of the Company
or any of
its subsidiaries and we have not been furnished with any such evaluation
or
appraisal.
Our
opinion does not address the underlying
business decision of the Company to engage in the Transaction. Our opinion
is
necessarily based on economic, monetary, market and other conditions
as in
effect on, and the information made available to us as of, the date hereof.
Our
advisory services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of the Company in
connection with its consideration of the Transaction and such opinion
does not
constitute a recommendation as to how any holder of Shares should vote
with
respect to the Transaction.
Based
upon and subject to the foregoing, it is our opinion that, as of the
date
hereof, the $45.50 per Share in cash to be received by the holders of
Shares
pursuant to the Agreement is fair from a financial point of view to such
holders.
Very
truly yours,
/s/
Goldman, Sachs & Co.
GOLDMAN,
SACHS & CO.
SECTION
262 OF THE DELAWARE GENERAL CORPORATION LAW
Section
262. Appraisal Rights. (a) Any
stockholder of a corporation of this State who holds shares of stock
on the date
of the making of a demand pursuant to subsection (d) of this section
with
respect to such shares, who continuously holds such shares through
the effective
date of the merger or consolidation, who has otherwise complied with
subsection
(d) of this section and who has neither voted in favor of the merger
or
consolidation nor consented thereto in writing pursuant to § 228 of this title
shall be entitled to an appraisal by the Court of Chancery of the fair
value of
the stockholder’s shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the
word
“stockholder” means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words “stock” and “share” mean
and include what is ordinarily meant by those words and also membership
or
membership interest of a member of a nonstock corporation; and the
words
“depository receipt” mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof,
solely of
stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal
rights shall be available for the shares of any class or series of
stock of a
constituent corporation in a merger or consolidation to be effected
pursuant to
§ 251 (other than a merger effected pursuant to § 251(g) of this title), § 252,
§ 254, § 257, § 258, § 263 or § 264 of this title:
(1) Provided,
however, that no appraisal rights under this section shall be available
for the
shares of any class or series of stock, which stock, or depository
receipts in
respect thereof, at the record date fixed to determine the stockholders
entitled
to receive notice of and to vote at the meeting of stockholders to
act upon the
agreement of merger or consolidation, were either (i) listed on a national
securities exchange or designated as a national market system security
on an
interdealer quotation system by the National Association of Securities
Dealers,
Inc. or (ii) held of record by more than 2,000 holders; and further
provided
that no appraisal rights shall be available for any shares of stock
of the
constituent corporation surviving a merger if the merger did not require
for its
approval the vote of the stockholders of the surviving corporation
as provided
in subsection (f) of § 251 of this title.
(2) Notwithstanding
paragraph (1) of this subsection, appraisal rights under this section
shall be
available for the shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of an
agreement of
merger or consolidation pursuant to §§ 251, 252, 254, 257, 258, 263 and 264 of
this title to accept for such stock anything except:
a. Shares
of
stock of the corporation surviving or resulting from such merger or
consolidation, or depository receipts in respect thereof;
b. Shares
of
stock of any other corporation, or depository receipts in respect thereof,
which
shares of stock (or depository receipts in respect thereof) or
depository
receipts at the effective date of the merger or consolidation will
be either
listed on a national securities exchange or designated as a national
market
system security on an interdealer quotation system by the National
Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash
in
lieu of fractional shares or fractional depository receipts described
in the
foregoing subparagraphs a. and b. of this paragraph; or
d. Any
combination of the shares of stock, depository receipts and cash in
lieu of
fractional shares or fractional depository receipts described in the
foregoing
subparagraphs a., b. and c. of this paragraph.
(3) In
the
event all of the stock of a subsidiary Delaware corporation party to
a merger
effected under § 253 of this title is not owned by the parent corporation
immediately prior to the merger, appraisal rights shall be available
for the
shares of the subsidiary Delaware corporation.
(c) Any
corporation may provide in its certificate of incorporation that appraisal
rights under this section shall be available for the shares of any
class or
series of its stock as a result of an amendment to its certificate
of
incorporation, any merger or consolidation in which the corporation
is a
constituent corporation or the sale of all or substantially all of
the assets of
the corporation. If the certificate of incorporation contains such
a provision,
the procedures of this section, including those set forth in subsections
(d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal
rights shall be perfected as follows:
(1) If
a
proposed merger or consolidation for which appraisal rights are provided
under
this section is to be submitted for approval at a meeting of stockholders,
the
corporation, not less than 20 days prior to the meeting, shall notify
each of
its stockholders who was such on the record date for such meeting with
respect
to shares for which appraisal rights are available pursuant to subsection
(b) or
(c) hereof that appraisal rights are available for any or all of the
shares of
the constituent corporations, and shall include in such notice a copy
of this
section. Each stockholder electing to demand the appraisal of such
stockholder’s
shares shall deliver to the corporation, before the taking of the vote
on the
merger or consolidation, a written demand for appraisal of such stockholder’s
shares. Such demand will be sufficient if it reasonably informs the
corporation
of the identity of the stockholder and that the stockholder intends
thereby to
demand the appraisal of such stockholder’s shares. A proxy or vote against the
merger or consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written demand
as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify
each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger
or
consolidation of the date that the merger or consolidation has become
effective;
or
(2) If
the
merger or consolidation was approved pursuant to § 228 or § 253 of this title,
then either a constituent corporation before the effective date of
the merger or
consolidation or the surviving or resulting corporation within 10 days
thereafter shall notify each of the holders of any class or series
of stock of
such constituent corporation who are entitled to appraisal rights of
the
approval of the merger or consolidation and that appraisal rights are
available
for any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section.
Such
notice may, and, if given on or after the effective date of the merger
or
consolidation, shall, also notify such stockholders of the effective
date of the
merger or consolidation. Any stockholder entitled to appraisal rights
may,
within 20 days after the date of mailing of such notice, demand in
writing from
the surviving or resulting corporation the appraisal of such holder’s shares.
Such demand will be sufficient if it reasonably informs the corporation
of the
identity of the stockholder and that the stockholder intends thereby
to demand
the appraisal of such holder’s shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation,
either (i)
each such constituent corporation shall send a second notice before
the
effective date of the merger or consolidation notifying each of the
holders of
any class or series of stock of such constituent corporation that are
entitled
to appraisal rights of the effective date of the merger or consolidation
or (ii)
the surviving or resulting corporation shall send such a second notice
to all
such holders on or within 10 days after such effective date; provided,
however,
that if such second notice is sent more than 20 days following the
sending of
the first notice, such second notice need only be sent to each stockholder
who
is entitled to appraisal rights and who has demanded appraisal of such
holder’s
shares in accordance with this subsection. An affidavit of the secretary
or
assistant secretary or of the transfer agent of the corporation that
is required
to give either notice that such notice has been given shall, in the
absence of
fraud, be prima facie evidence of the facts stated therein. For purposes
of
determining the stockholders entitled to receive either notice, each
constituent
corporation may fix, in advance, a record date that shall be not more
than 10
days prior to the date the notice is given, provided, that if the notice
is
given on or after the effective date of the merger or consolidation,
the record
date shall be such effective date. If no record date is fixed and the
notice is
given prior to the effective date, the record date shall be the close
of
business on the day next preceding the day on which the notice is
given.
(e) Within
120 days after the effective date of the merger or consolidation, the
surviving
or resulting corporation or any stockholder who has complied with subsections
(a) and (d) hereof and who is otherwise entitled to appraisal rights,
may file a
petition in the Court of Chancery demanding a determination of the
value of the
stock of all such stockholders. Notwithstanding the foregoing, at any
time
within 60 days after the effective date of the merger or consolidation,
any
stockholder shall have the right to withdraw such stockholder’s demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation,
any
stockholder who has complied with the requirements of subsections (a)
and (d)
hereof, upon written request, shall be entitled to receive from the
corporation
surviving the merger or resulting from the consolidation a statement
setting
forth the aggregate number of shares not voted in favor of the merger
or
consolidation and with respect to which demands for appraisal have
been received
and the aggregate number of holders of such shares. Such written statement
shall
be mailed to the stockholder within 10 days after
such
stockholder’s written request for such a statement is received by the surviving
or resulting corporation or within 10 days after expiration of the
period for
delivery of demands for appraisal under subsection (d) hereof, whichever
is
later.
(f) Upon
the
filing of any such petition by a stockholder, service of a copy thereof
shall be
made upon the surviving or resulting corporation, which shall within
20 days
after such service file in the office of the Register in Chancery in
which the
petition was filed a duly verified list containing the names and addresses
of
all stockholders who have demanded payment for their shares and with
whom
agreements as to the value of their shares have not been reached by
the
surviving or resulting corporation. If the petition shall be filed
by the
surviving or resulting corporation, the petition shall be accompanied
by such a
duly verified list. The Register in Chancery, if so ordered by the
Court, shall
give notice of the time and place fixed for the hearing of such petition
by
registered or certified mail to the surviving or resulting corporation
and to
the stockholders shown on the list at the addresses therein stated.
Such notice
shall also be given by 1 or more publications at least 1 week before
the day of
the hearing, in a newspaper of general circulation published in the
City of
Wilmington, Delaware or such publication as the Court deems advisable.
The forms
of the notices by mail and by publication shall be approved by the
Court, and
the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At
the
hearing on such petition, the Court shall determine the stockholders
who have
complied with this section and who have become entitled to appraisal
rights. The
Court may require the stockholders who have demanded an appraisal for
their
shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon
of the
pendency of the appraisal proceedings; and if any stockholder fails
to comply
with such direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After
determining the stockholders entitled to an appraisal, the Court shall
appraise
the shares, determining their fair value exclusive of any element of
value
arising from the accomplishment or expectation of the merger or consolidation,
together with a fair rate of interest, if any, to be paid upon the
amount
determined to be the fair value. In determining such fair value, the
Court shall
take into account all relevant factors. In determining the fair rate
of
interest, the Court may consider all relevant factors, including the
rate of
interest which the surviving or resulting corporation would have had
to pay to
borrow money during the pendency of the proceeding. Upon application
by the
surviving or resulting corporation or by any stockholder entitled to
participate
in the appraisal proceeding, the Court may, in its discretion, permit
discovery
or other pretrial proceedings and may proceed to trial upon the appraisal
prior
to the final determination of the stockholder entitled to an appraisal.
Any
stockholder whose name appears on the list filed by the surviving or
resulting
corporation pursuant to subsection (f) of this section and who has
submitted
such stockholder’s certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights
under this
section.
(i) The
Court
shall direct the payment of the fair value of the shares, together
with
interest, if any, by the surviving or resulting corporation to the
stockholders
entitled thereto. Interest may be simple or compound, as the Court
may direct.
Payment shall be so made to each such stockholder, in the case of holders
of
uncertificated stock forthwith, and the case of holders of shares represented
by
certificates upon the surrender to the corporation of the certificates
representing
such stock. The Court’s decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting corporation
be a
corporation of this State or of any state.
(j) The
costs
of the proceeding may be determined by the Court and taxed upon the
parties as
the Court deems equitable in the circumstances. Upon application of
a
stockholder, the Court may order all or a portion of the expenses incurred
by
any stockholder in connection with the appraisal proceeding, including,
without
limitation, reasonable attorney’s fees and the fees and expenses of experts, to
be charged pro rata against the value of all the shares entitled to
an
appraisal.
(k) From
and
after the effective date of the merger or consolidation, no stockholder
who has
demanded appraisal rights as provided in subsection (d) of this section
shall be
entitled to vote such stock for any purpose or to receive payment of
dividends
or other distributions on the stock (except dividends or other distributions
payable to stockholders of record at a date which is prior to the effective
date
of the merger or consolidation); provided, however, that if no petition
for an
appraisal shall be filed within the time provided in subsection (e)
of this
section, or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of such stockholder’s demand for an appraisal
and an acceptance of the merger or consolidation, either within 60
days after
the effective date of the merger or consolidation as provided in subsection
(e)
of this section or thereafter with the written approval of the corporation,
then
the right of such stockholder to an appraisal shall cease. Notwithstanding
the
foregoing, no appraisal proceeding in the Court of Chancery shall be
dismissed
as to any stockholder without the approval of the Court, and such approval
may
be conditioned upon such terms as the Court deems just.
(l) The
shares of the surviving or resulting corporation to which the shares
of such
objecting stockholders would have been converted had they assented
to the merger
or consolidation shall have the status of authorized and unissued shares
of the
surviving or resulting corporation
[FORM
OF
PROXY]
BURLINGTON
COAT FACTORY WAREHOUSE CORPORATION
1830
ROUTE 130
BURLINGTON,
NEW JERSEY 08016
PROXY
-- Special Meeting of Stockholders - [______, ] 2006-- THIS PROXY IS
SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS. The
undersigned hereby appoints Monroe G. Milstein and Andrew R. Milstein
as
Proxies, each with the power to appoint his substitute, and hereby
authorizes
them to represent and to vote, as designated below, all the shares
of Common
Stock of Burlington Coat Factory Warehouse Corporation held of record
by the
undersigned on [______], 2006, at the Special Meeting of Stockholders
to be held
on [______], 2006 or any adjournment thereof.
1.
Proposal
to adopt the Agreement and Plan of Merger, dated as of January 18,
2006, among
Burlington Coat Factory Warehouse Corporation, BCFWC Acquisition, Inc.,
and
BCFWC Mergersub, Inc., a wholly-owned subsidiary of BCFWC Acquisition,
Inc.,
pursuant to which BCFWC Mergersub, Inc. will be merged with and into
Burlington
Coat Factory Warehouse Corporation.
FOR
o
AGAINST
o
ABSTAIN
o
2.
In
their
discretion, the Proxies are authorized to vote upon such other business
as may
properly come before the meeting or any adjournment.
THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED IN
FAVOR OF THE ADOPTION OF THE AGREEMENT AND PLAN OF MERGER.
Please
sign exactly as name or names appears on this Proxy. When shares are
held
jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the
signer is
a corporation, please sign full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign
in
partnership name by authorized person.
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Date
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Signature
of Stockholder
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Signature,
if held jointly
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PLEASE
MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.